As filed with the Securities and Exchange Commission on May 11, 2001
Registration No. 333-57170

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- -------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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AMENDMENT NO. 3
TO
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933

---------------
Resolution Performance Products LLC
(Exact name of registrant as specified in charter)

Delaware 2821 76-0607613
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code
organization) Number)

RPP Capital Corporation
(Exact name of registrant as specified in charter)

Delaware 2821 76-0660306
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code
organization) Number)

1600 Smith Street, Suite 2400
Houston, Texas 77002
(888) 949-2502
(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices)

---------------

Marvin O. Schlanger
Chairman and President
Resolution Performance Products LLC
1600 Smith Street, Suite 2416
Houston, Texas 77002
(888) 949-2502
(Name, address, including zip code, and telephone number, including area code,
of agent for service of process)

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With a copy to:
Rosa A. Testani, Esq.
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
(212) 408-2400

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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.

If any of 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 statement number of the earlier effective registration statement
for the same offering. [_]
___________

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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.

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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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 it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
+ +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

Subject to Completion, Dated May 11, 2001

PROSPECTUS

[LOGO OF RESOLUTION PERFORMANCE PRODUCTS]

Resolution Performance Products LLC
RPP Capital Corporation

Offer to Exchange All Outstanding $200,000,000 Principal Amount of
13 1/2% Senior Subordinated Notes Due 2010
For $200,000,000 Principal Amount of
13 1/2% Senior Subordinated Notes Due 2010
Which Have Been Registered Under the Securities Act Of 1933

The Exchange Offer:

. We will exchange all old notes that are validly tendered and not validly
withdrawn for an equal principal amount of exchange notes that have been
registered.

. You may withdraw tenders of old notes at any time prior to the expiration of
the exchange offer.

. The exchange offer expires at 12:00 Midnight, New York City time, on June 8,
2001, unless we extend the offer.

The Exchange Notes:

. The terms of the exchange notes to be issued in the exchange offer are
substantially identical to the old notes, except that the exchange notes will
be freely tradable by persons who are not affiliated with us.

. No public market currently exists for the old notes. We do not intend to list
the exchange notes on any securities exchange and, therefore, no active
public market is anticipated.

. The exchange notes, like the old notes, will be unsecured, will not be
guaranteed by any of our current subsidiaries, and will rank

--junior to all of our existing and future senior or secured debt;

--junior to all existing and future liabilities of our current subsidiaries;

--equally with any other unsecured senior subordinated debt that we may
incur in the future, of which none currently exists; and

--senior to all subordinated debt that we may incur in the future, of which
none currently exists.

You should carefully consider the risk factors beginning on page 16 of this
prospectus before participating in the exchange offer.

-----------

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon
the adequacy or accuracy of this prospectus. Any representation to the
contrary is a criminal offense.

-----------

The date of this prospectus is May 11, 2001

TABLE OF CONTENTS

Page
----

Market and Industry Data and
Forecasts......................... 4
Summary............................ 5
Risk Factors....................... 16
The Exchange Offer................. 27
Use of Proceeds.................... 36
Capitalization..................... 36
Selected Historical and Pro Forma
Financial Information............. 37
Unaudited Pro Forma Financial
Information....................... 40
Management's Discussion and
Analysis of Financial Condition
and Results of Operations......... 45
Business........................... 57
Management......................... 78

Page
----

Security Ownership of Certain
Beneficial Owners and Management.. 85
The Transactions................... 87
Certain Relationships and Related
Transactions...................... 90
Description of the Credit
Agreement......................... 100
Description of the Notes........... 103
Book-Entry; Delivery and Form...... 148
Exchange Offer; Registration
Rights............................ 150
U.S. Federal Income Tax
Considerations ................... 153
Plan of Distribution............... 154
Legal Matters...................... 154
Experts............................ 154
Where You Can Find More
Information....................... 155
Index to Financial Statements...... F-1

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Unless otherwise indicated in this prospectus, (1) the terms "RPP LLC,"
"we," "our," "ours" and "us" refer to Resolution Performance Products LLC and
its subsidiaries, including the non-U.S. subsidiaries acquired in connection
with or following the recapitalization described below, or, where the context
requires, the operations of our predecessor, the epoxy resins and versatic
acids and derivatives business of the Royal Dutch/Shell Group of Companies,
(2) the term "RPP Capital" refers to RPP Capital Corporation, our wholly-owned
subsidiary and a co-obligor on the notes, (3) the term "Issuers" refers to RPP
LLC and RPP Capital, (4) the term "RPP Inc." refers to Resolution Performance
Products Inc., our parent company, formerly known as Shell Epoxy Resins Inc.
and (5) the term "RPP B.V." refers to Resolution Holdings B.V., our wholly-
owned subsidiary. The financial data included in this prospectus relating to
the period prior to the recapitalization come from the financial statements of
the epoxy resins and versatic acids and derivatives business of Shell.

----------------

Until August 9, 2001 (90 days after the date of this prospectus), all dealers
effecting transactions in the new notes, whether or not participating in this
exchange offer, may be required to deliver a prospectus.

MARKET AND INDUSTRY DATA AND FORECASTS

This prospectus includes market share and industry data and forecasts that
we obtained from industry publications and surveys, consultant surveys and
internal company surveys. The Chemical Economics Handbook--SRI International
(1998 edition and updates thereto), reports prepared by the American Plastics
Council, Inc. and FIDES (European Plastics Council), and studies prepared on
our behalf by each of CPI Consulting Associates and Garnett Consulting, were
the primary sources for third-party industry data and forecasts. Except where
otherwise noted, statements as to our position relative to our competitors or
as to our market share for (a) epoxy resins are based on historical 1999 sales
volume of liquid epoxy resins, (b) versatic acids and derivatives are based on
historical 1999 sales volume and (c) bisphenol-A are based on historical 1999
production capacity. Based on the limited industry information available for
2000, discussions with our customers and management's knowledge of the
industry and our performance, we believe that there were no material
differences in our market shares and position relative to our competitors in
2000 compared to 1999.

* * * * * *

EPIKOTE(R) Resins, EPON(R) Resins, EPI-CURE(R) Curing Agents, EPI-REZ(R)
Waterborne Resins, HELOXY(R) Modifiers, CARDURA(R) Glycidyl Ester, and
VeoVa(R) Monomers are some of our primary trademarks. All other trademarks,
service marks or trade names referred to in this prospectus are the property
of their respective owners.

SUMMARY

The following summary highlights selected information from this prospectus
and may not contain all of the information that you should consider before
participating in the exchange offer. This prospectus includes the specific
terms of the exchange notes, as well as information regarding our business, the
recapitalization and related financing transactions and detailed financial
data. You should read this prospectus in its entirety.

OUR BUSINESS

On November 14, 2000, RPP Holdings LLC, an affiliate of Apollo Management IV,
L.P. acquired control of RPP Inc., our parent, in a recapitalization
transaction. Prior to the recapitalization, RPP Inc. was a wholly owned
subsidiary of the Royal Dutch/Shell Group of Companies. The total consideration
paid in the recapitalization was approximately $857.7 million in cash and
retained securities (net of $8.5 million of excess cash at RPP LLC used to fund
the Transactions), subject to adjustment, and a contingent subordinated note
for up to $127 million, issued by RPP Inc. In connection with the
recapitalization, RPP Holdings and some members of our management invested $185
million of cash and Shell had retained an investment of $15 million. We entered
into a new senior secured credit agreement and distributed the proceeds from
borrowings thereunder, together with the proceeds from the offering of the Old
Notes, to RPP Inc. which in turn used the proceeds to fund $701.4 million of
the recapitalization. On a fully-diluted basis for all management options and
stock issuable under RPP Inc.'s stock option plan and restricted unit plan,
Apollo Management and its affiliates and other institutional investors own
(through their ownership of RPP Holdings) approximately 81.9% of the
outstanding common stock of RPP Inc., management owns (through its ownership of
RPP Holdings and RPP Inc.) approximately 11.3% of the outstanding common stock
of RPP Inc. and Shell owns approximately 6.8% of the outstanding common stock
of RPP Inc.

The following table sets forth the sources and uses of funds for the
transactions:

Amount
Sources: (in millions)
-------- --------------

Credit Facility(1)............................................ $504.1
Old Notes, net of discount.................................... 197.3
Common Equity Investment(2)................................... 200.0
------
Total Sources............................................... $901.4
======

Uses:
-----

Purchase Price(3)............................................. $857.7
Estimated Fees and Expenses................................... 43.7
------
Total Uses.................................................. $901.4
======

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(1) Represents borrowings under the credit agreement made on November 14, 2000,
consisting of $100.0 million under the A term loan facility, $350.0 million
under the B term loan facility and $54.1 million drawn under a $150.0
million revolving credit facility.
(2) Represents (a) the $185.0 million investment by RPP Holdings and
management, consisting of (1) $55.5 million of common stock of RPP Inc.,
our parent company, purchased by RPP Holdings and management and (2) $129.5
million of RPP Inc. junior subordinated notes purchased by RPP Holdings and
management and (b) the $15.0 million retained investment by Shell,
consisting of (1) $4.5 million of retained common stock of RPP Inc. and (2)
$10.5 million of RPP Inc. junior subordinated notes issued to Shell.
Interest payments, which are payable at an annual rate of 10.9%, and the
repayment of principal, which is due on the 12th anniversary of the closing
date of the recapitalization, on the junior subordinated notes are payable
in cash only to the extent these payments are permitted under the terms of
all indebtedness of RPP Inc. and its subsidiaries.
(3) Does not reflect the contingent subordinated note, issued by RPP Inc. and
which will not be accounted for as a liability on RPP Inc.'s balance sheet
unless and until earned. The contingent subordinated note will only be
earned to the extent the average contribution margin for 2001 and 2002
exceeds the contribution margin for the twelve months ended December 31,
2000 by $60 million to $75 million. Interest payments, which are payable at
an annual rate of 8% commencing after December 31, 2002, and the repayment
of principal, which is due on December 31, 2007, on the contingent
subordinated note will be payable in cash only to the extent the contingent
subordinated note is earned and such payments are permitted under the terms
of all indebtedness of RPP Inc. and its subsidiaries. In addition,
immediately after the closing of the transactions, there was additional
cash of approximately $18 million remaining on hand at RPP LLC.

The following chart summarizes our ownership (fully-diluted for all options
and stock to management issuable under RPP Inc.'s stock option plan and
restricted unit plan) and capital structure as of May 7, 2001:

[OWNERSHIP SUMMARY CHART]

- --------
* Apollo Management, other institutional investors and some members of
management have invested in RPP Inc. indirectly through their ownership of
RPP Holdings. Although not depicted above, RPP Holdings directly owns 91.1%
of the equity of RPP Inc. Apollo Management controls RPP Holdings.

SUMMARY OF THE TERMS OF THE EXCHANGE OFFER

On November 14, 2000, we completed the private offering of our 13 1/2% senior
subordinated notes due 2010. We entered into a registration rights agreement
with the placement agents in the private placement offering of the old notes.
Under that agreement, we agreed to deliver to you this prospectus and to
complete the exchange offer within 210 days after the date of original issuance
of the old notes. You are entitled to exchange in the exchange offer your old
notes for exchange notes which are identical in all material respects to the
old notes except that:

. the exchange notes have been registered under the Securities Act and will
be freely tradable by persons who are not affiliated with us;

. the exchange notes are not entitled to the rights which are applicable to
the old notes under the registration rights agreement; and

. our obligation to pay additional interest on the old notes if (a) the
exchange offer registration statement of which this prospectus forms a
part is not declared effective by May 13, 2001 or (b) if the exchange
offer is not consummated by June 12, 2001, in each case, at incremental
rates ranging from 0.25% per annum to 1.0% per annum depending on how
long we fail to comply with these deadlines, does not apply to the
exchange notes.

The Exchange We are offering to exchange up to $200.0 million
Offer.............. aggregate principal amount of 13 1/2% senior subordinated
notes which have been registered under the Securities Act
for up to $200.0 million aggregate principal amount of 13
1/2% senior subordinated notes which were issued on
November 14, 2000. Old notes may be exchanged only in
integral multiples of $1,000.

Resales............. Based on an interpretation by the staff of the Commission
set forth in no-action letters issued to third parties,
we believe that the exchange notes issued pursuant to the
exchange offer in exchange for old notes may be offered
for resale, resold and otherwise transferred by you
(unless you are our "affiliate" within the meaning of
Rule 405 under the Securities Act) without compliance
with the registration and prospectus delivery provisions
of the Securities Act, provided that you

. are acquiring the exchange notes in the ordinary course
of business, and

. have not engaged in, do not intend to engage in, and
have no arrangement or understanding with any person to
participate in, a distribution of the exchange notes.

Each participating broker-dealer that receives exchange
notes for its own account pursuant to the exchange offer
in exchange for the old notes that were acquired as a
result of market-making or other trading activity must
acknowledge that it will deliver a prospectus in
connection with any resale of the exchange notes. See
"Plan of Distribution."

Any holder of old notes who

. is our affiliate,

. does not acquire the exchange notes in the ordinary
course of its business, or

. tenders in the exchange offer with the intention to
participate, or for the purpose of participating, in a
distribution of exchange notes,

cannot rely on the position of the staff of the
Commission express in Exxon Capital Holdings Corporation,
Morgan Stanley & Co. Incorporated or similar no-action
letters and, in the absence of an exemption, must comply
with the registration and prospectus delivery
requirements othe Securties Act in connection with the
resale of the exchange notes.

Expiration Date;
Withdrawal of
Tenders............

The exchange offer will expire at 12:00 Midnight, New
York City time, June 8, 2001, or such later date and time
to which we extend it. We do not currently intend to
extend the expiration date. A tender of old notes
pursuant to the exchange offer may be withdrawn at any
time prior to the expiration date. Any old notes not
accepted for exchange for any reason will be returned
without expense to the tendering holder promptly after
the expiration or termination of the exchange offer.

Conditions to the
Exchange Offer.....
The exchange offer is subject to customary conditions,
some of which we may waive. See "The Exchange Offer--
Conditions to Exchange Offer."

Procedures for
Tendering Old
Notes..............
If you wish to accept the exchange offer, you must
complete, sign and date the accompanying letter of
transmittal, or a copy of the letter of transmittal,
according to the instructions contained in this
prospectus and the letter of transmittal. You must also
mail or otherwise deliver the letter of transmittal, or
the copy, together with the old notes and any other
required documents, to the exchange agent at the address
set forth on the cover of the letter of transmittal. If
you hold old notes through The Depository Trust Company
and wish to participate in the exchange offer, you must
comply with the Automated Tender Offer Program procedures
of DTC, by which you will agree to be bound by the letter
of transmittal.

By signing or agreeing to be bound by the letter of
transmittal, you will represent to us that, among other
things:

. any exchange notes that you receive will be acquired in
the ordinary course of your business;

. you have no arrangement or understanding with any
person or entity to participate in the distribution of
the exchange notes;

. if you are a broker-dealer that will receive exchange
notes for your own account in exchange for old notes
that were acquired as a result of market-making
activities, that you will deliver a prospectus, as
required by law, in connection with any resale of the
exchange notes; and

. you are not our "affiliate" as defined in Rule 405
under the Securities Act, or, if you are an affiliate,
you will comply with any applicable registration and
prospectus delivery requirements of the Securities Act.

Guaranteed Delivery
Procedures.........
If you wish to tender your old notes and your old notes
are not immediately available or you cannot deliver your
old notes, the letter of transmittal or any other
documents required by the letter of transmittal or comply
with the

applicable procedures under DTC's Automated Tender Offer
Program prior to the expiration date, you must tender
your old notes according to the guaranteed delivery
procedures set forth in this prospectus under "The
Exchange Offer--Guaranteed Delivery Procedures."

Effect on Holders
of Old Notes.......
As a result of the making of, and upon acceptance for
exchange of all validly tendered old notes pursuant to
the terms of, the exchange offer, we will have fulfilled
a covenant contained in the registration rights agreement
and, accordingly, we will not be obligated to pay
liquidated damages as described in the registration
rights agreement. If you are a holder of old notes and do
not tender your old notes in the exchange offer, you will
continue to hold your old notes and you will be entitled
to all the rights and limitations applicable to the old
notes in the Indenture, except for any rights under the
registration rights agreement that by their terms
terminate upon the consummation of the exchange offer.

Consequences of
Failure to
Exchange........... All untendered old notes will continue to be subject to
the restrictions on transfer provided for in the old
notes and in the indenture. In general, the old notes may
not be offered or sold unless registered under the
Securities Act, except pursuant to an exemption from, or
in a transaction not subject to, the Securities Act and
applicable state securities laws. Other than in
connection with the exchange offer, we do not currently
anticipate that we will register the old notes under the
Securities Act.

U.S. Federal Income
Tax
Considerations.....
The exchange of old notes for exchange notes in the
exchange offer should not be a taxable event for U.S.
federal income tax purposes. See "U.S. Federal Income Tax
Considerations."

Use of Proceeds..... We will not receive any cash proceeds from the issuance
of the exchange notes in the exchange offer.

Exchange Agent...... United States Trust Company of New York is the exchange
agent for the exchange offer. The address and telephone
number of the exchange agent are set forth in the section
captioned "The Exchange Offer--Exchange Agent."

SUMMARY OF THE TERMS OF THE EXCHANGE NOTES

The following summary is provided solely for your convenience. This summary
is not intended to be complete. You should read the full text and more specific
details contained elsewhere in this prospectus. For a more detailed description
of the exchange notes, see "Description of the Notes."

Issuers............. Resolution Performance Products LLC and RPP Capital
Corporation.

Exchange Notes $200,000,000 aggregate principal amount of 13 1/2% Senior
Offered............. Subordinated Notes due 2010.

Maturity............ November 15, 2010.

Interest............ Interest will be payable semi-annually in cash on May 15
and November 15, beginning May 15, 2001. Because we filed
the registration statement of which this prospectus forms
a part on the 122nd day instead of the 120th day
following the issuance of the old notes, we are required
under the registration rights agreement to pay additional
interest on the old notes for two days at a rate of .25%
per annum. We will pay this additional interest of
$2,777.78 in the aggregate, or $0.014 per $1,000
principal amount of old notes, to holders of the old
notes on May 15, 2001, together with the regular semi-
annual interest payment.

Holders of old notes whose old notes are accepted for
exchange in the exchange offer will be deemed to have
waived the right to receive any payment in respect of
interest on the old notes accrued from May 15, 2001, the
most recent date to which interest on the old notes has
been paid, to the date of issuance of the exchange notes.
Consequently, holders who exchange their old notes for
exchange notes will receive the same interest payment on
November 14, 2001 (the first interest payment date with
respect to the old notes and the exchange notes following
consummation of the exchange offer) that they would have
received if they had not accepted the exchange offer.

Optional We may redeem any of the exchange notes beginning on
Redemption.......... November 15, 2005. The initial redemption price is
106.750% of their principal amount, plus accrued
interest. The redemption price will decline each year
after 2005 and will be 100% of their principal amount,
plus accrued interest, beginning on November 15, 2008.

In addition, if a change of control occurs before
November 15, 2005, we may redeem the exchange notes at a
redemption price equal to 100% of their principal amount,
plus accrued interest, plus a "make-whole" premium.

Excess Cash Flow
Repurchase Offer... If we have excess cash flow for any fiscal year
(commencing with fiscal 2001), we will be required to
make an offer to purchase, on a pro rata basis, exchange
notes with 50% of the excess cash flow, reduced however
by the amount of any similar payments we elect or are
required to make to our senior lenders or other holders
of senior indebtedness, at a price equal to 100% of their
principal amount plus accrued interest to the date of
purchase. The term excess cash flow has the same meaning
specified in the credit agreement as in effect on
November 14, 2001, without giving effect to any
amendments thereto.

Change of Control... Upon the occurrence of a change of control, holders of
the exchange notes will have the right to require us to
repurchase their exchange notes at a price equal

to 101% of their principal amount plus accrued interest
to the date of repurchase. We may not have sufficient
funds available at the time of any change of control to
make any required debt repayment.

Ranking............. The exchange notes will be senior subordinated unsecured
obligations. The exchange notes will rank equally in
right of payment with all of our senior subordinated
unsecured indebtedness and will rank senior to all of our
subordinated indebtedness. The exchange notes will be
junior to all of our senior or secured indebtedness and
all liabilities of our subsidiaries that do not guarantee
the exchange notes. Because none of our existing
subsidiaries guarantee the exchange notes, the exchange
notes are junior to all existing and future liabilities
of our current subsidiaries.

As of December 31, 2000, we had:

. $484 million of senior indebtedness; and

. no senior subordinated indebtedness other than the
notes and no subordinated indebtedness.

As of December 31, 2000, our subsidiaries had $245
million of liabilities, including debt related to the
transactions of $131 million.

Certain Covenants... The terms of the exchange notes and indenture will
restrict our ability and the ability of our restricted
subsidiaries to:

. incur more indebtedness, including guarantees;

. create liens;

. pay dividends and make distributions in respect of our
capital stock;

. enter into agreements that restrict our subsidiaries'
ability to pay dividends or make distributions;

. redeem or repurchase our capital stock;

. make investments or other restricted payments;

. sell assets;

. issue or sell stock of restricted subsidiaries;

. enter into transactions with affiliates;

. merge or consolidate; and

. incur senior subordinated indebtedness.

These covenants are subject to a number of important
exceptions.

RISK FACTORS

See "Risk Factors" beginning on page 16 for a discussion of certain risks
relating to us, our business and an investment in the exchange notes before
participating in the exchange offer.

----------------

We are a Delaware limited liability company formed in May 1999 and a wholly-
owned subsidiary of Resolution Performance Products Inc., a Delaware
corporation formed in June 1999 which acquired all of the assets and certain
liabilities of the epoxy resins business of Shell pursuant to a contribution
agreement dated July 1, 1999. RPP Capital Corporation, our wholly-owned
subsidiary, is a Delaware corporation formed in October 2000 to serve as a co-
issuer of the notes and has nominal assets and no operations. Our principal
executive offices are located at 1600 Smith Street, Houston, Texas 77002 and
our telephone number is (888) 949-2502.

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION

The following table sets forth summary historical financial information,
summary unaudited pro forma financial information and other historical and pro
forma financial data. The historical statement of income data for the fiscal
years ended December 31, 1998, 1999 and 2000 and the historical balance sheet
data as of December 31, 1999 and 2000 are derived from our audited consolidated
and combined financial statements included elsewhere in this prospectus. The
historical statement of income data for the fiscal years ended December 31,
1996 and 1997 and the historical balance sheet data as of December 31, 1997 and
1998 are derived from our audited combined financial statements that are not
included herein. The historical balance sheet data as of December 31, 1996 are
derived from unaudited financial statements which, in the opinion of
management, include all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the data for the period.

The summary unaudited pro forma statement of income data gives effect to the
transactions and the acquisition of the remaining 50% of the Elenac GmbH Resins
Business as if they had occurred at the beginning of the periods presented. We
do not claim or represent that the following summary unaudited pro forma
financial information is indicative of the results that would have been
reported had the Transactions and acquisition of the remaining 50% of the
Elenac GmbH Resins Business actually occurred on the dates indicated above, nor
is it indicative of our future results. There can be no assurance that the
assumptions used by management (which they believe are reasonable) in the
preparation of the summary unaudited pro forma financial information will prove
to be correct.

The information contained in this table should also be read in conjunction
with "Unaudited Pro Forma Financial Information," "Selected Historical and Pro
Forma Financial Information," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and the audited consolidated
and combined financial statements and accompanying notes thereto included
elsewhere in this prospectus.

Historical Pro Forma
---------------------------------------- -------------------
For the fiscal years ended
December 31, For the fiscal year
---------------------------------------- ended December 31,
1996 1997 1998 1999 2000 2000
-------- -------- ------ ------ ------ -------------------
(in millions, except ratios and percentages)

Other Financial Data:
Cash flows from
operating activities... -- -- -- $134.0 $114.0 $114.0
Cash flows from
investing activities... -- -- -- (103.0) (17.0) (17.0)
Cash flows from
financing activities... -- -- -- (31.0) (78.0) (78.0)
Consolidated
EBITDA(3)(4)........... -- -- -- $161.5 $127.8 $151.3
Consolidated EBITDA
margin(5).............. -- -- -- 17.1% 13.5% 15.9%
Capital
expenditures(6)........ $ 51.0 $ 42.0 $ 59.0 $ 34.0 $ 18.0 $ 18.0

Balance Sheet Data
(at period end):
Total assets............ $ 791.7 $ 775.1 $719.0 $743.0 $792.0 N/A
Total debt.............. -- -- -- -- $681.4 N/A

"Unaudited Pro Forma Financial Information." Pro forma Consolidated EBITDA
as shown for the fiscal year ended December 31, 2000 has not been adjusted
by $6.6 of projected annual reduction of fixed costs that were previously
announced in connection with the transactions consisting of (x) $2.5
relating to overhead to be eliminated by actions such as closing several
Asian sales operations and conversion to distributorships, reducing certain
identified discretionary expenses, headcount reductions, rationalization of
warehouse space and reductions in packaging costs from the conversion of a
particular labeling system, (y) $2.0 relating to manufacturing cost
improvements for activities previously performed by Shell, with regard to
which management has developed a plan for these services to be performed
either in-house or on a contract basis at a lower cost and by the expected
cancellation of other miscellaneous manufacturing related agreements in
Europe, and (z) $2.1 relating to the expected cancellation of certain
agreements with Shell where we believe we can perform similar services, at
a lower cost, such as agreements that relate to the optimization of our
research and development function (which we expect will be completed within
18 months following the recapitalization) and the cessation and replacement
of certain services for our Japanese joint venture. Adjusting pro forma
Consolidated EBITDA shown above for these items, we would have had pro
forma adjusted Consolidated EBITDA of $158 for the fiscal year ended
December 31, 2000. We expect to incur additional one-time costs to achieve
these cost savings of approximately $3.1 which are not reflected in these
cost savings. While we consider the numerical specificity of these
projected cost savings to be reasonable, they are based on various
assumptions that are subject to inherent uncertainty. Management does not
believe that achieving these cost savings will have a negative effect on
revenues. We are unable to give any assurance that the cost savings will be
realized within the time frame we currently expect or at all, that the
costs necessary to achieve any of these savings will not exceed our
expectations or that they will not have a negative effect on revenues. For
a discussion of important factors that could cause actual results to differ
materially from our projections, see "Risk Factors--Projected Information"
and "--Forward-Looking Statements."
(5) Consolidated EBITDA margin is calculated as a percentage of revenues. Pro
forma Consolidated EBITDA margin is calculated as a percentage of pro
forma revenues.
(6) The capital expenditure amounts for the year ended December 31, 1999
exclude the repurchase of certain equipment held under a synthetic lease.
During 1998, we entered into a sale/leaseback transaction for certain of
our assets. In 1999, we repurchased these assets, requiring an outlay of
$71.

RISK FACTORS

You should carefully consider the risks described below before participating
in this exchange offer. 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 adversely affect our business, financial condition or results of
operations. In such case, you may lose all or part of your original
investment.

Risk Factors Related to an Investment in the Notes

Substantial Indebtedness--Our substantial indebtedness could adversely affect
our ability to raise additional capital to fund our operations, limit our
ability to react to changes in the economy or our industry and prevent us from
making debt service payments on the notes.

As a result of the transactions, we are a highly leveraged company. As of
December 31, 2000, we had $681 million of outstanding indebtedness, including
approximately $484 million of indebtedness other than the notes, all of which
would have been senior to the notes. In addition to the amount then
outstanding, we could have borrowed an additional $124 million under the
revolving credit facility which, if borrowed, also would have been senior to
the notes. Further, as of December 31, 2000, our subsidiaries had $245 million
of liabilities, including debt related to the transaction of $131 million, all
of which ranks senior in right of payment to the notes. This level of
indebtedness could have important consequences for you, including the
following:

. it may limit our ability to borrow money or sell stock for our working
capital, capital expenditures, debt service requirements or other
purposes;

. it may limit our flexibility in planning for, or reacting to, changes in
our operations or business;

. we will be more highly leveraged than some of our competitors, which may
place us at a competitive disadvantage;

. it may make us more vulnerable to a downturn in our business or the
economy;

. the debt service requirements of our other indebtedness could make it
more difficult for us to make payments on the notes;

. a substantial portion of our cash flow from operations could be
dedicated to the repayment of our indebtedness and would not be
available for other purposes; and

. there would be a material adverse effect on our business and financial
condition if we were unable to service our indebtedness or obtain
additional financing, as needed.

Substantial Indebtedness--Despite our substantial indebtedness, we may still
be able to incur significantly more debt. This could intensify the risks
described above.

The terms of the indenture do not prohibit us from incurring significant
additional indebtedness in the future. As of December 31, 2000, we had
$124 million available for additional borrowing under the revolving credit
facility under the credit agreement, including a subfacility for letters of
credit. All borrowings under the credit agreement will be senior to the notes.
Accordingly, at December 31, 2000, we could have had borrowings of up to $608
million outstanding under the credit agreement, all of which would have been
senior to the notes.

Subordination--Your right to receive payments on the notes will be junior to
the credit agreement and possibly all future borrowings such that, if we go
bankrupt, we may not be able to make payments on the notes because we first
need to pay all of these senior obligations in full.

The notes are unsecured, and we will have other debt obligations that come
before the notes, including all $608 million of indebtedness borrowed or
available for borrowing under the credit agreement and any additional senior
debt we may incur under the indenture. Consequently, in the event of any
payment or distribution of our assets upon bankruptcy, liquidation or
reorganization, the holders of senior debt must be paid in full before any
payments may be made on the notes. Sufficient assets may not remain to make
full payment on the notes. As of

December 31, 2000, we had $484 million of indebtedness other than the notes,
all of which would have been senior to the notes. In addition to the amount
then outstanding, we could have borrowed an additional $124 million under the
revolving credit facility which, if borrowed, also would have been senior to
the notes. Further, as of December 31, 2000, our subsidiaries had $245 million
of liabilities, including debt related to the transaction of $131 million, all
of which ranks senior in right of payment to the notes.

If we default in payment of any of our senior debt, we will not pay on the
notes unless the default has been cured or waived. In addition, even if we are
repaying our senior debt on time, payments on the notes may be blocked for up
to 180 consecutive days if we default on the senior debt in some other way. If
we default under the credit agreement and the lenders require immediate
repayment of the entire principal amount borrowed, we may not be able to repay
them and also repay the notes in full.

No Subsidiary Guarantees--We will rely on our subsidiaries for funds
necessary to meet our financial obligations, including the notes. Because our
subsidiaries have other creditors and are not obligated to repay and do not
guarantee repayment of the notes, you cannot rely on our subsidiaries to make
any payments on the notes directly to you or to make sufficient distributions
to enable us to satisfy our obligations to you under the notes.

Although we are an operating company, all of our foreign operations are
conducted through our subsidiaries. We may in the future create domestic
subsidiaries. For the year ended December 31, 2000, approximately 45% of our
revenues were generated by our foreign subsidiaries. We will depend in part on
those subsidiaries for dividends and other payments to generate the funds
necessary to meet our financial obligations, including the payment of
principal and interest on the notes. In addition, the earnings from, or other
available assets of, these operating subsidiaries, together with our domestic
operations, may not be sufficient to make distributions to enable us to pay
interest on the notes when due or principal of the notes at maturity.

Our subsidiaries have no direct obligation to pay amounts due on the notes
and do not guarantee the notes. If any or all of our subsidiaries become the
subject of a bankruptcy, liquidation or reorganization, the creditors of the
subsidiary or subsidiaries, including debt holders, must be paid in full out
of the subsidiary's or subsidiaries' assets before any monies may be
distributed to us as the holder of the equity in the subsidiary or
subsidiaries. As a result, in general, the notes have the effect of being
subordinated to existing and future third party indebtedness and other
liabilities of those subsidiaries, including trade payables. As of December
31, 2000, our subsidiaries had $245 million of liabilities, including debt
related to the transactions of $131 million. Our subsidiaries are also able to
borrow under the credit agreement.

Ability to Service Debt--We may not be able to generate sufficient cash to
service all of our indebtedness, including the notes.

Our ability to make payments on our indebtedness, including the notes,
depends on our ability to generate cash in the future. Our estimated annual
debt service in 2001 is approximately $103.3 million. The estimated debt
service for 2001 consists of the following:

. a $25.0 million voluntary principal payment made in the first quarter of
2001,

. scheduled mandatory principal payments totaling $7.1 million and

. interest payments totaling $71.2 million.

An increase of 1.0% in the interest rates payable on the floating rate portion
of indebtedness under the credit agreement would increase our 2001 estimated
annual debt service requirements by approximately $2.5 million. For the year
ended December 31, 2000, our historical and pro forma cash flows from
operating activities after giving effect to the transactions would have been
approximately $114 million. Accordingly, we will have to continue to generate
significant cash flows from operations to meet our debt service requirements.
If we do not generate sufficient cash flow to meet our debt service and
working capital requirements, we may need to seek additional financing or sell
assets. This may make it more difficult for us to obtain financing on terms
that are acceptable to us, or at all. Without this financing, we could be
forced to sell assets to make up for any shortfall in our payment obligations
under unfavorable circumstances.

The credit agreement limits our ability to sell assets and also restricts
the use of proceeds from that sale. Moreover, the credit agreement is secured
by substantially all of our assets. We may not be able to sell assets quickly
enough or for sufficient amounts to enable us to meet our obligations,
including our obligations on the

notes. Furthermore, a substantial portion of our assets are, and may continue
to be, intangible assets. Therefore, it may be difficult for us to pay you in
the event of an acceleration of the notes.

Restrictive Debt Covenants--Restrictive covenants in the credit agreement and
the indenture may prevent us from pursuing business strategies that could
otherwise improve our results of operations.

The indenture and the credit agreement limit our ability, among other
things, to:

. incur additional indebtedness or contingent obligations;

. pay dividends or make distributions to our members;

. repurchase or redeem our equity interests;

. make investments;

. grant liens;

. make capital expenditures;

. enter into transactions with our members and affiliates;

. sell assets; and

. acquire the assets of, or merge or consolidate with, other companies.

In addition, the credit agreement requires us to maintain financial ratios,
such as

. a minimum ratio of Consolidated EBITDA to interest expense; and

. a maximum ratio of debt to Consolidated EBITDA.

Complying with these restrictive covenants and financial ratios in the
indenture and the credit agreement may impair our ability to finance our
future operations or capital needs or to engage in other favorable business
activities.

Failure to Exchange Old Notes--If you do not properly tender your old notes,
you will continue to hold unregistered old notes and be subject to the same
limitations on your ability to transfer old notes.

We will only issue exchange notes in exchange for old notes that are timely
received by the exchange agent together with all required documents, including
a properly completed and signed letter of transmittal. Therefore, you should
allow sufficient time to ensure timely delivery of the old notes and you
should carefully follow the instructions on how to tender your old notes.
Neither we nor the exchange agent are required to tell you of any defects or
irregularities with respect to your tender of the old notes. If you are
eligible to participate in the exchange offer and do not tender your old notes
or if we do not accept your old notes because you did not tender your old
notes properly, then, after we consummate the exchange offer, you will
continue to hold old notes that are subject to the existing transfer
restrictions and will no longer have any registration rights or be entitled to
any additional interest with respect to the old notes. In addition:

. if you tender your old notes for the purpose of participating in a
distribution of the exchange notes, you will be required to comply with
the registration and prospectus delivery requirements of the Securities
Act in connection with any resale of the exchange notes; and

. if you are a broker-dealer that receives exchange notes for your own
account in exchange for old notes that you acquired as a result of
market-making activities or any other trading activities, you will be
required to acknowledge that you will deliver a prospectus in connection
with any resale of those exchange notes.

We have agreed that, for a period of 180 days after the exchange offer is
consummated, we will make this prospectus available to any broker-dealer for
use in connection with any resales of the exchange notes.

After the exchange offer is consummated, if you continue to hold any old
notes, you may have difficulty selling them because there will be fewer old
notes outstanding.

No Prior Market for the Exchange Notes--An active trading market may not
develop for the exchange notes, in which case, the trading market liquidity
and the market price quoted for the exchange notes could be adversely
affected.

The exchange notes are a new issue of securities with no established trading
market and will not be listed on any securities exchange or automated dealer
quotation system. The liquidity of the trading market in the exchange notes,
and the market price quoted for the exchange notes, may be adversely affected
by changes in the overall market for high yield securities and by changes in
our financial performance or prospects or in the prospects for companies in
our industry generally. As a result, you cannot be sure that an active trading
market will develop for the exchange notes. In addition, if a large amount of
old notes are not tendered or are tendered improperly, the limited amount of
exchange notes that would be issued and outstanding after we consummate the
exchange offer would reduce liquidity and could lower the market price of
those exchange notes.

Fraudulent Conveyance Statutes--If a court determines that the issuance of
the old notes in the recapitalization was a fraudulent transfer under federal
or state laws, the court could void the notes and you would no longer be
entitled to any payments with respect to the notes.

Our payment of consideration to finance a portion of the recapitalization
(including our issuance of the old notes) may be subject to review under
federal or state fraudulent transfer laws. While the relevant laws may vary
from state to state, under such laws, the payment of consideration will be a
fraudulent conveyance if (1) we paid the consideration with the intent of
hindering, delaying or defrauding creditors, or (2) we received less than
reasonably equivalent value or fair consideration in return for paying the
consideration, and, in the case of (2) only, one of the following is also
true:

. we were insolvent, or became insolvent, when we paid the consideration;

. paying the consideration left us with an unreasonably small amount of
capital; or

. we intended to, or believed that we would, be unable to pay debts as they
matured.

If the payment of the consideration were a fraudulent conveyance, a court
could, among other things, void our obligations regarding the payment of the
consideration and require the repayment of any amounts paid thereunder.

Generally, an entity will be considered insolvent if:

. the sum of its debts is greater than the fair value of its property;

. the present fair value of its assets is less than the amount that it will
be required to pay on its existing debts as they become due; or

. it cannot pay its debts as they became due.

Based upon financial statements and other information available to us, we
believe that we issued the old notes for proper purposes and in good faith and
that at the time we issued the old notes, we were solvent, had sufficient
capital to carry on our businesses and were able to pay our respective debts
as they mature. A court may not reach the same conclusions with regard to
these issues.

In addition, any future guarantees of the notes granted by our subsidiaries
could be deemed to be fraudulent conveyances.

Risks Related to Our Business

Absence of History as a Stand-alone Company--We historically operated as a
division of Shell and we may not be as profitable without the benefit of
Shell's infrastructure as we become a stand-alone company.

We have not had an independent operating history. As a subsidiary of Shell,
we relied on the operational, financial, administrative and information
systems resources and infrastructure of Shell. As a result of the
recapitalization, we are required to hire our own financial, administrative
and information systems staff as well

as enter into new operating and other agreements with Shell, some of which
will be transitional and others of which will be long term, so that we will
have the resources necessary to operate as an independent company. Our
transition to an independent company and continued dependence on Shell for
some services where we share facilities with one another involve the following
risks:

. Sharing Facilities with Shell--a majority of our facilities are co-
located within major Shell facilities, through which we need access to
conduct our business. We will also depend upon new operating agreements
with Shell for utility and other site services at these facilities.
Although we have contractual access rights, if Shell inhibits access to
our own facilities through its facilities, our business may be harmed.
Similarly, if Shell ceases to provide the services under the operating
agreements, we may not be able to obtain or provide these services at
prices or costs that would allow us to remain competitive.

. Administrative and Information Technology Support--as we complete the
transition to stand-alone operation, we are relying on contractual
arrangements with Shell to provide operational, administrative, human
resources, environmental and information services. We will also need
Shell's cooperation in our effort to develop independent information
technology and accounting systems. If Shell fails to supply these
administrative services under the agreements or to cooperate in the
transition phase, we could experience higher replacement costs and our
profits could decrease.

. Human Resources--as part of the transition, we need to recruit key
management, accounting and information technology personnel. We are also
relying on agreements with Shell for Shell to provide us, on a temporary
basis, with the services of approximately fifty employees who have
elected to remain with Shell. If Shell does not provide us with these
employees or we cannot replace them on a timely basis, our revenues and
profits may decline.

. Trade Names--we can no longer use Shell trademarks and trade names. Our
inability to use the Shell trademark and trade names may result in
decreased demand for our products and reduced revenues.

. Financial Statements--our historical combined financial statements are
based upon assumptions and estimates arising during our ownership by
Shell, including the allocation of costs and indebtedness. Our financial
statements therefore may not necessarily reflect what the results of
operations, financial position and cash flows would have been if we were
a stand-alone company during the period presented or what they will be
in the future.

Even if these risks do not materialize, we may have underestimated the costs
of running our business and successfully implementing our business strategy.
For a description of the long term and transitional agreements that we have
entered into with Shell referred to in the above paragraph, see "Certain
Relationships and Related Transactions--Ongoing Relationship with Shell."

Competition--Competition from our competitors could result in price
reductions for our products, a decrease in our market share position and
reduced profitability.

We face significant competition in the markets in which we operate.
Competition in our industry is based upon a number of considerations, such as
price, product innovation, product quality and distribution capability. In the
epoxy resins industry, we compete primarily with Dow Chemical and Vantico
Group S.A. (formerly a division of CIBA Specialty Chemicals). Vantico recently
underwent a leveraged recapitalization which may impact the competitive
environment. There are also several other companies, predominantly in Asia and
Eastern Europe, most of whom participate locally and in export markets. These
competitors may have competitive advantages (including, in some cases, lower
costs) which may enable them to impact prices for our products. Additionally,
other competitors may emerge, either through the development of new business,
or the purchase of existing businesses, with different competitive advantages
which we may not be able to foresee or to which we may not be able to
adequately respond in a timely manner. In addition, our industry is capital
intensive. This can cause continued production as long as prices are
sufficient to cover marginal costs even if prices are not adequate to cover
all costs. As a result, any significant overcapacity in the industry could
lead to substantial price competition.

In the BPA and versatic acids and derivatives product lines, we also face
competition from other manufacturers, many of which have significantly greater
financial and other resources than ours. These competitors may be better able
than we are to withstand changes in market conditions. In the BPA industry,
Mitsubishi sold Aristech Chemical Corporation to Sunoco, Inc. as of January 1,
2001. We may not have sufficient financial resources to respond to these
competitive pressures and to continue to make investments in our manufacturing
facilities or for product development or to be successful in otherwise
realizing or maintaining any of our competitive advantages.

End-Use Markets--We sell products to mature, highly competitive industries
that have undergone consolidation, and these larger customers may pressure us
into lowering our prices which could harm our profitability. Also, if we lose
one or more of our major customers, our results of operations could be
adversely affected.

Many of our customers are in mature industries, which have undergone
consolidation. As a result, in many end-use markets, such as aerospace,
automotive and heavy electrical equipment manufacture, there are only a few
large potential customers for our products. As our customers grow larger, and
their industries grow more concentrated, the few remaining large entities may
develop greater bargaining power and adversely affect our competitive
position. Consolidation trends in these industries have caused significant
pricing pressure on our products, and continued consolidation in these and
other industries may force prices lower, which would adversely affect our
business and financial position. From 1997 to 1999, our revenues have declined
each year, despite increasing volumes in each year, as a result of declining
prices and adverse currency impacts. We may not be able to maintain all or any
portion of announced price increases for any extended period of time or that
we will not lose any significant customers or volume in the future as a result
of these price increases. Historically, there have been instances where we and
our competitors have unsuccessfully attempted to increase prices.

Our top twenty customers accounted for approximately 55% of our revenues in
2000. In particular, Bayer, which purchases BPA from us, accounted for
approximately 10% of our revenues in 2000 (approximately $99 million). Bayer
has recently constructed another facility for the production of BPA and is
reducing its purchases of BPA from us over the next three years. The loss of
one or more of our major customers, or a material reduction in sales to these
customers, could result in reduced revenues and operating income.

Cyclicality--The industry in which we operate can be cyclical and significant
increases in the price of our raw materials or production overcapacity in the
industry could lead to price reductions for our products, increased costs and
lower profit margins.

The results in our business can be negatively impacted by supply and demand
movements of our final products and our raw materials. We use large quantities
of raw materials in manufacturing our products, primarily phenol and acetone
for the manufacture of BPA and propylene and chlorine for the manufacture of
ECH. In 2000, costs for these new materials comprised approximately 41% of our
total costs excluding interest expense and special charges. Significant
increases in the price of raw materials could adversely affect our operating
margins. The price of raw materials is a function of, among other things,
manufacturing capacity, demand, and the price of crude oil and natural gas
feedstocks. The base petrochemical industry historically has experienced
alternating periods of tight supply, causing prices to increase, followed by
periods of substantial capacity addition, resulting in oversupply, declining
prices and reduction in the use of existing production capacity. A significant
increase in raw material prices would cause our costs to increase and could
reduce our margins and profitability.

Our end-use market is also impacted by cyclical movements in certain
industries served directly or indirectly by us, including the automotive,
aerospace, electronics, food and beverage packaging, domestic appliances and
construction industries. The cyclical nature of pricing and investment in our
industry is likely to continue and as such, we may experience periods of
overcapacity, declining prices and lower profit margins at times in the
future. In addition, external factors beyond our control, such as general
economic conditions, competitors' actions, international events and
circumstances and governmental regulation in the United States and in other
foreign jurisdictions can cause volatility in raw material prices, as well as
fluctuations in demand for our products, product prices, volumes and margins.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations." Demand may not grow as we expect, especially in the event of
an economic downturn.

Projected Information--We may not achieve our projected cost savings and
demand increases, and even if we do, we may not be profitable.

Even if we are successful as a stand-alone company, we may not realize the
cost savings that we anticipate from the recapitalization, and other
initiatives or projected demand increases may not occur for the following
reasons:

. Any cost savings may be offset by costs incurred in operating as a
stand-alone company, including the cost of implementation.

. The cost savings are based on estimates and assumptions which may prove
to be incorrect.

. The cost savings may be offset by increases in other expenses, problems
unrelated to the recapitalization and other initiatives or an adverse
impact on net income resulting from the cost savings themselves.

. Our costs may increase due to increases in the cost of our raw
materials, many of which are petroleum-based products.

. We may not realize the cost savings that we anticipate if we experience
problems under our agreements with Shell or at the facilities we share
with Shell.

. Our industry is subject to general economic conditions and demand is not
likely to grow as quickly, if at all, or could decrease in an economic
downturn.

For a further discussion of important factors that could cause actual
results to differ materially from the results referred to in the forward-
looking statements contained in this prospectus, see "--Forward-Looking
Statements."

Forward-Looking Statements--Our actual results may be materially different
than those referred to in our forward-looking statements.

This prospectus contains "forward-looking statements" that involve risks and
uncertainties. Forward-looking statements include statements concerning our
plans, objectives, goals, strategies, future events, future revenues or
performance, capital expenditures, financing needs, plans or intentions
relating to acquisitions and other information that is not historical
information and, in particular, appear under the headings "Summary,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business." When used in this prospectus, the words
"estimates," "expects," "anticipates," "forecasts," "plans," "intends,"
"believes" and variations of these words or similar expressions are intended
to identify forward-looking statements. All forward-looking statements,
including without limitation, management's examination of historical operating
trends, are based upon our current expectations and various assumptions. Our
expectations, beliefs and projections are expressed in good faith and we
believe there is a reasonable basis for them. However, there can be no
assurance that management's expectations, beliefs and projections will result
or be achieved.

There are a number of risks and uncertainties that could cause our actual
results to differ materially from the results referred to in the forward-
looking statements contained in this prospectus. Important factors that could
cause our actual results to differ materially from the results referred to in
the forward-looking statements we make in this prospectus are set forth
elsewhere in this prospectus, including the other factors discussed under this
heading "Risk Factors." As stated elsewhere in this prospectus, these risks,
uncertainties and other important factors include, among others:

. general economic and business conditions;

. industry trends;

. increases in our leverage;

. changes in our ownership structure;

. restrictions contained in our debt agreements;

. the cost of developing our own stand-alone systems and infrastructure;

. the continuity or replacement of systems and services being provided to
us by Shell or its affiliates;

. changes in business strategy, development plans or cost savings plans;

. competition;

. changes in distribution channels or competitive conditions in the markets
or countries where we operate;

. the highly cyclical nature of the end-use markets in which we
participate;

. the loss of any of our major customers;

. raw material costs and availability;

. ability to attain and maintain any price increases for our products;

. changes in demand for our products;

. availability of qualified personnel;

. foreign currency fluctuations and devaluations and political instability
in our foreign markets;

. the loss of our intellectual property rights;

. availability, terms and deployment of capital;

. changes in, or the failure or inability to comply with, government
regulation, including environmental regulations; and

. increases in the cost of compliance with laws and regulations, including
environmental laws and regulations.

There may be other factors that may cause our actual results to differ
materially from the results referred to in the forward-looking statements. All
forward-looking statements attributable to us or persons acting on our behalf
apply only as of the date of this prospectus and are expressly qualified in
their entirety by the cautionary statements included in this prospectus. We
undertake no obligation to publicly update or revise forward-looking
statements which may be made to reflect events or circumstances after the date
made or to reflect the occurrence of unanticipated events.

Supply Agreements--We are dependent on long-term supply agreements with Shell
and others, and if they do not timely deliver our raw materials to us, we may
have to use alternative higher cost sources, if available, for our raw
materials or delay or cancel shipment of our products, any of which actions
could decrease our profit margins and adversely affect our business.

We rely on long-term supply agreements with Shell and other key suppliers
for most of our raw material supply. The loss of a key source of supply or a
delay in shipments could have an adverse effect on our business. Should any of
our suppliers fail to deliver or should any of our key long-term supply
contracts be canceled, we would be forced to purchase raw materials in the
open market, and no assurances can be given that we would be able to make
these purchases or at prices that would allow us to remain competitive. Some
of our raw materials are provided to us by one supplier and we could incur
significant time and expense if we had to replace the supplier. In addition,
several of our feedstocks at various facilities are transported through a
pipeline from one supplier. If we were unable to receive these feedstocks
through these pipeline arrangements, we may not be able to obtain them from
other suppliers at competitive prices or in a timely manner.

Dependence Upon Key Personnel--If we lose our senior management or the new
members of our management team do not work together successfully with the
former Shell management team, we may be unable to focus on our business or
pursue additional opportunities.

We are dependent on the services of our senior management team, including
Marvin O. Schlanger, our Chairman and President. The loss of Mr. Schlanger,
with his twenty-five years of experience in the chemical industry, would
adversely affect our ability to implement our business strategy. In addition,
Mr. Schlanger and J. Travis Spoede, our Executive Vice President and Chief
Financial Officer, were not part of the senior management team that existed
prior to the recapitalization. Accordingly, there is a very limited history of
our senior management team working together. If the new and old members of our
senior management are not successful in working together as a team,
management's attention may be diverted from our business and we may fail to
implement our business strategy or take advantage of future business
opportunities.

Exchange Rate Fluctuations--Our worldwide operations subject us to currency
translation risk and currency transaction risk which could cause our results
to fluctuate significantly from period to period and hinder us from making our
debt service payments.

The financial condition and results of operations of each operating
subsidiary are reported in the relevant local currency and then translated
into U.S. dollars at the applicable currency exchange rate for inclusion in
our financial statements. Exchange rates between these currencies and U.S.
dollars in recent years have fluctuated significantly and may do so in the
future. We generated 45% of our 2000 revenues from companies incorporated
outside the United States, and we incurred 43% of our 2000 total expenses from
companies incorporated outside the United States. Significant changes in the
value of the Netherland Guilders relative to the U.S. dollar could also have
an adverse effect on our financial condition and results of operations and our
ability to meet interest and principal payments on euro-denominated debt,
including certain borrowings under the credit agreement, and U.S. dollar
denominated debt, including the notes and certain borrowings under the credit
agreement.

In addition to currency translation risks, we incur currency transaction
risk whenever one of our operating subsidiaries enters into either a purchase
or a sales transaction using a different currency from the currency in which
it receives revenues. While owned by Shell, we did not enter into any separate
hedging contracts. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Given the volatility of exchange rates,
we may not be able to effectively manage our currency transaction and/or
translation risks. Volatility in currency exchange rates may cause our profits
to decrease or result in a loss.

International Operations--As a global business, we are exposed to local
business risks in several different countries which could increase our
operating costs and adversely affect our results of operations.

We manufacture and distribute our products in many countries around the
world. We are, and may increasingly become, confronted with different
political, social, legal and regulatory requirements in many jurisdictions.
These include:

. tariffs and trade barriers;

. hyperinflation;

. exchange controls;

. requirements relating to withholding taxes on remittances and other
payments by subsidiaries;

. different regimes controlling the protection of our intellectual
property;

. restrictions on our ability to own or operate subsidiaries, make
investments or acquire new businesses in these jurisdictions; and

. restrictions on our ability to repatriate dividends from our
subsidiaries.

Our international operations also expose us to different local political and
business risks and challenges. For example:

. We may be faced with political and social instability in countries in
which we operate that could result in nationalization or seizure of our
assets;

. We are faced with potential difficulties in staffing and managing local
operations; and

. We have to design local solutions to manage credit risks of local
customers and distributors.

Our expansion in emerging markets requires us to respond to rapid changes in
market conditions in these countries. Our overall success as a global business
depends, in part, upon our ability to succeed in differing economic, social
and political conditions. We may not succeed in developing and implementing
policies and strategies that are effective in each location where we do
business.

Environmental Regulation--The cost of complying with environmental laws and
regulations, including clean-up costs for existing and future environmental
conditions could be significant and reduce our operating income.

We are subject to extensive regulation under environmental laws by federal,
state and local governmental entities and foreign authorities. These laws
impose liability for damages to the environment and/or natural resources,
establish requirements to remediate contamination and to limit discharges of
hazardous substances to

air and water from ongoing operations, and provide for substantial fines and
potential criminal sanctions for violations. They are complex, change
frequently and have tended to become more stringent over time. These laws
affect how we operate our business, and govern the investigation and
remediation of environmental conditions at current and former facilities and
offsite disposal areas. For instance, we are currently investigating whether
there is an economically feasible means of replacing the current ECH
production process with a chlorine-free process at the Pernis facility. If we
find a feasible replacement solution by 2006, the Pernis facility will be
required to implement it by 2010 at a cost which could be material. In
addition, at our facilities that are physically part of larger, Shell-run
facilities, our operations may be affected by agreements we reach with Shell
regarding ongoing environmental compliance. Individuals may also seek recovery
of damages for alleged personal injury or property damage due to exposure to
hazardous substances at or from our facilities or to substances otherwise
owned, sold or controlled by us. Accordingly, complying with existing and
future environmental laws and regulations that affect our business could
impose material costs and liabilities on us.

Shell's agreement generally to indemnify us for environmental damages
associated with environmental conditions that occurred or existed before the
closing date of the recapitalization may not adequately protect us from
liability for these and other environmental matters due to both contractual
limitations in the agreement and the nature of the environmental laws, which
may impose strict liability.

We are responsible for any environmental damages associated with
environmental conditions arising from our business following the closing of
the recapitalization. Estimated costs for future environmental compliance and
remediation or other costs are often imprecise. Based on current regulations,
known conditions and Shell's agreement to indemnify us, we do not need to
accrue additional liabilities at this time. However, it is not possible to
predict accurately the amount or timing of costs resulting from regulatory
changes or future events. We anticipate that, in the future, we will continue
to face environmental liabilities and incur costs for environmental matters in
connection with our business operations and contractual obligations and these
costs could be maternal.

Occupational Health and Safety Laws and Regulations--The cost of complying
with laws and regulations to which our raw materials, chemicals, substances
and products are subject could be significant and reduce our operating income.

Our products (including the raw materials and intermediates we handle) and
operational processes are subject to rigorous federal, state, local and/or
foreign occupational health and safety laws, regulations and/or
investigations. There is a risk associated with key raw materials, chemicals,
substances and/or products that are currently characterized or may, in the
future, be recharacterized as having a toxicological or health related impact
on the environment, our customers or employees. For example, some of the raw
materials, chemicals, substances and/or products used in our business are
classified as highly hazardous chemicals by the Occupational Safety and Health
Administration. Additionally, some raw materials, chemicals, substances and/or
products have been classified as probable human and definite animal
carcinogens and have been associated with possible endocrine disruption. If
existing standards applicable to relevant raw materials, chemicals, substances
and/or products are amended or if raw materials, chemicals, substances and/or
products that are not currently covered become covered, it could result in
increased costs in order to comply with amended or new requirements and/or
claims brought by individuals exposed to these substances and may affect our
ability to operate certain plants. Changes in federal, state, local and/or
foreign occupational health and safety laws and regulations may also affect
the marketability of some of our products and may, in the future, impose
additional costs and reduce our profits.

Intellectual Property--We may not be able to adequately protect our
intellectual property rights, which could cause our revenues to decrease, or
we may be subject to claims that we are infringing upon the rights of others,
which could increase our operating costs and reduce our profitability.

As of March 1, 2001, we owned or licensed over 865 issued patents and own or
have rights to over 1,500 pending patents and patent applications. We rely on
patents to protect our intellectual property. While a presumption of validity
exists with respect to patents issued to us in the United States and other
jurisdictions, there can be no assurance that any of our patents will not be
challenged, invalidated, circumvented or rendered unenforceable. The laws of
many foreign countries do not protect our intellectual property rights to the
same extent as the laws of the United States. Furthermore, pending patent
applications filed by us may not result in an

issued patent, or, if patents are issued to us, the patents may not provide
meaningful protection against competitors or against competitive technologies.
You should be aware that the expiration of a patent can result in intense
competition with consequent erosion of profit margins.

Proprietary protection of our formulations, processes, apparatuses and other
technology is also important to our business. We rely upon unpatented
proprietary expertise and continuing technological innovation and other trade
secrets to develop and maintain our competitive position. Others may obtain
knowledge of trade secrets through independent development or other access by
legal means. The failure of our patents to protect our formulations,
processes, apparatuses, technology, or proprietary know-how could result in
loss of revenues and decreased profits.

Currently, there is no material pending litigation against us regarding any
intellectual property claim but we cannot assure you that there will not be
future claims. Intellectual property claims, with or without merit, could
subject us to costly litigation and divert our technical and management
personnel from their regular responsibilities. Furthermore, successful claims
could suspend the manufacture of products using the contested invention and
result in loss of revenues and decreased profits.

Concentration of Ownership and Control of Us--We are controlled by an
affiliate of Apollo and its interests as an equity holder may conflict with
yours as a creditor.

As of May 7, 2001, RPP Holdings owned 91.1% of the outstanding voting stock
of our parent company, RPP Inc., which owns all of our equity interests. RPP
Holdings is an affiliate of, and is controlled by, Apollo. Accordingly, Apollo
has the power to control us and RPP Inc. The interests of Apollo may not in
all cases be aligned with yours. For example, our equity holders may have an
interest in pursuing acquisitions, divestitures, financings or other
transactions, that, in their judgment, could enhance their equity investment,
even though these transactions might involve risks to the holders of the notes
if the transactions resulted in our being more highly leveraged or
significantly changed the nature of our business operations or strategy. In
addition, if we encounter financial difficulties, or we are unable to pay our
debts as they mature, the interests of our equity holders might conflict with
those of the holders of the notes. In that situation, for example, the holders
of the notes might want us to raise additional equity from RPP Holdings or
other investors to reduce our leverage and pay our debts, while RPP Holdings
might not want to increase their investment in us or have their ownership
diluted and instead choose to take other actions, such as selling our assets.

THE EXCHANGE OFFER

Purpose and Effect of the Exchange Offer

We have entered into a registration rights agreement with the placement
agents in the private placement offering of the old notes in which we agreed
to file a registration statement relating to an offer to exchange the old
notes for exchange notes. The registration statement of which this prospectus
forms a part was filed in compliance with this obligation. We also agreed to
use our commercially reasonable efforts to cause such offer to be consummated
within 210 days following the original issue of the old notes. The exchange
notes will have terms substantially identical to the old notes except that the
exchange notes will not contain terms with respect to transfer restrictions,
registration rights and additional interest payable for the failure to have
the registration statement of which this prospectus forms a part declared
effective by May 13, 2001 or the exchange offer consummated by June 12, 2001.
The old notes were issued on November 14, 2000.

Under the circumstances set forth below, we will use our commercially
reasonable efforts to cause the Commission to declare effective a shelf
registration statement with respect to the resale of the old notes and keep
the statement effective for up to two years after the effective date of the
shelf registration statement. These circumstances include:

. if pursuant to any changes in law, Commission rules or regulations or
prevailing interpretations thereof by the staff of the Commission do not
permit us to effect the exchange offer as contemplated by the
registration rights agreement;

. the exchange offer is not consummated within 210 days after the original
issue of the old notes; and

. if the placement agents in the private offering of old notes hold old
notes that have the status of an unsold allotment or any other holder of
old notes who is not able to participate in the exchange offer so
requests in writing on or before the 60th day after the consummation of
the exchange offer.

If we fail to comply with our obligations under the registration rights
agreement to have the registration statement of which this prospectus forms a
part declared effective by May 13, 2001 or the exchange offer consummated by
June 12, 2001, we will be required to pay additional interest to holders of
the old notes.

Each holder of old notes that wishes to exchange such old notes for
transferable exchange notes in the exchange offer will be required to make the
following representations:

. any exchange notes will be acquired in the ordinary course of its
business;

. such holder has no arrangement with any person to participate in the
distribution of the exchange notes; and

. such holder is not an "affiliate," as defined in Rule 405 of the
Securities Act, of either us or RPP Capital or, if it is an affiliate,
that it will comply with applicable registration and prospectus delivery
requirements of the Securities Act.

