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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report August 1, 1997 (Date of earliest event reported) (July 17, 1997)
-------------
EURAMAX INTERNATIONAL plc
(Exact name of registrant as specified in its charter)
England and Wales 333-05978 98-1066997
(State or other jurisdiction of Commission File Number (I.R.S. Employer
incorporation or organization) Identification No.)
5335 Triangle Parkway, Suite 550, Norcross, Georgia 30092
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 770-449-7066
---------------------------------------------------------------
(Former name or former address, if changed since last report)
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ITEM 1. NOT APPLICABLE
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 17, 1997, Euramax International plc's wholly owned subsidiary,
Amerimax Fabricated Products, Inc. (collectively the "Company"), acquired all of
the issued and outstanding capital stock of Gentek Holdings, Inc. and its
subsidiary Gentek Building Products, Inc. (collectively "Gentek" or "Fabral"),
consisting of assets and liabilities relating to Fabral, a division of Gentek
headquartered in Lancaster, Pennsylvania (the "Transaction"). The acquisition
was pursuant to a Purchase Agreement dated April 28, 1997 (the "Purchase
Agreement").
Fabral, created in 1967, was acquired in December 1994 by Gentek, which was
a subsidiary of Genstar Capital Corporation. Fabral is a manufacturer and
distributor of steel and aluminum roofing and wall paneling products
specifically for the agricultural, commercial and industrial markets. In
calendar 1996, Fabral had sales and EBITDA of $107.2 million and $10.1 million,
respectively.
The purchase price, including estimated adjustments for changes in net
tangible assets required by the Purchase Agreement and approximately $2.0
million in acquisition related fees and expenses, was approximately $78.0
million in cash. (See Pro Forma Condensed Combined Financial Statements). The
purchase price was determined by arm's-length negotiations between two
unaffiliated parties. Further adjustment upon determination of the final net
tangible assets is not anticipated to be material. The purchase price will be
allocated to the assets and liabilities of Gentek based upon their estimated
fair market value at the acquisition date under the purchase method of
accounting.
The Transaction was financed through borrowings ("Additional Borrowings") of
$38.0 million of senior secured revolving loans and $40.0 million of senior
secured term loans through Banque Paribas (as agent). Such borrowings were
available under the Company's Credit Agreement, which was amended and restated
to increase the Revolving Credit Facility from $85.0 million to $115.0 million
and to provide additional term loans of $40.0 million.
The description of the Transaction contained herein is qualified in its
entirety by reference to the Purchase Agreement dated as of April 28, 1997, by
and among the Company and Genstar Capital Corporation ("GCC"), Ontario Teachers'
Pension Plan Board and the Management Stockholders of Gentek Holdings Inc.
("Holdings") as sellers; GCC as sellers' representative; Holdings and Gentek
Building Products, Inc. ("GBPI") attached hereto as Exhibit 2.1 and incorporated
herein by reference.
ITEMS 3-6. NOT APPLICABLE
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired.
(1) Attached hereto as Exhibit 7(a)1, are the audited Restructured
Consolidated Financial Statements of Gentek Holdings, Inc. and its
Subsidiary Gentek Building Products, Inc. as of December 31, 1996 and for
the three years then ended, except for the audit of the predecessor period
from January 1, 1994 to September 14, 1994. As of the date of filing of
this Current Report on Form 8-K, it is impracticable for the Registrant to
provide the financial statements required by Item 7(a) of Form 8-K for the
predecessor period. In accordance with Item 7(a)(4) of Form 8-K, such
financial statements shall be filed by amendment to this Form 8-K no later
than 60 days after August 1, 1997.
(2) Attached hereto as Exhibit 7(a)2, are the unaudited Restructured Condensed
Consolidated Balance Sheet of Gentek Holdings, Inc. and its Subsidiary,
Gentek Building Products, Inc. as of June 30, 1997 and the unaudited
Restructured Condensed Consolidated Statements of Income of Gentek Holdings,
Inc. and its Subsidiary, Gentek Building Products, Inc. for the six months
ended June 30, 1996 and 1997.
2
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(b) Pro Forma Financial Information.
Attached hereto as Exhibit 7(b), are the unaudited Pro Forma Condensed
Combined Balance Sheet of Euramax International plc and Subsidiaries as of
June 28, 1997 and the unaudited Pro Forma Condensed Combined Statements of
Earnings of Euramax International plc and Subsidiaries for the year ended
December 31, 1996 and for the six months ended June 28, 1997, giving effect
to the Transaction.
(c) Exhibits
2.1* Purchase Agreement dated as of April 28, 1997, among the
Company and Genstar Capital Corporation ("GCC"), Ontario Teachers'
Pension Plan Board and the Management Stockholders of Gentek
Holdings, Inc. ("Holdings") as sellers GCC as sellers'
representative; Holdings and Gentek Building Products, Inc.
("GBPI").
7(a)1 Audited Restructured Consolidated Financial Statements of Gentek
Holdings, Inc. and its Subsidiary Gentek Building Products, Inc. as
of December 31, 1996 and for the three years then ended, except for
the audit of the predecessor period from January 1, 1994 to
September 14, 1994.
7(a)2 Unaudited Restructured Condensed Consolidated Balance Sheet as of
June 30, 1997 and the unaudited Restructured Condensed Consolidated
Statements of Income for the six months ended June 30, 1996 and
1997.
7(b) Unaudited Pro Forma Condensed Combined Balance Sheet of Euramax
International plc and Subsidiaries as of June 28, 1997 and
unaudited Pro Forma Condensed Combined Statements of Earnings of
Euramax International plc and Subsidiaries for the year ended
December 31, 1996 and for the six months ended June 28, 1997.
27 Financial Data Schedule.
* In accordance with Item 601(b)(2) of Regulation S-K, the schedules
have been omitted and a list briefly describing the schedules
is at the end of the Exhibit. The company will furnish
supplementary a copy of any omitted schedule to the Commission
upon request.
ITEMS 8-9. NOT APPLICABLE
3
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Euramax International plc
----------------------------
Registrant
/s/ R. Scott Vansant
----------------------------
Date August 1, 1997 R. Scott Vansant
---------------------------- V.P. Finance, Secretary
4
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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
among
GENSTAR CAPITAL CORPORATION,
ONTARIO TEACHERS' PENSION PLAN BOARD
and
THE MANAGEMENT STOCKHOLDERS LISTED ON SCHEDULE I HERETO,
as Sellers;
GENSTAR CAPITAL CORPORATION,
as the Sellers' Representative;
GENTEK HOLDINGS, INC.
and
GENTEK BUILDING PRODUCTS, INC.;
and
AMERIMAX FABRICATED PRODUCTS, INC.,
as Purchaser
Dated as of April 28, 1997
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TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms.......................................... 2
SECTION 1.02. Certain Rules of Construction.................................. 12
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of the Shares................................ 12
SECTION 2.02. Purchase Price................................................. 13
SECTION 2.03. Closing........................................................ 13
SECTION 2.04. Closing Deliveries by the Sellers.............................. 13
SECTION 2.05. Closing Deliveries by Purchaser................................ 13
SECTION 2.06. Purchase Price Adjustment...................................... 13
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS,
GENTEK HOLDINGS AND GENTEK
SECTION 3.01. Authority Relative to this Agreement........................... 16
SECTION 3.02. Organization and Qualification of Gentek Holdings and Gentek... 16
SECTION 3.03. Capital Stock of Gentek Holdings and Gentek; Ownership of the
Shares......................................................... 16
SECTION 3.04. No Conflict.................................................... 17
SECTION 3.05. Governmental Consents and Approvals............................ 17
SECTION 3.06. Financial Information.......................................... 17
SECTION 3.07. No Undisclosed Liabilities..................................... 18
SECTION 3.08. Receivables.................................................... 18
SECTION 3.09. Inventories.................................................... 18
SECTION 3.10. Conduct in the Ordinary Course; Absence of Material Adverse
Effect......................................................... 19
SECTION 3.11. Litigation..................................................... 20
SECTION 3.12. Compliance with Laws........................................... 20
SECTION 3.13. Environmental Matters.......................................... 21
SECTION 3.14. Material Contracts............................................. 21
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ii
SECTION 3.15. Intellectual Property.......................................... 23
SECTION 3.16. Real Property.................................................. 24
SECTION 3.17. Assets......................................................... 24
SECTION 3.18. Employee Benefit Matters....................................... 25
SECTION 3.19. Labor and Employment Matters................................... 26
SECTION 3.20. Taxes.......................................................... 26
SECTION 3.21. Accounts; Lockboxes; Safe Deposit Boxes........................ 27
SECTION 3.22. Brokers........................................................ 27
SECTION 3.23. Customers and Suppliers........................................ 28
SECTION 3.24. Affiliated Transactions........................................ 28
SECTION 3.25. Insurance...................................................... 28
SECTION 3.26. Warranties..................................................... 28
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
SECTION 4.01. Organization and Authority of Purchaser........................ 29
SECTION 4.02. No Conflict.................................................... 29
SECTION 4.03. Governmental Consents and Approvals............................ 29
SECTION 4.04. Private Placement.............................................. 30
SECTION 4.05. Investigation.................................................. 30
SECTION 4.06. Financing...................................................... 31
SECTION 4.07. Litigation..................................................... 31
SECTION 4.08. Brokers........................................................ 31
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Business Prior to the Closing....................... 32
SECTION 5.02. Access to Information.......................................... 32
SECTION 5.03. Confidentiality................................................ 33
SECTION 5.04. Regulatory and Other Authorizations; Notices and Consents...... 33
SECTION 5.05. Notice of Developments......................................... 33
SECTION 5.06. Use of Name.................................................... 34
SECTION 5.07. Ancillary Agreements........................................... 34
SECTION 5.08. Restructuring.................................................. 34
SECTION 5.09. Conveyance Taxes............................................... 35
SECTION 5.10. Exclusive Dealing.............................................. 35
SECTION 5.11. Intercompany Accounts.......................................... 35
SECTION 5.12. Alcan Note..................................................... 35
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iii
SECTION 5.13. Fabral Employee Plan Contributions............................. 35
SECTION 5.14. Further Action................................................. 35
ARTICLE VI
EMPLOYEE MATTERS
SECTION 6.01. Employees...................................................... 36
SECTION 6.02. Collective Bargaining Agreements............................... 37
ARTICLE VII
CONDITIONS TO CLOSING
SECTION 7.01. Conditions to Obligations of the Sellers and Purchaser......... 37
SECTION 7.02. Additional Condition to Obligations of the Sellers............. 38
SECTION 7.03. Additional Conditions to Obligations of Purchaser.............. 39
ARTICLE VIII
TERMINATION AND WAIVER
SECTION 8.01. Termination.................................................... 42
SECTION 8.02. Effect of Termination.......................................... 42
SECTION 8.03. Waiver......................................................... 43
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Representations, Warranties, Covenants and Agreements Not to
Survive........................................................ 43
SECTION 9.02. Exclusive Remedy............................................... 43
SECTION 9.03. Adjustment to Purchase Price................................... 44
SECTION 9.04. Indemnification by Purchaser................................... 44
SECTION 9.05. Expenses....................................................... 46
SECTION 9.06. Notices........................................................ 47
SECTION 9.07. Public Announcements........................................... 47
SECTION 9.08. Headings....................................................... 47
SECTION 9.09. Severability................................................... 47
SECTION 9.10. Entire Agreement............................................... 47
SECTION 9.11. Assignment..................................................... 48
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iv
SECTION 9.12. No Third Party Beneficiaries................................... 48
SECTION 9.13. Amendment...................................................... 48
SECTION 9.14. Governing Law.................................................. 48
SECTION 9.15. Counterparts................................................... 48
SECTION 9.16. Specific Performance........................................... 48
SECTION 9.17. Waiver of Jury Trial........................................... 49
SECTION 9.18. Liquidated Damages............................................. 49
EXHIBITS
EXHIBIT 1.01(a) Form of Indemnification Agreement
EXHIBIT 1.01(b) Form of Noncompetition Agreement
EXHIBIT 1.01(c) Form of Sellers' Representative Agreement
EXHIBIT 1.01(d) Form of Transition Services Agreement
EXHIBIT 5.08(f) Restructuring Agreement
EXHIBIT 7.02(v) Form of Opinion of Purchaser's Counsel
EXHIBIT 7.03(vii) Form of Opinion of Sellers' Counsel
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of April 28, 1997 (as amended,
restated, supplemented or otherwise modified from time to time, this
"Agreement"), among GENSTAR CAPITAL CORPORATION, a corporation organized and
existing under the laws of the Province of Alberta, Canada ("Genstar"), the
ONTARIO TEACHERS' PENSION PLAN BOARD, a non-share capital corporation organized
and existing under the Teachers' Pension Act R.S.O 1990, C.T.I. (Ontario)
("OTPPB"), and the MANAGEMENT STOCKHOLDERS of Gentek Holdings (as defined below)
listed on Schedule I hereto (the "Management Stockholders" and, together with
Genstar and OTPPB, the "Sellers"), as sellers; GENSTAR CAPITAL CORPORATION, a
corporation organized and existing under the laws of the Province of Alberta,
Canada (the "Sellers' Representative") (or such other person or persons as may
succeed Genstar (or any successor thereto) in accordance with the terms of the
Sellers' Representative Agreement (as defined below)), as the Sellers'
representative hereunder; GENTEK HOLDINGS, INC., a corporation organized and
existing under the laws of the State of Delaware ("Gentek Holdings"), and GENTEK
BUILDING PRODUCTS, INC., a corporation organized and existing under the laws of
the State of Delaware ("Gentek") and a direct wholly owned subsidiary of Gentek
Holdings; and AMERIMAX FABRICATED PRODUCTS, INC., a corporation organized and
existing under the laws of the State of Delaware ("Purchaser"), as purchaser;
W I T N E S S E T H:
WHEREAS, the Sellers own all of the issued and outstanding shares (the
"Shares") of capital stock of Gentek Holdings;
WHEREAS, Gentek Holdings owns all of the issued and outstanding shares
of capital stock of Gentek;
WHEREAS, Gentek, through its Fabral-Registered Trademark- division, is
engaged in the business of designing, manufacturing and distributing metal
roofing and siding products for the agricultural, commercial and industrial
markets at or from various locations in the United States (the "Business");
WHEREAS, pursuant hereto, the Sellers, Gentek Holdings, Gentek, Gentek
Restructuring Holdings, Inc., a corporation organized and existing under the
laws of the State of Delaware ("Newco Holdings"), and Gentek Restructuring,
Inc., a corporation organized and existing under the laws of the State of
Delaware ("Newco") and a direct wholly owned subsidiary of Newco Holdings, will
enter into a restructuring agreement (the "Restructuring Agreement"), pursuant
to which Gentek Holdings and Gentek will transfer to Newco Holdings and Newco
all of the assets of Gentek Holdings and Gentek other than the assets necessary
(giving effect to the Transition Services Agreement) for the conduct of the
Business (the "Transferred Assets"), and Newco Holdings and Newco will assume
all of the
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2
Liabilities of Gentek Holdings and Gentek, other than the Liabilities of the
Business and the Liabilities to be satisfied and discharged pursuant to this
Agreement (the "Transferred Liabilities"), in each case on the terms and
subject to the conditions set forth in the Restructuring Agreement
(collectively, the "Restructuring");
WHEREAS, the boards of directors and stockholders of Gentek Holdings
and Gentek have unanimously approved the Restructuring and the Restructuring
Agreement; and
WHEREAS, the Sellers wish to sell to Purchaser, and Purchaser wishes
to purchase from the Sellers, the Shares, all upon the terms and subject to the
conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the respective
agreements, covenants, representations and warranties hereinafter set forth and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. Unless the context otherwise
requires, the following terms, when used in this Agreement, shall have the
respective meanings specified below:
"Accounting Policies and Procedures" shall mean the accounting
policies and procedures used by Gentek in connection with the preparation of the
Reference Balance Sheet, except (i) that the value of aluminum, steel and resin
included in Inventory, whether standing alone as raw materials or incorporated
as work-in-process or finished products, shall be reflected at their replacement
cost net of any unamortized Inventory valuation reserve, (ii) that there shall
be no rationalization accrual, (iii) that cash, cash equivalents and cash
overdrafts shall be excluded from the calculation of tangible net assets of the
Business and (iv) as otherwise described in Section 1.01(a) of the Disclosure
Schedule. For purposes of this Agreement, the Accounting Policies and
Procedures were used only in connection with the preparation of the Reference
Balance Sheet and shall not be deemed to qualify or modify other accounting
policies and procedures and accounting terms as applicable under the terms
hereof.
"Action" shall mean any claim, charge, complaint, action, suit,
arbitration, grievance, inquiry, proceeding or investigation by or before any
Governmental Authority.
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3
"Adjustment Amount" shall have the meaning specified in Section
2.06(A).
"Adjustment Statement" shall mean a statement prepared by Purchaser's
Accountants setting forth its determination of the Year-End Net Assets, the
Closing Date Net Assets and the Closing Date Funded Debt.
"affiliate" shall mean, with respect to any specified person, any
other person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
person.
"Agreement" shall have the meaning specified in the preamble to this
Agreement.
"Alcan Note" shall mean the promissory note, dated December 21, 1994,
in the original principal amount of $25,000,000 made by Gentek Holdings to the
order of Alcan Aluminum Corporation.
"Ancillary Agreements" shall mean the Indemnification Agreement, the
Letter of Credit, the Noncompetition Agreement, the Sellers' Representative
Agreement and the Transition Services Agreement.
"Assets" shall have the meaning specified in Section 3.17.
"Business" shall have the meaning specified in the recitals to this
Agreement.
"business day" shall mean any day that is not a Saturday, a Sunday or
other day on which banks are required or authorized by Law to be closed in New
York, New York.
"Canadian Loan Documents" means the documents listed in
Section 1.01(b) of the Disclosure Schedule.
"Class A Common Stock" shall have the meaning specified in Section
3.03.
"Class B Common Stock" shall have the meaning specified in Section
3.03.
"Class C Common Stock" shall have the meaning specified in Section
3.03.
"Class D Common Stock" shall have the meaning specified in Section
3.03.
"Closing" shall have the meaning specified in Section 2.03.
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4
"Closing Date" shall have the meaning specified in Section 2.03.
"Closing Date Balance Sheet" shall mean the audited consolidated
balance sheet of Gentek Holdings and Gentek, after giving effect to the pro
forma effect of the Restructuring, as at the close of business on the Closing
Date, prepared in accordance with U.S. GAAP.
"Closing Date Funded Debt" shall mean the Funded Debt as of the
Closing Date, if any, as reflected on the Closing Date Balance Sheet.
"Closing Date Net Assets" shall mean the Tangible Net Assets as of the
Closing Date, as reflected on the Closing Date Balance Sheet, determined in
accordance with U.S. GAAP.
"Code" shall mean the Internal Revenue Code of 1986, as amended
through the date hereof.
"Confidentiality Agreement" shall mean the letter agreement, dated as
of October 9, 1996, between Credit Suisse First Boston Corporation, as agent for
Gentek and its affiliates, and Citicorp Venture Capital, Ltd.
"control" (including the terms "controlled by" and "under common
control with") shall mean, with respect to the relationship between or among two
or more persons, the possession, directly or indirectly, or as trustee, personal
representative or executor, of the power to direct or cause the direction of the
affairs or management of a person, whether through the ownership of voting
securities, as trustee, personal representative or executor, by contract or
otherwise, including, without limitation, the ownership, directly or indirectly,
of securities having the power to elect a majority of the board of directors or
similar body governing the affairs of such person.
"Disclosure Schedule" shall mean the Disclosure Schedule attached
hereto, dated as of the date hereof, and forming a part of this Agreement.
"Encumbrance" shall mean any security interest, pledge, mortgage,
lien, charge, encumbrance, adverse claim, preferential arrangement or
restriction of any kind.
"Environmental Claim" shall mean any action, suit, demand, demand
letter, claim, lien, notice of non-compliance or violation, notice of liability
or potential liability, investigation, proceeding, consent order or consent
agreement relating in any way to any Environmental Law, Environmental Permit or
Hazardous Materials.
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5
"Environmental Law" shall mean any Law, now or hereafter in effect and
as amended, and any judicial or administrative interpretation thereof, including
any judicial or administrative order, consent decree or judgment, relating to
pollution or protection of the environment, health, safety or natural resources.
"Environmental Permit" shall mean any permit, approval, identification
number, license or other authorization required under any applicable
Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended through the date hereof.
"Fabral Employee Plans" shall have the meaning specified in Section
3.18.
"Fabral Employees" shall have the meaning specified in Section
6.01(a).
"Financial Statements" shall have the meaning specified in Section
3.06.
"Funded Debt" means, without duplication, the aggregate amount of all
obligations due under indebtedness for borrowed money and capitalized leases (as
determined in accordance with U.S. GAAP) of Gentek, Gentek Holdings, and their
respective Subsidiaries, in each case after giving effect to the Restructuring,
including, without limitation, all obligations for principal, interest,
premiums, fees, expenses, overadvances, overdrafts, breakage costs and
indemnities due thereunder; provided, that in no event shall Funded Debt include
indebtedness incurred by Purchaser, Gentek, or Gentek Holdings at the Closing
for purposes of financing Purchaser's acquisition of the Shares hereunder.
"Genstar" shall have the meaning specified in the preamble to this
Agreement.
"Gentek Holdings" shall have the meaning specified in the recitals to
this Agreement.
"Gentek" shall have the meaning specified in the recitals to this
Agreement.
"Governmental Authority" shall mean any national, federal, state,
municipal or local or other government, governmental, regulatory or
administrative authority, agency or commission or any court, tribunal, or
judicial or arbitral body.
"Governmental Order" shall mean any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Authority.
"Hazardous Materials" shall mean (i) petroleum and petroleum products,
by products and breakdown products, radioactive materials, asbestos containing
materials and
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6
polychlorinated biphenyls, and (ii) any other chemicals, materials or
substances defined or regulated as toxic or hazardous or as a pollutant or
contaminant or as a waste under any applicable Environmental Law.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations promulgated thereunder.
"Indemnification Agreement" shall mean the agreement to be entered
into between Newco Holdings, Newco and Purchaser substantially in the form
attached hereto as Exhibit 1.01(a).
"Independent Accounting Firm" shall have the meaning specified in
Section 2.06(e).
"Intellectual Property" shall mean the Owned Intellectual Property and
the Licensed Intellectual Property.
"Intellectual Property Rights" shall mean all patents, patent
applications and patent disclosures; all inventions (whether or not patentable
and whether or not reduced to practice); all trademarks, service marks, trade
dress, trade names and corporate names and all the goodwill associated
therewith; all mask works; all registered and unregistered statutory and common
law copyrights; all registrations, applications and renewals for any of the
foregoing; and all trade secrets, confidential information, ideas, formulae,
compositions, know-how, manufacturing and production processes and techniques,
research information, drawings, specifications, designs, plans, improvements,
proposals, technical and computer data, documentation and software, financial
business and marketing plans, customer and supplier lists and related
information, marketing materials and all other proprietary rights.
"Inventories" shall mean all inventory, merchandise, finished goods,
raw materials, packaging, supplies and other personal property related to the
Business or, after giving effect to the Restructuring, maintained, held or
stored by or for Gentek Holdings or Gentek on the Closing Date.
"Investment" as applied to any person means (i) any direct or indirect
purchase or other acquisition by such person of any notes, obligations,
instruments, stock, securities, or ownership interest (including partnership
interests, limited liability company interests, and joint venture interests) of
any other person and (ii) any capital contribution by such person to any other
person.
"IRS" shall mean the Internal Revenue Service of the United States.
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7
"knowledge" shall mean, with respect to any specified person, (i) if
such person is an individual, the actual knowledge of such person, and (ii) if
such person is not an individual, the actual knowledge of any executive officer
or director (or other individual serving in a similar capacity) of such person.
"Law" shall mean any national, federal, state, municipal or local or
other statute, law, common law, ordinance, regulation, rule, code, order, other
requirement or rule of law.
"Leased Real Property" shall mean, after giving effect to the
Restructuring, the real property leased by Gentek Holdings or Gentek, as tenant,
together with, to the extent leased by Gentek Holdings or Gentek, all buildings
and other structures, facilities or improvements currently or hereafter located
thereon, all material fixtures, systems, equipment and items of personal
property of Gentek Holdings or Gentek attached or appurtenant thereto, and all
material easements, licenses, rights and appurtenances relating to the
foregoing.
"Leased Tangible Personal Property" shall mean, after giving effect to
the Restructuring, all material machinery, equipment, tools, supplies,
furniture, fixtures, personalty, vehicles, rolling stock and other tangible
personal property leased by Gentek Holdings or Gentek, as lessee.
"Letter of Credit" shall mean the letter of credit to be issued for
the benefit of Purchaser and for the account of Newco Holdings, in form and
substance reasonably satisfactory to Newco Holdings, the Sellers' Representative
and Purchaser, which shall provide credit support for the indemnification
obligations of Newco Holdings and Newco under the Indemnification Agreement,
substantially on the terms set forth in Section 5(d) of the Indemnification
Agreement and Schedule I thereto.
"Liabilities" shall mean any and all debts, liabilities and
obligations, whether accrued or fixed, absolute or contingent, matured or
unmatured or determined or determinable.
"Licensed Intellectual Property" shall mean, after giving effect to
the Restructuring, all Intellectual Property Rights licensed or sublicensed to
Gentek Holdings or Gentek from a third party.
"Management Stockholders" shall have the meaning specified in the
preamble to this Agreement.
