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608-055 Cook Composites and Polymers Co.

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Europe, and the Middle East. Thus demand for coatings in many countries was growing at the same rate or higher than these countries’ gross domestic product.4 Second, 50% of coating demand was driven by industries like the military or aviation and by industrial maintenance needs such as repainting ships and airplanes. Finally, the coatings industry traditionally had higher margins than the broader chemical industry because coatings were sold based on custom attributes, often for specific manufacturing processes.

Company Overview

Based in North Kansas City, Missouri, CCP was a leading manufacturer of gel coats, unsaturated polyester resins, coatings resins, and emulsions. In 1918, Charles Cook started the Cook Paint and Varnish Company. While most of that company was acquired by a larger paint company in the 1980s, several descendants of Charles Cook retained selected composites assets. In 1990, these family members entered into a new joint venture, Cook Composites and Polymers, with France’s TOTAL, one of the world’s largest oil and gas companies and a major chemical manufacturer. TOTAL owned 70% of the new entity while the family owned the remaining 30%. The new company became a part of TOTAL’s North American chemical subsidiary. The company expanded rapidly to include 14 plants located throughout North America and the region’s largest composites distributor (Composites One), and had nearly 1,300 employees and consolidated sales of over $1 billion. (See Exhibit 2 for CCP company financials.) Throughout its history, CCP had been innovative on a number of fronts, including product quality, waste control, automation, and designing products that emitted low levels of volatile organic compounds. It now had begun to think about how to reduce the environmental impact of its manufacturing processes.

In 2007, CCP was the world’s leading manufacturer of gel coats. CCP’s clients often ordered custom gel coats with very tight specifications, so quality was critical and mistakes could be costly and result in significant product liability. As a leading gel coat supplier for the marine industry, CCP worked with many major boat manufacturers. A typical customer might work with CCP for one to two years to develop and test a formulation and color of gel coat that met all of the technical requirements of the customer’s manufacturing process. Once finished, a customer might order millions of pounds of gel coat per year. The average price was over $1 per pound (or equivalently, $10 per gallon).a Orders were fulfilled on a make-to-order basis with a lead time of seven to ten days or fewer, or in some cases on a routine schedule to meet established stock levels. Production runs were scheduled on a weekly basis but reviewed and updated every day. CCP’s customers used its clear gel coats in synthetic marble and granite applications and as a top coat in marine applications. Its colored gel coats were used in marine, tub/shower, transportation, aerospace, and architectural applications. Gel coats made up less than 20% of CCP’s revenues, but generated as much as 30% of the company’s operating income. CCP's North Kansas City plant was one of several plants that produced gel coat.

Gel Coat Production at North Kansas City

Gel coat was manufactured in a batch process, with each batch processed in a mixing vessel. The North Kansas City plant had fifteen mixing vessels, each having a capacity of 10 drumsb (550 gallons). The plant operated three eight-hour shifts per day, five days per week, with a two-week annual shutdown for plant maintenance. Gel coat was a highly specified mixture of resin,

a This number has been disguised.

b These numbers have been disguised.

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thixotropes such as fumed silica (to affect thickness and prevent sag), monomers such as styrene, promoters and/or inhibitors (to affect drying time), fillers such as talc, pigments (to provide color), and stabilizers (to prolong shelf life). Raw materials were stored in bags and pails in the raw materials warehouse, which was adjacent to the production area.

Preparation

Manufacturing a gel coat batch began with an operator locating a mixing vessel and confirming that it had been sufficiently rinsed with styrene to remove residue from the previous batch. The operator then read the batch ticket (see Exhibit 3). The ticket typically contained a set of instructions about the batch, including the product name, the order number, the batch number, the anticipated quantity of final product, the raw materials and their quantities, and the processing time for the mixing procedure. In the final step of the prep stage, the operator located and obtained all materials that were listed in the batch ticket from the raw materials warehouse. This prep stage typically took 30 minutes.

Mixing and Testing

The materials were then added to the vessel and mixed according to the “recipe” described on the batch ticket, which together took approximately 90 minutes. After the mixing process was completed, an inspector from the quality lab extracted and tested a sample against specifications for color, gel time, weight, volatile organic compounds, viscosity, and sag resistance, and reported the results to the operator. This quality assessment process took 30 minutes.

CCP’s customers’ performance specifications for gel coat were among the most stringent in the industry. Gel coat performance was affected by even slight, often difficult-to-observe variations in raw materials, heat and humidity conditions in the production area, and even very small operator errors in measuring the raw materials. If CCP’s quality lab reported that the mixture met all of its specifications, the batch was approved. If any specifications were not met, the lab inspector provided instructions for any adjustments (e.g., small quantities of particular raw ingredients that the operator needed to add). The operator added these materials and then ran the mixing process again, and then brought another sample to the lab. The quality lab then ran its full testing protocols again, reported the results to the operator and, if necessary, specified any additional required modifications. Some colors were more technically challenging to produce than others. As a result, 50% of the batches required two rounds of mixing and quality assessments, and 50% required three rounds. See Exhibit 4 for an excerpt from a CCP training guide on troubleshooting gel coat production issues.

