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File No. 001-14789
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 2
TO
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of the
Securities Exchange Act of 1934
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GENTEK INC.
(Exact name of registrant as specified in its charter)
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Delaware 02-0505547
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
Liberty Lane 03842
Hampton, New Hampshire (Zip Code)
(Address of principal executive offices)
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Registrant's telephone number, including area code: (603) 929-2264
Securities to be registered pursuant to Section 12(b) of the Securities Exchange
Act of 1934:
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Title of each class Name of each exchange on which
to be so registered each class is to be registered
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Common Stock, New York Stock Exchange
par value $.01 per share
Securities to be registered pursuant to Section 12(g) of the Act: None.
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EXPLANATORY NOTE
This Registration Statement on Form 10 has been prepared on a
prospective basis on the assumption that, among other things, the Spinoff (as
hereinafter defined) and the related transactions contemplated to occur prior to
or contemporaneously with the Spinoff will be consummated as contemplated by the
Information Statement which is a part of this Registration Statement. There can
be no assurance, however, that any or all of such transactions will occur or
will occur as so contemplated. Any significant modifications or variations in
the transactions contemplated will be reflected in an amendment or supplement to
this Registration Statement.
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CROSS-REFERENCE
GENTEK INC.
INFORMATION INCLUDED IN INFORMATION STATEMENT
AND INCORPORATED IN FORM 10 BY REFERENCE
CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT
AND ITEMS OF FORM 10
ITEM 1. BUSINESS.
The information required by this item is contained under the section
entitled "The GenTek Business" in the Information Statement included herein as
Annex I (the "Information Statement").
ITEM 2. FINANCIAL INFORMATION.
The information required by this item is contained under the sections
entitled "Selected Financial Data" and "The GenTek Business: Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Information Statement.
ITEM 3. PROPERTIES.
The information required by this item is contained under the section
entitled "The GenTek Business--Properties" in the Information Statement.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is contained under the section
entitled "Beneficial Ownership of GenTek and General Chemical Group Common
Stock" in the Information Statement.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS.
The information required by this item is contained under the section
entitled "The GenTek Business: Management" in the Information Statement.
ITEM 6. EXECUTIVE COMPENSATION.
The information required by this item is contained under the section
entitled "The GenTek Business: Compensation of Directors and Executive Officers"
in the Information Statement.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is contained under the sections
entitled "Certain Relationships and Affiliate Transactions," "Arrangements
Between GenTek and New GCG Relating to
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the Spinoff" and "Risk Factors--Control by and Relationship with Principal
Stockholder; Potential Conflicts of Interest" in the Information Statement.
ITEM 8. LEGAL PROCEEDINGS.
The information required by this item is contained under the sections
entitled "The GenTek Business--Environmental Matters" and "The GenTek
Business--Legal Proceedings" in the Information Statement.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
The information required by this item is contained under the sections
entitled "Summary--Questions and Answers about the Spinoff, GenTek and New
GCG," "The Spinoff," "Risk Factors--Absence of a Trading Market; Possible
Volatility of Stock Price" and "Certain Provisions of Certificate of
Incorporation and Bylaws of GenTek--Dividends" in the Information Statement.
Based upon the number of record holders of Common Stock of The
General Chemical Group Inc. ("General Chemical Group") as of March 15, 1999, and
the distribution ratio of one share of Common Stock of GenTek Inc. for every
share of Common Stock of General Chemical Group, GenTek Inc. expects that the
number of record holders of Common Stock of GenTek Inc. will be 173 at the time
of such distribution of Common Stock of GenTek Inc.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
On January 25, 1999, as part of its original incorporation, GenTek
Inc. issued 1,000 shares of its Common Stock for a total consideration of $10 to
New Hampshire Oak, Inc. ("New Hampshire Oak"), a wholly owned subsidiary of
General Chemical Group. New Hampshire Oak is and will be the sole shareholder of
GenTek Inc. until the Spinoff, as described in the section entitled "The
Spinoff" in the Information Statement. Before the Spinoff, GenTek Inc. will
issue to New Hampshire Oak additional shares of its Common Stock and will issue
shares of its Class B Common Stock, par value $.01 per share, such that the
number of issued and outstanding shares of Common Stock and Class B Common Stock
of GenTek Inc. will be the same as the number of shares of common stock and
Class B common stock of General Chemical Group then issued and outstanding. New
Hampshire Oak will then immediately distribute all such shares of GenTek Inc. to
General Chemical Group. Subsequent to the Spinoff, neither New Hampshire Oak nor
General Chemical Group will hold any securities of GenTek Inc.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
The information required by this item is contained under the sections
entitled "Description of Capital Stock of GenTek" and "Certain Provisions of
Certificate of Incorporation and Bylaws of GenTek" in the Information Statement.
Reference is also made to the Certificate of Incorporation and Bylaws of GenTek
Inc. which are set forth as Exhibits 3.01 and 3.02 hereto.
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ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The information required by this item is contained under the section
entitled "Certain Provisions of Certificate of Incorporation and Bylaws of
GenTek--Indemnification and Limitation of Liability" in the Information
Statement. In addition, GenTek Inc. intends to obtain, procure and maintain
directors' and officers' liability insurance coverage generally consistent with
prevailing corporate practices.
ITEM 13. FINANCIAL STATEMENTS AND OTHER SUPPLEMENTARY DATA.
The information required by this item is contained under the section
entitled "GenTek Pro Forma Financial Statements" and in the "F-pages" in the
Information Statement. In addition, historical financial statements of Noma
Industries Limited, a Canadian company recently acquired by General Chemical
Group which will be a subsidiary of GenTek Inc., are contained in Annex B to the
Information Statement. Also, Annex II hereto, which follows the Information
Statement, contains the Schedule II for valuation and qualifying accounts.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements.
The information required by this item is contained in the "Index to
Consolidated Financial Statements" on page F-1 of the Information Statement.
This Form 10 also includes the following financial statements: (i) GenTek Pro
Forma Financial Statements, which are contained in the Information Statement;
and (ii) the Consolidated Balance Sheets of Noma Industries Limited at December
31, 1998 and 1997, and the Consolidated Statements of Operations of Noma
Industries Limited for the three years ended December 31, 1998, which are
contained in Annex B to the Information Statement.
In addition, Annex II hereto, which follows the Information
Statement, contains the Schedule II for valuation and qualifying accounts.
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(b) Exhibits.
The following documents are filed as exhibits hereto:
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Exhibit
No. Description
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2.01 Separation Agreement among The General Chemical Group
Inc., GenTek Inc., General Chemical Industrial Products Inc. Filed herewith
and General Chemical Corporation........................................ electronically
3.01 Amended and Restated Certificate of Incorporation of Filed herewith
GenTek Inc.............................................................. electronically
3.02 Amended and Restated Bylaws of GenTek Inc............................... Filed herewith
electronically
10.01 GenTek Inc. Restricted Unit Plan for Non-Employee Directors............. Filed herewith
electronically
10.02 GenTek Inc. Retirement Plan for Non-Employee Directors.................. Filed herewith
electronically
10.03 GenTek Inc. Performance Plan............................................ Filed herewith
electronically
10.04 GenTek Inc. Long-Term Incentive Plan.................................... Filed herewith
electronically
10.05 Employee Benefits Agreement among The General Chemical Group
Inc., General Chemical Industrial Products Inc., GenTek Inc. and Filed herewith
General Chemical Corporation............................................ electronically
10.06 Tax Sharing Agreement between GenTek Inc. and The General Filed herewith
Chemical Group Inc...................................................... electronically
10.07 Intellectual Property Agreement among General Chemical
Corporation, The General Chemical Group Inc., GenTek Inc. Filed herewith
and General Chemical Industrial Products Inc............................ electronically
10.08 Management Agreement between GenTek Inc. and Latona Filed herewith
Associates Inc.......................................................... electronically
10.09 Registration Rights Agreement between Paul M. Montrone and
the General Chemical Group Inc., as assumed by GenTek Inc. Filed herewith
with respect to Common Stock of GenTek Inc.............................. electronically
21.01 Subsidiaries of GenTek Inc.............................................. Filed herewith
electronically
27.01 Financial Data Schedule................................................. Filed herewith
electronically
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
GENTEK INC.
April 8, 1999 By: /s/ Todd M. DuChene
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Name: Todd M. DuChene
Title: Vice President and Secretary
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ANNEX I
THE INFORMATION CONTAINED IN THIS INFORMATION STATEMENT IS SUBJECT TO COMPLETION
OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO GENTEK INC.'S COMMON STOCK
HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES
WILL NOT BE ISSUED BEFORE THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS
INFORMATION STATEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION
OF AN OFFER TO BUY THESE SECURITIES.
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THE GENERAL CHEMICAL GROUP INC.
April __, 1999
Fellow Shareholders:
In January 1999, the Board of Directors of The General Chemical Group
Inc. announced that it intends to separate the company's manufacturing and
performance products segments from its industrial chemicals segment through a
Spinoff. The Board of Directors has concluded that shareholders can better
maximize the value of their investments if these two businesses are separated.
The Spinoff will give you a direct investment in two leaders in their respective
industries and is a major step in repositioning our businesses to enhance their
value to shareholders.
The General Chemical Group Inc. believes that its businesses are
facing divergent industry trends, which are expected to continue. The Spinoff
will enhance the businesses' access to the capital markets and enable the
management of each business to focus its attention and its company's resources
on the company's core business while pursuing the strategy that best suits that
business.