Resale of Exchange Notes

Based on interpretations of the Commission staff set forth in no action
letters issued to unrelated third parties, we believe that exchange notes
issued under the exchange offer in exchange for old notes may be offered for
resale, resold and otherwise transferred by any exchange note holder without
compliance with the registration and prospectus delivery provisions of the
Securities Act, if:

. such holder is not an "affiliate" of either of the Issuers within the
meaning of Rule 405 under the Securities Act;

. such exchange notes are acquired in the ordinary course of the holder's
business; and

. the holder does not intend to participate in the distribution of such
exchange notes.

Any holder who tenders in the exchange offer with the intention of
participating in any manner in a distribution of the exchange notes:

. cannot rely on the position of the staff of the Commission set forth in
"Exxon Capital Holdings Corporation" or similar interpretive letters; and

. must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale transaction.

This prospectus may be used for an offer to resell, for the resale or for
other retransfer of exchange notes only as specifically set forth in this
prospectus. With regard to broker-dealers, only broker-dealers that acquired
the old notes as a result of market-making activities or other trading
activities may participate in the exchange offer. Each broker-dealer that
receives exchange notes for its own account in exchange for old notes, where
such old notes were acquired by such broker-dealer as a result of market-
making activities or other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of the exchange notes.
Please read the section captioned "Plan of Distribution" for more details
regarding these procedures for the transfer of exchange notes.

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 for exchange any old notes
properly tendered and not withdrawn prior to the expiration date. We will
issue $1,000 principal amount of exchange notes in exchange for each $1,000
principal amount of old notes surrendered under the exchange offer. old notes
may be tendered only in integral multiples of $1,000.

The form and terms of the exchange notes will be substantially identical to
the form and terms of the old notes except the exchange notes will be
registered under the Securities Act, will not bear legends restricting their
transfer and will not provide for any additional interest upon our failure to
fulfill our obligations under the registration rights agreement to file, and
cause to be effective, a registration statement. The exchange notes will
evidence the same debt as the old notes. The exchange notes will be issued
under and entitled to the benefits of the same indenture that authorized the
issuance of the old notes. Consequently, both series will be treated as a
single class of debt securities under that indenture.

The exchange offer is not conditioned upon any minimum aggregate principal
amount of old notes being tendered for exchange.

As of the date of this prospectus, $200.0 million aggregate principal amount
of the old notes are outstanding. This prospectus and the letter of
transmittal are being sent to all registered holders of old notes. There will
be no fixed record date for determining registered holders of old notes
entitled to participate in the exchange offer.

We intend to conduct the exchange offer in accordance with the provisions of
the registration rights agreement, the applicable requirements of the
Securities Act and the Securities Exchange Act of 1934 and the rules and
regulations of the Commission. Old notes that are not tendered for exchange in
the exchange offer will remain outstanding and continue to accrue interest and
will be entitled to the rights and benefits such holders have under the
indenture relating to the old notes.

We will be deemed to have accepted for exchange properly tendered old notes
when we have given oral or written notice of the acceptance to the exchange
agent. The exchange agent will act as agent for the tendering holders for the
purposes of receiving the exchange notes from us and delivering exchange notes
to such holders. Subject to the terms of the exchange and registration rights
agreement, we expressly reserve the right to amend or terminate the exchange
offer, and not to accept for exchange any old notes not previously accepted
for exchange, upon the occurrence of any of the conditions specified below
under the caption "--Certain Conditions to the Exchange Offer."

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. We will pay all charges and expenses, other than those transfer taxes
described below, in connection with the exchange offer. It is important that
you read the section labeled "--Fees and Expenses" below for more details
regarding fees and expenses incurred in the exchange offer.

Expiration Date; Extensions; Amendments

The exchange offer will expire at 12:00 Midnight, New York City time on June
8, 2001, unless in our sole discretion, we extend it.

In order to extend the exchange offer, we will notify the exchange agent
orally or in writing of any extension. We will notify in writing or by public
announcement the registered holders of old notes of the extension no later
than 9:00 a.m., New York City time, on the business day after the previously
scheduled expiration date.

We reserve the right, in our sole discretion:

. to delay accepting for exchange any old notes;

. to extend the exchange offer or to terminate the exchange offer and to
refuse to accept old notes not previously accepted if any of the
conditions set forth below under "--Certain Conditions to the Exchange
Offer" have not been satisfied, by giving oral or written notice of such
deal, extension or termination to the exchange agent; or

. subject to the terms of the registration rights agreement, to amend the
terms of the exchange offer in any manner.

Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice or public
announcement thereof to the registered holders of old notes. If we amend the
exchange offer in a manner that we determine to constitute a material change,
we will promptly disclose such amendment in a manner reasonably calculated to
inform the holders of old notes of such amendment.

Without limiting the manner in which we may choose to make public
announcements of any delay in acceptance, extension, termination or amendment
of the exchange offer, we shall have no obligation to publish, advertise, or
otherwise communicate any such public announcement, other than by issuing a
timely press release to a financial news service.

Certain Conditions to the Exchange Offer

Despite any other term of the exchange offer, we will not be required to
accept for exchange, or exchange any exchange notes for, any old notes, and we
may terminate the exchange offer as provided in this prospectus before
accepting any old notes for exchange if in our reasonable judgment:

. the exchange notes to be received will not be tradable by the holder
without restriction under the Securities Act or the Securities Exchange
Act of 1934 and without material restrictions under the blue sky or
securities laws of substantially all of the states of the United States;

. the exchange offer, or the making of any exchange by a holder of old
notes, would violate applicable law or any applicable interpretation of
the staff of the Commission; or

. any action or proceeding has been instituted or threatened in any court
or by or before any governmental agency with respect to the exchange
offer that, in our judgment, would reasonably be expected to impair our
ability to proceed with the exchange offer.

In addition, we will not be obligated to accept for exchange the old notes
of any holder that has not made:

. the representations described under "--Purpose and Effect of the Exchange
Offer", "--Procedures for Tendering" and "Plan of Distribution", and

. such other representations as may be reasonably necessary under
applicable SEC rules, regulations or interpretations to make available to
it an appropriate form for registration of the exchange notes under the
Securities Act.

We expressly reserve the right, at any time or at various times, to extend
the period of time during which the exchange offer is open. Consequently, we
may delay acceptance of any old notes by giving oral or written notice of such
extension to the registered holders of the old notes. During any such
extensions, all old notes previously tendered will remain subject to the
exchange offer, and we may accept them for exchange unless they have been
previously withdrawn. We will return any old notes that we do not accept for
exchange for any reason without expense to their tendering holder as promptly
as practicable after the expiration or termination of the exchange offer.

We expressly reserve the right to amend or terminate the exchange offer, and
to reject for exchange any old notes not previously accepted for exchange,
upon the occurrence of any of the conditions of the exchange offer specified
above. We will give oral or written notice or public announcement of any
extension, amendment, non-acceptance or termination to the registered holders
of the old notes as promptly as practicable. In the case of any extension,
such notice will be issued no later than 9:00 a.m., New York City time, on the
business day after the previously scheduled expiration date.

These conditions are for our sole benefit and we may assert them regardless
of the circumstances that may give rise to them or waive them in whole or in
part at any or at various times in our sole discretion. If we fail at any time
to exercise any of the foregoing rights, that failure will not constitute a
waiver of such right. Each such right will be deemed an ongoing right that we
may assert at any time or at various times.

In addition, we will not accept for exchange any old notes tendered, and
will not issue exchange notes in exchange for any such old notes, if at such
time any stop order will be threatened or in effect with respect to the
registration statement of which this prospectus constitutes a part or the
qualification of the indenture under the Trust Indenture Act of 1939.

Procedures for Tendering

Only a holder of old notes may tender such old notes in the exchange offer.
To tender in the exchange offer, a holder must:

. complete, sign and date the letter of transmittal, or a facsimile of the
letter of transmittal; have the signature on the letter of transmittal
guaranteed if the letter of transmittal so requires; and mail or deliver
such letter of transmittal or facsimile to the exchange agent prior to
the expiration date; or

. comply with DTC's Automated Tender Offer Program procedures described
below.

In addition, either:

. the exchange agent must receive old notes along with the letter of
transmittal; or

. the exchange agent must receive, prior to the expiration date, a timely
confirmation of book-entry transfer of such old notes into the exchange
agent's account at DTC according to the procedures for book-entry
transfer described below or a properly transmitted agent's message; or

. the holder must comply with the guaranteed delivery procedures described
below.

To be tendered effectively, the exchange agent must receive any physical
delivery of the letter of transmittal and other required documents at the
address set forth below under "--Exchange Agent" prior to 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 in this prospectus 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 holder's election and risk.
Rather than mail these items, we recommend that holders use an overnight or
hand delivery service. In all cases, holders should allow sufficient time to
assure delivery to the exchange agent before the expiration date. Holders
should not send us the letter of transmittal or old notes. Holders may request
their respective brokers, dealers, commercial banks, trust companies or other
nominees to effect the above transactions for them.

Any beneficial owner whose old notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
tender should contact the registered holder promptly and instruct it to tender
on the owners' behalf. If such beneficial owner wishes to tender on its own
behalf, it must, prior to completing and executing the letter of transmittal
and delivering its old notes, either:

. make appropriate arrangements to register ownership of the old notes in
such owner's name; or

. obtain a properly completed bond power from the registered holder of old
notes.

The transfer of registered ownership may take considerable time and may not
be completed prior to the expiration date.

Signatures on a letter of transmittal or a notice of withdrawal described
below must be guaranteed by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the
United States or another "eligible institution" within the meaning of Rule
17Ad-15 under the Exchange Act, unless the old notes tendered pursuant thereto
are tendered:

. by a registered holder who has not completed the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on the letter
of transmittal; or

. for the account of an eligible institution.

If the letter of transmittal is signed by a person other than the registered
holder of any old notes listed on the old notes, such old notes must be
endorsed or accompanied by a properly completed bond power. The bond power
must be signed by the registered holder as the registered holder's name
appears on the old notes and an eligible institution must guarantee the
signature on the bond power.

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. Unless waived by the Issuers, they
should also submit evidence satisfactory to the Issuers of their authority to
deliver the letter of transmittal.

The exchange agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may use DTC's Automated Tender Offer
program to tender. Participants in the program may, instead of physically
completing and signing the letter of transmittal and delivering it to the
exchange agent, transmit their acceptance of the exchange offer
electronically. They may do so by causing DTC to transfer the old notes to the
exchange agent in accordance with its procedures for transfer. DTC will then
send an agent's message to the exchange agent. The term "agent's message"
means a message transmitted by DTC, received by the exchange agent and forming
part of the book-entry confirmation, to the effect that:

. DTC has received an express acknowledgment from a participant in its
Automated Tender Offer Program that is tendering old notes that are the
subject of such book-entry confirmation;

. such participant has received and agrees to be bound by the terms of the
letter of transmittal (or, in the case of an agent's message relating to
guaranteed delivery, that such participant has received and agrees to be
bound by the applicable notice of guaranteed delivery); and

. the agreement may be enforced against such participant.

We will determine in our sole discretion all questions as to the validity,
form, eligibility (including time of receipt), acceptance of tendered old
notes and withdrawal of tendered old notes. Our determination will

be final and binding. We reserve the absolute right to reject any old notes
not properly tendered or any old notes the acceptance of which would, in the
opinion of our counsel, be unlawful. We also reserve the right 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 with respect to tenders of old notes, neither we, the exchange
agent nor any other person will incur any liability for failure to give such
notification. Tenders of old notes will not be deemed made until such defects
or irregularities have been cured or waived. Any old notes received by the
exchange agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned to the exchange
agent without cost to the tendering holder, unless otherwise provided in the
letter of transmittal, as soon as practicable following the expiration date.

In all cases, we will issue exchange notes for old notes that we have
accepted for exchange under the exchange offer only after the exchange agent
timely receives:

. old notes or a timely book-entry confirmation of such old notes into the
exchange agent's account at DTC; and

. a properly completed and duly executed letter of transmittal and all
other required documents or a properly transmitted agent's message.

By signing the letter of transmittal, each tendering holder of old notes
will represent that, among other things:

. any exchange notes that the holder receives will be acquired in the
ordinary course of its business;

. the holder has no arrangement or understanding with any person or entity
to participate in the distribution of the exchange notes;

. if the holder is not a broker-dealer, that it is not engaged in and does
not intend to engage in the distribution of the exchange notes;

. if the holder is a broker-dealer that will receive exchange notes for its
own account in exchange for old notes that were acquired as a result of
market-making activities, that it will deliver a prospectus, as required
by law, in connection with any resale of such exchange notes; and

. the holder is not an "affiliate", as defined in Rule 405 of the
Securities Act, of either of the Issuers or, if the holder is an
affiliate, it will comply with any applicable registration and prospectus
delivery requirements of the Securities Act.

Book-Entry Transfer

The exchange agent will make a request to establish an account with respect
to the old notes at DTC for purposes of the exchange offer promptly after the
date of this prospectus; and any financial institution participating in DTC's
system may make book-entry delivery of old notes by causing DTC to transfer
such old notes into the exchange agent's account at DTC in accordance with
DTC's procedures for transfer. Holders of old notes who are unable to deliver
confirmation of the book-entry tender of their old notes into the exchange
agent's account at DTC or all other documents of transmittal to the exchange
agent on or prior to the expiration date must tender their old notes according
to the guaranteed delivery procedures described below.

Guaranteed Delivery Procedures

Holders wishing to tender their old notes but whose old notes are not
immediately available or who cannot deliver their old notes, the letter of
transmittal or any other required documents to the exchange agent or comply
with the applicable procedures under DTC's Automated Tender Offer Program
prior to the expiration date may tender if:

. the tender is made through an eligible institution;

. prior to the expiration date, the exchange agent receives from such
eligible institution either a properly completed and duly executed notice
of guaranteed delivery (by facsimile transmission, mail or hand delivery)
or a properly transmitted agent's message and notice of guaranteed
delivery:

--setting forth the name and address of the holder, the registered
number(s) of such old notes and the principal amount of old notes
tendered;

--stating that the tender is being made thereby; and

--guaranteeing that, within three (3) New York Stock Exchange trading
days after the expiration date, the letter of transmittal (or
facsimile thereof) together with the old notes or a book-entry
confirmation, and any other documents required by the letter of
transmittal will be deposited by the eligible institution with the
exchange agent; and

. the exchange agent receives such properly completed and executed letter
of transmittal (or facsimile thereof), as well as all tendered old notes
in proper form for transfer or a book-entry confirmation, and all other
documents required by the letter of transmittal, within three (3) New
York Stock Exchange trading days after the expiration date.

Upon request to the exchange agent, a notice of guaranteed delivery will be
sent to holders who wish to tender their old notes according to the guaranteed
delivery procedures set forth above.

Withdrawal of Tenders

Except as otherwise provided in this prospectus, holders of old notes may
withdraw their tenders at any time prior to the expiration date.

For a withdrawal to be effective:

. the exchange agent must receive a written notice (which may be by
telegram, telex, facsimile transmission or letter) of withdrawal at one
of the addresses set forth below under "--Exchange Agent", or

. holders must comply with the appropriate procedures of DTC's Automated
Tender Offer Program system.

Any such notice of withdrawal must:

. specify the name of the person who tendered the old notes to be
withdrawn;

. identify the old notes to be withdrawn (including the principal amount of
such old notes); and

. where certificates for old notes have been transmitted, specify the name
in which such old notes were registered, if different from that of the
withdrawing holder.

If certificates for old notes have been delivered or otherwise identified to
the exchange agent, then, prior to the release of such certificates, the
withdrawing holder must also submit:

. the serial numbers of the particular certificates to be withdrawn; and

. a signed notice of withdrawal with signatures guaranteed by an eligible
institution unless such holder is an eligible institution.

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 such facility. We will determine all
questions as to the validity, form and eligibility (including time of receipt)
of such notices, and our determination shall be final and binding on all
parties. We will deem any old notes so withdrawn not to have validity tendered
for exchange for purposes of the exchange offer. Any old notes that have been
tendered for exchange but that are not exchanged for any reason will be
returned to their holder without cost to the holder (or, in the case of old
notes tendered by book-entry transfer into the exchange agent's account at DTC
according to the procedures described above, such old notes will be credited
to an account maintained with DTC for old notes) as soon as practicable after

withdrawal, rejection of tender or termination of the exchange offer. Properly
withdrawn old notes may be retendered by following one of the procedures
described under "--Procedures for Tendering" above at any time on or prior to
the expiration date.

Exchange Agent

The United States Trust Company of New York has been appointed as exchange
agent for the exchange offer. You should direct questions and requests for
assistance, requests for additional copies of this prospectus or of the letter
of transmittal and requests for the notice of guaranteed delivery to the
exchange agent addressed as follows:

For Delivery by Registered or For Overnight Delivery Only:
Certified Mail:

United States Trust Company of New
United States Trust Company of New York
York 30 Broad Street, 14th
P.O. Box 84 Floor
Bowling Green Station New York, NY 10004-2304
New York, NY 10274-0084

By Hand: By Facsimile Transmission
(for eligible institutions only):
United States Trust Company of New
York
30 Broad Street, B-Level (646) 458-8111
New York, NY 10004-2304
Confirm facsimile by telephone only:

(800) 548-6565

Delivery of the letter of transmittal to an address other than as set forth
above or transmission via facsimile other than as set forth above does not
constitute a valid delivery of such letter of transmittal.

Fees and Expenses

We will bear the expenses of soliciting tenders. The principal solicitation
is being made by mail; however, we may make additional solicitations by
telegraph, telephone or in person by our officers and regular employees and
those of our affiliates.

We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to broker-dealers or others soliciting
acceptances of the exchange offer. We will, however, pay the exchange agent
reasonable and customary fees for its services and reimburse it for its
related reasonable out-of-pocket expenses.

Our expenses in connection with the exchange offer include:

. Commission registration fees;

. fees and expenses of the exchange agent and trustee;

. accounting and legal fees and printing costs; and

. related fees and expenses.

Transfer Taxes

We will pay all transfer taxes, if any, applicable to the exchange of old
notes under the exchange offer. The tendering holder, however, will be
required to pay any transfer taxes (whether imposed on the registered holder
or any other person) if:

. certificates representing old notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the
name of, any person other than the registered holder of old notes
tendered;

. tendered old notes are registered in the name of any person other than
the person signing the letter of transmittal; or

. a transfer tax is imposed for any reason other than the exchange of old
notes under the exchange offer.

If satisfactory evidence of payment of such taxes is not submitted with the
letter of transmittal, the amount of such transfer taxes will be billed to
that tendering holder.

Holders who tender their old notes for exchange will not be required to pay
any transfer taxes. However, holders who instruct us to register exchange
notes in the name of, or request that old notes not tendered or not accepted
in the exchange offer be returned to, a person other than the registered
tendering holder will be required to pay any applicable transfer tax.

Consequences of Failure to Exchange

Holders of old notes who do not exchange their old notes for exchange notes
under the exchange offer will remain subject to the restrictions on transfer
of such old notes:

. as set forth in the legend printed on the notes as a consequence of the
issuance of the old notes pursuant to the exemptions from, or in
transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws; and

. otherwise as set forth in the offering memorandum distributed in
connection with the private placement offering of the old notes.

In general, you may not offer or sell the old notes unless they are
registered under the Securities Act, or if the offer or sale is exempt from
registration under the Securities Act and applicable state securities laws.
Except as required by the exchange and registration rights agreement, we do
not intend to register resales of the old notes under the Securities Act.
Based on interpretations of the Commission staff, exchange notes issued
pursuant to the exchange offer may be offered for resale, resold or otherwise
transferred by their holders (other than any such holder that is our
"affiliate" within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that the holders acquired the exchange notes in the
ordinary course of the holders' business and the holders have no arrangement
or understanding with respect to the distribution of the exchange notes to be
acquired in the exchange offer. Any holder who tenders in the exchange offer
for the purpose of participating in a distribution of the exchange notes:

. could not rely on the applicable interpretations of the Commission; and

. must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale transaction.

Accounting Treatment

We will record the exchange notes in our accounting records at the same
carrying value as the old notes, as reflected in our accounting records on the
date of exchange. Accordingly, we will not recognize any gain or loss for
accounting purposes in connection with the exchange offer. We will record the
expenses of the exchange offer as incurred.

Other

Participation in the exchange offer is voluntary, and you should carefully
consider whether to accept. You are urged to consult your financial and tax
advisors in making your own decision on what action to take.

We may in the future seek to acquire untendered old notes in the open market
or privately negotiated transactions, through subsequent exchange offers or
otherwise. We have no present plans to acquire any old notes that are not
tendered in the exchange offer or to file a registration statement to permit
resales of any untendered old notes.

USE OF PROCEEDS

We will not receive any cash proceeds from the issuance of the exchange
notes. In consideration for issuing the exchange notes as contemplated in this
prospectus, We will receive in exchange old notes in like principal amount,
which will be canceled and as such will not result in any increase in our
indebtedness. We received net cash proceeds, after deducting applicable
discounts and expenses, of approximately $190.8 million from the issuance of
the old notes, all of which was used to fund a portion of the
recapitalization.

CAPITALIZATION

The following table sets forth our capitalization as of December 31, 2000.
This table should be read in conjunction with the audited consolidated and
combined financial statements, including the notes thereto, "The
Transactions," "Unaudited Pro Forma Financial Information," "Selected
Historical and Pro Forma Financial Information" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations," included
elsewhere in this prospectus.

December 31, 2000
-----------------
(in millions)

Cash and cash equivalents.................................. $ 19
====
Debt:
Credit agreement(1)...................................... $484
Old Notes, net of discount on the notes.................. 197
----
Total debt............................................... $681
----
Total owner's deficit(2)................................... (70)
----
Total capitalization....................................... $611
====

- --------
(1) Represents the $108 million A term loan facility, $350 million B term loan
facility and $26 million borrowed under the $150 million revolving credit
facility. As of December 31, 2000, additional borrowings of up to $124
million under the revolving credit facility were available for working
capital and general corporate purposes. The revolving credit facility may
be drawn in U.S. dollars or euros.
(2) Includes the following (in millions):

Rollover of investment from Shell.................................... $ 15
Proceeds from new member investment.................................. 185
----
$200
====

SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION

The following table presents selected historical financial information and
selected pro forma financial information. The historical statement of income
data for the fiscal years ended December 31, 1998, 1999 and 2000 and the
historical balance sheet data as of December 31, 1999 and 2000 are derived
from our audited consolidated and combined financial statements included
elsewhere in this prospectus. The historical statement of income data for the
fiscal years ended December 31, 1996 and 1997 and the historical balance sheet
data as of December 31, 1997 and 1998 are derived from our audited combined
financial statements that are not included herein. The historical balance
sheet data as of December 31, 1996 is derived from unaudited financial
statements which, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary to present fairly
the data for such periods.

The unaudited pro forma statement of income and related information reflect
the transactions and the acquisition of the remaining 50% of the Elenac GmbH
Resins Business as if they had occurred at the beginning of the relevant
period. The pro forma adjustments were applied to the historical financial
statements to reflect and account for the transactions as such and,
accordingly, do not affect the historical basis of our assets and liabilities.
It is important that you read this information along with the unaudited pro
forma financial information and the related notes. We do not claim or
represent that the following summary unaudited pro forma financial information
is indicative of the results that would have been reported had the
transactions and the acquisition of the remaining 50% of the Elenac GmbH
Resins Business actually occurred on the dates indicated above, nor is it
indicative of our future results. There can be no assurance that the
assumptions used by management (which they believe are reasonable) in the
preparation of the selected unaudited pro forma financial information will
prove to be correct. The following table should also be read in conjunction
with "Unaudited Pro Forma Financial Information," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and the audited
consolidated and combined financial statements and accompanying notes thereto
included elsewhere in this prospectus.

Historical Pro Forma
---------------------------------------------------------------- --------------
For the fiscal years ended For the fiscal
---------------------------------------------------------------- year ended
December 31, December 31, December 31, December 31, December 31, December 31,
1996 1997 1998 1999 2000 2000
------------ ------------ ------------ ------------ ------------ --------------
(in millions, except ratios and percentages)

Statement of Income
Data:
Revenues................ $1,009.8 $1,016.3 $995.4 $941.8 $948.9 $952.0
Purchases and variable
product costs.......... 530.4 571.7 539.5 510.0 578.8 550.3
Operating expenses...... 198.6 194.8 197.4 182.4 165.8 165.2
Selling, general and
administrative
expenses............... 61.5 60.9 62.0 59.1 53.9 62.3
Depreciation and
amortization(1)........ 56.8 56.6 35.1 34.0 34.0 34.0
Research and development
expenses............... 36.4 34.1 29.2 30.8 25.6 25.8
Special charges(2)...... 0.5 (1.4) 24.1 6.0 49.4 18.0
Operating income........ 125.6 99.6 108.1 119.5 41.4 96.4
Income from equity
investment............. 2.0 2.0 1.0 2.0 3.0 2.9
Net income.............. 82.5 66.5 66.7 76.5 19.4 14.4
Other Financial Data:
Cash flows provided by
operating activities... -- -- -- $134.0 $114.0 $114.0
Cash flows provided by
(used for) investing
activities............. -- -- -- (103.0) (17.0) (17.0)
Cash flows provided by
(used for) financing
activities............. -- -- (31.0) (78.0) (78.0)
Consolidated
EBITDA(3)(4)........... -- -- -- $161.5 127.8 151.3
Consolidated EBITDA
margin(5).............. -- -- -- 17.1% 13.5% 15.9%
Capital
expenditures(6)........ $ 51.0 $ 42.0 $ 59.0 $ 34.0 $ 18.0 $ 18.0
Cash interest
expense(7)............. -- -- -- -- 8.7 69.7
Ratio of earnings to
fixed charges(8)....... NM NM NM NM 4.4x 1.6x
Balance Sheet Data
(at period end):
Total assets............ $ 791.7 $ 775.1 $719.0 $743.0 $792.0 N/A
Total debt.............. -- -- -- -- $681.4 N/A

- -------
(1) Effective January 1, 1998, we revised the useful life of certain
manufacturing facilities from 10 years to 20 years. This change in
estimate reduced 1998 depreciation expense by $22.0.
(2) Special charges consist of non-recurring costs such as transaction,
transition and severance costs related to restructuring or cost reduction
programs. Transition costs, which are referred to in the indenture and as
determined by management, are expenses incurred outside the ordinary
course of business that relate to the activities required to establish
RPP LLC as an independent company. Special charges also include $0.5,
$(1.4), $24.1 and $6.0 of employee severance costs for the fiscal years
ended December 31, 1996, 1997, 1998 and 1999, respectively.
(3) Consolidated EBITDA represents income before income taxes, interest
expense, special charges and depreciation and amortization. Consolidated
EBITDA for the periods presented corresponds with the identically titled
definition used as a measure in both the indenture and our credit
agreement for determining our compliance with covenants contained in
those agreements. In addition, Consolidated EBITDA is presented because
it is used by investors to analyze and compare operating performance and
to determine a company's ability to service and/or incur debt. However,
Consolidated EBITDA should not be considered in isolation or as a
substitute for net income, cash flows or other income or cash flow data
prepared in accordance with generally accepted accounting principles or
as a measure of a company's profitability or liquidity. Consolidated
EBITDA is not calculated under GAAP and therefore is not necessarily
comparable to similarly titled measures of other companies. For a
discussion of Consolidated EBITDA for 1998, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
(4) Pro forma Consolidated EBITDA is not calculated under GAAP and therefore
is not necessarily comparable to similarly titled measures of other
companies. For a description of pro forma Consolidated EBITDA, see
"Unaudited Pro Forma Financial Information." Pro forma Consolidated
EBITDA as shown for the fiscal year ended December 31, 2000 has not been
adjusted by $6.6 of projected annual reduction of fixed costs that were
previously announced in connection with the transactions consisting of
(x) $2.5 relating to overhead to be eliminated by actions such as closing
several Asian sales operations and conversions to distributorships,
reducing certain identified discretionary expenses, headcount reductions,
rationalization of warehouse space and reductions in packaging costs from
the conversion of a particular labeling system, (y) $2.0 relating to
manufacturing cost improvements for activities previously performed by
Shell, with regard to which management has developed a plan for these
services to be performed either in-house or on a contract basis at a
lower cost and by the expected cancellation of other miscellaneous
manufacturing related agreements in Europe, and (z) $2.1 relating to the
expected cancellation of certain agreements with Shell where we believe
we can perform similar services at a lower cost, such as

agreements that relate to the optimization of our research and development
function (which we expect will be completed within 18 months following the
recapitalization) and the cessation and replacement of certain services for
our Japanese joint venture. Adjusting pro forma Consolidated EBITDA shown
above for these items, we would have had pro forma adjusted Consolidated
EBITDA of $158 for the fiscal year ended December 31, 2000. We expect to
incur additional one-time costs to achieve these cost savings of
approximately $3.1 which are not reflected in these cost savings. While we
consider the numerical specificity of these projected cost savings to be
reasonable, they are based on various assumptions that are subject to
inherent uncertainty. Management does not believe that achieving these cost
savings will have a negative effect on revenues. We are unable to give any
assurance that the cost savings will be realized within the time frame we
currently expect or at all, that the costs necessary to achieve any of these
savings will not exceed our expectations or that they will not have a
negative effect on revenues. For a discussion of important factors that
could cause actual results to differ materially from our projections, see
"Risk Factors--Projected Information" and "--Forward-Looking Statements."
(5) Consolidated EBITDA margin is calculated as a percentage of revenues. Pro
forma Consolidated EBITDA margin is calculated as a percentage of pro forma
revenues.
(6) The capital expenditure amounts for the year ended December 31, 1999
exclude the repurchase of certain equipment held under a synthetic lease.
During 1998, we entered into a sale/leaseback transaction for certain of
our assets. In 1999, we repurchased such assets, requiring an outlay of
$71.
(7) Cash interest expense represents interest expense less amortization of debt
issuance costs and the discount on the notes.
(8) For the purpose of computing the ratio of earnings to fixed charges,
earnings consist of earnings before income taxes and fixed charges. Fixed
charges consist of net interest expense including the amortization of
deferred debt issuance costs and the discount on the notes and one-third of
rent expense which management believes to be representative of the interest
factor thereon. Prior to year ended December 31, 2000, the ratio of
earnings to fixed charges on an historical basis was not meaningful because
as an operating unit of Shell we did not incur interest charges and rent
expense was an immaterial component of total allocations from Shell.

UNAUDITED PRO FORMA FINANCIAL INFORMATION

The unaudited pro forma statement of income for the year ended December 31,
2000, gives effect to the transactions and the acquisition of the remaining
50% of the Elenac GmbH Resins Business as if they had occurred at the
beginning of the period presented.

The unaudited pro forma adjustments, as described in the notes to the
unaudited pro forma financial information, are based on available information
and upon certain assumptions that our management believes are reasonable.

We do not claim or represent that the unaudited pro forma statement of
income information set forth below is indicative of the results that would
have been reported had the transactions and the acquisition of the remaining
50% of the Elenac GmbH Resins Business actually occurred at the beginning of
the period presented nor is it indicative of our future results. There can be
no assurance that the assumptions used in the preparation of the unaudited pro
forma financial information will prove to be correct. The unaudited pro forma
financial information should be read in conjunction with our audited
consolidated and combined financial statements and notes thereto included
elsewhere in this prospectus.

RESOLUTION PERFORMANCE PRODUCTS LLC

UNAUDITED PRO FORMA STATEMENT OF INCOME

Fiscal Year Ended December 31, 2000
(in millions)

RPP LLC Elenac Pro Forma RPP LLC
Historical(a) Adjustments(b) Adjustments Pro Forma
------------- -------------- ----------- ---------

Revenues................ $948.9 $(2.1) $ 5.2 (c) $952.0
Costs and expenses:
Purchases and variable
product costs........ 578.8 (4.1) (24.4)(c)(d) 550.3
Operating expenses.... 165.8 1.5 (2.1)(e) 165.2
Selling, general and
administrative ...... 53.9 -- 8.4 (c)(e)(f) 62.3
Depreciation and
amortization......... 34.0 -- -- 34.0
Research and
development ......... 25.6 0.2 -- 25.8
Special charges....... 49.4 -- (31.4)(g) 18.0
------ ----- ------ ------
Total............... 907.5 (2.4) (49.5) 855.6
------ ----- ------ ------
Operating income........ 41.4 0.3 54.7 96.4
Income from equity
investment............. 3.0 (0.1) -- 2.9
Interest expense, net... (9.0) -- (63.1)(c)(h) (72.1)
------ ----- ------ ------
Income before income
taxes.................. 35.4 0.2 (8.4) 27.2
Income tax
expense/(benefit)...... 16.0 0.1 (3.3)(c)(i) 12.8
------ ----- ------ ------
Net income.............. $ 19.4 $ 0.1 $ (5.1) $ 14.4
====== ===== ====== ======

See accompanying Notes to Unaudited Pro Forma Statement of Income.

RESOLUTION PERFORMANCE PRODUCTS LLC

NOTES TO UNAUDITED PRO FORMA
STATEMENT OF INCOME
(in millions, except percentages)

(a) Represents our historical audited consolidated and combined statement of
income for the year ended December 31, 2000. Certain reclassifications
have been made to prior periods to conform to current period presentation.

(b) Prior to March 31, 2000, we owned 50% of the Elenac GmbH Resins Business
and accounted for this investment on the equity basis. On March 31, 2000
we purchased the remaining 50% that we did not already own and therefore
will fully consolidate the results of the Elenac GmbH Resins Business in
subsequent periods. To reflect the pro forma effect of this purchase on
our operations for fiscal 2000, the schedule below presents the historical
results of operations of the Elenac GmbH Resins Business together with
applicable entries necessary to effect 100% elimination of the effects of
intercompany transactions between the Elenac GmbH Resins Business and our
other manufacturing and marketing operations:

Elenac GmbH Inter-Company
Resins Business Eliminations Total
--------------- ------------- -----

Revenues.............................. $8.8 $(10.9) $(2.1)
Costs and expenses:
Purchases and variable product
costs.............................. 6.8 (10.9) (4.1)
Operating expenses.................. 1.5 -- 1.5
Selling, general and administrative
................................... -- -- --
Depreciation and amortization....... -- -- --
Research and development............ 0.2 -- 0.2
---- ------ -----
Total ............................ 8.5 (10.9) (2.4)
Operating income ..................... 0.3 -- 0.3
Income from equity investment......... -- (0.1) (0.1)
Interest expense, net................. -- -- --
---- ------ -----
Income before income taxes............ 0.3 (0.1) 0.2
Income tax expense ................... (0.1) -- (0.1)
---- ------ -----
Net income............................ $0.2 $ (0.1) $ 0.1
==== ====== =====

(c) On January 8, 2001, we acquired Shell Epoxy Resins France S.A.S. Prior to
November 1, 2000 the results of Resins France were fully consolidated in
our results. To reflect the pro forma effect of this purchase on our
operations for fiscal 2000, the schedule below presents the historical
results of operations of Resins France from November 1, 2000 to the end of
fiscal 2000, net of consolidation adjustments:

Revenues.............................................................. $5.2
Costs and expenses:
Purchases and variable product costs................................ 4.2
Operating expenses.................................................. --
Selling, general and administrative ................................ 0.6
Depreciation and amortization....................................... --
Research and development ........................................... --
----
Total ............................................................ 4.8
Operating income ..................................................... 0.4
Income from equity investment......................................... --
Interest expense, net................................................. (0.1)
----
Income before income taxes............................................ 0.3
Income tax expense ................................................... (0.1)
----
Net income............................................................ $0.2
====

(d) As an integral part of the transactions, we have contractually negotiated,
effective upon the closing of the recapitalization, to purchase feedstocks
and other services from Shell, which effectively would have reduced our
costs of production by $28.6, for the fiscal year ended December 31, 2000,
if such contracts had been in place as of the beginning of the period. Of
the $28.6 of feedstock reductions, $24.7 relates to the change in pricing
of phenol. Prior to the transaction, phenol feedstock prices were based on
a formula. We have executed a contract that bases phenol feedstock pricing
more closely on discounted market rates. The cost reduction was calculated
by multiplying the actual volume of phenol consumed by the difference in
the historical formula based contract and the new market-based contract.

(e) As part of the recapitalization we have negotiated several agreements for
Shell to continue to provide services to us that we will need as a stand-
alone business at a lower cost than we were historically allocated and we
have reflected these agreements as if such contracts had been in place as
of the beginning of the relevant period. In certain other areas in which
we believe we can achieve operational or financial efficiencies, we have,
or will, establish our own resources to perform these functions but have
not made a pro forma adjustment to reflect these efficiencies. However, we
have adjusted historical allocations from Shell for those functions that
we plan to perform ourselves at a cost that exceeds our historical
allocation. As a result of the agreements with Shell and our plans to
perform certain functions ourselves, annual costs for the year ended
December 31, 2000 have been increased by a net $4.8, of which $2.1
represents reductions in operating expenses, and $6.9 represents increases
in selling, general and administrative expenses.

(f) Reflects the following:

Fiscal Year Ended
December 31, 2000
-----------------

Management fee charged to us by the majority shareholder
of RPP Inc. in accordance with the new management
agreement............................................... $0.9
====

(g) The unaudited pro forma statement of income for fiscal 2000 excludes the
following non-recurring items that were directly attributable to the
recapitalization. All of the following items were recorded as period costs
at the time of the recapitalization. The pro forma adjustment for fiscal
2000 reflects the elimination of $31 of transaction costs relating to
transaction due diligence and activities associated with the sale and
recapitalization, including approximately $21 in legal fees and other due
diligence, and $10 in financial services and advice, which were non-
recurring items that were directly attributable to the recapitalization.
The remaining special charges that were not excluded from the unaudited
pro forma statement of income for fiscal 2000 consist of $18 of transition
costs, the majority of which related to activities required to become an
independent entity including organizational design, recruiting,
establishment of fit for purpose work processes, information service fees
as well as establishment of a new brand.

(h) Reflects the following:

Fiscal Year Ended
December 31, 2000
-----------------

Interest income resulting from $.9 of loans at an interest
rate of 10.8%............................................ $(0.1)
Interest expense resulting from a nominal $54.1 of
revolver debt denominated in $9.1 at an interest rate of
8.0% and (Euro)48.2 at an interest rate of 7.8%.......... 3.7
Interest expense resulting from a nominal $100.0 of new
bank term debt denominated in (Euro)107.2 at an interest
rate of 7.8%............................................. 6.8
Interest expense resulting from $350.0 of new bank term
debt at an interest rate of 8.8%......................... 26.7
Interest expense resulting from the $200.0 of notes at an
interest rate of 13.5%................................... 23.5
Commitment fee charge relating to the undrawn portion of
the revolving credit facility............................ 0.4
Amortization of discount on the notes of $2.7............. 0.2
Amortization of debt issuance costs of $17.3 associated
with the term debt, revolver and the notes over the life
of the related debt...................................... 1.9
-----
$63.1
=====

A change of 1% in interest rates on the aggregate amount outstanding on the
revolver and term loan would have an incremental effect on annual interest
expense of approximately $2.5.

(i) Reflects the provision for income taxes at the statutory tax rate.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with "Selected
Historical and Pro Forma Financial Information," "Unaudited Pro Forma
Financial Information," and the audited consolidated and combined financial
statements, including the notes thereto, included elsewhere in this
prospectus. In addition to historical information, the following discussion
contains forward looking statements that are subject to a number of risks and
uncertainties. Our actual results may differ materially from the results
discussed in these forward-looking statements. Important factors that could
cause our actual results to differ materially from the results referred to in
the forward-looking statements made below are discussed below and elsewhere in
this prospectus, including under the heading "Risk Factors." There may be
other factors that may cause our actual results to differ materially from the
results referred to in the forward-looking statements. All forward-looking
statements attributable to us or persons acting on our behalf apply only as of
the date of this prospectus and are expressly qualified in their entirety by
the cautionary statements included in this prospectus. We undertake no
obligation to publicly update or revise forward-looking statements which may
be made to reflect events or circumstances after the date made or to reflect
the occurrence of unanticipated events.

The following covers periods before the completion of the transactions and
the acquisition of the remaining 50% of the Elenac GmbH Resins Business. In
connection with the transactions, we have entered into new financing
arrangements, altered our capital structure and entered into a number of
operating and feedstock supply agreements with Shell. The results of
operations and financial condition for the periods subsequent to the
consummation of the Transactions will not necessarily be comparable to prior
periods. The following should be read in conjunction with the "Unaudited Pro
Forma Financial Information," "Selected Historical and Pro Forma Financial
Information" and the audited consolidated and combined financial statements
and notes thereto included elsewhere in this prospectus.

Stand-Alone Company

The historical financial information included in this prospectus for periods
prior to the recapitalization is derived from the historical combined
financial statements of the epoxy resins business of Shell. The preparation of
this information is based on certain assumptions and estimates including
allocations of costs from Shell. This information may not necessarily reflect
what the results of operations, financial position and cash flows would have
been if the epoxy resins business of Shell had been a separate, stand-alone
entity during the periods presented or what the results of operations,
financial position and cash flows will be in the future. In addition, our
historical combined financial statements include certain assets, liabilities,
revenues and expenses which were not historically recorded at the entity level
of, but are associated with, our business and exclude certain expenses, such
as the cost of borrowing money, that will be relevant to us as a stand-alone
entity.

During the periods prior to July 1999 presented in "--Results of Operations"
below, our operations were conducted through various subsidiaries of Shell. In
July 1999, Shell commenced a corporate restructuring program in which all of
our manufacturing operations and primarily all of our marketing activities
were transferred into our current legal entity structure. Certain feedstocks
and a significant portion of our non-manufacturing operations were provided to
us by other Shell subsidiaries. In connection with the recapitalization, we
have entered into agreements with Shell under which Shell will provide us with
various feedstocks and services including information technology,
manufacturing site services and back-office accounting. We believe we have
negotiated favorable agreements with Shell which include cost and service
levels equal to or more beneficial to us than had historically been in place.
These agreements have been reflected in the unaudited pro forma statement of
income. However, in areas such as information technology, accounting and
building maintenance where we believe we can achieve operational or financial
efficiencies, we have, or will, obtain our own resources to perform these
functions. For the purpose of the unaudited pro forma statement of income, we
have adjusted historical allocations from Shell for those functions that we
plan to perform ourselves at a cost that exceeds our historical allocation. As
a result of the agreements with Shell and our plans to perform

information technology, accounting and building maintenance functions
ourselves, the fiscal 2000 unaudited pro forma statement of income reflects
reductions in feedstock and other costs of $29 million and a net increase in
other operating costs of $6 million. After giving effect to the transactions
(including the agreements with Shell) and the acquisition of the remaining 50%
of the Elenac GmbH Resins Business as if they occurred at the beginning of the
period, we would have generated pro forma Consolidated EBITDA of $151 million
for the year ended December 31, 2000.

We believe that the new management focus following the consummation of the
recapitalization will lead to further opportunities for reductions in our
operating costs. As previously announced in connection with the transactions,
we have identified annual savings of approximately $6.6 million from the
reduction of fixed costs, of which:

. $2.5 million relate to overhead to be eliminated by actions such as
closing several Asian sales operations and conversions to
distributorships, reducing certain identified discretionary expenses,
headcount reductions, rationalization of warehouse space and reductions
in packaging costs from the conversion of a particular labeling system,

. $2.0 million relate to manufacturing cost improvements for activities
previously performed by Shell, with regard to which management has
developed a plan for these services to be performed either in-house or
on a contract basis at a lower cost and by the expected cancellation of
other miscellaneous manufacturing related agreements in Europe, and

. $2.1 million relate to the expected cancellation of certain agreements
with Shell where we believe we can perform similar services at a lower
cost, such as agreements that relate to the optimization of our research
and development function (which we expect will be completed within 18
months following the recapitalization) and the cessation and replacement
of certain services for our Japanese joint venture.

These projected cost savings are discussed in the supplemental disclosure
accompanying pro forma Consolidated EBITDA but have not been reflected in the
unaudited pro forma financial statements, except as noted above. To achieve
these cost savings, we expect to incur additional one-time costs of
approximately $3.1 million which are not reflected in these cost savings or
the unaudited pro forma financial statements.

If our savings are less than our estimates or adversely affect our revenues
or operations, our results of operations will be less than we anticipate and
the savings we projected in the supplemental disclosure accompanying pro forma
Consolidated EBITDA will not be fully realized. For a discussion of important
factors that could cause actual results to differ materially from these
projections, see "Risk Factors--Projected Information" and "--Forward-Looking
Statements."

Results of Operations

The following table sets forth certain information derived from the audited
consolidated and combined statements of operations of RPP LLC for the years
ended December 31, 1998, 1999 and 2000, expressed as a percentage of revenues.
The following table and discussion should be read in conjunction with the
information contained in our audited consolidated and combined financial
statements and the notes thereto included elsewhere in this prospectus. Our
historical results of operations set forth below for periods prior to the
recapitalization may not necessarily reflect what would have occurred if the
epoxy resins business of Shell had been a separate, stand-alone entity during
the periods presented or what will occur in the future. See "Risk Factors--
Absence of History as a Stand-Alone Company." Accordingly, there can be no
assurance that the trends in the operating results will continue in the
future.

Year Ended
December 31,
----------------
1998 1999 2000
---- ---- ----

Revenue....................................................... 100% 100% 100%
Cost and expenses:
Purchases and variable product costs.......................... 54 54 61
Operating expenses............................................ 20 19 17
Selling, general and administrative........................... 6 6 6
Research and development...................................... 3 3 3
Depreciation and amortization................................. 4 4 4
Special charges............................................... 2 1 5
--- --- ---
Total....................................................... 89 87 96
Operating income.............................................. 11 13 4
Income from equity investment................................. -- -- --
Interest expense, net......................................... -- -- --
--- --- ---
Income before income taxes.................................... 11 13 4
Income tax expense............................................ 4 5 2
--- --- ---
Net income.................................................... 7 8 2
=== === ===
Consolidated EBITDA (1) ...................................... 17% 17% 13%
=== === ===

- --------
(1) Consolidated EBITDA represents income before income taxes, interest
expense, special charges and depreciation and amortization. Consolidated
EBITDA for the periods presented corresponds with the identically titled
definition used as a measure in both the indenture and our credit
agreement for determining our compliance with covenants contained in
those agreements. In addition, Consolidated EBITDA is presented because
it is used by investors to analyze and compare operating performance and
to determine a company's ability to service and/or incur debt. However,
Consolidated EBITDA should not be considered in isolation or as a
substitute for net income, cash flows or other income or cash flow data
prepared in accordance with generally accepted accounting principles or
as a measure of a company's profitability or liquidity. Consolidated
EBITDA is not calculated under GAAP and therefore is not necessarily
comparable to similarly titled measures of other companies.

During the latter part of the fourth quarter of 2000, the United States
economy began to experience a slowdown in the manufacturing sectors. A
significant portion of our customers in the United States operate in these
sectors. As a result, the U.S. chemical industry in general and we, to a
lesser extent, experienced softness in product demand apart from expected
seasonality. We believe that we experienced less product demand softness than
the U.S. chemical industry overall because epoxy resins continue to substitute
against other products as a result of its growing number of new end-use
applications. Further, the multitude of epoxy end-use markets and the
replacement of other materials with epoxy resins has served to soften demand
declines in any one end-use market. There can be no assurances that this trend
will not continue during 2001 nor that we will be able to realize margins we
have historically achieved as feedstock costs decline.

The following is a discussion of significant financial statement items
related to our audited consolidated and combined statements of income.

Revenue

Our revenue is primarily generated through the sale of our three main
product lines: (1) epoxy resins, (2) versatic acids and derivatives, and (3)
sales of BPA to third parties. In addition, we sell small amounts of ECH to
third parties. Revenue has historically been driven by volumes, market prices
and foreign currency fluctuations. Revenue also includes other income derived
primarily from royalty income and commission income.

Purchases and Variable Product Costs

Purchases and variable product costs are primarily comprised of feedstock
costs. Feedstock costs are driven primarily by market conditions and exchange
rates as volumes are generally consistent year over year. The significant
feedstocks for which we are highly sensitive to the market prices are phenol,
acetone, propylene and chlorine. We purchase chlorine, a primary raw material
for ECH, under long-term supply contracts with third parties which provide us
with producer-like economics by allowing us to buy this raw material at a
margin above production cost and thereby lower our manufacturing costs. We
also purchase propylene, the other primary raw material for ECH, under long-
term supply agreements with Shell that are based on market price less
negotiated volume discounts. We purchase phenol and acetone, the primary raw
materials for BPA, under attractive supply contracts with Shell and other
third parties that are based on discounted market prices and input-cost
formulae. Because we are co-located with Shell at several of our facilities,
our transportation and logistics costs for certain raw materials which Shell
provides us are reduced. Variable manufacturing costs, which are primarily
utilities, are also a significant component of this line item. Purchases and
variable costs are reduced by the sale of by-products generated during the
manufacturing process, primarily hydrochloric acid.

Operating Expenses

Operating expenses represents the costs associated with the non-variable
operations of our manufacturing facilities. Included in operating costs are
personnel related costs, manufacturing overhead and periodic maintenance, or
turnaround costs. Depreciation relating to manufacturing assets is included
within depreciation and amortization.

Selling, General and Administrative Expenses

Selling, general and administrative expenses are comprised primarily of
costs associated with non-manufacturing, non-research and development
operations, including management, accounting, treasury, information
technology, marketing and sales, and legal. This includes costs associated
with health, safety and environmental projects.

Depreciation and Amortization

Depreciation is computed on a straight-line basis over the estimated useful
lives of the respective assets. Estimated useful lives for plant and
equipment, office buildings, tanks and pipelines are twenty years and range
from three to ten years for other assets. Amortization is computed on a
straight-line basis for intangibles such as patents and deferred financing
costs.

Research and Development Expenses

Research and development expenses are costs associated with product or
customer specific initiatives and costs associated with projects that seek
improvements in manufacturing processes. Primarily all of our research and
development expenses are generated in one of our three research facilities. To
improve the investment return on our significant research and development
expenditures and improve global sharing of ideas within our business, we
intend to centrally manage all such costs.

Special Charges

Special charges consist of non-recurring type costs such as transaction,
transition and severance costs related to restructuring or cost reduction
programs.

Income from Equity Investment

Income from equity investment is related to unconsolidated equity investees.

Interest Expense, net

For periods after the transactions, interest expense, net consists of
interest expense payable with respect to borrowings under our credit agreement
and the notes, offset by our interest income from short term cash investments.
Interest expense also includes amortization of deferred financing costs and
amortization of the discount for the notes. Historically, as part of Shell, we
did not have any debt allocated to us except for operational accounts payable.
As such, we did not have any interest expense prior to November 14, 2000.

Income Taxes

Historically, our operations have been included in the tax returns submitted
by various Shell operating companies. The tax amounts reflected in our
historical results have been allocated based on the amounts expected to be
paid or received from the various Shell operating companies filing tax returns
in which our operations were included. As of December 31, 2000, we have
accrued for income taxes and income taxes will consist of deferred and current
income taxes. Additionally, we have made a Section 338(h)(10) election to
allow our recapitalization to be treated as an acquisition of assets for tax
purposes. Accordingly, for tax purposes the bases of our U.S. assets will be
stepped-up to their fair market values, and we will be able to depreciate our
assets using higher bases than the historical amount. This tax basis step-up
will reduce cash payments for income taxes over the next five years.

Comparison of 2000 results to 1999

Revenues

Total 2000 revenues increased by $7 million to $949 million, or 0.7%, over
total 1999 revenues. Sales volumes improved 3% with resins volume growing 4%
and versatics and BPA volumes unchanged. Resins volumes improved due to
increased economic activity in Asia Pacific and Europe as sales in both
regions improved.

Product prices in 2000 were lower for both resins and versatics, and were
improved for BPA. Resins prices fell 5% while versatics prices declined 10%.
Resins prices were impacted by a 17% decline in the Euro and a challenging
competitive environment, especially during the first half of 2000. Resins
product prices in the U.S. during the first half of 2000 were lower compared
to the same period in 1999 as we responded to the competitive market pricing.
Resins prices in the U.S. began increasing during the latter half of 2000.
European resins prices increased throughout 2000 in local currency. However,
the weakening Euro negated most of these gains when converted to the U.S.
dollar, resulting in a year-to-year decline of 9%. Versatics prices were also
adversely impacted by the weakening Euro. Versatics, which generates the
majority of its revenue in Europe, implemented price gains for the majority of
the product line in Europe. However, when converted to the U.S. dollar, prices
were 10% lower. BPA prices increased 16% compared to 1999. The price increase
was largely a result of increases in underlying crude oil prices, upon which
many of our customers' price formulae are based. We believe that there were no
significant fluctuations in our market shares in 2000 compared to 1999.

Purchases and Variable Product Costs

Purchases and variable product costs increased by $69 million, or 14%, to
$579 million. This increase was largely driven by the prices for feedstocks
which were much higher in 2000 due to the increasing price of crude oil and
related petrochemical products. Price increases for key raw materials ranged
from 21% to 46% compared to 1999 levels in the United States and 9% to 55% in
Europe. As a percentage of revenue, purchases and variable products costs
increased 7%, primarily as a result of proportionately higher cost of raw
materials. Historically, we have been able to pass through increases in our
raw material costs to our customers. However, the increase in revenues from
higher selling prices typically lags behind the increases in our raw material
costs.

In connection with the transactions, several new feedstock contracts were
implemented. If these new contracts had been in place during all of 2000 and
1999, raw material costs would have been reduced by approximately $29 million
and $26 million, respectively.

Operating Expenses

Operating expenses decreased by $16 million, or 9%, to $166 million. In
2000, costs were lower by $7 million due to reduced maintenance turnaround
activity as compared with 1999 which included extensive maintenance
turnarounds at Deer Park, Norco and Pernis. Costs were also reduced as a
result of the shutdown of the Durban facility, which incurred costs in early
1999, and the strong U.S. dollar also reduced operating expenses incurred in
Europe when translated to the U.S. dollar.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased by $5 million, or 8%,
to $54 million. Cost improvement initiatives and lower staffing levels as the
business has transitioned to independent status, as well as a reduction in
charges previously allocated to the business as a unit of Shell, led to the
decline.

On a pro forma basis, selling, general and administrative expenses, which
reflect the costs required to operate the business as an independent entity,
declined from $63 million in 1999 to $62 million in 2000.

Depreciation and Amortization

Depreciation and amortization remained unchanged at $34 million.

Research and Development Expenses

Research and development costs decreased by $5 million to $26 million. The
decrease is primarily due to continued rationalization of research and
development spending and more efficient expenditure of engineering support and
externally executed research and development.

Special Charges

Special charges increased by $43 million to $49 million. Transition costs
are non-recurring expenses incurred outside the ordinary course of business
and relate to the activities required to establish RPP LLC as an independent
company. Transition costs were $18 million in 2000, the majority of which
related to activities required to become an independent entity including
organizational design, recruiting, establishment of fit for purpose work
processes, information service fees as well as establishment of a new brand.
Transition costs will continue to be incurred during 2001 at approximately the
same amount incurred in 2000 as we complete the final activities necessary to
become an independent company.

Transaction costs of $31 million were expensed in 2000. These costs were for
transaction due diligence and financing activities associated with the sale
and recapitalization, including approximately $21 million in legal fees and
other due diligence fees, and $10 million in financial services and advice.

Severance costs were $0 million and $6 million in 2000 and 1999,
respectively.

Operating Income

Operating income decreased by $79 million, or 66%, to $41 million. The
decrease was primarily due to the increases in purchases and variable product
costs and operating expenses.

Income from Equity Investment

Income from equity investment changed insignificantly.

Interest Expense, Net

Interest expense, net increased by $9 million primarily due to the increase
in long term debt resulting from the Transactions, which included a leveraged
buy out recapitalization. No debt was outstanding in 1999.

Income Before Income Taxes

Income before taxes decreased by $87 million, or 71%, to $35 million due to
the decrease in operating income and increased interest expense, net.

Income Tax Expense

Income tax expense decreased by $29 million, or 64%, to $16 million.

Net Income

Net income for 2000 was $19 million, which was down 75% from $77 million for
1999. The decrease was due to decreased income before income taxes, partially
offset by decreased income tax expense.

Comparison of 1999 to 1998

Revenues

Revenues for 1999 decreased by $53 million, or 5% compared to 1998. While
overall sales volumes increased 4%, this increase was offset by declining
sales prices. Prices declined as the business took actions to preserve our
customer base in the face of increased imports of product from Asia into both
the United States and Western Europe. The decrease was also impacted by the
strengthening of the U.S. dollar relative to European currencies. There were
no significant fluctuations in our market shares in 1999 compared to 1998.

Purchases and Variable Product Costs

Purchases and variable product costs decreased by $30 million, or 6%, to
$510 million. This improvement was a function of the favorable feedstock
pricing environment, especially relating to phenol and chlorine, that was
prevalent during the first half of 1999.

Operating Expenses

Operating expenses decreased by $15 million, or 8%. The decrease was mainly
a result of the implementation of organizational efficiencies and the
strengthening U.S. dollar which reduced operating costs in Europe when
translated to U.S. dollars in our financial statements. These factors were
partially offset by the large amount of maintenance turnaround activity that
occurred in 1999.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased by $3 million, or 5%,
to $59 million. The decrease was primarily due to cost reduction initiatives.

Depreciation and Amortization

Depreciation and amortization decreased by $1 million, or 3%, to $34
million. The decline is primarily the result of changes in foreign currency
exchange rates and the sale and leaseback of certain assets.

Research and Development

Research and development costs increased by $2 million to $31 million, or
7%. The increase was due to specialty engineering costs.

Special Charges

Special charges decreased by $18 million, or 75%, to $6 million. The
decrease was primarily the result of a comprehensive Shell Chemicals severance
program that was announced in December 1998. The allocation of our
proportionate share of this program amounted to $24 million in 1998 and $6
million in 1999.

Operating Income

Operating income increased by $12 million, or 11% to $120 million. The
increase was due to a decrease in purchases and variable product costs and
operating expenses, partially offset by decreased revenues.

Income from Equity Investment

Income from equity investment changed insignificantly.

Income Before Income Taxes

Income before income taxes increased by $13 million, or 12%, to $122 million
due to the foregoing factors.

Income Tax Expense

Income tax expense increased by $3 million, or 7%, to $45 million.

Net Income

Net income for 1999 increased by $10 million, or 15%, to $77 million. The
increase was due to increased income before income taxes, partially offset by
increased income tax expense.

Liquidity and Capital Resources

Prior to the consummation of the transactions, we financed our operations
through net cash provided by operating activities and contributions and
advances from Shell. We also had participated in Shell's centralized treasury
management system whereby all of our cash receipts were remitted to Shell and
all of our cash disbursements were paid by Shell. While we were owned by
Shell, we did not incur any long-term debt to fund our operations.

After the consummation of the transactions, we established our own
centralized treasury management system. Instead of making distributions of our
excess operating cash flow to Shell as done previously, we have been able to
retain all of our operating cash flow to finance the working capital and other
needs of our business. During the first quarter of 2001, our operating cash
flow was more than our working capital needs, and we used this excess cash to
make a $25.0 million voluntary principal payment that reduced the amount of
long-term debt outstanding under the credit agreement. We expect to continue
to finance our operations through net cash provided by operating activities,
existing cash on hand and borrowings under our revolving credit facility. As a
result of the high level of debt incurred as part of the transactions, we will
have to generate significant cash flows to meet our new debt service
requirements.

In November 2000, RPP LLC and RPP Capital issued $200 million aggregate
principal amount of 13 1/2% Senior Subordinated Notes due 2010 in a private
offering pursuant to Rule 144A under the Securities Act of 1933. The old notes
were issued to bondholders at a discount of $3 million, and accordingly, we
received gross proceeds of $197 million from the offering of the old notes.
The notes may be redeemed in whole at any time or in part from time to time,
on and after November 15, 2005, at the specified redemption prices set forth
under "Description of the Notes--Redemption."

The notes are senior subordinated unsecured obligations ranking junior in
right of payment to all of our existing and future senior debt and all
liabilities of our subsidiaries that do not guarantee the notes. The proceeds
from the issuance of the notes were used to finance in part the
recapitalization and related transaction costs and expenses. Interest on the
notes is payable semi-annually in cash on each May 15 and November 15,
beginning May 15, 2001. The notes mature on November 15, 2010.

On November 14, 2000, RPP Inc., RPP LLC, RPP Capital and Resolution
Nederland B.V. entered into a $600 million credit agreement with a syndicate
of financial institutions. The credit agreement provides for a six-year euro
equivalent $100 million (at issuance) A term loan and an eight-year $350
million B term loan. Each term loan was fully drawn on November 14, 2000 and
used to finance the transactions, including certain related costs and
expenses. In addition, the credit agreement provides for a six-year $150
million revolving credit facility, the euro equivalent of which is also
available, to be used for, among other things, working capital and general
corporate purposes of ours and our subsidiaries, including without limitation,
certain permitted acquisitions. The revolving credit facility also includes a
sub-limit for letters of credit in an amount not to exceed

$50 million. At December 31, 2000, we had incurred $26 million under the
revolving credit facility and had additional borrowing capacity of $124
million.

The credit agreement is secured by substantially all current and future
assets of RPP LLC, including a pledge of 100% of the stock of our domestic
subsidiaries and 66 2/3% of the stock of our foreign subsidiaries. Our
borrowings and those of our subsidiaries under the credit agreement are
guaranteed by RPP Inc. and borrowings by our indirect subsidiary, Resolution
Nederland B.V., are also guaranteed by us. The credit agreement requires us to
maintain certain minimum financial covenants including a minimum interest
coverage ratio and a maximum total leverage ratio. As of December 31, 2000, we
were in compliance with each of our financial covenants. In addition, the
credit agreement is not subject to advance rates or a borrowing base limit on
availability.