Occasionally, a batch could not be adjusted to meet the specifications of the customer. These batches could be rejected after two or three rounds (approximately half the rejected batches were rejected after two rounds). In cases where there existed a potential discount market, rejected batches were considered “off-spec” and moved to the “odd lot” warehouse. Otherwise, rejected batches were considered ”scrap” and fully devalued and moved to the hazardous waste storage area to await collection for hazardous waste disposal. See Exhibit 4 for examples of gel coat quality issues. It took approximately 30 minutes to transfer a rejected batch from the vessel to a waste drum, move the drum to the appropriate area (either hazardous waste storage or odd-lot warehouse), and rinse the mixer and vessel. On average, odd-lot sales offset the cost of disposal for rejected batches.

Batch contamination was a leading cause of rejected batches. An even bigger problem for CCP was the risk of quality problems in a batch going undiscovered until a customer used the gel coat in its manufacturing process. The product liability risk associated with even a single batch failing to perform properly in a customer’s application could approach the multi-million-dollar range if

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multiple parts were affected (e.g., boats and recreation vehicles) and could jeopardize CCP’s brand reputation.

Filling and Rinsing

Once its quality was approved, a gel coat batch was transferred to the filling station, where it was packaged into drums or pails using gravity-based or mechanical filling equipment. Once the vessels were emptied, the operator used styrene to rinse the vessels and mixers, and then drained and moved the rinse styrene to the hazardous waste storage area for disposal. Together, the filling and rinsing steps required 30 minutes.

Producing the high-quality product on which CCP’s reputation was based required the company to carefully rinse the vessels. Even small amounts of gel coat from a previous batch that remained in the vessel or on the mixing equipment could contaminate the next batch. Contaminated batches inevitably failed quality tests, and were thus rejected. Styrene, a colorless liquid chemical, was considered an ideal rinse material because it was also a major ingredient in gel coat and evaporated quickly. However, styrene required special handling and management, as styrene vapor irritated the eyes, nose, and throat.5 Long-term exposure had been associated with headaches, fatigue, dizziness, confusion, drowsiness, malaise, and difficulty concentrating. Styrene had also been classified as a potential human carcinogen.6

In addition, waste styrene required special disposal procedures to comply with environmental regulations. Waste styrene was legally considered a hazardous waste, and as such its disposal was regulated under the U.S. Resource Conservation and Recovery Act (RCRA, pronounced “rick-rah”). Passed in 1976, RCRA authorized the Environmental Protection Agency (EPA), a U.S. government agency, to manage hazardous waste from the beginning to the end of its life cycle. In practice, this allowed the EPA to oversee the generation, transportation, treatment, storage, and disposal of hazardous waste. RCRA imposed stringent requirements on facilities that generated hazardous waste, specifying permissible methods for storage, recordkeeping, and emergency preparedness.

RCRA also required that such facilities send their hazardous waste only to licensed hazardous waste “Treatment, Storage, and Disposal Facilities.”7 Furthermore, the U.S. Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), nicknamed “Superfund,” gave the EPA authority to impose “joint and several” liability on hazardous waste generators like CCP for all costs associated with cleaning up contamination caused by any company that handled or disposed of their waste. Thus, CCP could potentially incur millions of dollars of liability if those companies it contracted with to ship, treat, or dispose of its hazardous waste caused major contamination—despite CCP conducting all of its hazardous waste transactions with fully licensed counterparts. CCP’s Kansas City Plant contracted with Philip Services Corporation, which collected CCP’s hazardous waste, combined it with other wastes, and then shipped these substances to cement manufacturers. Cement manufacturers used the material as a fuel to fire their energy-intensive cement kilns.

CCP faced some tradeoffs in deciding how much styrene to use in rinsing the mixers and vessels. More rinse styrene led to cleaner equipment, which increased the likelihood that the subsequent batch would avoid contamination and meet specifications. However, although additional amounts of styrene lowered the chance of rejection, it did so at diminishing marginal rates (see Exhibit 5 for data on how rinse styrene affected product conformance to specifications). Furthermore, styrene was expensive to purchase and, once used to rinse the vessels, became a hazardous waste that was costly to dispose of. CCP paid $0.70 per pound to purchase styrene and an average of $0.20 per pound to dispose of it. At its current usage rate of 550 pounds per batch, the procurement and disposal costs of rinse styrene constituted a significant percentage of the $4620 total cost of a 10-drum batch of gel

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coat.c Gromacki explained, “We use styrene—despite its cost—because the risk of using something else is so great we don’t want to take the chance on quality.”

CCP technical staff had already reduced the use of rinse styrene over the past several years, and believed that no further reduction opportunities were available without imposing unacceptable risks to product quality. As Gromacki remembered, “We were in a ‘zero progress’ situation. If we used less styrene to rinse the vessel—the traditional waste minimization approach through source reduction—we would run the risk of contamination. This meant that all of the traditional pollution waste reduction methods were off the table for us.” Furthermore, because rinse styrene was regulated as a hazardous waste, RCRA regulations and CERCLA liability made risky the prospect of developing alternative, potentially more beneficial, uses of rinse styrene. Finally, the cost of disposing of hazardous wastes was expected to continue rising 5% per year throughout the coming decade.