Following the Spinoff, GenTek Inc. (NYSE: GK) will operate the
manufacturing and performance products segments, and The General Chemical
Group Inc. (NYSE: GCG) will continue to operate the industrial chemicals
segment. GenTek Inc. will focus on increasing shareholder value through a
combination of value-enhancing acquisitions and internal growth. The
General Chemical Group Inc. will attempt to increase profitability by
improving operating efficiency and capitalizing on the expected recovery
in the Asian and Latin American economies, while also seeking selective
strategic growth opportunities.
We are enthusiastic about the Spinoff and the separate public status
of GenTek and The General Chemical Group Inc. This Information Statement
contains details on our businesses and the Spinoff. If you have questions,
however, please feel free to contact The General Chemical Group Inc.
Shareholder Services at 1-800-443-6474 (toll-free).
Best regards,
Paul M. Montrone
Chairman of the Board
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The General Chemical Group Inc.'s
Spinoff of
GenTek Inc.
[Logo]
THROUGH A 100% COMMON STOCK SPINOFF
Dear Shareholders:
The Board of Directors of The General Chemical Group Inc. ("General
Chemical Group") has determined to separate the company's manufacturing and
performance products segments (the "GenTek Business") from its industrial
chemicals segment (the "Industrial Chemicals Business") through a Spinoff.
General Chemical Group will accomplish the Spinoff by transferring the GenTek
Business to its subsidiary, GenTek Inc. ("GenTek"), and distributing the Common
Stock of GenTek to General Chemical Group shareholders. General Chemical Group
will continue to operate the Industrial Chemicals Business. Following the
Spinoff, GenTek will operate the GenTek Business as a new independent public
company. We are pleased to announce that the Spinoff will occur on or about
April 30, 1999.
The record date for the Spinoff is April 16, 1999. If you own Common
Stock of General Chemical Group as of the close of business on the record date,
you will receive one share of GenTek Common Stock for every share of Common
Stock of General Chemical Group that you own at that time. General Chemical
Group intends to distribute shares of GenTek Common Stock on April 30, 1999.
You do not need to take any action for the Spinoff to occur. You do
not have to pay for the shares of GenTek Common Stock that you will receive in
the Spinoff, nor do you have to surrender or exchange shares of Common Stock of
General Chemical Group in order to receive shares of GenTek Common Stock. The
number of shares of Common Stock of General Chemical Group that you own will not
change as a result of the Spinoff. GenTek Common Stock will trade on the New
York Stock Exchange under the symbol "GK". Common Stock of General Chemical
Group will continue to trade on the New York Stock Exchange under the symbol
"GCG".
This Information Statement gives you information about GenTek and the
GenTek Business, as well as General Chemical Group and the Industrial Chemicals
Business after the Spinoff. We are enthusiastic about the Spinoff and the
separate public status of these two businesses. We encourage you to read this
document carefully to learn more about the two companies and the Spinoff.
Sincerely,
Todd M. DuChene
Secretary
April __, 1999
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TABLE OF CONTENTS
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Page
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Summary..........................................................................................1
Forward-looking Statements......................................................................16
The Spinoff.....................................................................................17
Capitalization of GenTek........................................................................24
Selected Financial Data.........................................................................25
GenTek Pro Forma Financial Statements...........................................................28
The GenTek Business: Management's Discussion and Analysis of
Financial Condition and Results of Operations.............................................32
The GenTek Business.............................................................................40
The GenTek Business: Management................................................................53
The GenTek Business: Compensation of Directors and Executive Officers..........................56
Beneficial Ownership of GenTek and General Chemical Group Common Stock..........................65
Certain Relationships and Affiliate Transactions................................................71
Arrangements Between GenTek and New GCG Relating to the Spinoff.................................73
Risk Factors....................................................................................80
Description of Capital Stock of GenTek..........................................................85
Certain Provisions of the Certificate of Incorporation and Bylaws of GenTek.....................88
The Industrial Chemicals Business: Selected Financial Data.....................................90
The Industrial Chemicals Business: Pro Forma Financial Statements..............................92
The Industrial Chemicals Business: Discussion of Results.......................................95
The Industrial Chemicals Business..............................................................102
The Industrial Chemicals Business: Management.................................................116
Annual Meeting and Shareholder Proposals.......................................................119
Available Information..........................................................................119
Index to Defined Terms.........................................................................120
Index to Consolidated Financial Statements of The General Chemical Group Inc.
(To be GenTek after the Spinoff).........................................................F-1
Combined Financial Statements of the Industrial Chemicals Business.........................Annex A
Consolidated Financial Statements of Noma Industries Limited...............................Annex B
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SUMMARY
This summary highlights selected information from this document, but
does not contain all the details of the Spinoff or GenTek, including information
that may be important to you. To better understand the Spinoff and GenTek, you
should carefully review this entire document. References in this document to
"General Chemical Group" mean The General Chemical Group Inc. before the
Spinoff, which includes both the GenTek Business and the Industrial Chemicals
Business. References in this document to "GenTek" mean GenTek Inc. and its
subsidiaries after the Spinoff. References in this document to "New GCG" or "New
General Chemical Group" mean The General Chemical Group Inc. and its
subsidiaries after the Spinoff.
Introduction
The Spinoff culminates an extensive process during which the Board of
Directors and management of General Chemical Group, working with its financial
advisors, have considered options to enhance the value of General Chemical
Group's businesses to its shareholders. The Board of Directors and management of
General Chemical Group believe that shareholder value will be enhanced by
separating the GenTek and Industrial Chemicals Businesses into two separate,
stand-alone companies. After the Spinoff, GenTek will be a diversified
manufacturer of industrial components and performance chemicals; New GCG will be
a producer of soda ash and calcium chloride.
The Spinoff will allow these two companies to focus on their
respective businesses while taking advantage of the divergent trends in their
industries. The Board of Directors of General Chemical Group believes that this
action is in the best interest of shareholders.
We have highlighted certain information in this Summary to explain
the Spinoff process and give you a better understanding of GenTek. We also have
included cross-references in the Summary to other portions of the document where
you will find more detailed information about these matters. We encourage you to
read the entire document.
QUESTIONS AND ANSWERS ABOUT
THE SPINOFF, GENTEK AND NEW GCG
Q: Why do the Spinoff now?
A: Divergent strategic directions. The Board of Directors of General Chemical
Group determined that the Spinoff is in the best interest of the company's
shareholders at this time because divergent industry trends have required
the GenTek and Industrial Chemicals Businesses to pursue increasingly
different strategies. The GenTek Business is pursuing a growth strategy;
it is focusing on increasing shareholder value through a combination of
value-enhancing acquisitions and internal growth. The Industrial Chemicals
Business will attempt to increase profitability by improving operating
efficiency and capitalizing on the expected recovery in the Asian and
Latin American economies, while also seeking selective strategic
acquisitions and joint ventures to complement its existing businesses and
take advantage of the emerging consolidation trend in the soda ash
industry. As independent organizations, each company will be better
positioned to pursue its own strategy and the opportunities suitable for
its own business.
Q: How could I benefit from the Spinoff?
A: Direct investment in two businesses. The Spinoff will give you a direct
investment in two businesses that are leaders in different industries:
GenTek, a diversified manu-
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facturer of industrial components and performance chemicals; and New
GCG, a leading producer of soda ash and calcium chloride. General
Chemical Group believes that shareholders can better maximize the
values of their investments if these two businesses are separated.
Direct access to capital. Each company will have direct access to capital
markets and stock-based acquisition currency to finance its own expansion
and growth opportunities.
Focused management. Management of each company will concentrate its
attention and financial resources on the execution of a targeted strategic
plan. GenTek's management team will have the flexibility to pursue a
value-enhancing acquisition program, while New GCG's management will focus
on improving operating efficiency as well as seeking selective strategic
acquisitions and joint ventures to complement its existing businesses and
take advantage of the emerging consolidation trend in the soda ash
industry. In addition, each management's incentive compensation will be
more directly tied to the performance of its own business.
Focused valuation. The financial markets will be able to focus on the
GenTek and Industrial Chemicals Businesses separately and more accurately
evaluate these two distinct businesses and their performance.
Q: What do I have to do to participate in the Spinoff?
A: Nothing. No proxy or vote is necessary for the Spinoff. If you own Common
Stock of General Chemical Group at the close of business (5:00 p.m. EST)
on April 16, 1999 (the Record Date for the Spinoff), shares of GenTek
Common Stock will be credited to your brokerage account, or certificates
representing shares of GenTek Common Stock will be mailed to you on the
Spinoff Date, which will be on or about April 30, 1999. You do not need to
mail in any certificates of Common Stock of General Chemical Group to
receive stock certificates representing Common Stock of GenTek.
You will not receive new stock certificates for Common Stock of New GCG as
a result of the Spinoff, nor will the Spinoff change the number of shares
of Common Stock of New GCG that you own.
Q: When will the Spinoff happen?
A: April 30, 1999. General Chemical Group will distribute all of the shares
of Common Stock of GenTek on the Spinoff Date, which will be on or about
April 30, 1999. The effective time of the Spinoff will be at 5:00 p.m. EST
on that date, after which GenTek and its new shareholders will be the sole
beneficiaries of the GenTek Business and New GCG and its shareholders will
be the sole beneficiaries of the Industrial Chemicals Business.
Q: How many GenTek shares will I receive in the Spinoff?
A: You will receive one share of GenTek Common Stock for every share of
Common Stock of General Chemical Group that you own at the close of
business (5:00 p.m. EST) on the Record Date. Similarly, you will receive
one share of GenTek Class B Common Stock for every share of Class B Common
Stock of General Chemical Group that you own at the close of business on
the Record Date.