"Material Adverse Effect" shall mean, after giving effect to the
Restructuring, any circumstance, change in, or effect on the Business that,
(i) individually or in the
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8
aggregate with any other circumstances, changes in, or effects on the
Business is, or could be, materially adverse to the business, operations,
Assets or Liabilities, results of operations or condition (financial or
otherwise) of the Business or (ii) materially and adversely affects the
ability of the Sellers, Gentek Holdings, Gentek, Newco or Newco Holdings to
consummate the transactions contemplated hereby and to perform their
respective obligations hereunder.
"Material Contracts" shall have the meaning specified in Section 3.14.
"Newco Holdings" shall have the meaning specified in the recitals to
this Agreement.
"Newco" shall have the meaning specified in the recitals to this
Agreement.
"Noncompetition Agreement" shall mean the agreement to be entered into
among Newco Holdings, Newco and Purchaser substantially in the form attached
hereto as Exhibit 1.01(b).
"Objection Notice" shall have the meaning specified in
Section 2.06(c).
"OTPPB" shall have the meaning specified in the preamble to this
Agreement.
"Owned Intellectual Property" shall mean, after giving effect to the
Restructuring, all Intellectual Property Rights owned by Gentek Holdings or
Gentek
"Owned Real Property" shall mean, after giving effect to the
Restructuring, the real property owned by Gentek Holdings or Gentek, together
with all buildings and other structures, facilities or improvements currently or
hereafter located thereon, all material fixtures, systems, equipment and items
of personal property of Gentek Holdings or Gentek attached or appurtenant
thereto and all material easements, licenses, rights and appurtenances relating
to the foregoing.
"Owned Tangible Personal Property" shall mean, after giving effect to
the Restructuring, all material machinery, equipment, tools, supplies,
furniture, fixtures, personalty, vehicles, rolling stock and other tangible
personal property owned by Gentek Holdings or Gentek
"Percentage Share" shall mean, with respect to each Seller, the
fraction obtained by dividing (i) the number of Shares set forth opposite such
Seller's name on Schedule I hereto and (ii) the total number of Shares.
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9
"Permitted Encumbrances" shall mean such of the following as to which
no enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced:
(i) liens for Taxes, assessments, charges, levies or other
claims not yet due and payable, or the validity of which are being
contested in good faith by appropriate proceedings and for which adequate
reserves have been made on the Reference Balance Sheet;
(ii) Encumbrances imposed by Law, such as materialmen's,
mechanics', carriers', workmen's and repairmen's liens and other similar
liens which relate to payment obligations which are not yet delinquent and
have been incurred in the ordinary course of business;
(iii) pledges or deposits to secure obligations under
workers' compensation laws or similar legislation or to secure public or
statutory obligations;
(iv) Encumbrances and imperfections of title set forth in Section
3.16 of the Disclosure Schedule; and
(v) any other Encumbrances and imperfections of title that do
not materially and adversely affect the value or use of the affected
property or consummation of the transactions contemplated hereby.
"person" shall mean any individual, partnership, firm, corporation,
joint venture, association, trust, unincorporated organization or other entity,
as well as any syndicate or group that would be deemed to be a person under
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
"Purchase Price" shall have the meaning specified in Section 2.02.
"Purchaser" shall have the meaning specified in the preamble to this
Agreement.
"Purchaser's Accountants" shall mean Coopers & Lybrand LLP, in their
capacity as independent certified public accountants for Purchaser.
"Real Property" shall mean the Leased Real Property and the Owned Real
Property.
"Receivables" shall mean, after giving effect to the Restructuring,
any and all accounts receivable, notes and other amounts receivable by Gentek
Holdings or Gentek from
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10
third parties, arising from the conduct of the Business before the Closing
Date, together with all unpaid financing charges accrued thereon.
"Reference Balance Sheet" shall mean the unaudited pro forma
consolidated balance sheet of Gentek Holdings and Gentek, after giving effect to
the Restructuring, dated as of December 31, 1996, a copy of which is set forth
in Section 3.06 of the Disclosure Schedule.
"Reference Balance Sheet Date" shall mean December 31, 1996.
"Regulations" shall mean the Treasury Regulations (including Temporary
Regulations) promulgated by the United States Department of Treasury with
respect to the Code or other federal tax statutes.
"Restructuring" shall have the meaning specified in the recitals to
this Agreement.
"Restructuring Agreement" shall have the meaning specified in the
recitals to this Agreement.
"Retained Names and Marks" shall have the meaning specified in
Section 5.06.
"Returns" shall mean all Tax returns, reports and forms relating to
Gentek Holdings or Gentek that are due on or before the Closing Date.
"Securities Act" shall have the meaning specified in Section 4.04(a).
"Sellers" shall have the meaning specified in the preamble to this
Agreement.
"Sellers' Representative" shall have the meaning specified in the
preamble to this Agreement.
"Sellers' Representative Agreement" shall mean the agreement to be
entered into among the Sellers and the Sellers' Representative substantially in
the form attached hereto as Exhibit 1.01(c).
"Subsidiary" means, with respect to any person, any other corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that person or
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11
one or more of the other Subsidiaries of that person or a combination
thereof, or (ii) if a limited liability company, partnership, association or
other business entity, a majority of the partnership or other similar
ownership interest thereof is at the time owned or controlled, directly or
indirectly, by any person or one or more Subsidiaries of that person or a
combination thereof.
"Tangible Net Assets" means (i) the total tangible assets of the
Business less (ii) the total Liabilities of the Business, in each case after
giving effect to the Restructuring and as determined in accordance with U.S.
GAAP applied on a basis consistent with past practice, but excluding cash and
cash equivalents, Liabilities for corporate income taxes (deferred and current),
Liabilities comprising Funded Debt, intangible assets of the Business and
intercompany accounts of Gentek and Gentek Holdings. In no event shall the
determination of Tangible Net Assets take into account the assets or Liabilities
to be transferred to Newco or Newco Holdings pursuant to the Restructuring
Agreement.
"Tangible Personal Property" shall mean the Leased Tangible Personal
Property and the Owned Tangible Personal Property.
"Tax" or "Taxes" shall mean any and all taxes, fees, levies, duties,
tariffs, imposts, and other charges of any kind (together with any and all
interest, penalties, loss, damage, liability, expense, additions to tax and
additional amounts or costs incurred or imposed with respect thereto) imposed by
any government or taxing authority, including, without limitation, (i) taxes or
other charges on or with respect to income, franchises, concessions, windfall or
other profits, gross receipts, property, sales, use, capital, gains, capital
stock or shares, payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth; (ii) taxes or other charges in the
nature of excise, withholding, ad valorem, stamp, transfer, value added, or
gains taxes; (iii) license, registration and documentation fees; and (iv)
customs duties, tariffs, and similar charges.
"Tax Attributes" shall mean net operating losses, capital losses and
tax credits, and carryovers thereof, for purposes of federal income or state
income or franchise taxes.
"Third Party Claims" shall have the meaning specified in
Section 9.04(e).
"Threshold Amount" shall have the meaning specified in
Section 9.04(b).
"Transferred Assets" shall have the meaning specified in the recitals
to this Agreement.
"Transferred Liabilities" shall have the meaning specified in the
recitals to this Agreement.
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12
"Transition Services Agreement" shall mean the transition services
agreement to be entered into between Gentek Restructuring, Inc. and Gentek
Building Products, Inc. substantially in the form attached hereto as Exhibit
1.01(d).
"U.S. GAAP" shall mean United States generally accepted accounting
principles and practices as in effect from time to time and applied consistently
throughout the periods involved and in accordance with the provisions of
Regulation S-X promulgated under the Securities Act and the Securities Exchange
Act of 1934, as amended.
"U.S. Loan Documents" means the documents listed in Section 1.01(c) of
the Disclosure Schedule.
"Year-End Balance Sheet" shall mean the audited pro forma consolidated
balance sheet of Gentek Holdings and Gentek, after giving effect to the
Restructuring, dated as of December 31, 1996, prepared in accordance with U.S.
GAAP.
"Year-End Net Assets" shall mean the Tangible Net Assets as of
December 31, 1996, as reflected on the Year-End Balance Sheet, determined in
accordance with U.S. GAAP.
SECTION 1.02. Certain Rules of Construction. (a) All references in
this Agreement to the Reference Balance Sheet shall be construed to be
references to information set forth on the face of the Reference Balance Sheet,
without taking account of any footnotes thereto or any of the enumerated matters
listed in Section 1.01(a) of the Disclosure Schedule.
(b) In the event that any term of the Restructuring Agreement in
respect of any matter addressed therein should be inconsistent with any term of
this Agreement addressing such matter, the term of this Agreement shall govern
in respect of such matter.
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of the Shares. Upon the terms and
subject to the conditions of this Agreement, at the Closing, each Seller shall
sell, assign, transfer, convey and deliver to Purchaser or cause to be sold,
assigned, transferred, conveyed and delivered to Purchaser, free and clear of
all Encumbrances, and Purchaser shall purchase from each Seller, the Shares
owned by such Seller as set forth opposite such Seller's name on Schedule I
hereto free and clear of all Encumbrances.
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13
SECTION 2.02. Purchase Price. Subject to the adjustments provided
for in Section 2.06, the aggregate purchase price for the Shares shall be
$72,000,000 plus all cash and cash equivalents reflected on the books of Gentek
Holdings and Gentek at the close of business on the business day immediately
preceding the Closing Date after giving effect to the Restructuring (such
amount, the "Purchase Price").
SECTION 2.03. Closing. Upon the terms and subject to the conditions
of this Agreement, the sale and purchase of the Shares contemplated by this
Agreement shall take place at a closing (the "Closing") to be held at a location
mutually agreed between the Sellers' Representative and Purchaser, at 10:00
a.m., local time, on July 14, 1997, or at such other place or at such other time
or on such other date as the Sellers' Representative, on behalf of the Sellers,
and Purchaser may mutually agree upon in writing (the day on which the Closing
takes place being the "Closing Date").
SECTION 2.04. Closing Deliveries by the Sellers. At the Closing, the
Sellers shall deliver or cause to be delivered to Purchaser (i) stock
certificates evidencing the Shares duly endorsed in blank, or accompanied by
stock powers duly executed in blank, with all required stock transfer tax stamps
affixed, (ii) a receipt for the Purchase Price and (iii) all closing documents
required to be delivered by the Sellers, Gentek, or Gentek Holdings pursuant to
Section 7.03 that have not been delivered prior to the Closing.
SECTION 2.05. Closing Deliveries by Purchaser. At the Closing,
Purchaser shall deliver or cause to be delivered to the Sellers' Representative,
on behalf of the Sellers (i) the Purchase Price by wire transfer in immediately
available funds to the bank account or accounts designated by the Sellers'
Representative in writing not fewer than two business days prior to the Closing
to be disbursed in accordance with the Restructuring Agreement and (ii) all
closing documents required to be delivered by Purchaser pursuant to Section 7.02
that have not been delivered prior to the Closing.
SECTION 2.06. Purchase Price Adjustment. (a) The Purchase Price
shall be (i) increased by the amount by which, if any, the Closing Date Net
Assets exceeds the Year-End Net Assets, and (ii) decreased by the amount of
Closing Date Funded Debt, if any, plus the amount by which, if any, the Closing
Date Net Assets are less than the Year-End Net Assets (such net increase or
decrease, as the case may be, the "Adjustment Amount").
(b) In the event of a decrease in the Purchase Price pursuant to this
Section 2.06, the Sellers shall pay, within three business days of written
demand therefor, an amount equal to the Adjustment Amount by certified check or
wire transfer of immediately available funds to Purchaser's account, as
designated by Purchaser. In the event of an increase in the Purchase Price
pursuant to this Section 2.06, Purchaser shall pay, within three business days
of written demand therefor, an amount equal to the Adjustment Amount by
certified check or wire transfer of immediately available funds to the Sellers'
accounts, as
<PAGE>
14
designated by the Sellers' Representative. Any payment of the Adjustment
Amount, whether by Purchaser or by Sellers shall be made together with
interest thereon accruing from the Closing Date to the date of payment at a
fluctuating rate per annum of interest equal to the rate per annum announced
by Citibank, N.A. as its base rate in effect from time to time.
(c) On or before the 60th day after the Closing Date, Purchaser shall
prepare the Year-End Balance Sheet, the Closing Date Balance Sheet and the
Adjustment Statement, and Purchaser shall deliver a copy of the Year-End Balance
Sheet, the Closing Date Balance Sheet and the Adjustment Statement to the
Sellers' Representative. The Year-End Balance Sheet and the Closing Date
Balance Sheet shall be prepared in accordance with the accounting principles set
forth in Section 2.06(f) below. On or prior to the 30th day after the Sellers'
Representative's receipt of the Year-End Balance Sheet, the Closing Date Balance
Sheet and the Adjustment Statement, the Sellers' Representative may give
Purchaser a written notice stating in reasonable detail the Sellers'
Representative's objections and the bases therefor (an "Objection Notice") to
the Year-End Balance Sheet, the Closing Date Balance Sheet and/or the Adjustment
Statement. If the Sellers' Representative does not give Purchaser an Objection
Notice within such 30-day period, then the Year-End Balance Sheet, the Closing
Date Balance Sheet and the Adjustment Statement shall be conclusive and binding
upon the parties hereto and the Year-End Net Assets, the Closing Date Net Assets
and the Closing Date Funded Debt shall likewise be binding on the parties for
purposes of this Section 2.06.
(d) If the Sellers' Representative timely gives an Objection Notice
as described in Section 2.06(c) above, then the Sellers' Representative and
Purchaser shall attempt amicably to resolve their disputes as reflected in the
Objection Notice, and any amount agreed to in writing by the Sellers'
Representative and Purchaser as the Year-End Net Assets, the Closing Date Net
Assets and the Closing Date Funded Debt shall be conclusive and binding upon the
parties hereto for purposes of this Section 2.06.
(e) If the Sellers' Representative and Purchaser do not resolve all
disputes as reflected in the Objection Notice on or prior to the 30th day after
the Objection Notice is given, then the Sellers' Representative and Purchaser
shall retain a firm of certified public accountants that is mutually acceptable
to the Sellers' Representative and Purchaser (if the Sellers' Representative and
Purchaser are unable to agree on a mutually acceptable accounting firm prior to
the 45th day following delivery of the Objection Notice, then such firm will be
chosen randomly by lot from among the "big six" accounting firms other than
Purchaser's Accountants or Gentek Holdings', Newco Holdings', Gentek's or
Newco's accounting firm) (the "Independent Accounting Firm") to determine the
Year-End Net Assets, the Closing Date Net Assets and the Closing Date Funded
Debt as soon as practicable, and, in any event, within 30 days, all in
accordance with the standards and definitions set forth herein and in
Section 2.06(f) below. The Year-End Net Assets, the Closing Date Net Assets and
the Closing Date Funded Debt determined by the Independent
<PAGE>
15
Accounting Firm (i) in the case of any amount for a component thereof that is
not within the range of amounts established for such component as determined
by reference to the amount assigned to such component by the Sellers'
Representative and Purchaser in the Objection Notice and the Adjustment
Statement, respectively, will be deemed to be the amount assigned to such
component by the Sellers' Representative or Purchaser, as the case may be,
that is closest to the amount assigned to such component by the Independent
Accounting Firm, and (ii) after giving effect to clause (i), will be
conclusive and binding upon the parties hereto for purposes of this Section
2.06. The fees and expenses of the Independent Accounting Firm shall be
allocated between the Sellers and Purchaser in proportion to the aggregate
difference between the amounts assigned to the Year-End Net Assets, the
Closing Date Net Assets and the Closing Date Funded Debt by the Sellers'
Representative and Purchaser, respectively, in the Objection Notice and the
Adjustment Statement, respectively, and the Year-End Net Assets, the Closing
Date Net Assets and the Closing Date Funded Debt determined by the
Independent Accounting Firm.
(f) Each accounting term used herein shall have the meaning that is
applied thereto in accordance with U.S. GAAP and each account included in the
Year-End Balance Sheet and the Closing Date Balance Sheet shall be calculated in
accordance with U.S. GAAP and shall be based on the books and records of Gentek
and Gentek Holdings; provided that all known errors and adjustments (but only if
the aggregate amount of such adjustments exceeds $150,000) shall be taken into
account in the calculation of each account set forth above. With respect to the
calculation of the levels of the accounts set forth above, no change in
accounting principles shall be made from those utilized in preparing the
Year-End Balance Sheet (without regard to materiality), including, without
limitation, with respect to the nature or classification of accounts, closing
proceedings, levels of reserves or levels of accruals. For purposes of the
preceding sentence, "changes in accounting principles" includes all changes in
accounting principles, policies, practices, procedures or methodologies with
respect to financial statements, their classification or their display, as well
as all changes in practices, methods, conventions or assumptions utilized in
making accounting estimates.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS,
GENTEK HOLDINGS AND GENTEK
As an inducement to Purchaser to enter into this Agreement, each
Seller hereby severally, and not jointly, represents and warrants, and Gentek
Holdings and Gentek hereby jointly and severally represent and warrant, to
Purchaser that, except as set forth in the Disclosure Schedule attached hereto:
<PAGE>
16
SECTION 3.01. Authority Relative to this Agreement. If such person
is not an individual, that such person has all necessary power and authority,
and if such person is an individual, that such person has full legal capacity,
to enter into this Agreement, to carry out such person's obligations hereunder
and to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by such person, and (assuming due authorization,
execution and delivery by Purchaser and each other Seller) this Agreement
constitutes a legal, valid and binding obligation of such person enforceable
against such person in accordance with its terms.
SECTION 3.02. Organization and Qualification of Gentek Holdings and
Gentek. Each of Gentek Holdings and Gentek is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and is duly licensed or qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by it or the operation of
its business, after giving effect to the Restructuring, makes such licensing or
qualification necessary, except to the extent that the failure to be so licensed
or qualified could not reasonably be expected to have a Material Adverse Effect.
SECTION 3.03. Capital Stock of Gentek Holdings and Gentek; Ownership
of the Shares. (a) The authorized capital stock of Gentek Holdings consists of
2,000,000 shares of Class A common stock, par value $.01 per share (the "Class A
Common Stock"), 2,000,000 shares of Class B common stock, par value $.01 per
share (the "Class B Common Stock"), 1,000,000 shares of Class C common stock,
par value $.01 per share (the "Class C Common Stock"), and 1,000,000 shares of
Class D common stock, par value $.01 per share (the "Class D Common Stock").
There is no other capital stock authorized for issuance. After giving effect to
the Restructuring, there will be 497,544 shares of Class A Common Stock, no
shares of Class B Common Stock, 200,000 shares of Class C Common Stock, and no
shares of Class D Common Stock issued and outstanding, all of which outstanding
shares will be validly issued, fully paid and nonassessable. After giving
effect to the Restructuring, there will be no options, warrants, convertible
securities, stock appreciation rights, phantom stock rights, profit
participation rights, or other rights, agreements, arrangements or commitments
of any character relating to the capital stock of Gentek Holdings or obligating
such person to issue or sell any shares of capital stock of, or any other
interest in, Gentek Holdings other than pursuant to this Agreement. After
giving effect to the Restructuring, the Shares will constitute all of the issued
and outstanding capital stock of Gentek Holdings and the number of Shares set
forth opposite each Seller's name on Schedule I hereto will be owned of record
and beneficially solely by such Seller, free and clear of all Encumbrances and
all other shares of capital stock of Gentek Holdings previously issued and
outstanding and which have been purchased by Gentek Holdings shall have been
duly cancelled.
(b) The authorized capital stock of Gentek consists of 1,000 shares
of common stock, par value $.01 per share. There are 100 shares of common
stock, par value
<PAGE>
17
$.01 per share, of Gentek issued and outstanding, all of which (i) are
validly issued, fully paid and nonassessable, and (ii) owned of record and
beneficially solely by Gentek Holdings. There are no options, warrants,
convertible securities, stock appreciation rights, phantom stock rights,
profit participation rights, or other rights, agreements, arrangements or
commitments of any character relating to the capital stock of Gentek or
obligating such person to issue or sell any shares of capital stock of, or
any other interest in, Gentek
(c) After giving effect to the Restructuring, Gentek Holdings will
have no Subsidiaries other than Gentek, and Gentek will have no Subsidiaries.
SECTION 3.04. No Conflict. Assuming compliance with the notification
requirements of the HSR Act and the making and obtaining of all filings,
notifications, consents, approvals, authorizations and other actions referred to
in Section 3.05, the execution, delivery and performance of this Agreement by
such person do not and will not (i) if such person is not an individual,
violate, conflict with or result in the breach of any provision of the charter
or by-laws (or similar organizational documents) of such person, (ii) conflict
with or violate any Law or Governmental Order applicable to such person or the
Shares held thereby, or (iii) conflict with, or result in any breach of,
constitute a default (or event which with the giving of notice or lapse of time,
or both, would become a default) under, require any consent under, or give to
others any rights of termination, amendment, acceleration, suspension,
revocation or cancellation of, or result in the creation of any Encumbrance on
any of the Shares or other assets or properties of such person pursuant to, any
note, bond, mortgage, deed of trust, indenture, contract, agreement, lease,
sublease, license, permit, franchise or other instrument or arrangement to which
such person is a party or by which any of such Shares or other assets or
properties is bound or affected which could reasonably be expected to have a
material adverse effect on the ability of such person to consummate the
transactions contemplated by this Agreement.
SECTION 3.05. Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement by such person do not and will not
require any consent, approval, authorization or other order of, action by,
filing with or notification to any Governmental Authority, except the
notification requirements of the HSR Act.
SECTION 3.06. Financial Information. The Sellers' Representative has
delivered or caused to be delivered to Purchaser copies of the audited
consolidated balance sheets of Gentek Holdings and its subsidiaries as at
December 31, 1994, 1995 and 1996, and the related consolidated statements of
income, retained earnings, shareholders' equity and changes in financial
position of Gentek Holdings and its Subsidiaries for the partial fiscal year
ended December 31, 1994 and the fiscal years ended December 31, 1995 and 1996,
together with all related notes and schedules thereto (collectively, the
"Financial Statements"). The Financial Statements (i) were prepared in
accordance with the books of account and other
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18
financial records of Gentek Holdings (which books of account and other
financial records are accurate and complete in all material respects), (ii)
present fairly the consolidated financial condition and results of operations
of Gentek Holdings and its subsidiaries as of the dates thereof or for the
periods covered thereby, (iii) have been prepared in accordance with U.S.
GAAP (except with respect to calculating earnings per share) and (iv) include
all adjustments that are necessary for a fair presentation of the
consolidated financial condition and the results of the operations of Gentek
Holdings and its subsidiaries as of the dates thereof or for the periods
covered thereby. The Reference Balance Sheet (1) was prepared in accordance
with the books of account and other financial records of Gentek Holdings and
Gentek (which books of account and other financial records are accurate and
complete in all material respects), (2) presents fairly the consolidated
financial condition of Gentek Holdings and Gentek and their respective
subsidiaries as of the date thereof and (3) has been prepared in accordance
with U.S. GAAP except as set forth on Section 1.01 of the Disclosure Schedule
and as set forth in the definition of the Accounting Policies and Procedures
in a manner consistent with past practice, except as otherwise noted therein
and subject to the absence of footnote disclosure and changes resulting from
normal and customary year-end audit adjustments.
SECTION 3.07. No Undisclosed Liabilities. After giving effect to the
Restructuring, there will be no Liabilities of Gentek Holdings or Gentek, other
than Liabilities (i) adequately reflected or reserved against on the Reference
Balance Sheet (provided that in determining the adequacy of reserves for
contingent Liabilities for purposes of this Section 3.07, such Liabilities will
be treated as having been realized rather than contingent when the
representation provided for hereunder was made); (ii) identified by the express
terms of the Disclosure Schedule; (iii) addressed in the representations,
warranties, covenants or agreements made by the Sellers in this Agreement and
(A) not required to be disclosed in the Disclosure Schedule by the terms of any
such representation or warranty or (B) permitted to be incurred by the terms of
any such covenant or agreement, as the case may be; or (iv) incurred since the
Reference Balance Sheet Date in the ordinary course of business consistent with
past practice in accordance with Section 3.10 that could not, individually or in
the aggregate, reasonably be expected to cause a Material Adverse Effect.
SECTION 3.08. Receivables. Except to the extent, if any, reserved
for on the Reference Balance Sheet, all Receivables reflected on the Reference
Balance Sheet arose from, and the Receivables existing on the Closing Date will
have arisen from, the sale of Inventory or services to persons not affiliated
with Gentek Holdings, Gentek or Sellers and in the ordinary course of business
consistent with past practice.
SECTION 3.09. Inventories. Subject to amounts reserved therefor on
the face of the Reference Balance Sheet, the values at which all Inventories are
carried on the Reference Balance Sheet reflect the historical inventory
valuation policy of Gentek Holdings and Gentek of stating such Inventories in
accordance with the Accounting Policies and Procedures. The Inventories are in
good and merchantable condition in all material respects,
<PAGE>
19
are suitable and usable for the purposes for which they are intended and are
in a condition such that they can be sold in the ordinary course of business
consistent with past practice.