Borrowings that are maintained as dollar term loans or loans under the
revolving credit facility denominated in dollars, accrue interest at either
Citibank's prime lending base rate or the eurodollar rate plus, in each case,
a margin ranging from 1.25% to 3.75%, which margin is dependent upon our
leverage, as determined on a quarterly basis. Interest rates on the borrowings
maintained as euro term loans or loans under the revolving credit facility
denominated in euros, accrue interest at the euro rate plus associated costs
plus, in each case, a margin ranging from 2.25% to 3.0% depending our
leverage, as determined on a quarterly basis.

Interest period elections generally range from one to six months, or to the
extent available, nine or twelve months for eurodollar and euro rate loans.
With respect to eurodollar loans and euro rate loans, interest is payable at
the end of each interest period or, for interest periods longer than three
months, at least every 3 months.

With respect to base rate loans, interest is payable quarterly on the last
business day of each fiscal quarter. Calculation of all interest expense is
based on the actual number of days elapsed in a year comprising 360 days. For
each drawn letter of credit, we are required to pay a per annum fee equal to
the spread over the eurodollar rate for the revolving credit facility, a
fronting fee equal to 1/4 of 1% on the aggregate daily stated amount of each
letter of credit, plus administrative charges. Additionally, we will pay a
commitment fee ranging from 0.375% to 0.500% per annum, depending on our
leverage ratio, which commitment fee is payable quarterly on the unused
available portion of the revolving credit facility.

Each term loan under the credit agreement requires quarterly principal
reductions beginning on March 31, 2001. Also, we may be required to make
mandatory additional principal reductions, based on our excess cash flow and
other events described in the credit agreement.

For the year ended December 31, 2000, we generated net cash provided by
operating activities of $114 million, used cash in investing activities of $17
million and used cash in financing activities of $78 million, primarily due to
the transactions. Investing activities for all periods primarily consisted of
expenditures for property, plant and equipment. For the year ended December
31, 1999, we generated net cash provided by operating activities of $134
million, used cash in investing activities of $103 million and used cash in
financing activities of $31 million. For the year ended December 31, 1998, we
generated net cash provided by operating activities of $136 million, provided
cash by investing activities of $13 million and used cash in financing
activities of $149 million. The decrease in cash provided by investing
activities in 1999 from 1998 is due to a sale/lease back transaction of $71
million in 1999.

Expenditures for property, plant and equipment totaled $18 million, $105
million and $59 million for the years ending December 31, 2000, 1999 and 1998,
respectively. The increase in capital expenditures for 1999 was related to a
repurchase of equipment held under a synthetic lease totaling $71 million.

Because we have an established infrastructure in place, our capital
expenditures are generally not for the building of new plants but for their
maintenance and occasional incremental expansion where justified by the
expected return on investment. Our largest planned capital expenditure over
the next two years relates to an investment in our versatics business, to
improve the quality of our versatics manufacturing assets.

Capital expenditures necessary to maintain our business have historically been
relatively low at $9 million to $16 million per year, and we expect this to
continue for the next three to five years.

The high level of debt incurred as a result of the transactions may preclude
us from borrowing any more funds. Based on our current level of operations and
anticipated growth and cost savings, management believes that our cash flow
from operations, together with existing cash and cash equivalents on hand and
future borrowings under our revolving credit facility, if necessary, will be
sufficient to fund our working capital needs and expenditures, for property,
plant and equipment and debt service obligations, although no assurance can be
given in this regard.

Environmental

Our business is subject to various federal, state, local and foreign laws
and regulations which govern environmental health and safety-related matters.
Compliance with these laws and regulations requires substantial continuing
financial commitments and planning. Moreover, the laws and regulations
directly affect how we operate our business. For a more detailed discussion of
the impact of environmental matters on our business, see "Risk Factors--Risks
Related to Our Business--Environmental Regulation" and "Business--
Environmental/Occupational Health and Safety Matters."

The business has accrued $3 million at December 31, 1999, respectively, for
planned environmental remediation activities at three manufacturing sites.
Expensed environmental costs were less than $1 million in each of 2000, 1999
and 1998.

The fact that no additional accrual was provided in 2000 is influenced by
agreements associated with the transactions whereby Shell generally will
indemnify us for environmental damages associated with environmental
conditions that occurred or existed before the closing date of the
recapitalization. In addition, management believes that we maintain adequate
insurance coverage, with deductibles for environmental remediation activities.

Effects of Currency Fluctuations

We conduct operations in countries around the world. Therefore, our results
of operations are subject to both currency transaction risk and currency
translation risk. We incur currency transaction risk whenever we enter into
either a purchase or sales transaction using a currency other than the local
currency of the transacting entity. With respect to currency translation risk,
our financial condition and results of operations are measured and recorded in
the relevant domestic currency and then translated into U.S. dollars for
inclusion in our audited consolidated and combined financial statements.
Exchange rates between these currencies and U.S. dollars in recent years have
fluctuated significantly and may do so in the future. The majority of our
revenues and costs are denominated in U.S. dollars, with euro-related
currencies also being significant. We generated 45% of our 2000 revenues from
companies incorporated outside the United States, and we incurred 43% of our
2000 total expenses from companies incorporated outside the United States. The
net depreciation of the Netherland Guilder against the U.S. dollar and other
world currencies since 1997 has had a negative impact on our earnings, as
reported in U.S. dollars in our audited consolidated and combined financial
statements. Historically, we have not undertaken hedging strategies to
minimize the effect of currency fluctuations. Significant changes in the value
of the Netherland Guilder relative to the U.S. dollar could also have an
adverse effect on our financial condition and results of operations and our
ability to meet interest and principal payments on euro-denominated debt,
including certain borrowings under the credit agreement, and U.S. dollar
denominated debt, including the notes and certain borrowings under the credit
agreement.

Inflation and Seasonality

Certain of our expenses, such as feedstocks and other raw materials used in
the production of final products, supplies, maintenance and repairs and
compensation and benefits, are subject to normal inflationary pressures.
Although to date we have been able to offset inflationary cost increases
through operating efficiencies and price

increases, there can be no assurance that we will be able to offset any future
inflationary cost increases through these or similar means. Our revenues and
earnings are moderately seasonal, with the second and third quarters generally
providing stronger results. Such seasonality has also been customary in the
chemical industry in general, and we expect this trend to continue in future
periods.

Recent Accounting Pronouncements

Commencing January 1, 2001, we adopted SFAS 133 (Accounting for Derivative
Instruments and Hedging Activities). SFAS 133, as amended by SFAS 138,
requires that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of derivatives will be recorded
each quarter in current earnings or other comprehensive income, depending upon
whether a derivative is designated as part of a hedge transaction and if it is
the type of hedge transaction. We do not enter into derivative instruments for
trading purposes; however, starting in the first quarter of 2001, we entered
into interest rate swaps in connection with our credit facility. We use
interest rate swaps to protect against interest rate fluctuation by fixing the
variable portion of interest rates in our credit facility. By using the
interest rate swaps to hedge interest rate cash flows, we expose ourselves to
market risk; however market risk is managed through the setting and monitoring
of parameters that limit the types and degree of market risk which are
acceptable. As mentioned above, we entered into interest rate swap agreements
related to the term loan B for notional amounts of $50 million, $75 million
and $100 million that fix the LIBOR portion of our interest rates at 5.41%,
5.29% and 5.41%, respectively. The duration of the interest rate swap
agreements ranges from 12 months to 24 months. We expect to recognize a net $2
million charge in our consolidated statement of owner's deficit and
accumulated other comprehensive loss relating to the implementation of SFAS
133 in the first quarter of 2001.

Quantitative and Qualitative Disclosures About Market Risk

We are engaged in manufacturing and marketing resins in the U.S. and
internationally. We are exposed to certain market risks which include
financial instruments such as foreign currency, short-term investments, trade
receivables, and long-term debt. The adverse effects of potential changes in
these market risks are discussed below. The sensitivity analyses presented do
not consider the effects that such adverse changes may have on overall
economic activity nor do they consider additional actions management may take
to mitigate our exposure to such changes. The notes to our audited
consolidated and combined financial statements provide a description of our
accounting policies and other information related to these financial
instruments. We do not engage in speculative transactions and typically do not
engage in hedging activities, except for the interest rate swaps which were
put in place subsequent to December 31, 2000 in connection with our credit
agreement.

A substantial amount of assets and liabilities outside the U.S. are
denominated in Netherlands Guilders. The exchange rate of the U.S. dollar to
the Netherlands Guilder was 2.37, 2.19, and 1.89 at December 31, 2000, 1999
and 1998, respectively. We may utilize forward exchange contracts to hedge
foreign currency transaction exposures. The fair value of open forward
exchange contracts was not significant at December 31, 2000.

We place our short-term investments, which generally have a term of less
than 90 days, with high quality financial institutions. We also limit the
amount of credit exposure to any one institution, and have investment
guidelines concerning diversification and maturities designed to maintain
safety and liquidity. Due to the short-term nature of these instruments, their
carrying value approximates market value. Management does not believe that a
decrease of 1.0% from 2000 average investment rates would be material during
2001.

Management evaluates the creditworthiness of our customers and monitors
accounts on a regular basis, but typically does not require collateral. Our
trade receivables are primarily denominated in U.S. dollars and Netherlands
Guilders. In addition, trade receivables are generally due within 30 days and
are collected in a timely manner. Historically bad debts have not been
material and have been within management's expectations. Management believes
timely collection of trade receivables minimizes associated credit risk.

As of December 31, 2000, our outstanding long-term debt consisted of the
notes, a credit facility that includes a term loan A denominated in Euros, a
term loan B denominated in U.S. dollars, and European and

U.S. revolver loans. The notes, which mature in 2010, totaled $200 million and
bear interest at a fixed rate of 13 1/2%. As of December 31, 2000, their fair
value was estimated to be $203 million. At the same date, the term loan A,
term loan B and revolver loans totaled $108 million, $350 million and $26
million, respectively, and approximated their fair value. Borrowings that are
denominated in the U.S. dollar bear interest at either Citibank's prime
lending rate or the eurodollar rate (Libor) plus, in each case, a margin
ranging from 1.25% to 3.75%, depending upon our leverage, as determined
quarterly. Borrowings that are denominated in euros bear interest at the euro
rate (Euribor) plus a margin ranging from 2.25% to 3.0% depending on our
leverage, as determined quarterly. We periodically review various alternatives
to protect long-term debt against interest rate fluctuations. The market risk,
estimated as a potential increase in fair value of these debt instruments
resulting from a hypothetical 1.0% decrease in interest rates, is estimated to
not be material during 2001. Subsequent to year end, we entered into interest
rate swaps related to the term loan B for notional principal amounts of $50
million, $75 million and $100 million that fix the interest rates at 5.41%,
5.29% and 5.41%, respectively.

BUSINESS

Overview

We are the leading worldwide manufacturer and developer of epoxy resins,
with an estimated 40% U.S. market share and an estimated 29% global market
share, and are also the leading global manufacturer of versatic acids and
derivatives, with an estimated 75% global market share. Epoxy resins are
chemicals primarily used in the manufacture of coatings, adhesives, printed
circuit boards, fiber reinforced plastics and construction materials due to
their excellent adhesion, effective corrosion resistance, strong electrical
insulation and mechanical strength properties. Products containing epoxy
resins serve a wide range of end-use industries, including automotive,
aerospace, electrical, construction and industrial maintenance. Versatic acids
and derivatives are specialty products which complement our epoxy resin
product offerings in the coatings, adhesives and construction industries. We
focus on providing our customers with specialty "systems and solutions," which
are packages of basic and specialty epoxy resins combined with curing agents
and other materials that are designed to meet the specific technical
requirements of our customers. Many of our products are developed and
formulated for specific end-customer products and applications, where the
purchasing decisions are driven primarily by product performance, technical
specifications and the ability to deliver customized service and solutions
rather than solely by price. We plan to continue to enhance our customer focus
by growing these high performance specialty products, which accounted for
approximately 23% of our revenues in 2000. For the year ended December 31,
2000, we generated pro forma revenue of $952 million, pro forma Consolidated
EBITDA of $151 million, pro forma adjusted Consolidated EBITDA of $158
million, pro forma income from operations of $96 million and pro forma net
income of $14 million.

We are a global business with customers in three principal geographic
regions: the Americas (52% of revenues for the year ended December 31, 2000),
Europe (35%) and Asia Pacific (13%). These customers are served by our global
sales and customer service network and by manufacturing facilities in all
three regions. We manufacture the two principal components, or intermediates,
of epoxy resins, which are bisphenol-A, or BPA, and epichlorohydrin, or ECH,
and we operate two of the three largest epoxy resins manufacturing plants in
the world. This backward integration and world-scale manufacturing capability
provides us with a low cost, reliable supply of intermediates for the
production of epoxy resins. We believe that our market leadership in the epoxy
resins and versatics and derivatives industries is primarily attributable to
our strategy of offering our customers a broad line of products, technical
expertise and product applications support along with being a low cost
producer of epoxy resins.

RPP Inc., our parent company, was recapitalized in a transaction financed in
part by a private placement of the old notes. Prior to the recapitalization,
RPP Inc. was a wholly owned subsidiary of Shell. Shell determined that epoxy
resins was a non-core product and that the sale of our business was in line
with its strategy to focus its chemical business on basic petrochemical
products more directly related to oil and gas production. As part of the
recapitalization, our existing management was joined by Marvin O. Schlanger,
former President and Chief Executive Officer of Arco Chemical Company, who is
our current Chairman and President. As an independent entity with a management
team and employees focused solely on the manufacture and marketing of epoxy
resins and related products, we believe that we will be able to capitalize on
unrealized cost-savings and revenue-generating opportunities. The cost-saving
opportunities include reductions in overhead and manufacturing costs,
improvements in manufacturing efficiencies, optimization of supply and
operating arrangements with Shell and other third parties and better cash and
working capital management. The revenue-generating opportunities include
increasing sales to current customers, acquiring new customers, finding new
applications for our existing products, expanding our line of value-added
specialty products, capitalizing on the currently announced price increases
for epoxy resins and pursuing further price improvement opportunities for our
products.

We manufacture and sell liquid epoxy resins, or LER, using internally
produced BPA and ECH. We also combine LER with a variety of other materials,
which we either manufacture ourselves or purchase from others, to produce
solid epoxy resins, epoxy resin solutions and specialty epoxy resins. In
addition, we manufacture a wide range of epoxy resin curing agents, catalysts
and other additives which are sold with our epoxy resin products. Epoxy resins
are used in many applications, the most significant of which include:

. Coatings. Coatings are applied to a surface for protection and to enhance
certain properties. Coatings based on our epoxy resins and other
additives offer outstanding protection from some of the harshest
environments by increasing resistance to moisture, chemicals and heat.
Our epoxy resins also serve as bonding agents and enhance the flexibility
of coatings. The many readily available forms of the products also offer
ease of formulation and use to our customers. Epoxy resins are used in
marine coatings for ships and offshore structures and in industrial
maintenance coatings for chemical plants, refineries, utility plants, and
pulp and paper mills. They are also used for automotive anti-corrosion
primers as well as for interior coatings of food and beverage cans, where
they protect the freshness and flavor of the contents. Epoxy resins can
be formulated into powder coatings and waterborne coatings that attain
the performance of traditional solvent-borne coatings but are more
environmentally acceptable. Epoxy powder coatings are used on appliances,
outdoor furniture, and the exterior of oil and gas pipe. Epoxy waterborne
coatings offer excellent performance over concrete and cement surfaces,
such as warehouse flooring and parking decks.

. Electrical and Electronics. Epoxy resin systems are used for the
manufacture of the board component in printed circuit boards because of
their excellent electrical and thermal insulation properties. In
addition, electronic components are often encased in epoxy resins to
protect them from moisture and from mechanical and thermal shocks. Epoxy
resin systems are used in the manufacture of electronic devices from
computers to cellular communications and in the manufacture of the
electrical components in transportation vehicles and appliances.

. Composites. Composites are engineered materials which are fabricated from
epoxy resin systems reinforced with a fiber, typically glass or carbon.
Epoxy resin systems are chosen for their mechanical strength and
toughness as well as their fatigue and chemical resistance. In addition,
unlike many other products, epoxy resins adhere especially well to carbon
and other fibers. Because of superior strength and weight
characteristics, epoxy resin based composites are used in a broad and
growing array of applications as they replace metals and other plastics.
Examples include fiberglass pipe for use in refineries, chemical plants
and oilfields, recreational goods (golf shafts, boats, bicycles, tennis
rackets, and fishing rods), aerospace construction materials (commercial
and military aircrafts, satellites, and rockets), high performance
automobiles and civil infrastructure repair (marine piers, bridge
columns, bridge decks and parking decks).

. Adhesives. Epoxy resin systems are often formulated into two-part
adhesives for bonding metal, glass, cement or plastic, often as a
replacement for welding or mechanical fasteners. Epoxy resins are used in
adhesives because of their superior mechanical strength and toughness and
their chemical and moisture resistance. Epoxy adhesives are used in a
wide variety of applications in the automotive, aerospace, construction
and electronics industries.

We are also the leading manufacturer and marketer of versatic acids and
derivatives, taking advantage of our manufacturing economies of scale and low
cost ECH supply. Versatic acids and derivatives can be divided into three
groups: basic versatic acids, VeoVa and Cardura. Basic versatic acids are used
mainly in pharmaceuticals, peroxides and agrochemicals whereas VeoVa and
Cardura are used mainly in decorative and protective coatings and personal
care products. Our principal customers for these products operate in the
automotive coatings, paint and construction industries, similar to our epoxy
resin customers. Versatic acids and derivatives accounted for approximately
10% of our revenues for 2000.

We also sell our excess production of BPA and ECH to third parties. BPA is a
critical component of polycarbonate plastics, which are primarily used in the
growing electrical and electronics market, including computer and business
equipment and optical disk applications. Polycarbonate is also used in the
automotive and glass industries. In addition to being used in the manufacture
of epoxy resins and versatic acids and derivatives, ECH is used in water
treatment applications. Sales of BPA and ECH to third parties accounted for
approximately 28% of our revenues for 2000. Sales to Bayer AG, which purchases
BPA from us, accounted for approximately 10% of our revenues in 1999 and 2000.

The following chart shows how our key feedstocks are used to manufacture our
end products and is based on our pro forma results for the year ended December
31, 2000.

[CHART]

$330 $945
Key Raw (Dollars in Millions) Total Product
Material Revenues
Purchases

$16 Propylene Trimer Versatics $90

$39 Chlorine
$56 Propylene ECH $48

$11 Purchased
Epichlorohydrin
Liquid Epoxy
Resins $292

Solids, Solutions
and Other $296

$167 Phenol
$41 Acetone BPA $219

Industry Overview

The epoxy resin industry, led by three global producers, has had a
historical industry growth rate in excess of the growth rate of U.S. gross
domestic product. Epoxy resins are produced and consumed globally with 1999
industry volume (including curing agents) of over one million metric tons and
worldwide sales of approximately $2.6 billion. According to Garnett
Consulting, the worldwide demand for epoxy resins is expected to grow at 4% to
6% per annum from 1999-2004, which we believe is due to its value-added,
performance-driven nature and use in a growing number of new end-use
applications. Since 1975, U.S. sales volume of epoxy resins have grown at an
annual growth rate in excess of 5% according to SRI International, compared to
an annual U.S. real GDP growth rate of approximately 3% over the same period.
During the last economic downturn, in the early 1990's, the volume of epoxy
resins sold in the U.S. remained flat by gaining share from other materials.
In addition, the multitude of epoxy end-use markets and the replacement of
other materials with epoxy resins has served to soften demand declines in any
one end-use market. The U.S. and Europe accounted for approximately 60% of the
industry's global LER demand and capacity in 1999, with the U.S. being a
significant exporter of epoxy resins as well.

We are one of three global producers of epoxy resins, who together accounted
for approximately 59% of 1999 global capacity for LER, which is the foundation
product of the industry. Due to import tariffs, transportation costs, customer
preferences in performance and applications and industry structure, industry
dynamics vary by region. In the U.S., these three global producers account for
essentially all of LER capacity and, in Europe, they account for 64% of
capacity. There are also several other companies, predominantly in Asia and
Eastern Europe, most of whom participate locally and do not have the world-
scale manufacturing capabilities or cost structure to compete effectively in
the epoxy resins industry on a global basis. We believe the significant
capital required to construct a world-scale manufacturing facility, the
production volumes required to maintain low unit costs, the need to secure
reliable raw material supplies, the significant technical knowledge required
to develop high performance products and applications and the need to develop
close, integrated relationships with customers serve as substantial barriers
to entry for new competitors.

During the second half of 1999 and in 2000, prices of several of our
petroleum-based feedstocks (including propylene and phenol) increased
significantly, and may continue to increase, as a result of the underlying
increase in oil prices. Historically, we and our competitors have been able to
pass through changes in feedstock costs to our customers, although with a time
lag. This lag has generally ranged from three to twelve months, depending upon
the magnitude of the feedstock cost change and market dynamics. During the
fourth quarter of 2000, prices for several of our key feedstocks began to
decline.

The pricing environment for epoxy resins has been positively impacted by
strong demand worldwide, with 1999 volume consumption increasing 4% from 1998.
Demand for epoxy resins in 2000 was especially strong in Asia, as the
economies in that region began to emerge from the slowdown experienced in 1998
and early 1999. Strong demand in Asia has kept locally produced product in
Asia instead of being available for export, which has stabilized pricing. In
addition, recent shortages of ECH worldwide have led to price increases in
sales of ECH to non-backward integrated epoxy producers. In fact, shortages of
ECH have impacted some of our competitors so that their own production of
resins has been negatively impacted, which has forced them to reduce sales to
their own resins customers. These global ECH shortages are a result of
temporary operating problems at various ECH manufacturing facilities and
increased demand for ECH in other end-uses.

As a result of these recent industry conditions, during the second quarter
of 2000 we announced price increases for our resins product lines, in the
Americas, Europe and Asia, which began to take effect on June 1, 2000 in the
United States and on July 1, 2000 for the rest of the world. We have also
announced and implemented additional price increases since those in the second
quarter of 2000. Several other major resins producers have also announced
increased resins prices. As of March 1, 2001, we have not lost any major
customers or significant volume due to these price increases but we cannot
assure you that we will not lose any significant customers or volume in the
future. We also implemented price increases for BPA in the Americas and in
Europe which began to take effect in the second, third and fourth quarters of
2000 and are currently being accepted by our customers. ECH prices have also
increased worldwide. We cannot assure you that we will be able to attain or
maintain the increases in the prices of resins, BPA or ECH for any extended
period of time. During the latter part of the fourth quarter of 2000, the
United States economy began to experience a slowdown in the manufacturing
sectors. A significant portion of our customers in the United States operate
in these sectors. As a result, the U.S. chemical industry in general and we,
to a lesser extent, experienced softness in product demand apart from expected
seasonality. There can be no assurances that this trend will not continue
during 2001 nor that we will be able to realize margins we have historically
achieved as feedstock costs decline.

We believe the versatic acids and derivatives market had worldwide sales of
approximately $135 million in 1999. Furthermore, we believe that we are the
largest supplier of versatic acids and derivatives in the world with an
estimated 75% global market share. Although we currently have one principal
direct competitor, the major competition for our versatic acids and
derivatives business is from alternative products which provide similar,
though not exactly comparable, functionality. Cardura and the basic versatic
acids have a particular niche in their competitive markets through their
unique performance attributes. For VeoVa, there is a large market of
competitive products, most importantly, butyl acrylate. In the markets in
which VeoVa directly competes with alternative products, VeoVa attains varying
market shares which we believe range to up to 27%. The versatic acids and
derivatives business has traditionally been focused in the European and
Japanese markets. However, we are in the process of developing sales and
customer support in other regions, including the U.S., to promote the use of
versatic acids and derivatives.

BPA is produced and consumed globally with 1999 worldwide sales of
approximately $2 billion and industry volume of over 2.3 million metric tons,
of which 26% related to sales of BPA to third parties. In 1999, the leading
six producers of BPA accounted for approximately 80% of global capacity. Most
major BPA producers are forward integrated into either or both polycarbonate
and epoxy resins and at times will sell excess BPA to third parties. We
believe that we are one of the largest suppliers of BPA to third parties (25%
market share in 1999) and the third largest producer of BPA in the world. From
1994 to 1998, demand for BPA grew by approximately 8% per year driven
primarily by the polycarbonate end-uses (electronics, computer,
telecommunications and data equipment). Polycarbonate demand growth has
averaged 10% per year in the late

1990's and, according to Peppin & Associates, is expected to grow at
approximately 10% per year over the next three years. Because of continued
demand for these end-uses, Garnett Consulting expects BPA volume demand to
grow at 5% to 7% per year from 2000 to 2005.

Recent Developments

On January 31, 2001, we announced a plan to increase cash flow and reduce
expenses. This plan incorporates the initiatives to reduce costs and simplify
operations that were previously announced in connection with the transactions.
The key elements of the plan include: (1) renewed focus on our epoxy resins
and versatics markets and customers, (2) a global integrated production
planning and inventory process to reduce working capital, (3) a manufacturing
and supply chain effort to reduce logistics and other variable costs, (4) a
capital expenditure plan and (5) a fixed cost reduction program. We believe
that the cost reduction program will result in savings of approximately $35
million per year over the fourth quarter annualized 2000 rate. We expect to
incur one-time costs of approximately $7 million to implement this cost
reduction plan which are not reflected in these anticipated cost savings. The
one-time costs of $7 million are expected to consist of $4 million in
severance costs and $3 million in relocation and exit costs.

In March 2001, David T. Preston resigned his positions as a director,
officer and employee. Marvin O. Schlanger, our Chairman, was elected to the
additional position of President.

In addition, we hired J. Travis Spoede as our Executive Vice President,
Chief Financial Officer and Secretary. Mr. Spoede previously held various
positions with Union Carbide Corporation, serving most recently as Director of
Strategic Development, Joint Ventures from 1999 to 2001 and as Chief Financial
Officer of EQUATE Petrochemical Company, a joint venture between Union Carbide
Corporation and Petrochemical Industries Company of Kuwait, from 1994 to 1999.

Also, on March 14, 2001 we hired Hanna M. Lukosavich as Vice President and
Chief Information Officer. Ms. Lukosavich previously held various positions
with Mannesmann Pipe & Steel Corporation from 1983 to 2000, including Director
of Information Technology.

In May 2001, we hired Mark S. Antonvich as Vice President and General
Counsel. Mr. Antonvich was Senior Counsel to Enron Global Exploration &
Production Inc. since 2000, and had been Senior Corporate Counsel to BHP
Minerals from 1995 to 2000.

Competitive Strengths and Competition

We believe that the following competitive strengths position us to further
enhance our growth and profitability:

. Leading Global Market Position. We are the leading global supplier of
epoxy resins, with market shares of 29% globally and of 40% in the
Americas, 26% in Europe and 17% in Asia Pacific. We compete primarily
with Dow Chemical and Vantico Group S.A. (formerly a division of CIBA
Specialty Chemicals) in the epoxy resins industry. In 1999, we, together
with Dow and Vantico, accounted for 59% of global capacity for liquid
epoxy resins, which are the foundation of this industry. Due to import
tariffs, transportation costs, customer preferences in performance and
applications and industry structure, industry dynamics vary by region. In
the United States, these three companies account for essentially all of
LER capacity, while in Europe they account for 64% of capacity. Nan Ya is
a significant competitor in Asia. There are also other smaller
competitors, primarily in Asia and Eastern Europe, who participate
locally and do not have the world class manufacturing capabilities or
cost structure to effectively compete in the epoxy resins industry
worldwide.

We have achieved this position as a result of our worldwide manufacturing
presence, broad product line, global sales and distribution network,
technological and applications expertise, and research and development
capabilities. Our global leadership position enables us to effectively
meet our customers' volume and product performance requirements and
provides us with economies of scale to enhance our

low cost position. In addition, our global production capacity allows us
to service local and regional customers who require unique product
formulations, as well as globally oriented customers who require uniform
products on a worldwide basis. We believe that the globalization of our
customers has caused them to shift towards fewer suppliers who can supply
globally and has given us an advantage over local or regional suppliers.
We believe our broad product line and global presence reduces our
exposure to any one industry, product line, market, customer or
geographic region. In addition, this diversity provides us with a broad
base from which to increase sales and expand customer relationships. We
believe the significant capital required to construct a world scale
manufacturing facility, the production volumes required to maintain low
unit costs, the need to secure a broad range of reliable raw material and
intermediate material supplies, the significant technical knowledge
required to develop high performance products, applications and
processes, and the need to develop close, integrated relationships with
customers serve as substantial barriers to entry for new competitors. We
and Dow are the only two global epoxy resins companies that are backward
integrated into BPA and ECH and have technologically advanced
manufacturing facilities.

In the versatic acids and derivatives product line, which is a small but
growing niche market, our only significant competitor is Exxon, who
produces a broad range of carboxylic acids. Exxon produces an alternative
to our Cardura, called Glydexx, through a tolling arrangement, and an
equivalent to VeoVa through a joint venture with Borden. The main
competition for versatic products comes from other monomers, such as
acrylate esters, which are also used as a monomer with vinyl acetate for
the production of emulsions polymers. For Cardura, the main competition
is from hydroxy acrylic monomers for use in automotive/industrial
coatings applications. We believe that through our relationships with
epoxy resins customers to whom we can sell our versatic acids and
derivatives product line, we have a strong platform for growth, thereby
giving us a competitive advantage.

. Low Cost Position. We support our leading global market presence with our
strategically located, low cost manufacturing presence. Our low cost
position is the result of an integrated supply position in critical
intermediate materials combined with advanced process technology and the
manufacturing capability of two of the three largest manufacturing
facilities in the world for the production of LER.

. Global Manufacturing. We operate through a network of ten
manufacturing facilities located throughout the world which reduces
transportation and logistics costs and provides our global customers
with targeted service and reliable and timely supply of our products.
The majority of our manufacturing operations take place at our
technologically advanced, world-scale plants in Pernis, The
Netherlands and Deer Park, Texas, both of which are backward
integrated and are two of the three largest epoxy resins plants in
the world. We believe our Deer Park plant is the only resins plant in
the world with a continuous-flow manufacturing process and produces
at a low cost what we believe is the most consistent LER in the
world. Our Pernis plant is the largest resins facility in Europe and
it operates a semi-continuous process which also results in low
operating costs. Our global network of specialty and solid resins and
versatics plants allows us to respond to our customers' specific
requirements. We also maintain a manufacturing presence in Asia
through our 50% joint venture with Mitsubishi Chemical Company in
Japan and a tolling arrangement with Eternal Chemical, a Taiwan-based
company, for certain epoxy solutions.

.Backward Integration. We manufacture ECH and BPA, the two key
intermediate materials for epoxy resins, in both the U.S. and Europe.
This backward integration allows us to eliminate certain finishing
steps, reduces logistics costs, assures us a reliable long-term
supply, improves our production scheduling and capacity utilization
rates and further enhances our low cost position. This backward
integration differentiates us from several of our competitors and
provides us with a significant cost advantage.

In Europe, demand accelerated in early 2000 and most suppliers
encountered capacity problems, often in combination with temporary non-
availability of production units. We believe we were able to take
advantage of this situation and added new customers to our existing
customer base in the second half of the year.

In the production and sale of BPA, we compete with companies who are
backward integrated into phenol such as Aristech and Mitsui Chemical, and
those who are forward integrated into polycarbonate, such as

General Electric. Forward integrated polycarbonate manufacturers have
captive demand but also may sell excess to third parties. Both Mitsui
Chemical and Aristech (a subsidiary of Sunoco) do not have captive demand
but sell to third parties. Dow is a backward and forward integrated
manufacturer of BPA, but does not currently have excess capacity and
therefore sells to third parties only on a limited basis. Bayer, a
polycarbonate manufacturer who is currently a BPA customer of ours, is
reducing purchases from us because it recently started up additional BPA
production capacity. Competition in the BPA market is based primarily on
price, product quality (purity and form) and security of supply.

.Process Research and Development. To further improve our manufacturing
cost structure, we have invested significantly in process research and
development in order to continuously improve the manufacturing
efficiency of our facilities.

. Attractive Raw Material and Operating Agreements. We have entered into
attractive long-term agreements with Shell and other third parties to
purchase the basic commodity chemicals used to produce ECH and BPA and to
ensure the supply of other raw material inputs which we do not produce
ourselves. We believe these agreements, combined with the physical
proximity of Shell's facilities, provide us with "producer-like"
economics without requiring us to manufacture these materials ourselves
or own or invest in these types of manufacturing facilities. Since seven
of our ten sites are co-located on Shell sites, we have also entered into
various other long-term operating agreements with Shell for the supply of
utilities and other services to our facilities at attractive and
predictable pricing. We will continue to monitor and evaluate these raw
material and operating agreements to take advantage of any future
opportunities to reduce costs and improve our operating efficiency.

. Strong Customer Focus. We believe our strong customer focus provides us
with a significant competitive advantage. We provide our customers with a
"systems and solutions" package designed to meet their specific needs,
which we believe is of significant value to them. This package includes
high quality, consistent and reliable products supported by local sales
support and technical expertise. We manufacture and sell nearly 100
grades of epoxy resins and over 200 related products, including curing
agents, waterborne resins, high performance resins and modifiers, which
allows us to offer packages of complementary products to meet customer
requirements in many end-uses. We believe that our specialty products,
many of which are tailored to our customers' specific needs, enable us to
attract customers that value product innovation and reliable supply and
are committed to maintaining their established relationships. Customers
who buy both basic resins and specialty products accounted for 57% of our
revenue in 2000. On a company wide basis, our 50 largest customers
accounted for 75% of our revenue in 2000. Approximately 88% of these top
global resins customers have been our customers for at least 5 years. For
many of our products, our customers might experience significant
disruption and costs in order to switch to another supplier.

. Technological Expertise and Research and Development Capabilities. Our
technological expertise and our research and development capability
enhance our global leadership. With approximately 142 scientists and
technicians worldwide, we emphasize a customer-driven approach in
discovering new applications and processes while providing excellent
technical service. Our research and development organization seeks to
maintain our leadership position by:

--Developing new or improved epoxy applications based on existing
products and identified customer needs;

--Developing new resin products for customers in order to improve their
competitive advantage and profitability;

--Providing premier technical service for customers;

--Providing technical support for manufacturing locations and assisting
in plant optimization;

--Ensuring that our products are produced in accordance with our global
health and safety policies and objectives; and

--Developing low cost manufacturing processes globally.

Our research and development efforts have yielded over 2,300 product and
process patents (issued and pending) as of March 1, 2001, have
significantly strengthened our relationships with our customers and have
created significant competitive advantages in many of our product lines.

Business Strategy

We are pursuing a strategy designed to increase our revenues and cash flow
and enhance our global leadership position. Key elements of our strategy
include:

. Improve Profitability. As an independent entity (as opposed to a small
division of a major petroleum company prior to the recapitalization) with
a management team and employees focused solely on the manufacture and
marketing of epoxy resins and related products, we will seek to identify
opportunities to increase productivity and efficiency and reduce costs.
We expect to simplify our manufacturing, sales and distribution
infrastructure. In connection with the recapitalization, we have entered
into new key feedstock contracts with Shell. We have also entered into
operating agreements with Shell for the supply of utilities and other
services at our sites. We will continuously monitor these feedstock,
operating and other agreements to ensure competitive terms and take
advantage of favorable industry conditions. We anticipate that over a
period of time services currently being provided by Shell, such as
information technology, accounting and building maintenance, will either
be provided internally or outsourced to third parties, which we expect to
result in significant economic benefits. In a number of foreign
locations, we currently share offices with Shell and expect that these
foreign arrangements will be replaced with lower cost alternatives.
Several manufacturing services provided by Shell have already been
canceled and will be provided by internal resources at substantially
lower costs. In the near future, we expect to conclude studies on the
structure and number of our Asian sales offices with the expected result
of decreasing the number of locations and significantly reducing costs.
Similarly, we will undertake a study of our European laboratories and
manufacturing sites and expect to be able to take advantage of
substantial cost savings opportunities.

. Expand Presence in Specialty Products. We will continue to expand our
presence in specialty products by continuing to develop and formulate
products for specific customers and applications, by introducing epoxy
resin systems into new applications, and by expanding our marketing and
sales of current specialty products into all regions. We are committed to
growing our specialty product revenue. Specialty products, which are of
higher value to our customers, assist us in the retention of these
customers, generally provide us with better margins than our basic
products, and leverage our research and development capabilities and
formulation and application expertise. Most customers' needs are
application and performance rather than product specific, requiring an
in-depth knowledge of resins systems' applications from our research and
development staff. The close partnership of our technical personnel with
our marketing and sales staff who work directly with our customers in
this highly technical business has been a strategic element in our market
value proposition and in developing our leadership position in the
industry. Especially in new non-traditional applications, these specialty
products add significant value to our customers' operations and products
while often representing only a minor portion of their overall costs. In
addition, these products have higher competitive barriers due to the
significant customization and rigorous qualification and certification
procedures necessary to ensure performance and reliability.

In particular, we intend to focus on the "performance polymers" segment
of epoxy resins. These are resins with custom-made high performance
characteristics used in the aerospace, automotive and electronics
segments, among others. Currently under development with key customers in
existing applications are weathering/outdoor durable resins for marine,
industrial maintenance, and automotive coatings; curing agents which
impart flexibility for applications traditionally served by non-epoxy
materials; and thermally stable, rapid processing resin systems for
printed circuit boards used in network servers and cell phones. To
penetrate new applications, it is often critical to adapt the form of the
epoxy resin to the customer's process in order to take advantage of the
epoxy's superior properties. Thus, our waterborne epoxy technology allows
use of the resins in new processes and applications such as in glass
fiber sizing and vinyl floor coating. We also expect to increase our
specialty product sales by aggressively marketing our current specialty
products into all other regions, such as increasing penetration of our
versatic acids and derivatives into the Americas and waterborne epoxy
resins into Asia. In addition to this internal growth, we will also
pursue modest opportunistic acquisitions ("tuck-ins") to accelerate the
growth in particular products or segments, to integrate new technologies,
or to obtain access to complementary products, if attractive
opportunities arise.

. Improve Operating Efficiency and Cash Flow. We believe there are
significant opportunities to increase our cash flow which were previously
unrealized by Shell. As an independent operating entity, we intend to
manage our working capital efficiently and generate cash flow from
enhanced management focus. Capital expenditures necessary to maintain our
business have historically been relatively low at $9 million to $16
million per year, and we expect this trend to continue. We will continue
to make selective and capital efficient expansions in our core product
areas that allow us to expand capacity by eliminating bottlenecks in our
production chain and enhancing and upgrading our production technology.
On January 31, 2001 we announced a plan to reduce costs and increase cash
flow that is described in more detail under the caption "--Recent
Developments." We also intend to evaluate cash generating transactions
such as plant capacity reservation or pre-sale contracts whereby the
customer would prepay us for our production services. In addition, as a
result of the financial and legal structure of the recapitalization, we
expect to generate significant cash tax savings over the next three to
five years. We expect to use our excess cash flow to reduce leverage by
reducing indebtedness incurred in the recapitalization or by reinvesting
in our business.

Products

We manufacture and sell epoxy resins and related products, versatic acids
and derivatives, and BPA and ECH, the intermediate materials used in epoxy
resins. Our primary products are epoxy resins and related products. In
addition, as part of our strategy to provide a range of complementary products
which meet our customers' needs, we manufacture and sell versatic acids and
derivatives. As a backward integrated manufacturer of epoxy resins, we also
manufacture BPA and ECH, the two principal intermediate materials of epoxy
resins, for our internal use and sell the excess to third parties.

The basis on which our products compete in the marketplace varies depending
on end-uses. For example, in large volume applications such as automotive
primers and can coatings, we believe that customers require security of supply
and consistent product quality, but use price as a major factor in their
buying decisions. For more specialized applications, such as electronics or
composites, criteria such as product performance, technical support, and
breadth of product line are often more important than price. We look for
customers and markets that value our strengths: providing tailored performance
properties in specific end-uses, offering "one-stop shopping" for systems
(resin, modifier, curing agent) specially developed to work together for
optimum results, using sophisticated technology and technical experience which
allows us to make consistent quality product, and providing superior technical
service and applications advice. Our products often enhance the key
performance properties of the end products of our customers while often
accounting for only a small part of the total cost.

A consideration for many customers in the buying decision is the cost
associated with switching from us to another supplier, which also varies
greatly by end-use. In applications such as architectural paints, industrial
coatings and flooring, switching costs can be very low. In others, like
aerospace composites, electronics, can coatings, and automotive applications,
switching costs are generally significant. For many of our products, our
customers might experience significant disruption and costs in order to switch
to another supplier. In addition, most of our customers' needs are application
rather than product specific, requiring an in-depth knowledge of resin
systems' applications. Our technical and marketing staffs work closely with
our customers to develop products for their specific needs. Our specialty
products also have higher competitive barriers due to the significant
customization and rigorous qualification and certification procedures
necessary to ensure performance and reliability.

Epoxy Resins and Related Products

Epoxy resins are a family of synthetic thermoset polymers. Epoxy resins are
generally combined with other chemical additives to create inert, chemically-
stable, or "cured", products. Once cured, epoxy resins have attractive
attributes such as outstanding adhesion, corrosion and chemicals resistance,
high strength and toughness, temperature stability, electrical insulation and
easy processability.

Liquid epoxy resins are the foundation of the industry since most epoxy
resins are initially produced as liquid and can then be modified into solid
epoxy resins or solutions through the addition of incremental BPA or solvents.
In addition to these resins, there are other specialty epoxy resins based on
other raw materials.

Epoxy resins are used in applications such as coatings, electrical and
electronics, construction, adhesives and composites in a variety of end-use
industries. The following table sets forth typical epoxy resin applications
and their functionality:

Product End-Uses Product Functionality
- -------------------------------------- --------------------------------------

Coatings
-- Ship coatings -- Interior -- Moisture -- Film
-- Offshore coatings for resistance flexibility
structure food and -- Resistance to -- Corrosion
coatings beverage cans solvents resistance
-- Industrial -- Appliance -- Resistance to -- Regulatory
coatings in coatings chemicals compliance
chemical -- Outdoor -- Heat -- Light weight
plants, furniture resistance and high
refineries, coatings -- Adhesion to strength
utility -- Oil and gas substrates and -- UV resistance
plants, food pipe coatings coating layers
and dairy -- Concrete
plants, and coatings
pulp and -- Warehouse
paper mills flooring
-- Automotive -- Parking decks
anti-
corrosion
primers
-- Windmill
blades

Electrical/Electronics
-- Laminates for -- Attachment of -- Insulative and -- Mechanical and
printed components for dissipative thermal shock
circuit printed properties resistance
boards circuit boards -- Thermal -- Processing
-- Transformers -- Embedment of stability ease
and devices and -- Moisture -- Flame
switchgear motors resistance retardant

Composites
-- Fiber -- Aircraft--tail -- Mechanical -- Chemical
reinforced and wing strength and resistance
plastics sections, toughness -- Adhesive
-- Fiberglass helicopter -- Fatigue properties
pipes blades resistance with fibers
-- Golf club -- Race cars -- Light weight such as carbon
shafts -- Fuel tanks and high and glass
-- Boats -- Repairing strength
-- Bicycles marine piers,
-- Tennis bridge
rackets columns,
-- Fishing rods bridge decks
-- Windmill and parking
blades decks

Adhesives
-- Metal, glass, -- Road markers -- Superior -- Chemical
cement and -- "Do it mechanical resistance
plastic yourself" kits strength of -- Moisture
glues/ -- General adhesion resistance
bonding repairs -- Toughness of -- Adaptability
agents adhesion to a wide
-- Automotive variety of
vehicles substrates

Construction Materials
-- Moldings -- Glass and -- Sound -- Strength
-- Lab bench carbon fiber insulation -- Chemical
tops sizing -- Protection resistance
-- Floatation -- Textiles -- Saturation -- Adhesive
devices -- Filters properties properties
-- Electrical -- Tires with fibers
insulators such as carbon
-- Syntactic or glass
foams

Our primary customers of epoxy resins and related products are

. large, multi-national coatings producers, who typically use our epoxy
resins to make their finished product and who tend to require from their
epoxy resin suppliers consistent quality product and the ability to
deliver technical service to any of their worldwide production sites, and
also value our wide variety of specialty products;

. electrical, adhesive and composite end-users, who typically formulate and
cure our epoxy resins for their particular end-use and who tend to
require from their epoxy resin suppliers a higher quality, consistent
product and technical support; and

. specialty epoxy resin manufacturers, who typically buy standard LERs from
distributors and then formulate their own specialty epoxy resin products
for sale and who tend to buy their epoxy resins from distributors who are
able to deliver smaller orders in a cost-effective manner.

We believe we are the leading global supplier of epoxy resins because of our
low cost position, broad product line and leading technology. We are able to
provide consistent product quality, technical expertise, global service and
reliable supply at a low cost to our customers, thereby gaining a competitive
advantage. Epoxy resins accounted for 62% of our revenues in 2000, 1999 and
1998.

To maintain our market leadership and to provide for growth and greater
profitability, we have targeted certain segments and customers in each market
area and initiated market driven and customer focused research and product
development activities. Set forth below are examples of current and recently
completed product development activities:

. In the electrical laminates market, we have targeted development of resin
systems which are more thermally stable and/or resins which provide
greater productivity or ease in the fabrication of printed circuit
boards. More thermally stable electrical laminates are necessary for high
density circuitry used in more powerful computing devices and servers and
in wireless communication devices and will be increasingly attractive as
lead solders are banned and higher temperature solders are used. We have
developed resin systems that exhibit the thermal stability demanded. We
have also developed resins that increase circuit board production by a
significant multiple in the press cycle, the typical bottleneck in the
production of printed circuit boards.

. In the electronics market, our Japanese joint venture has developed a
premium product for encapsulating electronic components which we believe
is superior to alternative products in cost, performance and ease of
processing. In addition, we are developing a resin designed to allow for
the easy removal and replacement of a defective chip in a printed circuit
board without disposing of the entire board.

. In the composites market, we have focused our development efforts on
products where strength and weight are important and which could replace
metal and other plastics. We have solid positions in supplying resin
systems for the fabrication of golf shafts as well as resin systems which
are especially strong and flexible for use in manufacturing spoolable
tubing for the oilfield and other process industries.

. In the structural applications market, we are developing a sprayable
epoxy foam to provide insulation and to prevent corrosion under
insulation for use on pipes and storage tanks which will impart
sufficient flexibility to allow the pipe or tank to bend under stress or
expand with changes in temperature. We are also developing a new
waterborne resin for use in vinyl floor coatings to impart stain
resistance and gloss to the flooring.

. In the adhesives market, we are working with key customers to develop a
waterborne adhesive primer for use in manufacturing high performance
layered aluminum sheeting for aerospace construction. If developed, these
products will be significantly more environmentally acceptable than our
current products and those of our competitors.

. In the coatings market, we are introducing a new generation of waterborne
epoxy and curing agents which will have substantially the same
performance as traditional solventborne materials but could have
significantly lower adverse environmental emissions.

. We are developing new epoxy molecules which significantly increase
resistance to ultraviolet radiation and should enable our customers to
attain epoxy performance in outdoor applications where epoxies could not
be used previously because traditional epoxies yellow or fade from
sunlight. Significant material and labor cost savings can be realized by
end-use customers if a non-epoxy topcoat which is used for UV protection
can be eliminated from the finished coating.

. For epoxy powder coatings, curing has traditionally been carried out at
high temperatures, making powder unusable on sensitive materials such as
wood, paper, and plastics. We are testing new systems that may enable
curing of powder coatings at lower temperatures.

Versatic Acids and Derivatives

Versatic acids and derivatives include basic versatic acids, VeoVa and
Cardura. The applications for basic versatic acids include pharmaceuticals
(such as semi-synthetic penicillins), peroxides and agrochemicals and for
VeoVa and Cardura range from decorative and protective coatings to personal
care products (such as hair spray). Versatic acids and derivatives are
specialty products which have relatively high margins. As described below, we
anticipate increasing our sales of versatic acids and derivatives
significantly over the coming years by expanding our sales efforts
geographically. One of the primary end-uses of these products is in polymers
and additives for the coatings industry. Within this segment there is a wide
spectrum of polymer systems, usually coating binders, which provide
significant benefits to the finished coating, including adhesion, gloss,
flexibility, outdoor durability and ease of application. These products are
alternatives to other products and are distinguished by their unique branched
molecular structure. We manufacture versatic acids and derivatives using our
integrated manufacturing sites and our internally produced ECH.

We serve the coatings and construction industries with Cardura and VeoVa,
both of which are derivatives of versatic acids. Our customers use Cardura as
an intermediate for the production of automotive coatings as well as a flow
improver for epoxy resins. Our VeoVa is mainly sold to latex producers for use
in the production of latex paints.

The following table sets forth typical versatic acids and derivatives
applications and their functionality:

Product End-Uses Product Functionality
- -------------------------------------- --------------------------------------

Cardura
-- Automotive -- Floor - Gloss/aesthetic -- Ease of
coatings surfaces, appearance application
-- Industrial/metal grouts and - Chemical -- Water
coatings adhesives resistance resistance
-- Coil coatings -- Binders - Acid -- UV resistance
-- Can coatings -- Pigment paste resistance -- Diluent;
-- Polyester - Outdoor reduces
finishing durability viscosity
- Adhesion -- Pigment
-Flexibility wetting
properties

VeoVa
-- Emulsion -- Textile - Scrub -- Latex
paints coatings resistance production
-- Decorative -- Paper - Water efficiency
plasters -- Cement based repellency -- Chemical
-- Concrete grouts - Alkali resistance
additives -- Tile adhesives resistance
-- Adhesives -- Mortars
-- Inks

Versatic Acids

-- Pharmaceuticals -- Agrochemicals - Chemical
-- Peroxides -- Personal care building block
products

Versatic acids and derivatives accounted for approximately 10% of our
revenues in 2000 and 12% of our revenues in both 1999 and 1998.

The versatic acids and derivatives business has traditionally been focused
in the European and Japanese markets. We are in the process of developing
sales and customer support in other regions, including the U.S., Latin America
and Asia, to promote the use of versatic acids and derivatives in those
regions. We are also developing additional applications beyond the traditional
coatings market in order to broaden the customer base for these products, such
as the use of VeoVa in adhesive and paper coatings and Cardura for flow
improvement of pigment in epoxy paints. In addition, we are in the process of
constructing an advanced manufacturing facility for Cardura at our Pernis
facility. Once this plant becomes operational (currently expected to be at the
end of 2001), we expect to expand our production capacity for Cardura by one
third.

Bisphenol-A

BPA is a white, crystalline solid produced by the reaction of phenol with
acetone. BPA is produced in a molten state and is either used in a molten or
pelletized form in our production process for epoxy resins or is flaked or
pelletized for sale to third parties. BPA is used primarily for producing
polycarbonate and epoxy resins as well as for the production of other
products, including flame-retardants. End-uses of polycarbonate resins include
electricals and electronics (including computer and business equipment and
optical disks), glazing and sheeting, automobiles and appliances and power
tools, as well as recreational products, packaging and medical devices, films,
signs and ophthalmic lenses. BPA is also used in the production of
tetrabromobisphenol (TBBPA) which is used to impart flame resistance to epoxy
resins in printed circuit boards, as well as to polycarbonates and other
plastics.

The following table sets forth typical BPA applications and their
functionality:

Product End-Uses Product Functionality
- -------------------------------------- --------------------------------------

BPA
--Polycarbonate -- Epoxy resins --Chemical building
plastics --Automotive block
--Computer and --Appliances
business --Power tools
equipment
--Optical disk
applications
--Glazing
--Sheeting

Most BPA producers are forward integrated into either or both polycarbonate
and epoxy resins and at times will sell excess BPA to third parties. A limited
number of manufacturers produce BPA for resale. By producing our own BPA, we
maintain a low cost position for production of epoxy resins. We produce and
sell excess BPA in order to achieve economies of scale and thereby lower our
manufacturing costs. We currently use approximately 37% of our BPA to produce
epoxy resins and sell the remainder to third parties. We believe that we are
one of the largest suppliers of BPA to third parties (25% of market share in
1999) and the third largest producer of BPA in the world. Because the largest
end-use segment for BPA is the manufacture of polycarbonate resins, we focus
on sales to polycarbonate producers, who desire the high quality product
yielded by our process. In addition, because we do not compete in the
polycarbonate market, we believe our position as a supplier to non-integrated
polycarbonate customers is enhanced.

As our base epoxy resin business grows, we anticipate that we will be
increasing our internal use of BPA and decreasing third party sales. Bayer,
one of our BPA customers which accounted for approximately $99 million, or
approximately 10%, of total revenues in 2000, has recently constructed another
facility for the production of BPA and is reducing its purchases of BPA from
us over the next three years. However, we do not anticipate a material adverse
effect from the reduction of sales to this customer. We expect to replace this
lost volume with our own increasing internal use of BPA, with a large contract
we expect to enter into with a new third party customer of BPA and by
increasing sales of BPA to existing customers. From 1994 to 1998, demand for
BPA grew by approximately 8% per year, driven primarily by polycarbonate end-
uses (electronics, computers, telecommunications and data equipment) and we
expect this rate of growth to continue.

Polycarbonate demand growth has averaged 10% per year in the late 1990's, and
is expected to grow at approximately 10% per year over the next three years.
As a result of the significant construction of new BPA production facilities
in 1999 and 2000, BPA capacity industry-wide has increased by over 20% from
stated 1998 capacity to help meet fast-growing demand for BPA.

Sales of BPA to third parties accounted for 23% of our revenues in 2000, 20%
of our revenues in 1999 and 19% of our revenues in 1998.

Allylics

We manufacture allyl chloride, or AC, which we convert into ECH for
production of epoxy resins. We also sell small quantities of excess AC and ECH
to customers who use them for production of epoxy resins, glycerine, water
treatment polymers, and other specialty polymers. We currently use
approximately 76% of our ECH to produce epoxy resins and sell the remainder to
third parties.

The following table sets forth typical allylics applications and their
functionality:

Product End-Uses Product Functionality
- -------------------------------------- --------------------------------------

ECH/AC
-- Water -- Synthetic --Chemical building
treatment glycerin block
-- Epoxy resins

Sales of AC and ECH to third parties accounted for 5% of our revenues in
2000, 6% of our revenues in 1999 and 7% of our revenues in 1998.

Sales and Marketing

We market an extensive product line to meet a wide variety of customer
needs. We focus on selecting customers who are or have the potential to be
leaders in their industries and who have growth objectives which support our
own. In addition, we focus on customers who value our "systems and solutions"
package. This package includes high-quality, reliable products backed by local
sales support and technical expertise offered at an attractive price. Through
our customer relationships, we have established important cost and performance
requirements for each customer application. In the coatings industry, for
example, once we establish a strong position as a supplier of high quality,
high volume basic resin to our customers, we are often able to learn of their
other needs for specialty products, such as performance resins, curing agents
and/or modifiers, and supply these value-added products to them as well. As a
result, we have been able to expand the range of products purchased by larger
customers and thereby improve our overall margin. In other industries, such as
composites and electronics, our broad range of products and technical
capabilities has been the initial attraction to a customer seeking to solve a
problem or introduce a new product. We are then often able to use this
foothold to expand our sales to include many of the larger volume basic resins
to these customers.

The effectiveness of our customer-oriented sales and marketing strategy is
evidenced by the composition and history of our customer base:

. Our 50 largest customers accounted for 75% of our revenue in 2000.

. Approximately 88% of those customers have been our customers for at least
5 years.

. In the coatings industry, we have a majority supply position at 3 of the
4 largest customers globally.

. Customers who buy both basic resins and specialty epoxy resins accounted
for 57% of revenues in 2000.

We sell and support our products in over 75 countries throughout the world
through our regionally organized sales and customer service network. Our three
sales regions consist of the Americas, Europe and Africa, and Asia Pacific and
the Middle East. Sales in these regions accounted for 52%, 35% and 13%,
respectively, of total revenues for the year ended December 31, 2000. In all
of these regions, we use a direct sales force for sales to our larger
customers and third party distributors to serve our smaller customers, where
it is more cost efficient to do so. Our direct sales force, consisting of 20
employees in the Americas, 20 in Europe and Africa and 11 in

Asia Pacific and the Middle East is compensated on a salary basis, with a
bonus potential. Our distributors are compensated through a discount from the
list price of our products they purchase. Over the past year, we have shifted
$17 million of sales from our direct sales force to local distributors,
primarily in Asia, Latin America and, to a lesser extent, in Europe, in order
to enhance our service and the profitability of smaller accounts. We have also
been consolidating the number of distributors we use in order to reduce our
logistics and supervisory costs. We have annual distributor evaluations and
incentive programs which are designed to reinforce the "systems and solutions"
sales approach. We choose our distributors based on reputation, flexibility
and capability to bring the "systems and solutions" marketing strategy to
their customers. Each distributor carries our entire line of resins and
related products line (some on an exclusive basis), as well as versatic acids
and derivatives. Our broad product line provides our distributors with a
competitive advantage over competing distributors with more limited product
lines or who must source from multiple suppliers to achieve the same product
breadth. Distributors currently account for approximately 13% of our sales.

Approximately 40% of our sales to customers in the United States are made
under written contracts. Most of these contracts are for terms of one to two
years and have either evergreen provisions or automatic renewal. These
contracts are generally for the supply of quantities based on targeted
quantities or a specified percentage of the customer's requirements. Prices in
contracts for epoxy resins are generally negotiated based on market prices and
often include volume discounts. Prices in contracts for BPA are generally
established using multi-variable formulas, based on underlying chemical
benchmark prices, cost of production and a margin.

We have a worldwide customer service and support network. We have 9 customer
service specialists in the Americas, 9 in Europe and Africa and 1 in Asia
Pacific and the Middle East. We have been consolidating our customer service
and support network into key regional customer service centers, and expect to
continue to do so in order to reduce overhead costs. We have global account
teams that focus on coordination for major global customers, including
technical service, supply and pricing. In addition, technical professionals
are assigned to each of the three regions to support the sales effort. In the
Americas, we also have a telephone resource for technical advice and support
for our customers.

Research and Development

Our research and development activities are aimed at developing and
enhancing products, processes, applications and technologies to maintain our
position as a leading global epoxy resins supplier. We focus on:

. developing new or improved epoxy and specialty chemical applications
based on our existing product line and identified customer needs;

. developing new resin products for customers in order to improve their
competitive advantage and profitability;

. providing premier technical service for customers;

. providing technical support for manufacturing locations and assisting in
plant optimization;

. ensuring that our products are manufactured in accordance with our global
health and safety policies and objectives; and

. developing lower cost manufacturing processes globally.

We emphasize a customer driven, "systems and solutions" approach in
discovering new applications and processes and providing excellent customer
service through our technical staff. Through regular direct contact with our
key customers, our research and development personnel can become aware of
evolving customer needs in advance and can anticipate their requirements in
planning customer programs. We also focus on on-going improvement of plant
yields, fixed costs and capacity. For example, our continuous LER
manufacturing process is fed from an integration of continuous feedstock
streams from our BPA and ECH plants located on the same site. These continuous
integrated streams are characterized by exceptional product consistency, low
cost economics, and high quality resin that is valued by the customer for
demanding applications. We estimate that

this unique process provides us with a sustainable cost advantage over
conventional batch technology, which is the traditional method of
manufacturing epoxy resins.

We have approximately 142 scientists and technicians worldwide. We conduct
research and development activities at our facilities in Amsterdam and Pernis,
The Netherlands; Houston, Texas; Louvain la Neuve, Belgium; and Yokkaichi,
Japan. Our research and development facilities include a broad range of epoxy
synthesis, testing and formulating equipment, and small scale versions of
customer manufacturing processes for applications development and
demonstration.

Our research and development expenditures were $29 million, $31 million and
$26 million during 1998, 1999 and 2000, respectively. To improve the
investment return on our significant research and development expenditures and
improve global sharing of ideas within our business, we intend to centrally
manage all such costs. We expect to spend approximately 70% of our research
and development budget on product development and approximately 30% on process
development over the next few years.

Raw Materials

We manufacture BPA and ECH, the two key intermediate materials for epoxy
resins, at both the Deer Park and Pernis plants. This reduces logistics costs
and assures long-term and reliable supply. We currently use 37% of our BPA for
the production of our epoxy resins and sell the remainder to third parties. We
produce our own ECH but also maintain a position in the merchant market
businesses both as a buyer and as a seller to assure supply flexibility and
improve plant operating rates. We currently use 76% of the ECH we produce for
the manufacture of our epoxy resin products and Cardura.

We purchase chlorine, a primary raw material for ECH, under long-term supply
contracts with third parties which provide us with producer-like economics by
allowing us to buy this raw material at a margin above production cost and
thereby lower our manufacturing costs. We also purchase propylene, the other
primary raw material for ECH, under long-term supply agreements with Shell
that are based on market price less negotiated volume discounts. We purchase
phenol and acetone, the primary raw materials for BPA, under attractive supply
contracts with Shell and other third parties that are based on discounted
market prices and input-cost formulae. Because we are co-located with Shell at
several of our facilities, our transportation and logistics costs for certain
raw materials which Shell provides us are minimized.

Raw materials for versatic acids consist of carbon monoxide, propylene
trimer and di-isobutylene. Carbon monoxide is supplied by pipeline under a
long-term contract from a production facility near our Pernis plant, propylene
trimer is obtained via price formula based contracts and spot purchases and
di-isobutylene is obtained from Shell under a three year supply agreement. At
our Pernis site, versatic acids are combined with ECH to produce Cardura and
at our Moerdijk site they are combined with acetylene, which is purchased from
Shell under long-term supply agreements, to produce VeoVa.