By-Product Synergies

In late 2004, Gromacki became aware of “by-product synergy” (BPS) when Otavio Silva of Bridging the Gap and Rick Robson of Hallmark Cards, Inc., representatives of the Kansas City Regional By-Product Synergy Initiative, visited his headquarters office to introduce their project and the BPS concept. The BPS concept encouraged businesses to completely change their mental model of waste. Central to BPS was shifting the paradigm of waste from a necessary cost of doing business to a potential feedstock for other processes. In essence, BPS encouraged companies to recognize that one company’s waste could be another company’s raw material, and to think of waste as by-products that elicited business opportunities.

The most famous example of by-product synergies took place in the city of Kalundborg, Denmark. In Kalundborg, a power station, plasterboard factory, pharmaceutical plant, enzyme producer, oil refinery, and waste management company exchanged by-products including gypsum, sludge, ash, and waste water as well as residual heat (see Exhibit 6).8 As a result of these exchanges, these companies reduced or eliminated disposal costs and, in many cases, also reduced procurement costs. Over 10 regional by-product synergy groups had emerged throughout the United States, including the Kansas City Regional By-Product Synergy Initiative, and many more internationally, such as the National Industrial Symbiosis Program in the United Kingdom.

The Kansas City Regional By-Product Synergy Initiative

The Kansas City Regional By-Product Synergy Initiative was launched in July 2004 through the efforts of Bridging the Gap (a local non-governmental organization), Kansas City’s Environmental Excellence Business Network, the Environmental Improvement Energy Resources Authority, the Mid-America Regional Council (MARC), and U.S. EPA Region 7, with technical and training assistance from the U.S. Business Council for Sustainable Development. The founding members of the Initiative included 11 organizations that were interested in discovering innovative ways to integrate their operations to reduce pollution and material costs and also potentially create new income streams. The Initiative sponsored meetings where members sought to identify potential synergies between their waste products and procurement needs, and to develop these into commercially viable opportunities. To do so, they entered their inflow and outflow information into a confidential database that project teams and members examined for possible synergies. Meetings and information shared were confidential, which enabled companies to share information they considered proprietary. The EPA was included to help identify and overcome potential regulatory

c These numbers have been disguised.

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hurdles to these transactions. Exhibit 7 depicts potential synergies that the Kansas City Regional By-Product Synergy Initiative identified.

CCP was initially wary of getting involved in the Kansas City Regional BPS Initiative because the company’s previous efforts to develop an innovative, more beneficial use for one of its hazardous wastes had been unsuccessful and unexpectedly costly. In 1995, CCP developed a relationship with a small Florida company that specialized in recycling composites materials. Instead of disposing of it as hazardous waste, CCP gave some of its off-spec gel coat to the company, which planned to use it for the manufacture of artificial reef structures, landscape structures, and curb stops. CCP hoped to stimulate this application for market development to create a market alternative that would reduce waste disposal for CCP and its customers in the region.

Several years after this transaction, CCP received a call from the EPA asking about the best way to safely treat and dispose of drums of off-spec gel coat. “The phone call came as a surprise,” Gromacki recalled. “These drums and containers had been sitting in the Florida sun for several years when we thought that the materials had been recycled. I immediately flew down to Florida to assess the situation. I discovered the site drum removal and disposal plan proposed by the EPA was very dangerous. Even though we were not liable, we decided to take responsibility for the material.” CCP agreed to pay the entire cost of disposing of the materials because management felt it was the right thing to do and in the interest of public safety and risk management.

While CCP paid for the removal and disposal of the drums associated with its former product and that of several other companies, the EPA oversaw the process. At the end of this project, CCP was surprised by the EPA’s demand for nearly $500,000 to reimburse the agency for its “overhead, administrative and investigation” costs associated with the project. A senior manager at CCP noted, “Since CCP had taken the lead using a major contractor and engineering firm and [had] self-completed all the actual work including monitoring, repackaging, disposal, reporting and site investigation for roughly the same amount, CCP considered this demand outrageous, abusive and in bad faith considering the written and verbal understanding of the prior agreement with the EPA.” The additional cost of this regulatory fee pushed the entire loss to over $1 million.

CCP had also explored the option of disposing of its rinse styrene through a waste exchange. Waste exchanges dealt with hazardous materials and enabled businesses to purchase and sell or exchange discarded materials and reusable and recyclable commodities. Some waste exchanges were run as private for-profit businesses, while others were run by state or local governments or by non-profit organizations. A typical posting on a waste exchange included the material or waste, quantity, and form available as well the geographic location. In a successful transaction, one company’s waste became another company’s raw materials to be used in a new process. Waste exchange transactions often resulted in both parties reducing their operating costs: the seller reduced its waste disposal cost, while the buyer reduced its material procurement cost.