Example: If you own 100 shares of Common Stock of General Chemical Group
as of the close of business on April 16, 1999, you will receive 100 shares
of GenTek Common Stock in the Spinoff.
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Q: Will GenTek's shares be listed on an exchange?
A: Yes. Common Stock of GenTek will be listed, subject to notice of issuance,
on the New York Stock Exchange under the symbol "GK". Regular trading in
GenTek Common Stock will begin on or about May 3, 1999.
Q: What will happen to the listing of General Chemical Group's shares on the
New York Stock Exchange?
A: Nothing. The Common Stock of General Chemical Group will continue to be
listed on the New York Stock Exchange under the symbol "GCG".
Q: Will shares trade any differently as a result of the Spinoff?
A: Most likely, during part of April 1999. A regular public market for GenTek
Common Stock will not exist prior to the Spinoff Date. We expect, however,
that "when-issued" trading for GenTek Common Stock will develop on or
about the Record Date and continue through the Spinoff Date.
When-issued trading means that shares are traded prior to the time
certificates are actually available or issued and reflects the assumed
value of those shares after they have been issued (e.g., the assumed value
of GenTek Common Stock after the Spinoff). When-issued trading would lead
to the development of an orderly market and establish the trading price
for GenTek Common Stock after the Spinoff.
If when-issued trading develops, you may buy and sell shares of GenTek
Common Stock before the Spinoff Date. None of these trades, however, will
settle until after the Spinoff Date, when regular trading in GenTek Common
Stock has begun. If the Spinoff does not occur, all when-issued trading
will be null and void. If when-issued trading in GenTek Common Stock
occurs, the symbol on the New York Stock Exchange will be "GKwi".
General Chemical Group expects that its Common Stock will continue to
trade on a regular basis through the Spinoff Date. Any shares of Common
Stock of General Chemical Group sold between the Record Date and the
Spinoff Date will be accompanied by a due bill attached representing
GenTek Common Stock to be distributed in the Spinoff.
In addition, between the Record Date and the Spinoff Date, the Common
Stock of General Chemical Group may also trade on a when-issued basis,
reflecting an assumed post-Spinoff value for New GCG Common Stock. If
such when-issued trading occurs, the symbol on the New York Stock Exchange
will be "GCGwi".
Q: Will the Spinoff affect the trading price of my General Chemical Group
shares?
A: Yes. General Chemical Group is separating itself into two public companies
through the Spinoff. Therefore, after the Spinoff, the trading price of
New GCG Common Stock should reflect only the Industrial Chemicals Business
and will initially be lower than the trading price of Common Stock of
General Chemical Group prior to the Spinoff.
The combined trading prices of GenTek Common Stock and New GCG Common
Stock after the Spinoff may not equal the trading price of Common Stock of
General Chemical Group prior to the Spinoff. In addition, until the market
has evaluated the separate operations of both companies, the trading price
of each company's Common Stock may fluctuate significantly.
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Q: Will my dividends change?
A: General Chemical Group has been paying a regular quarterly cash dividend
of $.05 per share of Common Stock. After the Spinoff, the respective
Boards of Directors of GenTek and New GCG will be responsible for deciding
if a dividend will be paid by that company and the amount of any dividend.
Currently, GenTek anticipates paying a regular quarterly cash dividend of
$.05 per share after the Spinoff, while New GCG does not expect to pay
dividends. The dividend policies of GenTek and New GCG are, however,
subject to change. Dividend decisions for each company will be based on,
among other factors, its operating results and financial requirements and
the restrictions imposed by its financing facilities.
Q: What are the tax consequences of the Spinoff to General Chemical Group's
shareholders?
A: General Chemical Group has received a private letter ruling from the
Internal Revenue Service (the "IRS") that the Spinoff generally will be
tax-free to General Chemical Group and its shareholders for Federal income
tax purposes. The U.S. Federal income tax consequences of this transaction
are described in more detail in "The Spinoff" section, under the heading
"Certain United States Federal Income Tax Consequences," beginning on page
21 and in the "Risk Factors" section, under the heading "Federal Income
Tax Consequences of Changes in Control Following the Spinoff," on page 82.
Q: Are there risks relating to an investment in GenTek Common Stock?
A: The GenTek Business is subject to risks relating to, among other things,
general economic downturns, the highly competitive nature of its
end-markets, environmental laws and regulations, operating hazards, labor
disruptions, the Year 2000 problem, its ability to identify and consummate
acquisitions and successfully integrate acquired businesses, and its
leverage and debt service requirements. GenTek's separation from General
Chemical Group presents certain additional risks because the GenTek
Business has never operated independently, GenTek Common Stock has no
trading history, and there are certain potential adverse Federal income
tax consequences should there be a change of control of GenTek or New GCG
after the Spinoff. These factors are described in greater detail in the
"Risk Factors" section beginning on page 79.
Q: Will New GCG and GenTek be related in any way after the Spinoff?
A: General Chemical Group will not own any GenTek Common Stock after the
Spinoff. GenTek and New GCG will be separate, publicly owned companies.
Since one stockholder, Paul M. Montrone, controls a majority of the voting
rights of the stock of General Chemical Group and the Spinoff will be
through a pro rata distribution of GenTek stock to stockholders of General
Chemical Group, Mr. Montrone will control a majority of the voting rights
of the stock of both GenTek and New GCG. Mr. Montrone will also serve as
the Chairman of the Board of Directors of both companies. For further
information, see the sections "Beneficial Ownership of GenTek and General
Chemical Group Common Stock" and "Certain Relationships and Affiliate
Transactions" beginning on pages 65 and 70, respectively.
GenTek and New GCG will enter into agreements to govern their relationship
after the Spinoff. These agreements will provide for each party to make
certain services, records and personnel available to the other. They will
also provide for separation
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between GenTek and New GCG of assets, liabilities and responsibilities
with respect to employee benefits and compensation, taxes and for certain
other matters. For a more detailed description of these agreements, see
the section "Arrangements Between GenTek and New GCG Relating to the
Spinoff" beginning on page 72.
Q: What will New GCG look like after the Spinoff?
A: After the Spinoff, New GCG will continue to operate the Industrial
Chemicals Business and will be a leading producer of soda ash and calcium
chloride; New GCG will not conduct any of the businesses of General
Chemical Group's manufacturing or performance products segments.
The net revenues of the Industrial Chemicals Business were $261.5 million
in 1998 and $289.7 million in 1997. After giving pro forma effect to the
Spinoff and an initial borrowing under New GCG's financing facilities, New
GCG's consolidated long-term debt is expected to be approximately $150
million.
New GCG and the Industrial Chemicals Business are described in greater
detail in the sections "The Industrial Chemicals Business: Selected
Financial Data" through "The Industrial Chemicals Business: Management"
on pages 89 through 117.
Q: Are there risks relating to an investment in New GCG shares?
A: The Industrial Chemicals Business is subject to risks relating to, among
other things, fluctuations of world soda ash prices due to changes in
supply and demand, general economic downturns, environmental laws and
regulations, U.S. dollar exchange rates and the Year 2000 problem. The
separation of the GenTek and Industrial Chemicals Businesses presents
additional risks for New GCG because the Industrial Chemicals Business has
never operated independently, New GCG will be highly leveraged, certain
General Chemical Group executive officers will leave to join GenTek in
connection with the Spinoff, and there are certain potential adverse
Federal income tax consequences should there be a change of control of New
GCG or GenTek after the Spinoff. Some of these factors are discussed in
greater detail in the sections "The Industrial Chemicals Business:
Discussion of Results," beginning on page 94, and "The Industrial
Chemicals Business," beginning on page 101.
5
<PAGE>
<PAGE>
WHAT WE HAVE ALREADY ACCOMPLISHED TO PREPARE FOR THE SPINOFF
<TABLE>
<S> <C>
Board Appointments...................... General Chemical Group, as the current sole shareholder of
GenTek, has identified six persons to serve on the GenTek
Board of Directors. All of these persons are currently
directors of General Chemical Group and will be elected as
directors of GenTek on or prior to the Spinoff Date.
Paul M. Montrone will serve as the Chairman of the Board of
Directors of both GenTek and New GCG. The two companies
will have one other common director. The other four
directors of GenTek will resign as members of the Board of
Directors of General Chemical Group prior to the Spinoff.
The Board of Directors of General Chemical Group will have
six members after the Spinoff. Four of them, including Mr.
Montrone, are currently directors of the company. The Board
has identified two other persons who will serve on the Board
of Directors of New GCG and will elect them as directors
prior to the Spinoff.
For further information, see the section "The GenTek
Business: Management" and "The Industrial Chemicals
Business: Management" beginning on pages 53 and 115,
respectively.
Senior Management
Appointments............................ The senior management of GenTek and New GCG will include the
executive officers of General Chemical Group currently
responsible for the GenTek Business and the Industrial
Chemicals Business, respectively. These executives have
extensive experience in their respective industries.
Richard R. Russell will be the President and Chief Executive
Officer of GenTek. He has been the President and Chief
Executive Officer of General Chemical Group since 1994.
For further information on management of GenTek, see the
section "The GenTek Business: Management" beginning on
page 53.
John M. Kehoe, Jr. will be the President and Chief Executive
Officer of New GCG after the Spinoff. He has extensive
experience managing substantial public companies, including
as President and Chief Executive Officer of Wheelabrator
Technologies Inc. since 1993. For further information on
management of New GCG, see "The Industrial Chemicals
Business: Management" beginning on page 115.