The majority of our raw materials used in manufacturing our products are
available from more than one source and are readily available on the open
market. Those materials that are single sourced generally have long-term
supply contracts as a basis to guarantee a maximum of supply reliability.
Prices for most of our main feedstocks are driven by underlying petrochemical
benchmark prices and energy costs. We are in the process of consolidating
purchases and contract sharing for other major feedstocks as well as process
chemicals, packaging materials and services.

Manufacturing and Facilities

We manufacture our products in the United States, Europe and Asia. Our major
manufacturing operations take place at two world-scale sites in Pernis, The
Netherlands and Deer Park, Texas. To be world-scale, we believe an LER plant
must produce over 80kt per year of resins, achieving the threshold for major
economies of scale. Deer Park currently has 133kt capacity and Pernis has 86kt
capacity, making Deer Park the largest epoxy resin plant in the world and
Pernis one of the three largest plants in the world. We believe the Deer Park
plant is

the only "continuous" resins plant in the world in which BPA and ECH are
manufactured and reacted continuously to make epoxy all in one site. Based on
our estimates, this plant, which produces some of the most consistent quality
liquid epoxy resins, provides us with a cost advantage over conventional batch
technology, which is the traditional method of manufacturing epoxy resins,
and, we believe, provides us with the lowest manufacturing cost in the world.
We also maintain a manufacturing presence in Asia through our 50% ownership of
our Japanese joint venture and a tolling arrangement with Eternal Chemical, a
Taiwan-based company, for certain epoxy solutions (used primarily in
electronics).

The manufacturing process for LER requires access to sophisticated
technology and experience to make consistent quality product from batch to
batch. ECH is difficult to handle, especially the disposal of by-products from
its productions. Backward integration into both ECH and BPA and world-scale
plants are needed to achieve low manufacturing costs. Epoxy production
requires that product be manufactured to meet narrow ranges of molecular
weight and product reactivity. These properties are then aligned with
performance properties for customers, such as filler settling, adhesion and
color stability. We believe our technical knowledge, backward integration and
world-scale plants provide us with a significant competitive advantage in
manufacturing epoxy resins.

The severe conditions in the versatic acid production process require exotic
construction materials for various manufacturing facilities. The need to
access low-cost acetylene and ECH for the derivative products and the
necessary scale of the operation and experience which we have built up over
many years provide significant barriers to entry for the production of
versatic acids and derivatives.

We are headquartered in Houston, Texas and operate through a network of ten
manufacturing facilities. We own the plants and equipment at all of our
facilities, except at the facility owned and operated by our Japanese joint
venture. We lease the underlying real property at all of our facilities under
long-term leases with Shell, other than those located in Barbastro, Spain and
Lakeland, Florida, which we own, and the facility located in Yokkaichi, Japan
which is owned and operated by our Japanese joint venture. All of our
manufacturing facilities are co-located within Shell facilities, other than
our facilities in Barbastro, Spain and Lakeland, Florida and the facility
operated by our Japanese joint venture which is co-located within a Mitsubishi
Chemical facility. All of our facilities which are co-located within a Shell
site share utilities with the Shell site through operating agreements, and
generally such utilities and related assets are not owned by us. Our
manufacturing facilities with associated principal manufacturing capacities
(which may vary based on product mix in some locations) are listed below.

2000 Capacities
Plant Location Product (in kilotons)
-------------- ------------------------------- ---------------

Argo (IL, USA) SER, Solutions and Other 38
Barbastro (Spain) SER, Solutions and Other 10
Deer Park (TX, USA) BPA 228
ECH 85
LER 133
SER, Solutions and Other 25
Lakeland (FL, USA) SER, Solutions and Other 17
Moerdijk (Netherlands)* Versatic acids and derivatives 58
Norco (LA, USA) Crude ECH 80
SER, Solutions and Other 7
Pernis (Netherlands) BPA 144
ECH 80
LER 86
SER, Solutions and Other 40
Versatic acids and derivatives* 92
Stanlow (UK)* SER, Solutions and Other 15
Wesseling (Germany)* SER, Solutions and Other 20
Yokkaichi City (Japan)** LER 15
SER, Solutions and Other 27

- --------
* These facilities are operated by Shell or its affiliates on our behalf
pursuant to contractual arrangements.
** This facility is owned and operated by our Japanese joint venture with
Mitsubishi Chemical.

Intellectual Property

Our most significant intellectual property rights are our patents and
related proprietary rights. As of the end of the year 2000, we owned or
licensed 865 issued patents and owned or had rights to over 1,500 pending
patents and patent applications. Over half of our patents are in Europe and
the remainder are in the United States and Asia. We anticipate that we will
apply for additional patents in the future as we develop new products and
processes. Our intellectual property rights include know-how and patents
covering analytical tests, extensive applications testing capability and
industry-leading processing and formulating knowledge of thermoset resin
systems for specific end-uses such as protective and decorative coatings,
electrical laminates, electronics, composites, adhesives, fibers and textiles
and civil engineering. We have a broad portfolio of patents, know-how and
intellectual property agreements relating to our products.

As of the end of the year 2000, we owned or had licensing rights to a number
of trademarks. Our most significant trademarks are EPIKOTE(R) Resins, EPON(R)
Resins, EPI-CURE(R) Curing Agents, EPI-REZ(R) Waterborne Resins, HELOXY(R)
Modifiers, CARDURA(R) Glycidyl Ester, and VeoVa(R) Monomers.

Shell has retained rights in some of the intellectual property acquired by
us as part of the Transactions. See "Certain Relationships and Related
Transactions--Ongoing Relationship with Shell--Intellectual Property
Agreements."

Employees

At December 31, 2000, we had approximately 995 employees worldwide
(excluding Shell employees who operate certain of our facilities under
operating and maintenance agreements), approximately 66% of whom were employed
in manufacturing, 14% in research and development, 16% in sales and marketing
and 3% in management and administration. Of our employees, approximately 53%
are based in the Americas, 42% in Europe and Africa and 5% in Asia Pacific and
the Middle East. Certain of Shell's epoxy resin employees at the Deer Park and
Norco facilities in the United States who are represented by labor unions had
the right, and have exercised such right, to remain with Shell. Shell has
agreed to provide these employees (43 at Deer Park and 10 at Norco) to us
pursuant to interim labor services agreements for a period of up to two years
following the closing of the Transactions. We do not believe that the election
by such employees will have a material adverse effect on our operations and
anticipate that we will replace any such employees utilized under the interim
labor services agreements as soon as practicable. See "Certain Relationships
and Related Transactions."

Approximately 95 employees at our Deer Park plant are subject to a
collective bargaining agreement which expires on January 31, 2002.
Approximately 59 employees at our Norco plant are subject to a collective
bargaining agreement which expires on June 30, 2003. In several locations
outside the United States, employees are represented by local Staff Councils
as required by local laws or customs. Where necessary, we have completed the
required consultation process with these entities.

Management generally considers its relationships with its employees to be
satisfactory.

Environmental/Occupational Health and Safety Matters

We have adopted and implemented health, safety and environmental policies
similar to those that were developed and implemented by Shell. These policies
include systems and procedures governing environmental emissions, waste
generation, process safety management, handling and disposal, worker health
and safety requirements, emergency planning and response, and product
stewardship. Facility managers will assume day to day responsibility for
statutory and regulatory compliance, with oversight and support provided by
our corporate environmental and health and safety managers.

We are subject to extensive regulation under the environmental and
occupational health and safety laws by federal, state and local governmental
entities and foreign authorities, such as the European Union. These laws are
designed to protect workers and the public from exposure to certain hazardous
chemicals and dangerous work conditions and to protect natural resources and
limit discharges of hazardous substances to the environment from ongoing
operations. They provide for substantial fines and potential criminal
sanctions for violations and they establish requirements to remediate
contamination. The laws are complex, change frequently and have tended to
become more stringent over time.

Environmental laws will affect how we operate our business, including the
costs associated with the storage and disposal of raw materials, finished
products and wastes, as well as the investigation and remediation of
environmental conditions at current and former facilities. Moreover, the
nature of our operations exposes us to risks of liability for breaches of
safety, health and environmental laws as a result of the production, storage,
transportation, handling, sale and disposal of materials that may cause
contamination or personal injury when released to the environment.

For example, statutes such as CERCLA and comparable state and foreign laws
impose strict, joint and several liability for investigating and remediating
the consequences of spills and other releases of hazardous materials,
substances and wastes. In addition, individuals may seek recovery of damages
for alleged personal injury or property damage due to exposure to hazardous
substances and conditions at our facilities or to

substances otherwise owned, sold or controlled by us. Therefore,
notwithstanding our commitment to environmental management, we cannot assure
you that environmental, health and safety liabilities will not be incurred in
the future, nor that such liabilities will not result in a material adverse
effect on our financial condition, results of operations or business
reputation.

Our sites have an extended history in the manufacture of epoxy resins and
other industrial chemical processes. Shell has performed site assessments at
the major manufacturing facilities. The assessments have identified soil,
groundwater and/or surface water contamination associated with historical
operations and on-site waste disposal practices at a majority of the sites.
Liabilities associated with these matters generally are covered under our
environmental indemnity from Shell. See "Certain Relationships and Related
Transactions--Ongoing Relationship with Shell--Environmental Agreements."
These conditions are currently being investigated, remediated and/or monitored
by Shell, some at the direction of governmental authorities. With two
exceptions, Lakeland and Barbastro, the manufacturing facilities are part of
larger integrated complexes and, therefore, the on-going activities are part
of a site-wide cleanup program. Shell has the right to retain control over
such activities under the term of the Environmental Agreements. See "Certain
Relationships and Related Transactions--Ongoing Relationship with Shell--
Environmental Agreements."

At the Barbastro facility, we are unaware of any environmental conditions
likely to require material expenditures. At the Lakeland facility, the other
one of our two sites which is not co-located with a Shell facility,
groundwater contamination is present at and is migrating from the facility.
The characterization and remediation of this condition and the sources thereof
are the subject of a consent order (and any amendments thereto) issued by the
Florida Department of Environmental Protection. Remediation activities are
currently on-going. Shell will retain financial responsibility for all
contamination issues that are or become subject to the consent order and any
existing or future amendments thereto.

As a general matter, notwithstanding the indemnity provided by Shell,
certain liabilities for environmental and occupational health and safety
matters may fall outside the scope of the protections offered in the
Environmental Agreements, including liabilities and costs resulting from
future laws, permit conditions and other requirements. These liabilities may
result in the incurrence of material costs and/or impact our future
operations. They include the following:

. The permit for the hazardous waste incinerators at the Norco facility
expired in January 2000 although we are permitted to continue to utilize
the incinerators until a final decision is made regarding the permit
renewal. We have been involved in on-going negotiations with the
Louisiana Department of Environmental Quality regarding the renewal of
the permit for several years. In connection with these activities, we
have performed a risk assessment evaluating the potential impact of
incinerator emissions on the surrounding area. The risk assessment has
been submitted to the Louisiana Department of Environmental Quality and
is awaiting the agency's review and comment.

. Also affecting the renewal process described above are emission control
upgrades that must be installed on the incinerator to satisfy maximum
achievable control technology requirements imposed under the federal
Clean Air Act. Shell has agreed to indemnify us for issues relating to
the permit renewal and equipment upgrades, subject to a deductible, until
December 31, 2002. We are in the process of installing the required
hardware for emission control. In the event that the Louisiana Department
of Environmental Quality does not renew the incinerator permit or if the
new incinerator hardware does not meet the emission control regulatory
requirements, we may be required to incur significant additional waste
disposal costs or curtail operations, or both. Such costs will no longer
be subject to indemnification from Shell after December 31, 2002.
Insufficient information is available at this time to evaluate the
likelihood that the agency will not renew the permit or that the hardware
will not meet the regulatory requirements. If the Louisiana Department of
Environmental Quality renews the permit, it may impose more stringent
emissions requirements than those presently in force. Such requirements
may result in not only additional material expenditures for emissions
control equipment, but also increased operational costs.

. The toxicity level in an effluent discharge from a treatment system at
Shell's Deer Park facility has exceeded permit requirements in recent
months. The cause of such exceedances has not been determined, although
they may be attributable to elevated levels of our BPA in the wastewater.
If similar exceedances occur, penalties might be sought for
noncompliance. At present, there is no BPA limit in the facility's
wastewater discharge permit; however, we established an internal limit
and are currently meeting that limit and toxicity requirements.
Additional studies must be performed and controls implemented to limit
BPA in the effluent discharges if an effluent discharge limit below
current levels comes into effect. Subject to a deductible, Shell will
indemnify us for costs associated with identifying and implementing any
such controls, provided that such costs are incurred within the allotted
limitations period. In the event that additional controls are required at
a later date or as a result of new toxicity and/or BPA limitations
imposed by a governmental authority after the date of the
recapitalization, we would be responsible for the costs associated with
achieving compliance with the applicable standards.

. Approximately 50 of Shell's resins employees at the Pernis site have
experienced allergic reactions of the skin to ECH and the "Epikote" epoxy
resin manufactured at the facility over the past 15 years. In the past,
Shell transferred these employees to other operating units within the
Pernis complex or to other facilities in an effort to alleviate the
conditions. Notwithstanding these efforts, reoccurrences have developed
in the last 18 months among six previously sensitized employees currently
working in a resins BPA manufacturing site adjacent to the ECH and
Epikote facility. Although we have been unable to determine the cause of
these reoccurrences, are currently evaluating the effect of work practice
controls to resolve the issue. Similar allergic reactions have been
identified at other facilities, although to a lesser extent. The
continued occurrence of such reactions may ultimately impact on-going
operations at the facility.

. Certain chemicals have been alleged to interact with the endocrine
systems of humans and wildlife and disrupt normal processes (i.e.
endocrine disrupters). BPA is under evaluation as a potential "endocrine
disrupter." BPA is used as an intermediate at the Deer Park and Pernis
manufacturing facilities and is also sold directly to third parties.
Recent studies are inconclusive regarding BPA's influence, if any, on
endocrine systems. Industry groups and governmental agencies continue to
evaluate this matter. Their efforts may yield results that permit us to
evaluate better the significance of the alleged interaction. In the event
that BPA is determined to be an endocrine disrupter, further additional
operating costs would likely be incurred to meet more stringent
regulation of the chemical.

Industry Regulatory Matters

The production and marketing of chemical substances are regulated by
national and international laws. Although almost every country has its own
legal procedure for registration and import, laws and regulations in the
European Union, the United States and Japan are most significant to our
business, including the European inventory of existing commercial chemical
substances, the European list of notified chemical substances, the United
States Toxic Substances Control Act inventory and the chemical list of the
Japanese Ministry of Trade and Industry. Chemicals which are on one or more of
the above lists can usually be registered and imported without additional
testing in other countries, although additional administrative hurdles may
exist.

We also actively seek approvals from the U.S. Food and Drug Administration
for certain specialty chemicals produced by us, principally where we believe
that these specialty chemicals will or may be used by our customers in the
manufacture of products that will come in direct or indirect contact with
food.

Legal Proceedings

In the ordinary course of business, we are subject to various laws and
regulations and, from time to time, litigation. In the opinion of management,
compliance with existing laws and regulations will not materially affect our
financial position or results of operations. Management is not aware of any
pending actions against us.

MANAGEMENT

Board of Managers and Executive Officers

The following table sets forth certain information as of May 7, 2001 with
respect to the members of our Board of Managers and our executive officers,
who also hold the same positions with our parent RPP Inc.

Name Age Position
- ---- --- --------

Marvin O. Schlanger..... 53 Chairman and President
J. Travis Spoede........ 49 Executive Vice President, Chief Financial Officer and Secretary
James H. Melloan, Jr. .. 58 Vice President, Americas
Wouter W. Jongepier..... 38 Vice President, Europe and Africa
Dany Subrata............ 37 Vice President, Asia Pacific and the Middle East
Abraham van Mannekes.... 55 Vice President, Global Operations
Mark S. Antonvich....... 41 Vice President and General Counsel
Laurence M. Berg........ 35 Director
Peter P. Copses......... 42 Director
Joshua J. Harris........ 36 Director
Scott M. Kleinman....... 28 Director
Joel A. Asen............ 50 Director
Heinn F. Tomfohrde, 67 Director
III....................

Marvin O. Schlanger became Chairman of the Board of Managers of RPP LLC on
November 14, 2000. Mr. Schlanger was appointed President of RPP LLC and
Chairman and President of RPP Capital on March 2, 2001. Since October 1998,
Mr. Schlanger has been a principal in the firm of Cherry Hill Chemical
Investments, L.L.C., which provides management services and capital to the
chemical and allied industries. From 1999 to 2000, he also served as interim
president of OneChem, Ltd. From 1975 to October 1998, Mr. Schlanger held
various positions with ARCO Chemical Company, serving most recently as
President and Chief Executive Officer from May 1998 to October 1998 and as
Executive Vice President and Chief Operating Officer from 1994 to May 1998.
Mr. Schlanger is also a director of RPP Capital, UGI Corporation, OneChem,
Ltd. and Wellman, Inc.

J. Travis Spoede became Executive Vice President, Chief Financial Officer
and Secretary of RPP LLC and RPP Capital in March 2001. Prior thereto since
1974, Mr. Spoede held various positions with Union Carbide Corporation,
serving most recently as Director of Strategic Development, Joint Ventures
from 1999 to 2001 and as Chief Financial Officer of EQUATE Petrochemical
Company, a joint venture between Union Carbide Corporation and Petrochemical
Industries Company of Kuwait, from 1994 to 1999.

James H. Melloan, Jr. became Vice President, Americas of RPP LLC and RPP
Capital on November 14, 2000 and prior thereto had been the Business Manager
of the Americas of Shell's Resins/Versatics Products business since January
1998. Mr. Melloan joined Shell in 1993 and previously served as Marketing
Director of Epoxy Resins Formulators for ten years and a Business Director for
Celanese for five years.

Wouter W. Jongepier became Vice President, Europe and Africa of RPP LLC and
RPP Capital on November 14, 2000 and prior thereto had been the Sales Director
of the European and African operations of Shell's Resins/Versatics Products
business since 1999. Mr. Jongepier joined Shell in 1988 and has served in
roles varying from researcher in Belgium, specialties plant manager in Pernis,
and market development manager in the southern part of Europe.

Dany Subrata became Vice President, Asia Pacific and the Middle East of RPP
LLC and RPP Capital on November 14, 2000 and prior thereto had been the
Business Manager for Asia Pacific--Middle East of Shell's Resins/Versatics
Products business since late 1997. Mr. Subrata joined Shell in 1988 after a
brief career in manufacturing at P&G. In 1992, Mr. Subrata was assigned to a
Resins/Versatics Products business co-ordination and planning position in
Shell Centre, London. He was appointed Chemicals Manager--Indonesia and
Business Manager--Resins/Versatic Products for South East Asia and Oceania
upon his return to Asia in 1995.

Abraham van Mannekes became Vice President, Global Operations of RPP LLC and
RPP Capital on November 14, 2000 and prior thereto had been the Manager of
Operations of Shell's Resins/Versatics Products business since August 1999.
Prior to becoming Manager of Operations, Mr. van Mannekes served as a Director
of Shell's Research and Technology Centre in Amsterdam. Mr. van Mannekes spent
fifteen years, from 1972 to 1987, with Shell in polymer process development,
design and plant operations and in strategic planning, followed by seven years
in operations management at manufacturing sites in The Netherlands. Mr. van
Mannekes has held managerial positions in South Africa, The Netherlands and
Singapore.

Mark S. Antonvich became Vice President and General Counsel of RPP LLC in
May 2001 and prior thereto had been Senior Counsel for Enron Global
Exploration & Production Inc. since 2000. From 1995 to 2000, Mr. Antonvich
represented BHP Minerals in Tucson, Arizona, most recently serving as Senior
Corporate Counsel, advising those companies on commercial and administrative
manners in connection with copper mining activities. He was associated with
the firm of Lerch, Early & Brewer from 1991 to 1995 and Holland & Knight from
1987 to 1991.

Laurence M. Berg became a director of RPP Inc. on November 14, 2000 and a
member of the Board of Managers of RPP LLC and a director of RPP Capital on
March 2, 2001. Mr. Berg is a partner in Apollo Management, L.P., where he has
worked since 1992. Prior to that time, Mr. Berg was a member of the Mergers
and Acquisitions Department of Drexel Burnham Lambert Incorporated. Mr. Berg
is also a director of Berlitz International, Continental Graphics Holdings,
Inc. and Rent-A-Center, Inc.

Peter P. Copses became a director of RPP Inc. on November 14, 2000 and a
member of the Board of Managers of RPP LLC and a director of RPP Capital on
March 2, 2001. Mr. Copses is a partner in Apollo Management, L.P., where he
has worked since 1990. From 1986 to 1990, Mr. Copses was initially an
investment banker at Drexel Burnham Lambert Incorporated, and subsequently at
Donaldson, Lufkin Jenrette Securities Corporation, concentrating on the
structuring, financing and negotiation of mergers and acquisitions. Mr. Copses
is also a director of Rent-A-Center, Inc., Prandium, Inc. and Zale
Corporation.

Joshua J. Harris became a director of RPP Inc., a member of the Board of
Managers of RPP LLC and a director of RPP Capital on November 14, 2000. Mr.
Harris is a partner in Apollo Management, L.P. and has served as an officer of
certain affiliates of Apollo since 1990. Prior to that time, Mr. Harris was a
member of the Mergers and Acquisitions Department of Drexel Burnham Lambert
Incorporated. Mr. Harris is also a director of RPP Capital, Breuners Home
Furnishings Corporation, Clark Retail Enterprises, Inc., Florsheim Group Inc.,
NRT, Incorporated, Pacer International, Inc. and Quality Distribution Inc.

Scott M. Kleinman became a director of RPP Inc., a member of the Board of
Managers of RPP LLC and a director of RPP Capital on November 14, 2000. Mr.
Kleinman is a principal of Apollo Management, L.P., where he has worked since
February 1996. Prior to that time, Mr. Kleinman was employed by Smith Barney
Inc. in its Investment Banking division from July 1994 through January 1996.
Mr. Kleinman is also a director of Encompass Services Corporation.

Joel A. Asen became a director of RPP Inc. on November 14, 2000 and a member
of the Board of Managers of RPP LLC and a director of RPP Capital on March 2,
2001. Since May 1992, Mr. Asen has been President of Asen Advisory, which
provides strategic and financial advisory services. He was Managing Director
at Whitehead Sterling from 1991 to 1992, at Paine Webber, Inc. from 1990 to
1991 and at Drexel Burnham Lambert Incorporated from 1988 to 1990. From 1985
to 1988 he was a Senior Vice President at GAF Corporation. Prior to that time,
Mr. Asen was a Manager of Business Development at GE and Manager of Marketing
and Business Development at GECC.

Heinn F. Tomfohrde, III became a director of RPP Inc. on November 14, 2000
and a member of the Board of Managers of RPP LLC and a director of RPP Capital
on March 2, 2001. Mr. Tomfohrde has served the chemicals industry in a variety
of leadership positions for 44 years. He served as President and Chief
Operating

Officer of International Specialty Products, Inc. and its predecessor company,
GAF Chemicals Corp. from 1987 to 1993. Prior to that time, Mr. Tomfohrde spent
31 years with Union Carbide Corp., rising from positions in research and
development and marketing to senior management, serving as President of Union
Carbides Consumer and Industrial Products Group from 1983 to 1986.

Compensation of Board of Managers

The members of the Board of Managers of RPP LLC do not receive compensation
for their service on the Board of Managers but are reimbursed for their out-
of-pocket expenses.

Each of the members of the Board of Managers of RPP LLC also serves as a
director of RPP Inc. and is compensated for such services by RPP Inc. RPP Inc.
adopted a non-employee director stock option plan, effective as of November
14, 2000, pursuant to which options with respect to a total of 15,000 shares
of RPP Inc.'s common stock will be available for grant to directors of RPP
Inc. or any of its subsidiaries, including us, who are not also employees of
RPP Inc. or any of its subsidiaries. The option plan will be administered by
the board of directors of RPP Inc. or a compensation committee appointed from
time to time by the board of directors. The right to grant options under the
plan will expire on November 14, 2010 unless earlier terminated by the board
of directors of RPP Inc. Options granted under the plan will be nonqualified
stock options. As of March 10, 2001, RPP Inc. granted options covering 6,000
shares to its non-employee directors, each of whom also serves as a member of
the Board of Managers of RPP LLC.

Options are granted in the amounts determined by the board of directors of
RPP Inc. or the compensation committee. Except as otherwise determined by the
board of directors, options will vest as follows:

. One-third of the options will time vest in equal increments over five
years, ending on November 14, 2005. However, vesting of all of these
options will be accelerated immediately upon the consummation of a sale
of RPP Inc. for cash, or any transaction in which Apollo sells at least
fifty percent of its shares of common stock of RPP Inc.

. Two-thirds of the options will be performance options and will vest on
November 14, 2008. However, vesting of all or a portion of the
performance options will be accelerated upon the consummation of a sale
of RPP Inc. for cash, or any transaction in which Apollo sells at least
fifty percent of its shares of common stock of RPP Inc. The amount vested
will be based on the operating results achieved by the business.

The vesting of options will cease when the grantee is no longer a director
of RPP Inc. or any of its subsidiaries, and all unvested options will be
forfeited at such time.

The exercise price for the options will be determined by the board of
directors of RPP Inc. or the compensation committee. All options granted under
the plan will expire on December 14, 2008.

Executive Compensation

Prior to the recapitalization, we were a wholly owned business of Shell
operated by a management team comprised solely of Shell personnel. For the
period prior to the closing of the transactions on November 14, 2000 our
executive officers were compensated by Shell and for the period on and after
November 14, 2000 were compensated by us. The following table sets forth
information concerning the compensation of our Chairman and each of our other
four most highly compensated executive officers (including former officers)
for the years ended December 31, 2000 and 1999.

Summary Compensation Table

Annual
Compensation
----------------- All Other
Name and Principal Position Year Salary Bonus(1) Compensation(2)
- --------------------------- ---- -------- -------- ---------------

Marvin O. Schlanger................. 2000 $ 50,000 $ -- $ --
Chairman and President(3) 1999 -- -- --

David T. Preston.................... 2000 180,583 94,700 18,050
Former President(4) 1999 177,000 67,200 24,420

James C. Smith...................... 2000 144,000 50,400 14,400
Former Vice President, Finance and
Secretary(5) 1999 144,000 20,700 16,470

James H. Melloan, Jr. .............. 2000 149,333 49,200 14,933
Vice President, Americas 1999 147,000 27,300 17,480

Abraham van Mannekes................ 2000 134,962 --(6) --
Vice President, Global Operations 1999 137,614 36,017 --

- --------
(1) Bonuses were paid pursuant to the Incentive Compensation Program. Awards
were calculated on an annual basis according to business and individual
performance based on a formula determined by Shell for 1999 and 2000.
Bonuses were earned in the year reflected and paid in the subsequent year.

(2) Consists of employer's contributions to a tax deferred savings fund.

(3) Mr. Schlanger joined us on November 14, 2000 and his 2000 compensation is
reported only for the period we employed him.

(4) Mr. Preston served as our President from November 14, 2000 until March
2001. Prior thereto, Mr. Preston had been Vice President of Shell's
Resins/Versatics Products business since November 1997.

(5) Mr. Smith served as our Vice President, Finance and Secretary from
November 14, 2000 until March 31, 2001. Prior thereto, Mr. Smith was the
Finance Manager of Shell's Resins/Versatics Products business since 1999.

(6) The bonus earned by Mr. van Mannekes for the year 2000 has not yet been
determined.

Option Grants in Last Fiscal Year

The following table lists the stock options granted to each of the officers
named in the Summary Compensation Table above during the fiscal year 2000.

Individual Grants
- --------------------------------------------------------------------------
Potential
Realizable
Value at
Assumed
Annual Rates
Percent of of Stock
Total Price
Number of Options Appreciation
Securities Granted to for Option
Underlying Employees Exercise Term(1)
Name and Principal Options In Fiscal Price -------------
Position Granted(2) Year ($/Sh) Expiration Date 5%($) 10%($)
- ------------------ ---------- ---------- -------- ----------------- ------ ------
(In
Thousands)

Marvin O. Schlanger..... 21,000 50.0% $100.00 December 14, 2008 $1,003 $2,402

David T. Preston........ 3,900 9.3% $100.00 December 14, 2008 $ 186 $ 446

James C. Smith.......... -- -- -- -- $ -- $ --

James H. Melloan, Jr. .. 1,374 3.3% $100.00 December 14, 2008 $ 65 $ 157

Abraham van Mannekes.... 1,200 2.9% $100.00 December 14, 2008 $ 57 $ 137

- --------
(1) These amounts represent hypothetical gains that could be achieved for
those options if exercised at the end of the option term, assuming that
the fair market value of the common stock on the date of grant appreciates
at 5% or 10% over the option term, and that the option is exercised and
sold on the last day of the option term for the appreciated value. The
assumed 5% and 10% rates of common stock value appreciation are provided
in accordance with the rules of the Securities and Exchange Commission and
do not represent our estimate or projection of the future value of the
common stock of RPP, Inc. Actual gains, if any, on option exercises will
depend upon the future performance of the common stock of RPP, Inc.
(2) These options were granted under the 2000 Stock Option Plan. One third of
these options vest ratably over five years, beginning with the first
anniversary of the date of grant. Two-thirds of these options vest based
on performance criteria and will be exercisable on November 14, 2008.
Vesting accelerates upon a change of control.

The following table provides information as to the value of options held by
each of the named executive officers at the end of fiscal year 2000. None of
the named executive officers exercised any options during the last fiscal
year.

Option Values as of December 31, 2000

Number of Securities
Underlying
Unexercised Options
at December 31, 2000
----------------------------
Name Exercisable Unexercisable(1)
- ---- ----------- ----------------

Marvin O. Schlanger............................... -- 21,000
David T. Preston.................................. -- --
James C. Smith.................................... -- --
James H. Melloan, Jr. ............................ -- 1,374
Abraham van Mannekes.............................. -- 1,200

- --------
(1) At December 31, 2000 the fair market value of the common stock of RPP,
Inc. of $100 per share (which has the per share price paid in the
transactions) was the same as the exercise price of the options so none
of these options were in the money at December 31, 2000.

2000 Option Plan

RPP Inc. has adopted a stock option plan, effective as of November 14, 2000,
pursuant to which options with respect to a total of 54,000 shares of RPP
Inc.'s common stock will be available for grant to employees of, consultants
to, or directors of RPP Inc. or us. The option plan is administered by the
board of directors of RPP Inc. or a compensation committee appointed from time
to time by the board of directors. The right to grant options under the option
plan will expire on November 14, 2010. Options granted under the plan are
either nonqualified or incentive stock options.

Options are granted in amounts and at such times and to such eligible
persons as determined by the board of directors of RPP Inc. or the
compensation committee. As of March 10, 2001, RPP Inc. granted nonqualified
options covering 37,550 shares, representing approximately 8% of its total
common stock outstanding on a fully diluted basis. Options will vest in
accordance with a schedule as determined by the board of directors of RPP Inc.
or the compensation committee and this vesting schedule will be outlined in
the optionee's option agreement. We generally expect options to vest as
follows:

(a) One-third of the options will be time vesting options and will vest
in equal increments over five years, ending on November 14, 2005. However,
upon termination of a grantee's employment without cause or for good reason
within six months following the sale of RPP Inc. for cash or any
transaction in which RPP Holdings sells at least fifty percent of its
shares of common stock of RPP Inc. acquired by it, all of the time vesting
options allocated to such terminated employee shall vest immediately on
such termination.

(b) Two-thirds of the options will be performance options and will vest
on November 14, 2008. The amount vested will be based on the operating
results achieved by the business. However, vesting of all or a portion of
the performance options will be accelerated upon the consummation of a sale
of RPP Inc. for cash, or any transaction in which Apollo sells at least
fifty percent of shares of common stock of RPP Inc. acquired by it.

The vesting of options will occur only during an employee's term of
employment. All unvested options will be forfeited upon a termination of
employment.

The exercise price for the options will be determined by the board of
directors of RPP Inc. or the compensation committee, with the exercise price
initially being the same as the per share price being paid by RPP Holdings in
the recapitalization. The options will expire on the thirtieth day immediately
following the eighth anniversary of issuance.

Upon a termination of employment, RPP Inc. and RPP Holdings have repurchase
rights. Upon a sale of RPP Inc. for cash or the occurrence of any transaction
in which RPP Holdings sells at least 50% of the shares of common stock
acquired by it, RPP Inc. also has repurchase rights.

Employment Agreement

On November 14, 2000, we entered into an employment agreement with Marvin O.
Schlanger to act as our Chairman of the Board. Mr. Schlanger receives an
annual base salary of $400,000 per year, subject to any increase as determined
by the compensation committee of the board of directors. In addition,
Mr. Schlanger is entitled to receive an annual cash bonus based upon
achievement of certain operating and/or financial goals, with an annual target
bonus amount equal to seventy-five percent of Mr. Schlanger's then current
annual base salary. On November 14, 2000, Mr. Schlanger also was granted
options to purchase 21,000 shares of RPP Inc.'s common stock under the RPP
Inc. stock option plan. Mr. Schlanger will be entitled to participate in our
benefit plans.

The term of Mr. Schlanger's employment agreement is initially three years,
with automatic extensions for additional two year periods if neither party
gives notice that the term will not be so extended. We may terminate Mr.
Schlanger's employment at any time and for any reason and Mr. Schlanger may
resign at any time and for any reason. Under his employment agreement, Mr.
Schlanger has also agreed to non-competition provisions. In consideration of
this non-competition agreement, we have agreed to make payments to
Mr. Schlanger following

the termination of his employment. If we terminate Mr. Schlanger's employment
without cause or Mr. Schlanger resigns for good reason (including any material
diminution of his duties), Mr. Schlanger will be entitled to receive (1)
earned but unpaid amounts under our salary or benefit plans or programs and
(2) his current base salary for a period equal to the greater of (a) 12 months
following the termination date and (b) the period between the termination date
and July 10, 2003. If any such payments constitute a "parachute payment," as
defined in Section 280G of the Internal Revenue Code of 1986, as amended, then
the total amount of payments or benefits payable to Mr. Schlanger will be
reduced to the largest amount such that the provisions of 280G of the Code
relating to "excess parachute payments" shall no longer be applicable.
However, in the event Mr. Schlanger is terminated for cause or resigns without
good reason, we will not be obligated to make those payments.

Restricted Unit Plan

On November 14, 2000, RPP Inc. established a restricted unit plan under
which it issued to Marvin O. Schlanger restricted stock units, representing a
conditional right to receive 6,000 shares of common stock of RPP Inc., and
restricted note units, representing a conditional right to receive $1,400,000
principal amount of junior subordinated notes. Mr. Schlanger will be entitled
to receive the underlying shares of RPP Inc. common stock and junior
subordinated notes upon the earliest to occur of (1) Mr. Schlanger's achieving
the age of 65, (2) the termination of Mr. Schlanger's employment or (3) upon a
sale of control in which RPP Holdings sells at least fifty percent of its
shares of RPP Inc. or any merger or consolidation in which RPP Inc. is not the
surviving entity.

Separation Agreement with Former President

On March 9, 2001, we entered into a separation agreement with our then
President, David T. Preston, under which he resigned his positions as a
director, officer and employee effective as of March 17, 2001. Pursuant to the
separation agreement, we will pay Mr. Preston all salary and benefits due to
him through March 17, 2001 as well as medical coverage through June 30, 2001.
In addition, we have agreed to pay to Mr. Preston additional severance in
equal monthly installments of $18,333.33 each, commencing on March 17, 2001
and ending on March 1, 2003. Mr. Preston has agreed not to compete with us
until March 17, 2003.

Pursuant to the separation agreement, Mr. Preston forfeited all options
previously granted to him. On April 9, 2001, our parent, RPP Inc., repurchased
at their original cost of $250,000 all shares of its common stock and junior
subordinated notes that were held by Mr. Preston and pledged to RPP Inc. Mr.
Preston repaid in full all principal outstanding on the promissory note that
he gave to us on November 14, 2000 as consideration for our loan to him of
$125,000 in connection with his original purchase of the shares and the junior
subordinated notes. Pursuant to an investor rights agreement dated November
14, 2000, the repurchase amount payable to Mr. Preston was applied to the
outstanding principal on the promissory note, and all accrued and unpaid
interest on that note was forgiven.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

All of our membership units are owned by RPP Inc. and all of RPP Capital's
equity securities are owned by us. The following table sets forth information
with respect to the ownership of the capital stock of RPP Inc., as of May 7,
2001, by
. each person who owns beneficially more than 5% of the capital stock of RPP
Inc.,
. each member of our Board of Managers,
. each of our named executive officers, and
. all of our executive officers and members of the Board of Managers of RPP
LLC as a group.

RPP Inc. Common Stock (1)
-----------------------------
Number of Percent of
Name and Address of Beneficial Owner Shares Class
- ------------------------------------ -------------- -------------

Apollo Management IV, L.P. (2)................ 546,720 91.1%
Shell Oil Company (3)......................... 45,000 7.5
Marvin O. Schlanger (4)....................... -- --
J. Travis Spoede (5).......................... 600 *
Dany Subrata (5).............................. 600 *
Abraham van Mannekes (5)...................... 600 *
James H. Melloan, Jr. (5)..................... 450 *
Laurence M. Berg (2)(6)....................... 546,720 91.0
Peter P. Copses (2)(6)........................ 546,720 91.0
Joshua J. Harris (2)(6)....................... 546,720 91.0
Scott M. Kleinman (2)(6)...................... 546,720 91.0
Joel A. Asen (7).............................. -- --
Heinn F. Tomfohrde, III (8)................... -- --
All directors and executive officers as a
group (13 persons)........................... 549,270 91.5

- --------
* Less than one percent.

(1) The amounts and percentages of common stock beneficially owned are
reported on the basis of regulations of the SEC governing the
determination of beneficial ownership of securities. Under the rules of
the SEC, a person is deemed to be a "beneficial owner" of a security if
that person has or shares voting power, which includes the power to vote
or direct the voting of such security, or investment power, which includes
the power to dispose of or to direct the disposition of such security. A
person is also deemed to be a beneficial owner of any securities of which
that person has a right to acquire beneficial ownership within 60 days.
Securities that can be so acquired are deemed to be outstanding for
purposes of computing such person's ownership percentage, but not for
purposes of computing any other person's percentage. Under these rules,
more than one person may be deemed beneficial owner of the same securities
and a person may be deemed to be a beneficial owner of securities as to
which such person has no economic interest. Except as otherwise indicated
in these footnotes, each of the beneficial owners has, to our knowledge,
sole voting and investment power with respect to the indicated shares of
common stock.
(2) Represents all shares held of record by RPP Holdings. RPP Holdings is an
affiliate of, and is controlled by, Apollo Management through its 79.1%
ownership of RPP Holdings' membership interests. The address of each of
RPP Holdings and Apollo Management and of Messrs. Berg, Copses, Harris and
Kleinman is c/o Apollo Management, L.P., 1301 Avenue of the Americas, New
York, New York 10019.
(3) The address of Shell Oil Company is 910 Louisiana Street, One Shell Plaza,
Houston, Texas 77252.
(4) Does not include options to purchase 21,000 shares of common stock that
RPP Inc. issued to Mr. Schlanger under the RPP Inc. stock option plan and
6,000 restricted stock units that RPP Inc. issued to Mr. Schlanger
pursuant to the restricted unit plan on November 14, 2000. The options are
subject to time and performance vesting conditions. See "Management--2000
Option Plan." The restricted stock units represent a conditional right to
receive 6,000 shares of common stock of RPP Inc. upon the occurrence of
the events described under "Management--Restricted Unit Plan." The address
of Mr. Schlanger is c/o Resolution

Performance Products Inc., 1600 Smith Street, Houston, Texas 77002. In
addition, does not reflect Mr. Schlanger's indirect ownership interest in
the common stock of RPP Inc. through his direct ownership of 6,000
membership units of RPP Holdings.
(5) Does not include options to purchase 2,100, 900, 1,200 and 1,374 shares of
common stock that RPP Inc. issued to Messrs. Spoede, Subrata, van Mannekes
and Melloan, respectively, under the RPP Inc. stock option plan. These
options will be subject to time and performance vesting conditions. See
"Management--2000 Option Plan." The address of Messrs. Spoede, van
Mannekes, Subrata and Melloan is c/o Resolution Performance Products Inc.,
1600 Smith Street, Houston, Texas 77002.
(6) Includes 546,720 shares owned by RPP Holdings. Each of Messrs. Berg,
Copses, Harris and Kleinman may be deemed the beneficial owner of shares
of RPP Inc. owned by RPP Holdings and membership units of RPP Holdings due
to his status as a partner (in the case of Messrs. Berg, Copses and
Harris) and principal (in the case of Mr. Kleinman) of Apollo Management,
which controls RPP Holdings. Each such person disclaims beneficial
ownership of any such shares in which he does not have a pecuniary
interest. Does not include options to purchase 1,000 shares of common
stock that RPP Inc. issued to each of Messrs. Berg, Copses, Harris and
Kleinman pursuant to the RPP Inc. non-employee director stock option plan.
The options are subject to time and performance vesting conditions. See
"Management--Compensation of Board of Managers."
(7) Does not include options to purchase 1,000 shares of common stock that RPP
Inc. issued to Mr. Asen pursuant to the RPP Inc. non-employee director
stock option plan. The options are subject to time and performance vesting
conditions. See "Management-Compensation of Board of Managers." The
address of Mr. Asen is 445 Old Academy Road, Fairfield, Connecticut 06430.
(8) Does not include options to purchase 1,000 shares of common stock that RPP
Inc. issued to Mr. Tomfohrde pursuant to the RPP Inc. non-employee
director stock option plan. The options are subject to time and
performance vesting conditions. See "Management-Compensation of Board of
Managers." The address of Mr. Tomfohrde is 9 Sea Robin Court, Hilton Head,
South Carolina 29926.

THE TRANSACTIONS

On November 14, 2000, RPP Holdings, an affiliate of Apollo Management IV,
L.P., acquired control of RPP Inc. in a recapitalization transaction for
approximately $857.7 million in cash and retained securities (net of $8.5
million of excess cash at RPP LLC used to fund the Transactions), subject to
adjustment, and a contingent subordinated note for up to $127 million. The
contingent subordinated note, issued by RPP Inc., our parent, will only be
earned to the extent the average contribution margin in 2001 and 2002 exceeds
the contribution margin for the twelve months ended December 31, 2000 by $60
million to $75 million. In connection with the recapitalization, RPP Holdings
and certain members of our management invested $185 million of cash and Shell
had retained an investment of $15 million. We entered into a new senior
secured credit agreement and distributed the proceeds from borrowings
thereunder, together with the proceeds from the offering of the old notes, to
RPP Inc. which in turn used the proceeds to fund $701.4 million of the
recapitalization. On a fully-diluted basis for all management options and
stock issuable under RPP Inc.'s stock option plan and restricted unit plan,
Apollo Management and its affiliates and certain other institutional investors
own (through their ownership of RPP Holdings) approximately 81.9% of the
outstanding common stock of RPP Inc., management owns (through its ownership
of RPP Holdings and RPP Inc.) approximately 11.3% and Shell owns approximately
6.8%.

In order to facilitate our ability to operate on a stand-alone basis, Shell,
itself or through an affiliate, has agreed, among other things, to (1) assign,
license and sublicense to us certain intellectual property in connection with
the products manufactured and sold by us under contractual arrangements, (2)
continue to provide us with certain support services for specified periods of
time and (3) enter into supply and operating agreements. See "Certain
Relationships and Related Transactions--Ongoing Relationship with Shell."

Upon consummation of the transactions, RPP Inc. adopted a stock option plan
entitling certain key members of our management to acquire, subject to certain
conditions, up to approximately 9% of RPP Inc.'s total common stock
outstanding. See "Management--2000 Option Plan."

The Sale Agreements and the Assignment

On July 10, 2000, Shell and RPP Inc. entered into a US Sale Agreement with
Resin Acquisition, which has assigned its rights and obligations thereunder to
RPP Holdings, setting forth the terms and conditions upon which RPP Holdings
intends to purchase the US portion of the business from Shell. On September
11, 2000, RPP Inc. and Shell entered into a Non-US Sale Agreement, pursuant to
which RPP Inc. has agreed to acquire from Shell all of the outstanding capital
stock of RPP B.V., which is the entity that holds all of the non-US operations
of our business and RPP Inc. issued a note to Shell for the full purchase
price of $662 million less the European indebtedness to be assumed by us and
RPP Inc. at closing. RPP Inc. has assigned to us its rights and obligations
under the non-US Sale Agreement. The following is a summary of the sale
agreements which governed the recapitalization.

Consideration

The consideration paid under the sale agreements for the recapitalization
consisted of the following:

. RPP Holdings and some members of our management purchased from Shell
approximately $54.7 million of RPP Inc.'s common stock;

. RPP Inc. redeemed all of Shell's common stock ownership of RPP Inc. other
than the 7.5% retained ownership, for $185.0 million in cash and $140.0
million of its junior subordinated notes;

. RPP Holdings and some members of our management purchased from Shell
$127.6 million of junior subordinated notes of RPP Inc.;

. Certain other members of our management purchased from Shell $1.9 million
of junior subordinated notes of RPP Inc. and purchased $.8 million of
common stock of RPP Inc.;

. RPP Inc. issued the contingent subordinated note to RPP LLC as a capital
contribution; and

. RPP LLC paid Shell $659 million in cash and assumed $145 million of
European indebtedness then outstanding and transferred the contingent
subordinated note (which redeemed the promissory note issued by RPP LLC
to RPP B.V.) to Shell.

The amounts described above reflect the adjustments made at closing pursuant
to the sale agreements. An additional purchase price adjustment in cash will
be made to the extent that the actual working capital as of October 31, 2000
differs from the estimated working capital on that date. In addition, an
additional purchase price adjustment will be made to the extent that our
actual capital expenditures through October 31, 2000 differ from the estimated
capital expenditures, but in no event will we be required to pay Shell more
than the estimated adjustment paid to us at closing, if any. As of May 1,
2001, the additional purchase price adjustment has not been determined.

Shell has publicly disclosed in its Annual Report on Form 20-F filed with
the Commission that Shell's adjusted earnings in its Chemicals segment for
2000 excluded special credits of $67 million, resulting mainly from a net gain
from its divestment programs, partly offset by provisions for litigation. The
profit or loss realized by Shell in the transactions is a component of these
special credits.

Representations and Warranties

The sale agreements contained representations and warranties from Shell.
However, our ability to recover for breaches of such representations and
warranties is limited as follows: (a) RPP Holdings and RPP Inc. may only
recover damages in excess of $12.0 million and (b) no party's total liability
under the Sale Agreements may exceed $209.4 million, unless the claims arise
from breaches of fundamental representations and warranties, in which case
this limitation is raised to $905.0 million.

The representations and warranties contained in the sale agreements
generally survive until May 14, 2002. Fundamental representations and
warranties survive the closing indefinitely. The environmental agreements
described below under "Certain Relationships and Related Transactions--Ongoing
Relationship with Shell" contain the only representations and warranties
relating to environmental conditions that survived the closing. Some of the
representations and warranties relating to tax matters survive the closing
until the expiration of the applicable statute of limitations.

Indemnification

Shell has agreed to indemnify us and RPP Inc. and its affiliates against
certain liabilities, including, but not limited to:

. damages resulting from third party claims or other third party
liabilities (other than product liability claims, third party claims and
third party liabilities reflected on the closing working capital
statement) to the extent they relate to or arise prior to the closing of
the recapitalization;

. damages resulting from Shell's breach of any representations, warranties
or covenants contained in the Sale Agreements, subject to the limitations
set forth above; and

. damages resulting from product liability claims with respect to products
that were manufactured prior to the closing of the recapitalization and
sold within 90 days after the closing.

Covenant Not to Compete

Shell has agreed that neither it nor any of its affiliates will engage in or
own more than 10% of a business that manufactures or sells products related to
our business for five years following the closing of the recapitalization.
However, Shell and its affiliates may (a) continue to manufacture or sell
refinery products, including chemical feedstocks, (b) carry on their other
businesses as they existed on the day before the closing and any natural
development thereof, (c) acquire other entities as an immaterial part of its
business, (d) engage in the incidental resale of products similar to ours and
(e) develop and operate an e-commerce platform involving the trading of
products similar to ours.

Post-Closing Continuation of Contracts and Assignments

Except with respect to information technology, Shell has agreed to allow us
and RPP Inc. to continue to purchase goods and services under existing
contracts between Shell and its affiliates and third parties that governed the
sale of certain goods and services to the business prior to the closing to the
extent permitted by such third parties. However, Shell did not make any
representations or warranties as to the costs that any third party vendor may
charge us or that such contracts will not be terminated by Shell. If we choose
to make purchases under such contracts, we will be responsible for all charges
and costs relating to such purchases. We and RPP Inc. agreed to indemnify
Shell and its affiliates for all claims, damages and liabilities related to
our purchases under such contracts.

To the extent that they were unable to do so before the closing of the
recapitalization, Shell has agreed to, and to cause its affiliates to, assign
to RPP Inc. or us those contracts identified in the sale agreements as
promptly as practicable after the closing. However, it was a closing condition
that Shell assign to us all of the material contracts identified in the sale
agreements.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Ongoing Relationship with Shell

In connection with the recapitalization, we, our parent, RPP Inc., and Shell
or their respective affiliates entered into several additional agreements
providing for the continuation or transfer and transition of certain aspects
of our business operations. These agreements were the result of arm's-length
negotiations in connection with the recapitalization, and we believe they are
on terms at least as favorable to us as those we could have obtained from
unaffiliated third parties at that time. Set forth below are descriptions of
the material agreements that we or RPP Inc. have entered into with Shell.

From November 1, 2000 to December 31, 2000, we paid Shell approximately $63
million in the aggregate under the various agreements described below, net of
payments made by Shell to us.

SUMF, OMS and Supply Agreements

Several of our operations are located within or adjacent to sites occupied
by Shell's refinery business and its chemical business. In the United States,
these shared sites are in: Deer Park, Texas; Norco, Louisiana; Argo, near
Chicago, Illinois; and a laboratory facility in Westhollow, Texas. Shared
sites in Europe are in: Pernis and Moerdijk, near Rotterdam, The Netherlands;
Stanlow in the United Kingdom; Wesseling, Germany; and laboratory facilities
in Amsterdam and Pernis, The Netherlands and Louvain-La-Neuve, Belgium.

At most of the shared sites, we and Shell supply to each other certain site
services, utilities, materials and facilities, or "SUMF items." The
substantial majority of the SUMF items are provided by Shell to us. These SUMF
items include electricity, gas, water, steam, sewer systems, waste water
systems, waste management services, and environmental facilities, such as
incinerators and biotreaters, which are used to treat waste products generated
by both Shell and us. They also include, in some sites, office services,
emergency services, laboratory services, storage and warehousing functions,
rail, barge and trucking facilities, and other items. We believe that some
SUMF items supplied by Shell are critical to the continued operations of our
business and cannot easily be obtained from third parties. Other SUMF items,
however, we believe can be readily obtained from parties other than Shell.

Effective as of November 1, 2000, Shell and RPP Inc. or their affiliates,
entered into various new or amended and restated agreements dealing with the
shared sites, including SUMF agreements, ground leases from Shell to us for
the ground under several of our plants and other improvements purchased by us,
office and space leases and operation and maintenance services agreements
("OMS agreements").

In addition, the parties entered into a SUMF agreement relating to our
Lakeland, Florida site. Under this agreement, we will supply groundwater
recovery and biotreater systems services to facilitate compliance with the
consent order issued by the Florida Department of Environmental Protection.
See "Business--Environmental/Occupational Health and Safety Matters."

SUMF Agreements. In consideration for each SUMF item provided under a SUMF
agreement, the purchaser of the SUMF item is required in most cases to pay the
supplier an amount comprised of three basic components:

. its share of the supplier's variable costs for the SUMF item based on the
purchaser's consumption of such SUMF item;

. its share of the supplier's direct site costs and operating costs for the
SUMF item based on the purchaser's reserved capacity of the SUMF item or
an allocation agreed upon in the SUMF agreement; and

. a fixed amount representing the infrastructure charge for the SUMF item.

The purchaser is responsible under the SUMF agreements for certain other
charges, such as taxes levied or imposed on the supplier with respect to SUMF
items consumed by the purchaser. In a few cases, charges for the SUMF items
are based on commercial rates for similar products or services.

The SUMF agreements allocate liability for loss or damage to a party's
property or employees or to third parties either to Shell or to us based upon
certain factors, including the presence of a party's negligence in causing the
loss or damage. In addition, the SUMF agreements provide for indemnification
by one party to the

other. We have obtained insurance to cover losses and damages for which we may
be responsible under the SUMF agreements. To the extent the environmental
damages are recoverable under the SUMF agreements and under the environmental
agreements, we are required to make our claims under the environmental
agreements.

SUMF items that we believe can be easily obtained from a third party other
than Shell or that Shell believes can be easily obtained by it from a third
party other than us, such as warehouse management and office services, are
generally provided under the SUMF agreements on a short-term basis, typically
less than five years. Certain other SUMF items, such as provision of utilities
such as steam, are generally provided on a long-term basis for a period of
twenty years plus up to three five-year renewal terms. Either party has the
right to terminate a SUMF agreement in its entirety for various reasons,
including bankruptcy and payment or performance defaults of the other party
and upon three years' notice at the expiration of the initial term or any
renewal term. In addition, a party has the right to terminate a SUMF agreement
in its entirety if it is terminating the operations of all or substantially
all of its SUMF assets at the relevant site. Either party has the right to
terminate individual SUMF items (other than sole supplier SUMF items which can
be terminated by terminating the SUMF agreement in its entirety) for various
reasons, including bankruptcy and payment or certain limited performance
defaults of the other party. In addition, the supplier of a SUMF item can
generally terminate the supply of that SUMF item to the purchaser if it is
ceasing to supply the SUMF item to the entire site; and the purchaser of SUMF
items can generally terminate individual short-term SUMF items on 90 days'
notice (but, in the case of sites in Europe, termination must generally occur
at the end of each year) and individual long-term SUMF items on three years'
notice.

Lease Agreements. Shell has provided us ground leases in the United States
for the business' facilities in Deer Park, Norco and Argo and in Europe for
our facilities in Pernis, Moerdijk, Stanlow and Wesseling on a long-term basis
for lease terms at least as long as the terms of the SUMF or equivalent
agreements related to those sites. Shell has also provided to us space leases
for laboratory space in Westhollow and laboratory, office and warehouse space
in Norco in the United States and for laboratory space in Amsterdam and
Louvain-La-Neuve in Europe. The term of the Westhollow lease is ten years
(with Shell having the right to terminate at the end of the fifth year). The
term of each of the Amsterdam and Louvain-La-Neuve leases is two years. Rent
under all the ground leases is either de minimis or included as part of the
SUMF or equivalent agreement, except that rent payable by us to Shell under
the Pernis lease is equal to the payments required to be made by Shell under
its original lease with the Port of Rotterdam and additional payments are
required at Deer Park and Norco for our use of Shell's adjoining property.
Under the ground leases, we are also required to pay the pro rata portion of
taxes assessed on the land. Our space leases for laboratory and/or office and
warehouse space in Norco, Westhollow, Amsterdam and Louvain-La-Neuve require
us to pay rents for the space we occupy. The rental payments for space at
Norco escalate based on increases in the producer price index. Shell is
subleasing back space from us at our Norco facility at the same rental rate
per square foot that we pay Shell for the space we lease from it at Norco. The
ground leases impose certain responsibilities on us with respect to
environmental matters at or relating to the business facilities, from November
1, 2000 and allocate liability for environmental damages to the properties.
Generally, to the extent environmental damages are recoverable under a lease
and under the Environmental Agreement, the claims will be made under the
Environmental Agreements.

OMS Agreements. Our versatics facility in Pernis, The Netherlands, is
situated within Shell's refinery and chemical site and is operated on our
behalf by Shell pursuant to an OMS agreement. Shell's solvents and
demineralized water plants in Pernis are located within our facility and are
operated by us on behalf of Shell pursuant to two OMS agreements. Shell
operates our Moerdijk, The Netherlands, and Stanlow, England, facilities under
OMS agreements and our Wesseling, Germany facility is operated by a joint
venture between Shell and BASF AG, under a production agreement that is
similar to an OMS agreement.

In consideration for the services provided under an OMS agreement, the owner
of the facility is generally required to pay the operator of the facility an
amount comprised of three basic components: (1) the fixed costs of the
operator in supplying the operation services; (2) maintenance, parts and
materials costs; and (3) depreciation and capital charges for certain shared
assets.

The OMS agreements contain liability and indemnification provisions similar
to those contained in the SUMF agreements. We have obtained insurance to cover
losses and damages for which we may be responsible under the OMS agreements.

Operation and maintenance services under the OMS agreements are generally
provided on a long-term basis. However, the parties have termination rights
under these agreements that are similar to their termination rights under the
SUMF agreements.

Incinerator Agreement. In addition to shared services provided under the
SUMF agreements, we operate for ourselves and for Shell two incinerators
located at our Norco facility under a shared incinerator agreement. These
incinerators are owned jointly by Shell and us (6% and 94%, respectively).

Shell is required to pay us an amount comprised of two basic components: (1)
its share of our variable costs relating to the incinerators based on Shell's
use of the incinerators; and (2) its share of our fixed operating costs
relating to the incinerators based on Shell's capacity right in the
incinerators. Shell's initial capacity right in the incinerators is 6%. We and
Shell are also required to pay our respective shares of any required capital
improvements to the incinerators based on our relative capacity rights and, in
order to receive any of the benefits of discretionary capital improvements to
the incinerators, to pay our respective shares of any such improvements.

The incinerator agreement contains liability provisions similar to those
contained in the SUMF Agreements. We have obtained insurance to cover losses
and damages for which we may be responsible under the Incinerator Agreement.

Supply Agreements. We have contracted with Shell for our U.S. and European
facilities to purchase chemical ingredients, or feedstocks, to produce our
products. The terms of the agreements vary from three to ten years. Some of
the agreements can be extended at our option. Products we purchase from Shell
include phenol and acetone, acetylene, propylene, di-isobutylene and various
solvents. We also provide waste-stream propylene to Shell from our Norco
facility under a twenty year contract.

The price we pay to Shell for feedstocks varies depending upon the item.
However, we believe that the prices Shell is charging us are generally at or
below the prices we can obtain from third persons. Some contracts require us
to purchase all of our requirements for a particular feedstock from Shell.
Those contracts generally permit us to obtain a lower price elsewhere and, if
Shell does not match the lower price, we can purchase at the lower price from
a third party. We can also purchase from third parties if a force majeure
event prevents Shell from delivering feedstocks to us. Shell will make its
distribution facilities available for those third party purchases. Pricing for
propylene is based on market price less negotiated volume discounts. Pricing
for phenol and acetone is based on discounted market prices and input-cost
formulae.

Human Resources Agreements

In connection with the sale agreements, RPP Inc. entered into two human
resources agreements with Shell, one for our U.S. business and one for our
non-U.S. business. Prior to the recapitalization, RPP Inc. assigned its
interests under the human resources agreements to us.

U.S. Human Resources Agreement

Nonrepresented Employees. Pursuant to the U.S. human resources agreement
with Shell, RPP Inc. had the right to offer employment in a reasonably
comparable position to any employee of Shell's epoxy resins business in the
U.S. who is not represented by a labor union. Any nonrepresented employee who
accepted RPP Inc.'s employment offer and whose employment is terminated
(except for cause) by RPP Inc. on or before November 30, 2001 will be entitled
to specified severance payments. RPP Inc. is also obligated (1) to adopt and
maintain for six months following the closing certain employee welfare and
fringe benefit plans, programs, policies and practices for nonrepresented
employees that mirror the plans applicable to them before the closing

date, (2) to establish new pension plans that parallel those applicable to
nonrepresented employees before the closing date, and (3) to maintain until
November 14, 2002 the value of the total pay and benefits package for each
transferred nonrepresented employee so that it is reasonably comparable in the
aggregate to such employee's package prior to the closing. RPP Inc. has also
agreed to offer employment to each expatriate nonrepresented employee and if
such employee elects to accept employment, RPP Inc. is required to maintain
such employee's pay and benefits package until November 30, 2001.

Shell has agreed not to employ, from the closing until November 14, 2001,
any nonrepresented employee to whom RPP Inc. has offered employment or to whom
RPP Inc. is paying severance. RPP Inc. has agreed not to employ for a period
from the closing until November 14, 2001 any nonrepresented employee to whom
it has not offered employment or who during the six months prior to November
14, 2000 worked full-time or continuously part-time but was made redundant by
Shell within six months before or after November 14, 2000.

Shell will indemnify RPP Inc. against any losses arising out of certain
claims by nonrepresented employees that relate to their employment with or
termination of employment by Shell. RPP Inc. will indemnify Shell against any
losses arising out of claims by nonrepresented employees that arise prior to,
on or after November 30, 2000 and relate to their termination of employment
from Shell as a result of RPP Inc.'s failure to comply with applicable law in
its employment offer and selection process and any losses arising out of
claims by transferred nonrepresented employees that arise after the closing
date and that relate to their employment with or termination by RPP Inc.

Represented Employees. With respect to represented employees, RPP Inc. has
adopted, and will be the successor to Shell's obligations under, the
collective bargaining agreements at the Deer Park and Norco facilities and the
Deer Park Resins Divestiture Settlement Agreement and accompanying Letters of
Agreement. RPP Inc. will indemnify Shell for any loses arising out of RPP
Inc.'s failure to perform its obligations under any collective bargaining
agreement on and after November 30, 2000. Shell will indemnify RPP Inc. for
losses arising out of Shell's failure to perform under the collective
bargaining agreements and for certain other losses relating to represented
employees.