SECTION 3.10. Conduct in the Ordinary Course; Absence of Material
Adverse Effect. Since the Reference Balance Sheet Date, except for consummation
of transactions contemplated by the Restructuring Agreement, the Business has
been conducted in the ordinary course and consistent with past practice and
there has occurred no Material Adverse Effect and, without limiting the
generality of the foregoing, neither Gentek Holdings nor Gentek nor any of their
respective Subsidiaries have, with respect to the Business (except in each case
for consummation of transactions contemplated by the Restructuring Agreement):
(i) issued any notes, bonds, or other debt securities or any
capital stock or other equity securities or any securities convertible,
exchangeable, or exercisable into any capital stock or other equity
securities or otherwise incurred indebtedness for borrowed money;
(ii) declared or made any payment or distribution of cash or
other property to its stockholders with respect to its capital stock or
other equity securities or purchased or redeemed any shares of its capital
stock or other equity securities (including, without limitation, any
warrants, options, or other rights to acquire its capital stock or other
equity securities);
(iii) mortgaged or pledged any of its properties or assets or
subjected them to any Encumbrance, except Permitted Encumbrances and
Encumbrances to be discharged in connection with the Restructuring;
(iv) sold, assigned, or transferred any of the material tangible
Assets of the Business, except in the ordinary course of business, or
canceled any material Liabilities of the Business;
(v) sold, assigned, or transferred any patents or patent
applications, trademarks, service marks, trade names, corporate names,
copyrights, or copyright registrations or trade secrets, or made any
disclosure of any proprietary confidential information to any person that
could reasonably be expected to have a Material Adverse Effect;
(vi) made capital expenditures in respect of the Business or
commitments therefor that aggregate in excess of $900,000;
(vii) made any loans or advances to, guarantees for the
benefit of, or any Investments in, any persons in excess of $250,000 in the
aggregate (except loans,
<PAGE>
20
advances, guaranties or investments that will constitute Transferred
Assets or Transferred Liabilities, as the case may be);
(viii) suffered any damage, destruction, or casualty loss in
respect of the Business exceeding in the aggregate $250,000, whether or not
covered by insurance;
(ix) made any Investment in or taken steps to incorporate any
Subsidiary;
(x) entered into any other transaction in respect of the
Business other than in the ordinary course of business;
(xi) made any material changes in the financial condition,
assets, Liabilities, personnel, or operations of the Business or in its
relationships with suppliers, customers, distributors, brokers, lessors or
others, other than changes in the ordinary course of business; or
(xii) increased any of the compensation, benefits or
severance obligations, paid or to become payable, by Gentek Holdings or
Gentek to any of the Fabral Employees (except for compensation increases
for employees in the ordinary course of business consistent with past
practice) including any increase pursuant to any option, bonus, stock
purchase, pension, profit-sharing, deferred compensation, retirement or
other plan, arrangement, contract, or commitment.
SECTION 3.11. Litigation. There are no Actions by or against Gentek
Holdings or Gentek, or affecting any of the Assets or the Business, pending
before, or, to the knowledge of such person after due inquiry, threatened to be
brought by or before, any Governmental Authority. Neither Gentek Holdings nor
Gentek, nor any of their respective assets or properties, is subject to any
material Governmental Order, or any settlement agreement, decree or other
obligation that could be subject to any material Governmental Order, nor, to the
knowledge of such person after due inquiry, are there any such material
Governmental Orders threatened to be imposed by any Governmental Authority.
SECTION 3.12. Compliance with Laws. Gentek Holdings and Gentek have
each conducted and continue to conduct the Business in all material respects in
accordance with all Laws and Governmental Orders applicable to Gentek Holdings
or Gentek, as the case may be, or the Assets or the Business, and neither Gentek
Holdings nor Gentek is in violation of any such Law or Governmental Order in any
material respect, and no such Governmental Order has had or could reasonably be
expected to have a Material Adverse Effect.
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21
SECTION 3.13. Environmental Matters. Set forth on Section 3.13 of the
Disclosure Schedule is a list of the Environmental Permits held by Gentek
Holdings and Gentek that will be included in the Assets. Gentek Holdings and
Gentek are in compliance in all material respects with the requirements of such
Environmental Permits and with all applicable Environmental Laws. There are no
pending or threatened Environmental Claims against Gentek Holdings or Gentek or
any of the Assets or the Real Property that are material. None of the following
exists at the Real Property or other property owned or operated by Gentek
Holdings or Gentek except in compliance with applicable Environmental Laws:
(i) underground storage tanks; (ii) asbestos-containing material in any form or
condition; (iii) materials or equipment containing polychlorinated biphenyls; or
(iv) landfills, surface impoundments, or disposal areas. Gentek Holdings and
Gentek have not treated, stored, disposed of, arranged for or permitted the
disposal of, transported, handled, or released any substance, including, without
limitation, any Hazardous Substance, or owned or operated any property or
facility in a manner that (A) requires any corrective action or that could
reasonably be expected to give rise to any investigative, corrective or remedial
obligations, pursuant to any Environmental Law or (B) that could reasonably be
expected to give rise to a material Environmental Claim. No facts or
circumstances with respect to the past or current businesses, operations,
properties, or facilities of Gentek Holdings or Gentek, or any predecessor or
affiliate of Gentek Holdings or Gentek (including, without limitation, any
onsite disposal, offsite disposal, or release of hazardous materials,
substances, or wastes) would give rise or has given rise to any material
liability (contingent or otherwise) or material corrective or remedial
obligation under any Environmental Law relating to pollution or protection of
the environment. Neither this Agreement nor the transactions contemplated
hereby could reasonably be expected to result in any obligations for site
investigation or cleanup, or require notification to or the consent of
government agencies or third parties, pursuant to any of the so-called
"transaction-triggered" or "responsible property transfer" Environmental Laws.
Neither Gentek Holdings nor Gentek has expressly or by operation of law, assumed
or undertaken any liability, including, without limitation, any obligation for
corrective or remedial action, of any other person relating to Environmental
Laws.
SECTION 3.14. Material Contracts. Section 3.14 of the Disclosure
Schedule lists each contract and agreement to which Gentek Holdings or Gentek
will be a party after giving effect to the Restructuring, whether or not made in
the ordinary course of business, and which is material to Gentek Holdings or
Gentek or the conduct of the Business (the "Material Contracts"), including,
without limitation, any:
(i) pension, profit sharing, stock option, employee stock
purchase or other plan or written arrangement providing for deferred or
other compensation to Fabral Employees or any other employee benefit plan
or arrangement, or any collective bargaining agreement or any other
contract with any labor union, or severance agreements, programs, policies,
or written arrangements with respect to Fabral Employees;
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22
(ii) contract for the employment of any officer, individual
employee, or other person (who shall be a Fabral Employee) on a full-time,
part-time, consulting or other basis providing annual compensation in
excess of $100,000 or contract relating to loans to such officers,
directors, or Fabral Employees;
(iii) contract under which Gentek Holdings or Gentek has
advanced or loaned any other person amounts in the aggregate exceeding
$200,000;
(iv) agreement or indenture relating to borrowed money or other
Indebtedness or the mortgaging, pledging, or otherwise placing an
Encumbrance on any material Asset;
(v) guarantee of any obligation in excess of $200,000;
(vi) lease or agreement under which Gentek Holdings or Gentek is
lessee of or holds or operates any property, real or personal, owned by any
other party, except for any lease of real or personal property under which
the aggregate annual rental payments do not exceed $200,000;
(vii) lease or agreement under which Gentek Holdings or
Gentek is lessor of or permits any third party to hold or operate any
property, real or personal, owned or controlled by Gentek Holdings or
Gentek and having book value in excess of $200,000;
(viii) contract or group of related contracts with the same
party or group of affiliated parties the performance of which involves
consideration in excess of $200,000;
(ix) assignment, license, indemnification, or agreement with
respect to any intangible property (including, without limitation, any
Intellectual Property);
(x) warranty agreement with respect to its services rendered or
its products sold or leased;
(xi) agreement under which it has granted any person any
registration rights (including, without limitation, demand and piggyback
registration rights);
(xii) sales, distribution, or franchise agreements;
(xiii) contract or agreement prohibiting it from freely
engaging in any business or competing anywhere in the world; or
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23
(xiv) any other agreement which is material to its operations
and business prospects or involves a consideration in excess of $200,000
annually.
(b) Gentek Holdings and Gentek have performed in all material
respects all obligations required to be performed by them under the Material
Contracts and are not in any material respect in default under or in breach of
nor in receipt of any claim of default or breach under any Material Contract; no
event has occurred which with the passage of time or the giving of notice or
both would result in a default, breach, or event of noncompliance by Gentek
Holdings or Gentek under any Material Contract; neither Gentek Holdings nor
Gentek has any present expectation or intention of not fully performing all such
obligations in all material respects; neither Gentek Holdings nor Gentek has
knowledge of any breach or anticipated breach by the other parties to any
Material Contract.
(c) A true, complete and correct copy of each of the Material
Contracts, together with all amendments, waivers or other changes thereto has
been made available to Purchaser.
SECTION 3.15. Intellectual Property. Section 3.15 of the Disclosure
Schedule lists and briefly describes each item of patented or registered (or for
which application has been made) Intellectual Property and all material
unregistered trademarks, service marks, trade names, or copyrights owned by or
licensed to Gentek Holdings or Gentek applicable to or used in the Business,
together with a complete list of all licenses granted by or to Gentek Holdings
or Gentek with respect to any of the above and of all computer software owned
and/or used by Gentek Holdings or Gentek in connection with the Business (other
than mass marketed software with a license fee per user less than $1,000).
Gentek Holdings or Gentek owns all right, title, and interest in and to each
item of Owned Intellectual Property free and clear of all Encumbrances, except
Permitted Encumbrances, and each item of Licensed Intellectual Property is
licensed under a valid and subsisting license or sublicense. The Sellers'
Representative has, or has caused to be, made available to Purchaser copies of
all licenses or sublicenses, and all material ancillary documents, relating to
the Licensed Intellectual Property. Each license or sublicense relating to the
Licensed Intellectual Property is in full force and effect, and neither Gentek
Holdings nor Gentek is in breach or default of any such license or sublicense in
any material respect. To the knowledge of such person after due inquiry, except
as disclosed on Section 3.15 of the Disclosure Schedule, (i) the Intellectual
Property comprises all of the Intellectual Property Rights material to the
operation of the Business as currently conducted, and the conduct of the
Business as now being conducted does not misappropriate, conflict with,
infringe, or otherwise violate the rights of any other person; (ii) neither
Gentek Holdings nor Gentek has received any claim or written notice from any
person to such effect, no such claim is pending or threatened, and there are no
grounds or bases for any such claim; (iii) none of the Intellectual Property has
been or is being misappropriated or infringed by a third party; (iv) the
registered and patented Intellectual Property is subsisting and no aspect
thereof has
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24
been adjudged invalid or unenforceable or has been canceled or
revoked, no claim by any third party contesting the validity, enforceability,
use or ownership of any of the Intellectual Property is pending or is
threatened, and there are no grounds or bases for finding any of the
Intellectual Property invalid or unenforceable. All Intellectual Property
Rights that are material to the conduct of the Business and owned or held under
license by Gentek Holdings or Gentek immediately prior to Closing will be owned
or held under license by Gentek Holdings or Gentek immediately after the
Closing.
SECTION 3.16. Real Property. Section 3.16 of the Disclosure Schedule
lists and briefly describes each parcel of Real Property. After giving effect
to the Restructuring, Gentek Holdings or Gentek will own each parcel of Owned
Real Property free and clear of all Encumbrances, except for Permitted
Encumbrances, and will lease each parcel of Leased Real Property under a valid
and subsisting lease or sublease (each, a "Lease") subject to no Encumbrances,
except for Permitted Encumbrances. The Sellers' Representative has, or has
caused to be, made available to Purchaser copies of each deed, lease or
sublease, as the case may be, and all material ancillary documents, including
title searches and policies, and surveys, relating to the Real Property, to the
extent any such documents are in the possession of Gentek Holdings or Gentek.
Each lease or sublease relating to the Leased Real Property is in full force and
effect, and neither Gentek Holdings nor Gentek is in breach or default of any
such lease or sublease in any material respect and, to the knowledge of such
person party to such lease or sublease after due inquiry, no condition exists
which with the giving of notice, the passage of time or both could reasonably be
expected to result in such a breach or default. The Real Property constitutes
all of the real property owned or leased in connection with the Business. Other
than Gentek Holdings and Gentek, there are no parties in possession or parties
having any current or future right to occupy any of the Real Property. The Real
Property is in good condition and repair and has been suitable for the conduct
of the Business. Neither Gentek Holdings nor Gentek has received with respect
to the Real Property or any plant, building or improvement located thereon any
written notice regarding violations or potential violations of any applicable
building, zoning or other similar Laws. All permits, licenses and other
approvals necessary to the current occupancy and use of the Real Property have
been obtained, are in full force and effect and have not been violated in any
material respect, except to the extent the absence, ineffectiveness or violation
thereof has not had and could not reasonably be expected to have a Material
Adverse Effect. There exists no violation of any covenant, condition,
restriction, easement, agreement or order affecting any portion of the Real
Property, except to the extent any such violation has not had and could not
reasonably be expected to have a Material Adverse Effect. There are no pending
or, to the knowledge of such person after due inquiry, any threatened
condemnation proceedings affecting any portion of the Real Property.
SECTION 3.17. Assets. After giving effect to the Restructuring,
either Gentek Holdings or Gentek, as the case may be, will own, lease or have
the legal right to use all of the properties and assets necessary (giving effect
to the Transition Services
<PAGE>
25
Agreement) for the conduct of the Business as conducted immediately prior to
the Restructuring (including, without limitation, all Inventories,
Receivables, Real Property, Tangible Personal Property and Intellectual
Property) and, with respect to contract rights, will be party to and enjoy
the right to the benefits of all material contracts, agreements and other
arrangements necessary (giving effect to the Transition Services Agreement)
for the conduct of the Business as conducted immediately prior to the
Restructuring (all such properties, assets and rights being the "Assets").
After giving effect to the Restructuring, Gentek Holdings or Gentek, as the
case may be, will have good and marketable title to, or, in the case of
leased or subleased Assets, valid and subsisting leasehold interests in, all
of the Assets, free and clear of all Encumbrances, except Permitted
Encumbrances. After giving effect to the Restructuring, the Assets will
constitute all of the assets that were necessary (giving effect to the
Transition Services Agreement) for the conduct of the Business as of the
Reference Balance Sheet Date. None of the Transferred Assets are necessary
(giving effect to the Transition Services Agreement) for the conduct of the
Business. The Reference Balance Sheet reflects all of the assets necessary
(giving effect to the Transition Services Agreement) for the conduct of the
Business as of the Reference Balance Sheet Date.
SECTION 3.18. Employee Benefit Matters. Section 3.18 of the
Disclosure Schedule lists all "employee benefit plans" within the meaning of
Section 3(3) of ERISA, all material bonus, stock option, stock purchase,
incentive, deferred compensation, supplemental retirement, severance and
other employee benefit plans, programs or arrangements, and all material
employment or compensation agreements, in each case for the benefit of, or
relating to, current employees or former employees of Gentek Holdings or
Gentek, and in each case after giving effect to the Restructuring
(collectively, the "Fabral Employee Plans"). All Fabral Employee Plans have
been maintained in compliance in all material respects with the terms of such
Fabral Employee Plan and the requirements prescribed by applicable Law
currently in effect with respect thereto, and Gentek Holdings and Gentek have
performed all material obligations required to be performed by any of them
under, and are not in any material respect in default under or in violation
of, any provision of the Fabral Employee Plans. Each Fabral Employee Plan
intended to be qualified under Section 401(a) of the Code has heretofore been
determined by the IRS to so qualify, and each trust created thereunder has
heretofore been determined by the IRS to be exempt from tax under the
provisions of Section 501(a) of the Code and, to the knowledge of such person
after due inquiry, nothing has occurred since the date of the most recent
determination that could reasonably be expected to cause any such Fabral
Employee Plan or trust to fail to qualify under Section 401(a) or 501(a) of
the Code. Neither Gentek Holdings nor Gentek has incurred or expects to
incur any material liability to the Pension Benefit Guaranty Corporation
(other than for premium payments not yet due) or any material "withdrawal
liability" within the meaning of Section 4201 of ERISA. Assuming compliance
by Gentek with the provisions of Section 5.13, all contributions required to
be made under the terms of any Fabral Employee Plan have been timely made,
and no Fabral Employee Plan has an "accumulated funding deficiency" within
the meaning of Section 412 of the Code or Section 302 of ERISA.
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26
Except as set forth on Section 3.18 of the Disclosure Schedule, neither
Gentek Holdings nor Gentek has any obligation to provide retiree medical or life
insurance benefits under any Fabral Employee Plan or otherwise. To the
knowledge of such person after due inquiry, neither Gentek Holdings nor Gentek
has any material liability of any kind whatsoever under any provision of ERISA
or the Code solely by reason of being treated as a single employer under Section
414 of the Code with any trade, business, or entity other than Gentek Holdings
or Gentek. The Sellers' Representative has caused to be made available to
Purchaser with respect to each Fabral Employee Plan copies of (as applicable)
the plan and trust documents and any amendments thereto, the most recent
determination letter issued by the IRS or determination letter submission, if
any, the most recent annual report (Form 5500 series) as filed with the IRS, and
the most recent actuarial valuation report.
SECTION 3.19. Labor and Employment Matters. Section 3.19 of the
Disclosure Schedule lists each collective bargaining or other labor union
contract to which Gentek Holdings or Gentek will be a party after giving effect
to the Restructuring (the "Collective Bargaining Agreements"). To the knowledge
of such person after due inquiry, each Collective Bargaining Agreement is in
full force and effect, and neither Gentek Holdings nor Gentek is in breach or
default of any such Collective Bargaining Agreement in any material respect.
There are (i) no unfair labor practice charges or complaints or other material
employment-related charges, investigations, settlement agreements, decrees or
other labor or employment controversies or obligations pending or, to the
knowledge of such person after due inquiry, threatened against Gentek Holdings
or Gentek, (ii) no material union representation questions involving or
affecting persons employed by Gentek Holdings or Gentek, (iii) to the knowledge
of such person after due inquiry, (A) no existing or threatened union organizing
activities involving or affecting unorganized employees of Gentek Holdings or
Gentek and (B) no employee, group of employees or employee representative of
either Gentek Holdings or Gentek has filed any representation petition or made
any written or oral demand for recognition, or (iv) no strikes, slowdowns, work
stoppages, lockouts or other material labor dispute, or, to the knowledge of
such person after due inquiry, threats thereof, by or with respect to any
employees of Gentek Holdings or Gentek. Any notice required under any
applicable law or Collective Bargaining Agreement has been given, and all
bargaining obligations with any employee representative have been satisfied in
all material respects, including, without limitation, obligations relating to
the effects on bargaining unit employees of the transactions contemplated by
this Agreement. Neither Gentek Holdings nor Gentek has implemented any plant
closing or layoff of employees that could reasonably be expected to implicate
the Worker Adjustment Retraining and Notification Act of 1988, as amended, or
any similar state or local law or regulation, and no such layoffs will be
implemented before Closing without advance notification to Purchaser.
SECTION 3.20. Taxes. (a) Except as has not had and could not
reasonably be expected to have a Material Adverse Effect, (i) all Returns
required to be filed with
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27
respect to Gentek Holdings or Gentek have been timely filed and are true,
complete and correct; (ii) all Taxes due have been paid; (iii) no adjustment
relating to any of such Returns has been proposed formally or informally by
any Tax authority; (iv) no liens for any Taxes exist upon any of the Assets;
(v) no taxing authority in any jurisdiction in which Gentek Holdings or
Gentek does not file a Return has claimed that such a Return is required or
that Gentek Holdings or Gentek may be subject to Tax in that jurisdiction;
and (vi) neither Gentek Holdings nor Gentek is the beneficiary of any
nonroutine extension of time within which to file any Return.
(b) Neither Gentek Holdings nor Gentek has made any payments, is
obligated to make any payments, or is a party to any agreement that obligates
it to make any payments that will not be deductible under Section 280G of the
Code. Gentek Holdings is not and has not been a United States real property
holding corporation within the meaning of Code Section 897(c)(2) during the
applicable period specified in Code Section 897(c)(1)(A)(ii). Neither Gentek
Holdings nor Gentek is a party to any tax allocation or sharing agreement.
Neither Gentek Holdings nor Gentek (i) has been a member of an affiliated
group filing a consolidated federal income tax return (other than a group the
common parent of which was Gentek Holdings) or (ii) has any liability for the
Taxes of any person (other than of Gentek Holdings or Gentek) under Section
1.1502-6 of the Regulations (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.
(c) No representation or warranty is made regarding the availability
or utility of Tax Attributes or the amount thereof.
SECTION 3.21. Accounts; Lockboxes; Safe Deposit Boxes. Section 3.21
of the Disclosure Schedule lists (i) the name of each bank, savings and loan
association or other financial institution in which Gentek Holdings or Gentek
will have an account after giving effect to the Restructuring and (ii) the
location of all lockboxes and safe deposit boxes of Gentek Holdings or Gentek,
after giving effect to the Restructuring. On the Closing Date, neither Gentek
Holdings nor Gentek U.S will have any account, lockbox or safe deposit box other
than those listed in Section 3.21 of the Disclosure Schedule.
SECTION 3.22. Brokers. Except for CS First Boston Corporation and
Genstar, Genstar Capital LLC and/or one or more affiliates thereof, no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this Agreement
based upon any agreement, arrangement or understanding made by or on behalf of
such person. The Sellers shall pay any brokerage, finder's or other fee or
commission of CS First Boston Corporation and Genstar, Genstar Capital LLC and/
or the affiliates thereof and the Sellers shall pay, and hold Purchaser harmless
against, any liability, loss, or expense (including, without limitation,
reasonable attorneys' fees and out-of-pocket expenses) arising in connection
with any claim
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28
by any other person for brokerage commissions, finder's fees, or
similar compensation in connection with the transactions contemplated by this
Agreement.
SECTION 3.23. Customers and Suppliers. (a) Section 3.23 of the
Disclosure Schedule lists the 10 customers accounting for the largest share of
net sales of the Business for each of the two most recent fiscal years and sets
forth opposite the name of each such customer the percentage of consolidated net
sales attributable to such customer.
(b) To the knowledge of such person after due inquiry, since the date
of the Reference Balance Sheet, no material supplier of the Business has
indicated that it will stop, or materially decrease the rate of, supplying
materials, products, or services to the Business, and no customer listed in
Section 3.23 of the Disclosure Schedule has indicated that it will stop, or
materially decrease the rate of, buying materials, products, or services from
the Business.
SECTION 3.24. Affiliated Transactions. No officer, director,
employee, stockholder, or affiliate of Gentek Holdings, Gentek, Newco, or Newco
Holdings, or any individual related by blood, marriage, or adoption to any such
individual or any entity in which any such person or individual owns any
beneficial interest, is or will be a party to any agreement, contract,
commitment or transaction with Gentek Holdings, Gentek or any of their
respective Subsidiaries, or has any material interest in any material property
used by Gentek Holdings, Gentek or any of their respective Subsidiaries (in each
case after giving effect to the Restructuring), except in any case any
agreement, contract, commitment, transaction or interest entered into or
acquired on an arm's-length basis on terms substantially similar to those that
could reasonably be expected to have been agreed with an unaffiliated third
party.
SECTION 3.25. Insurance. Section 3.25 of the Disclosure Schedule
lists each insurance policy maintained by Gentek Holdings and Gentek with
respect to their respective properties, assets, and businesses after giving
effect to the Restructuring, and each such policy is in full force and effect as
of the date hereof. Neither Gentek Holdings nor Gentek is in default in any
material respect with respect to its obligations under any such insurance policy
maintained by it, and neither Gentek Holdings nor Gentek has been denied
insurance coverage. Neither Gentek Holdings nor Gentek has any self-insurance
or co-insurance programs applicable to the Business.
SECTION 3.26. Warranties. Except as described in Section 3.26 of the
Disclosure Schedule or reserved for on the Reference Balance Sheet, there are no
pending or, to the knowledge of such person after due inquiry, threatened claims
with respect to any warranty relating to any product sold or service rendered by
the Business nor any material Liabilities (whether accrued, contingent,
absolute, or otherwise) with respect to any product sold or service rendered by
the Business.
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29
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement to the Sellers to enter into this Agreement,
Purchaser hereby represents and warrants to each Seller as follows:
SECTION 4.01. Organization and Authority of Purchaser. Purchaser
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware, and has all necessary corporate power and
authority to enter into this Agreement, to carry out its obligations
hereunder and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by Purchaser, the performance by
Purchaser of its obligations hereunder and the consummation by Purchaser of
the transactions contemplated hereby have been duly authorized and approved
by all requisite action on the part of Purchaser. This Agreement has been
duly executed and delivered by Purchaser, and (assuming due authorization,
execution and delivery by each Seller Gentek Holdings and Gentek) this
Agreement constitutes a legal, valid and binding obligation of Purchaser,
enforceable against Purchaser in accordance with its terms.
SECTION 4.02. No Conflict. Assuming compliance with the
notification requirements of the HSR Act and the making and obtaining of all
filings, notifications, consents, approvals, authorizations and other actions
referred to in Section 4.03, the execution, delivery and performance of this
Agreement by Purchaser do not and will not (i) violate, conflict with or
result in the breach of any provision of the charter or by-laws (or similar
organizational documents) of Purchaser, (ii) conflict with or violate any Law
or Governmental Order applicable to Purchaser or (iii) conflict with, or
result in any breach of, constitute a default (or event which with the giving
of notice or lapse of time, or both, would become a default) under, require
any consent under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation or cancellation of, or result in the
creation of any Encumbrance on any of the assets or properties of Purchaser
pursuant to, any note, bond, mortgage, deed of trust, indenture, contract,
agreement, lease, sublease, license, permit, franchise or other instrument or
arrangement to which Purchaser is a party or by which any of such assets or
properties is bound or affected which could reasonably be expected to have a
material adverse effect on the ability of Purchaser to consummate the
transactions contemplated by this Agreement.
SECTION 4.03. Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement by Purchaser do not and will not
require any consent, approval, authorization or other order of, action by,
filing with, or notification to, any Governmental Authority, except (i) as
described in a writing given to the Sellers'
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30
Representative by Purchaser on the date of this Agreement and (ii) the
notification requirements of the HSR Act.