BPS differed from traditional waste exchanges in several ways. BPS groups had closed memberships, with each member company invested in identifying bilateral synergies. BPS groups emphasized building relationships and finding common connections, similar to typical supply chain relationships. Waste exchanges, on the other hand, had open memberships and were designed to reach as broad an audience as possible to increase the probability of a match. Whereas BPS partnerships held both parties responsible for quality and supply issues, waste exchanges operated using spot transactions that did not require investments in any long-term relationship.

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CCP and the Kansas City Regional By-Product Synergy Initiative

Gromacki realized as he attended Kansas City Regional BPS Initiative meetings that CCP might be able to find a partner who could use a product based on rinse styrene. After some preliminary exploration, he came to doubt that he would find a partner for the rinse styrene itself, but thought that there might be demand for a surface coating that CCP could produce based on the rinse styrene. During a meeting in June 2006, Gromacki learned that another BPS Initiative member was planning to repaint its concrete storage area, and that the concrete coating would need to be resistant to water, chemicals, and forklift traffic. While most concrete coatings available on the market were based on chemical formulations that did not use styrene, Gromacki wondered whether his company’s rinse styrene could be the foundation of a product suitable for this infrastructure application.

In August 2006, Gromacki worked with another CCP division that had been charged with improving manufacturing processes throughout CCP and with a third-party contractor, Advanced Protective Coatings (APC), that specialized in infrastructure coatings applications. CCP had specifically recruited APC to the Kansas City Regional BPS group to work on this project. As with CCP’s high-end gel coat applications, Gromacki discovered that there were many nuances with the infrastructure applications that required in-depth knowledge of both the coating and the surface onto which it was to be applied. Working with this group, Gromacki ran an internal pilot test of their new polyester concrete coating that used rinse styrene as the base ingredient. To test the performance of the new coating in a realistic setting, CCP applied various versions in different areas of its own storage area, ultimately identifying the version that performed the best. Gromacki said, “By putting this new product in our own hazardous waste storage area, [we] demonstrated confidence in this new material.”

Once CCP was convinced that its concrete coating was effective, Gromacki approached Kansas City Regional BPS Initiative member Harley-Davidson, Inc. regarding its concrete containment area and potentially using the CCP styrene-based concrete coating at its plant. Harley-Davidson management was initially uncomfortable with the idea of using such a product in the plant, but eventually concluded that the anti-corrosive properties of the rinse styrene-based polyester concrete coating would be effective in its manufacturing environment. After the application in March 2007—through the third-party contractor—had been completed, CCP continued to follow up to assess the coating’s performance.

Based on this experience, CCP realized that its concrete coating could be sold in the infrastructure resurfacing product market, likely at an attractive price given its use of rinse styrene as an input. CCP’s gross profit on the rinse styrene-based polyester concrete coating would typically be $0.20 per pound. These profits equated to $0.40 per pound of rinse styrene because rinse styrene constituted 50% of the weight and volume of the concrete coating.d

Gromacki described the importance of the Kansas City Regional BPS Initiative, “I don’t think that we could have gotten started without the Kansas City Regional BPS Initiative. We couldn’t have gone on our own to approach another company to pilot test our concrete coating. There would have been too many barriers and too many concerns about using a waste material in a production plant. It was our participation in the Kansas City Project that gave us the credibility and the ability to get through the door to talk to the right people.” Instead of paying a waste broker to collect the rinse styrene and ship it for cement kiln combustion, CCP could now use the rinse styrene in this new product.

d These numbers have been disguised.

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Despite CCP’s membership in the Kansas City BPS Project, there was still some resistance to BPS within CCP. The low-end coating application was completely different from CCP’s traditional high-end gel coat market, and not everyone at CCP was excited about the prospect. Since the cost of rinse styrene was charged to its manufacturing division, the manufacturing division’s leadership and plant management were motivated to find new uses for rinse styrene. However, although the company could easily produce the concrete coating based on rinse styrene without interfering with gel coat production, CCP would face a significant R&D effort to develop a robust and consistent manufacturing process for the concrete coating product, significant start-up costs to develop the market, and an investment to develop long-term technical support capabilities. Together, these costs were estimated at $3 million, although the cost was almost a secondary issue compared to the ambivalence of the technical staff. “We are a market leader in quality and performance,” Gromacki explained. “When we start talking about manufacturing a low-end generic product, there isn’t a lot of enthusiasm on the technical side.”

In addition, the initiative faced resistance from the sales personnel. As one sales manager put it, “My group doesn’t have the bandwidth to sell ‘waste’ as well as our gel coats.” It takes a long time to understand a market and cultivate customer relationships. I don’t think it’s a good idea to divert our focus for the sake of shaving some manufacturing cost. We've used waste exchanges in the past; why can't we use them again? They're perfect—we save money on waste disposal, but we don’t have to make selling waste a priority in our organization.” In addition, because their compensation was tied to the marginal income of their sales, sales personnel were encouraged to prioritize selling products with higher margins than the new concrete coating.