Non-U.S. Human Resources Agreement. Pursuant to the Non-U.S. human resources
agreement with Shell, RPP Inc. has agreed to fulfill all Shell's obligations
under any local agreements or arrangements with the staff councils and any
other relevant employee representatives in connection with the
recapitalization. RPP Inc. has also agreed to offer employment to each
expatriate non-U.S. employee and, if such employee elects to accept
employment, RPP Inc. will maintain such employee's pay and benefits package.
With respect to the non-U.S. employees who were previously employed by Shell
or its affiliates but have become employees of RPP Inc., RPP Inc. has agreed
to:

. provide each such employee with a severance package if no reasonably
comparable position is available with RPP Inc. or if such employee is
terminated for any reason (except cause) on or prior to November 14,
2002;

. either maintain the value of the total pay and benefits package for all
such employees or provide transitional payments to all such employees in
order to compensate them in full for any difference in value between the
old and new packages;

. adopt and maintain for a period of at least 6 months after November 14,
2000 new welfare plans for the benefit of all non-U.S. employees that
mirror the plans applied to them prior to November 14, 2000; and

. establish new pension plans that are similar to the plans applied to
them prior to November 14, 2000.

RPP Inc. has agreed not to solicit or employ, until November 14, 2001, any
non-U.S. employee (1) to whom RPP Inc. has not offered employment, (2) who
continues to be employed by Shell and was employed in the business at any time
during the six months prior to November 14, 2000 or (3) who exercises a legal
right to remain with Shell. Shell has agreed generally not to solicit or
employ, from the closing date until November 14, 2001, any non-U.S. employee.

Shell will provide RPP Inc., and its subsidiaries upon request, with certain
employees for its non-U.S. operations for up to nine months after November 14,
2000.

Shell will indemnify RPP Inc. against any losses arising out of certain
claims by non-U.S. employees that relate to their employment prior to November
14, 2000 or their employment date, as the case may be, with, or termination
by, Shell or its affiliates and the failure by Shell or its affiliates to
perform their obligations to inform or consult with employee representatives
under any trade union or works council agreement. RPP Inc. will indemnify
Shell against any losses arising out of claims by non-U.S. employees that
arise after November 14, 2000 or their employment date, as the case may be,
and relate to their employment with, or termination by, RPP Inc.

Interim Labor Services Agreements

As part of the recapitalization, we entered into two interim labor services
agreements dated as of November 1, 2000, one for our Deer Park facility and
the other for our Norco facility, pursuant to which Shell, upon our request,
will provide us with qualified operators and maintenance personnel at these
facilities. Certain of Shell's epoxy resin employees at the Deer Park and
Norco facilities in the United States who are represented by labor unions had
the right, and have exercised such right, to remain with Shell upon
consummation of the recapitalization. Shell has agreed to provide these
employees (43 at Deer Park and 10 at Norco) to us pursuant to the interim
labor services agreements for a period of up to two years from November 14,
2000. We will pay Shell the amount due for actual hours of service provided at
the actual labor rates incurred in the relevant facility during the month the
service was provided. Shell will provide interim labor services for a period
of up to two years from November 14, 2000; provided, however, that if Shell
ceases operations at the Deer Park or Norco facilities, Shell may terminate
the applicable interim labor services agreement on one year advance notice to
us.

Environmental Agreements

Shell and we entered into two environmental agreements dated as of November
1, 2000, one for our U.S. business and one for our non-U.S. business setting
forth Shell's indemnification obligations with respect to health, safety and
environmental matters. Shell will generally remain liable for environmental
conditions that occurred or existed before November 14, 2000. The indemnity
extends to damages associated with third-party claims (including those by a
governmental entity) for (1) exposure or injury to persons or third-party
property caused by hazardous substances at our property, off-site disposal
locations and pre-close toll manufacturing facilities; (2) the transportation,
treatment, storage, handling or disposal of hazardous materials at off-site
locations, our property and pre-close toll manufacturing facilities; (3) the
remediation of contamination at or migrating from our property and pre-close
toll manufacturing facilities; and (4) non-conformance with environmental,
health and safety laws in effect as of November 14, 2000. Claims relating to
any of the above matters are subject to an aggregate deductible of $1.0
million.

Special provision is also made for: (1) compliance issues identified in the
environmental agreements and (2) existing groundwater contamination at and
migrating from the facility in Lakeland, Florida, which is currently subject
to a consent order issued by the Florida Department of Environmental
Protection. With respect to compliance issues, Shell generally has agreed to
indemnify us to the extent that costs for these matters exceed approximately
$6.4 million and RPP Inc. incurs costs before the assigned expiration dates.
Once these criteria are met, Shell is responsible for 100% of the
environmental damages up to an aggregate of $10.0 million and then becomes
liable for 80% of the costs in excess of $10.0 million. Indemnity claims for
site contamination issues at the Lakeland facility, which relate to the
consent order and any amendments thereto, are not subject to any deductible,
nor are they limited in time or amount.

Shell also will indemnify us for environmental damages relating to: (1) site
contamination issues at (a) the Lakeland, Florida facility which are not the
subject of the consent order and (b) the facility in Barbastro, and (2)
certain issues of non-compliance, which exist as of November 14, 2000, but are
not specifically identified in the environmental agreements. Claims for these
matters are limited to $10.0 million in the aggregate, are

subject to the $1.0 million deductible and must be asserted within five and
three years, respectively, of November 14, 2000.

Shell also has agreed to provide a limited indemnity where, in the absence
of a third-party claim and where we are not required by law or regulation to
report, we elect to investigate and remediate environmental conditions for
which a third-party claim, although not pending, would likely be brought if
such a condition were brought to the attention of the relevant governmental
agency. In such instance, Shell will indemnify us for 75% of any costs
incurred.

With respect to environmental conditions at the Yokkaichi facility, RPP,
Inc. and Shell have agreed that any environmental damages shall be reduced to
reflect proportionate interest of RPP B.V. in the joint venture and its
exposure to environmental damages of the joint venture.

In addition to those noted above, the environmental agreements impose some
limitations on Shell's indemnification obligations, the primary of which
include the following:

. we are not entitled to seek indemnity for environmental damages that
result from or are increased by any material change in use of certain
sites;

. we have certain restrictions on performing sub-surface investigations at
the properties after November 14, 2003 (except that those restrictions
apply to the Pernis facility as of November 14, 2000); and

. Shell has no obligation for most environmental damages if such damages
result from or are increased by a post-closing requirement of any permit
or environmental law or any environmental laws or changes to applicable
standards that come into force after November 14, 2000. This limitation
applies only to

-- compliance issues which are not specifically identified in the
Environmental Agreements,

-- site contamination issues at the Lakeland facility (other than known
Lakeland site contamination issues) and

-- site contamination issues at the Barbastro facility.

RPP Inc., in turn, has agreed to indemnify and hold Shell harmless for
environmental damages that result from any environmental condition that arises
on or after November 14, 2000, unless Shell has agreed to assume
responsibility for the matter under the terms of the environmental agreements.

Intellectual Property Agreements

As part of the recapitalization, we entered into two intellectual property
transfer and license agreements, one for our U.S. business and one for our
non-U.S. business, pursuant to which Shell contributed to us by assignment or
license intellectual property of all types used in Shell's resins business
worldwide. Certain of the intellectual property rights that we have acquired
from Shell are subject to pre-existing licenses to third parties. In addition,
Shell retained some rights to the transferred intellectual property. For
example, many patents and know-how are currently shared among Shell's other
divisions and our business. Where these shared rights are used in our
business, they have either been acquired by us subject to licenses back to
Shell to use these rights for their other businesses, or licensed from Shell.
Our licenses from Shell are royalty-free licenses and their duration is
generally linked to the life of the relevant licensed rights. The licenses are
freely assignable and include the right to sublicense, with the exception of
certain rights used principally by Shell that may be transferred only to
affiliates or successors of our business. Pursuant to the intellectual
property transfer and license agreements, we have also acquired the worldwide
trademarks that are used exclusively in our business, and rights in the
copyright to all technical information used in our business. In addition,
Shell assigned to us, and we have assumed the obligations under, intellectual
property agreements to which Shell is a party and which are used exclusively
in our business. To the extent any such material agreements are not
transferable by their terms, Shell has agreed to cooperate with us to obtain
the necessary third party consents to such transfer. We and Shell have also
agreed to indemnify each other for claims by a third party arising out of or
in connection with the exercise of the licenses and rights granted under these
agreements.

Interim Agreements for Information Technology Services

As part of the recapitalization, we entered into two interim agreements for
information technology services, one for our U.S. business and the other for
our non-U.S. business, pursuant to which Shell Chemical Company and Shell
Services, Inc. provide specified information technology services to us. The
purpose of the these agreements is to assure that we receive substantially the
same information technology services on substantially the same terms and
conditions after the recapitalization that the resins business of Shell
Chemical received prior to the recapitalization.

The services to be provided include, among others, the management, support
and administration of voice communications, desktop computers and desktop
applications, servers and other infrastructure systems, email, Internet and
intranet access and disaster recovery support.

Shell will provide the services for a period up until November 1, 2004.
However, we may terminate the provision of any particular service on thirty
(30) days' notice to Shell. In addition, by November 1, 2001, we must inform
Shell whether we will require Shell to continue to provide the services for
the full four year term, subject to the termination of particular services by
us, or whether we will transition the provision of the services from Shell to
another party by August 1, 2003.

The aggregate cost to us for the provision of the services under the interim
agreements for information technology services will be no more than $13.7
million per year, subject to increases in the third and fourth years of the
term based on changes to the producer price index. The costs will be increased
for additional services requested by us. In addition, if Shell is able to
generate certain cost savings, they will be passed along to us.

Financial Business Processing Transition Agreements

As part of the recapitalization, we entered into two financial business
processing transition agreements dated as of November 1, 2000, one for our
U.S. business and one for our non-U.S. business, pursuant to which Shell, or
its subcontractor, will provide specified accounting and related services to
us. The purpose of these agreements is to ensure that we receive substantially
the same accounting and related services on substantially the same terms and
conditions after the recapitalization that the resins units of Shell received
prior to the recapitalization.

The services being provided include, among others, the accounting,
management and administration of purchasing, invoicing, accounts payable and
receivable, inventory, fixed assets, month-end and year-end closings and
business reporting.

Shell will provide the services until the financial business processing
transition agreements terminate on November 1, 2002. The aggregate cost to us
for the provision of the services under the financial business processing
transition agreements will be $8.0 million per year.

Interim Services Agreement

As part of the recapitalization, we entered into an interim services
agreement dated as of November 1, 2000, pursuant to which Shell will provide
us with the same level of office services, building and plant maintenance and
other services as in effect during the prior six month period. We will pay
Shell up to $153,250 per month for these services, which Shell has agreed to
provide for terms ranging from six months to two years, unless we terminate
them on 90 days' advance written notice. In addition, we and Shell will
indemnify each other for certain losses.

Tax Agreement and Tax Deed

As part of the recapitalization, we entered into a tax agreement for our
U.S. business and a tax deed for our non-U.S. business dated as of November 1,
2000. The tax agreement provides, among other things, that Shell will be
responsible for, and will indemnify us against, any liability for taxes that
were payable, or accrued, as a

result of business activities during the period prior to November 14, 2000.
The tax deed provides, among other things, that Shell Petroleum N.V. will
indemnify us against any liability for taxes arising as a result of business
activities occurring on or prior to November 1, 2000, subject to certain
exceptions, such as liabilities for taxes that arise as a result of any change
in law after the closing that had retrospective effect. The tax agreement and
tax deed also provide that we will be responsible for, and will indemnify
Shell Chemical against any liability for taxes that become payable after
November 14, 2000 and November 1, 2000, respectively, except to the extent
that the liability relates to an event occurring during, or to income that was
earned or accrued during, a pre-closing period.

Pursuant to the tax agreement, both Shell Chemical and we have made an
election under Section 338(h)(10) of the Internal Revenue Code of 1986, as
amended, to treat the recapitalization, for federal income tax purposes, as a
purchase of all of the assets of the epoxy resins business that we now own
after the recapitalization. Making this election allows us to increase our
depreciation and amortization deductions for U.S. Federal income tax purposes
with respect to the U.S. assets we now own.

Agreements with Stockholders of RPP Inc.

Shareholders' Agreement

On November 14, 2000, RPP Inc. entered into a shareholders' agreement with
RPP Holdings and Shell which governs certain aspects of the relationship among
RPP Inc., RPP Holdings and Shell. The shareholders' agreement contains, among
other matters,

. restrictions on the transfer of shares of common stock by Shell;

. preemptive rights granted to Shell to purchase equity securities issued
by RPP Inc. to RPP Holdings or its affiliates in the amounts required to
maintain Shell's percentage ownership;

. agreement by Shell to consent to the sale of more than 50% of the equity
securities of RPP Inc. or substantially all of its assets to a third
party if such sale is approved by the Board of Directors, and to sell
its shares of common stock if so required;

. rights of Shell to participate in transfers of common stock by RPP
Holdings other than to an affiliate;

. rights of Shell to receive financial information; and

. prohibitions on transactions between RPP Inc. and its affiliates,
subject to certain exceptions.

The shareholders' agreement terminates upon the earlier of a sale of RPP
Inc. and the consummation of a public equity offering that raises gross
proceeds of at least $100 million.

Investor Rights Agreement

RPP Inc. entered into an investor rights agreement with RPP Holdings and
members of management who own stock, options and/or junior subordinated notes
of RPP Inc. which governs certain aspects of the relationship among RPP Inc.,
RPP Holdings and the management holders. The investor rights agreement
contains, among other matters,

. restrictions on the transfer of shares of common stock, options and
junior subordinated notes by the management holders;

. rights of RPP Inc. and RPP Holdings to purchase common stock and junior
subordinated notes in the event of certain permitted transfers by the
management holders;

. agreement by the management holders to consent to the sale of more than
50% of the equity securities of RPP Inc. or substantially all of its
assets to a third party and to sell their shares of common stock if so
required;

. rights of the management holders to participate in transfers of common
stock and junior subordinated notes by RPP Holdings other than to an
affiliate;

. repurchase rights of RPP Inc. and RPP Holdings in the event of
termination of employment of the management holders;

. requirements of RPP Inc. to purchase common stock and junior
subordinated notes in the event of a termination of employment initiated
by RPP Inc. or any of its subsidiaries for any reason other than for
cause within six months of the closing of the recapitalization of
management holders who accepted loans from RPP LLC; and

. restrictions on sales of common stock and junior subordinated notes by
the management holders in the event of an initial public offering.

The investor rights agreement terminates upon the earlier of a sale of RPP
Inc. or approval by holders holding a majority of the common stock of RPP Inc.

Shell Registration Rights Agreement

On November 14, 2000, RPP Inc. entered into a registration rights agreement
with Shell pursuant to which Shell has incidental registration rights to
include its RPP Inc. common stock in the same or concurrent registration
statement filed by RPP Inc. for the registration of RPP Inc. common stock
under the Securities Act. RPP Inc. will bear all expenses, other than selling
expenses, incurred in the registration process. The registration rights
agreement also contains customary provisions with respect to registration
procedures, underwritten offerings and indemnification and contribution
rights.

RPP Holdings Registration Rights Agreement

On November 14, 2000, RPP Inc. entered into a registration rights agreement
with RPP Holdings pursuant to which RPP Holdings has demand and incidental
registration rights. As a result, at RPP Holdings' request, RPP Inc. will be
obliged to prepare and file a registration statement covering the shares so
requested to be registered by RPP Holdings. In addition, should RPP Inc.
propose to register any of its common stock for sale to the public, RPP
Holdings will have the right to include its RPP Inc. common stock in the same
or concurrent registration statement filed by RPP Inc. for the registration of
RPP Inc. common stock under the Securities Act. RPP Inc. will bear all
expenses, other than selling expenses, incurred in the registration process.
The registration rights agreement also contains customary provisions with
respect to registration procedures, underwritten offerings and indemnification
and contribution rights.

Management Promissory Notes

On November 14, 2000, we loaned $925,000 in the aggregate to some members of
our then existing management and other employees, to finance up to one-half of
the purchase price payable by them in connection with their purchases of RPP
Inc.'s common stock and junior subordinated notes in the recapitalization. In
particular, we made loans to each of our then executive officers in the
following amounts:

. David T. Preston--$125,000 loaned to finance in part his purchase of 750
shares of RPP Inc. stock and $175,000 principal amount of RPP Inc.
junior subordinated notes, which loan was repaid on April 9, 2001 as
described below; and

. Dany Subrata--$100,000 loaned to finance in part his purchase of 600
shares of RPP Inc. stock and $140,000 principal amount of RPP Inc.
junior subordinated notes.

In March 2001, we loaned $100,000 to J. Travis Spoede, our new Executive
Vice President, Chief Financial Officer and Secretary, to finance in part his
purchase of 600 shares of RPP Inc. stock and $140,000 principal amount of RPP
Inc. junior subordinated notes.

The loans are evidenced by promissory notes made by the employee in favor of
us. Interest payable on each promissory note will accrue at an annual rate of
10.75%. Interest payments are, at the option of the employee,

payable in cash semi-annually or accrue and become due and payable on November
14, 2008. Except in the case of Mr. Preston, principal on the promissory notes
will become due and payable on November 14, 2008. Each promissory note is
secured by the RPP Inc. common stock and junior subordinated notes to be
purchased by such employee and options held by such employee and, except for
such pledged securities, is non-recourse to the employee.

In connection with the termination of Mr. Preston's employment with us, on
April 9, 2001, Mr. Preston repaid his loan to us with the proceeds from the
repurchase of his securities by RPP Inc. and the accrued and unpaid interest
of $4,480 on his promissory note was forgiven by us. For a discussion of the
terms of Mr. Preston's severance arrangements, "Management--Separation
Agreement with Former President."

Securities Indemnification Agreement

On November 14, 2000, we entered into a securities indemnification agreement
with Shell and RPP Holdings. Under the agreement, we agreed to indemnify
Shell, RPP Holdings and their respective affiliates and each of their
respective directors and officers and other related persons against
liabilities arising under the Securities Act in connection with the private
placement offering of the old notes, and we also granted contribution rights
to such persons.

Apollo Management Agreement

On November 14, 2000, we entered into a management consulting agreement with
Apollo Management IV, L.P. Under the terms of the management consulting
agreement, we retained Apollo to provide management consulting and financial
advisory services to us and pay Apollo an annual management fee of $1.0
million for providing those services. In particular, Apollo will provide at
our request consulting and advisory services relating to proposed financial
transactions, acquisitions and other senior management matters relating to our
business. In addition, as consideration for arranging the recapitalization and
the related financing thereof, we paid Apollo a fee of $5.0 million on
November 14, 2000. We will also be required to pay Apollo a transaction fee if
we engage in any merger, acquisition, disposition, recapitalization, issuance
of securities, financing or similar transaction unless we and Apollo are
unable to mutually agree upon the terms of Apollo's engagement, in which case
we will be able to retain another special advisor. Since Apollo beneficially
owns 91.1% of us and a majority of the members of our Board of Managers are
affiliated with Apollo, it has the power, through its representatives and
equity ownership, to approve on our behalf and set the terms of Apollo's
engagement, even if the independent members of the Board of Managers were
opposed. See "Risk Factors--Concentration of Ownership and Control of Us."
However, the members of the Board of Managers of RPP LLC who are affiliated
with Apollo are aware that they have fiduciary obligations to RPP LLC, not
Apollo, and RPP LLC expects that each member of its Board of Managers will
comply with his fiduciary duties under Delaware law. The management consulting
agreement has a ten-year term and, commencing on November 14, 2005 and at the
end of each year thereafter, will automatically extend for an additional year
unless terminated upon five years' prior notice to the time the agreement
would otherwise expire.

DESCRIPTION OF THE CREDIT AGREEMENT

In connection with the offering of the old notes, we entered into a credit
agreement with a syndicate of financial institutions. The credit agreement
provides for the following:

. a six-year euro equivalent of $100 million A term loan at issuance and an
eight-year $350 million B term loan which was drawn at the closing to
finance in part the recapitalization and certain related costs and
expenses; and

. a six-year $150 million revolving credit facility (the euro equivalent of
which is also available), which may include letters of credit (subject to
a sublimit of not more than $50 million), to be used for, among other
things, working capital and general corporate purposes of ours and our
subsidiaries, including, without limitation, effecting certain permitted
acquisitions.

Prepayments

The loans under the term loan facilities are required to be prepaid (subject
to certain exceptions) with, and after the repayment in full of such loans,
permanent reductions to the revolving credit facility are required in an
amount equal to,

. 100.0% of the net cash proceeds of all asset sales and dispositions by us
and our subsidiaries, subject to certain exceptions,

. 100.0% of the net cash proceeds of issuances of certain debt obligations
and certain preferred stock by us and our subsidiaries,

. 50.0% of the net cash proceeds from common equity and certain preferred
stock issuances by us and our subsidiaries, including in connection with
permitted acquisitions,

. 75.0% of annual excess cash flow (as defined in the credit agreement) and

. 100.0% of certain insurance proceeds.

The applicable percentages in the first four items may be reduced based upon
our leverage ratio. Mandatory prepayments and permanent reductions will be
allocated first, to the term loan facilities and second, to the revolving
credit facility. The credit agreement will require us to make annual
amortization payments (payable in quarterly installments) equal to 3 1/3% of
the facility with respect to A term loans and 1% with respect to B term loans.

Voluntary prepayments and commitment reductions will be permitted in whole
or in part, subject to minimum prepayment or reduction requirements, provided
that voluntary prepayments of certain loans on a date other than the last day
of the relevant interest period will be subject to the payment of customary
breakage costs, if any. Such voluntary prepayments and commitment reductions
may be made without premium or penalty except that a premium will be payable
if we prepay the B term loans on or before November 14, 2002.

Interest and Fees

The interest rates under the credit agreement are as follows:

. A dollar term loan facility and loans under revolving credit facility
denominated in dollars: at our option the base rate or the eurodollar
rate (as defined in the credit agreement), plus, in each case, a margin;

. A euro term loan facility and loans under the revolving credit facility
denominated in euros: the euro rate (as defined in the credit agreement)
plus a margin plus associated costs (as defined in the credit agreement);
and

. B term loan facility: at our option the base rate or the eurodollar rate,
plus, in each case, a margin.

100

We may elect interest periods of 1, 2, 3 or 6, or to the extent available to
each lender with outstanding loans and/or commitments under the respective
tranche of loans, 9 or 12, months for eurodollar loans and euro rate loans.
With respect to eurodollar loans and euro rate loans, interest will be payable
at the end of each interest period and, in any event, at least every 3 months
for interest periods longer than three months. With respect to base rate
loans, interest will be payable quarterly on the last business day of each
fiscal quarter. In each case, calculation of interest will be on the basis of
actual number of days elapsed in a year of 360 days.

For each letter of credit we issue, we will be required to pay (a) a per
annum fee equal to the spread over the eurodollar rate for the revolving
credit facility from time to time in effect, (b) a fronting fee equal to 1/4
of 1% on the aggregate outstanding stated amounts of such letters of credit,
plus (c) customary administrative charges. We are also required to pay a
commitment fee equal to 1/2 of 1% per annum on the undrawn portion of the
revolving credit facility. The percentage shall decrease if our leverage ratio
decreases.

Collateral and Guarantees

The loans incurred by the Issuers are guaranteed by RPP Inc. and all of our
existing and future direct and indirect wholly-owned domestic subsidiaries.
The Issuers' U.S. loans are secured by a perfected security interest in
substantially all of our properties and assets and our direct and indirect
wholly-owned domestic subsidiaries, now owned or acquired later, including a
pledge of all capital stock and notes owned by us and our domestic
subsidiaries; provided that no more than 66 2/3% of the stock of our foreign
subsidiaries are required to be pledged in respect of such loans. In addition,
loans incurred by Resolution Nederland B.V., a subsidiary of RPP B.V., are
guaranteed by RPP Inc., us and all of our existing and future direct and
indirect domestic and material foreign subsidiaries (the "Non-U.S.
Guarantors"), subject to exceptions and restrictions. The obligations of
Resolution Nederland B.V. and the Non-U.S. Guarantors will be secured by a
perfected security interest in the assets described above and in certain
material property and assets owned by Resolution Nederland B.V. and the Non-
U.S. Guarantors.

Representations and Warranties and Covenants

The credit agreement contains customary representations and warranties and
contains customary covenants restricting our ability to, among others

. declare dividends or redeem or repurchase capital stock;

. prepay, redeem or purchase debt;

. incur liens and engage in sale-leaseback transactions;

. make loans and investments;

. incur additional indebtedness;

. amend or otherwise alter debt and other material agreements;

. make capital expenditures;

. engage in mergers, acquisitions and asset sales;

. transact with affiliates; and

. alter the business we conduct.

We are required to indemnify the agent and lenders and comply with specified
financial and affirmative covenants.

The credit agreement also contains the following financial covenants:

. We must maintain a ratio of Consolidated EBITDA to consolidated
interest expense of at least 1.60:1.00 for any 12-month period ending
on the last day of any fiscal quarter ending on or prior to September
30, 2002. Thereafter, the minimum ratio we are required to maintain
increases in various

101

increments until March 31, 2008, when it becomes 2.50:1.00 for such
quarterly period and all subsequent quarters.

. We must maintain a ratio of consolidated debt to Consolidated EBITDA of
no more than 5.75:1.00 for any 12-month period ending on the last day
of any fiscal quarter ending on or prior to September 30, 2002.
Thereafter, the maximum ratio we are allowed decreases in various
increments after every four quarters until December 31, 2006, when it
becomes 4.00:1.00 for such period and all subsequent periods.

Under the credit agreement, our Consolidated EBITDA is calculated as
follows:

. our Consolidated Net Income before consolidated interest expense and
provision for taxes; plus

. the amount of all amortization and depreciation and other non-cash
items; plus

. management and consultant fees paid to Apollo under the Apollo
management consulting agreement; minus

. the amount of all cash payments to the extent that such cash payments
relate to a non-cash item incurred in a previous period which was added
back to Consolidated EBITDA in such previous period. However, we agreed
that with respect to calculating covenant compliance for any twelve
month period including the calendar quarters ended March 31, 2000, June
30, 2000, September 30, 2000 and December 31, 2000:

--Consolidated EBITDA would be $47,400,000, $40,300,000, $37,200,000
(or, if higher, our actual Consolidated EBITDA for the fiscal quarter
ending September 30, 2000) and $39,200,000, respectively, and

--Consolidated interest expense would be $19,125,000 for each such
fiscal quarter.

As defined in the credit agreement, "Consolidated Net Income" means our
consolidated net income minus any dividends that we pay to RPP Inc. plus the
following adjustments:

(a) after-tax non-recurring or extraordinary gains or losses, and non-
recurring transition expenses related to the transactions,

(b) creation of accruals and reserves within twelve months of closing of
the transactions,

(c) until May 14, 2002, adjustments made in connection with the
calculation of "pro forma EBITDA" and "Adjusted EBITDA" as defined in the
offering memorandum dated November 14, 2000 relating to the private
placement of the old notes to the extent those adjustments are not
reflected in any period of four consecutive fiscal quarters ending before
May 14, 2002 and continue to be applicable, and

(d) gains and losses on asset sales.

The definition of Consolidated EBITDA contained in our credit agreement is
different than the definition of Consolidated EBITDA contained in the
indenture. The indenture definition is used in presenting Consolidated EBITDA
for all other purposes in this prospectus, including under "Selected
Historical and Pro Forma Financial Information." However, the differences in
Consolidated EBITDA for 2000 as calculated under the indenture and the credit
agreement would not be material.

Events of Default

Events of default under the credit agreement include, but are not limited
to,

. our failure to pay principal or interest when due;

. our material breach of any representation or warranty;

. covenant defaults;

. events of bankruptcy; and

. a change of control.

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DESCRIPTION OF THE NOTES

The old notes were, and the exchange notes will be, issued under an
indenture among RPP LLC and RPP Capital and United States Trust Company of New
York, as trustee. The definitions of certain capitalized terms used in the
following summary are set forth below under "Certain Definitions." For
purposes of this section, references to the "Issuers" refer to RPP LLC and RPP
Capital.

On November 14, 2000, we issued $200.0 million aggregate principal amount of
old notes under the indenture. The terms of the exchange notes are identical
in all material respects to the old notes, except the exchange notes will not
contain transfer restrictions and holders of exchange notes will no longer
have any registration rights or be entitled to any additional interest. The
trustee will authenticate and deliver exchange notes for original issue only
in exchange for a like principal amount of old notes. Any old notes that
remain outstanding after the consummation of the exchange offer, together with
the exchange notes, will be treated as a single class of securities under the
indenture. Accordingly, all references in this section to specified
percentages in aggregate principal amount of the outstanding exchange notes
will be deemed, at any time after the exchange offer is consummated, to be the
same percentage in aggregate principal amount of the old notes and exchange
notes then outstanding.

The following description is a summary of the material provisions of the
indenture. It does not restate the terms of the indenture in their entirety.
We urge that you carefully read the indenture and the Trust Indenture Act of
1939, which has been filed as an exhibit to the registration statement,
because the indenture and the TIA govern your rights as holders of the notes,
not this description.

General

The old notes are, and the exchange notes will be, general unsecured
obligations of the Issuers, ranking subordinate in right of payment to all
existing and future Senior Debt of the Issuers.

The exchange notes will be issued in fully registered form only, without
coupons, in denominations and integral multiples of $1,000.

Initially, the trustee will act as paying agent registrar for the notes. You
may present your notes for registration or transfer and exchange at the
offices of the registrar, which initially will be the trustee's corporate
trust office. The Issuers may change any paying agent and registrar without
prior notice.

The Issuers will pay principal (and premium, if any) on the notes at the
trustee's corporate office in New York, New York. At the Issuers' option,
interest may be paid at the trustee's corporate trust office or by check
mailed to the registered address of holders.

Principal, Maturity and Interest

The Issuers will issue up to an aggregate principal amount of $200.0 million
of exchange notes in the exchange offer. The old notes and the exchange notes
will mature on November 15, 2010. Additional notes in an unlimited amount may
be issued under the indenture from time to time, subject to the limitations
set forth under "--Certain Covenants--Limitation on Incurrence of Additional
Indebtedness." The old notes, the exchange notes and any additional notes
subsequently issued will be treated as a single class for all purposes under
the indenture.

Interest on the notes will be payable semi-annually in cash on each May 15
and November 15, commencing on May 15, 2001 to the persons who are registered
holders at the close of business on the May 1 and November 1 immediately
preceding the applicable interest payment date. Interest on the notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from and including the date of issuance and will be
computed on the basis of a 360-day year of twelve 30-day months.

103

Holders of old notes whose old notes are accepted for exchange in the
exchange offer will be deemed to have waived the right to receive any payment
in respect of interest on the old notes accrued from November 14, 2000 (the
original issue date of the old notes) to the date of issuance of the exchange
notes. Consequently, holders who exchange their old notes for exchange notes
will receive the same interest payment on May 15, 2001 (the first interest
payment date with respect to the old notes and the exchange notes following
consummation of the exchange offer) that they would have received had they not
accepted the exchange offer.

The notes will not be entitled to the benefit of any mandatory sinking fund.

Redemption

Optional Redemption

The Issuers may redeem all or portions of the notes, on and after
November 15, 2005, upon not less than 30 nor more than 60 days' notice, at the
following redemption prices (expressed as percentages of the principal amount)
if redeemed during the twelve-month period commencing on November 15 of the
year set forth below, plus, in each case, accrued and unpaid interest if any,
to the date of redemption:

Year Percentage
---- ----------

2005........................................ 106.750%
2006........................................ 104.500%
2007........................................ 102.250%
2008 and thereafter......................... 100.000%

Optional Redemption upon Change of Control

In addition, at any time prior to November 15, 2005, upon the occurrence of
a Change of Control, the Issuers may redeem the notes, in whole but not in
part, at a redemption price equal to the principal amount of the notes plus
the Applicable Premium plus accrued and unpaid interest, if any, to the date
of redemption. Notice of redemption of the notes upon a Change of Control will
be mailed to holders of the notes not more than 30 days following the
occurrence of a Change of Control.

Selection and Notice of Redemption

If less than all of the notes are to be redeemed at any time, the trustee
will select those notes for redemption in compliance with the requirements of
the principal national securities exchange, if any, on which the notes are
listed or, if the notes are not then listed on a national securities exchange,
on a proportional basis, by lot or by such method as the trustee considers
fair and appropriate, provided that:

. notes with a principal amount of $1,000 or less may only be redeemed in
full and

. if a partial redemption is made with the Net Cash Proceeds of an Equity
Offering, the trustee will select the notes or portions of the notes for
redemption only on a proportional basis or on as nearly a proportional
basis as is practicable, unless the method is otherwise prohibited.

Notice of redemption will be mailed by first-class mail at least 30 but not
more than 60 days before the redemption date to each holder of notes to be
redeemed at its registered address. If any note is to be redeemed in part
only, the notice of redemption that relates to the note will state the portion
of the principal amount to be redeemed. A new note in a principal amount equal
to the unredeemed portion will be issued in the name of the holder upon
cancellation of the original note. On and after the redemption date, interest
will cease to accrue on those notes called for redemption if the Issuers have
deposited with the paying agent the funds needed to pay the applicable
redemption price.

104

Subordination

The payment of all Obligations on or relating to the notes is subordinated
in right of payment to the prior payment in full in cash or Cash Equivalents
of all Obligations on Senior Debt of the Issuers (including the Obligations
with respect to the Credit Agreement).

The holders of Senior Debt will be entitled to receive payment in full in
cash or Cash Equivalents of all Obligations due in respect of Senior Debt
(including interest accruing after the commencement of any bankruptcy or other
like proceeding at the rate specified in the applicable Senior Debt even if
such interest is not an allowed claim in such proceeding) before the holders
of notes will be entitled to receive any payment or distribution of any kind
with respect to any Obligations on, or relating to, the notes in the event of
any distribution to creditors of either Issuer:

(1) in a liquidation or dissolution of either Issuer;

(2) in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to either Issuer or their respective properties;

(3) in an assignment for the benefit of creditors; or

(4) in any marshalling of either of the Issuers' assets and liabilities.

Neither Issuer may make any payment or distribution of any kind or character
with respect to any Obligations on, or relating to, the notes or acquire any
notes for cash or property or otherwise if:

(1) a payment default on any Senior Debt of either of the Issuers occurs
and is continuing; or

(2) any other default occurs and is continuing on Designated Senior Debt
of either of the Issuers that permits holders of the Designated
Senior Debt to accelerate its maturity and the Trustee receives a
notice of such default (a "Payment Blockage Notice") from the
Representative of any Designated Senior Debt.

Payments on and distributions with respect to any Obligations on, or with
respect to, the notes may and will be resumed:

(1) in the case of a payment default, upon the date on which such default
is cured or waived; and

(2) in case of a nonpayment default, the earliest to happen of:

. the date on which all nonpayment defaults are cured or waived (so
long as no other event of default exists),

. 180 days after the date on which the applicable Payment Blockage
Notice is received or

. the date on which the trustee receives notice from the
Representative for such Designated Senior Debt rescinding the
Payment Blockage Notice, unless the maturity of any Designated
Senior Debt has been accelerated.

No new Payment Blockage Notice may be delivered unless and until 360 days
have elapsed since the effectiveness of the immediately prior Payment Blockage
Notice.

No nonpayment default that existed or was continuing on the date of delivery
of any Payment Blockage Notice to the trustee will be, or be made, the basis
for a subsequent Payment Blockage Notice unless such default shall have been
cured or waived for a period of not less than 90 consecutive days. However,
under the indenture, any subsequent action, or any breach of any financial
covenants for a period commencing after the date of delivery of such initial
Payment Blockage Notice that in either case would give rise to a default
pursuant to any provisions under which a default previously existed or was
continuing would constitute a new default for this purpose.

The Credit Agreement requires that we promptly notify each lender if payment
of the notes is accelerated because of an Event of Default.

105

Since the right to be paid principal and interest on the notes ranks junior
to the rights of holders of our Senior Debt, if we become bankrupt or
insolvent, creditors of either Issuer who are not holders of Senior Debt,
including the holders of the notes, may recover less proportionately than
holders of Senior Debt.

At December 31, 2000, on a consolidated basis, we and our Restricted
Subsidiaries had approximately $484 million of Senior Debt outstanding. In
addition to the amount then outstanding, we could have borrowed an additional
$124 million under the Credit Agreement which, if borrowed, also would have
been senior to the notes. Further, as of December 31, 2000, our subsidiaries
had $245 million of liabilities, including debt related to the transaction of
$131 million, all of which ranks senior in right of payment to the notes.

Excess Cash Flow Repurchase Offer

(a) If we have Excess Cash Flow for any year beginning with 2001, and our
Leverage Ratio is more than 3.0 to 1.0 on the last day of such year, we must
use an amount equal to 50% of the Excess Cash Flow in that fiscal year:

(1) first, to the extent we elect (or are required by the terms of any
Senior Debt), to prepay, repay, redeem or purchase (and
permanently reduce the commitments thereunder) Senior Debt with
such percentage of Excess Cash Flow;

(2) second, to the extent of the balance of such percentage of Excess
Cash Flow after application in accordance with clause (1), to make
an offer to the holders of the notes (and to holders of other
Senior Subordinated Debt whom we designate) to purchase notes (and
such other Senior Subordinated Debt) any remaining as provided in
the indenture (an "Excess Cash Flow Offer"); and

(3) third, to the extent of the balance of such percentage of Excess
Cash Flow, after application in accordance with clause (1) or (2)
above, to any other application or use not prohibited by the
indenture.

In connection with any prepayment, repayment or purchase of Indebtedness
pursuant to clause (1) above, we must permanently retire that Indebtedness and
cause the related loan commitment (if any) to be permanently reduced in an
amount equal to the principal amount so prepaid, repaid or purchased.

The amount of Excess Cash Flow included in any Excess Cash Flow Offer will
be reduced by the aggregate amount of any optional prepayments of Senior Debt
during the fiscal year for which Excess Cash Flow was calculated, but only to
the extent that such prepayments by their terms cannot be reborrowed or
redrawn and do not occur in connection with a refinancing of all or any
portion of such Senior Debt.

(b) If we make an Excess Cash Flow Offer, we will be required to purchase
notes tendered in response to an offer by us for the notes (and other Senior
Subordinated Debt) at a purchase price of 100% of their principal amount
(without premium) plus accrued but unpaid interest (or, in respect of such
other Senior Subordinated Debt at such lesser price, if any, as may be
provided for by the terms of such Senior Subordinated Debt), in accordance
with the procedures (including prorating in the event of oversubscription) set
forth in the indenture. If the aggregate purchase price of notes (and any
other Senior Subordinated Debt) tendered pursuant to the offer is less than
the Excess Cash Flow allotted to the purchase of the notes, we will be
required to apply the remaining Excess Cash Flow in accordance with clause
(a)(3) above. We will not be required to make an Excess Cash Flow Offer to
purchase notes (and other Senior Subordinated Debt) pursuant to this covenant
if the available Excess Cash Flow is less than $5.0 million (which lesser
amount will be carried forward for purposes of determining whether such an
offer is required with respect to the Excess Cash Flow in any subsequent
fiscal year).

(c) We will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of notes under this covenant. To the extent
that the provisions of any securities laws or regulations conflict with
provisions of this covenant, we will comply with the applicable securities
laws and regulations and will not be deemed to have breached its

106

obligations under this covenant by so doing. The covenant and other provisions
contained in the indenture relating to our obligation to make an Excess Cash
Flow Offer may be waived or modified with the written consent of the holders
of a majority in principal amount of the notes.

For example, using our year 2000 historical results, we would have had
Excess Cash Flow of approximately $100 million. The calculation of Excess Cash
Flow for 2000 is provided in the table below:

(Dollars in millions)

Step One:
---------
Calculate Adjusted
Consolidated Net Income Consolidated Net Income...... $19
Plus:
Depreciation and
amortization................. 34
Deferred tax expense...... 10
Non-cash interest
expense...................... 6
Minus:
Net non-cash charges
included
in Consolidated Net
Income....................... (12)
Plus:
Non-cash gains............ 2
----
Adjusted Consolidated Net
Income....................... 59
Step Two:
---------
Add Decrease
in Consolidated
Working Capital (less Cash
and Cash Equivalents)................................. 65
Step Three:
-----------
Subtract Capital Expenditures......................... (18)
Step Four:
----------
Subtract Cash Used in
Elenac Acquisition.................................... (6)
----
Total Excess Cash Flow for 2000....................... $100
====

For future years, we will also be required to subtract the amount of any
permanent principal payment on the notes and capital lease obligations to
calculate Excess Cash Flow.

107

Change of Control

The indenture provides that upon the occurrence of a Change of Control, each
holder will have the right to require that we purchase all or a portion of the
notes pursuant to the offer described below (the "Change of Control Offer"),
at a purchase price equal to 101.0% of the principal amount plus accrued
interest to the date of purchase. Notwithstanding the occurrence of a Change
of Control, we will not be obligated to repurchase the notes under this
covenant if we have exercised our right to redeem all the notes under the
terms of the section titled "--Optional Redemption."

The indenture will provide that, prior to the mailing of the notice referred
to below, but in any event within 30 days following any Change of Control, we
covenant to:

. repay in full and terminate all commitments under Indebtedness under the
Credit Agreement and all other Senior Debt the terms of which require
repayment upon a Change of Control or offer to repay in full and
terminate all commitments under all Indebtedness under the Credit
Agreement and all other such Senior Debt and to repay the Indebtedness
owed to (and terminate all commitments of) each lender which has
accepted such offer; or

. obtain consents required under the Credit Agreement and all such other
Senior Debt to permit the repurchase of the notes as provided below.

We will first comply with the covenant in the immediately preceding sentence
before we are required to repurchase notes under the provisions described
below. Our failure to comply with the covenant described in the second
preceding sentence (and any failure to send the notice referred to in the
succeeding paragraph as a result of the prohibition in the second preceding
sentence) constitutes an Event of Default described in clause (3) and not in
clause (2) under "Events of Default" below.

Within 30 days following the date upon which the Change of Control occurred,
we will send, by first class mail, a notice to each holder, with a copy to the
trustee, which notice shall govern the terms of the Change of Control Offer.
The notice will state, among other things, the purchase date, which must be no
earlier than 30 days nor later than 60 days from the date the notice is
mailed, other than as may be required by law (the "Change of Control Payment
Date"). Holders electing to have a note purchased pursuant to a Change of
Control Offer must surrender the note, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the note completed, to the paying
agent at the address specified in the notice prior to the close of business on
the third business day prior to the Change of Control Payment Date.

We will not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at
the times and otherwise in compliance with the requirements set forth in the
indenture applicable to a Change of Control Offer made by us and purchases all
notes validly tendered and not withdrawn under such Change of Control Offer.

If we make a Change of Control Offer, there can be no assurance that we will
have available funds sufficient to pay the Change of Control purchase price
for all the notes that might be delivered by holders seeking to accept the
Change of Control Offer. In the event we are required to purchase outstanding
notes pursuant to a Change of Control Offer, we expect that we would seek
third party financing to the extent we lack available funds to meet our
purchase obligations. However, there can be no assurance that we would be able
to obtain such financing.

The trustee may not waive the covenant relating to a holder's right to
redemption upon a Change of Control. However, the covenant and other
provisions contained in the indenture relating to our obligation to make a
Change of Control Offer may be waived or modified with the written consent of
the holders of a majority in principal amount of the notes. Restrictions
described in the indenture on the ability of the issuers and our Restricted
Subsidiaries to incur additional Indebtedness, to grant liens on our property,
to make Restricted Payments and to make Asset Sales may also make more
difficult or discourage a takeover of RPP LLC, whether favored or opposed by
our management. Consummation of any such transaction may require redemption or

108

repurchase of the notes, and there can be no assurance that the Issuers or the
acquiring party will have sufficient financial resources to effect such
redemption or repurchase. Such restrictions and the restrictions on
transactions with Affiliates may make more difficult or discourage any
leveraged buyout of RPP LLC or any of our Restricted Subsidiaries by our
management. While such restrictions cover a wide variety of arrangements which
have traditionally been used to effect highly leveraged transactions, the
indenture may not afford you protection in all circumstances from the adverse
aspects of a highly leveraged transaction, reorganization, restructuring,
merger or similar transaction.

We will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in connection with the repurchase of notes
pursuant to a Change of Control Offer. To the extent that the provisions of
any securities laws or regulations conflict with the "Change of Control"
provisions of the indenture, we will comply with the applicable securities
laws and regulations and will not be deemed to have breached our obligations
under the "Change of Control" provisions of the indenture by so doing.

The definition of "Change of Control" includes, among other transactions, a
disposition of "all or substantially all" of the property and assets of RPP
LLC. With respect to the disposition of property or assets, the phrase "all or
substantially all" as used in the indenture varies according to the facts and
circumstances of the subject transaction, has no clearly established meaning
under relevant law and is subject to judicial interpretation. Accordingly, in
certain circumstances, there may be a degree of uncertainty in ascertaining
whether a particular transaction would involve a disposition of "all or
substantially all" of the property or assets of a Person, and therefore it may
be unclear whether a Change of Control has occurred and whether we are
required to make a Change of Control Offer.

Certain Covenants

The indenture contains, among others, the following covenants:

Limitation on Incurrence of Additional Indebtedness

RPP LLC will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, create, incur, assume, guarantee, acquire, become
liable, contingently or otherwise, with respect to, or otherwise become
responsible for payment of (collectively, "incur") any Indebtedness (other
than Permitted Indebtedness); provided, however, that if no Default or Event
of Default shall have occurred and be continuing at the time of or as a
consequence of the incurrence of any such Indebtedness, RPP LLC and its
Restricted Subsidiaries may incur Indebtedness (including, without limitation,
Acquired Indebtedness) if on the date of the incurrence of such Indebtedness,
after giving effect to the incurrence thereof, the Consolidated Fixed Charge
Coverage Ratio of RPP LLC is greater than 2.0 to 1.0 if such incurrence is on
or prior to June 30, 2002 and 2.25 to 1.0 if such incurrence is thereafter;
provided that the amount of Indebtedness (other than Acquired Indebtedness)
that may be incurred pursuant to the foregoing by Restricted Subsidiaries of
RPP LLC that have not Guaranteed the Notes in compliance with the "Limitation
on Issuances of Guarantees by Restricted Subsidiaries" covenant shall not
exceed $50.0 million, in the case of the Domestic Restricted Subsidiaries, and
$50.0 million, in the case of the Foreign Restricted Subsidiaries, in each
case, at any one time outstanding.

Limitation on Restricted Payments

RPP LLC will not, and will not cause or permit any of its Restricted
Subsidiaries to, directly or indirectly:

. declare or pay any dividend or make any distribution (other than
dividends or distributions payable in Qualified Capital Stock of RPP
LLC) on or in respect of shares of its Capital Stock to holders of that
Capital Stock;

. purchase, redeem or otherwise acquire or retire for value any Capital
Stock of RPP LLC or any warrants, rights or options to purchase or
acquire shares of any class of such Capital Stock of RPP LLC;

109

. make any principal payment on, purchase, defease, redeem, prepay,
decrease or otherwise acquire or retire for value, prior to any
scheduled final maturity, scheduled repayment or scheduled sinking fund
payment, any Indebtedness of RPP LLC that is subordinate or junior in
right of payment to the notes (other than Indebtedness described in
clause (7) of the definition of "Permitted Indebtedness"); or

. make any Investment (other than Permitted Investments) (each of the
actions listed above being referred to as a "Restricted Payment"), if at
the time of such Restricted Payment or immediately after giving effect
thereto:

(1) a Default or an Event of Default shall have occurred and be
continuing; or

(2) RPP LLC is not able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance
with the "Limitation on Incurrence of Additional Indebtedness"
covenant; or

(3) the aggregate amount of Restricted Payments (including such
proposed Restricted Payment) made after November 14, 2000 (the
amount expended for such purposes, if other than in cash, being
the fair market value of such property as determined reasonably
and in good faith by the Board of Directors of RPP LLC, whose
determination will be conclusive) exceeds the sum of:

(a) 50% of the cumulative Consolidated Net Income (or if cumulative
Consolidated Net Income shall be a loss, minus 100% of such
loss) of RPP LLC earned after November 14, 2000 and on or prior
to the date the Restricted Payment occurs (the "Reference
Date") (treating such period as a single accounting period);
plus

(b) 100% of the aggregate Net Cash Proceeds and the fair market
value, as determined in good faith by the Board of Directors of
RPP LLC, of property other than cash received by RPP LLC from
any Person (other than a Subsidiary of RPP LLC) from the
issuance and sale subsequent to November 14, 2000 and on or
prior to the Reference Date of Qualified Capital Stock of RPP
LLC (other than Excluded Contributions); plus

(c) without duplication of any amounts included in clause (3)(b)
above, 100% of the aggregate Net Cash Proceeds of any equity
contribution received by RPP LLC from a holder of RPP LLC's
Capital Stock (other than Excluded Contributions); plus

(d) the amount by which Indebtedness of RPP LLC or any of its
Restricted Subsidiaries is reduced on RPP LLC's balance sheet
upon the conversion or exchange after November 14, 2000 of any
Indebtedness of RPP LLC or any of its Restricted Subsidiaries
incurred after November 14, 2000 into or for Qualified Capital
Stock; plus

(e) without duplication, the sum of:

(I) the aggregate amount returned in cash on or with respect to
Investments (other than Permitted Investments) made after
November 14, 2000 whether through interest payments,
principal payments, dividends or other distributions or
payments;

(II) the net cash proceeds received by RPP LLC or any
Restricted Subsidiary of RPP LLC from the disposition of
all or any portion of such Investments (other than to a
Subsidiary of RPP LLC's); and

(III) upon redesignation of an Unrestricted Subsidiary as a
Restricted Subsidiary, the fair market value of such
Subsidiary (valued in each case as provided in the
definition of "Investment");

provided, however, that the sum of clauses (I), (II) and (III) above
will not exceed the aggregate amount of all such Investments made by
RPP LLC or any Restricted Subsidiary in the relevant Person or
Unrestricted Subsidiary after November 14, 2000.

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However, the provisions set forth in the immediately preceding paragraph do
not prohibit:

(1) the payment of any dividend or other distribution within 60 days
after the date of declaration of that dividend or other
distribution if the dividend or other distribution would have been
permitted on the date of declaration;

(2) if no Default or Event of Default shall have occurred and be
continuing, the acquisition of any shares of Capital Stock of RPP
LLC, either (a) solely in exchange for shares of Qualified Capital
Stock of RPP LLC or Qualified Capital Stock of RPP Inc. or (b)
through the application of net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of RPP LLC)
of shares of Qualified Capital Stock of RPP LLC or, to the extent
the proceeds are contributed by RPP Inc. to RPP LLC, from the
shares of Capital Stock of RPP Inc.;

(3) if no Default or Event of Default shall have occurred and be
continuing, the acquisition of any Indebtedness of RPP LLC that is
subordinate or junior in right of payment to the notes either:

(a) solely in exchange for shares of Qualified Capital Stock of RPP
LLC or RPP Inc., or

(b) through the application of net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of RPP LLC)
of:

-- shares of Qualified Capital Stock of RPP LLC or RPP Inc., or

-- Refinancing Indebtedness;

(4) if no Default or Event of Default shall have occurred and be
continuing, repurchases by RPP LLC or any Restricted Subsidiary of
RPP LLC of, or dividends, distributions or advances to RPP Inc. to
allow RPP Inc. to repurchase (and/or to make payments on notes
previously issued by RPP Inc. representing the consideration for
the previous repurchase of), securities of RPP Inc., RPP Holdings
or RPP LLC from employees, directors or consultants of RPP Inc.,
RPP LLC or any Subsidiaries of RPP LLC or their authorized
representatives

(a) upon the death, disability or termination of employment of such
employees, directors or consultants or to the extent required
pursuant to employee benefit plans, employment agreements or
consulting agreements or

(b) pursuant to any other agreements with such employees or
directors of or consultants to RPP Inc., RPP LLC or any
Subsidiaries of RPP LLC, in an aggregate amount not to exceed
$7.5 million in any calendar year (with unused amounts in any
calendar year being carried over to succeeding years subject to
a maximum of $15.0 million in any calendar year), provided that
the cancellation of Indebtedness owing to RPP LLC or any
Restricted Subsidiary of RPP LLC from such employees, directors
or consultants of RPP LLC or any of its Restricted Subsidiaries
in connection with a repurchase of Capital Stock of RPP LLC will
not be deemed to constitute a Restricted Payment under the
indenture;

(5) the declaration and payment of dividends to holders of any class
or series of Preferred Stock of RPP LLC, provided that for the
most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date
of issuance of such Preferred Stock, after giving effect to such
issuance on a pro forma basis, RPP LLC would have been able to
incur at least $1.00 of Indebtedness (other than Permitted
Indebtedness) under the "Limitation on Incurrence of Additional
Indebtedness" covenant;

(6) the payment of dividends on RPP LLC's Common Stock (or dividends,
distributions or advances to RPP Inc. to allow RPP Inc. to pay
dividends on RPP Inc.'s Common Stock), following the first public
offering of RPP LLC's Common Stock (or of RPP Inc.'s Common Stock)
after November 14, 2000, of:

. in the case of the first public offering of RPP LLC's Common
Stock, up to 6% per annum of the net proceeds received by RPP LLC
in such public offering, or

. in the case of the first public offering of RPP Inc.'s Common
Stock, up to 6% per annum of the amount contributed by RPP Inc.
from the proceeds received by RPP Inc. from such

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offering, other than, in each case, public offerings with respect
to RPP LLC's Common Stock (or of RPP Inc.'s Common Stock)
registered on Form S-8;

(7) the payment of dividends, distribution or advances to RPP Inc. to
allow RPP Inc. to repurchase, retire or otherwise acquire or retire
for value equity interests of RPP Inc., in existence on November
14, 2000 and from the persons holding such equity interests on
November 14, 2000 and which are not held by Apollo or any of its
Affiliates or members of management of RPP LLC and its Subsidiaries
on November 14, 2000 (including any equity interests issued in
respect of such equity interests as a result of a stock split,
recapitalization, merger, combination, consolidation or similar
transaction), provided, however, that RPP LLC shall be permitted to
make Restricted Payments under this clause only if after giving
effect thereto, RPP LLC would be permitted to incur at least $1.00
of additional Indebtedness (other than Permitted Indebtedness)
pursuant to the "Limitation on Incurrence of Additional
Indebtedness" covenant;

(8) other Restricted Payments in an aggregate amount not to exceed
$20.0 million;

(9) if no Default or Event of Default shall have occurred and be
continuing, payments or distributions to, or dividends,
distributions or advances to RPP Inc. to allow RPP Inc. to make
payments or distributions to, dissenting stockholders pursuant to
applicable law, pursuant to or in connection with a consolidation,
merger or transfer of assets that complies with the provisions of
the indenture applicable to mergers, consolidations and transfers
of all or substantially all of the property and assets of RPP LLC;

(10) Investments that are made with Excluded Contributions;

(11) Any payments made to consummate the transactions pursuant to or
contemplated by the Master Sale Agreement, the Non-US Sale
Agreement, the Transaction Documents, the Non-US Transaction
Documents (as such terms are defined in the Master Sale Agreement)
and any other agreements related to the Recapitalization in effect
on the closing date of the Recapitalization, including payments
made by RPP LLC to RPP Inc. to allow RPP Inc. to satisfy its
obligations under such agreements or documents, in each case, as
such agreements or documents are in effect on the Issue Date as
amended from time to time so long as such amendment is in the good
faith judgment of the Board of Directors of RPP LLC not more
disadvantageous to you in any material respect than such agreement
or document as in effect on November 14, 2000;

(12) repurchases of Capital Stock deemed to occur upon the exercise of
stock options, warrants or other convertible securities, to the
extent such Capital Stock represents a portion of the
consideration for such exercise;

(13) payment of dividends, other distributions or other amounts by RPP
LLC to RPP Inc. in amounts required for RPP Inc. to pay franchise
taxes and other fees required to maintain its existence and
provide for all other operating costs of RPP Inc., including,
without limitation, in respect of director fees and expenses,
administrative, legal and accounting services provided by third
parties and other costs and expenses, including all costs and
expenses with respect to filings with the SEC, of up to $2.5
million per fiscal year;

(14) the acquisition of any shares of Disqualified Capital Stock of RPP
LLC either:

. solely in exchange for shares of Disqualified Capital Stock of
RPP LLC or Capital Stock of RPP Inc. or

. through the application of the net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of RPP LLC)
of shares of Disqualified Capital Stock of RPP LLC or, to the
extent the proceeds are contributed by RPP Inc. to RPP LLC, from
shares of Capital Stock of RPP Inc.;

(15) any purchase or redemption of Indebtedness that ranks junior to
the notes utilizing any Net Cash Proceeds remaining after RPP LLC
has complied with the requirements of the covenants described
under "Limitation on Asset Sales" and "Change of Control";

112

(16) the payment of dividends, other distributions or amounts by RPP
LLC to RPP Inc. in amounts required to pay the tax obligations of
RPP LLC and its Subsidiaries and the tax obligations of RPP Inc.
or any of its direct or indirect parents attributable to RPP LLC
and its Subsidiaries; provided that:

. the amount of dividends paid pursuant to this clause (16) to
enable RPP Inc. or any of its direct or indirect parents to pay
Federal and state income taxes at any time will not exceed the
amount of such Federal and state income taxes actually owing by
RPP Inc. or any of its direct or indirect parents at such time
for the respective period and

. any refunds received by RPP Inc. or any of its direct or indirect
parents attributable to RPP LLC and its Subsidiaries shall
promptly be returned by RPP Inc. or any of its direct or indirect
parents to RPP LLC; and

(17) if no Default or Event of Default shall have occurred and be
continuing, payments of cash, or dividends, distributions or
advances to RPP Inc. to allow RPP Inc. to make payments of cash,
in lieu of the issuance of fractional shares upon the exercise of
warrants or upon the conversion or exchange of, or issuance of
Capital Stock in lieu of cash dividends on, any Capital Stock of
RPP Inc., RPP LLC or any Restricted Subsidiary, which in the
aggregate do not exceed $3.0 million.

In determining the aggregate amount of Restricted Payments made after November
14, 2000 in accordance with clause (3) of the immediately preceding paragraph,
amounts expended pursuant to clauses (1), (2), (4), (5), (6), (7), (8), (9),
(15) and (17) will be included in the calculation.

Not later than the date of making any Restricted Payment, RPP LLC will
deliver to the trustee an officers' certificate stating that such Restricted
Payment complies with the indenture and setting forth in reasonable detail the
basis upon which the required calculations were computed, which calculations
may be based upon RPP LLC's latest available internal quarterly financial
statements.

Limitation on Asset Sales

RPP LLC will not, and will not permit any of its Restricted Subsidiaries to,
consummate an Asset Sale unless:

(1) RPP LLC or the applicable Restricted Subsidiary, as the case may
be, receives consideration at the time of such Asset Sale at least
equal to the fair market value of the assets sold or otherwise
disposed of (as determined in good faith by RPP LLC's senior
management, or in the case of an Asset Sale in excess of $5.0
million, the Board of Managers of RPP LLC);

(2) at least 75% of the consideration received by RPP LLC or the
Restricted Subsidiary, as the case may be, from such Asset Sale
shall be in the form of:

. cash or Cash Equivalents,

. properties and assets to be owned by RPP LLC or any of its
Restricted Subsidiaries and used in a Permitted Business or

. Capital Stock in one or more Persons engaged in a Permitted
Business that are or thereby become Restricted Subsidiaries of
RPP LLC,

and, in each case, such consideration is received at the time of such
disposition; provided that the amount of

. any liabilities (as shown on RPP LLC's or such Restricted
Subsidiary's most recent balance sheet) of RPP LLC or any
Restricted Subsidiary (other than liabilities that are by their
terms subordinated to the notes) that are assumed by the
transferee of any such assets, and

. any notes or other securities received by RPP LLC or any such
Restricted Subsidiary from such transferee that are converted by
RPP LLC or such Restricted Subsidiary into cash within 180 days
after such Asset Sale (to the extent of the cash received) shall
be deemed to be cash for the purposes of this provision only; and

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(3) upon the consummation of an Asset Sale, RPP LLC will apply, or
cause such Restricted Subsidiary to apply, the Net Cash Proceeds
relating to such Asset Sale within 360 days of receipt thereof
either:

(a) to prepay any Senior Debt or any Indebtedness of a Restricted
Subsidiary and, in the case of any Senior Debt or Indebtedness
of a Restricted Subsidiary under any revolving credit facility,
effect a permanent reduction in the availability under such
revolving credit facility (or effect a permanent reduction in
availability under such revolving credit facility regardless of
the fact that no prepayment is required);

(b) to make an Investment

-- in properties and assets that replace the properties and
assets that were the subject of such Asset Sale,

-- in properties and assets that will be used in a Permitted
Business or
-- permitted by clause (1) of the definition of Permitted
Investments (collectively, "Replacement Assets"); or

Pending the final application of the Net Cash Proceeds, RPP LLC and its
Restricted Subsidiaries may temporarily reduce Indebtedness or otherwise
invest such Net Cash Proceeds in any manner not prohibited by the indenture.