</TABLE>
6
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Arranging New Financing
Facilities.............................. To reflect the independent status of GenTek and New GCG
after the Spinoff, each company will have its own separate
financing facilities, which are expected to be in place on or
about the Spinoff Date. The proceeds of these facilities will
be used in part to repay General Chemical Group's existing
borrowings from third parties.
At this time, General Chemical Group expects that,
immediately after the Spinoff, GenTek's indebtedness for
borrowed money will be about $490 million, and New GCG's
indebtedness for borrowed money will be about $150 million.
The amount of GenTek's anticipated indebtedness includes
approximately $240 million of additional debt incurred and
assumed in the recent acquisition of Noma Industries Limited.
See "The GenTek Business: Management's Discussion and
Analysis of Financial Condition and Results of Operations"
beginning on page 32.
GenTek's indebtedness will be primarily borrowings under a
credit facility extended by a bank syndicate. GenTek expects
that approximately $60 million would be available under this
facility for borrowings after the Spinoff. New GCG's
indebtedness will include approximately $100 million of
senior subordinated notes and $50 million of borrowings under
a revolving credit facility extended by a bank syndicate. New
GCG expects to have approximately $35 million of availability
under its revolving facility for borrowings after the
Spinoff.
General Chemical Group is finalizing the debt financing of
the two companies with banks and other financial
institutions. The specific terms of the indebtedness of
GenTek and New GCG will depend on, among other things, the
market conditions for debt financing at the time of the
Spinoff. For further information, see "The Spinoff" section,
under the heading "Financing Facilities," beginning on page
18.
</TABLE>
7
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<PAGE>
<TABLE>
<S> <C>
Applied for New York
Stock Exchange Listing.................. GenTek Common Stock is expected to trade on the New York
Stock Exchange. There is not currently a public market for
GenTek Common Stock, although a "when-issued" trading
market is expected to develop on or before April 16, 1999.
The GenTek Common Stock will be listed, subject to notice of
issuance, on the New York Stock Exchange under the symbol
"GK" and regular trading is expected to begin on the Spinoff
Date (i.e., on or about April 30, 1999). For further
information, see "The Spinoff" section, under the heading
"Listing and Trading of GenTek and New GCG Common
Stock," beginning on page 22.
Received Internal Revenue
Service Tax Ruling...................... General Chemical Group has received a private letter tax
ruling from the IRS to the effect that the Spinoff, including the
pre-Spinoff transfers of assets and liabilities to separate the
GenTek and Industrial Chemicals Businesses, generally will
be tax-free to General Chemical Group and its shareholders
for Federal income tax purposes. For further information, see
"The Spinoff" section, under the heading "Certain United
States Federal Income Tax Consequences," beginning on page
21.
Tax matters are complicated, and the tax consequences of the
Spinoff to you will depend on your personal circumstances.
You should consult your own tax advisor for a full
understanding of the tax consequences to you of the Spinoff.
Requested Conversion of
Class B Common Stock.................... In order to obtain the private letter ruling from the IRS
concerning the tax-free nature of the Spinoff, General
Chemical Group requested the conversion of, and Paul M.
Montrone and his family trusts agreed to convert, some shares
of Class B Common Stock into Common Stock of General
Chemical Group on or prior to the Record Date. As a result
of such conversion, the voting power of the shares held or
controlled by Mr. Montrone and his family trusts will decrease
from 89.9% to 80.6%. General Chemical Group believes that,
without such conversion of Class B Common Stock, the
Spinoff could have adverse tax consequences to General
Chemical Group.
</TABLE>
8
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<PAGE>
KEY TERMS OF THE SPINOFF
<TABLE>
<S> <C>
Shareholder Action...................... None Required. No action is required by shareholders of
General Chemical Group to receive Common Stock of
GenTek in the Spinoff. You do not need to surrender
Common Stock of General Chemical Group to receive
Common Stock of GenTek in the Spinoff. The number of
shares of Common Stock of General Chemical Group you own
will not change as a result of the Spinoff; those shares will
represent Common Stock of New GCG.
Record Date............................. April 16, 1999. You need to own Common Stock of General
Chemical Group as of the close of business (5:00 p.m. EST)
on April 16, 1999 (the "Record Date") to receive Common
Stock of GenTek in the Spinoff.
Spinoff/Mailing Date.................... April 30, 1999. The Spinoff will happen on April 30, 1999.
On that date, ChaseMellon Shareholder Services, L.L.C. (the
"Distribution Agent") will mail GenTek Common Stock
certificates to, or credit shares of GenTek Common Stock to
the brokerage accounts of, General Chemical Group
shareholders.
Spinoff Ratio........................... One-for-One. You will receive one share of GenTek
Common Stock for every share of Common Stock of General
Chemical Group you owned as of the close of business on the
Record Date. In addition, one share of Class B Common
Stock of GenTek will be distributed in the Spinoff for every
share of Class B Common Stock of General Chemical Group
to the owners of record as of the close of business on the
Record Date.
Shares to Be Distributed................ Same Number as General Chemical Group Stock. All
GenTek Common Stock owned by General Chemical Group
will be distributed in the Spinoff; after the Spinoff, General
Chemical Group will no longer own any GenTek Common
Stock. Based on 16,773,192 shares of Common Stock of
General Chemical Group outstanding (representing the
number of shares of Common Stock outstanding as of March
15, 1999, plus the number of shares issued upon conversion
of Class B Common Stock of General Chemical Group by Mr.
Montrone and his family trusts), the same number of shares of
GenTek Common Stock will be distributed in the Spinoff.
</TABLE>
9
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<PAGE>
WHO CAN HELP ANSWER YOUR QUESTIONS
Shareholders of General Chemical Group or New GCG with questions about the
Spinoff or their shares should contact:
The General Chemical Group Inc. Shareholder Services
P.O. Box 1400
Pittsburgh, PA 15230
Telephone (toll free): 1-800-443-6474
After the Spinoff, shareholders of GenTek with questions about their shares
should contact:
GenTek Inc. Shareholder Services
P.O. Box 1400
Pittsburgh, PA 15230
Telephone (toll free): 1-800-443-6474
The agent responsible for the distribution of Common Stock of GenTek in the
Spinoff and acting as Distribution Agent and registrar for Common Stock of both
GenTek and New GCG after the Spinoff is:
ChaseMellon Shareholder Services, L.L.C.
85 Challenger Road
Overpeck Centre
Ridgefield Park, NJ 07660
Telephone (toll free): 1-800-756-3353
10
<PAGE>
<PAGE>
GENTEK
The following information only highlights selected information about
the GenTek Business. You should read this information together with other
information about the GenTek Business, including the section "The GenTek
Business: Management's Discussion and Analysis of Financial Condition and
Results of Operations" beginning on page 32 and the section "The GenTek
Business" beginning on page 40.
<TABLE>
<S> <C>
The GenTek Business..................... The GenTek Business, which consists of the manufacturing
and performance products segments of General Chemical
Group, is a diversified manufacturer of industrial components
and performance chemicals. GenTek intends to build on its
strengths and increase shareholder value through a
combination of value-enhancing acquisitions and internal
growth.
Financial Highlights.................... In 1998 and 1997, the GenTek Business generated net
revenues of $443.9 million and $368.5 million, respectively,
representing increases of 20% and 12%, respectively, from
the prior years.
Consistent with its strategy of pursuing value-enhancing
acquisitions, the GenTek Business has made two acquisitions in
1999. In February 1999, it acquired Defiance, Inc.
("Defiance"), and in April 1999 it acquired Noma Industries
Limited ("Noma"), in transactions that valued their equity at
approximately $57 million and $220 million (C$330 million),
respectively. On a pro forma basis, the GenTek Business' 1998
revenues and operating profits would have been $805.6 million
and $84.7 million, respectively, if these acquisitions had
been consummated on January 1, 1998.
Manufacturing Segment................... The GenTek Business' manufacturing segment specializes in
the design and production of stamped and machined rocker
arms, roller rocker arms, roller followers and other precision,
highly engineered metal components for the automotive and
industrial markets. The principal end-customers of these
products are DaimlerChrysler, Ford and General Motors. The
manufacturing segment also produces fluid-handling
equipment for the automotive service market and for industrial
applications. The manufacturing segment is currently
undergoing a significant expansion to accommodate new business
awarded by U.S. auto manufacturers, as well as pursuing
business in markets outside the United States.
</TABLE>
11
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<PAGE>
<TABLE>
<S> <C>
Defiance, recently acquired by the GenTek Business, is a
manufacturer of specialty antifriction bearings for the
transportation industry and a provider of vehicle testing
services, tooling design and preproduction dies and components
primarily for the automotive industry. The Defiance
acquisition increases the range of products and services
provided by the manufacturing segment and allows for a more
complete product offering of valve-train-related engine
components to the automotive industry.
Noma Industries Limited................. General Chemical Group recently acquired Noma, a leading
North American producer of insulated wire and wire-related
products for the automotive, appliance and electronic
industries. In 1998 and 1997, Noma reported revenues of
C$398.4 million and C$360.3 million, respectively. Noma's
operating profits were C$46.0 million in 1998 and C$40.5
million in 1997 (determined in accordance with Canadian
generally accepted accounting principles ("Canadian
GAAP")).
Noma adds significant scale and scope to the GenTek Business'
manufacturing segment, providing an additional platform for
future growth. In particular, Noma further expands the GenTek
Business' product offerings to the automotive industry and
provides access to Noma's blue-chip customer base in the
growing consumer appliance and electronic markets.