CCP’s outside legal counsel was concerned about liability and cautioned against pursuing novel alternative approaches to disposing of rinse styrene beyond the destructive methods clearly detailed by regulations based on RCRA and CERCLA (see Exhibit 8). Finally, questions arose about whether this application of BPS was actually environmentally beneficial, given that CCP’s former disposal practices had its rinse styrene serve as fuel for cement kilns, which reduced the kilns’ use of fossil fuels. (See Exhibit 9 for environmental data on cement and concrete coating manufacturing.)

The Future

Gromacki could now point to the pilot project as a successful initiative that would not have happened without the Kansas City Regional BPS Initiative. CCP had been approached by potential customers who had expressed an interest in using the new concrete coating in their own facilities. Yet, Gromacki wondered about the future. What operational implications would it face if CCP developed the market for the concrete coating product? What other organizational resources would be needed to sell the by-product? Would customers think that CCP had lost its focus on producing top-of-the-line premium products? Did it make sense to invest resources in developing a lower-cost, lower-end product instead of focusing on improving CCP’s high-performance gel coats?

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Exhibit 1 Glossary

By-Product Synergy (BPS): By-Product Synergy involved companies working together to identify opportunities to match one company’s unwanted by-products with another company’s feedstock needs. Central to the BPS concept was thinking of wastes as potential business opportunities rather than as necessary costs of doing business.

Carbon dioxide: A colorless, odorless gas. Carbon dioxide emissions resulting from fossil fuel combustion were a major cause of global climate change, and remained in the atmosphere for approximately 100 years. Carbon dioxide global concentration had increased by 30% since the Industrial Revolution.

CERCLA: The U.S. Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) was a U.S. federal law passed in 1980 that taxed chemical and petroleum industries while also making available federal funds (from a “Superfund”) for the cleanup of hazardous waste sites. CERLA imposed “strict, joint and several, and retroactive liability,” which meant that the U.S. Environmental Protection Agency (EPA) could hold fully liable for all cleanup costs any company involved in generating, transporting, or disposing of hazardous waste, even if the company’s actions at the time of disposal met all legal requirements.

Composite: A material composed of two or more structurally complementary substances that possessed structural or functional properties not found in the original substances.

Gel coat: A chemical compound that was applied to the surface of a mold and that quickly bonded to become an integral part of the finished composite. Gel coats were typically used to provide color, durability, and strength.

Hazardous wastes: Manufacturing by-products and other wastes with properties that made them dangerous or potentially harmful to human health or the environment. In the U.S., hazardous waste was regulated by the federal EPA and state environmental agencies.

Odd lot: A batch whose output differed from its intended size.

Off-spec: Products or materials that did not meet specifications, but had alternative uses that enabled them to avoid disposal as waste.

Polymers: Compounds of high molecular weight that consisted of repeated subunits, often simple molecules. Synthetic polymers included polystyrene and polyester.

RCRA: The Resource Conservation and Recovery Act (RCRA) was a U.S. federal law passed in 1976 that governed the management and disposal of solid and hazardous wastes.

Resin: A binder for coatings. Examples included acrylic, alkyd, polyurethane and silicone.

Sag resistance: A characteristic that slowed or stopped paints and coatings from dripping, drooping, or running (due to gravity) while they were being applied and while they dried.

Styrene: A colorless liquid used in the manufacture of coatings, paints, plastics, and resins.

Sources: Stuart M. Lee, Dictionary of Composite Materials Technology, CRC Press, 1989. The Energy Information Administration Glossary website, http://www.eia.doe.gov/glossary/glossary_s.html; the Free Dictionary.com website, www.thefreedictionary.com; and the National Paint and Coatings Association website, http://www.paint.org; all accessed September 2007. The BBC Weather Page website, http://www.bbc.co.uk/climate/evidence/carbon_ dioxide.shtml; the National Safety Council website, http://www.nsc.org/ehc/glossary.htm#c; the Environmental Protection Agency websites, http://www.epa.gov/superfund/policy/cercla.htm and http://www.epa.gov/osw/ hazwaste.htm; the Cray Valley Company website, http://www.crayvalley.co.uk/application/gel_coat_app1.html; the Business Dictionary website, http://www.businessdictionary.com/definition/odd-lot.html, and the Glidden website, http://www.gliddenpro. com/NUSGLP/toolbelt/PaintProperties.jsp; all accessed April 2008.

608-055 Cook Composites and Polymers Co.

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Exhibit 2 Selected Company Financials

Year Sales ($ million)

2003 825 2004 965 2005 1,104 2006 1,138 2007

1,071

Source: Company documents.

Note: This table reports corporate-wide figures that include all operations of Cook Composites and Polymers Co. and its subsidiaries, including its 14 plants, several of which produced gel coat.