On the 361st day after an Asset Sale or such earlier date, if any, as the
senior management or the Board of Directors of RPP LLC or of such Restricted
Subsidiary determines not to apply the Net Cash Proceeds relating to such
Asset Sale as set forth in clauses (3)(a), (3)(b) and (3)(c) of the next
preceding paragraph (each, a "Net Proceeds Offer Trigger Date"), such
aggregate amount of Net Cash Proceeds which have not been applied on or before
such Net Proceeds Offer Trigger Date as permitted in clauses (3)(a), (3)(b)
and (3)(c) of the next preceding paragraph (each a "Net Proceeds Offer
Amount") shall be applied by RPP LLC or such Restricted Subsidiary to make an
offer to purchase (the "Net Proceeds Offer") on a date (the "Net Proceeds
Offer Payment Date") not less than 30 nor more than 60 days following the
applicable Net Proceeds Offer Trigger Date, from all Holders on a pro rata
basis, that amount of Notes equal to the Net Proceeds Offer Amount at a price
equal to 100% of the principal amount of the Notes to be purchased, plus
accrued and unpaid interest thereon, if any, to the date of purchase;
provided, however, that if RPP LLC elects (or is required by the terms of any
Senior Subordinated Debt), such Net Proceeds Offer may be made ratably to
purchase the Notes and other Indebtedness of RPP LLC that ranks pari passu
with the Notes.

If at any time any non-cash consideration received by RPP LLC or any
Restricted Subsidiary of RPP LLC, as the case may be, in connection with any
Asset Sale is converted into or sold or otherwise disposed of for cash (other
than interest received with respect to any such non-cash consideration), then
such conversion or disposition shall be deemed to constitute an Asset Sale
hereunder as of the date of such conversion or disposition and the Net Cash
Proceeds thereof will be applied in accordance with this covenant.

The Issuers may defer the Net Proceeds Offer until there is an aggregate
unutilized Net Proceeds Offer Amount equal to or in excess of $10.0 million
resulting from one or more Asset Sales (at which time, the entire unutilized
Net Proceeds Offer Amount, and not just the amount in excess of $10.0 million,
shall be applied as required pursuant to the preceding paragraph).

In the event of the transfer of substantially all (but not all) of the
property and assets of RPP LLC and its Restricted Subsidiaries as an entirety
to a Person in a transaction permitted under "Merger, Consolidation and Sale
of Assets," which transaction does not constitute a Change of Control, the
successor corporation shall be deemed to have sold the properties and assets
of RPP LLC and its Restricted Subsidiaries not so transferred for purposes of
this covenant, and shall comply with the provisions of clause (3) of this
covenant with respect to

114

such deemed sale as if it were an Asset Sale. In addition, the fair market
value of such properties and assets of RPP LLC or its Restricted Subsidiaries
deemed to be sold shall be deemed to be Net Cash Proceeds for purposes of this
covenant.

Notice of each Net Proceeds Offer will be mailed to the record holders as
shown on the register of holders within 25 days following the Net Proceeds
Offer Trigger Date, with a copy to the trustee, and will comply with the
procedures set forth in the indenture. Upon receiving notice of the Net
Proceeds Offer, holders may elect to tender their notes in whole or in part in
integral multiples of $1,000 in exchange for cash. To the extent holders
properly tender notes in an amount exceeding the Net Proceeds Offer Amount,
notes of tendering holders will be purchased on a pro rata basis (based on
amounts tendered). To the extent that the aggregate amount of the notes
tendered pursuant to a Net Proceeds Offer is less than the Net Proceeds Offer
Amount, RPP LLC may use such excess Net Proceeds Offer Amount for general
corporate purposes or for any other purposes not prohibited by the indenture.
Upon completion of any such Net Proceeds Offer, the Net Proceeds Offer Amount
shall be reset at zero. A Net Proceeds Offer shall remain open for a period of
20 business days or such longer period as may be required by law.

The Issuers will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Asset
Sale" provisions of the Indenture, the Issuers shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached their obligations under the "Asset Sale" provisions of the indenture
by virtue thereof. The covenant and other provisions contained in the
indenture relating to the Issuers' obligation to make a Net Proceeds Offer may
be waived or modified with the written consent of the holders of a majority in
principal amount of the notes.

Limitations on Dividend and Other Payment Restrictions Affecting Subsidiaries

RPP LLC will not, and will not cause or permit any of its Restricted
Subsidiaries (other than a Restricted Subsidiary that has executed a
Subsidiary Guarantee) to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of RPP LLC to

(a) pay dividends or make any other distributions on or in respect of its
Capital Stock (it being understood that the priority of any preferred
stock in receiving dividends or liquidating distributions prior to
dividends or liquidating distributions being paid on common stock shall
not be deemed a restriction on the ability to make distributions on
Capital Stock);

(b) make loans or advances or to pay any Indebtedness or other obligation
owed to RPP LLC or any other Restricted Subsidiary of RPP LLC; or

(c) transfer any of its property or assets to RPP LLC or any other
Restricted Subsidiary of RPP LLC, except for such encumbrances or
restrictions existing under or by reason of:

(1) applicable law, rule, regulation, order, grant or governmental
permit;

(2) the indenture;

(3) the Credit Agreement;

(4) customary non-assignment provisions of any contract, license or any
lease of any Restricted Subsidiary of RPP LLC;

(5) any instrument governing Acquired Indebtedness, which encumbrance or
restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person or the properties or
assets of the Person so acquired;

115

(6) agreements existing or entered into on November 14, 2000 to the
extent and in the manner such agreements are in effect on November
14, 2000;

(7) purchase money obligations for property acquired in the ordinary
course of business or Capitalized Lease Obligations that impose
restrictions of the nature discussed in clause (c) above on the
property so acquired;

(8) contracts for the sale of assets, including, without limitation,
customary restrictions with respect to a Restricted Subsidiary of
RPP LLC pursuant to an agreement that has been entered into for the
sale or disposition of all or substantially all of the Capital Stock
or assets of such Restricted Subsidiary;

(9) secured Indebtedness otherwise permitted to be incurred pursuant to
the covenants described under "Limitation on Incurrence of
Additional Indebtedness" and "Limitation on Liens" that limit the
right of the debtor to dispose of the assets securing such
Indebtedness;

(10) customary provisions in joint venture agreements and other similar
agreements entered into in the ordinary course of business;

(11) customary net worth and restrictions on transfer, assignment or
subletting provisions contained in leases and other agreements
entered into by RPP LLC or any Restricted Subsidiary;

(12) any restriction in any agreement or instrument of a Receivables
Subsidiary governing a Qualified Receivables Transaction;

(13) an agreement governing Indebtedness incurred to Refinance the
Indebtedness issued, assumed or incurred pursuant to an agreement
referred to in clauses (1) through (12) above; provided, however,
that the provisions relating to such encumbrance or restriction
contained in any such Indebtedness, taken as a whole, are no less
favorable to RPP LLC in any material respect as determined by the
Board of Directors of RPP LLC in their reasonable and good faith
judgment than the provisions relating to such encumbrance or
restriction contained in agreements referred to in such clauses; or

(14) an agreement governing Indebtedness permitted to be incurred
pursuant to the "Limitation on Incurrence on Additional
Indebtedness" covenant; provided that the provisions relating to
such encumbrance or restriction contained in such Indebtedness,
taken as a whole, are no less favorable to RPP LLC in any material
respect as determined by the Board of Directors of RPP LLC in their
reasonable and good faith judgment than the provisions contained in
the Credit Agreement or in the indenture as in effect on November
14, 2000.

Limitation on the Issuance and Sale of Capital Stock of Restricted
Subsidiaries

RPP LLC will not sell, and will not permit any Restricted Subsidiary of RPP
LLC, directly or indirectly, to issue or sell, any shares of Capital Stock of
a Restricted Subsidiary (including options, warrants or other rights to
purchase shares of such Capital Stock) except:

(1) to RPP LLC or a Wholly Owned Restricted Subsidiary;

(2) issuance of director's qualifying shares or sales to foreign
nationals of shares of Capital Stock of Foreign Restricted
Subsidiaries of RPP LLC, to the extent required by applicable law;

(3) if, immediately after giving effect to such issuance or sale, such
Restricted Subsidiary would no longer constitute a Restricted
Subsidiary of RPP LLC 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) the sale or issuance of Common Stock that is Qualified Capital Stock
of Restricted Subsidiaries of RPP LLC, if the proceeds from such
issuance and sale are applied in accordance with the "Limitation on
Asset Sales" covenant.

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Limitation on Issuances of Guarantees by Restricted Subsidiaries

RPP LLC will not permit any of its Restricted Subsidiary, directly or
indirectly, to Guarantee any Indebtedness of RRP LLC which ranks equally with
or subordinate in right of payment to the Notes ("Guaranteed Indebtedness"),
unless (1) such Restricted Subsidiary simultaneously executes and delivers a
supplemental indenture to the indenture providing for a Guarantee (a
"Subsidiary Guarantee") of payment of the notes by such Restricted Subsidiary
and (2) such Restricted Subsidiary waives and will not in any manner
whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against RPP LLC or
any other Restricted Subsidiary as a result of any payment by such Restricted
Subsidiary under its Subsidiary Guarantee so long as any notes remain
outstanding; provided that this paragraph will not apply to any Guarantee of
any Restricted Subsidiary

(a) that existed at the time such Person became a Restricted Subsidiary and
was not incurred in connection with, or in contemplation of, such Person
becoming a Restricted Subsidiary or

(b) of Indebtedness incurred under the Credit Agreement or

(c) that is provided by a Foreign Restricted Subsidiary of Indebtedness
incurred by another Foreign Restricted Subsidiary.

If the Guaranteed Indebtedness is pari passu with the notes, then the
Guarantee of such Guaranteed Indebtedness shall be pari passu with, or
subordinated to, the Subsidiary Guarantee. If the Guaranteed Indebtedness is
subordinated to the notes, then the Guarantee of such Guaranteed Indebtedness
shall be subordinated to the Subsidiary Guarantee at least to the extent that
the Guaranteed Indebtedness is subordinated to the notes.

Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted
Subsidiary may provide by its terms that it shall be automatically and
unconditionally released and discharged upon

. any sale, exchange or transfer, to any Person not an Affiliate of RPP
LLC, of all of RPP LLC's and each Restricted Subsidiary's Capital Stock
in, or all or substantially all the assets of, such Restricted
Subsidiary (which sale, exchange or transfer is not prohibited by the
indenture),

. the release or discharge of the Guarantee, if any, which resulted in the
creation of such Subsidiary Guarantee, except a discharge or release by
or as a result of payment under such Guarantee or

. the designation of such Restricted Subsidiary as an Unrestricted
Subsidiary in accordance with the provisions of the Indenture.

Future Guarantors

If RPP LLC organizes or acquires any Domestic Restricted Subsidiary after
November 14, 2000 (each, a "New Domestic Restricted Subsidiary"), that, after
giving pro forma effect to the acquisition or organization of such New
Domestic Restricted Subsidiary or Subsidiaries (if applicable), together with
each other New Domestic Restricted Subsidiary, has consolidated assets or
Consolidated EBITDA which exceeds 5 percent of the total consolidated assets,
as of the end of the most recently completed fiscal quarter for which
financial statements are available, or total Consolidated EBITDA, for the most
recent preceding 4 fiscal quarters for which financial statements are
available, of RPP LLC and its Restricted Subsidiaries, RRP LLC will cause each
New Domestic Restricted Subsidiary to promptly execute and deliver to the
trustee a Subsidiary Guarantee.

Thereafter, such New Domestic Restricted Subsidiary shall be a Guarantor for
all purposes of the indenture.

As of November 14, 2000, which was the Closing Date, RPP LLC had no Domestic
Restricted Subsidiaries other than RPP Capital, a co-obligor on the notes.

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Limitations on Liens

RPP LLC will not, and will not cause or permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or permit or
suffer to exist any Liens of any kind against or upon any property or assets
of RPP LLC or any of its Restricted Subsidiaries whether owned on November 14,
2000 or acquired after November 14, 2000, or any proceeds therefrom, or assign
or otherwise convey any right to receive income or profits therefrom unless:

(1) in the case of Liens securing Indebtedness that is expressly
subordinate or junior in right of payment of the notes, the notes
are secured by a Lien on such property, assets or proceeds that is
senior in priority to such Liens; and

(2) in all other cases, the notes are equally and ratably secured,

except for the following Liens which are expressly permitted:

(a) Liens existing as of November 14, 2000;

(b) Liens securing Senior Debt, Guarantor Senior Debt and
Indebtedness (including any guarantee) incurred by a Restricted
Subsidiary under the Credit Agreement;

(d) Liens in favor of RPP LLC or a Wholly Owned Restricted Subsidiary
of RPP LLC on assets of any Restricted Subsidiary of RPP LLC;

(e) Liens securing Refinancing Indebtedness which is incurred to
Refinance any Indebtedness (including, without limitation,
Acquired Indebtedness) which has been secured by a Lien permitted
under the indenture and which has been incurred in accordance
with the provisions of the indenture; provided, however, that
such Liens:

(I) are no less favorable to holders of the notes and are not more
favorable to the lienholders with respect to such Liens than
the Liens in respect of the Indebtedness being Refinanced; and

(II) do not extend to or cover any property or assets of RPP LLC
or any of its Restricted Subsidiaries not securing the
Indebtedness so Refinanced;

(f) Liens securing Indebtedness of Restricted Subsidiaries of RPP LLC
so long as such Indebtedness is otherwise permitted under the
indenture; and

(g) Permitted Liens.

Prohibition on Incurrence of Senior Subordinated Debt

The Issuers and the Guarantors, if any, will not incur or suffer to exist
Indebtedness that is senior in right of payment to the notes or any Subsidiary
Guarantee and subordinate in right of payment by its terms to any other
Indebtedness of the Issuers or such Guarantor, as the case may be.

Merger, Consolidation and Sale of Assets

RPP LLC will not, in a single transaction or series of related transactions,
consolidate or merge with or into any Person, or sell, assign, transfer,
lease, convey or otherwise dispose of (or cause or permit any Restricted
Subsidiary of RPP LLC to sell, assign, transfer, lease, convey or otherwise
dispose of) all or substantially all of RPP LLC's assets (determined on a
consolidated basis for RPP LLC and RPP LLC's Restricted Subsidiaries) whether
as an entirety or substantially as an entirety to any Person unless:

(1) either (a) RPP LLC shall be the surviving or continuing corporation,
partnership, trust or limited liability company or (b) the Person
(if other than RPP LLC) formed by such consolidation or into which
RPP LLC is merged or the Person which acquires by sale, assignment,
transfer, lease, conveyance or other disposition the properties and
assets of RPP LLC and of RPP LLC's Restricted Subsidiaries
substantially as an entirety (the "Surviving Entity"):

118

(x) shall be a corporation, partnership, trust or limited liability
company organized and validly existing under the laws of the
United States or any State thereof or the District of Columbia;
and

(y) shall expressly assume, by supplemental indenture (in form and
substance satisfactory to the trustee), executed and delivered to
the trustee, the due and punctual payment of the principal of,
and premium, if any, and interest on all of the notes and the
performance of every covenant of the notes and the indenture on
the part of RPP LLC to be performed or observed;

(2) immediately after giving effect to such transaction on a pro forma
basis and the assumption contemplated by clause (1)(b)(y) above
(including giving effect to any Indebtedness and Acquired
Indebtedness incurred or anticipated to be incurred in connection
with or in respect of such transaction), RPP LLC or such Surviving
Entity, as the case may be, shall be able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant
to the "Limitation on Incurrence of Additional Indebtedness"
covenant;

(3) immediately before and immediately after giving effect to such
transaction on a pro forma basis and the assumption contemplated by
clause (1)(b)(y) above (including, without limitation, giving effect
to any Indebtedness and Acquired Indebtedness incurred or
anticipated to be incurred or repaid and any Lien granted or to be
released in connection with or in respect of the transaction), no
Default or Event of Default shall have occurred or be continuing;
and

(4) RPP LLC or the Surviving Entity, as the case may be, shall have
delivered to the trustee an Officers' Certificate and an opinion of
counsel, each stating that such consolidation, merger, sale,
assignment, transfer, lease, conveyance or other disposition and, if
a supplemental indenture is required in connection with such
transaction, such supplemental indenture comply with the applicable
provisions of the Indenture and that all conditions precedent in the
Indenture relating to such transaction have been satisfied.

Notwithstanding the foregoing, (a) the merger of RPP LLC with an Affiliate
incorporated solely for the purpose of reincorporating RPP LLC in another
jurisdiction shall be permitted and (b) the merger of any Restricted
Subsidiary of RPP LLC into RPP LLC or the transfer, lease, conveyance or other
disposition of all or substantially all of the assets of a Restricted
Subsidiary of RPP LLC to RPP LLC shall be permitted so long as RPP LLC
delivers to the Trustee an Officers' Certificate stating that the purpose of
such merger, transfer, lease, conveyance or other disposition is not to
consummate a transaction that would otherwise be prohibited by clause (3) of
this covenant.

For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of RPP LLC the Capital Stock of which constitutes all or
substantially all of the properties and assets of RPP LLC, shall be deemed to
be the transfer of all or substantially all of the properties and assets of
RPP LLC.

The indenture provides that upon any consolidation, combination or merger or
any transfer of all or substantially all of the assets of RPP LLC in
accordance with the foregoing, in which RPP LLC is not the continuing
corporation, the successor Person formed by such consolidation or into which
RPP LLC is merged or to which such conveyance, lease or transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
RPP LLC under the indenture and the notes with the same effect as if such
Surviving Entity had been named as such.

Each Guarantor (other than any Guarantor whose Subsidiary Guarantee is to be
released in accordance with the terms of such Subsidiary Guarantee and the
indenture in connection with any transaction complying with the provisions of
"--Limitation on Asset Sales") will not, and RPP LLC will not cause or permit
any Guarantor to, consolidate with or merge with or into any Person other than
RPP LLC or any other Guarantor unless:

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(1) the entity formed by or surviving any such consolidation or merger
(if other than the Guarantor) or to which such sale, lease,
conveyance or other disposition shall have been made is a
corporation organized and existing under the laws of the United
States, any State thereof, the District of Columbia thereof or the
jurisdiction in which such Guarantor is organized;

(2) such entity assumes by supplemental indenture all of the obligations
of the Guarantor on its Subsidiary Guarantee;

(3) immediately after giving effect to such transaction on a pro forma
basis, no Default or Event of Default shall have occurred and be
continuing; and

(4) immediately after giving effect to such transaction and the use of
any net proceeds therefrom on a pro forma basis, RPP LLC could
satisfy the provisions of clause (2) of the first paragraph of this
covenant.

Any merger or consolidation of a Guarantor with and into RPP LLC (with RPP
LLC being the surviving entity) or another Guarantor that is a Wholly Owned
Restricted Subsidiary of RPP LLC need only comply with clause (4) of the first
paragraph of this covenant.

Limitations on Transactions with Affiliates

(1) RPP LLC will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, enter into, or permit to exist any transaction or
series of related transactions (including, without limitation, the purchase,
sale, lease or exchange of any property or the rendering of any service) with,
or for the benefit of, any of its Affiliates (each an "Affiliate
Transaction"), other than

. Affiliate Transactions permitted under paragraph (2) below and

. Affiliate Transactions on terms that are no less favorable than those
that could reasonably have been obtained in a comparable transaction at
such time on an arm's-length basis from a Person that is not an Affiliate
of RPP LLC or such Restricted Subsidiary.

All Affiliate Transactions (and each series of related Affiliate Transactions
which are similar or part of a common plan) involving aggregate payments or
other property with a fair market value in excess of $2.0 million shall be
approved by the Board of Directors of RPP LLC or such Restricted Subsidiary,
as the case may be, such approval to be evidenced by a Board Resolution
stating that such Board of Directors has determined that such transaction
complies with the foregoing provisions. If RPP LLC or any Restricted
Subsidiary of RPP LLC enters into an Affiliate Transaction (or a series of
related Affiliate Transactions related to a common plan) that involves an
aggregate fair market value of more than $10.0 million, RPP LLC or such
Restricted Subsidiary, as the case may be, shall, prior to the consummation
thereof, obtain a favorable opinion as to the fairness of such transaction or
series of related transactions to RPP LLC or the relevant Restricted
Subsidiary, as the case may be, from a financial point of view, from an
Independent Financial Advisor and file the same with the trustee.

(2) The restrictions set forth in clause (1) shall not apply to:

(a) reasonable fees and compensation paid to and indemnity provided on
behalf of, officers, directors, employees or consultants of RPP LLC
or any Restricted Subsidiary of RPP LLC as determined in good faith
by RPP LLC's Board of Directors;

(b) transactions exclusively between or among RPP LLC and any of its
Restricted Subsidiaries or exclusively between or among such
Restricted Subsidiaries, provided such transactions are not otherwise
prohibited by the indenture;

(c) any agreement as in effect or entered into as of November 14, 2000 or
any amendment thereto or any transaction contemplated thereby
(including pursuant to any amendment thereto) in any replacement
agreement thereto so long as any such amendment or replacement
agreement is not more disadvantageous to the holders in any material
respect than the original agreement as in effect on November 14,
2000;

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(d) Restricted Payments and Permitted Investments permitted by the
Indenture;

(e) transactions in which RPP LLC or any of its Restricted Subsidiaries,
as the case may be, delivers to the trustee a letter from an
Independent Financial Advisor stating that such transaction is fair
to RPP LLC or such Restricted Subsidiary from a financial point of
view or meets the requirements of the first sentence of paragraph (1)
above;

(f) the issuance of securities or other payments, awards or grants in
cash, securities or otherwise pursuant to or the funding of,
employment arrangements, stock options and stock ownership plans or
similar employee benefit plans approved by Board of Directors of RPP
LLC in good faith and loans to employees of RPP LLC and its
Subsidiaries which are approved by the Board of Directors of RPP LLC
in good faith;

(g) the payment of all fees and expenses related to the Transactions;

(h) transactions with customers, clients, suppliers, or purchasers or
sellers of goods or services, in each case on ordinary business terms
and otherwise in compliance with the terms of the Indenture, which
are fair to RPP LLC or its Restricted Subsidiaries, in the reasonable
determination of the Board of Directors of RPP LLC or the senior
management thereof, or are on terms at least as favorable as could
reasonably have been obtained at such time from an unaffiliated
party;

(i) fees payable to Apollo pursuant to the Management Agreement;

(j) any contribution to the capital of RPP LLC by RPP Inc., or any sales
of Capital Stock of RPP LLC to RPP Inc.; and

(k) any tax sharing agreement or arrangement and payments pursuant
thereto among RPP LLC and its Subsidiaries and any other Person with
which RPP LLC or its Subsidiaries is required or permitted to file a
consolidated tax return or with which RPP LLC or any of its
Restricted Subsidiaries is or could be part of a consolidated group
for tax purposes in amounts not otherwise prohibited by the
indenture.

Reports to Holders

The indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any notes are outstanding, RPP LLC
will file a copy of the following information and reports with the Commission
for public availability (unless the Commission will not accept such a filing)
and will furnish to the holders of notes and to securities analysts and
prospective investors, upon their written request:

(1) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms
10-Q and 10-K if RPP LLC were required to file such Forms, including
a "Management's Discussion and Analysis of Financial Condition and
Results of Operations" that describes the financial condition and
results of operations of RPP LLC and its consolidated Subsidiaries
(it being understood that the first of such Forms required to be
filed by RPP LLC after November 14, 2000 will be a Form 10-Q for the
quarter ending September 30, 2000 and will be filed on or prior to
the 45th day after November 14, 2000) and, with respect to the
annual information only, a report thereon by RPP LLC's certified
independent accountants; and

(2) all current reports that would be required to be filed with the
Commission on Form 8-K if RPP LLC were required to file such
reports, in each case within the time periods specified in the
Commission's rules and regulations.

In addition, following the consummation of the exchange offer contemplated
by the Registration Rights Agreement, whether or not required by the rules and
regulations of the Commission, RPP LLC will file a copy of all such
information and reports with the Commission for public availability within the
time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available
to securities analysts and prospective investors upon written request to RPP
LLC.

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In addition, RPP LLC has agreed that, for so long as any notes remain
outstanding, it will furnish to the holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.

Events of Default

The following events are defined in the indenture as "Events of Default":

(1) the failure to pay interest on any notes when the same becomes due
and payable and the default continues for a period of 30 days
(whether or not such payment shall be prohibited by the subordination
provisions of the indenture);

(2) the failure to pay the principal on any notes, when such principal
becomes due and payable, at maturity, upon redemption or otherwise
(including the failure to make a payment to purchase notes tendered
pursuant to a Change of Control Offer or a Net Proceeds Offer)
(whether or not such payment shall be prohibited by the subordination
provisions of the indenture);

(3) a default by RPP LLC or any Restricted Subsidiary of RPP LLC in the
observance or performance of any other covenant or agreement
contained in the indenture which default continues for a period of 30
days after RPP LLC receives written notice specifying the default
(and demanding that such default be remedied) from the trustee or the
holders of at least 25% of the outstanding principal amount of the
notes;

(4) the failure to pay at final stated maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal
amount of any Indebtedness of RPP LLC or any Significant Subsidiary
of RPP LLC, or the acceleration of the final stated maturity of any
such Indebtedness by the holders thereof if the aggregate principal
amount of such Indebtedness, together with the principal amount of
any other such Indebtedness in default for failure to pay principal
at final stated maturity or which has been accelerated, exceeds $10.0
million or more at any time;

(5) one or more judgments in an aggregate amount in excess of $10.0
million (exclusive of amounts covered by insurance other than self-
insurance) shall have been rendered against RPP LLC or any of its
Significant Subsidiaries and such judgments remain undischarged,
unpaid or unstayed for a period of 60 days after such judgment or
judgments become final and non-appealable;

(6) certain events of bankruptcy affecting RPP LLC or any of its
Significant Subsidiaries; or

(7) any Subsidiary Guarantee made by a Significant Subsidiary ceases to
be in full force and effect or any Subsidiary Guarantee made by a
Significant Subsidiary is declared to be null and void and
unenforceable or any Subsidiary Guarantee made by a Significant
Subsidiary is found to be invalid or any such Guarantor denies its
liability under its Subsidiary Guarantee (other than by reason of
release of a Guarantor in accordance with the terms of the
Indenture).

If an Event of Default (other than an Event of Default specified in clause
(6) above with respect to RPP LLC) shall occur and be continuing, the trustee
or the holders of at least 25% in principal amount of outstanding notes may
declare the principal of and accrued interest on all the notes to be due and
payable by notice in writing to the Issuers and the trustee specifying the
respective Event of Default and that it is a "notice of acceleration" (the
"Acceleration Notice"), and the same

. shall become immediately due and payable or

. if there are any amounts outstanding under the Credit Agreement, it shall
become immediately due and payable upon the first to occur of an
acceleration under the Credit Agreement or five business days after
receipt by RPP LLC and the Representative under the Credit Agreement of
such Acceleration Notice but only if such Event of Default is then
continuing.

If an Event of Default specified in clause (6) above with respect to RPP LLC
occurs and is continuing, then all unpaid principal of, and premium, if any,
and accrued and unpaid interest on all of the outstanding notes shall
automatically become and be immediately due and payable without any
declaration or other act on the part of the trustee or any holder.

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The indenture provides that, at any time after a declaration of acceleration
with respect to the notes as described in the preceding paragraph, the holders
of a majority in principal amount of the notes may rescind and cancel such
declaration and its consequences:

(1) if the rescission would not conflict with any judgment or decree;

(2) if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely
because of the acceleration;

(3) to the extent the payment of such interest is lawful, interest on
overdue installments of interest and overdue principal, which has
become due otherwise than by such declaration of acceleration, has
been paid;

(4) if RPP LLC has paid the trustee its reasonable compensation and
reimbursed the trustee for its expenses, disbursements and advances;
and

(5) in the event of the cure or waiver of an Event of Default of the type
described in clause (6) of the description above of Events of
Default, the trustee shall have received an officers' certificate and
an opinion of counsel that such Event of Default has been cured or
waived.

No such rescission will affect any subsequent Default or Event of Default or
impair any right consequent thereto.

The holders of a majority in principal amount of the notes may waive any
existing Default or Event of Default under the indenture, and its
consequences, except a Default in the payment of the principal of or interest
on any notes.

Holders of the notes may not enforce the indenture or the notes except as
provided in the indenture and under the TIA. Subject to the provisions of the
indenture relating to the duties of the trustee, the trustee is under no
obligation to exercise any of its rights or powers under the indenture at the
request, order or direction of any of the holders, unless such holders have
offered to the trustee reasonable indemnity. Subject to all provisions of the
indenture and applicable law, the holders of a majority in aggregate principal
amount of the then outstanding Notes have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the trustee
or exercising any trust or power conferred on the trustee.

Under the indenture, RPP LLC is required to provide an officers' certificate
to the trustee

-- promptly upon any such officer obtaining knowledge of any Default or
Event of Default describing such Default or Event of Default and the
status thereof, and

-- annually, describing whether or not they know of any Default or Event of
Default.

No Personal Liability of Directors, Officers, Employees, Members and
Stockholders

No Affiliate, director, officer, employee, limited liability company member
or stockholder of RPP LLC or any Subsidiary, as such, shall have any liability
for any obligations of the Issuers under the notes or the indenture or any
Subsidiary Guarantee or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each holder of notes by accepting a
note waives and releases all such liability. The waiver and release were part
of the consideration for issuance of the notes.

Legal Defeasance and Covenant Defeasance

The Issuers may at any time elect to have their obligations and the
obligations of any Guarantors discharged with respect to the outstanding notes
("Legal Defeasance"). Such Legal Defeasance means that the Issuers will be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding notes, except for:

(1) the rights of holders to receive payments in respect of the principal
of, premium, if any, and interest on the notes when such payment are
due;

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(2) RPP LLC's obligations with respect to the notes concerning issuing
temporary notes, registration of notes, mutilated, destroyed, lost or
stolen notes and the maintenance of an office or agency for payments;

(3) the rights, powers, trust, duties and immunities of the trustee and
RPP LLC's obligations in connection therewith; and

(4) the Legal Defeasance provisions of the indenture.

In addition, the Issuers may at any time elect to have their obligations
released with respect to certain covenants that are described in the indenture
("Covenant Defeasance"). Any omission to comply with such obligations would
then not constitute a Default or Event of Default with respect to the notes.
If Covenant Defeasance occurs, RPP LLC's failure to perform these covenants
will no longer constitute an Event of Default with respect to the notes.

In order to exercise either Legal Defeasance or Covenant Defeasance:

(1) the Issuers must irrevocably deposit with the trustee, in trust, for
the benefit of the holders cash in U.S. dollars, non-callable U.S.
government obligations, or a combination thereof, in such amounts as
will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if
any, and interest on the Notes on the stated date for payment thereof
or on the applicable redemption date, as the case may be;

(2) in the case of Legal Defeasance, the Issuers must deliver to the
trustee an opinion of counsel in the United States reasonably
acceptable to the trustee confirming that:

(a) the Issuers have received from, or there has been published by,
the Internal Revenue Service a ruling; or

(b) since the date of the execution of the Indenture, there has been
a change in the applicable federal income tax law,

in either case to the effect that, and based thereon such opinion of
counsel shall confirm that, the holders will not recognize income, gain or
loss for federal income tax purposes as a result of such Legal Defeasance
and will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Legal
Defeasance had not occurred;

(3) in the case of Covenant Defeasance, the Issuers must deliver to the
trustee an opinion of counsel in the United States reasonably
acceptable to the trustee confirming that the holders will not
recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not
occurred;

(4) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the
period ending on the 91st day after the date of deposit;

(5) such Legal Defeasance or Covenant Defeasance must not result in a
breach or violation of, or constitute a default under the indenture,
the Credit Agreement or any other material agreement or instrument to
which RPP LLC or any of its Subsidiaries is a party or by which RPP
LLC or any of its Subsidiaries is bound;

(6) the Issuers must deliver to the trustee an officers' certificate
stating that the deposit was not made by the Issuers with the intent
of preferring the holders over any other creditors of the Issuers or
with the intent of defeating, hindering, delaying or defrauding any
other creditors of the Issuers or others;

(7) RPP LLC must deliver to the trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent to the
Legal Defeasance or the Covenant Defeasance was complied with;

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(8) RPP LLC must deliver to the trustee an opinion of counsel to the
effect that if no intervening bankruptcy of RPP LLC occurs between
the date of deposit and the 91st day following the date of the
deposit and no holder is an insider of RPP LLC, then after the 91st
day following the date of the deposit the trust funds will not be
subject to the effect of Section 547 of the United States Bankruptcy
Code or Section 15 of the New York Debtor and Creditor Law; and

(9) certain other customary conditions precedent are satisfied.

However, the opinion of counsel required by clause (2) above is not required
if all notes not theretofore delivered to the trustee for cancellation

. have become due and payable,

. will become due and payable on the maturity date within one year or

. are to be called for redemption within one year under arrangements
satisfactory to the trustee for the giving of notice of redemption by the
trustee in the name, and at the expense, of RPP LLC.

Satisfaction and Discharge

The indenture will be discharged when:

(1) either (a) all the notes theretofore authenticated and delivered
(except lost, stolen or destroyed notes which have been replaced or
paid and notes for whose payment money has theretofore been deposited
in trust or segregated and held in trust by RPP LLC and thereafter
repaid to RPP LLC or discharged from such trust) have been delivered
to the trustee for cancellation or (b) all notes not theretofore
delivered to the trustee for cancellation have become due and payable
upon redemption or maturity and RPP LLC has irrevocably deposited or
caused to be deposited with the trustee funds in an amount sufficient
to pay and discharge the entire Indebtedness on the notes not
theretofore delivered to the trustee for cancellation, for principal
of, premium, if any, and interest on the notes to the date of deposit
together with irrevocable instructions from RPP LLC directing the
trustee to apply such funds to the payment thereof at maturity or
redemption, as the case may be;

(2) RPP LLC has paid all other sums payable under the indenture by RPP
LLC; and

(3) RPP LLC has delivered to the trustee an officers' certificate and an
opinion of counsel stating that all conditions precedent under the
indenture relating to the satisfaction and discharge of the indenture
have been complied with.

When the indenture is discharged, it ceases to be of further effect except
for surviving rights of registration or transfer or exchange of the notes.

Modification of the Indenture

From time to time, the Issuers, any Guarantors and the trustee, without the
consent of the holders, may amend the indenture to cure ambiguities, defects
or inconsistencies, and to add guaranties to secure the notes or similar
provisions, so long as such change does not, in the good faith determination
of the Board of Directors of RPP LLC, adversely affect the rights of any of
the Holders in any material respect. In making its determination, the Board of
Directors of RPP LLC may rely on such evidence as it deems appropriate. Other
modifications and amendments of the Indenture may be made with the consent of
the holders of a majority in principal amount of the then outstanding notes
issued under the indenture, except that the consent of each holder affected
thereby is required to:

(1) reduce the amount of notes whose holders must consent to an
amendment;

(2) reduce the rate of or change or have the effect of changing the time
for payment of interest, including defaulted interest, on any notes;

125

(3) reduce the principal of or change or have the effect of changing the
fixed maturity of any notes, or change the date on which any notes
may be subject to redemption or reduce the redemption price therefor
as described under "--Redemption";

(4) make any notes payable in money other than that stated in the notes;

(5) make any changes in provisions of the indenture protecting the right
of each holder to receive payment of principal of and interest on
such note on or after the due date thereof or to bring suit to
enforce such payment, or permitting holders of a majority in
principal amount of notes to waive Defaults or Events of Default;

(6) modify or change any provision of the indenture or the related
definitions affecting the subordination or ranking of the notes or
any Subsidiary Guarantee in a manner which adversely affects the
holders;

(7) make any change in the foregoing amendment provisions, which require
each holder's consent, or in the waiver provisions; or

(8) release any Guarantor that is a Significant Subsidiary from any of
its obligations under its Subsidiary Guarantee or the Indenture other
than in accordance with the terms of the indenture.

Governing Law

The Indenture, the notes and any Subsidiary Guarantee will be governed by,
and construed in accordance with, the laws of the State of New York but
without giving effect to applicable principles of conflicts of law to the
extent that the application of the law of another jurisdiction would be
required thereby.

The Trustee

United States Trust Company of New York is the trustee under the indenture
and has been appointed to act as registrar and paying agent with respect to
the notes. The indenture provides that, except during the continuance of an
Event of Default, the trustee will perform only such duties as are
specifically set forth in the indenture. During the existence of an Event of
Default, the trustee will exercise such rights and powers vested in it by the
indenture, and issue the same degree of care and skill in its exercise as a
prudent man would exercise or use under the circumstances in the conduct of
his own affairs.

If the trustee becomes a creditor of the Issuers, the indenture and the
provisions of the TIA limit the rights of the trustee to obtain payments of
its claims or to realize on certain property received in respect of its
claims. Subject to the TIA, the trustee will be permitted to engage in other
transactions; however, if the trustee acquires any conflicting interest as
described in the TIA, 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. You should read the indenture for the full definition of all such
terms and any other terms used herein for which no definition is provided.

"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries

(1) existing at the time such Person becomes a Restricted Subsidiary of RPP
LLC or at the time it merges or consolidates with RPP LLC or any of its
Restricted Subsidiaries or

(2) Assumed in connection with the acquisition of assets from such Person

in each case, not incurred by such Person in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary of RPP LLC or
such acquisition, merger or consolidation.

"Affiliate" of any specified Person means any other Person who directly or
indirectly through one or more intermediaries controls, or is controlled by,
or is under common control with, such specified Person.

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The term "control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"Controlling" and "controlled" shall have correlative meanings. For purposes
of the Indenture, the Royal Dutch/Shell Group of Companies and their
Affiliates are not deemed Affiliates of RPP LLC so long as they beneficially
own securities representing less than thirty-five percent of the voting power
of RPP LLC or RPP Inc; provided that Apollo beneficially owns securities
representing a greater percentage of the voting power of RPP LLC or RPP Inc.
than the Royal Dutch/Shell Group of Companies and their Affiliates.

"Apollo" means Apollo Management IV, L.P. and its Affiliates.

"Applicable Premium" means, with respect to a note, the greater of

(1) 1.0% of the then outstanding principal amount of such note and

(2) (a) the present value of all remaining required interest and
principal payments due on such note and all premium payments
relating to the note assuming a redemption date of
November 15, 2005, computed using a discount rate equal to the
Treasury Rate plus 50 basis points minus

(b) the then outstanding principal amount of such note minus

"Asset Acquisition" means:

(1) an Investment by RPP LLC or any Restricted Subsidiary of RPP LLC in any
other Person pursuant to which such Person shall become a Restricted
Subsidiary of RPP LLC or any Restricted Subsidiary of RPP LLC, or shall
be merged with or into or consolidated with RPP LLC or any Restricted
Subsidiary of RPP LLC; or

(2) the acquisition by RPP LLC or any Restricted Subsidiary of RPP LLC of
the assets of any Person (other than a Restricted Subsidiary of RPP
LLC) which constitute all or substantially all of the assets of such
Person or comprise any division or line of business of such Person or
any other properties or assets of such Person other than in the
ordinary course of business.

"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary
course of business), assignment or other transfer for value by RPP LLC or any
of its Restricted Subsidiaries, including any Sale and Leaseback Transaction,
to any Person other than RPP LLC or a Wholly Owned Restricted Subsidiary of
RPP LLC of

. any Capital Stock of any Restricted Subsidiary of RPP LLC (other than
directors' qualifying shares); or

. any other property or assets of RPP LLC or any Restricted Subsidiary of
RPP LLC other than in the ordinary course of business

Notwithstanding the preceding, the following items shall not be deemed
Asset Sales:

(1) a transaction or series of related transactions for which RPP LLC
or its Restricted Subsidiaries receive aggregate consideration of
less than $3.0 million;

(2) the sale or exchange of equipment in connection with the purchase
or other acquisition of other equipment, in each case used in the
business of RPP LLC and its Restricted Subsidiaries;

(3) the sale, lease, conveyance, disposition or other transfer of all
or substantially all of the assets of RPP LLC that is permitted
under "Merger, Consolidation and Sale of Assets";

(4) disposals of equipment in connection with the reinvestment in or
the replacement of its equipment and disposals of worn-out or
obsolete equipment, in each case in the ordinary course of
business of RPP LLC or its Restricted Subsidiaries;

(5) the sale of accounts receivable pursuant to a Qualified
Receivable Transaction;

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(6) sales or grants of licenses to use RPP LLC's or any Restricted
Subsidiary's patents, trade secrets, know-how and technology to
the extent that such license does not prohibit the licensor from
using the patent, trade secret, know-how or technology;

(7) the disposition of any Capital Stock or other ownership interest
in or assets or property of an Unrestricted Subsidiary;

(8) Capacity Arrangements;

(9) any Restricted Payment permitted by the covenant described under
"Limitations on Restricted Payments" or that constitutes a
Permitted Investment; and

(10) one or more Sale and Leaseback Transactions for which RPP LLC or
any Restricted Subsidiary of RPP LLC receives aggregate
consideration from them of less than $15.0 million.

"Beneficial Owner" has the meaning assigned to such term in rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership or any particular "person" (as such term is used in Section 13(d)(3)
of the Exchange Act), such "person" will be deemed to have beneficial
ownership of all securities that such "Person" has the right to acquire,
whether such right is currently exercisable or is exercisable only upon the
occurrence of a subsequent condition, regardless of when such right may be
exercised.

"Board of Directors" of any Person means the board of directors or
equivalent governing board of such Person or any duly authorized committee
thereof.

"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of any Person to have been duly adopted by the Board
of Directors of such Person and to be in full force and effect on the date of
such certification, and delivered to the trustee.

"Capacity Arrangements" means any agreement or arrangement involving,
relating to or otherwise facilitating, (a) requirement contracts, (b) tolling
arrangements or (c) the reservation or presale of production capacity of RPP
LLC or its Restricted Subsidiaries by one or more third parties.

"Capitalized Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability of a Person under a capital lease
that would at that time be required to be capitalized on a balance sheet in
accordance with GAAP, with the stated maturity being 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 by prepaid by the lessee without payment of a
penalty.

"Capital Stock" means:

(1) in the case of a corporation, any and all shares, interests,
rights to purchase, warrants, options, participations or other
equivalents (however designated and whether or not voting) of
corporate stock; and

(2) with respect to any other Person, any and all partnership,
membership, limited liability interests or other equity interests
of such Person.

"Cash Equivalents" means:

(1) U.S. dollars, and in the case of any Foreign Restricted
Subsidiaries of RPP LLC, Euros and such local currencies held by
them from time to time in the ordinary course of business;

(2) marketable direct obligations issued by, or unconditionally
guaranteed by, the United States, Germany, Spain, Great Britain
and The Netherlands or issued by any agency of those countries and
backed by the full faith and credit of the respective country, in
each case maturing within one year from the date of acquisition;

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(3) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or
any public instrumentality maturing within one year from the date of
acquisition and, at the time of acquisition, having one of the two
highest ratings obtainable from either Standard & Poor's Ratings
Services ("S&P") or Moody's Investors Service, Inc. ("Moody's") or,
if Moody's and S&P cease to exist, any other nationally recognized
statistical rating organization designated by the Board of Directors
of RPP LLC;

(4) commercial paper maturing no more than one year from the date it is
created and, at the time of acquisition, having a rating of at least
A-1 from S&P or at least P-1 from Moody's or, if Moody's and S&P
cease to exist, the equivalent from any other nationally recognized
statistical rating organization designated by the Board of Directors
of RPP LLC;

(5) time deposits, certificates of deposit or bankers' acceptances
maturing within one year from the date of acquisition issued by any
bank organized under the laws of the United States of America or any
state or the District of Columbia or any foreign jurisdiction having
at the date of acquisition combined capital and surplus of at least
$250.0 million;

(6) repurchase obligations with a term of not more than thirty days for
underlying securities of the types described in clause (2) above
entered into with any bank meeting the qualifications specified in
clause (5) above;

(7) investments in money market funds, which invest substantially all
their assets in securities of the types described in clauses (2)
through (6) above; and

(8) overnight deposits and demand deposit accounts (in the respective
local currencies) maintained in the ordinary course of business.

"Change of Control" means the occurrence of one or more of the following:

(1) any sale, lease, exchange, convenance, disposition or other transfer,
in one or a series of related transactions, of all or substantially
all of the assets of RPP Inc. or RPP LLC to any Person or group of
related Persons for purposes of Section 13(d) of the Exchange Act (a
"Group"), together with any Affiliates of such Person, other than to
the Permitted Holders;

(2) any approval, adoption or initiating of a plan or proposal for the
liquidation or dissolution of RPP Inc. or RPP LLC;

(3) any Person or Group, together with any Affiliates, other than the
Permitted Holders, shall become the Beneficial Owner or owner of
record, by way of merger, consolidation or other business
combinations or by purchase in one transaction or a series of related
transactions, of shares representing more than 50% of the aggregate
ordinary voting power represented by the issued and outstanding
Capital Stock of RPP Inc. or RPP LLC;

(4) any Person or Group, together with any Affiliates or Related Persons
thereof, other than Permitted Holders, shall succeed in having a
sufficient number of its nominees elected in the Board of Directors
of RPP Inc. or RPP LLC such that such nominees, when added to any
existing director remaining on the Board of Directors of RPP LLC
after such election who was a nominee of or is an Affiliate or
Related Person of such Person or Group, will constitute a majority of
the Board of Directors of RPP LLC; or

(5) RPP Inc. shall cease to own, directly or indirectly, a majority of
the Capital Stock of RPP LLC.

"Commodity Agreement" means any commodity futures contract, commodity option
or other similar agreement or arrangement entered into by RPP LLC or any
Restricted Subsidiary of RPP LLC designed to protect RPP LLC or any of its
Restricted Subsidiaries against fluctuations in the price of the commodities
at the time used in the ordinary course of business of RPP LCC or any of its
Restricted Subsidiaries.

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"Common Stock" means any and all shares, interests or other participations
in, and other equivalents (however designated and whether voting or non-
voting) of such Person's common stock, whether outstanding on the Issue Date
or issued after the Issue Date, including all series and classes of such
common stock.

"Consolidated EBITDA" means, with respect to any Person, for any period, the
sum (without duplication) of:

(1) Consolidated Net Income; and

(2) to the extent Consolidated Net Income has been reduced by the
following,

(a) all income taxes of such Person and its Restricted Subsidiaries
paid or accrued in accordance with GAAP for such period (other than
income taxes attributable to extraordinary, unusual or nonrecurring
gains or losses),

(b) Consolidated Interest Expense, and

all as determined on a consolidated basis for such Person and its Restricted
Subsidiaries in accordance with GAAP as applicable.

"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters for which financial statements are available (the "Four
Quarter Period") ending on or prior to the date of the transaction giving rise
to the need to calculate the Consolidated Fixed Charge Coverage Ratio (the
"Transaction Date") to Consolidated Fixed Charges of such Person for the Four
Quarter Period. In addition to and without limitation of the foregoing, for
purposes of this definition, "Consolidated EBITDA" and "Consolidated Fixed
Charges" shall be calculated after giving effect on a pro forma basis
(consistent with the provisions below) for the period of such calculation to:

(1) the incurrence or repayment of any Indebtedness of such Person or any
of its Restricted Subsidiaries (and the application of the proceeds
thereof) giving rise to the need to make such calculation and any
incurrence or repayment of other Indebtedness (and the application of
the proceeds thereof), other than the incurrence or repayment of
Indebtedness in the ordinary course of business for working capital
purposes pursuant to working capital facilities, occurring during the
Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if
such incurrence or repayment, as the case may be (and the application
of the proceeds thereof), occurred on the first day of the Four
Quarter Period;

(2) any asset sales or other dispositions or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to
the need to make such calculation as a result of such Person or one
of its Restricted Subsidiaries (including any Person who becomes a
Restricted Subsidiary as a result of the Asset Acquisition)
incurring, assuming or otherwise being liable for Acquired
Indebtedness and also including any Consolidated EBITDA (including
any pro forma expense and cost reductions, adjustments and other
operating improvements or synergies both achieved by such Person
during such period and to be achieved by such Person and with respect
to the acquired assets, all as determined in good faith by a
responsible financial or accounting officer of RPP LLC attributable
to the assets which are the subject of the Asset Acquisition or asset
sale or other dispositions during the Four Quarter Period) occurring
during the Four Quarter Period or at any time subsequent to the last
day of the Four Quarter Period and on or prior to the Transaction
Date, as if such asset sale or other dispositions or Asset
Acquisition (including the incurrence, assumption or liability for
any such Acquired Indebtedness) occurred on the first day of the Four
Quarter Period. If such Person or any of its Restricted Subsidiaries
directly or indirectly guarantees Indebtedness of a third Person, the
preceding sentence shall give effect to the incurrence of such
guaranteed Indebtedness as

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if such Person or any Restricted Subsidiary of such Person had
directly incurred or otherwise assumed such guaranteed Indebtedness;
and

(3) all adjustments used in connection with the calculation of pro forma
EBITDA and Adjusted EBITDA as set forth in the Offering Memorandum to
the extent such adjustments are not fully reflected in such Four
Quarter Period and continue to be applicable.

Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated
Fixed Charge Coverage Ratio,"

(1) interest on outstanding Indebtedness determined on a fluctuating
basis as of the Transaction Date and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate
per annum equal to the rate of interest on such Indebtedness in
effect on the Transaction Date; and

(2) notwithstanding clause (1) above, interest on Indebtedness determined
on a fluctuating basis, to the extent such interest is covered by
agreements relating to Interest Swap Obligations or Currency
Agreements, shall be deemed to accrue at the rate per annum resulting
after giving effect to the operation of such agreements.

"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of:

(1) Consolidated Interest Expense (excluding amortization or write-off of
deferred financing costs), plus

(2) the product of (x) the amount of all dividend payments on any series
of Preferred Stock of such Person or its Restricted Subsidiaries
(other than dividends paid in Qualified Capital Stock) paid, accrued
or scheduled to be paid or accrued during such period times (y) a
fraction, the numerator of which is one and the denominator of which
is one minus the then current effective consolidated federal, state
and local income tax rate of such Person, expressed as a decimal.

"Consolidated Indebtedness" shall mean, at any time, the sum of (without
duplication) all Indebtedness of RPP LLC and its Restricted Subsidiaries
exclusive of the items referred to in clauses (6) and (8) of the definition of
Indebtedness.

"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication:

(1) the aggregate of the interest expense of such Person and its
Restricted Subsidiaries for such period determined on a consolidated
basis in accordance with GAAP, including, without limitation,

(a) any amortization of debt discount and amortization or write-off
of deferred financing costs (including the amortization of costs
relating to interest rate caps or other similar agreements),

(b) the net costs under Interest Swap Obligations,

(d) the interest portion of any deferred payment obligation; and

(2) the interest component of Capitalized Lease Obligations paid, accrued
and/or scheduled to be paid or accrued by such Person and its
Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP, minus interest income for
such period.

"Consolidated Net Income" means, with respect to any Person, for any period,
the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that the following shall be excluded:

(1) after-tax gains or losses from Asset Sales (without regard to the
$3.0 million limitation set forth in the definition thereof) or
abandonments or reserves relating thereto;

(2) after-tax items which are extraordinary gains or losses or
nonrecurring gains, losses, expenses or income (including, without
limitation, expenses related to the Transactions, severance and
transition expenses incurred as a direct result of the transition of
RPP LLC to an independent operating company in connection with the
Transactions provided that with respect to any non-

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recurring item or transition expense, RPP LLC delivers to the trustee
an Officer's Certificate specifying and quantifying such item or
expense and states that such item or expense is a general non-
recurring item or specifically a severance or transition expense, as
the case may be);

(3) the net income of any Person acquired in a "pooling of interests"
transaction accrued before the date it becomes a Restricted Subsidiary
of the referent Person or is merged or consolidated with the referent
Person or any Restricted Subsidiary of the referent Person;

(4) the net income (but not loss) of any Restricted Subsidiary of the
referent Person to the extent that the declaration of dividends or
similar distributions by that Restricted Subsidiary of that income is
prohibited by contract, operation of law or otherwise;

(5) the net income of any Person, other than a Restricted Subsidiary of
the referent Person, except to the extent of cash dividends or
distributions paid to the referent Person or to a Restricted
Subsidiary of the referent Person by such Person;

(6) the establishment of accruals and reserves within twelve months after
the Issue Date that are required to be so established in accordance
with GAAP;

(7) income or loss attributable to discontinued operations (including,
without limitation, operations disposed of during such period whether
or not such operations were classified as discontinued); and

(8) 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 of the successor corporation prior to such consolidation,
merger or transfer of assets.

"Consolidated Non-cash Charges" means, with respect to any Person, for any
period, the aggregate depreciation, amortization and other non-cash expenses
(solely for the purpose of determining compliance with the "Limitation on
Restricted Payments" covenant, excluding any non-cash items for which a future
cash payment will be required and for which an accrual or reserve is required
by GAAP to be made) of such Person and its Restricted Subsidiaries reducing
Consolidated Net Income of such Person and, its Restricted Subsidiaries for
such period, determined on a consolidated basis in accordance with GAAP.

"Credit Agreement" means the Credit Agreement dated as of the Issue Date,
among RPP LLC, RPP Capital, one or more other Subsidiaries of RPP LCC, the
lenders party to the Credit Agreement in their capacities as lenders and
Morgan Stanley Senior Funding, Inc., as administrative agent, together with
the related documents (including, without limitation, any guarantee agreements
and security documents), in each case as such agreements may be amended
(including any amendment and restatement), supplemented or otherwise modified
from time to time, including any agreement extending the maturity of,
refinancing, replacing or otherwise restructuring (including increasing the
amount of available borrowings thereunder or adding Restricted Subsidiaries of
RPP LLC as additional borrowers or guarantors thereunder) all or any portion
of the Indebtedness under such agreement or any successor or replacement
agreement and whether by the same or any other agent, lender or group of
lenders.

"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect RPP
LLC or any Restricted Subsidiary of RPP LLC against fluctuations in currency
values.

"Default" means an event that is, or with the passage of time or the giving
of notice or both would be, an Event of Default.

"Designated Senior Debt" means:

(1) Indebtedness under or in respect of the Credit Agreement; and

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(2) any other Senior Debt the principal amount of which is at least $25.0
million and that RPP LLC has designated as "Designated Senior Debt".

"Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable at the option of the holder thereof), or upon the
happening of any event (other than an event which would constitute a Change of
Control or an Asset Sale), matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is redeemable at the sole option of
the holder thereof (except, in each case, upon the occurrence of a Change of
Control or an Asset Sale) on or prior to the final maturity date of the notes;
provided that any class of Capital Stock of such Person that by its terms
authorizes such Person to satisfy its obligations thereunder by delivery of
Qualified Capital Stock shall not be deemed Disqualified Stock.

"Domestic Restricted Subsidiary" means any Restricted Subsidiary of RPP LLC
incorporated under the laws of the United States, any State or the District of
Columbia.

"Euros" means the single currency of the participating member states as
described in any legislative measures of the European Union for the
introduction of, change over to, or operation of, a single or unified European
currency.

"Excess Cash Flow" has the same meaning specified under "Adjusted Excess
Cash Flow" in the Credit Agreement as in effect on the Issue Date, without
giving effect to any amendment.

"Exchange Act" means the Securities Exchange Act of 1934, as amended, or any
successor statutes.

"Excluded Contribution" means Net Cash Proceeds received by RPP LLC from (a)
contributions to its common equity capital and (b) the sale of Qualified
Capital Stock of RPP LLC, in each case designated as Excluded Contributions
pursuant to an Officers' Certificate executed on the date such capital
contributions are made or the date such Qualified Capital Stock is sold, as
the case may be, which are excluded from the calculation set forth in clause
(3) under "--Certain Covenants--Limitation on Restricted Payments."

"fair market value" means with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for
cash, between a willing seller and a willing and able buyer, neither of whom
is under undue pressure or compulsion to complete the transaction. Fair market
value shall be determined conclusively by the Board of Directors of RPP LLC
acting reasonably and in good faith and shall be evidenced by a Board
Resolution of the Board of Directors of RPP LLC delivered to the trustee.

"Foreign Restricted Subsidiary" means any Restricted Subsidiary of RPP LLC
incorporated in any jurisdiction outside of the United States.

"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.

"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person,
including any obligation, direct or indirect, contingent or otherwise, of such
Person

(1) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness of such other Person (whether arising
by virtue of partnership arrangements, or by agreements to keep-well,
to purchase assets, goods, securities or services (unless such
purchase arrangements are on arm's-length terms and are entered into
in the ordinary course of business) to take-or-pay, or to maintain
financial statement conditions or otherwise), or

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(2) entered into for purposes of assuring in any other manner the obligee
of such Indebtedness of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part).

Notwithstanding the preceding, "Guarantee" does not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.

"Guarantor" means:

(1) each New Domestic Restricted Subsidiary required to execute and
deliver a Subsidiary Guarantee pursuant to the "Future Guarantors"
covenant; and

(2) each of RPP LLC's Restricted Subsidiaries that in the future executes
a supplemental indenture, in which such Restricted Subsidiary agrees
to be bound by the terms of the indenture as a Guarantor,

provided that any Person constituting a Guarantor as described above shall
cease to constitute a Guarantor when its respective Subsidiary Guarantee is
released in accordance with the terms of the indenture.

"Guarantor Senior Debt" means, with respect to any Guarantor, the principal
of, premium, if any, and interest (including any interest accruing subsequent
to the filing of a petition of bankruptcy at the rate provided for in the
documentation with respect thereto, whether or not such interest is an allowed
claim under applicable law) on any Indebtedness of a Guarantor, whether
outstanding on the Issue Date or created, incurred or assumed after the Issue
Date, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the Indebtedness or pursuant to which the Indebtedness
is outstanding expressly provides that such Indebtedness shall not be senior
in right of payment to the Subsidiary Guarantee of such Guarantor. Without
limiting the generality of the foregoing, "Guarantor Senior Debt" shall also
include the principal of, premium, if any, interest (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on, and all other amounts
owing by any Guarantor in respect of,

. all monetary obligations of every nature of a Guarantor under, or with
respect to, the Credit Agreement, including, without limitation,
obligations to pay principal and interest, reimbursement obligations
under letters of credit, fees, expenses and indemnities (including
guarantees thereof);

. all Interest Swap Obligations (including guarantees thereof); and

. all obligations under Currency Agreements (including guarantees thereof),
in each case whether outstanding on or incurred after the Issue Date.

Notwithstanding the preceding, "Guarantor Senior Debt" shall not include:

(1) any Indebtedness of such Guarantor to a Restricted Subsidiary of such
Guarantor;

(2) Indebtedness to, or guaranteed on behalf of, any director, officer or
employee of such Guarantor or any director, officer or employee of
any Subsidiary of such Guarantor (including, without limitation,
amounts owed for compensation);

(3) Indebtedness to trade creditors and other amounts incurred in
connection with obtaining goods, materials or services (other than if
incurred under the Credit Agreement);

(4) Indebtedness represented by Disqualified Capital Stock;

(5) any liability for federal, state, local or other taxes owed or owing
by such Guarantor;

(6) that portion of any Indebtedness incurred in violation of the
indenture provisions set forth under "Limitation on Incurrence of
Additional Indebtedness" (but, as to any such obligation, no such
violation shall be deemed to exist for purposes of this clause (6) if
the holder(s) of such obligation or their representative shall have
received an officers' certificate of RPP LLC to the effect that the
incurrence of such Indebtedness does not (or, in the case of
revolving credit Indebtedness, that the incurrence of the entire
committed amount thereof at the date on which the initial borrowing
thereunder is made would not) violate such provisions of the
indenture);

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(7) any Indebtedness which, when incurred and without respect to any
election under Section 1111(b) of Title 11, United States Code, is
without recourse to RPP LLC or any Guarantor; and

(8) any Indebtedness, which is, by its express terms, subordinated in
right of payment to any other Indebtedness of such Guarantor.

"Indebtedness" means with respect to any Person any indebtedness of such
Person, without duplication, in respect of:

(1) all Obligations for borrowed money, including, without limitation,
Senior Debt;

(2) all Obligations evidenced by bonds, debentures, notes or other
similar instruments;

(3) all Capitalized Lease Obligations;

(4) the deferred and unpaid purchase price of property, all conditional
sale obligations and all Obligations under any title retention
agreement, but excluding trade accounts payable and other accrued
liabilities arising in the ordinary course of business;

(5) all Obligations for the reimbursement of any obligor on any letter of
credit, banker's acceptance or similar credit transaction;

(6) guarantees and other contingent Obligations in respect of
Indebtedness referred to in clauses (1) through (5) above and clause
(8) below;

(7) all Obligations of any other Person of the type referred to in
clauses (1) through (6) which are secured by any lien on any property
or asset of such Person, the amount of such Obligation being deemed
to be the lesser of the fair market value of such property or asset
or the amount of the Obligation so secured;

(8) all Obligations under Currency Agreements, Commodity Agreements and
Interest Swap Obligations of such Person; and

(9) all Disqualified Capital Stock issued by such Person with the amount
of Indebtedness represented by such Disqualified Capital Stock being
equal to the greater of its voluntary or involuntary liquidation
preference and its maximum fixed repurchase price, but excluding
accrued dividends, if any.

For purposes of the definition of Indebtedness, the "maximum fixed repurchase
price" of any Disqualified Capital Stock which does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Disqualified Capital Stock as if such Disqualified Capital Stock were
purchased on any date on which Indebtedness shall be required to be determined
pursuant to the indenture, and if such price is based upon, or measured by,
the fair market value of such Disqualified Capital Stock, such fair market
value shall be determined reasonably and in good faith by the Board of
Directors of the issuer of such Disqualified Capital Stock. For purposes of
the covenant described above under the caption "Limitation on Incurrence of
Additional Indebtedness," in determining the principal amount of any
Indebtedness to be incurred by RPP LLC or any Restricted Subsidiary or which
is outstanding at any date, the principal amount of any Indebtedness which
provides that an amount less than the principal amount shall be due upon any
declaration of acceleration shall be the accreted value of the Indebtedness at
the date of determination.