SECTION 4.04. Private Placement. (a) Purchaser understands that
(i) the offering and sale of the Shares under this Agreement is intended to
be exempt from the registration requirements of the Securities Act of 1933,
as amended (the "Securities Act"), pursuant to Section 4(2) thereof and (ii)
there is no existing public or other market for the Shares and there can be
no assurance that Purchaser will be able to sell or dispose of the Shares.
(b) Purchaser is acquiring the Shares for its own account solely
for the purpose of investment and not with a view to, or for offer or sale in
connection with, any distribution thereof.
(c) Purchaser is an "accredited investor" as such term is defined
in Regulation D promulgated under the Securities Act.
(d) Purchaser is not a broker-dealer subject to Regulation T
promulgated by the Board of Governors of the Federal Reserve System.
(e) Purchaser has sufficient knowledge and experience in financial
and business matters so as to be capable of evaluating the merits and risks
of its investment in the Shares, and Purchaser is capable of bearing the
economic risks of such investment, including a complete loss of its
investment in the Shares.
(f) Purchaser has been given the opportunity to ask questions of,
and receive answers from, the Sellers' Representative, Gentek Holdings and
Gentek concerning the transactions contemplated by this Agreement, the Shares
and other related matters. The Sellers' Representative, Gentek Holdings
and/or Gentek have made available to Purchaser or its agents all documents
and information requested by or on behalf of Purchaser relating to an
investment in the Shares. In evaluating the suitability of an investment in
the Shares, Purchaser has not relied upon any representations or other
information (whether oral or written) made by or on behalf of Gentek
Holdings, Gentek or any Seller other than as contemplated by the two
preceding sentences and Article III.
(g) Purchaser understands that it may not sell or dispose of any of
the Shares other than pursuant to a registered offering, unless otherwise
exempt from the registration requirements of the Securities Act.
SECTION 4.05. Investigation. (a) Purchaser (i) has made its own
inquiry and investigation into, and, based thereon, has formed an independent
judgment concerning, Gentek Holdings, Gentek and the Business, (ii) has been
furnished with or given adequate
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31
access to such information about Gentek Holdings, Gentek and the Business as
it has requested, (iii) will not assert any claim (other than for fraud or
wilful misconduct) against any Seller, Gentek Holdings or Gentek or any of
their respective directors, officers, employees, agents, stockholders,
affiliates, consultants, counsel, accountants, investment bankers or
representatives, or hold any Seller, Gentek Holdings or Gentek or any such
other persons liable, with respect to any inaccuracies, misstatements or
omissions with respect to such information, and (iv) understands that none of
the Sellers, Gentek Holdings or Gentek is making any representation or
warranty with respect to the Business or the operations, assets, Liabilities
or financial condition of Gentek Holdings or Gentek, other than as
specifically set forth in this Agreement.
(b) In connection with Purchaser's investigation of Gentek
Holdings, Gentek and the Business, Purchaser has received from Gentek
Holdings, Gentek and/or the Sellers' Representative certain estimates,
projections, forecasts, plans and budgets for the Business. Purchaser (i)
understands that there are uncertainties inherent in attempting to make such
projections, forecasts, plans and budgets, (ii) is familiar with such
uncertainties, (iii) is taking full responsibility for making its own
evaluation of the adequacy and accuracy of all estimates, projections,
forecasts, plans and budgets furnished to it, (iv) will not assert any claim
(other than for fraud or wilful misconduct) against any Seller or any of
their respective directors, officers, employees, agents, stockholders,
affiliates, consultants, counsel, accountants, investment bankers or
representatives, or hold any Seller or any such other persons liable, with
respect to such estimates, projections, forecasts, plans and budgets, and (v)
understands that none of the Sellers is making any representation or warranty
with respect to any estimates, projections, forecasts, plans or budgets
referred to in this Section 4.05.
SECTION 4.06. Financing. On the Closing Date (assuming that on
such date all conditions precedent to the Closing, other than payment of the
Purchase Price, have been satisfied or waived), Purchaser will have funds
sufficient to consummate the transactions contemplated by this Agreement.
SECTION 4.07. Litigation. Except as set forth in a writing given
to the Sellers' Representative by Purchaser on the date of this Agreement, no
claim, action, proceeding or investigation is pending or, to the knowledge of
Purchaser after due inquiry, threatened, which seeks to delay or prevent the
consummation of, or which could reasonably be expected to materially
adversely affect Purchaser's ability to consummate, the transactions
contemplated by this Agreement.
SECTION 4.08. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon any
agreement, arrangement or understanding, written or oral, made by or on
behalf of Purchaser.
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ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Business Prior to the Closing. Except as
set forth in Section 5.01 of the Disclosure Schedule, and except as
contemplated by the Restructuring Agreement, between the date hereof and the
Closing, Gentek Holdings and Gentek shall, and the Sellers shall cause Gentek
Holdings and Gentek to, conduct the Business in the ordinary course and
consistent with past practice. Without limiting the generality of the
foregoing, except as described in Section 5.01 of the Disclosure Schedule,
Gentek Holdings and Gentek (in each case except as contemplated by the
Restructuring Agreement) shall each, and the Sellers shall cause each of
Gentek Holdings and Gentek to, (i) continue its advertising and promotional
activities, and pricing and purchasing policies, in accordance with past
practice; (ii) not shorten or lengthen the customary payment cycles for any
of its payables or receivables; (iii) use commercially reasonable efforts to
(A) preserve intact the business organization of the Business, (B) keep
available to Purchaser the services of its employees, and (C) preserve its
current relationships with its customers, suppliers and other persons with
which it has significant business relationships; (iv) exercise, but only
after notice to Purchaser and receipt of Purchaser's prior written consent
(which consent shall not be unreasonably withheld), any rights of renewal
pursuant to the terms of any of the Leases listed in Section 3.16 of the
Disclosure Schedule which by their terms would otherwise expire; and (v) not
engage in any practice, take any action, fail to take any action or enter
into any transaction which could reasonably be expected to cause any
representation or warranty of any Seller, Gentek Holdings or Gentek to be
untrue or result in a breach of any covenant made by the Sellers, Gentek
Holdings or Gentek in this Agreement.
SECTION 5.02. Access to Information. From the date hereof until
the Closing, upon reasonable notice the Sellers shall cause Gentek Holdings
and Gentek and their respective officers, directors, employees, agents,
representatives, accountants and counsel to, (i) afford the officers,
employees and authorized agents, representatives, accountants, counsel and
financing sources of Purchaser reasonable access, during normal business
hours, to the offices, properties, plants, other facilities, books and
records of or relating to the Business or the Restructuring and to those
officers, directors, employees, agents, representatives, accountants and
counsel of Gentek Holdings and Gentek who have any knowledge relating to the
Business, (ii) prepare interim monthly balance sheets for the Business
prepared in accordance with the Accounting Policies and Procedures in a
manner consistent with the Reference Balance Sheet and (iii) furnish to the
officers, employees and authorized agents, representatives, accountants,
counsel and financing sources of Purchaser, at Purchaser's expense, such
additional financial and operating data and other information regarding the
assets, properties and goodwill of the Business (or legible copies thereof)
as Purchaser may from time to time reasonably request.
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SECTION 5.03. Confidentiality. The terms of the
Confidentiality Agreement are hereby incorporated herein by reference and
shall continue in full force and effect and bind Purchaser and its affiliates
until the Closing, at which time such Confidentiality Agreement and the
obligations of the parties under this Section 5.03 shall terminate; provided,
however, that (i) the Confidentiality Agreement shall be deemed modified to
the extent necessary to permit Purchaser to disclose the Evaluation Material
(as defined in the Confidentiality Agreement) to the providers of financing
to be used by Purchaser for the payments required hereunder, subject to such
providers adhering to the terms of the Confidentiality Agreement as if they
were parties thereto, and (ii) the Confidentiality Agreement shall terminate
only in respect of that portion of the Proprietary Information (as defined in
the Confidentiality Agreement) exclusively relating to the transactions
contemplated by this Agreement. If this Agreement is, for any reason,
terminated prior to the Closing, the Confidentiality Agreement shall continue
in full force and effect.
SECTION 5.04. Regulatory and Other Authorizations; Notices and
Consents. (a) Gentek Holdings and Gentek shall each, and the Sellers shall
cause each of Gentek Holdings and Gentek to, use commercially reasonable
efforts to obtain all authorizations, consents, orders and approvals of all
Governmental Authorities and officials that may be or become necessary for
the consummation of the transactions contemplated by this Agreement and shall
cooperate fully with Purchaser in promptly seeking to obtain all such
authorizations, consents, orders and approvals. Each party hereto shall make
an appropriate filing, if necessary, pursuant to the HSR Act with respect to
the transactions contemplated by this Agreement promptly after the date
hereof and shall supply as promptly as practicable to the appropriate
Governmental Authorities any additional information and documentary material
that may be requested pursuant to the HSR Act.
(b) Gentek Holdings and Gentek shall each give promptly such
notices to third parties and use commercially reasonable efforts to obtain
such third party consents and estoppel certificates necessary to consummate
the Restructuring and the transactions contemplated hereby as Purchaser may
reasonably request. Purchaser shall cooperate and use commercially
reasonable efforts to assist Gentek Holdings or Gentek in giving such notices
and obtaining such consents and estoppel certificates.
SECTION 5.05. Notice of Developments. Prior to the Closing, the
Sellers' Representative shall promptly notify Purchaser in writing of (i) all
events, circumstances, facts and occurrences arising subsequent to the date
of this Agreement which could reasonably be expected to result in any breach
of a representation or warranty or covenant of any Seller in this Agreement
or which could reasonably be expected to have the effect of making any
representation or warranty of any Seller in this Agreement untrue, incomplete
or incorrect in any material respect and (ii) all other material developments
affecting the Assets, Liabilities, business, financial condition, operations
or results of operations of the Business; provided that such notice shall not
be deemed to cure any such breach or to amend this
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Agreement or the Disclosure Schedule unless so accepted for such purpose in
writing by Purchaser and the Sellers' Representative.
SECTION 5.06. Use of Name. Anything herein to the contrary
notwithstanding, no interest in or right to use the name "Gentek" or any
derivation thereof or any logo, trademark or trade name, other than the
trademarks and trade names set forth in Section 5.06 of the Disclosure
Schedule, in which the Seller has any interest (collectively, the "Retained
Names and Marks") is being transferred to Purchaser pursuant to the
transactions contemplated hereby. As promptly as practicable after the
Closing, Purchaser shall cause each of Gentek Holdings and Gentek (i) to take
such action and file such documents as are necessary to change its corporate
name so as not to contain the word "Gentek," and (ii) to remove or obliterate
all the Retained Names and Marks from its signs, purchase orders, invoices,
sales orders, labels, letterheads, shipping documents and other materials.
Purchaser shall not, and shall cause each of Gentek Holdings and Gentek not
to, put into use after the Closing Date any materials (whether or not in
existence on the Closing Date) that bear any Retained Name or Mark or any
name, mark or logo similar thereto. Notwithstanding the foregoing, Purchaser,
Gentek Holdings and Gentek shall be entitled for a period of 90 days
following the Closing Date to use any signs, purchase orders, invoices, sales
orders, labels, letterheads or shipping documents existing on the Closing
Date that bear any Retained Name or Mark or any name, mark or logo similar
thereto, in each case where the removal of any Retained Name or Mark or any
such similar name, mark or logo would be impractical or result in undue
expense in the reasonable judgment of Purchaser; provided, however, that
Purchaser shall, or shall cause Gentek Holdings or Gentek to, place a stamp,
mark or other notation on any such item that identifies such Retained Name or
Mark as the property of Newco or such other person as may be designated by
Newco Holdings or Newco. None of the Sellers, Newco Holdings or any of its
affiliates shall have any responsibility for claims by third parties arising
out of, or relating to, the use by Purchaser, Gentek Holdings or Gentek or
successor thereof of any Retained Name or Mark after the Closing Date, and
Purchaser shall defend, indemnify and hold harmless the Sellers, Newco
Holdings and each of its affiliates from any and all claims that may arise
out of the use thereof by Purchaser, Gentek Holdings or Gentek or any
business thereof whether or not in accordance with this Agreement, except to
the extent any such claim arose out of an act or omission of Gentek Holdings,
Gentek or the Sellers occurring prior to the Closing.
SECTION 5.07. Ancillary Agreements. Gentek Holdings, Gentek and
each Seller shall execute and deliver at or prior to the Closing each
Ancillary Agreement to which it is to be a party.
SECTION 5.08. Restructuring. Prior to the Closing, Gentek Holdings
and Gentek shall consummate the Restructuring in accordance in all material
respects with the Restructuring Agreement, a copy of the form of which is
attached hereto as Exhibit 5.08.
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35
SECTION 5.09. Conveyance Taxes. Purchaser shall pay one-half of
and the Sellers, as a group, shall pay one-half of any real property transfer
or gains, sales, use, transfer, value added, stock transfer, and stamp taxes,
any transfer, recording, registration, and other fees, and any similar Taxes
which become payable in connection with the sale and purchase of the Shares
pursuant to this Agreement, excluding, in any event, any such taxes or fees
which may become payable in connection with the Restructuring, however,
independently of the sale and purchase of the Shares hereunder.
SECTION 5.10. Exclusive Dealing. During the period from the date of
this Agreement to the earlier of the Closing Date or the termination of this
Agreement, other than for the Restructuring, the Sellers shall not, and shall
not permit any of their respective affiliates to, take any action to,
directly or indirectly, encourage, initiate, or engage in discussions or
negotiations with, or provide any information to, any person other than
Purchaser and its affiliates and representatives, concerning any sale of any
of the Shares, merger, or other business combination involving Gentek
Holdings or Gentek, sale of all or substantially all of the assets of Gentek
Holdings or Gentek, or any other similar transaction, and the Sellers shall,
and shall cause their respective affiliates to, terminate, as of the date of
this Agreement, any such discussions or negotiations in progress on the date
hereof. The foregoing provisions of this Section 5.10 shall have no effect
during the period provided for in Section 9.18 during which Purchaser is
entitled to exercise the cure right thereof in respect of financing.
SECTION 5.11. Intercompany Accounts. At or prior to the Closing,
Gentek shall cause all intercompany accounts between the Business and its
other divisions or affiliates to be cancelled and released.
SECTION 5.12. Alcan Note. At or prior to the Closing, Gentek
Holdings and Gentek shall take or cause to be taken such actions as shall be
necessary to be released (and for the Assets to be released) from all
Liabilities under the Alcan Note, the U.S. Loan Documents and the Canadian
Loan Documents, and such releases shall be in form and substance reasonably
acceptable to Purchaser.
SECTION 5.13. Fabral Employee Plan Contributions. As promptly as
practicable, and in any event not later than 15 days after the Closing Date,
Gentek shall deposit or cause to be deposited in the appropriate accounts all
employee contributions and all matching contributions required to be made by
Gentek with respect thereto required under any Fabral Employee Plan.
SECTION 5.14. Further Action. Each of the parties hereto shall use
commercially reasonable efforts to take, or cause to be taken, all
appropriate action, do or cause to be done all things necessary, proper or
advisable under applicable Law, and execute and deliver such documents and
other papers, as may reasonably be required to carry out the
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36
provisions of this Agreement and consummate and make effective the
transactions contemplated by this Agreement.
ARTICLE VI
EMPLOYEE MATTERS
SECTION 6.01. Employees. (a) Except as otherwise provided herein,
for the one-year period commencing on the Closing Date (or such longer period
as may be required by the terms of any collective bargaining agreement or
applicable law) (the "Continuation Period"), Purchaser shall provide, or
cause Gentek Holdings and Gentek to provide, those persons actively employed
by Gentek Holdings and Gentek in the Business immediately prior to the
Closing, and those employees of the Business on vacation, leave of absence,
disability (except employees on long-term disability and on short-term
disability who immediately thereafter become eligible for long-term
disability) or sick leave or layoff (whether or not such employees return to
active employment with Gentek Holdings or Gentek) (the "Fabral Employees"),
with employee benefits substantially similar to those provided to similarly
situated employees of Purchaser; provided that all employee benefits which
are provided under a Collective Bargaining Agreement listed on Section 3.19
of the Disclosure Schedule shall continue to be provided by Purchaser in all
respects as set forth in such Collective Bargaining Agreements ("Continued
Benefits"), including Continued Benefits promised to retired Fabral
Employees, until such time as the Continued Benefits shall have been the
subject of good faith bargaining by and among the parties to such Collective
Bargaining Agreements. Notwithstanding the prior sentence, nothing herein
shall prohibit or prevent Purchaser from terminating any Fabral Employees
from employment with Purchaser for any lawful reason, including without cause
or as a result of a restructuring of the Business by Purchaser so long as
such terminated Fabral Employees shall be entitled for the period from the
Closing Date to the six-month anniversary of the Closing Date (the
"Transition Period") to severance benefits in conformance with the terms of
the Alcan Building Products Severance Policy, Employee Relations Policy No.
16, a copy of which is set forth in Section 6.01(a) of the Disclosure
Schedule, as applicable to Fabral Employees immediately prior to the Closing,
in lieu of severance benefits under the Alumax Severance Pay Plan.
(b) To the extent that service is relevant for purposes of
eligibility and vesting under any employee benefit plan, program or
arrangement established or maintained by Purchaser, Gentek Holdings or Gentek
for the benefit of Fabral Employees, such plan, program or arrangement shall
credit such employees or former employees with service for purposes of
eligibility and vesting (but not for purposes of benefit accrual other than
with respect to profit sharing contributions, if any, made in accordance with
the terms of the Amerimax Companies Retirement and Savings Plan on behalf of
participating Fabral
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Employees) for service earned prior to the Closing with Gentek Holdings, any
affiliate thereof, or any predecessor owner of the Business.
SECTION 6.02. Collective Bargaining Agreements. Purchaser shall
(i) subject to the rights of the affected Fabral Employees regarding
representation, cause the Business to continue to recognize the unions listed
in Section 6.02 of the Disclosure Schedule as the sole and exclusive
collective bargaining agents for the affected Fabral Employees and (ii) cause
the Business to continue to be bound by, and to comply in all respects with,
the terms and conditions of the collective bargaining agreements listed in
Section 6.02 of the Disclosure Schedule if applicable to any of the Fabral
Employees; provided, however, that nothing in this Agreement (subject to the
foregoing provisions of this Section 6.02) shall prevent Purchaser, Gentek
Holdings or Gentek from closing down facilities after the Closing Date.
ARTICLE VII
CONDITIONS TO CLOSING
SECTION 7.01. Conditions to Obligations of the Sellers and
Purchaser. The obligations of each Seller and Purchaser to consummate the
transactions contemplated by this Agreement shall be subject to the
fulfillment, at or prior to the Closing, of each of the following conditions:
(a) Any waiting period (and any extension thereof) under the HSR
Act applicable to the purchase of the Shares contemplated by this Agreement
shall have expired or shall have been terminated;
(b) No Action shall have been commenced by or before any
Governmental Authority against any Seller or Purchaser seeking to restrain
or materially and adversely alter the transactions contemplated by this
Agreement which, in the reasonable, good faith determination of the
Sellers' Representative or Purchaser is likely to render it impossible or
unlawful to consummate such transactions; provided, however, that the
provisions of this Section 7.01(b) shall not apply to any party which has
directly or indirectly solicited or encouraged any such Action;
(c) Each Seller, Purchaser, Gentek Holdings and Gentek shall
have received all authorizations, consents, orders and approvals of all
Governmental Authorities and officials and all third party consents and
estoppel certificates necessary for the consummation of the transactions
contemplated by this Agreement;
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(d) The Sellers' Representative and Purchaser shall have
received from Gentek Holdings a certificate, in form and substance
reasonably satisfactory to the Sellers' Representative and Purchaser,
signed by a duly authorized officer of Gentek Holdings and certifying
pursuant to Section 1.897-2(h) of the Treasury Regulations that the stock
of Gentek Holdings is not a United States real property interest within the
meaning of Section 897(c)(1) of the Code.
(e) The Ancillary Agreements shall have been executed and
delivered by each of the parties thereto and shall be in full force and
effect; and
(f) The Restructuring shall have been consummated in accordance
in all material respects with the Restructuring Agreement and on terms
reasonably satisfactory to Purchaser and Sellers.
SECTION 7.02. Additional Condition to Obligations of the Sellers.
The obligations of each of the Sellers to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment, at or
prior to the Closing, of each of the following additional conditions:
(i) The representations and warranties of Purchaser contained in
this Agreement shall have been true, complete and correct in all material
respects when made and shall be true, complete and correct in all material
respects as of the Closing Date with the same force and effect as if made
as of the Closing Date (other than such representations and warranties as
are made as of another date), and the covenants and agreements contained in
this Agreement to be complied with by Purchaser on or before the Closing
shall have been complied with in all material respects, and the Sellers'
Representative shall have received a certificate from Purchaser to such
effect signed by a duly authorized officer thereof;
(ii) The Sellers' Representative shall have received a true,
complete and correct copy, certified by the secretary or an assistant
secretary of Purchaser, of the resolutions duly and validly adopted by the
board of directors of Purchaser evidencing its authorization of the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby;
(iii) The Sellers' Representative shall have received a
certificate of the secretary or an assistant secretary of Purchaser
certifying the names and signatures of the officers of Purchaser authorized
to sign this Agreement and the other documents to be delivered hereunder;
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(iv) The Sellers' Representative shall have received copies of
all third party and governmental consents, approvals, and filings required
in connection with the consummation of the transactions hereunder; and
(v) The Sellers' Representative shall have received from counsel
to Purchaser legal opinion letters, addressed to the Sellers and the
Sellers' Representative and dated the Closing Date, opining as to the
matters set forth on Exhibit 7.02(v).
SECTION 7.03. Additional Conditions to Obligations of Purchaser.
The obligations of Purchaser to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment, at or prior to the
Closing, of each of the following additional conditions:
(i) The representations and warranties of the Sellers, Gentek
Holdings and Gentek contained in this Agreement shall have been true,
complete and correct in all material respects when made and shall be true,
complete and correct in all material respects as of the Closing Date with
the same force and effect as if made as of the Closing Date (other than
such representations and warranties as are made as of another date), and
the covenants and agreements contained in this Agreement to be complied
with by the Sellers, Gentek Holdings or Gentek on or before the Closing
shall have been complied with in all material respects, and Purchaser shall
have received a certificate from Gentek Holdings, Gentek and the Sellers,
respectively, to such effect signed, in the case of each corporation, by a
duly authorized officer thereof;
(ii) Purchaser shall have received a true, complete and correct
copy, certified by the secretary or an assistant secretary of Gentek
Holdings, of the resolutions duly and validly adopted by the board of
directors of Gentek Holdings evidencing its authorization of the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby;
(iii) Purchaser shall have received a certificate of the
secretary or an assistant secretary of Gentek Holdings and Gentek
certifying the names and signatures of the officers of Gentek Holdings and
Gentek authorized to sign this Agreement and the other documents to be
delivered hereunder;
(iv) Purchaser shall have received good standing certificates for
Gentek Holdings and Gentek from the Secretary of State of the State of
Delaware, in each case dated as of a date not earlier than five Business
Days prior to the Closing Date;
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(v) Purchaser shall have received a copy of (A) the certificates
of incorporation, as amended, of Gentek Holdings and Gentek, certified by
the Secretary of State of the State of Delaware, as of a date not earlier
than five Business Days prior to the Closing Date and accompanied by a
certificate of the secretary or assistant secretary of each such entity,
dated as of the Closing Date, stating that no amendments have been made to
such certificate of incorporation since such date, and (B) the by-laws of
Gentek Holdings and Gentek, certified by the secretary or assistant
secretary of each such entity;
(vi) Purchaser shall have received copies of all third party and
governmental consents, approvals, releases and filings required in
connection with the consummation of the transactions hereunder;
(vii) Purchaser shall have received from counsel to the
Sellers legal opinion letters, addressed to Purchaser and dated the Closing
Date, opining as to the matters set forth on Exhibit 7.03(vii), together
with a letter to the effect that Purchaser's lenders financing the
transaction contemplated hereby may rely on such opinions;
(viii) Purchaser shall have received on the Closing Date the
resignations, effective as of the Closing Date, of each director and
officer of Gentek Holdings and Gentek listed on Section 7.03 of the
Disclosure Schedule;
(ix) Purchaser shall have received a copy of the minute books and
stock register and corporate seals of Gentek Holdings and Gentek;
(x) An audit of the financial statements of the Business for the
fiscal years ended December 31, 1995 and 1996, in form and substance
reasonably satisfactory to Purchaser, shall have been completed, the cost
of which shall be solely Purchaser's expense; provided, however, that audit
expenses incurred by Gentek Holdings or Gentek for audit services required
in connection with Gentek Holdings' and Gentek's own audits independent of
the audit referred to in this Section 7.03(x) shall be for the account of
Gentek Holdings or Gentek, as the case may be;
(xi) A title insurance company selected by Purchaser (the "Title
Company") shall be willing to insure at standard rates Gentek's marketable
title in and to the Owned Real Property in fee simple, such entity's
leasehold estate in any financable Leased Real Property (a "Financable
Leasehold") free and clear of all Encumbrances other than Permitted
Encumbrances, including such endorsements and affirmative coverages as
Purchaser reasonably shall require including without limitation
non-imputation endorsements. Gentek shall cooperate in good faith with
Purchaser in attempting to arrange such coverages including, in connection
with the
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non-imputation endorsements, providing such affidavits as to factual
matters with the knowledge of Gentek as Purchaser may reasonably request.