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Exhibit 3 Sample Gel Coat Batch Ticket

943W16 912003100719 BASE WHITE

DATE: 10/24/03 REV#: TIME:9:52:07 REV DATE: PROGRAM: MCB54CK5 RESP: ORDER#:

43 1/30/025A

PAGE: PROD.DT: SHIP DT:

YIELD:

1 10/24/03 10/24/03 5500.00

COMMENTS:

GALLONS: 524

POUNDS CODE DESCRIPTION H F Ra POUNDS INITIALED BY3315.00 0400878 ISO/NPG Resin 2 3 1 3315.00 850.00 w841 1 0 0 4165.00

High Speed Mix Above 20 minutes

55.00 x523 1 0 0 4220.00 135.00 x530 Silica, Amorphous 1 0 0 4355.00

High Speed Mix Above 10 minutes

402.50 10A0001 Styrene 45-55 TBC 2 3 2 4757.50 225.00 x945 Alumina Trihydrate 0 0 0 4982.50 225.00 x114 Talc (Hydrous Magnesium) 1 0 0 5207.50 285.00 10A0010 Methyl Methacrylate 2 3 2 5492.50

High Speed Mix Above 5 minutes

142.00 10A0001 Styrene 45-55 TBC 2 3 2 5634.50 5.10 700C434 CU Stabilizer 2 3 2 5639.60 5.10 09A0182 Arquad 2C-75 3 3 0 5644.70

10.75 06A0026 Cobalt Drier 12% 2 2 0 5655.45 1.14 700C259 HQ Inhibitor Solution 2 2 0 5656.59 8.50 05A0007 Ethylene Glycol 2 1 0 5665.09

Low Speed Mix above 5 minutes

Source: Company documents.

a H F R refers to health, flammability, and reactivity risks associated with each material; each is measured on a scale of 0 (low) to 4 (high).

608-055 Cook Composites and Polymers Co.

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Exhibit 4 Excerpt from CCP Training Guide on Gel Coat Quality Issues

OPEN MOLDING: Conventional Gel Coat—Troubleshooting Guide

COMMON GEL COAT PROBLEMS AND SOLUTIONS

PROBLEM CAUSE SOLUTIONS OR ITEMS TO CHECK Resin tearing—or resin separation Pigments separate from resin Check sources of water contamination

Application Avoid over-spray. Improper spray techniques create excessive over-spray, droplets and flooding. Can be aggravated by long gel time and sagging. Do not allow over-spray to dry; keep a wet line.

Sags and runs Excessive gel coat Spray techniques

Apply 18 + 2 mils, wet. Atomizing air is pushing and blowing the gel coat. Not enough styrene is being volatilized.

Low viscosity Check viscosity and thixotropic properties. Over agitated. Material was reduced, but should not have been.

Mold Wax Silicone content too high.

Other Jarring the mold before gelation.

Softness Soft gel coat film which can be easily matted

Incomplete cure of gel coat. Check catalyst levels, contaminants and film thickness.

Splotches after demolding Solvent contamination Ensure that all solvent has been flushed out of spray equipment lines. For internal mix equipment, ensure that solvent flush line is not leaking.

Splotches after parts are sanded and buffed—also referred to as ‘leathery,’ ‘pebbly,’ ‘chicken skin’

Over-spray Do not allow over-spray to accumulate.

Not maintaining a wet line Spray laps within five minutes.

Cure The total film must cure as a total homogenous film rather than several independently cured thin films.

Water spotting—see also fading Usually caused by exposure with a combination of excessive heat and moisture

Use only a product recommended for the particular application. Improper shrink-wrap. Use only a product (and recommended procedures) applicable to gel coats.

Poorly cured gel coat Check for both over- and under-catalyzation.

Certain chemical treatments such as chlorine and/or cleaners

Misuse of these chemicals.

Exposure of parts to moisture too quickly after fabrication

Allow one week ambient cure before service.

Cook Composites and Polymers Co. 608-055

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Exhibit 4 (continued)

Examples of Gel Coat Issues

“Air Bubbles”

“Fish Eyes”

Primary cause: poor lamination roll-out techniques by the technician.

Primary causes: water contamination, oil contamination, silicone contamination (mold-release agents), or dust/dirt on the mold.

“Alligator”

“Blister”

Primary causes: poor cure of gel coat before resin is applied, due to water contamination or solvent contamination of gel coat, incorrect catalyst level, or thin application (<12 mils) of gel coat.

Primary causes: water contamination, solvent contamination, oil contamination, or poor cure due to improper catalyst level.

Source: Company documents.

608-055 Cook Composites and Polymers Co.

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Exhibit 5 Gel Coat Conformance to Specifications as a Function of Rinse Styrene Use

Pounds of Rinse Styrene

per Batcha

Percent Conforming Batchesb (%)

500 95.02 510 96.98 520 98.16 530 98.88 540 99.32 550 99.59 560 99.75 570 99.84 580 99.90 590 99.94 600 99.96

Source: Created by casewriter. Numbers have been disguised.

a Pounds of rinse styrene used to clean mixing vessel after each batch.

b Percent conforming batches is equivalent to the probability that a given batch conforms to spec given the amount of rinse styrene used to clean the vessel before the batch is produced. For example, if 98.3% of batches conform to spec, then out of 1000 batches, on average, 983 batches conform to spec and 17 batches are rejected.