"Independent Financial Advisor" means a firm:

(1) which does not have a direct or indirect common equity interest in
RPP LLC; and

(2) which, in the judgment of the Board of Directors of RPP LLC, is
otherwise independent and qualified to perform the task for which it
is to be engaged.

"Interest Swap Obligations" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic

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payments calculated by applying either a floating or a fixed rate of interest
on a stated notional amount in exchange for periodic payments made by such
other Person calculated by applying a fixed or a floating rate of interest on
the same notional amount and shall include, without limitation, interest rate
swaps, caps, floors, collars and similar agreements.

"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit, including a guarantee, or capital contribution
to (by means of any transfer of cash or other property to others or any
payment for property or services for the account or use of others), or any
purchase or acquisition by such Person of any Capital Stock, bonds, notes,
debentures or other securities or evidences of Indebtedness issued by, any
Person. "Investment" does not include extensions of trade credit by,
prepayment of expenses by, and receivables owing to, RPP LLC and its
Restricted Subsidiaries on commercially reasonable terms in accordance with
normal trade practices of RPP LLC or such Restricted Subsidiary, as the case
may be. For purposes of the "Limitation on Restricted Payments" covenant:

(1) "Investment" shall include and be valued at the fair market value of
the net assets of any Restricted Subsidiary of RPP LLC at the time
that such Restricted Subsidiary is designated an Unrestricted
Subsidiary of RPP LLC and shall exclude the fair market value of the
net assets of any Unrestricted Subsidiary of RPP LLC at the time that
such Unrestricted Subsidiary is designated a Restricted Subsidiary of
RPP LLC ; and

(2) the amount of any Investment shall be the original cost of such
Investment plus the cost of all additional Investments by RPP LLC or
any of its Restricted Subsidiaries, without any adjustments for
increases or decreases in value, or write-ups, write-downs or write-
offs with respect to such Investment, reduced by the payment of
dividends or distributions in connection with such Investment or any
other amounts received in respect of such Investment; provided that
no such payment of dividends or distributions or receipt of any such
other amounts shall reduce the amount of any Investment if such
payment of dividends or distributions or receipt of any such amounts
would be included in Consolidated Net Income.

If RPP LLC or any Restricted Subsidiary of RPP LLC sells or otherwise disposes
of any Common Stock of any direct or indirect Restricted Subsidiary of RPP LLC
such that, after giving effect to any such sale or disposition, such Person
ceases to be a Restricted Subsidiary of RPP LLC, RPP LLC shall be deemed to
have made an Investment on the date of any such sale or disposition equal to
the fair market value of the Common Stock of that Restricted Subsidiary not
sold or disposed of.

"Issue Date" means November 14, 2000.

"Leverage Ratio" means, with respect to any Person as of any date, the ratio
of (1) Consolidated Indebtedness on such date to (2) Consolidated EBITDA of
such Person during the Four Quarter Period ending on or prior to the
Transaction Date. In addition to and without limitation of the foregoing, for
purposes of this definition, "Consolidated EBITDA" and "Consolidated
Indebtedness" shall be calculated after giving effect on a pro forma basis for
the period of such calculation to clauses (2) and (3) of the first paragraph
of the definition of "Consolidated Fixed Charge Coverage Ratio."

"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind, including any conditional sale or other
title retention agreement, any lease in the nature thereof and any agreement
to give any security interest.

"Management Agreement" means the Management Agreement dated as of the Issue
Date between RPP LLC and Apollo.

"Net Cash Proceeds" means (a) with respect to any Asset Sale, the proceeds
in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of cash or

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Cash Equivalents (other than the portion of any such deferred payment
constituting interest) received by RPP LLC or any of its Restricted
Subsidiaries from such Asset Sale net of:

(1) reasonable out-of-pocket expenses and fees relating to such Asset
Sale (including, without limitation, legal, accounting and investment
banking fees and sales commissions);

(2) taxes paid or payable after taking into account any reduction in
consolidated tax liability due to available tax credits or deductions
and any tax sharing arrangements;

(3) repayment of Indebtedness that is required to be repaid in connection
with such Asset Sale;

(4) appropriate amounts to be provided by RPP LLC or any Restricted
Subsidiary, as the case may be, as a reserve, in accordance with
GAAP, against any liabilities associated with such Asset Sale and
retained by RPP LLC or any Restricted Subsidiary, as the case may be,
after such Asset Sale, including, without limitation, pension and
other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale; and

(5) all distributions and other payments required to be made to minority
interest holders in Restricted Subsidiaries or joint ventures as a
result of such Asset Sales;

and (b) with respect to any issuance or sale of Capital Stock, means the cash
proceeds of such issuance or sale, net of attorneys' fees, accountants' fees,
underwriters' or placement agents' or initial purchasers' fees, discounts or
commissions and brokerage, consultant and other fees and expenses actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.

"New Domestic Restricted Subsidiary" has the meaning set forth in the
"Future Guarantors" covenant.

"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.

"Offering Memorandum" means the Offering Memorandum dated November 8, 2000
relating to the offering of the notes issued on the Issue Date.

"Option Plan" means the Resolution Performance Products Inc. 2000 Stock
Option Plan.

"Permitted Business" means the business of RPP LLC and its Restricted
Subsidiaries as existing on the Issue Date and any other businesses that are
the same, similar or reasonably related, ancillary or complementary thereto
and reasonable extensions thereof.

"Permitted Holders" means Apollo and other Related Parties.

"Permitted Indebtedness" means, without duplication, each of the following:

(1) Indebtedness under the notes issued in the offering and the exchange
notes and any Subsidiary Guarantee;

(2) Indebtedness incurred pursuant to the Credit Agreement by RPP LLC
and its Restricted Subsidiaries, including RPP Nederland B.V., in an
aggregate principal amount at any time outstanding not to exceed
$600.0 million less (A) scheduled permanent repayments of
Indebtedness under the Credit Agreement made upon or after the
scheduled maturity date for such payment by RPP LLC and its
Restricted Subsidiaries, if the Leverage Ratio of RPP LLC on the
date such payment is made is more than 3.0 to 1.0 and (B) the amount
of all repayments of term debt and permanent commitment reductions
under the Credit Agreement with (1) Net Cash Proceeds of Asset Sales
applied thereto as required by the "Limitation on Asset Sales"
covenant and (2) Excess Cash Flow applied thereto in the amounts
required by the "Excess Cash Flow Repurchase Offer" covenant if the
Leverage Ratio of RPP LLC on the date such payment or

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commitment reduction is made is more than 3.0 to 1.0; provided that
the aggregate principal amount of Indebtedness permitted to be
incurred from time to time under this clause (2) shall be reduced
dollar for dollar by the amount of any Indebtedness then outstanding
under clause (12) below and provided further that any Indebtedness
incurred pursuant to the Credit Agreement on the Issue Date shall be
deemed to be incurred under this clause (2); and provided further
that the amount of Indebtedness permitted to be incurred pursuant to
the Credit Agreement in accordance with this clause (2) shall be in
addition to any Indebtedness to be incurred pursuant to the Credit
Agreement in reliance on and in accordance with clauses (10) and
(16) below;

(3) other Indebtedness of RPP LLC and its Restricted Subsidiaries
outstanding on the Issue Date (including, without limitation,
Indebtedness incurred in connection with the Transactions) reduced by
the amount of any scheduled amortization payments or mandatory
prepayments when actually paid or permanent reductions thereon;

(4) Interest Swap Obligations of RPP LLC covering Indebtedness of RPP
LLC or any of its Restricted Subsidiaries and Interest Swap
Obligations of any Restricted Subsidiary of RPP LLC covering
Indebtedness of RPP LLC or such Restricted Subsidiary; provided,
however, that such Interest Swap Obligations are entered into to
protect RPP LLC and its Restricted Subsidiaries from fluctuations in
interest rates on Indebtedness incurred in accordance with the
indenture to the extent the notional principal amount of such
Interest Swap Obligation does not exceed the principal amount of the
Indebtedness to which such Interest Swap Obligation relates;

(5) Indebtedness under Currency Agreements; provided that in the case of
Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of RPP LLC and its
Restricted Subsidiaries outstanding other than as a result of
fluctuations in foreign currency exchange rates or by reason of fees,
indemnities and compensation payable thereunder;

(6) Indebtedness of a Restricted Subsidiary of RPP LLC to RPP LLC or to
a Restricted Subsidiary of RPP LLC for so long as such Indebtedness
is held by RPP LLC, a Restricted Subsidiary of RPP LLC or the lenders
or collateral agent under the Credit Agreement, in each case subject
to no Lien held by a Person other than RPP LLC, a Restricted
Subsidiary of RPP LLC or the lenders or collateral agent under the
Credit Agreement; provided that if as of any date any Person other
than RPP LLC, a Restricted Subsidiary of RPP LLC or the lenders or
collateral agent under the Credit Agreement owns or holds any such
Indebtedness or holds a Lien in respect of such Indebtedness, such
date shall be deemed the incurrence of Indebtedness not constituting
Permitted Indebtedness under this clause (6) by the issuer of such
Indebtedness;

(7) Indebtedness of RPP LLC to a Restricted Subsidiary of RPP LLC for so
long as such Indebtedness is held by a Restricted Subsidiary of RPP
LLC or the lenders or the collateral agent under the Credit Agreement
and is subject to no Lien other than a Lien in favor of the lenders
or collateral agent under the Credit Agreement; provided that (a) any
Indebtedness of RPP LLC to any Restricted Subsidiary of RPP LLC is
unsecured and subordinated, pursuant to a written agreement, to RPP
LLC's obligations under the Indenture and the notes and (b) if as of
any date any Person other than a Restricted Subsidiary of RPP LLC
owns or holds any such Indebtedness or any Person holds a Lien other
than a Lien in favor of the lenders or collateral agent under the
Credit Agreement in respect of such Indebtedness, such date shall be
deemed the incurrence of Indebtedness not constituting Permitted
Indebtedness under this clause (7) by RPP LLC;

(8) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business; provided,
however, that such Indebtedness is extinguished within two business
days of incurrence;

(9) Indebtedness of RPP LLC or any of its Restricted Subsidiaries in
respect of performance bonds, bankers' acceptances, workers'
compensation claims, surety or appeal bonds, payment obligations in
connection with self-insurance or similar obligations, and bank
overdrafts (and letters of credit in respect thereof);

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(10) Indebtedness represented by Capitalized Lease Obligations, Purchase
Money Indebtedness or Acquired Indebtedness of RPP LLC and its
Restricted Subsidiaries not to exceed $30.0 million in the aggregate
at any one time outstanding; provided that all or a portion of the
$30.0 million permitted to be incurred under this clause (10) may,
at the option of RPP LLC, be incurred under the Credit Agreement or
pursuant to clause (16) below (in addition to the amount set forth
therein) instead of pursuant to Capitalized Lease Obligations,
Purchase Money Indebtedness or Acquired Indebtedness;

(11) Indebtedness arising from agreements of RPP LLC or a Restricted
Subsidiary of RPP LLC providing for indemnification, adjustment of
purchase price or similar obligations, in each case, incurred or
assumed in connection with the disposition of any business, assets
or a Subsidiary, other than guarantees by RPP LLC or a Restricted
Subsidiary of RPP LLC of Indebtedness incurred by any Person
acquiring all or any portion of such business, assets or a
Subsidiary for the purpose of financing such acquisition; provided,
however, that:

(a) such Indebtedness is not reflected on the balance sheet of RPP
LLC or any Restricted Subsidiary of RPP LLC (contingent
obligations referred to in a footnote to financial statements and
not otherwise reflected on the balance sheet will not be deemed
to be reflected on such balance sheet for purposes of this clause
(a)); and

(b) the maximum assumable liability in respect of all such
Indebtedness shall at no time exceed the gross proceeds including
the fair market value of noncash proceeds (the fair market value
of such noncash proceeds being measured at the time it is
received as determined in good faith by the Board of Directors of
RPP LLC or the Restricted Subsidiary, as applicable, and without
giving effect to any subsequent changes in value) actually
received by RPP LLC and its Restricted Subsidiaries in connection
with such disposition;

(12) the incurrence by a Receivables Subsidiary of Indebtedness in a
Qualified Receivables Transaction that is without recourse (other
than pursuant to representations, warranties, covenants and
indemnities entered into in the ordinary course of business in
connection with a Qualified Receivables Transaction) to RPP LLC or
to any Restricted Subsidiary of RPP LLC or their assets (other than
such Receivables Subsidiary and its assets), and is not guaranteed
by any such Person; provided that any outstanding Indebtedness
incurred under this clause (12) shall reduce (for so long as, and to
the extent that, the Indebtedness referred to in this clause (12)
remains outstanding) the aggregate amount permitted to be incurred
under clause (2) above to the extent set forth therein;

(13) Indebtedness under Commodity Agreements;

(14) Guarantees of Indebtedness of (a) any Restricted Subsidiary of RPP
LLC by RPP LLC and its Restricted Subsidiaries, including agreements
of RPP LLC to keep well or maintain financial statement conditions
of any Restricted Subsidiary of RPP LLC and (a) RPP LLC incurred
pursuant to the Credit Agreement or pursuant to clauses (4) and (5)
above by any Restricted Subsidiary of RPP LLC;

(15) Refinancing Indebtedness;

(16) additional Indebtedness of RPP LLC and its Restricted Subsidiaries
in an aggregate principal amount not to exceed $50.0 million at any
one time outstanding (which amount may, but need not, be incurred in
whole or in part under the Credit Agreement) plus up to an
additional amount as contemplated by, and to the extent not incurred
under, clause (10) above; and

(17) Indebtedness of RPP LLC or any of its Restricted Subsidiaries
consisting of (x) the financing of insurance premiums in the
ordinary course of business or (y) take-or-pay obligations contained
in supply arrangements entered into in the ordinary course of
business and on a basis consistent with past practice.

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For purposes of determining compliance with the "Limitation on Incurrence of
Additional Indebtedness" covenant,

(a) in the event that an item of Indebtedness meets the criteria of more
than one of the categories of Permitted Indebtedness described in clauses
(1) through (17) above or is entitled to be incurred pursuant to the
Consolidated Fixed Charge Coverage Ratio provisions of such covenant, RPP
LLC shall, in its sole discretion, classify (or later reclassify) such
item of Indebtedness in any manner that complies with such covenant,

(b) accrual of interest, accretion or amortization of original issue
discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms or in the form of Capital
Stock, the payment of dividends on Disqualified Capital Stock in the form
of additional shares of the same class of Disqualified Capital Stock and
increases in the amount of Indebtedness outstanding solely as a result of
fluctuations in the exchange rate of currencies will not be deemed to be
an incurrence of Indebtedness or an issuance of Disqualified Capital
Stock for purposes of the "Limitation on Incurrence of Additional
Indebtedness" covenant,

(c) Guarantees of, or obligations in respect of letters of credit relating
to, Indebtedness which is otherwise included in the determination of a
particular amount of Indebtedness shall not be included,

(d) if obligations in respect of letters of credit are incurred pursuant to
the Credit Agreement and are being treated as incurred pursuant to clause
(2) above and the letters of credit relate to other Indebtedness, then
such other Indebtedness shall not be included,

(e) if such Indebtedness is denominated in a currency other than U.S.
dollars, the U.S. dollar equivalent principal amount thereof will be
calculated based on the relevant currency exchange rates in effect on the
date such indebtedness was incurred, and

(f) Indebtedness need not be incurred solely by reference to one category
of Permitted Indebtedness or the Consolidated Fixed Charge Coverage Ratio
provisions of such covenant but may be permitted to be incurred in part
under any combination of categories of Permitted Indebtedness and the
Consolidated Fixed Charge Coverage Ratio provisions.

"Permitted Investments" means:

(1) Investments by RPP LLC or any Restricted Subsidiary of RPP LLC in
any Person that is or will become immediately after such Investment
a Restricted Subsidiary of RPP LLC or that will merge or consolidate
into RPP LLC or a Restricted Subsidiary of RPP LLC; provided that
such Restricted Subsidiary of RPP LLC is not restricted from making
dividends or similar distributions by contract, operation of law or
otherwise other than as permitted by the "Limitations on Dividend
and Other Payment Restrictions Affecting Subsidiaries" covenant;

(2) Investments in RPP LLC by any Restricted Subsidiary of RPP LLC;
provided that any Indebtedness evidencing such Investment is
unsecured and subordinated, pursuant to a written agreement, to RPP
LLC's obligations under the notes and the indenture;

(3) Investments in cash and Cash Equivalents;

(4) loans and advances to employees and officers of RPP LLC and its
Restricted Subsidiaries made (a) in the ordinary course of business
for bona fide business purposes not to exceed $7.5 million in the
aggregate at any one time outstanding or (b) to fund purchases of
Capital Stock of RPP LLC or RPP Inc. under the Option Plan or
similar employment arrangements so long as no cash is actually
advanced by RPP LLC or any of its Restricted Subsidiaries to such
employees and officers to fund such purchases;

(5) Currency Agreements, Commodity Agreements and Interest Swap
Obligations entered into in the ordinary course of RPP LLC's or its
Restricted Subsidiaries' businesses and otherwise in compliance with
the indenture;

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(6) Investments in securities of trade creditors or customers received

(a) pursuant to any plan of reorganization or similar arrangement
upon the bankruptcy or insolvency of such trade creditors or
customers or

(b) in settlement of delinquent obligations of, and other disputes
with, customers, suppliers and others, in each case arising in
the ordinary course of business or otherwise in satisfaction of
a judgment;

(7) Investments

(a) made by RPP LLC or its Restricted Subsidiaries consisting of
consideration received in connection with an Asset Sale made in
compliance with the "Limitation on Asset Sales" covenant;

(b) consisting of consideration received by RPP LLC or any of its
Restricted Subsidiaries in connection with a transaction that
would be an Asset Sale if it consisted of aggregate
consideration received by RPP LLC or any of its Restricted
Subsidiaries of $3.0 million or more or

(c) acquired in exchange for, or out of the proceeds of, a
substantially concurrent offering of Capital Stock (other than
Disqualified Stock) of RPP LLC (which proceeds of any such
offering of Capital Stock of RPP LLC shall not have been, and
shall not be, included in clause (3)(b) of the first paragraph
of the "Limitation on Restricted Payments" covenant);

(8) Investments of a Person or any of its Subsidiaries existing at the
time such Person becomes a Restricted Subsidiary of RPP LLC or at
the time such Person merges or consolidates with RPP LLC or any of
its Restricted Subsidiaries, in either case in compliance with the
indenture; provided that such Investments were not made by such
Person in connection with, or in anticipation or contemplation of,
such Person becoming a Restricted Subsidiary of RPP LLC or such
merger or consolidation;

(9) Investments in the notes;

(10) Investments in existence on the Issue Date (including, without
limitation, Investments made in connection with the Transactions);

(11) Investments made after the Issue Date in the Yuka Shell Epoxy
Kabushi Kaisha Company joint venture between RPP LLC and Mitsubishi
Chemical Corp. not to exceed $10.0 million at any one time
outstanding;

(12) guarantees of Indebtedness to the extent permitted pursuant to the
"Limitation on Indebtedness" and "Limitation on Issuances of
Guarantees by Restricted Subsidiaries" covenants; and

(13) additional Investments (including Investments in joint ventures and
Unrestricted Subsidiaries) not to exceed $50.0 million at any one
time outstanding.

"Permitted Liens" means the following types of Liens:

(1) Liens for taxes, assessments or governmental charges or claims that
are either (a) not delinquent or (b) being contested in good faith
by appropriate proceedings and as to which RPP LLC or its Restricted
Subsidiaries shall have set aside on its books such reserves, if
any, as shall be required in conformity with

. GAAP in the case of a Domestic Restricted Subsidiary, and

. generally accepted accounting principles in effect from time to
time in the applicable jurisdiction, in the case of a Foreign
Restricted Subsidiary;

(2) statutory and common law Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen, customs
and revenue authorities and other Liens imposed by law incurred in
the ordinary course of business for sums not yet delinquent or being
contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made
in respect thereof;

141

(3) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and
other types of social security, including any Lien securing letters
of credit issued in the ordinary course of business consistent with
past practice in connection therewith, or to secure the performance
of tenders, statutory obligations, surety and appeal bonds, bids,
leases, government contracts, performance and return-of-money bonds
and other similar obligations (exclusive of obligations for the
payment of borrowed money);

(4) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings
which may have been duly initiated for the review of such judgment
shall not have been finally terminated or the period within which
such proceedings may be initiated shall not have expired;

(5) licenses, sublicenses, leases, subleases, easements, rights-of-way,
zoning restrictions and other similar charges or encumbrances in
respect of property not interfering in any material respect with the
ordinary conduct of the business of RPP LLC and its Restricted
Subsidiaries, taken as a whole;

(6) any interest or title of a lessor under any Capitalized Lease
Obligation or operating lease; provided that such Liens do not
extend to any property or assets which is not leased property
subject to such Capitalized Lease Obligation or operating lease;

(7) Liens securing Indebtedness permitted pursuant to clause (10) of the
definition of "Permitted Indebtedness"; provided, however, that in
the case of Purchase Money Indebtedness (a) the Indebtedness shall
not exceed the cost of such property or assets and shall not be
secured by any property or assets of RPP LLC or any Restricted
Subsidiary of RPP LLC other than the property and assets so acquired
or constructed and any improvements thereon and (b) the Lien
securing such Indebtedness shall be created within 180 days of such
acquisition or construction or, in the case of a refinancing of any
Purchase Money Indebtedness, within 180 days of such refinancing;

(8) Liens upon specific items of inventory or other goods and proceeds
of any Person securing such Person's obligations in respect of
bankers' acceptances or similar credit transactions issued or
created for the account of such Person to facilitate the purchase,
shipment or storage of such inventory or other goods;

(9) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds
thereof;

(10) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of RPP
LLC or any of its Restricted Subsidiaries, including rights of
offset and set-off;

(11) Liens securing Interest Swap Obligations so long as the Interest
Swap Obligations relate to Indebtedness that is otherwise permitted
under the indenture;

(12) Liens in the ordinary course of business not exceeding $10.0 million
at any one time outstanding that (a) are not incurred in connection
with borrowing of money and (b) do not materially detract from the
value of the property or materially impair its use;

(13) Liens by reason of judgment or decree not otherwise resulting in an
Event of Default;

(14) Liens securing Indebtedness permitted to be incurred pursuant to
clauses (12) and (16) of the definition of "Permitted Indebtedness";

(15) Liens securing Indebtedness under Currency Agreements and Commodity
Agreements permitted under the indenture;

(16) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with
importation of goods;

142

(17) Liens arising out of conditional sale, title retention, consignment
or similar arrangements for the sale of goods entered into by RPP
LLC or any of its Restricted Subsidiaries in the ordinary course of
business;

(18) Liens securing Acquired Indebtedness incurred in accordance with the
"Limitation on Incurrence of Additional Indebtedness" covenant
(including, without limitation, clause (10) of the definition of
Permitted Indebtedness); provided that:

(a) such Liens secured such Acquired Indebtedness at the time of and
prior to the incurrence of such Acquired Indebtedness by RPP LLC
or a Restricted Subsidiary of RPP LLC and were not granted in
connection with, or in anticipation of, the incurrence of such
Acquired Indebtedness by RPP LLC or a Restricted Subsidiary of
RPP LLC; and

(b) such Liens do not extend to or cover any property or assets of
RPP LLC or of any of its Restricted Subsidiaries other than the
property or assets that secured the Acquired Indebtedness prior
to the time such Indebtedness became Acquired Indebtedness of RPP
LLC or a Restricted Subsidiary of RPP LLC and are no more
favorable to the lienholders than those securing the Acquired
Indebtedness prior to the incurrence of such Acquired
Indebtedness by RPP LLC or a Restricted Subsidiary of RPP LLC;
and

(19) Liens securing insurance premium financing arrangements, provided
that such Lien is limited to the applicable insurance contracts.

"Person" means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture, or a
governmental agency or political subdivision thereof or any other entity.

"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.

"Purchase Money Indebtedness" means Indebtedness of RPP LLC and its
Restricted Subsidiaries incurred in the normal course of business for the
purpose of financing all or any part of the purchase price, or the cost of
installation, construction or improvement, of property or equipment or other
related assets and any Refinancing thereof.

"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.

"Qualified Receivables Transaction" means any transaction or series of
transactions that may be entered into by RPP LLC or any of its Restricted
Subsidiaries in which RPP LLC or any of its Restricted Subsidiaries may sell,
convey or otherwise transfer to (1) a Receivables Subsidiary (in the case of a
transfer by RPP LLC or any of its Restricted Subsidiaries) and (2) any other
Person (in the case of a transfer by a Receivables Subsidiary), or may grant a
security interest in, any accounts receivable (whether now existing or arising
in the future) of RPP LLC or any of its Restricted Subsidiaries, and any
related assets, including all collateral securing such accounts receivable,
all contracts and all guarantees or other obligations in respect of such
accounts receivable, proceeds of such accounts receivable and other assets
(including contract rights) which are customarily transferred or in respect of
which security interests are customarily granted in connection with asset
securitization transactions involving accounts receivable.

"Recapitalization" means the recapitalization of RPP LLC and RPP Inc. as
described in the Offering Memorandum.

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"Receivables Subsidiary" means a Wholly Owned Restricted Subsidiary of RPP
LLC that engages in no activities other than in connection with the financing
of accounts receivable and that is designated by the Board of Directors of RPP
LLC (as provided below) as a Receivables Subsidiary:

(1) no portion of the Indebtedness or any other Obligations (contingent
or otherwise) of which

(a) is guaranteed by RPP LLC or any Restricted Subsidiary of RPP LLC
(excluding guarantees of Obligations (other than the principal
of, and interest on, Indebtedness) pursuant to representations,
warranties, covenants and indemnities entered into in the
ordinary course of business in connection with a Qualified
Receivables Transaction),

(b) is recourse to or obligates RPP LLC or any Restricted Subsidiary
of RPP LLC in any way other than pursuant to representations,
warranties, covenants and indemnities entered into in the
ordinary course of business in connection with a Qualified
Receivables Transaction or

(c) subjects any property or asset of RPP LLC or any Restricted
Subsidiary of RPP LLC, directly or indirectly, contingently or
otherwise, to the satisfaction thereof, other than pursuant to
representations, warranties, covenants and indemnities entered
into in the ordinary course of business in connection with a
Qualified Receivables Transaction;

(2) with which neither RPP LLC nor any Restricted Subsidiary of RPP LLC
has any material contract, agreement, arrangement or understanding
other than on terms no less favorable to RPP LLC or such Restricted
Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of RPP LLC, other than fees payable in the
ordinary course of business in connection with servicing accounts
receivable; and

(3) with which neither RPP LLC nor any Restricted Subsidiary of RPP LLC
has any obligation to maintain or preserve such Restricted
Subsidiary's financial condition or cause such Restricted Subsidiary
to achieve certain levels of operating results.

Any such designation by the Board of Directors of RPP LLC shall be evidenced
to the trustee by filing with the trustee a Board Resolution giving effect to
such designation and an officers' certificate certifying that such designation
complied with the preceding conditions.

"Refinance" means, in respect of any security or Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a
security or Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have
correlative meanings.

"Refinancing Indebtedness" means any Refinancing by RPP LLC or any
Restricted Subsidiary of RPP LLC of (A) for purposes of clause (15) of the
definition of Permitted Indebtedness, Indebtedness incurred or existing in
accordance with the "Limitation on Incurrence of Additional Indebtedness"
covenant (other than pursuant to clause (2), (4), (5), (6), (7), (8), (9),
(10), (11), (12) or (14) of the definition of Permitted Indebtedness) or (B)
for any other purpose, Indebtedness incurred in accordance with the
"Limitation on Incurrence of Additional Indebtedness" covenant, in each case
that does not:

(1) result in an increase in the aggregate principal amount of
Indebtedness of such Person as of the date of such proposed
Refinancing (plus the amount of any premium, accrued interest and
defeasance costs, required to be paid under the terms of the
instrument governing such Indebtedness and plus the amount of
reasonable fees, expenses, discounts and commissions incurred by RPP
LLC in connection with such Refinancing); or

(2) create Indebtedness with

(a) if the Indebtedness being Refinanced was incurred pursuant to
clause (3) of the definition of Permitted Indebtedness, a
Weighted Average Life to Maturity that is less than the Weighted
Average Life to Maturity of the Indebtedness being Refinanced or
a final maturity earlier than the final maturity of the
Indebtedness being Refinanced or

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(b) if the Indebtedness being Refinanced was otherwise incurred in
accordance with the definition of Permitted Indebtedness or with
the "Limitation on Incurrence of Additional Indebtedness"
covenant, a Weighted Average Life to Maturity that is less than
the Weighted Average Life to Maturity of the notes or a final
maturity earlier than the final maturity of the notes;

provided that--

. if such Indebtedness being Refinanced is Indebtedness solely of
RPP LCC, then such Refinancing Indebtedness shall be
Indebtedness solely of RPP LCC and

. if such Indebtedness being Refinanced is subordinate or junior
to the notes, then such Refinancing Indebtedness shall be
subordinate to the notes at least to the same extent and in the
same manner as the Indebtedness being Refinanced.

"Related Parties" of a specified Person means

(a) if a natural person, (1) any spouse, parent or lineal descendant
(including by adoption) of such Person or (2) the estate of such
Person during any period in which such estate holds Capital Stock
of RPP LLC or of RPP Inc. for the benefit of any Person referred
to in clause (a)(1) and

(b) if a trust, corporation, partnership, limited liability company
or other entity, the beneficiaries, stockholders, partners,
owners or Persons beneficially owning an interest of more than
50% of which consist of such Person and/or such other Persons
referred to in the immediately preceding clause (a).

"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Debt; provided that if, and
for so long as, any Designated Senior Debt lacks such a representative, then
the Representative for such Designated Senior Debt shall at all times
constitute the holders of a majority in outstanding principal amount of such
Designated Senior Debt in respect of any Designated Senior Debt.

"Restricted Subsidiary" of any Person means any Subsidiary of such Person
which at the time of determination is not an Unrestricted Subsidiary.

"RPP Nederland" means Resolution Nederland, B.V.

"RPP Inc." means Resolution Performance Products Inc., a Delaware
corporation, and any successor corporation.

"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to RPP LLC or a Restricted Subsidiary of any property, whether owned
by RPP LLC or any Restricted Subsidiary at the Issue Date or later acquired,
which has been or is to be sold or transferred by RPP LLC or such Restricted
Subsidiary to such Person or to any other Person from whom funds have been or
are to be advanced by such Person on the security of such Property other than:

(a) arrangements between RPP LLC and a Wholly Owned Restricted Subsidiary
of RPP LLC or between Wholly Owned Restricted Subsidiaries of RPP LLC
or

(b) any arrangement whereby the transfer involves fixed or capital assets
and is consummated within 120 days after the date RPP LLC or a
Restricted Subsidiary acquires or finishes construction of such fixed
or capital assets.

"Senior Debt" means the principal of, premium, if any, and accrued and
unpaid interest (including any interest accruing subsequent to the filing of a
petition of bankruptcy or other like proceeding at the rate provided for in
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on any Indebtedness of either Issuer,
whether outstanding on the Issue Date or thereafter created, incurred

145

or assumed, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior in right of
payment to the notes. Without limiting the generality of the preceding
sentence, "Senior Debt" shall also include the principal of, premium, if any,
interest (including any interest accruing subsequent to the filing of petition
of bankruptcy or other like proceeding at the rate provided for in the
documentation with respect thereto, whether or not such interest is an allowed
claim under applicable law) on, and all other amounts owing by either Issuer
in respect of,

. all monetary obligations of every nature (including guarantees thereof)
of either Issuer under, or with respect to, the Credit Agreement,
including, without limitation, obligations to pay principal, premium and
interest, reimbursement obligations under letters of credit, fees,
expenses and indemnities;

. all Interest Swap Obligations (including guarantees thereof); and

. all obligations under Currency Agreements and Commodity Agreements
(including guarantees thereof), in each case whether outstanding on or
incurred after the Issue Date.

Notwithstanding the preceding, "Senior Debt" shall not include:

(1) any Indebtedness of RPP LLC to any of its Subsidiaries;

(2) Indebtedness to, or guaranteed on behalf of, any director, officer or
employee of RPP LLC or any director, officer or employee of any
Subsidiary of RPP LLC (including, without limitation, amounts owed
for compensation);

(3) Indebtedness to trade creditors and other amounts incurred in
connection with obtaining goods, materials or services (other than if
incurred under the Credit Agreement);

(4) Indebtedness represented by Disqualified Capital Stock;

(5) any liability for federal, state, local or other taxes owed or owing
by either Issuer;

(6) that portion of any Indebtedness incurred in violation of the
indenture provisions set forth under "Limitation on Incurrence of
Additional Indebtedness" (unless the holder(s) of such obligation or
their representative shall have received an officers' certificate of
RPP LLC to the effect that the incurrence of such Indebtedness does
not (or, in the case of revolving credit Indebtedness, that the
incurrence of the entire committed amount thereof at the date on
which the initial borrowing thereunder is made would not) violate
such provisions of the indenture);

(7) Indebtedness which, when incurred and without respect to any election
under Section 1111(b) of Title 11, United States Code, is without
recourse to either Issuer; and

(8) any Indebtedness, which is, by its express terms, subordinated in
right of payment to any other Indebtedness of either Issuer.

"Senior Subordinated Debt" means, with respect to a Person, the notes and
any other Indebtedness of such Person that specifically provides that such
Indebtedness is to rank on an equal basis with the notes in right of payment
and is not subordinated by its terms in right of payment to any Indebtedness
or other obligations of such Person which is not Senior Debt of such Person.

"Shell" means the Royal Dutch/Shell Group of Companies and its Affiliates;
provided that such Affiliates are not Affiliates of Apollo.

"Significant Subsidiary," means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Rule 1.02(w) of Regulation S-X under
the Securities Act.

"Subsidiary," with respect to any Person, means:

(1) any corporation of which the outstanding Capital Stock having at
least a majority of the votes entitled to be cast in the election of
directors under ordinary circumstances shall at the time be owned,
directly or indirectly, by such Person or a Subsidiary of such
Person; or

146

(2) any other Person of which at least a majority of the voting interest
under ordinary circumstances is at the time, directly or indirectly,
owned by such Person or a Subsidiary of such Person.

"Transactions" means the offering of the notes, the recapitalization of RPP
LLC and the related borrowings under the Credit Agreement on the Issue Date.

"Treasury Rate" means the rate per annum equal to the yield to maturity at
the time of computation of United States Treasury securities with a constant
maturity most nearly equal to the period from such date of redemption to
November 15, 2005; provided, however, that if the period from such date of
redemption to November 15, 2005 is not equal to the constant maturity of the
United States Treasury security for which a weekly average yield is given, the
Treasury Rate shall be obtained by linear interpolation (calculated to the
nearest one-twelfth of a year) from the weekly average yields of United States
Treasury securities for which such yields are given, except that if the period
from such date of redemption to November 15, 2005 is less than one year, the
weekly average yield on actually traded United States Treasury securities
adjusted to a constant maturity of one year shall be used.

"Unrestricted Subsidiary" means (1) any Subsidiary of any Person that is
designated an Unrestricted Subsidiary by the Board of Directors of such Person
in the manner provided below and (2) any Subsidiary of an Unrestricted
Subsidiary. The Board of Directors may designate any Subsidiary, including any
newly acquired or newly formed Subsidiary, to be an Unrestricted Subsidiary
only if:

. such Subsidiary does not own any Capital Stock of, or own or hold any
Lien on any property of, RPP LLC or any other Subsidiary of RPP LLC that
is not a Subsidiary of the Subsidiary to be so designated;

. either (1) RPP LLC certifies to the trustee in an officers' certificate
that such designation complies with the "Limitation on Restricted
Payments" covenant or (2) the Subsidiary to be so designated at the time
of designation has total consolidated assets of $1,000 or less; and

. each Subsidiary to be so designated and each of its Subsidiaries has not
and does not after the time of designation, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable with respect
to any Indebtedness pursuant to which the lender has recourse to any of
the assets of RPP LLC or any of its Restricted Subsidiaries (other than
the assets of such Unrestricted Subsidiary).

The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary only if

. immediately after giving effect to such designation, RPP LLC is able to
incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) in compliance with the "Limitation on Incurrence of
Additional Indebtedness" covenant and

. immediately before and immediately after giving effect to such
designation, no Default or Event of Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall 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.

"Weighted Average Life to Maturity" means, when applied to any indebtedness
at any date, the number of years obtained by dividing

(1) the then outstanding aggregate principal amount of such Indebtedness
into

(2) the sum of the total of the products obtained by multiplying (a) the
amount of each then remaining installment, sinking fund, serial maturity or
other required payment of principal, including payment at final maturity,
in respect thereof, by (b) the number of years (calculated to the nearest
one-twelfth) which will elapse between such date and the making of such
payment.

"Wholly Owned Restricted Subsidiary" of any Person means any Restricted
Subsidiary of such Person of which all the outstanding voting securities
(other than in the case of a Foreign Restricted Subsidiary, directors'
qualifying shares or an immaterial amount of shares required to be owned by
other Persons pursuant to applicable law) are owned by such Person or any
Wholly Owned Restricted Subsidiary of such Person.

147

BOOK-ENTRY; DELIVERY AND FORM

Except as set forth below, the exchange notes will initially be issued in
the form of one or more fully registered notes in global form without coupons.
Each global note shall be deposited with the trustee, as custodian for, and
registered in the name of DTC or a nominee thereof. The old notes to the
extent validly tendered and accepted and directed by their holders in their
letters of transmittal, will be exchanged through book-entry electronic
transfer for the global note.

Except as set forth below, the global note may be transferred, in which but
not in part, solely to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the global note may not be exchanged for
notes in certificated form except in the limited circumstances described
below.

The Global Notes

We expect that pursuant to procedures established by DTC

(a) upon the issuance of the global notes, DTC or its custodian will
credit, on its internal system, the principal amount of notes of the
individual beneficial interests represented by such global notes to the
respective accounts of persons who have accounts with such depositary,
and

(b) ownership of beneficial interests in the global notes will be shown on,
and the transfer of such ownership will be effected only through:

. records maintained by DTC or its nominee with respect to interests of
persons who have accounts with DTC "participants" and

. the records of participants with respect to interests of persons
other than participants.

So long as DTC, or its nominee, is the registered owner or holder of the
global notes, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the notes represented by such global notes for all
purposes under the indenture. No beneficial owner of an interest in the global
notes will be able to transfer that interest except in accordance with DTC's
procedures, in addition to those provided for under the indenture with respect
to the notes.

Payments of the principal of, premium, if any, and interest on the global
notes will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. None of us, the trustee or any paying agent will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests in the global
notes or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interest.

We expect that DTC or its nominee, upon receipt of any payment of principal,
premium, if any, and interest on the global notes, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of the global notes as shown on the records
of DTC or its nominee. We also expect that payments by participants to owners
of beneficial interests in the global notes held through such participants
will be governed by standing instructions and customary practice, as is now
the case with securities held for the accounts of customers registered in the
names of nominees for such customers. Such payments will be the responsibility
of such participants.

Transfers between participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in same-day funds. If a holder requires physical delivery of a
certificated note for any reason, including to sell notes to persons in states
that require physical delivery of the notes, or to pledge such securities,
such holder must transfer its interest in the global notes, in accordance with
the normal procedures of DTC and with the procedures set forth in the
indenture. Consequently, the ability to transfer notes or to pledge notes as
collateral will be limited to such extent.

148

Notes that are issued as described below under "--Certified Notes," will be
issued in registered definitive form without coupons (each, a "Certificated
Note"). Upon the transfer of Certificated Notes, such certificated notes may,
unless the global note has previously been exchanged for certificated notes,
be exchanged for an interest in the global note representing the principal
amount of notes being transferred.

DTC has advised us that it will take any action permitted to be taken by a
holder of notes (including the presentation of notes for exchange as described
below) only at the direction of one or more participants to whose account the
DTC interests in the global notes are credited and only in respect of such
portion of the aggregate principal amount of notes as to which such
participant or participants has or have given such direction. However, if
there is an event of default under the indenture, DTC will exchange the global
notes for certificated notes, which it will distribute to its participants.

DTC has advised the issuers as follows:

(1) DTC is a limited-purpose trust company organized under the laws of the
State of New York,

(2) a member of the Federal Reserve System,

(3) a "clearing corporation" within the meaning of the New York Uniform
Commercial Code and

(4) a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act.

DTC was created to hold securities for its participants and facilitate the
clearance and settlement of securities transactions between participants
through electronic bookentry changes in accounts of its participants, thereby
eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations and certain other organizations. Indirect access to the DTC
system is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly ("indirect participants").

Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the global notes among participants of DTC, it is
under no obligation to perform such procedures and such procedures may be
discontinued at any time. Neither we nor the trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.

Certificated Securities

If DTC is at any time unwilling or unable to continue as a depositary for
the global notes and a successor depositary is not appointed by us within 90
days, certificated notes will be issued in exchange for the global notes.

149

EXCHANGE OFFER; REGISTRATION RIGHTS

We and the placement agents entered into the registration rights agreement
on November 14, 2000 where we agreed, for the benefit of holders of the old
notes, that we would, at our expense,

(1) within 120 days after November 14, 2000, file a registration statement
on Form S-1 or Form S-4 with the Commission relating to a registered
exchange offer for the old notes under the Securities Act, and

(2) use our commercially reasonable efforts to cause the exchange offer
registration statement to be declared effective under the Securities
Act within 180 days after November 14, 2000.

As soon as practicable after the registration statement of which this
prospectus forms a part is declared effective, we will offer to all holders of
the old notes not prohibited by law or Commission staff policy an opportunity
to exchange their securities for a like principal amount of the exchange
notes. We will keep the exchange offer open for acceptance for not less than
20 business days (or longer if required by applicable law) after the date
notice of the exchange offer is mailed to the holders of the old notes. For
each old note surrendered to us for exchange pursuant to the exchange offer,
the holder of such old note will receive an exchange note having a principal
amount at maturity equal to that of the surrendered old note. Interest on each
exchange note will accrue from the later of

(1) the last interest payment date on which interest was paid on the old
note surrendered in exchange therefor or

(2) if the old note is surrendered for exchange on a date in a period
which includes the record date for an interest payment date to occur
on or after the date of such exchange and as to which interest will be
paid, the date of such interest payment.

Under existing interpretations of the Commission contained in several no-
action letters to third parties, after the exchange offer the exchange notes
will be freely transferable by holders thereof who are not our affiliates
without further registration under the Securities Act. However, each holder
that wishes to exchange its old notes for exchange notes will be required to
represent

(a) that any exchange notes to be received by it will be acquired in the
ordinary course of its business,

(b) that at the time of the commencement of the exchange offer it has no
arrangement or understanding with any person to participate in the
distribution (within the meaning of Securities Act) of the exchange notes
in violation of the Securities Act,

(d) if such holder is not a broker-dealer, that it is not engaged in, and
does not intend to engage in, the distribution of exchange notes and

(e) if such holder is a broker-dealer--

that it will receive exchange notes for its own account in exchange for
old notes that were acquired as a result of market-making or other
trading activities and that it will deliver a prospectus in connection
with any resale of such exchange notes.

The Commission has taken the position that participating broker-dealers may
fulfill their prospectus delivery requirements with respect to the exchange
notes, other than a resale of an unsold allotment from the original sale of
the old notes, by delivering to prospective purchasers the prospectus
contained in the exchange offer registration statement. We have agreed to make
available during the period required by the Securities Act, a prospectus
meeting the requirements of the Securities Act for use by participating
broker-dealers and other persons, if any, with similar prospectus delivery
requirements for use in connection with any resale of exchange notes.

If:

. because of any change in current law or prevailing interpretations of
the staff of the Commission, we are not permitted to effect an exchange
offer,

. the exchange offer is not consummated within 210 days after November 14,
2000,

150

. the placement agents in the private offering of old notes hold old notes
that have the status of an unsold allotment, or

. any other holder of old notes who is not able to participate in the
exchange offer so requests in writing on or before the 60th day after
the consummation of the exchange offer,

then in each case, we will promptly deliver to the holders of the old notes
and the trustee written notice thereof and at our sole expense,

. as promptly as practicable, file a shelf registration statement covering
resales of the old notes,

. use our commercially reasonable efforts to cause the shelf registration
statement to be declared effective under the Securities Act and

. subject to customary exceptions, use our commercially reasonable efforts
to keep effective the shelf registration statement until the earlier of
(a) the date on which, in the written opinion of our counsel, all
outstanding old notes held by persons that are not affiliates of any of
us may be resold without registration under the Securities Act pursuant
to Rule 144(k) under the Securities Act or any successor provision
thereto and (b) such time as all of the old notes have been sold
thereunder.

If a shelf registration statement is filed, we will

-- provide to each holder of old notes copies of the prospectus that is a
part of the shelf registration statement,

-- notify each such holder when the shelf registration statement for the
old notes has become effective and

-- take certain other actions as are required to permit unrestricted
resales of the old notes.

A holder that sells old notes pursuant to the shelf registration statement
will be required to be named as a selling securityholder in the related
prospectus and to deliver a prospectus to purchasers, will be subject to
certain of the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions of the
registration rights agreement that are applicable to such holder, including
certain indemnification rights and obligations.

If we fail to comply with the above provisions or if the exchange offer
registration statement or the shelf registration statement fails to become
effective, then, as additional interest, amounts shall become payable in
respect of the old notes as follows:

(a) if (A) neither the exchange offer registration statement nor the
shelf registration statement is filed with the Commission within 120 days
following November 14, 2000 or (B) notwithstanding that we have consummated
or will consummate an exchange offer, we are required to file a shelf
registration statement and such shelf registration statement is not filed
on or prior to the date required by the registration rights agreement, then
commencing on the day after either such required filing date, additional
interest shall accrue on the principal amount of the notes at a rate of
.25% per annum for the first 90 days immediately following each such filing
date, such additional interest rate increasing by an additional .25% per
annum at the beginning of each subsequent 90-day period; or

(b) if (A) neither the exchange offer registration statement nor a shelf
registration statement is declared effective by the Commission within 180
days following November 14, 2000 or (B) notwithstanding that we have
consummated or will consummate an exchange offer, we are required to file a
shelf registration statement and such shelf registration statement is not
declared effective by the Commission on or prior to the 60th day following
the date such shelf registration statement was filed, then, commencing on
the day after either such required effective date, additional interest
shall accrue on the principal amount of the notes at a rate of .25% per
annum for the first 90 days immediately following such date, such
additional interest rate increasing by an additional .25% per annum at the
beginning of each subsequent 90-day period; or

151

(c) subject to certain customary exceptions, if (A) we have not exchanged
exchange notes for all old notes validly tendered in accordance with the
terms of the exchange offer on or prior to June 12, 2001 or (B) if
applicable, the shelf registration statement has been declared effective
and such shelf registration statement ceases to be effective at any time
prior to November 14, 2002 (other than after such time as all notes have
been disposed of thereunder), then additional interest shall accrue on the
principal amount of the notes at a rate of .25% per annum for the first 90
days commencing on (x) June 13, 2001 in the case of (A) above, or (y) the
day such shelf registration statement ceases to be effective in the case of
(B) above, such additional interest rate increasing by an additional .25%
per annum at the beginning of each subsequent 90-day period.

However, the additional interest rate on the notes we may be required to pay
will not exceed in the aggregate 1.0% per annum. If we are required to pay
additional interest, the additional interest will cease to accrue:

(1) upon the filing of the exchange offer registration statement or a shelf
registration statement, in the case of clause (a) above,

(2) upon the effectiveness of the exchange offer registration or a shelf
registration statement, in the case of clause (b) above,

(3) upon the exchange of exchange notes for all old notes tendered,in the
case of clause (c)(A) above, or

(4) upon the effectiveness of the shelf registration statement which had
ceased to remain effective, in the case of clause (c)(B) above.

Any amounts of additional interest due pursuant to clause (a), (b) or (c)
above will be payable in cash on the same original interest payment dates as
the old notes.

Because we filed the exchange offer registration statement of which this
prospectus forms a part on the 122nd day instead of the 120th day following
the issuance of the old notes, we are required under the registration rights
agreement to pay additional interest on the old notes for two days at a rate
of .25% per annum. We will pay this additional interest of $2,777.78 in the
aggregate, or $0.014 per $1,000 principal amount of old notes, to holders of
the old notes on May 15, 2001, together with the first semiannual interest
payment.

152

U.S. FEDERAL INCOME TAX CONSIDERATIONS

General

The following is a summary of material U.S. Federal income tax consequences
of the exchange of old notes for exchange notes pursuant to the exchange
offer, but does not address any other aspects of U.S. Federal income tax
consequences to holders of old notes or exchange notes. This summary is based
upon the Internal Revenue Code of 1986, as amended, existing and proposed
regulations thereunder, and published rulings and court decisions, all as in
effect and existing on the date hereof and all of which are subject to change
at any time, which change may be retroactive. This summary is not binding on
the Internal Revenue Service or on the courts, and no ruling will be requested
from the Internal Revenue Service on any issues described below. There can be
no assurance that the Internal Revenue Service will not take a different
position concerning the matters discussed below and that such positions of the
Internal Revenue Service would not be sustained.

Except as expressly stated otherwise, this summary applies only to U.S.
holders that exchange old notes for exchange notes in the exchange offer and
who hold the old notes as capital assets. It does not address the tax
consequences to taxpayers who are subject to special rules (such as financial
institutions, tax-exempt organizations and insurance companies). A "U.S.
holder" means a beneficial owner of a note who purchased the notes pursuant to
the offering and is, for U.S. Federal income tax purposes

. a citizen or resident of the United States;

. a corporation, partnership or other entity created or organized in or
under the laws of the United States or any political subdivision thereof;

. an estate the income of which is subject to U.S. Federal income taxation
regardless of its source; or

. a trust if

--a court within the United States is able to exercise primary
supervision over the administration of the trust and

--one or more U.S. fiduciaries have the authority to control all
substantial decisions of the trust.

Persons considering the exchange of old notes for exchange notes should
consult their own tax advisors concerning the U.S. Federal income tax
consequences in light of their particular situations as well as any
consequences arising under the laws of any other taxing jurisdiction.

Exchange of an Old Note for an Exchange Note Pursuant to the Exchange Offer

The exchange by any holder of an old note for an exchange note will not
constitute a taxable exchange for U.S. Federal income tax purposes.
Consequently, no gain or loss will be recognized by holders that exchange old
notes for exchange notes pursuant to the exchange offer. For purposes of
determining gain or loss upon the subsequent sale or exchange of exchange
notes, a holder's tax basis in an exchange will be the same as such holder's
tax basis in the old note exchanged therefor. Holders will be considered to
have held the exchange notes from the time of their acquisition of the old
notes.

153

PLAN OF DISTRIBUTION

Until 90 days after the date of this prospectus, all dealers effecting
transactions in the exchange notes, whether or not participating in this
distribution, may be required to deliver a prospectus. This is in addition to
the obligation of dealers to deliver a prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.

Each broker-dealer that receives exchange notes for its own account pursuant
to the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of such exchange notes. This prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of exchange notes received in exchange for old
notes only 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 from the date on which the exchange offer is consummated, it will
make this prospectus, as amended or supplemented, available to any broker-
dealer for use in connection with any such resale.

We will not receive any proceeds from any sale of exchange notes by broker-
dealers. Exchange notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the exchange notes or a combination of such
methods of resale, at prices related to such prevailing market prices or at
negotiated prices. Any such resale may be made directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer or the purchasers of
any exchange notes. Any broker-dealer that resells exchange notes that were
received by it for its own account pursuant to the exchange offer and any
broker or dealer that participates in a distribution of such exchange notes
may be deemed to be an "underwriter" within the meaning of the Securities Act
and any profit on any such resale of exchange notes and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The letter of transmittal states that
by acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.

For a period of 180 days from the date on which the exchange offer is
consummated, we will promptly send additional copies of this prospectus and
any amendment or supplement to this prospectus to any broker-dealer that
requests such documents in the letter of transmittal. We have agreed to pay
all expenses incident to the exchange offer, other than commissions or
concessions of any broker-dealers and will indemnify the holders of the notes,
including any broker-dealers, against certain liabilities, including
liabilities under the Securities Act.

LEGAL MATTERS

The validity of the exchange notes will be passed upon for RPP LLC and RPP
Capital by O'Sullivan Graev & Karabell, LLP, New York, New York.

EXPERTS

The Consolidated and Combined Financial Statements of Resolution Performance
Products LLC, included in this prospectus, except as they relate to Shell
Nederland Chemie B.V.'s Resins Business, at June 30, 2000 and December 31,
1999 and for the six months ended June 30, 2000 and the years ended December
31, 1999 and 1998, have been audited by PricewaterhouseCoopers LLP,
independent accountants, and insofar as they relate to Shell Nederland Chemie
B.V.'s Resins Business at June 30, 2000 and for the six months ended June 30,
2000 and the years ended December 31, 1999 and 1998, have been audited by KPMG
Accountants N.V., independent auditors as stated in their reports appearing
herein. Such financial statements have been so included in reliance on the
reports of such independent accountants and auditors given on the authority of
such firms as experts in auditing and accounting.

154

WHERE YOU CAN FIND MORE INFORMATION

We will be required to file annual and quarterly reports and other
information with the Securities and Exchange Commission after the registration
statement described below is declared effective by the Commission. You may
read and copy any reports, statements and other information we file at the
Commission's public reference rooms in Washington, D.C., New York, New York,
and Chicago, Illinois. You may request copies of the documents, upon payment
of a duplicating fee, by writing the Public Reference Section of the
Commission. Please call 1-800-SEC-0330 for further information on the public
reference rooms. Our filings will also be available to the public from
commercial document retrieval services and at the web site maintained by the
Commission at http://www.sec.gov.

We have filed a registration statement on Form S-4 to register with the
Commission the exchange notes to be issued in exchange for the old notes. This
prospectus is part of that registration statement. As allowed by the
Commission's rules, this prospectus does not contain all of the information
you can find in the registration statement or the exhibits to the registration
statement. You should note that where we summarize in the prospectus the
material terms of any contract, agreement or other document filed as an
exhibit to the registration statement, the summary information provided in the
prospectus is less complete than the actual contract, agreement or document.
You should refer to the exhibits filed to the registration statement for
copies of the actual contract, agreement or document.

We have not authorized anyone to give you any information or to make any
representations about us or the transactions we discuss in this prospectus
other than those contained in this prospectus. If you are given any
information or representations about these matters that is not discussed in
this prospectus, you must not rely on that information. This prospectus is not
an offer to sell or a solicitation of an offer to buy securities anywhere or
to anyone where or to whom we are not permitted to offer or sell securities
under applicable law.

155

Index To Financial Statements

Page
----

Resolution Performance Products LLC

Consolidated and Combined Financial Statements

As of December 31, 2000 and 1999 and for each of the three years in the
period ended December 31, 2000

Report of PricewaterhouseCoopers LLP, Independent Accountants........... F-2

Independent Auditors' Report of KPMG Accountants N.V.................... F-3

Independent Auditors' Report of KPMG Accountants N.V. .................. F-4

Consolidated and Combined Balance Sheets as of December 31, 2000 and
1999................................................................... F-5

Consolidated and Combined Statements of Income and Comprehensive Income
for each of the three years in the period ended December 31, 2000...... F-6

Consolidated and Combined Statements of Owner's Equity (Deficit) and
Accumulated Other Comprehensive Loss for each of the three years in the
period ended December 31, 2000 ........................................ F-7

Consolidated and Combined Statements of Cash Flows for each of the three
years in the period ended December 31, 2000 ........................... F-8

Notes to Consolidated and Combined Financial Statements................. F-9

F-1

Report of Independent Accountants

To the Board of Managers and Owner of
Resolution Performance Products LLC

In our opinion, based on our audits and the reports of other auditors, the
accompanying consolidated and combined balance sheet and the related
consolidated and combined statements of income and comprehensive income,
owner's equity and accumulated other comprehensive loss and cash flows present
fairly, in all material respects, the financial position of Resolution
Performance Products LLC and its predecessor, the Shell Chemicals' Resins
Business (the Resins Business) at December 31, 2000 and 1999, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of Resolution Performance Products LLC management and
management of the Resins Business; our responsibility is to express an opinion
on these financial statements based on our audits. We did not audit the
financial statements of the Resins Business's manufacturing and marketing
operations in The Netherlands, for any period prior to July 1, 2000. The
Resins Business's manufacturing and marketing operations in The Netherlands
had total assets of $234 million and $251 million at June 30, 2000, and
December 31, 1999, respectively, and total revenues of $173 million, $330
million and $341 million for the six months ended June 30, 2000 and for the
years ended December 31, 1999 and 1998, respectively. Those statements were
audited by other auditors whose reports thereon have been furnished to us, and
our opinion expressed herein, insofar as it relates to the amounts included
for those operations, is based solely on the report of the other auditors. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America which require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits and the report of other
auditors provide a reasonable basis for our opinion.

As described in Note 3 to the Consolidated and Combined Financial
Statements, the Resins Business had significant transactions and relationships
with affiliated entities. Because of these relationships, it is possible that
the terms of these transactions were not the same as those that would result
from transactions among wholly unrelated parties. Furthermore, as discussed in
Notes 1 and 3, the Consolidated and Combined Financial Statements include
various cost allocations and management estimates based on assumptions that
management believed were reasonable under the circumstances. However, these
allocations and estimates are not necessarily indicative of the costs and
expenses that would have resulted had Resolution Performance Products LLC been
operated as a separate entity.

As discussed in Note 4 to the Consolidated and Combined Financial
Statements, effective for the year ended December 31, 2000, the Company has
given retroactive effect to the change in its method of accounting for its
inventories in the United States from LIFO (last-in, first-out) method to the
FIFO (first-in, first-out) method.

/s/ PricewaterhouseCoopers LLP
Houston, Texas

March 15, 2001

F-2

Independent Auditors' Report

To the Board of Directors and Shareholder of
Shell Nederland Chemie B.V.

We have audited the balance sheet as at 30 June 2000 and the related
statements of income, comprehensive income and owner's net investment and of
cash flows, for the six month period 30 June 2000, of Shell Nederland Chemie
B.V.'s Resins Business ("SNC Resins Business"), not separately presented
herein. We did not audit the statements of income, comprehensive income and
owner's net investment and of cash flows for the six-month period ended 30
June 1999. These financial statements are the responsibility of Shell
Nederland Chemie B.V.'s and SNC Resins Business' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the SNC Resins Business as
at 30 June 2000 and the results of its operations and its cash flows for the
six month period ended 30 June 2000, in conformity with generally accepted
accounting principles in the United States.

As described in Note 3 to the financial statements, the SNC Resins Business
has significant transactions and relationships with affiliated entities.
Because of these relationships, it is possible that the terms of these
transactions are not the same as those that would result from transactions
among unrelated third parties. Furthermore, as described in notes 1 and 3, the
financial statements include various cost allocations and management estimates
based on assumptions that management believe are reasonable under the
circumstances. These allocations and estimates, however, are not necessarily
indicative of the costs and expenses, assets or liabilities that would have
resulted had the SNC Resins Business been operated as a separate entity.

Rotterdam, The Netherlands, 15 September 2000

(except for Note 10.5 which is as of 27 October 2000)

/s/ KPMG Accountants N.V.

F-3

Independent Auditors' Report

To the Board of Directors and Shareholder of
Shell Nederland Chemie B.V.

We have audited the balance sheet as at 31 December 1999, and the related
statements of income, comprehensive income and owner's net investment and of
cash flows, for each of the years in the two-year period ended 31 December
1999, of Shell Nederland Chemie B.V.'s Resins Business ("SNC Resins
Business"), not separately presented herein. These financial statements are
the responsibility of Shell Nederland Chemie B.V.'s and SNC Resins Business'
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the SNC Resins Business as
at 31 December 1999, and the results of its operations and its cash flows for
each of the years in the two-year period ended 31 December 1999, in conformity
with generally accepted accounting principles in the United States.

Rotterdam, The Netherlands, 31 March 2000

(except for Note 10.5 which is as of 27 October 2000)

/s/ KPMG Accountants N.V.

F-4

RESOLUTION PERFORMANCE PRODUCTS LLC

CONSOLIDATED AND COMBINED BALANCE SHEET

December 31, 2000 and 1999
(in millions of U.S. dollars)

2000 1999
---- ----

Assets
Current assets:
Cash and cash equivalents........................................ $ 19 $ --
Receivables, less allowance for doubtful accounts of $3 and $0,
respectively.................................................... 148 127
Due from related parties......................................... 3 7
Prepaid assets................................................... 6 --
Inventories, less allowance for inventory obsolescence of $7 and
$0, respectively................................................ 149 158
Deferred income taxes............................................ 1 2
---- ----
Total current assets........................................... 326 294
Property, plant and equipment, at cost, less accumulated
depreciation...................................................... 411 432
Intangible assets, at cost, less accumulated amortization.......... 20 4
Investments in equity affiliates................................... 10 12
Deferred income taxes.............................................. 25 1
---- ----
Total assets................................................... $792 $743
==== ====
Liabilities and Owner's Equity (Deficit) and
Accumulated Other Comprehensive Loss
Current liabilities:
Accounts payable--trade.......................................... $118 $ 45
Other payables and accruals...................................... 27 19
Due to related parties........................................... -- 2
Deferred income taxes............................................ -- 8
Current portion of long-term debt................................ 7 --
---- ----
Total current liabilities...................................... 152 74
Deferred income taxes.............................................. 5 90
Pensions and other retirement plan obligations..................... 27 15
Long-term debt..................................................... 674 --
---- ----
Total liabilities.............................................. 858 179
Commitments and contingencies (Notes 10 and 11).................... -- --
Owner's Equity (deficit)
Member Interest
1,000,000 units authorized, 1,000,000 units issued............... -- --
Predecessor Owner's Investment................................... -- 636
Accumulated Deficit.............................................. (37) --
Accumulated Other Comprehensive Loss............................. (29) (72)
---- ----
Total Owner's Equity............................................. (66) 564
==== ====
Total liabilities and owner's equity (deficit) and accumulated
other comprehensive loss...................................... $792 $743
==== ====

The accompanying notes are an integral part of these financial statements.