Purchaser shall pay all premiums and other costs for obtaining such
coverages;
(xii) Purchaser shall have received a survey, at Purchaser's
sole cost and expense, of each parcel of Owned Real Property and each
parcel of Leased Real Property on which Gentek has a Financable Leasehold,
in each case conforming to the Minimum Standard Detail Requirements jointly
established and approved in 1992 by ALTA and ACSM, certified to Gentek,
Purchaser, Purchaser's lender, if any, financing the purchase of the Shares
contemplated hereby, and the Title Company, and showing no Encumbrances
other than Encumbrances that do not materially and adversely affect the
value or use of the affected property or the consummation of the
transactions contemplated hereby;
(xiii) All Real Property shall be in substantially the same
condition and repair as that on the date hereof, reasonable wear and tear
excepted;
(xiv) Purchaser shall have received evidence reasonably
satisfactory to it that UCC-3 termination statements, other terminations,
pay-offs and/or releases have been executed, delivered and filed in order
to effect releases of Encumbrances on assets of Gentek and Gentek Holdings
and satisfy or discharge Liabilities of Gentek and Gentek Holdings
(including, without limitation, Liabilities under the Alcan Note), in each
case after giving effect to the Restructuring;
(xv) In the case of the Leased Real Property of Gentek in each of
Elkhart, Indiana, Rathdrum, Idaho, and Cedar City, Utah, either
(A) Purchaser shall have received evidence reasonably satisfactory to
Purchaser to the effect that any landlord consent required under the terms
of the leases covering such Leased Real Property were obtained in
connection with the assignment thereof by Alcan Aluminum Corporation to
Gentek or (B) Purchaser shall have received from the landlord of such
Leased Real Property an estoppel certificate, in form reasonably
satisfactory to Purchaser, in respect of the absence of any such consent;
(xvi) There shall exist no Funded Debt, other than
capitalized lease obligations (under leases that have been disclosed to
Purchaser in a notice delivered by the Sellers' Representative on or before
the Closing Date) not in excess of $50,000;
(xvii) The Year-End Balance Sheet shall reflect Year-End Net
Assets (taking account only of such captions as appear on the Reference
Balance Sheet) of not less than $24,000,000; and
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(xviii) Between the date hereof and the Closing Date, there
shall have been no Material Adverse Effect.
ARTICLE VIII
TERMINATION AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated at any
time prior to the Closing (i) by the mutual written consent of the parties
hereto; (ii) by Purchaser if, between the date hereof and the time scheduled
for the Closing, (A) any representation or warranty of the Sellers contained
in this Agreement shall not have been true, complete and correct in any
material respect when made, or (B) the Sellers shall have failed in any
material respect to comply with any covenant or agreement contained in this
Agreement to be complied with by them, and in either case and as a result
thereof, one or more of the conditions to the obligations of Purchaser to
consummate the transactions contemplated by this Agreement could not
reasonably be expected to be satisfied on the Closing Date; (iii) by the
Sellers' Representative, on behalf of the Sellers, if, between the date
hereof and the time scheduled for the Closing, (A) any representation or
warranty of Purchaser contained in this Agreement shall not have been true,
complete and correct in any material respect when made, or (B) Purchaser
shall have failed in any material respect to comply with any covenant or
agreement contained in this Agreement to be complied with by it, and in
either case and as a result thereof, one or more of the conditions to the
obligations of the Sellers to consummate the transactions contemplated by
this Agreement could not reasonably be expected to be satisfied on the
Closing Date; or (iv) by the Sellers' Representative, on behalf of the
Sellers, or Purchaser if the Closing shall not have occurred by July 14,
1997; provided, however, that (A) the right to terminate this Agreement under
this clause (iv) shall not be available to any party whose failure to fulfill
any obligation under this Agreement shall have been the primary cause of, or
shall have primarily resulted in, the failure of the Closing to occur on or
prior to such date, and (B) in the event that on or prior to the date
referred to above in this clause (iv) Purchaser shall notify the Sellers'
Representative that Purchaser intends to exercise the cure right in respect
of financing as provided in Section 9.18, then such date shall be extended to
the date that is the earlier of (1) the date on which the cure period
provided for in Section 9.18 expires and (2) the date on which Purchaser
notifies the Sellers' Representative that it no longer wishes to pursue such
cure.
SECTION 8.02. Effect of Termination. In the event of termination
of this Agreement as provided in Section 8.01, this Agreement shall forthwith
become void and there shall be no liability on the part of any party hereto
except (i) as set forth in this Section 8.02 and Sections 5.03, 9.05, 9.16,
9.17 and 9.18 and (ii) that nothing herein shall relieve any party from
liability for any willful breach of this Agreement.
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SECTION 8.03. Waiver. (a) The Sellers' Representative, on behalf
of the Sellers, may (i) extend the time for the performance of any of the
obligations or other acts of Purchaser, (ii) waive any inaccuracies in the
representations and warranties of Purchaser contained herein or in any
document delivered by Purchaser pursuant hereto or (iii) waive compliance
with any of the agreements or conditions of Purchaser contained herein. Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the Sellers' Representative.
(b) Purchaser may (i) extend the time for the performance of any of
the obligations or other acts of any Seller or the Sellers' Representative,
(ii) waive any inaccuracies in the representations and warranties of any
Seller contained herein or in any document delivered by any Seller or the
Sellers' Representative pursuant hereto or (iii) waive compliance with any of
the agreements or conditions of any Seller or the Sellers' Representative
contained herein. Any such extension or waiver shall be valid only if set
forth in an instrument in writing signed by Purchaser.
(c) Any waiver of any term or condition shall not be construed as a
waiver of any subsequent breach or a subsequent waiver of the same term or
condition, or a waiver of any other term or condition, of this Agreement.
The failure of any party to assert any of its rights hereunder shall not
constitute a waiver of any of such rights.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Representations, Warranties, Covenants and Agreements
Not to Survive. Except (i) for the provisions of Sections 2.06, 5.03, 5.06,
5.09, 5.13, 5.14, 6.01, 6.02, 9.02, 9.03, 9.04, 9.05, 9.06, 9.07, 9.08, 9.09,
9.11, 9.12, 9.13, 9.14, 9.16 and 9.17 and the first sentence of Section
5.04(a) and (ii) as otherwise specifically provided in the Indemnification
Agreement, the representations, warranties, covenants and agreements
contained in this Agreement shall be deemed to be conditions of the purchase
and sale of the Shares only, and shall expire with, and be terminated and
extinguished by the consummation of such purchase and sale of the Shares at
the Closing.
SECTION 9.02. Exclusive Remedy. Except with respect to any fraud
or willful misconduct on the part of any Seller or the Sellers'
Representative, Purchaser's sole and exclusive remedy with respect to any and
all claims relating to the subject matter of this Agreement shall be pursuant
to the indemnification provisions set forth in the Indemnification Agreement
and/or the Letter of Credit and Section 9.16 hereof. In furtherance of and
subject to the foregoing, Purchaser hereby waives, to the fullest extent
permitted under applicable law, any and all other rights, claims (other than
claims for fraud) and causes
<PAGE>
44
of action it may have, from and after the Closing, against each Seller and
the Sellers' Representative and their respective affiliates and each of their
respective officers, directors, employees, agents, and representatives
relating to the subject matter of this Agreement.
SECTION 9.03. Adjustment to Purchase Price. The parties hereto
shall treat all payments by Newco Holdings under the Indemnification
Agreement as adjustments to the Purchase Price under this Agreement.
SECTION 9.04. Indemnification by Purchaser. (a) Until the earlier
of (i) the second anniversary of the Closing Date and (ii) the termination of
this Agreement in accordance with its terms, and effective upon and subject
to the occurrence of the Closing, Purchaser shall indemnify each Seller, the
Sellers' Representative, Newco Holdings and Newco and their respective
affiliates and each of their respective officers, directors, employees,
agents, successors and assigns (each an "Indemnified Party") with respect to,
and hold each of them harmless from and against, any and all Liabilities,
losses, damages, claims, costs and expenses, interest, awards, judgments and
penalties (including, without limitation, attorneys' and consultants' fees
and expenses, and investigative, corrective, or remedial action costs)
suffered, incurred or sustained by any of them or to which any of them
becomes subject (including, without limitation, any Action brought or
otherwise initiated by any of them) (a "Loss"), resulting from, arising out
of or relating to (A) any misrepresentation or any breach of any warranty
made by Purchaser contained in this Agreement, unless such misrepresentation
or breach shall have been waived in writing by each Seller, the Sellers'
Representative, Newco Holdings and Newco prior to the Closing; (B) any breach
of any covenant or agreement made by Purchaser contained in this Agreement,
unless such breach shall have been waived in writing by each Seller, the
Sellers' Representative, Newco Holdings and Newco prior to the Closing; (C)
(1) any collective bargaining agreement listed on Section 3.19 of the
Disclosure Schedule applicable to any Fabral Employee, (2) any suit or claim
of violation under the Worker Adjustment and Retraining Notification Act of
1988, as amended, for any actions taken by Purchaser, Gentek Holdings or
Gentek after the Closing Date with respect to any facility, site of
employment, operating unit or Fabral Employee, (3) any action taken on or
after the Closing Date by Purchaser, Gentek Holdings or Gentek with respect
to any Fabral Employee Plan,(4) any claim arising from events occurring after
the Closing Date for payments or benefits by Fabral Employees or their
respective beneficiaries under any Fabral Employee Plan; (D) the conduct of
the Business or any other action or omission by Purchaser, Gentek Holdings or
Gentek after the Closing Date, except, in each case, to the extent such loss
arises from a fact or circumstance constituting a breach of representation or
warranty made by the Sellers hereunder. To the extent that Purchaser's
undertakings set forth in this Section 9.04 may be unenforceable, Purchaser
shall contribute the maximum amount that it is permitted to contribute under
applicable Law to the payment and satisfaction of all Losses incurred by any
Indemnified Party.
<PAGE>
45
(b) The indemnification obligations of Purchaser pursuant to
Section 9.04(a)(A) and (B) shall not be effective until the aggregate dollar
amount of all Losses which would otherwise be indemnifiable pursuant to
Section 9.04(a) exceeds $300,000 (the "Threshold Amount"), and then only to
the extent such aggregate amount exceeds the Threshold Amount. In addition,
no claim may be made against Purchaser for indemnification pursuant to
Section 9.04(a) for breaches of representations and warranties only with
respect to any individual item of Loss, unless such item exceeds $25,000, nor
shall any such item be applied to or considered part of the Threshold Amount.
For the purposes of this Section 9.04(b), in computing such individual or
aggregate amounts of claims, the amount of each claim shall be deemed to be
an amount (i) net of any Tax benefit to the Indemnified Party or any
affiliate thereof and (ii) net of any insurance proceeds and any indemnity,
contribution or other similar payment recoverable by the Indemnified Party or
any affiliate thereof from any third party with respect thereto.
(c) Payments by Purchaser pursuant to Section 9.04(a) shall be
limited to the amount of any Losses that remains after deducting therefrom
(i) any Tax benefit to the Indemnified Party or any affiliate thereof and
(ii) any insurance proceeds and any indemnity, contribution or other similar
payment recoverable by the Indemnified Party or any affiliate thereof with
respect thereto. If a payment is made by Purchaser in accordance with this
Section 9.04, and if in a subsequent taxable year a Tax benefit is realized
by the Indemnified Party or any affiliate thereof with which the Indemnified
Party files a consolidated, combined or unitary Tax return (that was not
previously taken into account to reduce an amount otherwise payable by
Purchaser under this Section 9.04), the Indemnified Party shall pay to
Purchaser at the time of such realization the amount of such Tax benefit to
the extent that the Tax benefit would have resulted in a reduction in the
amount paid by Purchaser under this Section 9.04 if the Tax benefit had been
obtained in the year of such payment. A Tax benefit will be considered to be
realized for purposes of this Section 9.04 at the time that it is reflected
on a Tax return of the Indemnified Party or any affiliate thereof with which
the Indemnified Party files a consolidated, combined or unitary Tax return.
(d) An Indemnified Party shall give Purchaser notice of any matter
which such Indemnified Party has reasonably determined has given or could
reasonably be expected to give rise to a right of indemnification under this
Agreement, within 60 days of such determination, stating the amount of the
Loss, if known, and method of computation thereof, and containing a reference
to the provisions of this Agreement in respect of which such right of
indemnification is claimed or arises; provided that failure to notify or
delay in notifying Purchaser shall not release its obligations under this
Section 9.04, except to the extent such failure or delay actually harms
Purchaser.
(e) The obligations and Liabilities of Purchaser under this Section
9.04 with respect to Losses arising from claims of any third party which are
subject to the
<PAGE>
46
indemnification provided for in this Section 9.04 ("Third Party Claims")
shall be governed by and contingent upon the following additional terms and
conditions:
(i) If an Indemnified Party shall receive notice of any Third
Party Claim, such Indemnified Party shall give Purchaser notice of such
Third Party Claim within 30 days (notwithstanding the 60 day period
specified in subsection (d) above) of the receipt by such Indemnified Party
of such notice; provided that failure to notify or delay in notifying
Purchaser shall not release its obligations under this Section 9.04, except
to the extent such failure or delay actually harms Purchaser;
(ii) If Purchaser acknowledges in writing its obligation to
indemnify an Indemnified Party hereunder against any Losses that may result
from such Third Party Claim, then Purchaser shall be entitled to assume and
control the defense of such Third Party Claim at its expense and through
counsel of its choice if it gives notice of its intention to do so to such
Indemnified Party within 20 business days of the receipt of such notice
from such Indemnified Party. In the event Purchaser shall exercise the
right to undertake any such defense against any such Third Party Claim as
provided above, the Indemnified Party shall cooperate with Purchaser in
such defense, and make available to Purchaser at Purchaser's expense, all
witnesses, pertinent records, materials and information in the Indemnified
Party's possession or under such Indemnified Party's control relating
thereto as is reasonably required by Purchaser. If Purchaser does not
exercise its right to undertake any such defense against any such Third
Party Claim, the Indemnified Party may assume such defense, and the
reasonable costs incurred by such Indemnified Party in connection with such
defense shall be added to the indemnification liability obligations of
Purchaser under this Section 9.04. No such Third Party Claim may be
settled by Purchaser without the prior written consent of the Indemnified
Party, and no such Third Party Claim may be settled by any Indemnified
Party without the prior written consent of Purchaser.
(f) Notwithstanding anything to the contrary contained in this
Agreement, the maximum amount of indemnifiable Losses which may be recovered
from Purchaser arising out of or resulting from the causes enumerated in
Section 9.04(A) or (B) shall be an aggregate amount equal to 25 percent of
the Purchase Price.
SECTION 9.05. Expenses. Except as otherwise specified in this
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such costs and expenses, whether or not the
Closing shall have occurred; provided, however, that any such costs and
expenses (including costs and expenses incurred in connection with obtaining
third-party consents) which may become payable in connection with the
Restructuring
<PAGE>
47
independently of the sale and purchase of the Shares hereunder shall be paid
by Newco Holdings or Newco.
SECTION 9.06. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by
delivery in person, or by courier service, cable, telecopy, telegram, or
registered or certified mail (postage prepaid, return receipt requested) to
the respective parties hereto at their addresses set forth on the signature
pages to this Agreement (or at such other address for a party hereto as shall
be specified in a notice given in accordance with this Section 9.06).
SECTION 9.07. Public Announcements. No party to this Agreement
shall make, or cause to be made, any press release or public announcement
with respect to this Agreement or the transactions contemplated hereby or
otherwise communicate with any news media with respect thereto without the
prior written consent of the other parties, and the parties shall cooperate
as to the timing and contents of any such press release or public
announcement; provided, however, that such prior written consent (i) shall
not be unreasonably withheld and (ii) shall not be required for releases,
announcements or communications to the extent obtaining such prior written
consent would prevent the timely and accurate dissemination of information as
required to comply with any applicable Law.
SECTION 9.08. Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any
way the meaning, construction or interpretation of this Agreement.
SECTION 9.09. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely as possible in an
acceptable manner in order that the transactions contemplated hereby are
consummated as originally contemplated to the greatest extent possible.
SECTION 9.10. Entire Agreement. This Agreement, the exhibits and
schedules hereto, the Disclosure Schedule and the Ancillary Agreements
constitute the entire agreement of the parties hereto with respect to the
subject matter hereof and supersede all prior agreements, covenants,
representations, warranties, undertakings and understandings, written or
oral, among the parties hereto with respect to the subject matter hereof and
thereof.
<PAGE>
48
SECTION 9.11. Assignment. This Agreement may not be assigned by
operation of law or otherwise without the express written consent of the
Sellers' Representative, on behalf of the Sellers, and Purchaser (which
consent may be granted or withheld in the reasonable discretion of each such
party); provided that Purchaser may, without such written consent (but
subject to prior written notice thereof to the Sellers' Representative),
assign, directly or indirectly, any or all of its rights and obligations
hereunder to any of its affiliates, to any affiliate of Citicorp Venture
Capital, Ltd., to any person which provides financing to Purchaser, Gentek
Holdings, Gentek or any of their subsidiaries or affiliates, or to any
subsequent purchaser of Gentek Holdings, Gentek or any of their subsidiaries
(whether through merger, consolidation, sale of stock, sale of assets or
otherwise); provided further that no such assignment shall relieve Purchaser
of any of its obligations hereunder in the event any such assignee shall fail
timely to perform any of such assignee's obligations hereunder.
SECTION 9.12. No Third Party Beneficiaries. This Agreement shall be
binding upon and inure solely to the benefit of the parties hereto, their
permitted assigns and the Indemnified Parties and nothing herein, whether
express or implied, is intended to or shall confer upon any other person any
legal or equitable right, benefit or remedy of any nature whatsoever under or
by reason of this Agreement.
SECTION 9.13. Amendment. This Agreement may not be amended,
restated, supplemented or otherwise modified except (i) by an instrument in
writing signed by the Sellers' Representative, on behalf of the Sellers, and
Purchaser or (ii) by a waiver in accordance with Section 8.03.
SECTION 9.14. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS, AND NOT THE
LAWS OF CONFLICTS, OF THE STATE OF NEW YORK.
SECTION 9.15. Counterparts. This Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original
but all of which taken together shall constitute one and the same agreement.
SECTION 9.16. Specific Performance. The parties hereto each
acknowledge that the rights of each party to consummate the transactions
contemplated hereby are special, unique and of extraordinary character, and
that, in the event that any party violates or fails or refuses to perform any
covenant or agreement made by it herein, the non-breaching party may be
without an adequate remedy at law. The parties each agree, therefore, that
in the event that either party violates or fails or refuses to perform any
covenant or agreement made by such party herein, the non-breaching party or
parties may, subject to the terms of this
<PAGE>
49
Agreement and in addition to any remedies at law for damages or other relief,
institute and prosecute an action in any court of competent jurisdiction to
enforce specific performance of such covenant or agreement or seek any other
equitable relief.
SECTION 9.17. Waiver of Jury Trial. Each of the parties hereto
waives to the fullest extent permitted by law any right it may have to trial
by jury in respect of any claim, demand, action or cause of action based on,
or arising out of, under or in connection with this Agreement, or any course
of conduct, course of dealing, verbal or written statement or action of any
party hereto, in each case whether now existing or hereafter arising, and
whether in contract, tort, equity or otherwise. The parties to this
Agreement each hereby agrees that any such claim, demand, action or cause of
action shall be decided by court trial without a jury and that the parties to
this Agreement may file an original counterpart of a copy of this Agreement
with any court as evidence of the consent of the parties hereto to the waiver
of their right to trial by jury.
SECTION 9.18. Liquidated Damages. In the event that circumstances
should occur in which the representation and warranty made by Purchaser in
Section 4.06 is breached, Purchaser shall pay to Gentek, on demand,
liquidated damages in the amount of $15 million in immediately available
funds. Notwithstanding the foregoing, Purchaser shall have 30 days
(commencing on the date of such breach) within which to cure such breach
(during which it shall not be obligated to pay such liquidated damages);
provided that, at the time such breach is cured, if at all, (i) each of the
conditions to Purchaser's obligations to consummate the transactions
contemplated by this Agreement shall be deemed satisfied, notwithstanding any
subsequent event which would otherwise cause any such condition not to have
been satisfied (other than any subsequent event or change in circumstances
primarily caused by an act or omission to act of any of the Sellers, Newco,
Newco Holdings, Gentek or Gentek Holdings), and (ii) each of the conditions
to the Sellers' obligations to consummate the transactions contemplated by
this Agreement must continue to be satisfied; provided, further, that
Purchaser shall not be obligated to pay such liquidated damages if, before
the expiration of the period for Purchaser's exercise of the cure right
provided for in this Section 9.18, both (A) the condition specified in
Section 7.01(a) or the portion of the condition specified in Section 7.01(b)
relating to Actions by Governmental Authorities shall cease to be fulfilled
and (B) Purchaser, with the good faith cooperation of the Sellers, shall have
acted with all reasonable diligence and in good faith to effect
reinstatement of fulfillment of such conditions. The parties acknowledge
that payment of such liquidated damages is not intended as a forfeiture or
penalty, but is a reasonable estimate of the actual damages that Gentek,
Gentek Holdings and the Sellers would incur if Purchaser were to breach the
representation and warranty made in Section 4.06, and that it would be
impracticable and extremely difficult to ascertain the amount of such
damages.
<PAGE>
IN WITNESS WHEREOF, each party hereto has executed, or caused its
duly authorized officer(s) to execute, this Agreement as of the date first
written above.
SELLERS
-------
GENSTAR CAPITAL CORPORATION
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
Scotia Plaza
40 King Street West, Suite 4900
Toronto, Ontario
Canada M5H 4A2
Attention: John McCarthy
Telephone: (416) 360-4632
Telecopy: (416) 360-1714
ONTARIO TEACHERS' PENSION
PLAN BOARD
By:
-----------------------------------
Name:
Title:
5650 Yonge Street
North York, Ontario
Canada M2M 4H5
Attention: Todd Hryhorczuk
Telephone: (416) 730-5388
Telecopy: (416) 730-5374
<PAGE>
-----------------------------------
DAVID L. BURKE
7118 Colesbrooke Drive
Hudson, Ohio 44236
-----------------------------------
KONG H. CHEN
603 Minette Circle
Mississauga, Ontario
Canada L5A 3B9
-----------------------------------
GEORGE E. ECKERD
12150 Old Stone Drive
Indianapolis, Indiana 46236
-----------------------------------
PAUL E. ERB, JR.
1990 Copperfield Drive
Lancaster, Pennsylvania 17603
-----------------------------------
J. HERBERT GAUL, JR.
c/o Gentek Building Products, Inc.
29325 Chagrin Blvd.
Cleveland, Ohio 44122
-----------------------------------
RUSSEL H. HENK
400 Stonegate Court
Millersville, Pennsylvania 17551
<PAGE>
-----------------------------------
JOSEPH P. IPPOLITO
1 Gates Ct.
Cranbury, New Jersey 08512
-----------------------------------
DARVIN L. KING
760 West Streetsboro Rd., Rt. 303
Hudson, Ohio 44236
-----------------------------------
STEPHEN L. KLEIN
5037 Boulder Creek Drive
Solon, Ohio 44139
-----------------------------------
ALAIN LAROSE
1838 Borry
Varennes, Quebec
Canada J3X 1M4
-----------------------------------
JAMES F. MCGLINN
26312 Ibeza
Mission Viejo, California 92692
-----------------------------------
JEFFREY V. MILLER
1449 Arthur Drive
Wooster, Ohio 44691
<PAGE>
-----------------------------------
MICHAEL C. MILLER
13319 14A Avenue
Surrey, British Columbia
Canada V4A 6P3
-----------------------------------
WAYNE G. PALMER
686 Artreva Crescent
Burlington, Ontario
Canada L7L 2B6
-----------------------------------
GERARD D. PAPAZIAN
1518 Quarry Lane
Lancaster, Pennsylvania 17603
-----------------------------------
JAN P. RANDLES
135 Grey Fox Run
Bentleyville, Ohio 44022
-----------------------------------
ALAIN ROBITAILLE
37 Robinwood Crescent
London, Ontario
Canada N6G 4M5
-----------------------------------
DONALD L. SPERRY
507-5 Deer Run
Aurora, Ohio 44202
<PAGE>
-----------------------------------
DANIEL R. TAYLOR
c/o Gentek Building Products, Inc.
29325 Chagrin Blvd.
Cleveland, Ohio 44122
-----------------------------------
DENNIS M. THOMPSON
912 Lake Avenue
Spring Lake Heights, New Jersey 07762
-----------------------------------
JOHN UMIASTOWSKI
164 Seigniorly Ave., #201
Pointe Claire, Quebec
Canada H9R 1K1
SELLERS' REPRESENTATIVE
-----------------------
GENSTAR CAPITAL CORPORATION
By: -----------------------------------
Name:
Title:
By: -----------------------------------
Name:
Title:
Scotia Plaza
40 King Street West, Suite 4900
Toronto, Ontario
Canada M5H 4A2
Attention: John McCarthy
Telephone: (416) 360-4632
Telecopy: (416) 360-21714
<PAGE>
GENTEK HOLDINGS
---------------
GENTEK HOLDINGS, INC.
By: -----------------------------------
Name:
Title:
By: -----------------------------------
Name:
Title:
c/o Gentek Building Products, Inc.
29325 Chagrin Boulevard
Cleveland, Ohio 44122
Attention: President
Telephone: (216) 514-3501
Telecopy: (216) 514-3572
GENTEK
------
GENTEK BUILDING PRODUCTS, INC.
By: -----------------------------------
Name:
Title:
By: -----------------------------------
Name:
Title:
29325 Chagrin Boulevard
Cleveland, Ohio 44122
Attention: President
Telephone: (216) 514-3501
Telecopy: (216) 514-3572
<PAGE>
PURCHASER
---------
AMERIMAX FABRICATED
PRODUCTS, INC.