Cook Composites and Polymers Co. 608-055

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Exhibit 6 Network in Kalundborg, Denmark

Source: John Ehrenfeld and Nicholas Gertler, "Industrial Ecology in Practice: The Evolution of Interdependence at Kalundborg," Journal of Industrial Ecology 1 (1) (1997): 67–79. Exhibit modified by casewriter.

KemiraAcid Plant(Jutland)

NeighboringFarms

Asnaes Power Station(Coal-fired)

Novo NordiskPharmaceutical Plant

GyprocWallboard

Plant

Greenhouses(Discontinued)

DistrictHeating

Fish Farms

Cement & RoadAggregate

Treated Sludge

forFertilizer

Heat

Steam

Sulfur

ScrubberSludge

Cooling &WasteUtilityWater

Steam

FuelGas

FlyAsh

Heat

Heat

Statoil Refinery

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Cook Composites and Polymers Co. 608-055

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Exhibit 8 Memo from CCP Outside Legal Counsel

The Useful Product Defense

Background

CERCLA Arranger Liability: “[A]ny person who by contract, agreement, or otherwise arranged for disposal or treatment, or arranged with a transporter for transport for disposal or treatment, of hazardous substances owned or possessed by such person, by any other party or entity, at any facility or incineration vessel owned or operated by another party or entity and containing such hazardous substances . . . .” 42 U.S.C. § 9607(a)(3).

CERCLA Definitions: “The terms ‘disposal’, ‘hazardous waste’, and ‘treatment’ shall have the meaning provided in section 1004 of the Solid Waste Disposal Act.” 42 U.S.C. § 9601(29).

RCRA Definitions: Under RCRA, “disposal” and “treatment” refer to disposal and treatment of hazardous or solid wastes. 42 U.S.C. § 6903(3), (34).

Based on these definitions, arranger liability applies only to arranging for disposal or treatment of hazardous substances that are either solid or hazardous wastes. The question becomes whether the party was arranging for disposal of a waste or engaging in the sale of a useful product.

Two Tests

1. Reason for the Transaction: Analyzes the intent of the parties to determine whether they intended the transaction to be a sale of useful product or an arrangement for disposal.

Types of factors considered:

• Did the seller intend to dispose of a hazardous waste? • What are the purposes and inevitable consequences of the transaction? • Did the seller ever dispose of the material before or after the sale in issue? • Was the product manufactured as a principal business product or a by-product? • Did the seller have knowledge of the eventual disposal of the substance at the time of sale?

2. Nature of the Material: Analyzes whether the substance was a useful product or a waste at the time of the transaction.

Types of factors considered:

• Does the product have value on the open market? • Does the product have a productive use? • If the product sold has already been used, is it still useful for the same purpose for which it was

manufactured? • When it comes to a mix of a useful product and a waste, does the waste make an otherwise useful

product all waste (adding a small amount of lead to a carton of milk), or does it just decrease the usefulness of the product (adding a small amount of lead to a gold bar)?

(continued)

608-055 Cook Composites and Polymers Co.

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Practical Considerations

Factor Consideration Structure of transaction • Structure the transaction similarly to that of any other sale of in-spec

products o Use the same sales contract o Use the same contract provisions o Use the same sales staff

• Do not use disposal agreements Packaging of the material • Package the material in a similar manner as in-spec products Storing of the material • Store the material in a similar manner as in-spec products Past disposal • Consider past and future disposal practices. Is there some basis for

treating similar materials differently? Value of the materials • Know the market for the materials and the value of the materials on those

markets and document this information. • Sell materials at the highest price possible. • Operate the selling of the off-spec materials at a net profit.

Customers • Sell to customers normally engaged in the distribution or use of the subject products, including regular company customers

• Sell to customers who will use the product for the purpose for which the materials were manufactured

• Be skeptical of “innovative” processes • Utilize new customer forms to screen purchasers of off-spec products

Classifying the material • Classify the material with a term that describes the material as something more than a by-product or off-specification material (i.e., Grade A/Non-Grade A)

• Consider whether to further classify off-spec materials as reworkable/non-reworkable

Other considerations • Obtain appropriate indemnities/insurance from buyers

Lessons Learned

• There is no bright-line test to determine whether a transaction is a sale of a useful product or an arrangement for disposal. – While some transactions can be easily classified as one or the other, most sales of off-specification

material will fall somewhere in the middle. – Anything that can be done to execute the transaction like a normal product sale will increase the

chances that the useful product defense will be successful.

• EPA will inevitably take the position that drums contain waste and not useful product. – Once this assumption is made, it will be very difficult to get EPA to back off this position. – EPA will not give consideration to all of the factors the Courts use to characterize the transaction,

instead focusing on one or two factors (i.e., price, past disposal practices).

• Be wary of “innovators.” If you do not understand how the materials are being used, be suspicious.

Source: Company documents.