Performance Products
Segment................................. The GenTek Business' performance products segment
provides a broad range of value-added products and services
to four principal markets: Pharmaceutical and Personal
Care, Environmental, Technology and Chemical Processing.
Its principal products include antiperspirant and antacid active
ingredients, water treatment chemicals, specialty agrichemicals,
advanced lithographic printing plates and related pressroom
chemicals, ultra-high-purity electronic chemicals,
and a range of chemical intermediates used in photographic,
pulp and paper and other applications. The GenTek Business
also provides "closed loop" sulfuric acid regeneration services,
which significantly reduce the waste streams generated by
certain refineries and chemical plants.
</TABLE>
12
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<PAGE>
<TABLE>
<S> <C>
Competitive Strengths................... The GenTek Business has a strong customer base and enjoys
a significant market share for a majority of its product lines in
both its manufacturing and performance products segments.
Management believes that its strong market positions result
from its competitive strengths:
High-quality, value-added products and customer
service;
Technological, marketing and distribution expertise;
Low-cost manufacturing; and
Transactional and turnaround experience of its
management.
Strategy................................ The GenTek Business aims to build upon its strengths and
increase shareholder value through the following initiatives:
Pursue value-enhancing acquisitions and investments
to generate incremental cash flow and earnings;
Capitalize on favorable trends in existing markets where
legislation, consumer preferences and increased outsourcing
of chemical manufacturing are expected to result in growth
opportunities for the GenTek Business;
Enhance its competitive position by expanding and diversifying
product offerings in both existing and new markets; and
Continue to improve operating efficiency through capital
expenditures designed to enhance productivity and reduce
energy, raw material and labor costs.
</TABLE>
13
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<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The Spinoff is treated as a reverse spinoff for financial statement
purposes because the greater proportion of General Chemical Group's assets and
operations will be held by GenTek after the Spinoff. Therefore, the Spinoff will
be reflected, for financial statement presentation, as if General Chemical Group
formed a new company consisting of the Industrial Chemicals Business (i.e., New
GCG) and distributed the stock of that company as a dividend to General Chemical
Group's stockholders, with the assets and operations of the GenTek Business
remaining with General Chemical Group after the Spinoff. Accordingly, General
Chemical Group's financial statements reflect the financial position and results
of operations of the GenTek Business as continuing operations and the financial
position and results of operations of the Industrial Chemicals Business as
discontinued operations. On an ongoing basis, the GenTek financial statements
will consist of the GenTek Business and the New GCG financial statements will
consist of the Industrial Chemicals Business.
The following summary historical and pro forma financial data
highlight selected information for your benefit. The following information is
only a summary, and you should read it in conjunction with more detailed
information about the GenTek Business appearing in the rest of this document,
including the "Risk Factors" section beginning on page 79 and the General
Chemical Group (to be GenTek after the Spinoff) Consolidated Financial
Statements and notes thereto included in the "F-pages" of this Information
Statement. For a description of the basis of presentation of the historical
financial data of the GenTek Business, see Note 1 to the General Chemical Group
(to be GenTek after the Spinoff) Consolidated Financial Statements.
Because the GenTek Business did not actually operate as a separate,
stand-alone company during the periods depicted, it may have recorded different
results had it been operated independently of the Industrial Chemicals Business.
Therefore, the financial information presented below is not necessarily
indicative of the results of operations or financial position that would have
resulted if the GenTek Business had been a separate, stand-alone company during
the periods shown, or of its future performance as a separate, stand-alone
company.
The pro forma balance sheet data have been prepared on the basis that
the Spinoff, the acquisitions of Noma and Defiance, and all related
transactions, including the initial borrowings under GenTek's new financing
facility, had occurred at December 31, 1998. The pro forma statement of
operations data for the year ended December 31, 1998 have been prepared on the
basis that these transactions had occurred as of January 1, 1998. This pro forma
financial information does not necessarily represent what the financial position
or results of operations of the GenTek Business would actually have been had
these transactions in fact occurred on such date, or as of the beginning of such
periods, or to be indicative of the financial position or results of operations
for the GenTek Business for any future date or period. For a description of the
pro forma adjustments, see "GenTek Pro Forma Financial Statements" beginning on
page 28.
14
<PAGE>
<PAGE>
GenTek Summary Financial Data
<TABLE>
<CAPTION>
Proforma
1994 1995 1996 1997 1998 1998
----------- --------------- --------------- --------------- ------------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net revenues................................. $ 275,767 $ 290,185 $ 330,120 $ 368,516 $ 443,919 $ 805,584
Gross profit................................. 89,116 84,822 100,883 116,604 117,293(1) 182,929
Operating profit............................. 34,997(2) 43,564 48,723(3) 67,526 51,721(4) 84,655
Interest expense (5)......................... 20,813 12,927 10,747 8,855 14,624 35,888
Income from continuing operations before
income taxes and extraordinary item..... 13,165(2) 32,835 39,200(3) 59,535 37,313 48,783
Income (loss) from continuing operations and
before extraordinary item............... 7,155(2) (551)(6) 20,775(3) 33,274 41,069(6) $ 48,131
---------
---------
Income from discontinued operations.......... 21,150 21,644 25,833 23,041 10,299
Income before extraordinary item............. 28,305(2) 21,093(7) 46,608(3) 56,315 51,368(6)
Net income (8)............................... $ 20,102(2) $ 21,093(7) $ 46,608(3) $ 56,315 $ 47,707(6)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Balance Sheet Data (at end of period):
Cash, cash equivalents and short-term
investments............................. $ 28,143 $ 18,097 $ 50,091 $ 20,401 $ 61,310 $ 12,680
Total assets................................. 252,037 259,773 274,298 389,818 536,818 762,993
Long-term debt (9)........................... 304,750 291,495 234,609 258,004 357,531 473,525
Total equity (deficit)....................... (216,831) (215,336) (119,753) (94,239) (54,696) (5,072)
Other Data:
Capital expenditures......................... $ 21,538 $ 24,842 $ 19,231 $ 26,203 $ 33,737 $ 45,989(10)
Depreciation and amortization (11)........... 11,922 12,506 13,653 15,829 22,511 36,254(12)
</TABLE>
- ------------------
(1) Includes a one-time charge of $12.1 million ($7.6 million after tax)
primarily due to an asset impairment writedown for two of the GenTek
Business' manufacturing facilities.
(2) Includes a one-time charge of $9.0 million ($5.4 million after tax) due to
litigation related to an incident at one of the GenTek Business'
manufacturing facilities.
(3) Includes a one-time charge of $6.8 million ($4.1 million after tax)
primarily related to awards made under a restricted unit plan, which
replaced certain prior equity programs. General Chemical Group recorded a
one-time charge of $12.5 million ($7.8 million after tax), and the amount
mentioned in the previous sentence related to the GenTek Business (the
continuing operations).
(4) Includes incremental accruals of $9.8 million ($5.9 million after tax)
principally related to litigation and environmental spending.
(5) Excludes interest expense allocated to discontinued operations (the
Industrial Chemicals Business).
(6) Includes a nonrecurring gain of $19.5 million related to an income tax
settlement.
(7) The financial statements reflect a nonrecurring charge to income tax
expense of $17.1 million for all years prior to 1995 related to Internal
Revenue Service examinations.
(8) During 1994 and 1998, the General Chemical Group recorded extraordinary
losses of $8.2 million and $3.7 million, respectively, related to the
early retirement of certain outstanding indebtedness.
(9) Includes the current portion of long-term debt.
(10) Reflects the sum of 1998 capital expenditures of the GenTek Business,
Defiance and Noma.
(11) Consolidated depreciation and amortization excluding amortization of
deferred financing costs.
(12) Reflects the sum of 1998 depreciation and amortization of the GenTek
Business, Defiance and Noma.
15
<PAGE>
<PAGE>
FORWARD-LOOKING STATEMENTS
This Information Statement includes forward-looking statements and
information that are based on the beliefs, plans, expectations and assumptions
of General Chemical Group and GenTek and on information currently available to
these entities. The words "may," "should," "expect," "anticipate," "intend,"
"plan," "continue," "believe," "seek," "estimate" and similar expressions used
in this Information Statement are intended to identify forward-looking
statements. The forward-looking statements in this Information Statement involve
certain risks, uncertainties and assumptions. Many of these factors are beyond
the ability of General Chemical Group or GenTek to control or predict. As a
result, the future actions, financial condition, results of operations and stock
price of GenTek could differ materially from those expressed in any
forward-looking statements.
The following factors, among others, in some cases have affected, and
in the future could affect, the actions, financial condition, results of
operations and stock price of the GenTek Business: (1) the degree of leverage of
GenTek and the financial and operating restrictions imposed by its debt
facilities; (2) the cyclicality of the chemical and manufacturing industries,
together with the highly competitive nature of these industries; (3) discovery
of any additional or unknown environmental contamination at the company's
facilities, possible modification of existing laws and regulations relating to
the protection of human health and the environment, and the adoption of new laws
and regulations in the future; (4) GenTek's ability to identify suitable
acquisitions, complete such acquisitions at reasonable prices and on favorable
terms and conditions, and successfully integrate any acquired businesses into
the company's operations; (5) increases in the cost of energy or raw materials
used in the manufacture of the GenTek Business' products; (6) susceptibility of
the GenTek Business to general economic conditions; (7) GenTek's ability to
assess, mitigate and remediate the potential impact of the Year 2000 problem;
and (8) the ability of the GenTek Business to operate as an independent business
following the Spinoff. See also the factors described under the section "Risk
Factors" beginning on page 79.