By: -----------------------------------
Name:
Title:
5335 Triangle Parkway
Suite 550
Norcross, Georgia 30092
Attention: J. David Smith,
Chief Executive Officer
Telephone: (770) 449-7066
Telecopy: (770) 449-3554
with a copy to:
Citicorp Venture Capital, Ltd.
399 Park Avenue, 14th Floor
New York, New York 10043
Attention: Joseph M. Silvestri
Telephone: (212) 559-2081
Telecopy: (212) 888-2940
<PAGE>
SCHEDULE I
STOCKHOLDERS/STOCK OWNERSHIP
<TABLE>
<CAPTION>
SHARES* HELD
-----------------------
STOCKHOLDER UNRESTRICTED RESTRICTED
<S> <C> <C>
----------- ------------ ----------
Genstar Capital Corporation............................... 950,000 --
Ontario Teachers' Pension Plan Board...................... 400,000 --
Management Stockholders:
David L. Burke....................................... 507 --
Kong H. Chen......................................... 1,500 --
George E. Eckerd..................................... 100 65
Paul E. Erb, Jr. .................................... 500 325
J. Herbert Gaul, Jr. ................................ 5,000 1,625
Russel H. Henk....................................... 500 325
Joseph P. Ippolito................................... 1,100 --
Darvin L. King....................................... 600 390
Stephen L. Klein..................................... 1,500 975
Alain Larose......................................... 250 --
James F. McGlinn..................................... 507 325
Jeffrey V. Miller.................................... 1,000 --
Michael C. Miller.................................... 1,000 --
Wayne G. Palmer...................................... 250 --
Gerard D. Papazian................................... 1,800 1,170
Jan P. Randles....................................... 10,000 --
Alain Robitaille..................................... 500 --
Donald L. Sperry..................................... 5,071 3,250
Daniel R. Taylor..................................... 2,250 1,463
Dennis M. Thompson................................... 500 325
John Umiastowski..................................... 415 --
------------ ---------
Total: 1,384,850 10,238
------------ ---------
------------ ---------
</TABLE>
- ------------------------
* Class A common stock, par value $.01 per share, of Gentek Holdings, except
for the shares held by OTPPB, which are Class C common stock, par value $.01
per share, of Gentek Holdings.
<PAGE>
AMENDMENT NO. 1
TO STOCK PURCHASE AGREEMENT
AMENDMENT NO. 1, dated as of July ___, 1997 ("Amendment No. 1"), to that
certain Stock Purchase Agreement, dated as of April 28, 1997 (the
"Agreement"), among GENSTAR CAPITAL CORPORATION, a corporation organized and
existing under the laws of the Province of Alberta, Canada ("Genstar"), the
ONTARIO TEACHERS' PENSION PLAN BOARD, a non-share capital corporation
organized and existing under the Teachers' Pension Act R.S.O 1990, C.T.I.
(Ontario) ("OTPPB"), and the MANAGEMENT STOCKHOLDERS of Gentek Holdings (as
defined below) listed on Schedule I to the Agreement (the "Management
Stockholders" and, together with Genstar and OTPPB, the "Sellers"), as
sellers; GENSTAR CAPITAL CORPORATION, a corporation organized and existing
under the laws of the Province of Alberta, Canada (the "Sellers'
Representative") (or such other person or persons as may succeed Genstar (or
any successor thereto) in accordance with the terms of the Sellers'
Representative Agreement (as defined in the Agreement)), as the Sellers'
representative hereunder; GENTEK HOLDINGS, INC., a corporation organized and
existing under the laws of the State of Delaware ("Gentek Holdings"), and
GENTEK BUILDING PRODUCTS, INC., a corporation organized and existing under
the laws of the State of Delaware ("Gentek") and a direct wholly owned
subsidiary of Gentek Holdings; and AMERIMAX FABRICATED PRODUCTS, INC., a
corporation organized and existing under the laws of the State of Delaware
("Purchaser"), as purchaser.
W I T N E S S E T H:
--------------------
WHEREAS, the parties to the Agreement, pursuant to Section 9.13 of the
Agreement, desire to amend the Agreement; and
WHEREAS, the Required Sellers (as defined in the Sellers' Representative
Agreement) have authorized the Sellers' Representative to execute this
Amendment No. 1 on behalf of the Sellers pursuant to the Sellers'
Representation Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
hereby agree to amend the Agreement pursuant to Section 9.13 of the Agreement
as follows:
SECTION 1. Amendments to the Agreement.
(a) Section 2.03 of the Agreement is amended by replacing "July 14, 1997"
with "July 15, 1997."
<PAGE>
2
(b) Section 3.03(a) of the Agreement is amended and restated as follows:
"SECTION 3.03. Capital Stock of Gentek Holdings and Gentek; Ownership of
the Shares. (a) The authorized capital stock of Gentek Holdings consists
of 2,000,000 shares of Class A common stock, par value $.01 per share (the
"Class A Common Stock"), 2,000,000 shares of Class B common stock, par
value $.01 per share (the "Class B Common Stock"), 1,000,000 shares of
Class C common stock, par value $.01 per share (the "Class C Common
Stock"), and 1,000,000 shares of Class D common stock, par value $.01 per
share (the "Class D Common Stock"). There is no other capital stock
authorized for issuance. After giving effect to the Restructuring, there
will be 497,128 shares of Class A Common Stock, no shares of Class B Common
Stock, 200,000 shares of Class C Common Stock, and no shares of Class D
Common Stock issued and outstanding, all of which outstanding shares will
be validly issued, fully paid and nonassessable. After giving effect to
the Restructuring, there will be no options, warrants, convertible
securities, stock appreciation rights, phantom stock rights, profit
participation rights, or other rights, agreements, arrangements or
commitments of any character relating to the capital stock of Gentek
Holdings or obligating such person to issue or sell any shares of capital
stock of, or any other interest in, Gentek Holdings other than pursuant to
this Agreement. After giving effect to the Restructuring, the Shares will
constitute all of the issued and outstanding capital stock of Gentek
Holdings and the number of Shares set forth opposite each Seller's name on
Schedule I hereto will be owned of record and beneficially solely by such
Seller, free and clear of all Encumbrances and all other shares of capital
stock of Gentek Holdings previously issued and outstanding and which have
been purchased by Gentek Holdings shall have been duly cancelled."
(c) Section 3.06 of the Agreement is amended and restated as follows:
"SECTION 3.06. Financial Information. The Sellers' Representative
has delivered or caused to be delivered to Purchaser copies of the
audited consolidated balance sheets of Gentek Holdings and its
subsidiaries as at December 31, 1994 and 1995, and the related
consolidated statements of income, retained earnings, shareholders'
equity and changes in financial position of Gentek Holdings and its
Subsidiaries for the partial fiscal year ended December 31, 1994 and
the fiscal year ended December 31, 1995, together with all related
notes and schedules thereto (collectively, the "Financial
Statements"). The Financial Statements (i) were prepared in
accordance with the books of account and other financial records of
Gentek Holdings (which books of account and other financial records
are accurate and complete in all material respects), (ii) present
fairly the consolidated financial condition and results of operations
of Gentek Holdings and its subsidiaries as of the dates thereof or for
the periods covered thereby, (iii) have been prepared in accordance
with U.S. GAAP (except with respect to calculating earnings per share)
and (iv) include all adjustments that are necessary for a fair
presentation of the consolidated financial condition and the results
of the operations of Gentek Holdings and its subsidiaries as of the
dates thereof or for the periods covered thereby. Upon delivery of
the financial statements referred to in Section 7.03(xix), such
financial statements (i) will have been prepared in accordance with
the books of account and other financial records of Gentek Holdings
(which books of account and other financial records are accurate and
complete in all material respects), (ii) will present fairly the
consolidated financial condition and results of operations of Gentek
Holdings and its subsidiaries as of the dates thereof or for the
periods covered thereby, (iii) will have been prepared in accordance
<PAGE>
3
with U.S. GAAP (except with respect to calculating earnings per share)
and (iv) will include all adjustments that are necessary for a fair
presentation of the consolidated financial condition and the results
of the operations of Gentek Holdings and its subsidiaries as of the
dates thereof or for the periods covered thereby. The Reference
Balance Sheet (1) was prepared in accordance with the books of account
and other financial records of Gentek Holdings and Gentek (which books
of account and other financial records are accurate and complete in
all material respects), (2) presents fairly the consolidated financial
condition of Gentek Holdings and Gentek and their respective
subsidiaries as of the date thereof and (3) has been prepared in
accordance with U.S. GAAP except as set forth on Section 1.01 of the
Disclosure Schedule and as set forth in the definition of the
Accounting Policies and Procedures in a manner consistent with past
practice, except as otherwise noted therein and subject to the absence
of footnote disclosure and changes resulting from normal and customary
year-end audit adjustments."
(d) Section 7.03 of the Agreement is amended to add subparagraph 7.03(xix)
to the end thereof as follows:
"(xix) The Sellers' Representative shall deliver or cause to be
delivered to Purchaser copies of the audited consolidated balance sheets of
Gentek Holdings and its subsidiaries as at December 31, 1996, and the
related consolidated statements of income, retained earnings, shareholders'
equity and changes in financial position of Gentek Holdings and its
Subsidiaries for the fiscal year ended December 31, 1996, together with all
related notes and schedules thereto."
(e) Section 8.01(iv) is amended by replacing "July 14, 1997" with "July
15, 1997."
(f) The form of Restructuring Agreement (as defined in the Agreement)
attached as Exhibit 5.08 to the Agreement is amended and restated in the form
attached hereto as Annex 1.
<PAGE>
4
(g) Schedule I to the Agreement is amended and restated in the form
attached hereto as Annex 2.
SECTION 2. Waiver of Inaccuracy in Agreement by Purchaser.
(a) Pursuant to Section 8.03(b) of the Agreement, Purchaser hereby
expressly waives any breach of Section 3.03(a) or 3.06 of the Agreement
occurring prior to the effectiveness of Section 1 hereof.
(b) The waiver and agreement set forth in paragraph (a) of this section
shall not be construed as a waiver of any other term or condition of this
Agreement.
SECTION 3. Reference to and Effect on the Agreement.
(a) Upon the effectiveness of Section 1 hereof, on and after the date
hereof each reference in the Agreement to "this Agreement," "the Agreement,",
"hereunder," "hereof," "herein" or words of like import shall mean and be a
reference to the Agreement as amended by Section 1 hereof.
(b) Except as specifically amended above, the Agreement shall remain in
full force and effect and is hereby ratified and confirmed.
SECTION 4. Execution and Counterparts. This Amendment No. 1 may be
executed in one or more counterparts, and by the different parties hereto in
separate counterparts, each of which when executed shall be deemed to be an
original but all of which taken together shall constitute one and the same
instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, each party hereto has executed, or caused its duly
authorized officer to execute, this Amendment No. 1 as of the date first
written above.
GENSTAR CAPITAL CORPORATION
By:
-------------------------
Name:
Title:
ONTARIO TEACHERS' PENSION
PLAN BOARD
By:
--------------------------
Name:
Title:
SELLERS' REPRESENTATIVE
------------------------
ON BEHALF OF THE SELLERS
GENSTAR CAPITAL CORPORATION
By:
---------------------------
Name:
Title:
<PAGE>
GENTEK HOLDINGS
---------------
GENTEK HOLDINGS, INC.
By:
---------------------------
Name:
Title:
By:
---------------------------
Name:
Title:
GENTEK
------
GENTEK BUILDING PRODUCTS, INC.
By:
---------------------------
Name:
Title:
By:
---------------------------
Name:
Title:
PURCHASER
---------
AMERIMAX FABRICATED
PRODUCTS, INC.
By:
---------------------------
Name:
Title:
<PAGE>
ANNEX 2
to
Amendment No. 1 to Stock Purchase Agreement
SCHEDULE I
STOCKHOLDERS/STOCK OWNERSHIP
<TABLE>
<CAPTION>
SHARES* HELD
--------------------------
STOCKHOLDER UNRESTRICTED RESTRICTED
----------- ------------ -----------
<S> <C> <C>
Genstar Capital Corporation.................... 475,000 --
Ontario Teachers' Pension Plan Board........... 200,000 --
Management Stockholders:
David L. Burke............................ 253.5 --
Kong H. Chen.............................. 750 --
George E. Eckerd.......................... 50 32.5
Paul E. Erb, Jr. ......................... 250 162.5
J. Herbert Gaul, Jr. ..................... 2,500 812.5
Russel H. Henk............................ 250 162.5
Joseph P. Ippolito........................ 550 --
Darvin L. King............................ 300 195
Stephen L. Klein.......................... 750 487.5
Alain Larose.............................. 125 --
Jeffrey V. Miller......................... 500 --
Michael C. Miller......................... 500 --
Wayne G. Palmer........................... 125 --
Gerard D. Papazian........................ 900 585
Jan P. Randles............................ 5,000 --
Alain Robitaille.......................... 250 --
Donald L. Sperry.......................... 2,535.5 1,625
Daniel R. Taylor.......................... 1,125 731.5
Dennis M. Thompson........................ 250 162.5
John Umiastowski.......................... 207.5 --
--------- -------
Total: 692,171.5 4,956.5
--------- -------
--------- -------
</TABLE>
- ------------------------
* Class A common stock, par value $.01 per share, of Gentek Holdings, except
for the shares held by OTPPB, which are Class C common stock, par value $.01
per share, of Gentek Holdings.
<PAGE>
AMENDMENT NO. 2
TO STOCK PURCHASE AGREEMENT
AMENDMENT NO. 2, dated as of July 16, 1997 ("Amendment No. 2"), to that
certain Stock Purchase Agreement, dated as of April 28, 1997 (the "Agreement"),
among GENSTAR CAPITAL CORPORATION, a corporation organized and existing under
the laws of the Province of Alberta, Canada ("Genstar"), the ONTARIO TEACHERS'
PENSION PLAN BOARD, a non-share capital corporation organized and existing under
the Teachers' Pension Act R.S.O 1990, C.T.I. (Ontario) ("OTPPB"), and the
MANAGEMENT STOCKHOLDERS of Gentek Holdings (as defined below) listed on Schedule
I to the Agreement (the "Management Stockholders" and, together with Genstar and
OTPPB, the "Sellers"), as sellers; GENSTAR CAPITAL CORPORATION, a corporation
organized and existing under the laws of the Province of Alberta, Canada (the
"Sellers' Representative") (or such other person or persons as may succeed
Genstar (or any successor thereto) in accordance with the terms of the Sellers'
Representative Agreement (as defined in the Agreement)), as the Sellers'
representative hereunder; GENTEK HOLDINGS, INC., a corporation organized and
existing under the laws of the State of Delaware ("Gentek Holdings"), and GENTEK
BUILDING PRODUCTS, INC., a corporation organized and existing under the laws of
the State of Delaware ("Gentek") and a direct wholly owned subsidiary of Gentek
Holdings; and AMERIMAX FABRICATED PRODUCTS, INC., a corporation organized and
existing under the laws of the State of Delaware ("Purchaser"), as purchaser.
W I T N E S S E T H:
--------------------
WHEREAS, the parties to the Agreement, pursuant to Section 9.13 of the
Agreement, desire to amend the Agreement; and
WHEREAS, the Required Sellers (as defined in the Sellers' Representative
Agreement) have authorized the Sellers' Representative to execute this
Amendment No. 2 on behalf of the Sellers pursuant to the Sellers'
Representation Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
hereby agree to amend the Agreement pursuant to Section 9.13 of the Agreement
as follows:
<PAGE>
2
SECTION 1. Amendments to the Agreement.
(a) Section 1.01 of the Agreement is amended by amending and restating the
definitions of "Closing Date Balance Sheet", "Closing Date Funded Debt",
"Closing Date Net Assets" and "Funded Debt" as follows:
"Closing Date Balance Sheet" shall mean the audited consolidated
balance sheet of Gentek Holdings and Gentek, after giving effect to the pro
forma effect of the Restructuring, as at 12:01 a.m. on July 14, 1997, prepared
in accordance with U.S. GAAP.
"Closing Date Funded Debt" shall mean the Funded Debt as of the
Closing Date (effective as of 12:01 a.m. on July 14, 1997), if any, as
reflected on the Closing Date Balance Sheet.
"Closing Date Net Assets" shall mean the Tangible Net Assets as of the
Closing Date (effective as of 12:01 a.m. on July 14, 1997), as reflected on the
Closing Date Balance Sheet, determined in accordance with U.S. GAAP.
"Funded Debt" means, without duplication, the aggregate amount of all
obligations due under indebtedness for borrowed money and capitalized leases
(as determined in accordance with U.S. GAAP) of Gentek, Gentek Holdings, and
their respective Subsidiaries, in each case after giving effect to the
Restructuring as of 12:01 a.m. on July 14, 1997, including, without
limitation, all obligations for principal, interest, premiums, fees,
expenses, overadvances, overdrafts, breakage costs and indemnities due
thereunder; provided, that in no event shall Funded Debt include indebtedness
incurred by Purchaser, Gentek, or Gentek Holdings at the Closing for purposes
of financing Purchaser's acquisition of the Shares hereunder.
(b) Section 2.02 of the Agreement is amended and restated as follows:
"SECTION 2.02 Purchase Price. Subject to the adjustments provided for
in Section 2.06, the aggregate purchase price for the Shares shall be
$72,000,000 plus all cash and cash equivalents reflected on the books of
Gentek Holdings and Gentek at the close of business on the business day
immediately preceding the Closing Date (effective as of 12:01 a.m. on July
14, 1997) after giving effect to the Restructuring (such amount, the
"Purchase Price")."
(c) Section 2.03 of the Agreement is amended by replacing "July 15, 1997"
with "July 17, 1997."
(d) Section 8.01(iv) of the Agreement is amended by replacing "July 15,
1997" with "July 17, 1997."
<PAGE>
3
SECTION 2. Reference to and Effect on the Agreement.
(a) Upon the effectiveness of Section 1 hereof, on and after the date
hereof each reference in the Agreement to "this Agreement," "the Agreement,",
"hereunder," "hereof," "herein" or words of like import shall mean and be a
reference to the Agreement as amended by Section 1 hereof.
(b) Except as specifically amended above, the Agreement shall remain in
full force and effect and is hereby ratified and confirmed.
SECTION 3. Execution and Counterparts. This Amendment No. 2 may be
executed in one or more counterparts, and by the different parties hereto in
separate counterparts, each of which when executed shall be deemed to be an
original but all of which taken together shall constitute one and the same
instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, each party hereto has executed, or caused its duly
authorized officer to execute, this Amendment No. 2 as of the date first
written above.
SELLERS' REPRESENTATIVE
-----------------------
ON BEHALF OF THE SELLERS
GENSTAR CAPITAL CORPORATION
By:
---------------------------
Name:
Title:
PURCHASER
---------
AMERIMAX FABRICATED
PRODUCTS, INC.
By:
---------------------------
Name:
Title:
<PAGE>
LIST OF EXHIBITS AND DISCLOSURE SECTIONS
Exhibit 1.01(a) Form of Indemnification Agreement
Exhibit 1.01(b) Form of Noncompetition Agreement
Exhibit 1.01(c) Form of Sellers' Representative Agreement
Exhibit 1.01(d) Form of Transition Services Agreement
Exhibit 5.08(f) Restructuring Agreement
Exhibit 7.02(v) Form of Opinion of Purchaser's Counsel
Exhibit 7.03(vii) Form of Opinion of Sellers' Counsel
Section 1.01(a) Accounting
Section 1.01(b) Canadian Loan Documents
Section 1.01(c) U.S. Loan Documents
Section 3.04 No Conflict
Section 3.05 Governmental Consents and Approvals
Section 3.07 No Undisclosed Liabilities
Section 3.10 Conduct
Section 3.11 Litigation
Section 3.13 Environmental Matters
Section 3.14 Material Contracts
Section 3.15 Intellectual Property
Section 3.16 Real Property
Section 3.18 Employee Benefit Matters
Section 3.19 Labor Matters
Section 3.21 Accounts; Lockboxes; Safe Deposit Boxes
Section 3.23 Customers and Suppliers
Section 3.25 Insurance
Section 3.26 Warranties
Section 5.06 Use of Name
Section 6.01(a) Employees
Section 6.02 Collective Bargaining Agreements
<PAGE>
EXHIBIT 7(a)1
GENTEK HOLDINGS, INC. AND ITS SUBSIDIARY
GENTEK BUILDING PRODUCTS, INC.
REPORT ON AUDIT OF CONSOLIDATED RESTRUCTURED FINANCIAL STATEMENTS -
STOCK PURCHASE AGREEMENT AMONG GENSTAR CAPITAL CORPORATION,
ONTARIO TEACHERS' PENSION PLAN BOARD AND THE MANAGEMENT
STOCKHOLDERS LISTED ON SCHEDULE I THEREIN, AS SELLERS; GENSTAR CAPITAL
CORPORATION, AS SELLERS' REPRESENTATIVE; GENTEK HOLDINGS, INC. AND
GENTEK BUILDING PRODUCTS, INC.; AND AMERIMAX FABRICATED PRODUCTS, INC.
AS PURCHASER DATED AS OF APRIL 28,1997
for the years ended December 31, 1996 and 1995
and for the period September 15, 1994 (inception) to December 31, 1994
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
PAGES
-----
<S> <C>
Report of Independent Accountants..................................... 1
Restructured Consolidated Financial Statements:
Restructured Balance Sheets........................................ 2
Restructured Statements of Income.................................. 3
Restructured Statements of Stockholders' Equity.................... 4
Restructured Statements of Cash Flows.............................. 5
Notes to Restructured Financial Statements......................... 6-17
</TABLE>
Gentek Holdings, Inc. and its Subsidiary
Gentek Building Products, Inc. - Restructured
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Stockholders of
Gentek Holdings, Inc.
We have audited the accompanying restructured consolidated balance sheets of
Gentek Holdings, Inc. and its Subsidiary-Gentek Building Products, Inc. as of
December 31, 1996 and 1995 and the related restructured consolidated
statements of income, stockholders' equity and cash flows for the years ended
December 31, 1996 and 1995 and for the period September 15, 1994 (inception)
to December 31, 1994. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 the disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and the significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
The accompanying restructured financial statements were prepared to present
the balance sheets and related statements of income, stockholders' equity and
cash flows of Gentek Holdings, Inc. and its Subsidiary-Gentek Building
Products, Inc. pursuant to the stock purchase agreement referred to in Note
1, in conformity with generally accepted accounting principles.