F-5

RESOLUTION PERFORMANCE PRODUCTS LLC

CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME

Years Ended December 31, 2000, 1999 and 1998
(in millions of U.S. dollars)

1999 1998
As adjusted As adjusted
2000 (See Note 4) (See Note 4)
---- ------------ ------------

Revenues....................................... $949 $942 $995
Cost and Expenses:
Purchase and variable product costs.......... 579 510 540
Operating expenses........................... 166 182 197
Selling, general and administrative.......... 54 59 62
Depreciation and amortization................ 34 34 35
Research and development..................... 26 31 29
Special charges.............................. 49 6 24
---- ---- ----
Total...................................... 908 822 887
---- ---- ----
Operating income............................... 41 120 108
---- ---- ----
Income from equity investment.................. 3 2 1
Interest expense, net.......................... (9) -- --
---- ---- ----
Income before income taxes..................... 35 122 109
Income tax expense............................. (16) (45) (42)
---- ---- ----
Net income..................................... $ 19 $ 77 $ 67
==== ==== ====
Comprehensive income:
Net income..................................... $ 19 $ 77 $ 67
Currency translation gain (loss), net of tax... 43 (34) 17
---- ---- ----
Comprehensive income........................... $ 62 $ 43 $ 84
==== ==== ====

The accompanying notes are an integral part of these financial statements.

F-6

RESOLUTION PERFORMANCE PRODUCTS LLC

CONSOLIDATED AND COMBINED STATEMENTS OF
OWNER'S EQUITY (DEFICIT) AND ACCUMULATED OTHER COMPREHENSIVE LOSS

Years Ended December 31, 2000, 1999 and 1998
(in millions of U.S. dollars (except for units))

Accumulated Other
Member Predecessor Accumulated Comprehensive Income
Interest Owners Investment Deficit (Loss) Total
-------- ----------------- ----------- -------------------- -----

Balance, January 1,
1998, as adjusted...... $-- $ 683 $-- $(55) $628
Net cash distribution to
owners................. (149) (149)
Tax effect of
transaction among
owners.................
Net income.............. 67 67
Other comprehensive
income, net............ 17 17
---- ----- ---- ---- ----
Balance, December 31,
1998, as adjusted...... $-- $ 601 $-- $(38) $563
==== ===== ==== ==== ====
Balance, January 1,
1999, as adjusted...... $-- $ 601 $-- (38) $563
Net cash distribution to
owners................. (31) (31)
Tax effect of
transaction among
owners................. (11) (11)
Net income.............. 77 77
Other comprehensive
loss, net ............. $(34) (34)
---- ----- ---- ---- ----
Balance, December 31,
1999................... $-- $ 636 $-- $(72) $564
==== ===== ==== ==== ====
Balance, January 1,
2000, as adjusted...... $-- $ 636 $-- $(72) $564
Net cash distribution to
owners................. (61) (61)
Tax effect of
transaction among
owners................. 4 4
Net income for the
period January 1 to
October 31, 2000....... 47 47
Recapitalization through
the reissuance of
1,000,000 member
units.................. 626 (626) --
Capital contribution.... 200 200
Distribution to parent
after
recapitalization....... (826) (9) (835)
Net loss for the period
November 1 to December
31, 2000............... (28) (28)
Other comprehensive
income, net............ 43 43
---- ----- ---- ---- ----
Balance, December 31,
2000................... $-- $ -- $(37) $(29) $(66)
==== ===== ==== ==== ====

The accompanying notes are an integral part of these financial statements.

F-7

RESOLUTION PERFORMANCE PRODUCTS LLC

CONSOLIDATED AND COMBINED STATEMENT OF CASH FLOWS

Years Ended December 31, 2000, 1999 and 1998
(in millions of U.S. dollars)

2000 1999 1998
---- ----- -----

Cash flows provided by (used for) operating activities:
Net income............................................... $ 19 $ 77 $ 67
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 34 34 35
Gain on sale of assets................................. (2) -- --
Equity earnings in affiliates.......................... (3) -- --
(Increase) decrease in working capital:
Receivables.......................................... (21) (19) 4
Due from and owing to related parties................ 2 -- 1
Prepaid assets....................................... (6) -- --
Inventories.......................................... 9 36 14
Payables and accruals................................ 81 1 20
Deferred income taxes.................................. (11) 4 (2)
Pensions and other retirement plans obligations........ 12 -- --
Other non-current items................................ -- 1 (3)
---- ----- -----
Net cash provided by operating activities........... 114 134 136
---- ----- -----
Cash flows provided by (used for) investing activities:
Capital expenditures..................................... (18) (105) (59)
Purchase of Elenac....................................... (6) -- --
Proceeds from asset disposals............................ 2 -- 71
Distributions from equity affiliates..................... 5 2 1
---- ----- -----
Net cash (used for) provided by investing
activities......................................... (17) (103) 13
---- ----- -----
Cash flows provided by (used for) financing activities:
Net cash distributions to owner.......................... (61) (31) (149)
Purchase of owner's investment........................... (858) -- --
Proceeds from issuance of long-term debt................. 504 -- --
Proceeds from senior subordinated notes.................. 197 -- --
Payments on long-term debt............................... (28) -- --
Deferred finance costs................................... (17) -- --
Equity contributions..................................... 185 -- --
---- ----- -----
Net cash (used for) financing activities............ (78) (31) (149)
---- ----- -----
Net increase in cash and cash equivalents.................. 19 -- --
Cash and cash equivalents at beginning of year............. -- -- --
---- ----- -----
Cash and cash equivalents at end of year................... $ 19 $ -- $ --
---- ----- -----
Supplemental disclosures of cash flow information:
Cash paid during the period for interest................. $ 4 $ -- $ --
Cash paid during the period for income taxes............. -- 32 43
==== ===== =====

The accompanying notes are an integral part of these financial statements.

F-8

RESOLUTION PERFORMANCE PRODUCTS LLC

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

December 31, 2000, 1999 and 1998
(in millions of U.S. dollars)

1. Organization, Formation and Basis of Presentation

The Consolidated financial statements include the consolidated operations of
Resolution Performance Products LLC ("RPP LLC", or the "Company"), and its
wholly owned subsidiaries including RPP Capital Corporation ("RPP CC") since
November 1, 2000.

Prior to November 1, 2000, the financial statements include the operations
of the resins business ("Resins Business") of the Royal Dutch/Shell Group of
Companies ("Shell"). RPP LLC is a wholly owned subsidiary of Resolution
Performance Products, Inc. ("RPPI"). RPP CC is a wholly owned finance
subsidiary of RPP LLC that was formed in October 2000 to co-issue the 13 1/2%
Senior Subordinated Notes jointly and severally with RPP LLC. RPP CC has
nominal assets and no operations.

On November 14, 2000, with an effective date of November 1, 2000, RPP LLC
acquired the Resins Business from Shell. On the same dates, simultaneous with
the above acquisition, RPPI was acquired by RPP Holdings LLC, an affiliate of
Apollo Management IV, L.P. ("Apollo") in a recapitalization transaction. (See
Note 13).

The accompanying Consolidated and Combined Financial Statements are
presented in conformity with generally accepted accounting principles in the
United States ("U.S."). The accompanying Combined Financial Statements have
been prepared from Shell's historical accounting records and are presented on
a carve-out basis to include the historical operations applicable to the
Resins Business of Shell. In addition, the Combined Financial Statements have
been restated to reflect the accounting change from LIFO to FIFO method of
costing inventory. (See Note 4)

In July 1999, Shell commenced a corporate restructuring program in
preparation for the sale of the Resins Business. Under this program, all of
the Resins Business manufacturing operations and certain of its marketing
activities were transferred into new legal entities within the Shell Group.
This program included the transfer of the manufacturing operations in The
Netherlands, the U.S. and the United Kingdom to Shell Epoxy Resins LLC and
Shell Epoxy Resins Holdings B.V. and its various non-U.S. subsidiaries. No
gains or losses were recognized on the transfer of assets and operations
pursuant to this program, given the related party nature of such transactions.
The tax effects of these transactions, resulting from changes to the tax bases
of assets, have been recorded through owner's net investment.

The Consolidated and Combined Financial Statements include all revenues and
costs directly attributable to the Resins Business, including costs for
facilities, functions and services used by the Resins Business at shared Shell
sites and costs for certain functions and services performed by centralized
Shell organizations and directly charged to the Resins Business based on
usage. The results of operations also include allocations of Shell's general
corporate expenses.

In addition, Shell provided cash management services to the Resins Business
through centralized treasury systems. As a result, all charges and cost
allocations for facilities, functions and services performed by Shell
organizations for the Resins Business are deemed to have been paid by the
Resins Business to Shell, in cash, during the period in which the cost was
recorded in the Consolidated and Combined Financial Statements. Allocations of
current income taxes receivable or payable are deemed remitted, in cash, by or
to Shell in the year in which the related income taxes were recorded.

All of the allocations and estimates in the Consolidated and Combined
Financial Statements are based on assumptions that Shell management believes
are reasonable under the circumstances. However, these allocations

F-9

RESOLUTION PERFORMANCE PRODUCTS LLC

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)

December 31, 2000, 1999 and 1998
(in millions of U.S. dollars)
and estimates are not necessarily indicative of the costs and expenses that
would have resulted if the Resins Business had been operated as a separate
entity. It is not practicable to estimate the costs and expenses that would
have resulted on a stand-alone basis.

The Company is engaged in manufacturing and marketing resins in the U.S. and
internationally. Resins include epoxy resins, Versatic acids and derivatives.
Epoxy resins are chemicals primarily used in the manufacture of coatings,
adhesives, printed circuit boards, fiber reinforced plastics and construction
materials.

Products containing epoxy resins serve a wide range of end-users, including
automotive, aerospace, electrical, construction and industrial maintenance.
Versatic acid and derivatives are specialty products that complement epoxy
resins product offerings in the coatings, adhesives and construction
industries.

2. Significant Accounting Policies

Principles of Consolidation and Combination

The accompanying Consolidated Financial Statements include the accounts of
RPP LLC and its subsidiaries. The Combined Financial Statements include the
accounts of the resin business of Shell. Corporate joint ventures are
accounted for using the equity method. All significant intercompany
transactions and accounts have been eliminated in consolidation.

Cash and Cash Equivalents

Cash equivalents consist of highly liquid investments that are readily
convertible into cash and have a maturity of three months or less at the date
of acquisition.

Inventories

Inventories primarily include product, materials and supplies. The
inventories are valued at the lower of cost or net realizable value. The
Company uses the FIFO method to cost its inventories. (See Note 4)

Inventory exchange transactions, which involve homogeneous commodities in
the same line of business and do not involve the payment or receipt of cash,
are not accounted for as a purchase or a sale. Any resulting volumetric
exchange balances are accounted for as part of accrued liabilities or
receivables. As of December 31, 2000 and 1999, amounts reclassified as part of
accrued liabilities were $1 and $1, respectively.

Property, Plant and Equipment

Property, plant and equipment is carried at cost, net of accumulated
depreciation. Depreciation is computed on a straight-line basis over the
estimated useful lives of the respective assets. Estimated useful lives for
plant and equipment, office buildings, tanks and pipelines are 20 years and
range from three to ten years for other assets. Gains or losses from
retirements or sales are recognized in income. Expenditures for maintenance
and repairs, including major plant maintenance (turnaround), are expensed as
incurred. Replacements and improvements are capitalized.

F-10

RESOLUTION PERFORMANCE PRODUCTS LLC

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)

December 31, 2000, 1999 and 1998
(in millions of U.S. dollars)

Intangible Assets

Intangible assets consist primarily of patents, which are being amortized on
a straight-line basis over periods ranging from 6 to 17 years. The intangible
assets totaled $3 and $4, net of accumulated amortization of $9 and $8, at
December 31, 2000 and 1999, respectively.

Other intangibles include deferred financing costs of $17 and $0, net of
accumulated amortization of $0 at each of December 31, 2000 and 1999. Deferred
financing costs are being amortized over 5 to 10 year financing terms and are
recorded as interest expense.

Impairment of Long-Lived Assets

The carrying values of long-lived assets and intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of the
carrying value of an asset is assessed by reference to an estimate of the
asset's undiscounted future net cash flows. Measurement of any impairment
would include a comparison of discounted estimated future net cash flows to
the net carrying value of the related assets.

Revenue Recognition

Revenues associated with sales of chemical products are recorded when title
passes to the customer upon delivery. Provisions for discounts and rebates to
customers, and returns are provided for in the same period the related sales
are recorded.

Research and Development Costs

Internal research and development costs are expensed as incurred.

Income Taxes

The Company provides for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes ("SFAS
109"). SFAS 109 requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of temporary differences
between the financial statement carrying amounts and the tax basis of the
assets and liabilities.

Prior to recapitalization of the Company, the Resins Business of Shell, and
the related tax effects thereof, are included in a number of tax returns
submitted by various Shell operating companies. There is no formal tax
allocation agreement between the various Shell operating companies and the
Resins Business. Accordingly, the tax amounts reflected in these Combined
Financial Statements have been allocated based on the amounts expected to be
paid or received from the various Shell operating companies filing tax returns
in which the Resins Business is included, with net operating loss and credit
carryforwards recorded in the event such benefits are expected to be realized
by the Shell operating companies. The provision for income taxes represents
income taxes deemed paid or received for the current year plus the change in
deferred taxes during the year, excluding effects related to Shell's corporate
restructuring program. The pro forma effect on the Consolidated and Combined
Statement of Income and Comprehensive Income, Owner's Equity and Accumulated
Other Comprehensive Loss of reflecting the provision for income taxes on a
separate return basis is not material.

Deferred taxes result from differences between the financial and tax bases
of Shell's Resins Business's assets and liabilities, and are adjusted for
changes in tax rates and tax laws when changes are enacted. Valuation

F-11

RESOLUTION PERFORMANCE PRODUCTS LLC

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)

December 31, 2000, 1999 and 1998
(in millions of U.S. dollars)
allowances are recorded to reduce deferred tax assets when it is more likely
than not that a tax benefit will not be realized by the relevant Shell
operating company.

Stock-Based Compensation

RPPI grants stock options to employees of the Company for a fixed number of
shares with an exercise price no less than the fair value of the shares at the
date of grant. The Company accounts for such stock option grants in accordance
with Financial Accounting Standards Board No. 123, Accounting for Stock-Based
Compensation ("FAS 123"), which permits the measurement of compensation
expense in accordance with Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees ("APB 25"), and the Company has
elected to follow APB 25.

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses and the disclosures of contingent assets
and liabilities. Although management believes these estimates are reasonable,
actual results could differ from those estimates.

Risks and Uncertainties

The Company has operations in approximately 13 countries, and in each
country, the business is subject to varying degrees of risk and uncertainty.
The Company insures its business and assets against insurable risks in a
manner that it deems appropriate. Because of its diversity, the Company
believes that the risk of loss from non-insurable events in any one business
or country would not have a material, adverse effect on its operations as a
whole. Additionally, management believes there is no material concentration of
risk within any single customer or supplier, except for Shell, or small group
of customers or suppliers, whose failure or nonperformance would materially
affect the Company's results.

Foreign Currency Transactions

For the Company's operations outside the U.S., where the local currency is
considered to be the functional currency, those operations are translated into
U.S. dollars using the exchange rate at each balance sheet date for assets and
liabilities; the average exchange rate is utilized for each period for
revenues, expenses, gains and losses and cash flows. The effects of
translating such operations into U.S. dollars are included as a component of
comprehensive income and owner's equity. A substantial amount of assets and
liabilities outside the United States are denominated in the Netherland
Guilder. The U.S. dollar to The Netherland Guilder exchange rate was 2.37,
2.19 and 1.89 at December 31, 2000, 1999 and 1998, respectively. The effects
of remeasuring those operations where the U.S. dollar is used as the
functional currency, and all related transaction gains and losses, are
reflected in current earnings.

The Company may utilize forward exchange contracts to hedge foreign currency
transaction exposures. Gains and losses on hedging contracts are deferred and
included in the measurement of the related transaction. The fair value of open
forward exchange contracts was not significant at December 31, 2000 and 1999.

F-12

RESOLUTION PERFORMANCE PRODUCTS LLC

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)

December 31, 2000, 1999 and 1998
(in millions of U.S. dollars)

Environmental Costs

Environmental costs relating to current operations are expensed or
capitalized, as appropriate, depending on whether such costs provide future
economic benefits. Liabilities are recognized when the costs are considered
probable and can be reasonably estimated. Measurement of liabilities is based
on currently enacted laws and regulations, existing technology and
undiscounted, site-specific costs. Environmental liabilities in connection
with properties which are sold or closed are realized upon such sale or
closure, to the extent they are probable and estimable and not previously
reserved. In assessing environmental liabilities, no set-off is made for
potential insurance recoveries. Recognition of any joint and several liability
is based upon the Company's best estimate of its final pro rata share of the
liability.

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, as amended by SFAS 137 and 138, and is effective for the Company as
of January 1, 2001. SFAS 133, as amended by SFAS 138, requires that all
derivative instruments be recorded on the balance sheet at their fair value.
Changes in the fair value of derivatives are recorded each period in current
earnings or other comprehensive income, depending on whether a derivative is
designated as part of a hedge transaction and, if it is, the type of hedge
transaction. The adoption of these policies will have no material impact on
the Company's operations.

Reclassifications

Certain reclassifications were made to prior year amounts in order to
conform with the current year's presentation.

3. Transactions With Related Parties

The Company and its predecessor have entered into transactions with
subsidiaries and affiliates of the Royal Dutch/Shell Group of Companies. All
transactions were entered into in the ordinary course of business. Upon
consummation of the recapitalization, Shell, while owning a 6.8% fully diluted
ownership interest in RPPI, has no operational controls or board of director
representation, and therefore is no longer considered a related party. The
aggregate amounts of related party transactions were as follows for the years
ended December 31, 2000, 1999 and 1998:

2000 1999 1998
---- ---- ----

Revenues................................................... $ 18 $ 33 $ 31
Cost and expenses:
Purchases and variable products costs.................... 308 234 279
Operating expenses....................................... 85 66 67
Selling, general and administrative expenses............. 25 39 60
Research and development expenses........................ 17 14 18

Revenues

Sales to related parties are derived largely from the sale of finished
products. Amounts due from related parties were $3 and $7 at December 31, 2000
and 1999, respectively.

Costs and Expenses

The Company purchases a significant portion of its primary feedstocks from
Shell. In instances where the Business's manufacturing facilities are operated
as part of a larger Shell petrochemical and refining

F-13

RESOLUTION PERFORMANCE PRODUCTS LLC

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)

December 31, 2000, 1999 and 1998
(in millions of U.S. dollars)
complex, Shell may also provide site services, utilities, materials,
facilities and operatorship services. Research and development activities are
performed largely by the Company's employees at Shell's technology centers in
the United States and The Netherlands. In addition, Shell provided various
corporate services (such as cash management, legal, marketing, benefit plans
and other financial services) to the Resins Business.

Prior to the recapitalization, the costs of services were directly charged
to or allocated between the Resins Business and other divisions of Shell,
using methods which Shell's management considered reasonable. Allocation
methods include proportionate allocation on the basis of assets, production
volumes, usage, revenues and employees. Such charges and allocations are not
necessarily indicative of amounts that would have been incurred had the Resins
Business operated as a separate entity. As of the recapitalization, all
transactions between Shell and the Company are governed by written contractual
agreements that clearly define all goods and services to be delivered and the
costs for such goods and services.

All charges and cost allocations for facilities, functions and services
performed by Shell organizations for the Resins Business are deemed to have
been paid by the Resins Business to Shell, in cash, during the period in which
the cost was recorded in the Combined Financial Statements. Since the Resins
Business was in a net receivable position from Shell due to the cash
management agreement, no interest expenses were provided. Amounts owing to
related parties were $0 and $2 at December 31, 2000 and 1999, respectively.

The Company has significant transactions and relationships with affiliated
entities. Because of these relationships, it is possible that the terms of
these transactions are not the same as those that would result from
transactions among wholly unrelated parties.

On November 14, 2000, certain officers of the Company issued notes payable
totaling $1 to the Company to purchase stock of RPPI.

The Company entered into a management agreement with Apollo for management
consulting services. Under the agreement, Apollo shall advise the Company
concerning such management matters that relate to proposed financial
transactions, acquisitions and other senior management matters related to the
business, administration and policies of the Company.

As consideration, the Company has agreed to pay Apollo an annual fee of $1
payable in equal quarterly installments of $0.250.

4. Inventories of Products

Product inventories are valued at the lower of cost or net realizable value,
cost being determined using either a weighted-average or FIFO method.
Effective November 1, 2000, the Company changed its inventory accounting
policy in the U.S. from LIFO (Last In First Out) to FIFO (First In First Out).
The change was made to provide better matching of revenues and expenses.

A retroactive restatement of prior year's financial statements was made to
present financial results on a consistent basis. The change increased
/(decreased) cost of sales previously reported by the following amounts:

1998.................. $ 3
1999.................. $(7)

The cumulative effect on Owner's Equity at December 31, 1997 of this
accounting change was an increase of $19.

F-14

RESOLUTION PERFORMANCE PRODUCTS LLC

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)

December 31, 2000, 1999 and 1998
(in millions of U.S. dollars)
Total inventories at December 31, 2000 were comprised of the following:

2000 1999
---- ----

Raw materials.................. $ 17 $ 5
Finished products.............. 121 137
Materials and supplies......... 11 16
---- ----
Total........................ $149 $158
==== ====

5. Property, Plant and Equipment

Property, plant and equipment consists primarily of manufacturing assets as
follows:

December 31,
-------------
2000 1999
------ -----

Plant and equipment...................... $ 983 $ 918
Office buildings......................... 32 29
Other assets............................. 32 50
------ -----
Total.................................. $1,047 $ 997
Less: accumulated depreciation .......... (636) (565)
------ -----
Net property, plant and equipment ....... $ 411 $ 432
====== =====

Effective January 1, 1998, the useful life for the Resins Business's
European manufacturing facilities was changed from 10 years to 20 years. This
change in estimate reduced 1998 depreciation expense by approximately $22.

6. Investments in Equity Affiliates

Investments in affiliates, accounted for using the equity method, are as
follows as of December 31, 2000 and 1999:

Country of Percentage
Joint venture incorporation holding 2000 1999
------------- ------------- ---------- ---- ----

Japan Epoxy Resins (formerly Yuka Shell
Epoxy k.k)................................ Japan 50% $10 $ 9
Resins manufacturing operations of Elenac
Gmbh)..................................... Germany 50% -- 3
--- ---
$10 $12
=== ===

On March 31, 2000, Shell purchased the remaining 50% resin manufacturing
operations and inventory of Elenac Gmbh for $6.

7. Income Taxes

The income tax expense consists of the following:

2000 1999 1998
---- ---- ----

U.S. and other income taxes:
Current income tax--U.S............ $ 12 $34 $37
Current income tax--outside U.S.... 14 7 7
Deferred income tax--U.S........... (12) (1) (5)
Deferred income tax--outside U.S... 2 5 3
---- --- ---
Total............................ $ 16 $45 $42
==== === ===

F-15

RESOLUTION PERFORMANCE PRODUCTS LLC

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)

December 31, 2000, 1999 and 1998
(in millions of U.S. dollars)
Deferred income taxes are provided for the temporary differences between the
book and tax bases of the Resins Business's assets and liabilities.
Significant components of deferred tax assets and liabilities as of December
31, 2000 and 1999 are as follows:

2000 1999
---- -----

Deferred tax assets:
Environmental liabilities and other............................ $ 1 $ 1
Tax carryforwards.............................................. -- 9
Employee related accruals...................................... 25 --
--- -----
Total deferred tax assets................................ 26 10
--- -----
Deferred tax liabilities:--
Items associated with capitalized costs:
Expenditures and other..................................... (5) (84)
Transactions with shareholders............................. -- (11)
Inventory.................................................... -- (10)
--- -----
Total deferred tax liabilities........................... (5) (105)
--- -----
Net deferred tax asset (liabilities)........................... $21 $ (95)
=== =====

Historically, our operations have been included in the tax returns submitted
by various Shell operating companies. The tax amounts reflected in our
historical results have been allocated based on the amounts expected to be
paid or received from the various Shell operating companies filing tax returns
in which our operations were included. As of December 31, 2000, we have
accrued for income taxes and income taxes will consist of deferred and current
income taxes. Additionally, we will make a Section 338(h)(10) election to
allow our recapitalization to be treated as an acquisition of assets for tax
purposes. Accordingly, for tax purposes the bases of our U.S. assets will be
stepped-up to their fair market values, and we will be able to depreciate our
assets using higher bases than the historical amount. This tax basis step-up
will reduce cash payments for income taxes over the next five years.

The corporate restructuring program (see Note 1) resulted in changes in the
tax bases of certain of the Resins Business assets. Due to the related party
nature of this restructuring, the changes in the deferred tax balances
relating to these changes in the tax bases have been recorded through owner's
equity. A deferred tax liability of $11 resulted from the tax bases changes
for the year ended December 31, 1999. A deferred tax asset of $115 resulted
from the bases changes for the year ended December 31, 2000.

Deferred tax assets and liabilities are recorded in the accompanying
Consolidated and Combined Balance Sheet as follows:

2000 1999
---- ----

Current assets............... $ 1 $ 2
Noncurrent assets............ 25 1
Current liabilities.......... -- (8)
Noncurrent liabilities....... (5) (90)
--- ----
$21 $(95)
=== ====

F-16

RESOLUTION PERFORMANCE PRODUCTS LLC

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)

December 31, 2000, 1999 and 1998
(in millions of U.S. dollars)

Total income tax expense for the years 2000, 1999 and 1998 was equivalent to
effective tax rates of %, 36% and 39%, respectively. Income before income
taxes attributable to U.S. and non-U.S. operations was as follows:

2000 1999 1998
---- ---- ----

U.S..................... $(5) $ 96 $ 81
Non-U.S................. 40 33 25
--- ---- ----
$35 $129 $106
=== ==== ====

Reconciliation of actual tax expense to the expected tax expense calculated
at the U.S. statutory rate (35%) is as follows:

2000 1999 1998
---- ---- ----

Tax at 35%................................................. $ 12 $44 $38
Non-deductible expenditures................................ 1 -- --
U.S. state taxes........................................... (1) 2 4
Benefit of Foreign Sales Corporation....................... 2 (2) (1)
Effect of different tax rates in non-U.S. jurisdictions.... 2 1 1
---- --- ---
Total.................................................... $ 16 $45 $42
==== === ===

8. Pension Plans, Other Postretirement Benefits and 401(k) Plan

Effective December 1, 2000, the Company began providing defined pension and
other post-retirement benefit plans to employees in the U.S. and
internationally. Approximately 531 employees in the U.S. and 415 employees
internationally participate in these plans. The following table provides a
reconciliation of benefit obligations, plan assets and the funded status of
the plans for the year ended December 31, 2000:

Pension Other
Benefits Benefits
--------- ---------

Change in benefits obligation
Benefits obligation at beginning of year............ $ 76 $ 19
Service and interest cost........................... 1 1
--------- ---------
Benefits obligation at end of year.................. $ 77 $ 20
--------- ---------
Change in plan assets
Fair value of plan assets at beginning of year...... $ 70 $ --
--------- ---------
Fair value of plan assets at end of year............ $ 70 $ --
--------- ---------
Funded status....................................... (7) --
Unrecognized net transition obligation / (asset).... -- (20)
Unrecognized net actuarial loss / (gain)............ -- --
Unrecognized prior service cost..................... -- --
--------- ---------
Prepaid (accrued) benefit cost...................... $ (7) $ (20)
========= =========
Weighted-average assumptions as of December 31, 2000
Discount rate....................................... 3.5%-7.8% 0.0%-7.8%
Expected return on plan assets...................... 8.0%-9.5% 0.0%-9.5%
Rate of compensation increase....................... 2.0%-4.5% 0.0%-4.5%
Net periodic benefit cost........................... $ -- $ --
========= =========

F-17

RESOLUTION PERFORMANCE PRODUCTS LLC

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)

December 31, 2000, 1999 and 1998
(in millions of U.S. dollars)

Effective December 1, 2000, the Company established a 401(k) plan or a
savings plan as an additional retirement and income tax reduction facility.
Full time employees are eligible to participate immediately. Employees may
make pre-tax and after-tax contributions ranging from 1% to 16% and 1% to 21%,
respectively. Employees are eligible to participate in the Company
contributions after completion of two years of service. Company contributions
range from 3, 5 and 10 percent after completion of service of 2, 5 and 9
years, respectively. Company contributions amounted to less than $1 for the
year ended December 31, 2000.

Prior to the recapitalization, certain of the Resin Business's U.S.
employees participated in the Shell Oil Company Pension Plan (a defined
benefit plan) and the Shell Provident Fund (a defined contribution plan). The
Resins Business's allocated share of contributions to these plans was $2 in
each of 2000, 1999 and 1998.

Prior to the recapitalization, substantially all of the Resins Business U.S.
employees participate in Shell Oil Company sponsored postretirement benefit
plans that provided healthcare and life insurance benefits for retirees and
their eligible dependents. Such plans are unfunded, and the costs are shared
by Shell Oil Company and its employees. The Resins Business allocated share of
expense for such postretirement plans was $1 in each of 2000, 1999 and 1998.

Prior to the recapitalization, certain of the Resins Business employees
based outside the U.S. participated in various Shell defined benefit and
defined contribution pension schemes and postretirement benefit plans. The
Resins Business allocated share of contributions to these plans was $0, $2 and
$2 in 2000, 1999 and 1998, respectively.

Pension and other retirement obligations related to the aforementioned
funded pension plan and unfunded OPEB plan totaled $27 and $15 as of December
31, 2000 and 1999, respectively.

9. Long-term Debt

Long-term debt at December 31, 2000, consisted of the following (in
millions):

Senior Subordinated Notes, net of discount....... $ 197
Term Loan A...................................... 108
Term Loan B...................................... 350
European Revolver................................ 23
US Revolver...................................... 3
-----
Total long-term debt............................. $ 681
Less current portion of long-term debt .......... (7)
-----
$ 674
=====

In November 2000, RPP LLC and RPP Capital Corporation issued $200 aggregate
principal amount of 13 1/2% Senior Subordinated Notes due November 15, 2010
(the "Notes") in a private offering pursuant to Rule 144A under the Securities
Act of 1933. The Notes were issued at a discount of $3, for a total of $197 in
net proceeds. The Notes may be redeemed in whole at any time or in part from
time to time, on and after November 15, 2005, at specified redemption prices.

The Notes are general unsecured obligations ranking subordinate in right of
payment to all existing and future senior debt. The proceeds from the issuance
of the Notes were used to finance the recapitalization and

F-18

RESOLUTION PERFORMANCE PRODUCTS LLC

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)

December 31, 2000, 1999 and 1998
(in millions of U.S. dollars)
certain related transaction costs and expenses. Interest on the Notes is
payable semi-annually in cash on each May 15 and November 15.

On November 14, 2000, RPPI, RPP LLC, RPP Capital Corporation, and Resolution
Nederland BV entered into a $600 Credit Facility with a syndicate of financial
institutions. The Credit Facility provides for a six-year Euro equivalent $100
(at issuance) term loan (Term Loan A) and an eight-year $350 term loan (Term
Loan B). Each Term Loan was fully drawn at closing and used to finance the
recapitalization and certain related costs and expenses. In addition, the
Credit Facility provides a six-year, $150 revolving credit facility, the euro
equivalent of which is also available; the proceeds may be used for
expenditures including working capital and general corporate purposes,
including without limitation, certain permitted acquisitions. The revolving
Credit Facility includes a sub-limit for letters of credit in an amount not to
exceed $50.

As of December 31, 2000, additional borrowings of up to $124 million under
the revolving Credit Facility were available for working capital and general
corporate purposes subject to certain conditions. The revolving credit
facility may be drawn in U.S. dollars or euros.

The Credit Facility is principally secured by all current and future assets
of RPP LLC, and requires the Company to maintain certain minimum financial
covenants including a minimum interest coverage ratio and a maximum total
leverage ratio. As of December 31, 2000, the Company was in compliance with
each of its financial covenants. In addition, the Credit Facility is not
subject to advance rates or a borrowing base.

Borrowings that are maintained as dollar term loans or loans under the
revolving Credit Facility denominated in dollars, incur interest at either
Citibank's prime lending rate (Base Rate) or the Eurodollar Rate (Libor) plus,
in each case, a margin ranging from 1.25% to 3.75%, which margin is dependent
upon the Company's leverage, as determined quarterly. Interest rates on the
borrowings maintained as Euro term loans, and loans under the revolving Credit
Facility denominated in Euros, are at the Euro Rate (Euribor) plus associated
costs plus, in each case, a margin ranging from 2.25% to 3.0% depending on the
Company's leverage, as determined quarterly.

Interest period elections generally range from one to six months, or to the
extent available, nine or twelve months for Eurodollar and Euro Rate loans.
With respect to Eurodollar loans and Euro Rate loans, interest is
payable at the end of each interest period and, in any event, at least every 3
months for interest periods longer than three months.

With respect to Base Rate loans, interest is payable quarterly on the last
business day of each fiscal quarter. Calculation of all interest expense is
based on the actual number of days elapsed in a year comprising 360 days. For
each drawn letter of credit, the Company is required to pay a per annum fee
equal to the spread over the Eurodollar rate for the revolving Credit
Facility, a fronting fee equal to 1/4 of 1% on the aggregate daily stated
amount of each letter of credit, plus administrative charges. Additionally,
the Company will pay a commitment fee ranging from 0.375% to 0.500% per annum,
depending on the Company's leverage ratio, and is payable quarterly on the
available portion of the revolving Credit Facility.

Each term loan requires quarterly principal reductions beginning on March
31, 2001. Also, the Company may be required to make mandatory additional
principal reductions, based on the Company's excess cash flow and certain
other events as described in the Credit Agreement.

F-19

RESOLUTION PERFORMANCE PRODUCTS LLC

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)

December 31, 2000, 1999 and 1998
(in millions of U.S. dollars)

Current maturities of long-term debt, including the Senior Subordinated
Notes, for the years ending December 31, are as follows (in millions):

2001............................................. $ 7
2002............................................. 7
2003............................................. 7
2004............................................. 7
2005............................................. 7
Thereafter....................................... 646
-----
$ 681
=====

10. Contingencies and Other Matters

In the ordinary course of business, the Company is subject to various laws
and regulations and, from time to time, litigation. In the opinion of
management, compliance with existing laws and regulations will not materially
affect the financial position or results of operations of the Company.
Management is not aware of any pending actions against the Company.

The Company is also subject to various environmental laws and regulations.
Similar to other companies in the chemicals industry, the Company incurs costs
for preventive and corrective actions at facilities and waste disposal sites,
and those environmental costs of operations and remediation activities are
accrued on a basis consistent with the accounting policy set forth in Note 2.
The Company may be obligated to take remedial action as a result of the
enactment of laws or the issuance of new regulations or to correct the effects
on the environment
of disposal practices or releases of chemical substances. Most of the
expenditures to fulfill these obligations relate to facilities and sites where
past operations followed practices and procedures that were considered
appropriate under regulations, if any, existing at the time, but may now
require investigatory or remedial work to adequately protect the environment
or address new regulatory requirements. The Company has accrued $3 at December
31, 1999 for planned environmental remediation activities at three sites, and
this accrual, in management's opinion, is appropriate based on existing facts
and circumstances. Expensed environmental costs were less than $1 in each of
2000, 1999 and 1998.

The fact that no additional accrual was provided in 2000 is influenced by
agreements associated with the transaction whereby Shell will indemnify RPP
LLC for environmental damages associated with certain environmental conditions
that occurred or existed before the closing date of the recapitalization,
subject to limitations. In addition, the Company believes that it carries
adequate insurance coverage, subject to certain deductibles and limitations.

11. Leases and Other Commitments

Effective January 1, 2000, the Company entered into contractual agreements
with Shell for the supply of site services, utilities, materials and
facilities (SUMF services) and for operation and maintenance services (OMS
services) necessary to operate the Company on a stand-alone basis. The
duration of the contracts range from one year or less to 20 years, depending
on the nature of services. Such contracts may be terminated by either party as
provided for in the respective agreements; generally, 90 days notice is
required for short-term contracts and three years notice is required for
longer-term contracts (generally in excess of five years). Contractual pricing
generally includes a fixed and variable component.

F-20

RESOLUTION PERFORMANCE PRODUCTS LLC

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)

December 31, 2000, 1999 and 1998
(in millions of U.S. dollars)

Also effective January 1, 2000, the Company entered into contractual
agreements with Shell for the purchase of feedstocks. The terms of the
agreements vary from three to ten years, extendable at the Company's request
and cancelable by either party as provided for in the respective agreements.
Feedstock prices are based on market prices less negotiated volume discounts
or cost input formulas.

The total net payable outstanding under these contracts as of December 31,
2000, was approximately $38, and the Company expensed $63 for the two months
from the inception of the transaction to December 31, 2000.

In July 1999, Shell repurchased for $71 certain equipment used in the
Company's U.S. operations and previously held under an operating lease
pursuant to a sale and leaseback transaction executed by Shell in December
1998. No gain or loss associated with the sale and leaseback transaction was
attributable to the Resins Business in 1998.

Future minimum payments under noncancelable operating leases with initial or
remaining terms of one year or more consisted of the following at December 31,
2000:

Total
-----

2001............................... $ 3
2002............................... 2
2003............................... 1
2004............................... 1
2005 and thereafter................ --
---
Total minimum lease payments..... $ 7
===

Rental expense under operating leases was $4, $5 and $7 in 2000, 1999 and
1998, respectively.

F-21

RESOLUTION PERFORMANCE PRODUCTS LLC

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)

December 31, 2000, 1999 and 1998
(in millions of U.S. dollars)
12. Segment and Related Information

Using guidelines set forth in SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, the Company has identified three
reportable segments based on geographic information: (i) America, (ii) Europe
and Africa, and (iii) Asia Pacific and Middle East. Management operates its
business through geographic regions and is not organized nor does it prepare
discreet financial information by product line within the geographic regions.

Selected financial data by geographic region are presented below:

Asia
Pacific
Europe and
and Middle Inter-
America Africa East segment Total
------- ------ ------- ------- -----

As of and for the year ended
December 31, 2000:
Revenues from external customers......... $523 $397 $29 $ -- $949
Intersegment revenues.................... 32 244 4 (280) --
Depreciation and amortization expense.... 24 10 -- -- 34
Special charges.......................... 45 4 -- -- 49
Operating income......................... 4 37 -- -- 41
Total assets............................. 441 340 11 -- 792
Equity investments in and advances
to unconsolidated subsidiaries.......... -- 10 -- -- 10
Expenditures for long-lived assets....... 8 10 -- -- 18
As of and for the year ended
December 31, 1999:
Revenues from external customers......... $508 $362 $72 $ -- $942
Intersegment revenues.................... 51 260 2 (313) --
Depreciation and amortization expense.... 20 14 -- -- 34
Special charges.......................... 3 2 1 -- 6
Operating income......................... 83 33 4 -- 120
Total assets............................. 431 331 20 (39) 743
Equity investments in and advances to
unconsolidated subsidiaries............. -- 12 -- -- 12
Expenditures for long-lived assets....... 74 31 -- -- 105
As of and for the year ended
December 31, 1998:
Revenues from external customers......... $544 $380 $71 $ -- $995
Intersegment revenues.................... 60 269 2 (331) --
Depreciation and amortization expense.... 26 9 -- -- 35
Special charges.......................... 13 9 2 -- 24
Operating income......................... 85 22 1 -- 108
Total assets............................. 368 354 30 (33) 719
Equity investments in and advances to
unconsolidated subsidiaries............. -- 13 -- -- 13
Expenditures for long-lived assets....... 17 42 -- -- 59

Revenues from external customers for each product group are presented below:

December 31,
--------------------------
2000 1999 1998
---- ---- ----

BPA.................................................. $219 $194 $188
ECH.................................................. 48 54 70
Resins............................................... 585 584 615
Versatics............................................ 90 102 113
Other................................................ 7 8 9
---- ---- ----
Total Revenues....................................... $949 $942 $995

F-22

RESOLUTION PERFORMANCE PRODUCTS LLC

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)

December 31, 2000, 1999 and 1998
(in millions of U.S. dollars)

Selected information on a per domicile country basis is presented below:

Revenues:

December 31,
----------------
2000 1999 1998
---- ---- ----

U.S........................................................... $551 $533 $569
Netherlands................................................... 363 330 341
Germany....................................................... 93 73 79
Other*........................................................ 222 319 337
Intercompany.................................................. (280) (313) (331)
---- ---- ----
Total....................................................... $949 $942 $995

Net Long Lived Assets:

December 31,
--------------
2000 1999 1998
---- ---- ----

U.S.............................................................. $245 $263 $201
Netherlands...................................................... 163 173 185
Germany.......................................................... 4 -- --
Other*........................................................... 12 12 15
Intercompany..................................................... -- -- --
---- ---- ----
Total.......................................................... $424 $448 $401

- --------
*Other consists of other foreign countries that individually account for less
than 10% of the total revenues.

Sales revenues are attributed to geographic regions based on the location of
the manufacturing facility and/or marketing company, and are not based on
location of customer. Intersegment amounts represent sales transactions within
and between geographic regions.

During the year ended December 31, 2000 and 1999, sales to one major
customer, Bayer, amounted to approximately 10% and 10%, respectively, of the
total Company revenue.

13. The Transaction

On November 14, 2000, RPP LLC and its affiliates acquired the Resins
Business of Shell. Furthermore, on such date, Shell and RPP Inc. completed
their sale to RPP Holdings LLC, an affiliate of Apollo Management IV, L.P.,
whereby RPP Holdings acquired control of RPP Inc. in a recapitalization
transaction ("the Transaction"). The purchase price was approximately $840
million (net of $18 million of excess cash at RPP LLC), subject to adjustment,
and a contingent subordinated note for up to $127 million (the "Earn-out"), to
be issued by RPP Inc., our parent. Immediately following the Transaction, on a
fully-diluted basis for all management options and stock issuable under RPP
Inc.'s stock option plan, Apollo Management and certain co-investors own
(through their ownership of RPP Holdings) approximately 81.9% of the
outstanding common stock of RPP Inc., management owns (through its ownership
of RPP Holdings and RPP Inc.) approximately 11.3% of the outstanding common
stock of RPP Inc. and Shell owns approximately 6.8% of the outstanding common
stock of RPP Inc.

F-23

RESOLUTION PERFORMANCE PRODUCTS LLC

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)

December 31, 2000, 1999 and 1998
(in millions of U.S. dollars)

The acquisition has been accounted for as a leveraged recapitalization. The
excess of the purchase price over the net assets acquired was recorded in
Owner's Equity.

The consolidated net loss for the period November 1, 2000 to December 31,
2000 was $28. The difference between the net income for the year ended
December 31, 2000 of $19 and the net loss for the period November 1, 2000 to
December 31, 2000 was classified as part of predecessor Owner's investment in
the Owner's Equity.

The results of operations derived from the Resins Business of Shell are
included in the Company's Consolidated and Combined Financial Statements for
all periods presented. Unaudited pro forma consolidated results of operations
have been prepared as if the acquisition had occurred on January 1, 2000, 1999
and 1998:

Year Ended December 31,
-----------------------
2000 1999 1998
------- ------- -------

Revenue...................... $ 952 $ 942 $ 995
Operating income............. 96 160 156
Net income................... 14 53 49

The unaudited pro forma consolidated results of operations presented above
do not purport to be indicative of results that would have occurred had the
acquisition occurred as of the dates presented, nor do they purport to be
indicative of results that will be obtained in the future.

14. Special Charges

Transaction and Transition Costs

In connection with the recapitalization transaction, the Company expensed
certain costs totaling $49. The transaction costs were directly related to the
acquisition, and consisted primarily of outside professional services. These
costs were primarily transitional costs that are non-recurring in nature and
relate to charges required to establish RPP LLC as an independent entity, and
consisted of the following:

(1) $31 of transaction costs relating to transaction due diligence and
activities associated with the sale and recapitalization, including
approximately $21 in legal fees and other due diligence fees, and $10 in
financial services and advice.

(2) $18 of transition costs, the majority of which related to activities
required to become an independent entity including organizational design,
recruiting, establishment of fit for purpose work processes, information
service fees as well as establishment of a new brand.

Employee Severance Costs

The Resins Business of Shell recorded charges for employee severance of
approximately $0, $6 and $24 during the years ended December 31, 2000, 1999
and 1998, respectively, representing an allocation of its proportionate share
of a comprehensive Shell Chemicals severance program announced in December
1998.

15. Fair Value of Financial Instruments

The Company does not hold or issue financial instruments for trading
purposes.

F-24

RESOLUTION PERFORMANCE PRODUCTS LLC

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)

December 31, 2000, 1999 and 1998
(in millions of U.S. dollars)
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
the value. Potential income tax ramifications related to the realization of
unrealized gains and losses that would be incurred in an actual sale or
settlement have not been taken into consideration.

The carrying amounts for cash and cash equivalents, accounts receivable, and
current liabilities are reasonable estimates of their fair values, principally
due to the short-term maturities of these instruments. The estimated fair
value of the Senior Subordinated Notes is based on the most recently available
trading prices. The carrying amounts for the Term Loans are reasonable
estimates of fair values, principally due to their relatively short-term
maturities and the lack of markets for these instruments.

The estimated fair values of financial instruments are as follows:

2000 1999
-------------- --------------
Carrying Fair Carrying Fair
Amounts Value Amounts Value
-------- ----- -------- -----

Financial assets:
Cash and cash equivalents ................... $19 $19 $-- $--
Accounts receivable, net .................... 148 148 127 127

Financial liabilities:
Accounts Payable and Accruals................ 145 145 64 64

Long-term debt--principal:
Senior subordinated notes, including current
portion..................................... 197 203 -- --
Term loan A.................................. 108 108 -- --
Term loan B.................................. 350 350 -- --
Revolver loans .............................. 26 26 -- --

16. Stock Option Plan

RPP Inc. has adopted a stock option plan pursuant to which options with
respect to a total of 54,000 shares of RPP Inc.'s common stock will be
available for grant to employees of, consultants to, or directors of RPP Inc.
or RRP LLC. The option plan is administered by the board of directors of RPP
Inc. or a compensation committee appointed from time to time by the board of
directors. The right to grant options under the option plan will expire on the
tenth anniversary of the closing date of the Transactions. Options granted
under the plan are or will be either nonqualified or incentive stock options.

Options are granted in amounts and at such times and to such eligible
persons as determined by the board of directors of RPP Inc. or the
compensation committee. On December 31, 2000, RPP Inc. granted nonqualified
options covering 41,982 shares, representing approximately 8% of its total
common stock outstanding on a fully diluted basis. Options will vest in
accordance with a schedule as determined by the board of directors of RPP Inc.
or the compensation committee and this vesting schedule will be outlined in
the optionee's option agreement. We expect options to vest as follows:

F-25

RESOLUTION PERFORMANCE PRODUCTS LLC

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)

December 31, 2000, 1999 and 1998
(in millions of U.S. dollars)

(b) Two-thirds of the options will be performance options and will vest
on November 14, 2008, the closing date of the Transactions. The amount
vested will be based on the operating results achieved by the business.
However, vesting of all or a portion of the performance options will be
accelerated upon the consummation of a sale of RPP Inc. for cash, or any
transaction in which Apollo sells at least fifty percent of shares of
common stock of RPP Inc. acquired by it.

The vesting of options will occur only during an employee's term of
employment. All unvested options will be forfeited upon a termination of
employment.

Upon a termination of employment, RPP Inc. and RPP Holdings have certain
repurchase rights. Upon a sale of RPP Inc. for cash or the occurrence of any
transaction in which RPP Holdings sells at least 50% of the shares of common
stock acquired by it, RPP Inc. also has certain repurchase rights. The
weighted-average remaining contractual life of outstanding options at December
31, 2000 was approximately 8 years.

A summary of the Option Plan as of December 31, 2000, and changes during the
year ended is presented below:

Number of shares Weighted average
covered by options exercise price
------------------ ----------------

Outstanding at January 1, 2000........... -- --
Granted.................................. 35,450 $100
Exercised................................ -- --
Cancelled................................ -- --
------ ----
Outstanding at December 31, 2000......... 35,450 $100
====== ====

Exercisable at December 31, 2000......... -- --
====== ====

The Company has elected to follow APB 25 and related interpretations in
accounting for employee stock options. The options granted were valued using
the fair value approach which represents the purchase price of the stock paid
by RPP Holdings in the recapitalization. Accordingly, no compensation expense
has been recognized for these stock options. Pro forma information regarding
net income and earnings per share is required by FAS 123, which also requires
that the information be determined as if the Company had accounted for its
employee stock options granted subsequent to December 31, 1994 under the fair
value method of FAS 123. The fair value for these options was estimated at the
date of grant using the Black-Scholes option pricing model, and was not
material.

17. Subsequent Events

On January 8, 2001, the Company and its affiliates acquired Shell Epoxy
Resins France S.A.S. The purchase price in U.S. dollars was $1. This
acquisition was made in connection with the transaction described in Note 13.

On January 31, 2001, the Company announced the commencement of a cost
restructure program in connection with its business strategy. The cost
restructure program included among other things, a reduction in workforce that
affected 17 employees globally. The total costs associated with the cost
restructure program is currently estimated at $7. The total costs include
severance costs associated with the reduction in workforce of $4 and
relocation costs of $3. These costs will be recognized in 2001 as special
charges.

F-26

[LOGO OF RESOLUTION PERFORMANCE PRODUCTS]

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 (the
"DGCL") provides for the indemnification of officers and directors under
certain circumstances against expenses incurred in successfully defending
against a claim and authorizes Delaware corporations to indemnify their
officers and directors under certain circumstances against expenses and
liabilities incurred in legal proceedings involving such persons because of
their being or having been an officer or director. Pursuant to Section
102(b)(7) of the DGCL, the Certificate of Incorporation of RPP Capital
provides that the directors of RPP Capital shall not be held personally liable
to RPP Capital Corp or its stockholders for monetary damages for breaches of
fiduciary duty as directors, except that any director shall remain liable (1)
for any breach of the director's fiduciary duty of loyalty to RPP Capital Corp
or its stockholders, (2) for acts or omissions not in good faith or involving
intentional misconduct or a knowing violation of law, (3) for liability under
Section 174 of the DGCL or (4) for any transaction from which the director
derived an improper personal benefit. The amended and restated By-laws of RPP
Capital provide for indemnification of its officers and directors to the full
extent authorized by law.

Section 18-108 of the Delaware Limited Liability Company Act (the "Act")
provides that, subject to such standards and restrictions, if any, as are set
forth in a limited liability company's operating agreement, a limited
liability company may, and shall have the power to, indemnify and hold
harmless any member or manager or other person from and against any and all
claims and demands whatsoever. The By-laws of RPP LLC provide that RPP LLC
shall, to the fullest extent authorized under the Act, indemnify and hold
harmless against all expense, liability and loss (including attorneys' fees,
judgments, fines, excise taxes or penalties and amounts paid in settlement)
reasonably incurred or suffered, any manager or officer of RPP LLC including
indemnification for negligence or gross negligence but excluding
indemnification (1) for acts or omissions involving actual fraud or willful
misconduct or (2) with respect to any transaction from which the indemnitee
derived an improper personal benefit.

Item 21. Exhibits and Financial Statement Schedules.

2.1* Amended and Restated Master Sale Agreement (US) dated as of November 14,
2000 among Shell Oil Company, Resin Acquisition, LLC and Resolution
Performance Products Inc.

2.2* Amended and Restated SPNV Resins Sale Agreement dated as of November 14,
2000 between Shell Oil Company and Resolution Performance Products Inc.

2.3* Assignment and Assumption Agreement dated November 13, 2000 between
Resolution Performance Products Inc. and Resolution Performance Products
LLC

2.4* Assignment and Assumption Agreement dated November 14, 2000 between
Resin Acquisition, LLC and RPP Holdings LLC

3.1* Certificate of Formation of Resolution Performance Products LLC filed on
May 10, 1999

3.2* Certificate of Amendment to Certificate of Formation of Resolution
Performance Products LLC filed on November 14, 2000

3.3* Amended and Restated Limited Liability Company Agreement of Resolution
Performance Products LLC dated as of November 14, 2000

3.4* Bylaws of Resolution Performance Products LLC dated as of November 14,
2000

3.5* Certificate of Incorporation of RPP Capital Corporation dated as of
October 23, 2000

3.6* Amended and Restated Bylaws of RPP Capital Corporation dated as of
November 14, 2000

4.1* Indenture, dated as of November 14, 2000, among Resolution Performance
Products LLC, RPP Capital Corporation and United States Trust Company of
New York

4.2* Form of New Note (included as Exhibit B to Exhibit 4.1)

II-1

4.3* Registration Rights Agreement, dated as of November 14, 2000 among
Resolution Performance Products LLC, RPP Capital Corporation, RPP
Holdings LLC, Morgan Stanley & Co. Incorporated, J.P. Morgan Securities
Inc. and Salomon Smith Barney Inc.

5.1* Opinion of O'Sullivan Graev & Karabell, LLP

10.1* Credit Agreement dated as of November 14, 2000 among Resolution
Performance Products Inc., Resolution Performance Products LLC, RPP
Capital Corporation, Resolution Nederland B.V., the various lender
parties thereto, Salomon Smith Barney Inc., as Syndication Agent,
Morgan Guaranty Trust Company of New York, as Documentation Agent, and
Morgan Stanley Senior Funding Inc., as Administrative Agent, Lead
Arranger and Sole Book Manager

10.2* Employment Agreement dated as of November 14, 2000 between Resolution
Performance Products LLC and Marvin O. Schlanger

10.3* Secured Promissory Note dated as of November 14, 2000 entered into by
David T. Preston in favor of Resolution Performance Products LLC

10.4* Pledge Agreement dated as of November 14, 2000 between Resolution
Performance Products LLC and David T. Preston

10.5* Secured Promissory Note dated as of November 14, 2000 entered into by
Wouter W. Jongepier in favor of Resolution Performance Products LLC

10.6* Pledge Agreement dated as of November 14, 2000 between Resolution
Performance Products LLC and Wouter W. Jongepier

10.7* Secured Promissory Note dated as of November 14, 2000 entered into by
Dany Subrata in favor of Resolution Performance Products LLC

10.8* Pledge Agreement dated as of November 14, 2000 between Resolution
Performance Products LLC and Dany Subrata

10.9* Secured Promissory Note dated as of March 7, 2001 entered into by J.
Travis Spoede Trust (Dated 03/26/99) in favor of Resolution Performance
Products LLC

10.10* Pledge Agreement dated as of March 7, 2001 among Resolution Performance
Products LLC,
J. Travis Spoede and the J. Travis Spoede Trust (Dated 03/26/99)

10.11* Environmental Agreement dated as of November 1, 2000 between Shell Oil
Company and Resolution Performance Products LLC

10.12* Environmental Agreement dated as of November 1, 2000 between Shell
Petroleum N.V. and Resolution Performance Products LLC

10.13* Intellectual Property Transfer and License Agreement and Contribution
Agreement dated as of November 14, 2000 between Shell Oil Company and
Resolution Performance Products LLC

10.14* Intellectual Property Transfer and License Agreement and Contribution
Agreement dated as of November 14, 2000 between Shell Internationale
Research Maatschappij B.V. and Shell Epoxy Resins Research B.V.

10.15* Interim Agreement for Information Technology Services (US Business)
dated as of November 1, 2000 among Shell Chemical Company, Shell
Services International Inc. and Resolution Performance Products LLC

10.16* Interim Agreement for Information Technology Services (Non-US) dated as
of November 1, 2000 among Shell Chemicals Limited, Shell International
B.V. and Shell Epoxy Resins Nederland B.V.

II-2

10.17* Indemnity and Contribution Agreement dated as of November 14, 2000
among Resolution Performance Products LLC and the indemnified parties
listed therein

10.18* Management Consulting Agreement dated as of November 14, 2000 among
Resolution Performance Products LLC and Apollo Management IV, L.P.

10.19* First Amended and Restated Deer Park Site Services, Utilities,
Materials and Facilities Agreement dated November 1, 2000 between Shell
Chemical Company, for itself and as agent for Shell Oil Company, and
Resolution Performance Products LLC

10.20* First Amended and Restated Norco Site Services, Utilities, Materials
and Facilities Agreement dated November 1, 2000 between Shell Chemical
Company, for itself and as agent for Shell Oil Company, and Resolution
Performance Products LLC

10.21* First Amended and Restated Pernis Site Services, Utilities, Materials
and Facilities Agreement dated November 1, 2000 between Shell Epoxy
Resins Nederland B.V. and Shell Nederland Raffinaderij B.V.

10.22* First Amended and Restated Pernis Site Services, Utilities, Materials
and Facilities Agreement dated November 1, 2000 between Shell Epoxy
Resins Nederland B.V. and Shell Nederland Chemie B.V.

10.23* Deer Park Ground Lease and Grant of Easements dated as of November 1,
2000 between Shell Oil Company and Resolution Performance Products LLC

10.24* Norco Ground Lease and Grant of Servitudes dated as of November 1, 2000
between Shell Oil Company and Resolution Performance Products LLC

10.25* Amended and Restated Agreement of Sub-Lease (Pernis) dated as of
November 1, 2000 between Shell Epoxy Resins Nederland B.V. and Shell
Nederland Raffinaderij B.V.

10.26* Resolution Performance Products Inc. 2000 Stock Option Plan

10.27* Resolution Performance Products Inc. 2000 Non-Employee Directors Stock
Option Plan

10.28* Restricted Unit Plan

10.29* Separation Agreement dated as of March 9, 2001 between Resolution
Performance Products Inc., Resolution Performance Products LLC and
David T. Preston

12.1* Statement of Computation of Ratio of Earnings to Fixed Charges

21.1* Subsidiaries of the Registrants

23.1* Consent of O'Sullivan Graev & Karabell, LLP (included in Exhibit 5.1)

23.2 Consent of PricewaterhouseCoopers LLP

23.3 Consent of KPMG Accountants N.V.

23.4* Consent of CPI Consulting Associates

23.5* Consent of Garnett Consulting

24.1* Powers of Attorney (included on signature pages originally filed)

25.1* Statement of Eligibility and Qualification under the Trust Indenture
Act of 1939 of United States Trust Company of New York as Trustee

99.1* Form of Letter of Transmittal

99.2* Form of Notice of Guaranteed Delivery

99.3* Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees

99.4* Form of Letter to Clients

- --------
* Previously filed.

(b) FINANCIAL STATEMENT SCHEDULES

Schedules have been omitted because they are either not applicable or the
required information has been disclosed in the financial statements or notes
thereto.

II-3

Item 22. Undertakings.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the foregoing provisions, or otherwise, the
Registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrants of expenses incurred or paid by a director, officer or
controlling person of the Registrants 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 Registrants
will, unless in the opinion of their counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by them is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.

The undersigned Registrants hereby undertake:

1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;

(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act;

(b) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in the volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and

(c) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;

2. That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and

3. To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.

The undersigned Registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 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.

The undersigned Registrants hereby undertake to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
the registration statement when it became effective.

II-4

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 3 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Houston, State of Texas, on the 10th day of May, 2001.

Resolution Performance Products LLC

/s/ Marvin O. Schlanger
By: _________________________________
Marvin O. Schlanger
Chairman and President

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement has been signed by the following persons
in the capacities and on the dates indicated:

Signature Title Date
--------- ----- ----

/s/ Marvin O. Schlanger Chairman and President May 10, 2001
______________________________________ (principal executive
Marvin O. Schlanger officer)

/s/ J. Travis Spoede Executive Vice President, May 10, 2001
______________________________________ Chief Financial Officer
J. Travis Spoede and Secretary (principal
financial and accounting
officer)

* Manager May 10, 2001
______________________________________
Joel A. Asen

* Manager May 10, 2001
______________________________________
Laurence M. Berg

* Manager May 10, 2001
______________________________________
Peter P. Copses

* Manager May 10, 2001
______________________________________
Joshua J. Harris

* Manager May 10, 2001
______________________________________
Scott M. Kleinman

* Manager May 10, 2001
______________________________________
Heinn F. Tomfohrde, III

/s/ Marvin O. Schlanger
*By: ____________________________
Marvin O. Schlanger
Attorney-in-fact

II-5

SIGNATURES

RPP Capital Corporation

/s/ Marvin O. Schlanger
By: _________________________________
Marvin O. Schlanger
Chairman and President

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement has been signed by the following persons
and in the capacities and on the dates indicated:

Signature Title Date
--------- ----- ----

/s/ Marvin O. Schlanger Chairman and President May 10, 2001
______________________________________ (principal executive
Marvin O. Schlanger officer)

/s/ J. Travis Spoede Executive Vice President, May 10, 2001
______________________________________ Chief Financial Officer
J. Travis Spoede and Secretary (principal
financial and accounting
officer)

* Director May 10, 2001
______________________________________
Joshua J. Harris

* Director May 10, 2001
______________________________________
Scott M. Kleinman

/s/ Marvin O. Schlanger
*By: ____________________________
Marvin O. Schlanger
Chairman and President

II-6

Exhibit Index