GenTek does not intend to update publicly any forward-looking
statements, whether as a result of new information, future events or otherwise.
All subsequent written and oral forward-looking statements attributable to
General Chemical Group or GenTek, or persons acting on behalf of any of them,
are expressly qualified in their entirety by these cautionary statements.
16
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<PAGE>
THE SPINOFF
Reasons for the Spinoff
The Board of Directors of General Chemical Group has determined that
the Spinoff is in the best interest of shareholders of General Chemical Group.
General Chemical Group believes shareholders can better maximize the value of
their investments if the GenTek and Industrial Chemicals Businesses are
separated.
The GenTek and Industrial Chemicals Businesses are developing
increasingly different strategies to address the divergent trends in their
respective industries. The GenTek Business, which consists of the manufacturing
and performance products segments of General Chemical Group, will focus on
increasing shareholder value through a combination of value-enhancing
acquisitions and internal growth. The Industrial Chemicals Business, which is a
leading producer of soda ash and calcium chloride, will attempt to increase its
profitability by improving its operating efficiency and capitalizing on the
expected recovery in the Asian and Latin American economies, while also
selectively seeking strategic acquisitions and joint ventures to complement its
existing businesses and take advantage of the emerging consolidation trend in
the soda ash industry. As independent organizations, each company will be able
to pursue more effectively its own strategy and the opportunities suitable for
its own business. See "The GenTek Business--Strategy" and "The Industrial
Chemicals Business--Strategy."
The Spinoff will enable each company to access the capital markets
independently, without the capital resource allocation issues present within the
combined General Chemical Group. The financial markets will be able to focus on
the GenTek Business and the Industrial Chemicals Business separately and more
accurately evaluate these two distinct businesses and their performance. In
addition, as a result of such direct access to capital markets, each company
will have its own stock-based acquisition currency to finance expansion and
growth opportunities. The Spinoff will permit investors to make investment
decisions based on the operations and financial results of the individual
companies.
The Spinoff will also enable management of each company to
concentrate its attention and financial resources on the execution of a targeted
strategic plan. The management team of the GenTek Business will have the
flexibility to pursue a value-enhancing acquisition program, while the
management of the Industrial Chemicals Business will be able to adapt to, and
take advantage of, the emerging consolidation trend in its industry. The Spinoff
will also permit each company to offer management incentives more directly tied
to the performance of its business; each of GenTek and New GCG can develop
employee compensation and benefit programs more appropriate to its individual
operations, including stock-based and other incentive programs that reward
management and employees based on the success of their own operations.
Accordingly, General Chemical Group has concluded that the long-term
interests of both businesses are best served through the creation of two
separate, independent and focused corporations: GenTek focused on
value-enhancing acquisitions and its manufacturing and performance products
segments, and New GCG focused on soda ash and calcium chloride.
17
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<PAGE>
Manner of Effecting the Spinoff
General Chemical Group will effect the Spinoff by delivering all of
the outstanding shares of GenTek Common Stock to the Distribution Agent for
distribution to the holders of record of Common Stock of General Chemical Group
as of the close of business (5:00 p.m., EST) on the Record Date of April 16,
1999. The distribution of GenTek Common Stock will be made on the basis of a
distribution ratio of one share of GenTek Common Stock for each share of Common
Stock of General Chemical Group held as of the close of business on the Record
Date. Similarly, one share of GenTek Class B Common Stock will be distributed in
the Spinoff for each share of Class B Common Stock of General Chemical Group
owned on the Record Date. The actual total number of shares of GenTek Common
Stock and Class B Common Stock to be distributed will depend on the number of
shares of Common Stock and Class B Common Stock of General Chemical Group
outstanding as of the Record Date. The Distribution Agent will credit the
brokerage accounts of General Chemical Group shareholders, or will mail GenTek
Common Stock certificates to General Chemical Group shareholders, on or about
April 30, 1999 (the "Spinoff Date"). The shares of GenTek Common Stock will be
fully paid and nonassessable and the holders thereof will not be entitled to
preemptive rights.
No holder of Common Stock of General Chemical Group will be required
to pay any cash or other consideration for shares of GenTek Common Stock
received in the Spinoff or to surrender or exchange shares of General Chemical
Group Common Stock. On and after the Spinoff Date, certificates for shares of
Common Stock of General Chemical Group will represent the same shares of New
GCG. You will not receive new stock certificates for Common Stock of New GCG as
a result of the Spinoff.
Prior to the Spinoff, General Chemical Group will engage in a series
of internal restructuring transactions (the "Reorganization") to separate the
GenTek Business from the Industrial Chemicals Business. As a result, at the time
of the Spinoff, GenTek will hold, through its wholly owned subsidiary, General
Chemical Corporation, all the assets and liabilities related to the GenTek
Business, and New GCG will hold, through its wholly owned subsidiary, General
Chemical Industrial Products Inc., all the assets and liabilities related to the
Industrial Chemicals Business. GenTek and General Chemical Group will enter into
various agreements to govern their relationship after the Spinoff, including
making available to each other certain services, records and personnel. They
will also provide for separation between GenTek and New GCG of assets,
liabilities and responsibilities with respect to employee benefits and
compensation, taxes and for certain other matters. See "Arrangements Between
GenTek and New GCG Relating to the Spinoff."
Financing Facilities
To reflect the independent status of GenTek and New GCG after the
Spinoff, each company will have its own separate financing facilities. The
proceeds of initial borrowings under these facilities will be used in part to
repay General Chemical Group's existing borrowings from third parties, including
$240 million of additional debt incurred and assumed in connection with the
recent acquisition of Noma. General Chemical Group is currently finalizing the
terms of these financing facilities with banks and other financial institutions
and expects that these facilities will be in place on or prior to the Spinoff
Date.
At this time, management expects that GenTek will have a credit
facility provided by a bank syndicate (collectively, the "GenTek Financing
Facility") of about $550 million, of which approximately
18
<PAGE>
<PAGE>
$490 million will be funded on or about the Spinoff Date, including
approximately $240 million of borrowings related to the acquisition of Noma. It
is expected that approximately $60 million will be available for borrowings
after the Spinoff.
At this time, General Chemical Group expects that, after the Spinoff,
New GCG will have financing facilities (collectively, the "New GCG Financing
Facilities") of about $185 million, of which approximately $150 million will be
funded on or about the Spinoff Date and approximately $35 million will be
available for future borrowings. The New GCG Financing Facilities will include
approximately $100 million of senior subordinated notes and $50 million of
borrowings under a revolving credit facility extended by a bank syndicate. New
GCG expects to have approximately $35 million of availability under its
revolving facility for borrowings after the Spinoff.
General Chemical Group is finalizing the debt financing of the two
companies with banks and other financial institutions. The specific terms of
indebtedness of GenTek and New GCG will depend on, among other things, the
market conditions for debt financing at the time of the Spinoff. The pro forma
financial statements for GenTek and the Industrial Chemicals Business included
in this Information Statement have been prepared on the assumption that
borrowings under the GenTek Financing Facility and the New GCG Financing
Facilities will bear interest at an annual rate of approximately 7% and 10%,
respectively, which are assumptions that management believes are reasonable for
purposes of preparing the pro forma financial statements. By comparison, the
1998 weighted average interest rate for borrowings by General Chemical Group was
7.9%. Management expects that the GenTek Financing Facility and the New GCG
Financing Facilities will impose operating and financial restrictions on GenTek
and New GCG, respectively, including limitations on their ability to incur
additional indebtedness, pay dividends or make distributions in respect of their
Common Stock, create liens, or consolidate, merge or sell their assets. In
addition, it is expected that both GenTek and New GCG will be required to comply
with specified financial covenants and ratios. General Chemical Group expects
that restrictions under the GenTek Financing Facility will be similar to those
under General Chemical Group's existing bank facilities, while the New GCG
Financing Facilities may impose more stringent requirements.
Conditions to the Spinoff
Paul M. Montrone holds or controls, including through trusts of which
he is the settlor and a co-trustee or of which he is the settlor and his wife is
the sole trustee with investment and voting discretion (collectively, the
"Montrone Trusts"), a total of 9,758,421 shares of Class B Common Stock of
General Chemical Group, representing all of the Class B Common Stock and 89.9%
of the voting power of the capital stock of General Chemical Group. These shares
of Class B Common Stock also represent 47.1% of General Chemical Group's total
number of outstanding capital stock. In order to obtain the private letter
ruling from the IRS concerning the tax-free nature of the Spinoff, General
Chemical Group requested the conversion of, and Mr. Montrone and the Montrone
Trusts agreed to convert, 5,800,000 shares of Class B Common Stock into Common
Stock on or prior to the Record Date so that, as of the Record Date, the
outstanding Class B Common Stock will represent less than 20% of the total
number of shares of outstanding Common Stock and Class B Common Stock of General
Chemical Group (the "Class B Conversion"). The Class B Conversion is intended to
result in the GenTek Class B Common Stock distributed in the Spinoff
representing less than 20% of the total value of all of the shares of Common
Stock and Class B Common Stock of GenTek.
19
<PAGE>
<PAGE>
As a result of the Class B Conversion, the voting power of the shares
held or controlled by Mr. Montrone and the Montrone Trusts will decrease from
89.9% to 80.6%. General Chemical Group believes that, without the Class B
Conversion, the Spinoff could have adverse tax consequences to General Chemical
Group. See "Beneficial Ownership of GenTek and General Chemical Group Common
Stock."