In our opinion, the restructured financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Gentek Holdings, Inc. and its Subsidiary-Gentek Building Products, Inc. as
of December 31, 1996 and 1995 and the consolidated results of their
operations and their cash flows for the years ended December 31, 1996 and
1995 and for the period September 15, 1994 (inception) to December 31, 1994,
as restructured for the stock purchase agreement referred to in Note 1, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
CLEVELAND, OHIO
July 24, 1997
<PAGE>
RESTRUCTURED CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
(In Thousands of Dollars)
<TABLE>
<CAPTION>
ASSETS 1996 1995
----------- ---------
<S> <C> <C>
Current assets:
Cash........................................................................................ $ 56 $ 26
Accounts receivable, net of allowances for doubtful accounts of $124 and $71, respectively.. 12,692 13,106
Inventories................................................................................. 14,227 13,764
Deferred income taxes....................................................................... 282 250
Other current assets........................................................................ 97 60
----------- ---------
Total current assets.................................................................... 27,354 27,206
Property, plant and equipment, net............................................................ 10,683 10,377
Other non-current assets:
Deferred charges and other intangible assets, net........................................... 1,826 2,001
Deferred income taxes....................................................................... 8,410 1,497
Employee loans.............................................................................. 61 63
----------- ---------
Total non-current assets............................................................... 10,297 3,561
----------- ---------
Total assets......................................................................... $ 48,334 $ 41,144
----------- ---------
----------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade..................................................................... $ 5,221 $ 5,260
Accrued expenses and other liabilities...................................................... 1,269 1,166
----------- ---------
Total current liabilities.............................................................. 6,490 6,426
Long-term liabilities:
Extended warranty contracts................................................................. 70 75
----------- ---------
Total long-term liabilities............................................................ 70 75
----------- ---------
Total liabilities.................................................................... 6,560 6,501
----------- ---------
Commitments and contingencies (Notes 11 and 14)............................................... -- --
Stockholders' equity:
Common stock................................................................................ 14 14
Additional paid-in capital.................................................................. 27,663 27,647
Accumulated deficit......................................................................... (18,175) (21,479)
Note payable--Alcan to be retained by sellers............................................... 32,272 28,461
----------- ---------
Total stockholders' equity........................................................... 41,774 34,643
----------- ---------
Total liabilities and stockholders' equity........................................... $ 48,334 $ 41,144
----------- ---------
----------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
Gentek Holdings, Inc. and its Subsidiary
Gentek Building Products, Inc. - Restructured
2
<PAGE>
RESTRUCTURED CONSOLIDATED STATEMENTS OF INCOME
for the years ended December 31, 1996 and 1995 and for the period
September 15, 1994 (inception) to December 31, 1994
(In Thousands of Dollars)
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Net sales..................................................................... $ 107,186 $ 101,251 $ 1,834
Cost of sales................................................................. 92,404 88,385 1,628
--------- --------- ---------
Gross profit.......................................................... 14,782 12,866 206
Selling, general and administrative expenses.................................. 5,793 5,407 92
--------- --------- ---------
Income from operations................................................ 8,989 7,459 114
Other expenses:
Interest expense on Alcan note payable........................................ 3,811 3,363 98
Other, net.................................................................... (71) 31 --
--------- --------- ---------
Total other expenses, net................................................ 3,740 3,394 98
--------- --------- ---------
Income before income taxes............................................... 5,249 4,065 16
Provision for income taxes:
Current.................................................................. 1,635 1,252 6
Deferred................................................................. 417 339 --
--------- --------- ---------
Total provision for income taxes......................................... 2,052 1,591 6
--------- --------- ---------
Net income............................................................... $ 3,197 $ 2,474 $ 10
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
Gentek Holdings, Inc. and its Subsidiary
Gentek Building Products, Inc. - Restructured
3
<PAGE>
RESTRUCTURED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
for the years ended December 31, 1996 and 1995 and the period
September 15, 1994 (inception) to December 31, 1994
(In Thousands of Dollars)
<TABLE>
<CAPTION>
NOTE
COMMON PAID-IN ACCUMULATED PAYABLE
STOCK CAPITAL DEFICIT ALCAN TOTAL
----------- --------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
Balance at September 15, 1994 (inception).................. $ 14 $ 26,868 $ (18,966) $ 25,000 $ 32,916
Net income............................................... -- -- 10 -- 10
Deemed contribution, net................................. -- -- 62 -- 62
Note payable--Alcan to be retained by sellers............ -- -- -- 98 98
----------- --------- ------------ --------- ---------
Balance at December 31, 1994............................... 14 26,868 (18,894) 25,098 33,086
Net income............................................... -- -- 2,474 -- 2,474
Deemed dividend, net..................................... -- -- (5,059) -- (5,059)
Proceeds from sale of stock.............................. -- 717 -- -- 717
Compensatory effect of options........................... -- 62 -- -- 62
Note payable--Alcan to be retained by sellers............ -- -- -- 3,363 3,363
----------- --------- ------------ --------- ---------
Balance at December 31, 1995............................... 14 27,647 (21,479) 28,461 34,643
Net income............................................... -- -- 3,197 -- 3,197
Deemed contribution, net................................. -- -- 107 -- 107
Compensatory effect of options........................... -- 16 -- -- 16
Note payable--Alcan to be retained by sellers............ -- -- -- 3,811 3,811
----------- --------- ------------ --------- ---------
Balance at December 31, 1996............................... $ 14 $ 27,663 $ (18,175) $ 32,272 $ 41,774
----------- --------- ------------ --------- ---------
----------- --------- ------------ --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
Gentek Holdings, Inc. and its Subsidiary
Gentek Building Products, Inc. - Restructured
4
<PAGE>
RESTRUCTURED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1996 and 1995 and the period
September 15, 1994 (inception) to December 31, 1994
(In Thousands of Dollars)
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income........................................................................... $ 3,197 $ 2,474 $ 10
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation....................................................................... 847 815 23
Amortization....................................................................... 175 174 5
Deferred income taxes.............................................................. (6,945) (2,038) --
Loss on sale of property, plant and equipment...................................... 2 31 --
Long-term interest payable......................................................... 3,811 3,363 98
Compensatory effect of stock options............................................... 16 62 --
Changes in assets and liabilities:
Accounts receivable................................................................ 414 1,298 (1,834)
Inventories........................................................................ (463) (731) 1,628
Other current assets............................................................... (37) (9) --
Accounts payable, trade............................................................ (39) (1,041) 36
Other assets and liabilities, net.................................................. (3) 31 (28)
Accrued expenses and other liabilities............................................. 103 649 --
--------- --------- ---------
Net cash provided by (used in) operating activities............................ 1,078 5,078 (62)
--------- --------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment........................................... (1,155) (710) --
--------- --------- ---------
Net cash used in investing activities.......................................... (1,155) (710) --
--------- --------- ---------
Cash flows from financing activities:
Deemed contribution (dividend), net.................................................. 107 (5,059) 62
Proceeds from sale of stock.......................................................... -- 717 --
--------- --------- ---------
Net cash provided by (used in) financing activities............................ 107 (4,342) 62
--------- --------- ---------
Increase in cash....................................................................... 30 26 --
Cash at beginning of year.............................................................. 26 -- --
--------- --------- ---------
Cash at end of year.................................................................... $ 56 $ 26 $ --
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
Gentek Holdings, Inc. and its Subsidiary
Gentek Building Products, Inc. - Restructured 5
<PAGE>
NOTES TO RESTRUCTURED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands of Dollars)
1. ORGANIZATION AND BASIS OF PRESENTATION:
Gentek Holdings, Inc. ("Holdings"), a subsidiary of Genstar Capital
Corporation ("Parent, GCC"), was incorporated on September 15, 1994 as NACLA
Holdings, Inc. and adopted its current name on October 24, 1994. Holdings has
a wholly-owned subsidiary, Gentek Building Products, Inc. ("GBPI"), which has
a wholly-owned subsidiary Gentek Building Products Limited ("GBPL"). GBPI was
incorporated on June 24, 1994, as NACLA Acquisition Corporation; adopted its
current name on October 24, 1994, and became a wholly-owned subsidiary of
Holdings on December 15, 1994. GBPL was incorporated on June 28, 1994 as
108509 Ontario, Inc.; adopted its current name on November 22, 1994, and
became a wholly-owned subsidiary of GBPI on December 15, 1994.
Holdings was formed to acquire, through GBPI and GBPL, certain assets and
assume certain liabilities of Alcan Building Products (United States)
Division and Alcan Building Products (Canadian) Division (collectively
referred to as the "Building Products Division(s)") of Alcan Aluminum
Corporation and Alcan Aluminium Limited, respectively (collectively referred
to as "Alcan"). On June 24, 1994 GBPI and GBPL entered into separate purchase
agreements with Alcan which were consummated on December 20, 1994 (the
"Acquisition").
On April 28, 1997 a Stock Purchase Agreement was entered into among GCC,
Ontario Teachers' Pension Plan Board and the management stockholders of
Holdings, as sellers: GCC as sellers' representative; Holdings and GBPI; and
Amerimax Fabricated Products, Inc. ("Amerimax"), as purchaser ("Stock
Purchase Agreement"). The closing date for the proposed transaction is July
17, 1997.
In connection with the Stock Purchase Agreement, a restructuring
agreement was entered into which states that immediately prior to the sale of
the stock of Holdings, GBPI shall own only the properties and assets of GBPI
necessary for the conduct of business of its Fabral Division. In connection
with the restructuring, GBPI will contribute all of its properties and all
postretirement benefits other than pensions, assets and liabilities other
than those of its Fabral Division; including all bank debt, its investment in
GBPL, to a new company ("Newco") which will be controlled by Holding's
existing stockholders (See Note 10). In addition, under the terms of the
restructuring, Holdings will retain all historical net operating loss tax
carryforwards and the note payable to Alcan (including accrued interest
thereon) will be retained by the sellers' at closing (See Notes 9 and 12).
The transaction is expected to qualify for tax free treatment under Section
351 of the Internal Revenue Code of 1986, as amended.
Gentek Holdings, Inc. and its Subsidiary
Gentek Building Products, Inc. - Restructured 6
<PAGE>
NOTES TO RESTRUCTURED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In Thousands of Dollars)
1. ORGANIZATION AND BASIS OF PRESENTATION, CONTINUED:
The accompanying financial statements have been prepared as if Holdings
had been restructured under the Stock Purchase Agreement at December 20, 1994
and as if the Fabral Division had operated as an independent stand-alone
entity for all periods presented. Certain obligations were already recorded
by GBPI on a stand alone basis such as employee benefit obligations, income
taxes, and other corporate expenses. These obligations have been allocated to
GBPI's restructured financial statements using several factors, including
revenues, number of employees or other reasonable methods. Other corporate
expenses of GBPI have been allocated to the restructured GBPI on a basis that
management believes is reasonable and represents the expenses as if
restructured GBPI was a stand alone operation. Also, certain transactions
have been excluded from these financial statements as these transactions were
not relevant to the historical operations of the Fabral Division or retained
under the restructuring agreement. These financial statements have been
prepared on the basis of the Stock Purchase Agreement as discussed above.
The consolidated financial statements for the period September 15, 1994
(inception) through December 31, 1994 represent operations of Holdings for
the ten day period ended December 31, 1994. Certain disclosures related to
this ten day period have not been presented in the comparative disclosures as
the amounts are immaterial.
These financial statements may not necessarily be indicative of the
results that would have been attained if the Fabral Division had been
operated as a separate legal entity with no affiliation or support from
Holdings or GBPI.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The significant accounting policies used in preparation of the restructured
consolidated financial statements are as follows:
BUSINESS AND CONCENTRATIONS OF CREDIT RISK
The Fabral Division ("Fabral") designs, manufactures and distributes coated
aluminum and steel coil and aluminum and steel roofing systems. There are six
manufacturing facilities. Because most of the Fabral's products are intended for
exterior use, sales tend to be lower during periods of inclement weather,
especially in northern markets which usually results in less net sales in the
first quarter than any other periods of the year.
Fabral sells its products throughout the U.S. For the years ended December
31, 1996 and 1995 combined net sales to the Fabral's largest two customers
represent approximately 17% and 16%, respectively, of total net sales. GBPI
performs ongoing credit evaluations of its customers and generally does not
require collateral. GBPI monitors potential credit losses and such losses have
been within management's expectations.
CASH AND CASH EQUIVALENTS
There were no cash equivalents at December 31, 1996 and 1995. Fabral's cash
resources are maintained by GBPI; therefore on a restructured basis, cash
represents petty cash and imprest accounts.
Gentek Holdings, Inc. and its Subsidiary
Gentek Building Products, Inc. - Restructured 7
<PAGE>
NOTES TO RESTRUCTURED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In Thousands of Dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments consist of the Alcan note payable (Note 9).
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
under the average cost method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Significant additions
and improvements are capitalized while expenditures for maintenance and
repairs are charged to operations as incurred. The cost of assets retired or
otherwise disposed of and the related accumulated depreciation are eliminated
from the accounts in the year of disposal. Gains and losses resulting from
disposals are included in operations. Depreciation is computed using the
straight line method based on the following ranges of estimated useful lives:
<TABLE>
<S> <C>
Buildings and improvements................... 10-40 years
Leasehold improvements....................... Life of lease or 40 years
Machinery and equipment...................... 5-10 years
Tooling and dies............................. 2-5 years
Furniture, fixture and office equipment...... 5-7 years
</TABLE>
DEFERRED CHARGES AND OTHER INTANGIBLE ASSETS
Deferred charges and other intangible assets consist of the cost of
acquisition in excess of the fair value of net assets acquired ("goodwill"),
costs assigned to non-compete and various technology, patent and trademark
agreements and rights. These items are being amortized using the straight-line
method over the respective useful lives as follows:
<TABLE>
<S> <C>
Goodwill............................................................... 40 years
Trademark license agreements........................................... 7-99 years
Patents and trademarks................................................. 17 years
</TABLE>
The carrying value of intangible assets is periodically reviewed by GBPI
based on the expected future undiscounted operating cash flows of the related
business unit. Based upon its most recent analysis, GBPI believes that no
material impairment of intangible assets exists at December 31, 1996.
Gentek Holdings, Inc. and its Subsidiary
Gentek Building Products, Inc. - Restructured 8
<PAGE>
NOTES TO RESTRUCTURED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In Thousands of Dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
INCOME TAXES
Holdings and GBPI use the liability method of accounting for income
taxes. Deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and
liabilities and are measured using enacted tax rates and laws that will be in
effect when the differences are expected to reverse. The effect on deferred
taxes of a change in tax rates is recognized in the period that includes the
enactment date.
PRODUCT WARRANTY COSTS, SERVICE RETURNS AND EXTENDED WARRANTY CONTRACTS
Anticipated costs related to product warranty and service returns are
provided for based upon management's estimate of such costs after
consideration of historical trends and sales of products to which such costs
relate. Revenues from extended warranty contracts are recognized on a
straight line basis over the term of the extended warranty.
USE OF SIGNIFICANT ACCOUNTING ESTIMATES
The preparation of restructured consolidated financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosures of contingent assets and liabilities at the
dates of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.
3. INVENTORIES:
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Raw materials, work-in-process and supplies................ $ 12,654 $ 12,210
Finished products.......................................... 1,573 1,554
--------- ---------
Total.................................................. $ 14,227 $ 13,764
--------- ---------
--------- ---------
</TABLE>
4. OTHER CURRENT ASSETS:
Other current assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1996 1995
----- -----
<S> <C> <C>
Prepaid rent............................................ $ 26 $ 26
Prepaid advertising..................................... 12 13
Prepaid insurance....................................... 30 --
Other................................................... 29 21
--- ---
........................................................ $ 97 $ 60
--- ---
--- ---
</TABLE>
Gentek Holdings, Inc. and its Subsidiary
Gentek Building Products, Inc. - Restructured 9
<PAGE>
NOTES TO RESTRUCTURED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In Thousands of Dollars)
5. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
-------- --------
<S> <C> <C>
Land and improvements................................ $ 643 $ 643
Buildings and improvements........................... 4,042 4,025
Machinery, equipment, tooling and dies............... 6,239 5,792
Furniture, fixtures and office equipment............. 455 439
Construction in progress............................. 985 313
-------- --------
12,364 11,212
Less accumulated depreciation and
amortization........................................ (1,681) (835)
-------- --------
Total............................................ $10,683 $10,377
-------- --------
-------- --------
</TABLE>
6. DEFERRED CHARGES AND OTHER INTANGIBLE ASSETS:
Deferred charges and other intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
--------- ---------
<S> <C> <C>
Goodwill...................................... $ 761 $ 761
Non-compete agreements........................ 854 854
Patents and trademarks........................ 565 565
--------- ---------
2,180 2,180
Less: Accumulated amortization................ (354) (179)
--------- ---------
Total..................................... $ 1,826 $ 2,001
--------- ---------
--------- ---------
</TABLE>
7. EMPLOYEE LOANS:
GBPI has made interest free mortgage loans to employees upon relocation
aggregating $61 and $63 at December 31, 1996 and 1995, respectively.
Repayment terms range from 5 to 25 years and the mortgages are generally
collateralized by the value of the underlying assets.
Gentek Holdings, Inc. and its Subsidiary
Gentek Building Products, Inc. - Restructured 10
<PAGE>
NOTES TO RESTRUCTURED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In Thousands of Dollars)
8. ACCRUED EXPENSES AND OTHER LIABILITIES:
Accrued expenses and other liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Compensation................................... $ 939 $ 841
Real estate taxes.............................. 58 54
Personal property taxes........................ 85 25
Warranty....................................... 50 50
Sales tax...................................... 77 24
Other.......................................... 60 172
--------- ---------
$ 1,269 $ 1,166
--------- ---------
--------- ---------
</TABLE>
9. ALCAN NOTE PAYABLE TO BE RETAINED BY SELLERS:
In connection with the Acquisition (Note 1), Holdings issued a
subordinated promissory note to Alcan in the principal amount of $25,000. The
note bears interest at 12.97% per annum and the maturity date is December 15,
2004. Prior to December 31, 1999, no principal payments are permitted. After
December 31, 1999, Holdings can give notice and repay the note along with any
outstanding accrued interest with the following pre-payment premiums:
<TABLE>
<CAPTION>
YEAR PREMIUM
--------- ---------------
<S> <C>
2000..... 4%
2001..... 3%
2002..... 2%
2003..... 1%
2004..... 0%
</TABLE>
Upon an occurrence of a change in control, as defined in the note
agreement, Alcan may require Holdings to pay the then outstanding principal
along with any unpaid interest at that time. Prepayments and payments upon a
change in control are prohibited however, if such payment would cause a
default or event of default of the GBPI or GBPL Credit Agreements. No cash
payments of interest are required until June 15, 2000 with accrued interest
added to the principal balance and compounded on each interest payment date
of June 15 and December 15. However, after June 15, 2000, no interest shall
be paid if such payment would (i) cause a default or event of default of the
GBPI or GBPL Credit Agreements and no other such defaults then exist or (ii)
cause Holdings to have inadequate cash on hand taking into account its
working capital needs over the six month period following the interest
payment date. This promissory note contains various financial covenants.
Gentek Holdings, Inc. and its Subsidiary
Gentek Building Products, Inc. - Restructured 11
<PAGE>
NOTES TO RESTRUCTURED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In Thousands of Dollars)
9. ALCAN NOTE PAYABLE TO BE RETAINED BY SELLERS, CONTINUED:
Prior to the closing date for the proposed transaction underlying the Stock
Purchase Agreement (Note 1), Holding's stockholders will retain the Note Payable
- -Alcan and accrued interest thereon. Therefore, this amount is included in the
stockholders' equity section of these restructured consolidated financial
statements. Additionally, Holding's stockholders are currently negotiating with
Alcan to acquire the note payable plus accrued interest at a discount. Any gain
recognized with this proposed transaction would be recorded by Holdings prior to
the sale of the stock of Holdings.
The fair value of the Alcan note was estimated with a discounted cash flow
analysis based on Holdings' current incremental borrowing rate for similar types
of borrowing arrangements. The carrying value of the debt, $32,272 was estimated
to have a fair value of $27,545 at December 31, 1996.
10. EMPLOYEE BENEFIT PLANS:
PENSION
GBPI maintains an hourly retirement plan which results from a collective
bargaining agreement with Fabral unionized hourly employees at Goshen/Elkhart
Products Division ("Division"). The hourly unionized retirement plan includes
all active and retired employees of this Division. Retirement benefits under the
hourly unionized plan are based on $17 per month for each year of benefit
accrual service, up to a maximum of 30 years. This plan will be the only plan of
GBPI retained by Holdings under the terms of the restructuring agreement.
In general, GBPI policy is to fund this plan based on legal requirements,
tax considerations, local practices and investment opportunities. The components
of pension expense for the Goshen/Elkhart Products Division Plan for the years
ended December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Service costs for benefits........................... $ 12 $ 9
Interest cost........................................ 14 14
Actual return on plan assets......................... (9) (11)
Amortization of gain................................. (1) (4)
--- --
Net periodic pension cost.......................... $ 16 $ 8
--- --
--- --
</TABLE>
Gentek Holdings, Inc. and its Subsidiary
Gentek Building Products, Inc. -Restructured 12
<PAGE>
NOTES TO RESTRUCTURED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In Thousands of Dollars)
10. EMPLOYEE BENEFIT PLANS, CONTINUED:
Significant plan assumptions include the following:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Discount rate................................................... 7.50% 7.00%
Expected long-term rate of return............................... 9.00% 9.00%
Expected rate of salaried compensation increases................ N/A% N/A%
</TABLE>
The following table sets forth the funded status of the Goshen/Elkhart
Products Division Plan accounted for using Statement of Financial Accounting
Standards No. 87--"Employers Accounting for Pensions", and the amounts
recognized in the Holding's restructured consolidated financial statements,
for the years ended December 31, 1996 and 1995.
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
-------------- -------------
<S> <C> <C>
Plan assets at fair value................................. $149 $ 140
-------------- ----------
Present value of benefits earned to date
based on current compensation levels:
Vested................................................ (202) (185)
Non-vested............................................ (7) (5)
-------------- ----------
Accumulated benefit obligation............................ (209) (190)
Effect of future salary increases......................... -- --
-------------- ----------
Projected benefit obligation.............................. (209) (209)
-------------- ----------
Projected benefit obligation in excess of
plan assets............................................. (60) (50)
Unrecognized net gain..................................... (38) (44)
Adjustment required to recognize minimum
liability............................................... 38 44
-------------- ----------
Net pension asset (accrual) recorded in the
Restructured Consolidated Balance Sheets................ $ (60) $ (50)
-------------- ----------
-------------- ----------
</TABLE>
The plans' assets consist primarily of an annuity contract with a life
insurance company.
The earnings of Holdings as presented herein are charged with the cost of
benefits earned by the GBPI's employees as services are rendered. The cost of
these benefits allocated to GBPI for the years ended December 31, 1996 and 1995
was $20 and $21, respectively.
GBPI also has a noncontributory defined benefit pension plan covering
eligible Fabral non-union hourly and salaried employees. The salaried and
non-union hourly plan only includes the active employees from the Acquisition
date (Note 1) that are employed by GBPI. Benefits under the salaried and
non-union hourly plan, are generally based on the employee's compensation during
the three years of highest salary prior to retirement.
Gentek Holdings, Inc. and its Subsidiary
Gentek Building Products, Inc. -Restructured 13
<PAGE>
NOTES TO RESTRUCTURED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In Thousands of Dollars)
10. EMPLOYEE BENEFIT PLANS, CONTINUED:
In general, GBPI's policy is to fund this plan based on legal requirements,
tax considerations, local practices and investment opportunities. The plans'
assets consist primarily of listed common stock and corporate and government
bonds. The non-union hourly and salaried employees will be vested in the GBPI
plan on the closing date of the Stock Purchase Agreement (Note 1) and will not
participate thereafter. Expense related to this plan was $215 in 1996 and $180
in 1995. No obligations related to the plan will be retained by Holdings under
the terms of the restructuring agreement.
In 1995, GBPI established contributory incentive savings plans covering all
full-time salaried and non-union hourly employees. Under the plans, participants
may make voluntary contributions from 1% to 16% of annual compensation. GBPI
contributes fifty to seventy cents, depending on the participant's level of
continuous service, for each dollar of participant contribution up to 6% not to
exceed $9 per employee. For the years ended December 31, 1996 and 1995, GBPI
contributed $172 and $153, respectively in the form of matching contributions to
the plan related to Fabral.
OTHER POST EMPLOYMENT BENEFITS
GBPI provides postretirement medical and life insurance benefits to certain
retirees and eligible dependents for employees of GBPI commencing with the date
of Acquisition (Note 1). The medical plan is contributory, with retiree
contributions adjusted periodically. As part of its acquisition strategy,
Holdings in 1995 eliminated benefits for U.S. employees who would not be
eligible to receive benefits as of December 31, 1995. The plans are unfunded and
pay reasonable and customary charges for medically necessary expenses incurred
by retirees, after stated deductibles have been met. Holdings has reserved the
right to change or eliminate these benefit plans. Postretirement benefit costs
allocated to GBPI related to Fabral for the years ended December 31, 1996 and
1995 were $58 and $83, respectively. No obligations related to these plans will
be retained by Holdings under the terms of the restructuring agreement.
11. LEASES:
GBPI leases various facilities, machinery and equipment and vehicles under
noncancellable operating lease agreements related to Fabral. Several of these
leases are subject to renewal options under various terms. Minimum rental
commitments related to Fabral are summarized under the agreements and are as
follows:
<TABLE>
<CAPTION>
YEAR OPERATING
----------------------- -----------
<S> <C>
1997................... $ 967
1998................... 929
1999................... 513
2000................... 197
2001................... 156
---------
Total minimum payments. $ 2,762
---------
---------
</TABLE>
Gentek Holdings, Inc. and its Subsidiary
Gentek Building Products, Inc. -Restructured 14
<PAGE>
NOTES TO RESTRUCTURED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In Thousands of Dollars)
11. LEASES, CONTINUED:
Operating lease payments related to Fabral aggregated $1,263 and $1,151 for
the years ended December 31, 1996 and 1995, respectively.
12. INCOME TAXES:
The provision for income taxes for the years ended December 31, 1996 and
1995, respectively, is comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1996 1995 1994
--------- --------- --------
<S> <C> <C> <C>
Current:
Federal................................. $ 1,339 $ 1,025 $ 5
State and local......................... 296 227 1
Deferred................................ 417 339 --
--------- --------- ---------
$ 2,052 $ 1,591 $ 6
--------- --------- ---------
--------- --------- ---------
</TABLE>
A reconciliation of Holdings' effective income tax rate to the U.S.
statutory federal rate is as follows for the years ended December 31, 1996 and
1995:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Statutory tax rate............................... 34% 34% 34%
Increase in tax rate resulting from:
State taxes, net of federal benefits............. 5 5 5
---- ---- ----
39% 39% 39%
---- ---- ----
---- ---- ----
</TABLE>
Holdings has U.S. operating tax loss carryforwards of $26,425, ("tax
carryforward benefits") which are available to offset future taxable income and
taxes, respectively. The tax carryforward benefits begin to expire in 2010.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes and the benefit of
existing tax carryforward benefits.
At December 31, 1996 and 1995, Holdings had gross deferred tax assets of
$10,483 and $3,092 and gross deferred tax liabilities of $1,791 and $1,345,
respectively. The principal temporary differences provided for in these deferred
taxes are depreciation and amortization, non deductible accruals, and tax loss
carryforward benefits. (See Note 1.)
Gentek Holdings, Inc. and its Subsidiary
Gentek Building Products, Inc. -Restructured 15
<PAGE>
NOTES TO RESTRUCTURED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In Thousands of Dollars)
13. STOCKHOLDERS' EQUITY:
<TABLE>
<CAPTION>
NO. OF NO. OF VOTING/
PAR AUTHORIZED OUTSTANDING NON-
CLASS VALUE SHARES SHARES VOTING
- ----------------------------------------------------------------- ----- ---------- ----------- -------------
<S> <C> <C> <C> <C>
A................................................................ $ .01 2,000,000 984,850 Voting
B................................................................ $ .01 2,000,000 -- Non-Voting
C................................................................ $ .01 1,000,000 400,000 Voting
D................................................................ $ .01 1,000,000 -- Non-Voting
---------- -----------
6,000,000 1,384,850
---------- -----------
</TABLE>
The Class A common shares which are fully paid can be converted to Class B
common shares on a one-to-one basis and/or Class C common shares which are fully
paid can be converted to Class D common shares on a one-to-one basis, except
that conversions are not allowable if no respective shares of Class A and/or
Class C shares would be issued and outstanding after the conversion. Authorized
and unissued shares of Class B and Class D common shares are required to be
reserved sufficient to effect the respective conversions and any Class A and/or
Class C common shares. Converted shares must be cancelled and may not be
reissued. Subject to GBPI and GBPL's credit facilities, dividends are permitted
as long as equal dividends are declared and paid for each class.