Cook Composites and Polymers Co. 608-055

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Exhibit 9 Environmental Data

Gel Coat Manufacturing

Gel coat manufacturing required the mixing of precise amounts of many raw materials as well as the use of additional raw materials to clean the vessel between batches. Producing and transporting styrene, one of these raw materials, to the Kansas City plant resulted in the emissions of 2.5 pounds CO2 per pound of styrene acquired.

Cement Manufacturing

Cement manufacturing required heating raw materials to extremely high temperatures. Because of its high energy content, combusting 1 pound of styrene generated enough heat for the kiln to produce 20 pounds of cement. Cement manufacturing resulted in CO2 emissions from two sources: (1) the extraction, transportation, and combustion of fuels; and (2) the chemical reactions that occurred within the cement manufacturing process, which were unaffected by the particular fuels the kiln used.

The emissions associated with the extraction, transportation, and combustion of fuels depended on the fuel source. When cement kilns were fueled exclusively by fossil fuels, these emissions amounted to 0.25 pounds CO2 per pound of cement produced. In contrast, when fueled by styrene, this figure declined to 0.19 pounds CO2 per pound of cement produced.

Concrete Coating Manufacturing

Producing one gallon of conventional concrete coating resulted in lifecycle emissions of 21.4 pounds CO2. This figure included emissions associated with all upstream activities (e.g., raw material extraction and transportation) as well as coating manufacturing. By contrast, producing one gallon of concrete coating based on rinse styrene would avoid 7.3 pounds of these CO2 emissions. Rinse styrene constituted 50% of the weight and volume of the concrete coating.e The density of styrene is 7.55 pounds per gallon.

Putting CO2 Emissions into Context

To help put CO2 emissions into context, note that one pound of CO2 emissions results from 1.25 car miles of a mid-sized automobile.

Sources: Carnegie Mellon University Green Design Institute, “Economic Input-Output Life Cycle Assessment (EIO-LCA) model, 2008,” http://www.eiolca.net, accessed March 2008; Thomas D. Kelly and Grecia R. Matos, U.S. Geological Survey, Data Series 140, Historical Statistics for Mineral and Material Commodities in the United States, version 1.2, http://minerals.usgs.gov/ds/2005/140/, accessed March 2008; Lisa J. Hanle, Kamala R. Jayaraman, and Joshua S. Smith, “CO2 Emissions Profile of the U.S. Cement Industry,” presented at the 13th International Emission Inventory Conference, Washington D.C., U.S. Environmental Protection Agency, http://www.epa.gov/ttn/chief/conference/ ei13/ghg/hanle.pdf, accessed March 2008; personal correspondence with Christian Solli, LCA-lab, Industrial Ecology Program, Norwegian University of Science and Technology; Shell Chemicals, “Styrene Monomer Material Safety Data Sheet,” version 2 effective 07/18/2006, http://www.shellchemicals.com/msds/1,1098,1136,00.html, accessed March 2008; the Nature Conservancy, “Climate Change: What's Your Impact?,” http://www.nature.org/initiatives/ climatechange/calculator/, accessed March 2008.

e These numbers have been disguised.

608-055 Cook Composites and Polymers Co.

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Endnotes

1 Information in this section is based on Christian Fiatz et al, “Coatings and Colorants, Hot Spot for M&A,” Oppenheim Research, August 6, 2007, via OneSource, accessed December 2007.

2 Christian Fiatz et al., “Coatings and Colorants.”

3 Christian Fiatz et al., “Coatings and Colorants.”

4 Christian Fiatz et al., “Coatings and Colorants. Christian Fiatz et al, “Chemicals Sector Report, Let the Good Times Roll . . .,” Oppenheim Research, July 2007, p.7, via OneSource, accessed December 2007.

5 Information in this paragraph is based on U.S. Department of Labor, Safety and Health Topics: Styrene, http://www.osha.gov/SLTC/styrene/index.html; U.S. Environmental Protection Agency, Technology Transfer Network–Air Toxics Web Site: Styrene, revised January 2000, http://www.epa.gov/ttn/atw/hlthef/styrene. html; and U.S. Environmental Protection Agency, consumer fact sheet on styrene, http://www.epa.gov/ safewater/contaminants/dw_contamfs/styrene.html, accessed October 2007.

6 International Agency for Research on Cancer, “IARC Monographs–Classifications—Complete List of Agents,” updated November 29, 2007, http://monographs.iarc.fr/ENG/Classification/crthalllist.php, accessed December 2007.

7 EPA, “Introduction to Treatment, Storage, and Disposal Facilities (40 CFR Parts 264/265, Subpart A–E),” September 2005, http://www.epa.gov/osw/inforesources/pubs/hotline/training/tsdf05.pdf, accessed March 2011.

8 The Kalundborg Center for Industrial Symbiosis, “Industrial Symbiosis,” http://www.symbiosis.dk, accessed December 2007. Marian R. Chertow and D. Rachel Lombardi, “Quantifying Economic and Environmental Benefits of Co-Located Firms,” Environmental Science and Technology, 39(17), 2005: 6535–6541.