The Spinoff is subject to a number of other conditions, including (1)
receipt of a favorable private letter ruling from the IRS concerning the
tax-free nature of the Spinoff, (2) appropriate equity and debt market
conditions for the Spinoff, (3) various regulatory approvals, including the
Securities and Exchange Commission's (the "SEC") declaration of the
effectiveness of the Registration Statement on Form 10 (the "Form 10") filed
under the Securities Exchange Act of 1934 (the "Exchange Act") to register the
Common Stock of GenTek, (4) closings under the new financing facilities for each
of GenTek and New GCG, and the application of a portion of their proceeds to
repay debt of General Chemical Group, (5) receipt by General Chemical Group's
Board of Directors of an independent appraisal confirming that General Chemical
Group's surplus is sufficient to permit the dividend of GenTek shares without
violating Section 170 of the Delaware General Corporation Law, and (6) approval
by the Board of Directors of General Chemical Group of the final terms of the
Spinoff, including the formal declaration of a dividend to General Chemical
Group's shareholders and other specific actions necessary to the Spinoff. See
also "Arrangements Between GenTek and New GCG Relating to the Spinoff."
The Board of Directors of General Chemical Group may amend, modify or
abandon the Spinoff at any time prior to the Spinoff Date.
Effect of the Spinoff
Following the Spinoff, which will be effective at 5:00 p.m. EST on
the Spinoff Date, GenTek and New GCG will be separate public companies: GenTek
will operate the manufacturing and performance products segments of General
Chemical Group; and New GCG will operate the Industrial Chemicals Business.
The number and identity of shareholders of GenTek immediately after
the Spinoff generally will be the same as the number and identity of
shareholders of General Chemical Group on the Record Date. Immediately after the
Spinoff, GenTek expects to have approximately 173 holders of record of GenTek
Common Stock and approximately 16,773,192 shares of GenTek Common Stock
outstanding, based on the one-to-one distribution ratio of the Spinoff and the
number of record shareholders and outstanding shares of Common Stock of General
Chemical Group as of the close of business on March 15, 1999 and accounting for
the Class B Conversion. The actual number of shares of GenTek Common Stock to be
distributed will be determined as of the Record Date. In addition, a total of
3,958,421 shares of GenTek Class B Common Stock will be distributed to holders
of Class B Common Stock of General Chemical Group (based on the expected number
of outstanding shares of Class B Common Stock of General Chemical Group
following the Class B Conversion).
20
<PAGE>
<PAGE>
Certain United States Federal Income Tax Consequences
The following is a discussion of the material Federal income tax
consequences of the Spinoff and the Reorganization and does not purport to be a
complete analysis or description of all potential tax effects of these
transactions. The discussion assumes that holders of Common Stock of General
Chemical Group will hold their Common Stock as a capital asset as of the
effective date of the Spinoff. The discussion does not address all of the tax
consequences that may be relevant to particular shareholders in light of their
personal circumstances or to taxpayers subject to special treatment under the
Federal income tax laws (for example, insurance companies, financial
institutions, broker-dealers, tax-exempt organizations, foreign corporations,
foreign partnerships or other foreign entities and individuals who are not
citizens or residents of the United States), and does not address any aspects of
state, local or foreign tax law.
The following discussion is based upon the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the U.S. Treasury Regulations
thereunder, and administrative rulings and judicial decisions in effect as of
the date of this Registration Statement. Subsequent legislative, administrative
or judicial changes or interpretations could affect the accuracy of the
statements or conclusions set forth herein. Any such change could apply
retroactively. Each stockholder of General Chemical Group is urged to consult
his or her own tax advisor as to the Federal, state, local and foreign tax
consequences of the transactions.
General Chemical Group has received a private letter ruling from the
IRS to the effect that the Spinoff and the Reorganization generally will be
tax-free to General Chemical Group and its shareholders. The private letter
ruling, which is dependent upon the accuracy of certain representations made by
General Chemical Group, provides that, among other things, for Federal income
tax purposes:
(1) No gain or loss will be recognized by General Chemical Group as a
result of the Spinoff and the Reorganization, except for gain attributable
to certain intercompany transactions and gain attributable to GenTek stock
distributed in the Spinoff to any shareholder that is a foreign person and
that owns more than 5% of the Common Stock of General Chemical Group as of
the Record Date.
(2) No gain or loss will be recognized by the shareholders of General
Chemical Group as a result of the Spinoff and the Reorganization.
(3) Each General Chemical Group shareholder's tax basis in the
General Chemical Group Common Stock he or she holds immediately prior to
the Spinoff will be allocated between such General Chemical Group Common
Stock and the GenTek Common Stock that the shareholder receives in the
Spinoff in proportion to the respective fair market values of each.
(4) Each General Chemical Group shareholder's holding period in the
GenTek Common Stock that the stockholder receives in the Spinoff will
include the period he or she held the General Chemical Group Common Stock.
General Chemical Group will provide appropriate information to enable General
Chemical Group's stockholders to allocate their tax basis in their General
Chemical Group shares between their New GCG Common Stock and GenTek Common
Stock.
21
<PAGE>
<PAGE>
U.S. Treasury Regulations require each General Chemical Group
shareholder who receives GenTek Common Stock in the Spinoff to attach to his or
her Federal income tax return for the year in which the Spinoff occurs a
detailed statement setting forth such information as may be appropriate in order
to show the applicability of section 355 of the Code to the Spinoff. General
Chemical Group will provide the appropriate information to General Chemical
Group's stockholders after the Spinoff.
Listing and Trading of GenTek and New GCG Common Stock
General
The Common Stock of GenTek is expected to be approved for listing
(subject to notice of issuance) on the New York Stock Exchange (the "NYSE")
under the symbol "GK". After the Spinoff, the Common Stock of New GCG will
continue to be listed on the NYSE under the symbol "GCG".
Since General Chemical Group is separating itself into two public
companies through the Spinoff, the trading price of New GCG Common Stock should
reflect only the Industrial Chemicals Business and will initially be lower than
the trading price of Common Stock of General Chemical Group prior to the
Spinoff. In addition, there is currently no public trading market for GenTek
Common Stock. There can be no predictions, estimates or assurances about the
trading price for Common Stock of GenTek or of New GCG after the Spinoff. The
combined trading prices of GenTek Common Stock and New GCG Common Stock may be
less than, equal to or greater than the trading price of Common Stock of General
Chemical Group prior to the Spinoff. In addition, until GenTek Common Stock is
fully distributed, an orderly trading market develops and the market has fully
evaluated the separate operations of GenTek and New GCG, the trading prices of
their Common Stock may fluctuate significantly. The prices at which GenTek
Common Stock and New GCG Common Stock trade will be determined by the market and
may be influenced by many factors, including, among others, the depth and
liquidity of the market for such Common Stock, investor perception of the GenTek
Business or the Industrial Chemicals Business (as the case may be), the
financial results of GenTek or New GCG (as the case may be), the dividend
policies of the companies, sales of substantial amounts of GenTek Common Stock
or New GCG Common Stock (or the perception that such sales could occur) and
general economic and market conditions.
Listing and Trading between Record Date and Spinoff Date
GenTek Common Stock. A when-issued trading market for GenTek Common
Stock is expected to develop on or about the Record Date and continue through
the Spinoff Date. The term "when-issued" means that shares are traded prior to
the time certificates are actually available or issued. Prices at which the
GenTek Common Stock may trade on a when-issued basis or after the time
certificates are actually available or issued cannot be predicted. During the
period when GenTek Common Stock is subject to when-issued trading, its symbol on
the NYSE will be "GKwi". Even though when-issued trading may develop, none of
these trades would settle prior to the Spinoff Date, and if the Spinoff does not
occur, all when-issued trading will be null and void.
General Chemical Group Common Stock. General Chemical Group Common
Stock will continue to trade on a regular basis and may also trade on a
when-issued basis, reflecting an assumed post-Spinoff value for New GCG Common
Stock. If when-issued trading in New GCG Common Stock is available, General
Chemical Group shareholders may trade their existing Common Stock prior to the
22
<PAGE>
<PAGE>
Spinoff Date in either the when-issued market or in the regular market for the
trading of Common Stock of General Chemical Group. General Chemical Group
understands that if when-issued trading in its Common Stock is not available,
its shares will only trade on a regular basis. In that case, the NYSE will
require that shares of Common Stock of General Chemical Group that are sold or
purchased during the period from the Record Date through the Spinoff Date be
accompanied by "due bills", and that during such period neither Common Stock of
General Chemical Group nor the due bills may be purchased or sold separately.
Due bills are instruments evidencing the obligation of the transferor of those
shares to deliver the GenTek Common Stock to be distributed in the Spinoff with
respect to the shares of General Chemical Group Common Stock being traded.
When-issued trading in New GCG Common Stock, if available, could last
from on or about the Record Date through the Spinoff Date. If a shareholder
trades in the when-issued market, he will have no obligation to transfer to a
purchaser of Common Stock of General Chemical Group those shares of GenTek
Common Stock that such shareholder receives in the Spinoff. If this when-issued
market develops, an additional listing for Common Stock of General Chemical
Group, identifiable by the trading symbol "GCGwi", will appear on the NYSE.
Differences may exist during this period between the price of Common Stock of
General Chemical Group and the combined value of when-issued GenTek Common Stock
plus New GCG Common Stock.
Affiliates
Shares of GenTek Common Stock issued in the Spinoff will be freely
transferable, except for securities received by persons who may be deemed to be
affiliates of GenTek under the Securities Act of 1933 (the "Securities Act").