Pursuant to a private placement memorandum, certain management investors
subscribed for 35,850 Class A common shares for $717 and subscribed for 12,253
Class A restricted common shares and options to purchase 5,182 Class A
restricted common shares which were accepted by Holdings. During 1996, Holdings
repurchased 1,650 Class A restricted common shares. The compensation element of
the restricted shares and options of $245 will be recognized as compensation
expense over a ten year vesting period. Holdings committed to contribute the
proceeds from the sale of these Class A common shares,
restricted shares and options to GBPI in the form of an additional capital
contribution upon the receipt of the proceeds from the management investors.
All classes of Common Stock are subject to the terms of a Stockholder
Agreement as well as a Management Investors Agreement, an Institutional Investor
Agreement and a GCC Stock Purchase Agreement, as appropriate. These Agreements
contain certain covenants and restrict the transfers of the different classes of
Common Stock to varying degrees. In the event an employee ceases to be employed
by Holdings or GBPI, or desires to sell his/her common shares, Holdings has the
option to repurchase the shares subject to certain rights of first refusal.
During 1995, Holdings established the Gentek Holdings, Inc. 1995 Equity
Incentive Plan (the "Plan"). The number of Class A shares of common stock that
may be issued under this Plan shall not exceed 137,900. All stock options
granted become exercisable in cumulative 20% installments, commencing one year
from the date of grant with full vesting occurring on the fifth anniversary
date, and expire in ten years, subject to earlier termination in certain events
related to termination of employment.
Gentek Holdings, Inc. and its Subsidiary
Gentek Building Products, Inc. -Restructured 16
<PAGE>
NOTES TO RESTRUCTURED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In Thousands of Dollars)
13. STOCKHOLDERS' EQUITY, CONTINUED:
The following summarizes the changes in the number of Class A common shares
under option:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Options outstanding at the beginning of the year............... 31,325 --
Options granted during the year................................ 32,450 32,800
Options cancelled during the year.............................. 7,800 1,475
--------- ---------
Options outstanding at the end of the year..................... 55,975 31,325
--------- ---------
--------- ---------
Options exercisable at the end of the year..................... 5,445 --
--------- ---------
--------- ---------
Option price per share......................................... $ 20.00 $ 20.00
--------- ---------
--------- ---------
</TABLE>
Holdings accounts for employee stock options under APB Opinion No. 25, under
which no compensation cost has been recognized except for the Class A common
shares noted above. Had compensation cost been determined based on the fair
value of options at their grant dates consistent with the method of Statement of
Financial Accounting Standards No. 123 ("SFAS 123"), there would have been no
significant effect on Holdings net income.
The fair value of each option grant was estimated on the date of grant using
a present value calculation, using the following assumptions for grants in 1996
and 1995, respectively: risk free rate of return of 6.75% and 7.00% and a
weighted average expected option life of 10 years. A 10 year life and a 0%
dividend yield was used for all grants.
The Plan has 81,925 common shares available for grant of future options at
December 31, 1996.
14. COMMITMENTS AND CONTINGENCIES:
Various claims, lawsuits, and complaints arising in the ordinary course of
business have been filed or are pending against GBPI related to Fabral or may
arise in the future involving allegations of negligence, product defects, and
breach of warranty, among other allegations. Some of the foregoing matters
involve or may involve compensatory or punitive damages in large amounts.
Litigation is subject to many uncertainties, the outcome of individual
litigated matters is not predicable with assurance, and it is possible that
some of the foregoing matters could be decided unfavorably to GBPI or
Holdings. Although the liability, if any, associated with these matters was
not determinable at December 31, 1996, it is the opinion of management of
Holdings that all such matters are either indemnified by the seller under the
terms of the purchase agreements (Note 1) or are adequately accrued for or
are adequately covered by insurance or, if not so covered, are without merit
or are of such kind, or involve such amounts, as would not have a significant
effect on the restructured consolidated financial position or results of the
operations of Holdings if disposed of unfavorably.
Gentek Holdings, Inc. and its Subsidiary
Gentek Building Products, Inc. -Restructured 17
<PAGE>
EXHIBIT 7(a)2
Gentek Holdings, Inc. and its Subsidiary
Gentek Building Products, Inc.
Restructured Condensed Consolidated Balance Sheet
June 30, 1997
(Thousands of U.S. Dollars)
(Unaudited)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................................... $ 18
Accounts receivable, net.......................................................... 16,280
Inventories....................................................................... 15,632
Deferred income taxes............................................................. 282
Other current assets.............................................................. 87
---------
Total current assets............................................................. 32,299
Property, plant and equipment, net................................................. 10,862
Deferred income taxes.............................................................. 8,170
Goodwill........................................................................... 713
Other assets....................................................................... 1,085
---------
$ 53,129
---------
---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................................. $ 6,541
Accrued expenses and other liabilities............................................ 1,106
---------
Total current liabilities........................................................ 7,647
Other liabilities................................................................. 70
---------
Total liabilities................................................................ 7,717
---------
Commitments and contingencies --
Stockholders' equity:
Common Stock...................................................................... 14
Additional paid-in capital........................................................ 27,663
Accumulated deficit............................................................... (16,678)
Note payable-Alcan to be retained by sellers...................................... 34,413
---------
Total stockholders' equity....................................................... 45,412
---------
$ 53,129
---------
---------
</TABLE>
The accompanying notes are an integral part
of these condensed consolidated financial statements.
<PAGE>
Gentek Holdings, Inc. and its Subsidiary
Gentek Building Products, Inc.
Restructured Condensed Consolidated Statements of Income
For the six months ended June 30, 1997 and 1996
(Thousands of U.S. Dollars)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Net Sales................................................................................... $ 50,827 $ 49,294
--------- ---------
Costs and expenses:
Cost of goods sold......................................................................... 44,443 42,838
Selling and general........................................................................ 3,058 2,921
Depreciation and amortization.............................................................. 574 563
--------- ---------
48,075 46,322
--------- ---------
Earnings from operations................................................................... 2,752 2,972
Interest expense on Alcan note payable...................................................... (2,141) (1,888)
Other income (expense), net................................................................. 4 10
--------- ---------
Earnings before income taxes............................................................... 615 1,094
Provision for income taxes................................................................. 240 427
--------- ---------
Net earnings............................................................................... $ 375 $ 667
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part
of these condensed consolidated financial statements.
<PAGE>
Gentek Holdings, Inc. and its Subsidiary
Gentek Building Products, Inc.
Restructured Condensed Consolidated Statements of Cash Flows
For the six months ended June 30, 1997 and 1996
(Thousands of U.S. Dollars)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Net cash provided by (used in) operating activities............................................. $ (495) $ 1,854
--------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment..................................................... (665) (197)
--------- ---------
Net cash used in investing activities......................................................... (665) (197)
--------- ---------
Cash flows from financing activities:
Deemed contribution (dividend), net............................................................ 1,122 (1,667)
--------- ---------
Net cash provided by (used in) financing activities........................................... 1,122 (1,667)
--------- ---------
Net decrease in cash and equivalents............................................................ (38) (10)
Cash and equivalents at beginning of period..................................................... 56 26
--------- ---------
Cash and equivalents at end of period........................................................... $ 18 $ 16
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part
of these condensed consolidated financial statements.
<PAGE>
Gentek Holdings, Inc. And Its Subsidiary
Gentek Building Products, Inc.
Notes to Interim Restructured Condensed Consolidated Financial Statements
(Thousands of U.S. Dollars)
(Unaudited)
1. INTERIM PRESENTATION:
The interim financial statements have been prepared by management in
accordance with the basis of presentation and accounting policies stated in
Notes 1 and 2 to the audited financial statements of Gentek for the years
ended December 31, 1994, 1995 and 1996 and should be read in conjunction with
those audited financial statements. The unaudited interim condensed
consolidated financial statements reflect all adjustments which are, in the
opinion of management, necessary for a fair statement of the results for the
interim periods presented.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
For information regarding summary of significant accounting policies, see
Note 2 to the audited financial statements of Gentek for the years ended
December 31, 1994, 1995 and 1996.
3. INVENTORIES
Components of inventories are as follows:
JUNE 30, 1997
-------------
Raw Materials, work-in-process and supplies............... $ 13,107
Finished Goods............................................ 2,525
-------------
$ 15,632
-------------
-------------
4. COMMITMENTS AND CONTINGENCIES
Various claims, lawsuits, and complaints arising in the ordinary course of
business have been filed or are pending against Gentek related to Fabral or
may arise in the future involving allegations of negligence, product defects,
and breach of warranty, among other allegations. Some of the foregoing
matters involve or may involve compensatory or punitive damages in large
amounts. Litigation is subject to many uncertainties, the outcome of
individual litigated matters is not predictable with assurance, and it is
possible that some of the foregoing matters could be decided unfavorably to
Gentek. Although the liability, if any, associated with these matters was not
determinable at June 30, 1997, it is the opinion of management that all such
matters are either indemnified by the seller under the terms of the Purchase
Agreement or are adequately accrued for or are adequately covered by
insurance or, if not covered, are without merit or are of such kind, or
involve such amounts, as would not have a significant effect on the
restructured consolidated financial position or results of the operations of
Gentek if disposed of unfavorably.
5. SUBSEQUENT EVENT
Pursuant to the Purchase Agreement dated April 28, 1997 among the Company and
Genstar Capital Corporation ("GCC"), Ontario Teachers' Pension Plan Board and
the Management Stockholders of Gentek Holdings, Inc.("Holdings") as sellers;
GCC as sellers' representative; Holdings and Gentek Building Products,
Inc.("GBPI"), on July 17, 1997, the Company purchased all of the issued and
outstanding capital stock of Holdings and GBPI (collectively "Gentek" or
"Fabral"), consisting of assets and liabilities relating to Fabral, a
division of Gentek headquartered in Lancaster, Pennsylvania ( the
"Transaction").
<PAGE>
Gentek Holdings, Inc. And Its Subsidiary
Gentek Building Products, Inc.
Notes to Interim Restructured Condensed Consolidated
Financial Statements - Continued
(Thousands of U.S. Dollars)
(Unaudited)
5. SUBSEQUENT EVENT - CONTINUED
The purchase price, including estimated adjustments for changes in net
tangible assets required by the Purchase Agreement and approximately $2.0
million in acquisition related fees and expenses, was approximately $78.0
million in cash. (See Pro Forma Condensed Combined Financial Statements).
Further adjustment upon determination of the final net tangible assets is not
anticipated to be material. The purchase price will be allocated to the
assets and liabilities of Gentek based upon their estimated fair value at the
acquisition date under the purchase method of accounting.
The Transaction was financed through borrowings of $38.0 million of senior
secured revolving loans and $40.0 million of senior secured term loans. Such
borrowings were available under the Credit Agreement which was amended and
restated to increase the Revolving Credit Facility from $85.0 million to
$115.0 million and to provide additional term loans of $40.0 million.
<PAGE>
EXHIBIT 7(b)
Euramax International plc and Subsidiaries
Pro Forma Condensed Combined Financial Statements
(Thousands of U.S. Dollars)
(Unaudited)
The following unaudited Pro Forma Condensed Combined Financial Statements
have been prepared by taking the historical financial statements of Euramax
International plc and Gentek Holdings, Inc and its Subsidiary Gentek Building
Products, Inc. and giving effect to the Transaction as if it had occurred on
June 28, 1997 in respect to the Balance Sheet and January 1, 1996 in respect
to the Statements of Earnings. Fabral's historical financial statements are
presented on a calendar-month basis ending June 30, 1997, whereas the
Company's financial statements are presented on a 4-4-5 reporting basis with
the period ending on June 28, 1997. Management does not believe the
difference in reporting periods has significant impact upon the pro forma
statements. The unaudited Pro Forma Condensed Combined Financial Statements
do not purport to be indicative of the results that would actually have been
obtained if the Transaction had occurred on the date indicated or of the
results that may be obtained in the future. The pro forma adjustments, as
described in the accompanying footnotes, are based on available information
and certain assumptions that management believes are reasonable.
The Transaction was accounted for under the purchase method of accounting.
The initial purchase price, including the related fees and expenses, has been
allocated to the assets and liabilities of Fabral based upon management's
preliminary estimates of their fair value, with the remainder allocated to
goodwill. Such initial purchase price is subject to adjustment based upon the
completion of an audit to determine the change in Fabral's net tangible
assets from December 31, 1996 through July 14, 1997. Management has estimated
such change in connection with the preparation of the Pro Forma Condensed
Combined Financial Statements and does not expect further adjustments to the
purchase price to be significant. Additionally, the allocation of purchase
price for the Transaction is subject to revision when additional information
concerning asset and liability valuation becomes available. The pro forma
earnings adjustments include adjustments to interest expense related to the
Additional Borrowings, amortization of goodwill relating to the allocation of
the purchase price and the related income tax effects. The pro forma balance
sheet adjustments include adjustments to long-term debt related to the
Additional Borrowings to fund the Transaction, as well as related acquisition
fees and expenses; and adjustments to assets and liabilities of Fabral to
allocate the purchase price, with the remainder allocated to goodwill.
<PAGE>
Euramax International plc and Subsidiaries
Pro Forma Condensed Combined Balance Sheet
As of June 28, 1997
(Thousands of U.S. Dollars)
(Unaudited)
<TABLE>
<CAPTION>
EURAMAX
INTERNATIONAL TOTAL PRO FORMA
PLC FABRAL HISTORICAL ADJUSTMENTS PRO FORMA
------------ --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $ 12,558 $ 18 $ 12,576 $ -- $ 12,576
Cash in escrow................................. 12,764 -- 12,764 -- 12,764
Accounts receivable, net....................... 72,801 16,280 89,081 -- 89,081
Inventories.................................... 79,622 15,632 95,254 500(b) 95,754
Deferred income taxes.......................... 819 282 1,101 -- 1,101
Other current assets........................... 3,185 87 3,272 -- 3,272
------------ --------- ---------- ----------- -----------
Total current assets.......................... 181,749 32,299 214,048 500 214,548
Property, plant and equipment, net.............. 98,671 10,862 109,533 -- (b) 109,533
Deferred income taxes........................... -- 8,170 8,170 -- 8,170
Goodwill........................................ 42,464 713 43,177 31,923(b) 75,100
Other assets.................................... 11,201 1,085 12,286 165(c) 12,451
------------ --------- ---------- ----------- -----------
$ 334,085 $ 53,129 $ 387,214 $ 32,588 $ 419,802
------------ --------- ---------- ----------- -----------
------------ --------- ---------- ----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................... $ 48,924 $ 6,541 $ 55,465 $ -- $ 55,465
Accrued expenses............................... 25,900 1,106 27,006 625(a) 27,631
Current maturities of long-term debt........... 2,845 -- 2,845 -- 2,845
------------ --------- ---------- ----------- -----------
Total current liabilities..................... 77,669 7,647 85,316 625 85,941
Long-term debt, less current maturities......... 197,024 -- 197,024 77,375(a) 274,399
Other liabilities............................... 5,717 70 5,787 -- 5,787
Deferred income taxes........................... 11,493 -- 11,493 -- 11,493
------------ --------- ---------- ----------- -----------
Total liabilities............................. 291,903 7,717 299,620 78,000 377,620
------------ --------- ---------- ----------- ------------
Redeemable preference shares.................... 37,698 -- 37,698 -- 37,698
------------ --------- ---------- ----------- -----------
Ordinary shareholders' equity:
Ordinary shares................................ 1,000 14 1,014 (14)(d) 1,000
Additional paid-in capital..................... -- 27,663 27,663 (27,663)(d) --
Retained earnings (deficit).................... 4,439 (16,678) (12,239) 16,678 (d) 4,439
Note payable-Alcan to be retained by sellers... -- 34,413 34,413 (34,413)(d) --
Foreign currency translation adjustment........ (955) -- (955) -- (955)
------------ --------- ---------- ----------- -----------
Total ordinary shareholders' equity........... 4,484 45,412 49,896 (45,412) 4,484
------------ --------- ---------- ----------- -----------
$ 334,085 $ 53,129 $ 387,214 $ 32,588 $ 419,802
------------ --------- ---------- ----------- -----------
------------ --------- ---------- ----------- -----------
</TABLE>
See Notes to Pro Forma Condensed Combined Financial Statements.
<PAGE>
Euramax International plc and Subsidiaries
Pro Forma Condensed Combined Statement of Earnings
(Thousands of U.S. Dollars)
(Unaudited)
<TABLE>
<CAPTION>
EURAMAX INTERNATIONAL PLC FABRAL FOR THE YEAR ENDED DECEMBER 27, 1996
---------------------------------------- ------ ------------------------------------
SUCCESSOR COMBINED
PREDECESSOR FOR THE FOR THE
FOR THE NINE THREE YEAR ENDED FOR THE
MONTHS ENDED MONTHS ENDED DECEMBER YEAR ENDED PRO FORMA
SEPTEMBER 25, DECEMBER 27, 27, DECEMBER 31, TOTAL ADJUST-
1996 1996 1996 1996 HISTORICAL MENTS PRO FORMA
------------- ------------ ----------- ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales............. $ 363,308 $ 125,529 $ 488,837 $ 107,186 $ 596,023 $ -- $ 596,023
------------- ------------ ----------- ------------ ---------- ----------- ------------
Costs and expenses:
Cost of goods sold.. 300,185 104,055 404,240 91,382 495,622 -- 495,622
Selling and general. 33,286 10,950 44,236 5,793 50,029 -- 50,029
Depreciation and
amortization....... 6,995 2,591 9,586 1,022 10,608 913(e) 11,521
------------- ------------ ----------- ------------ ---------- ----------- ------------
340,466 117,596 458,062 98,197 556,259 913 557,172
------------- ------------ ----------- ------------ ---------- ----------- ------------
Earnings from
operations......... 22,842 7,933 30,775 8,989 39,764 (913) 38,851
Interest expense,
net................. (622) (6,187) (6,809) (3,811) (10,620) (3,196)(f) (13,816)
Other income
(expense), net...... (298) (235) (533) 71 (462) -- (462)
------------- ------------ ----------- ------------ ---------- ----------- ------------
Earnings before income
taxes............... 21,922 1,511 23,433 5,249 28,682 (4,109) 24,573
Provision for income
taxes............... 8,342 505 8,847 2,052 10,899 (1,183)(g) 9,716
------------- ------------ ----------- ------------ ---------- ----------- -----------
Net earnings......... 13,580 1,006 14,586 3,197 17,783 (2,926) 14,857
Dividends on redeemable
preference shares... -- (1,191) (1,191) -- (1,191) -- (1,191)
------------- ------------ ----------- ------------ ---------- ----------- -----------
Net earnings available
for ordinary
shareholders........ $ $13,580 $ (185) $ 13,395 $ 3,197 $ 16,592 $ (2,926) $ 13,666
------------- ------------ ----------- ------------ ---------- ----------- ----------
------------- ------------ ----------- ------------ ---------- ----------- ----------
</TABLE>
See Notes to Pro Forma Condensed Combined Financial Statements.
<PAGE>
Euramax International plc and Subsidiaries
Pro Forma Condensed Combined Statement of Earnings
For the six months ended June 28, 1997
(Thousands of U.S. Dollars)
(Unaudited)
<TABLE>
<CAPTION>
EURAMAX
INTERNATIONAL TOTAL PRO FORMA
PLC FABRAL HISTORICAL ADJUSTMENTS PRO FORMA
------------ --------- ---------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Net Sales................................. $ 251,163 $ 50,827 $ 301,990 $ -- $ 301,990
------------ --------- ---------------- ------ -----------
Costs and expenses:
Cost of goods sold...................... 201,101 44,443 245,544 -- 245,544
Selling and general..................... 22,530 3,058 25,588 -- 25,588
Depreciation and amortization........... 5,294 574 5,868 456(e) 6,324
------------ --------- ---------------- ------ -----------
228,925 48,075 277,000 456 277,456
------------ --------- ---------------- ------ -----------
Earnings from operations................ 22,238 2,752 24,990 (456) 24,534
Interest expense, net..................... (11,197) (2,141) (13,338) (1,363)(f) (14,701)
Other income (expense), net............... (185) 4 (181) -- (181)
------------ --------- ---------------- ------ -----------
Earnings before income taxes............ 10,856 615 11,471 (1,819) 9,652
Provision for income taxes.............. 3,723 240 3,963 (504)(g) 3,459
------------ --------- ---------------- ------ -----------
Net earnings............................ 7,133 375 7,508 (1,315) 6,193
Dividends on redeemable preference
shares.................................. (2,508) -- (2,508) -- (2,508)
------------ --------- ---------------- ------ -----------
Net earnings available for ordinary
shareholders............................ $ 4,625 $ 375 $ 5,000 $(1,315) $ 3,685
------------ --------- ---------------- ------ -----------
------------ --------- ---------------- ------ -----------
</TABLE>
See Notes to Pro Forma Condensed Combined Financial Statements.
<PAGE>
Euramax International plc and Subsidiaries
Notes to Pro Forma Condensed Combined Financial Statements
(Thousands of U.S. Dollars)
(Unaudited)
The Pro Forma Condensed Combined Balance Sheet (Unaudited) reflects the
Transaction as if it had occurred on June 28, 1997.
(a) To record the acquisition of the stock of Gentek Holdings, Inc. and
its wholly owned subsidiary Gentek Building Products, Inc., determined as
follows:
Purchase price (Additional Borrowings)............................. $ 72,000
Estimated net tangible asset adjustment............................ 4,000
Deferred Financing and Acquisition costs paid at closing........... 1,375
---------
Total cash...................................................... 77,375
Accrued deferred financing and acquisition costs................ 625
---------
$ 78,000
---------
---------
(b) To allocate purchase price to assets acquired and excess purchase price
to goodwill ($32,636), net of elimination of goodwill ($713) from Fabral
historical financial statements. Based upon a preliminary assessment, the
historical values of property, plant and equipment recorded by Fabral are
deemed to approximate fair value. These asset values are subject to
adjustment based upon further review, but management does not expect such
adjustment to be significant.
(c) To record deferred financing fees of $1,250, net of $1,085 to eliminate
various intangible assets recorded on Fabral historical financial statements.
(d) To eliminate equity, additional paid-in capital and retained deficit of
Fabral, as well as the Alcan note payable to be retained by sellers.
The Pro Forma Condensed Combined Statements of Earnings (Unaudited) reflect
the Transaction as if it had occurred on January 1, 1996, as follows:
(e) The adjustment reflects Goodwill amortization of $1,088 and $544 for the
year ended December 31, 1996 and six months ended June 28, 1997, respectively,
net of elimination of Fabral historical amortization expense of $175 and $88,
respectively.
The Company used the purchase method of accounting for the Transaction. The
initial purchase price for the Transaction, including the related fees and
expenses, has been allocated to the assets and liabilities of the Company based
upon management's preliminary estimates of their fair value, with the remainder
allocated to goodwill in the amount of $32,636. Goodwill is amortized over a 30
year period.
<PAGE>
Euramax International plc and Subsidiaries
Notes to Pro Forma Condensed Combined Financial Statements--Continued
(Thousands of U.S. Dollars)
(Unaudited)
(f) Increase in net interest expense resulting from the pro forma
capitalization (Additional Borrowings plus estimated net tangible asset
adjustment) necessary to fund the Transaction. Components of this increase are:
YEAR ENDED SIX MONTHS ENDED
DECEMBER 27, 1996 JUNE 28, 1997
----------------- -----------------
Interest Expense
Revolving credit facility $38,000 at
8.4375%................................. $3,206 $1,603
Tranche A term loan $20,000 at 8.4375%... 1,688 844
Tranche C term loan $20,000 at 8.9375%... 1,788 894
Commitment fee on unused revolving
credit.................................. 75 38
--------- ---------
Cash interest expense.................... 6,757 3,379
Amortization of deferred financing costs
$1.25 million over 5 years.............. 250 125
--------- ----------
Pro forma interest expense............... 7,007 3,504
Elimination of Fabral historical interest
expense................................ (3,811) (2,141)
---------- ----------
$3,196 $ 1,363
---------- ----------
---------- ----------
Interest rates used for the revolving credit facility and terms loans are
based upon the actual LIBOR borrowing rate at June 28, 1997 plus 2.75% for the
revolving credit facility and Tranche A term loans and 3.25% for the Tranche C
term loans.
If interest rates increased by 0.25%, total interest expense related to the
additional borrowings would increase by $195 for the year ended December 31,
1996, and $98 for the six months ended June 28, 1997.
(g) Net decrease in provision for income taxes as a result of the above
adjustments, except for goodwill which is not a deductible tax expense, at an
assumed tax rate of 37%.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-26-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-27-1997
<CASH> 25,322
<SECURITIES> 0
<RECEIVABLES> 77,056
<ALLOWANCES> (4,255)
<INVENTORY> 79,622
<CURRENT-ASSETS> 181,749
<PP&E> 103,691
<DEPRECIATION> (5,020)
<TOTAL-ASSETS> 334,085
<CURRENT-LIABILITIES> 77,669
<BONDS> 135,000
0
37,698
<COMMON> 1,000
<OTHER-SE> 3,484
<TOTAL-LIABILITY-AND-EQUITY> 334,085
<SALES> 251,163
<TOTAL-REVENUES> 251,163
<CGS> 201,101
<TOTAL-COSTS> 201,101
<OTHER-EXPENSES> 27,459
<LOSS-PROVISION> 550
<INTEREST-EXPENSE> 11,197
<INCOME-PRETAX> 10,856
<INCOME-TAX> 3,723
<INCOME-CONTINUING> 7,133
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,625
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