Persons who may be deemed to be affiliates of GenTek after the Spinoff generally
include individuals or entities that control, are controlled by, or are under
common control with GenTek; they will include certain directors and executive
officers of GenTek. Persons who are affiliates of GenTek generally will be
permitted to sell their shares of GenTek Common Stock received in the Spinoff
only pursuant to Rule 144 under the Securities Act. As a result, GenTek Common
Stock received by GenTek affiliates pursuant to the Spinoff may be sold if
certain provisions of Rule 144 under the Securities Act are complied with (e.g.,
the amount sold within a three-month period does not exceed the greater of one
percent of the outstanding GenTek Common Stock or the average weekly trading
volume for GenTek Common Stock during the preceding four week period, and the
securities are sold in "broker's transactions" and in compliance with certain
notice provisions under Rule 144).
Reasons for Furnishing this Document
This Information Statement is being furnished solely to provide
information to shareholders of General Chemical Group who will receive shares of
GenTek Common Stock in the Spinoff. It is not, and is not to be construed as, an
inducement or encouragement to buy or sell any securities of General Chemical
Group, GenTek or New GCG. The information contained in this Information
Statement is believed to be accurate as of the date set forth on its cover.
Changes may occur after that date, and General Chemical Group, GenTek and New
GCG will not update the information except in the normal course of their
respective public disclosures.
23
<PAGE>
<PAGE>
CAPITALIZATION OF GENTEK
The following table sets forth, as of December 31, 1998, the
historical capitalization of GenTek, and such capitalization on an adjusted
basis to reflect the Spinoff, the acquisitions of Noma and Defiance, and related
transactions, including the initial borrowings under the GenTek Financing
Facility and the application of a portion of the proceeds of such borrowings to
repay General Chemical Group's existing borrowings from third parties, as if
such transactions had occurred prior to December 31, 1998. The Spinoff is
treated as a reverse Spinoff for financial statement purposes. See "Selected
Financial Data" for description of the accounting treatment of the Spinoff.
This table should be read in conjunction with the GenTek Pro Forma
Financial Statements, and the General Chemical Group (to be GenTek after the
Spinoff) Consolidated Financial Statements and the notes thereto included in the
"F-pages" of this Information Statement.
<TABLE>
<CAPTION>
At December 31, 1998
----------------------------------
Historical As Adjusted
-------------- -------------
(In thousands)
<S> <C> <C>
Current Maturities of Long-Term Debt........... $ 50,802 $ 16,730
----------- -----------
Long-Term Debt................................. 306,729 473,525
----------- -----------
Stockholders' Equity
Common Stock....................... 224 224
Additional Paid-in Capital......... (182,563) (127,343)
Accumulated Comprehensive Income... (2,446) (2,446)
Treasury Stock..................... (32,289) (32,289)
Retained Earnings.................. 162,378 156,782
----------- -----------
Total Stockholders' Equity.... (54,696) (5,072)
----------- -----------
Total Capitalization........ $ 302,835 $ 485,183
----------- -----------
----------- -----------
</TABLE>
24
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<PAGE>
SELECTED FINANCIAL DATA
The Spinoff is treated as a reverse spinoff for financial statement
purposes because the greater proportion of General Chemical Group's assets and
operations will be held by GenTek after the Spinoff. Therefore, the Spinoff will
be reflected, for financial statement presentation, as if General Chemical Group
formed a new company consisting of the Industrial Chemicals Business (i.e., New
GCG) and distributed the stock of that company as a dividend to General Chemical
Group's stockholders, with the assets and operations of the GenTek Business
remaining with General Chemical Group after the Spinoff. Accordingly, General
Chemical Group's financial statements reflect the financial position and results
of operations of the GenTek Business as continuing operations and the financial
position and results of operations of the Industrial Chemicals Business as
discontinued operations. On an ongoing basis, the GenTek financial statements
will consist of the GenTek Business and the New GCG financial statements will
consist of the Industrial Chemicals Business.
The following selected financial data have been derived from and
should be read in conjunction with "The GenTek Business: Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the General
Chemical Group (to be GenTek after the Spinoff) Consolidated Financial
Statements and notes thereto included in the "F-pages" of this Information
Statement. For a description of the basis of presentation of the historical
financial data of the GenTek Business, see note 1 to such Consolidated Financial
Statements.
The statement of operations data set forth below for each of the
three years in the period ended December 31, 1998 and the balance sheet data at
December 31, 1998 and 1997 are derived from the General Chemical Group (to be
GenTek after the Spinoff) Consolidated Financial Statements and notes thereto
included in the "F-pages" of this Information Statement. The statement of
operations data for the years ended December 31, 1995 and 1994 and the balance
sheet data at December 31, 1996, 1995 and 1994 are derived from financial
statements of General Chemical Group (to be GenTek after the Spinoff) not
included in this Information Statement. The General Chemical Group (to be GenTek
after the Spinoff) Consolidated Financial Statements as of December 31, 1998 and
1997 and for the three years ended December 31, 1998 have been audited by
Deloitte & Touche LLP, independent auditors.
Because the GenTek Business did not actually operate as a separate,
stand-alone business during the periods depicted, it may have recorded different
results had it been operated independently of the Industrial Chemicals Business.
Therefore, the financial information presented below is not necessarily
indicative of the results of operations or financial position that would have
resulted if the GenTek Business had been a separate, stand-alone business during
the periods shown, or of its future performance as a separate, stand-alone
business.
25
<PAGE>
<PAGE>
Selected Financial Data
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
----------- ------------ ----------- ---------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net revenues .......................................... $ 275,767 $ 290,185 $ 330,120 $ 368,516 $ 443,919
Gross profit .......................................... 89,116 84,822 100,883 116,604 117,293(1)
Operating profit ...................................... 34,997(2) 43,564 48,723(3) 67,526 51,721(4)
Interest expense (5) .................................. 20,813 12,927 10,747 8,855 14,624
Income from continuing operations before income
taxes and extraordinary item ...................... 13,165(2) 32,835 39,200(3) 59,535 37,313
Income (loss) from continuing operations
before extraordinary item ......................... 7,155(2) (551)(6) 20,775(3) 33,274 41,069(7)
Income from discontinued operations ................... 21,150 21,644 25,833 23,041 10,299
Income before extraordinary item ...................... 28,305(2) 21,093(6) 46,608(3) 56,315 51,368(7)
Net income (8) ........................................ $ 20,102(2) $ 21,093(6) $ 46,608(3) $ 56,315 $ 47,707(7)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Earnings per common share - basic:(9)
Income (loss) from continuing operations .............. $ .36 $ (.03) $ .98 $ 1.55 $ 1.95
Income from discontinued operations ................... 1.07 1.10 1.21 1.08 .49
Extraordinary item - loss on extinguishment of
debt (net of tax) ................................. .41 -- -- -- .17
Net income ..................................... $ 1.02 $ 1.07 $ 2.19 $ 2.63 $ 2.27
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Earnings per common share - assuming
dilution:(9)
Income (loss) before continuing operations ............ $ .36 $ (.03) $ .95 $ 1.48 $ 1.88
Income from discontinued operations ................... 1.07 1.10 1.18 1.02 .47
Extraordinary item - loss from extinguishment of
debt (net of tax) ................................. .41 -- -- -- .17
Net income ..................................... $ 1.02 $ 1.07 $ 2.13 $ 2.50 $ 2.18
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Balance Sheet Data (at end of period):
Cash, cash equivalents and short-term
investments ....................................... $ 28,143 $ 18,097 $ 50,091 $ 20,401 $ 61,310
Total assets .......................................... 252,037 259,773 274,298 389,818 536,818
Long-term debt (10) ................................... 304,750 291,495 234,609 258,004 357,531
Total equity (deficit) ................................ (216,831) (215,336) (119,753) (94,239) (54,696)
Other Data:
Capital expenditures .................................. $ 21,538 $ 24,842 $ 19,231 $ 26,203 $ 33,737
Depreciation and amortization (11) .................... 11,922 12,506 13,653 15,829 22,511
</TABLE>
26
<PAGE>
<PAGE>
- ------------------
(1) Includes a one-time charge of $12.1 million ($7.6 million after tax or
$.33 per share) primarily due to an asset impairment writedown for two of
the GenTek Business' manufacturing facilities.
(2) Includes a one-time charge of $9.0 million ($5.4 million after tax) due to
litigation related to an incident at one of the GenTek Business'
manufacturing facilities.
(3) Includes a one time charge of $6.8 million ($4.1 million after tax)
primarily related to awards made under a restricted unit plan, which
replaced certain prior equity programs. General Chemical Group recorded a
one-time charge of $12.5 million ($7.8 million after tax), and the amount
mentioned in the previous sentence related to the GenTek Business (the
continuing operations).
(4) Includes incremental accruals of $9.8 million ($5.9 million after tax or
$.27 per share) principally related to litigation and environmental
spending.
(5) Excludes interest expense allocated to discontinued operations (the
Industrial Chemicals Business).
(6) The financial statements reflect a nonrecurring charge to income tax
expense of $17.1 million for all years prior to 1995 related to Internal
Revenue Service examinations.
(7) Includes a nonrecurring gain of $19.5 million ($.89 per share) related to
an income tax settlement.
(8) During 1994 and 1998, the General Chemical Group recorded extraordinary
losses of $8.2 million and $3.7 million respectively, related to the early
retirement of certain outstanding indebtedness.
(9) Basic earnings per common share calculations are based on the weighted
average number of shares outstanding during the periods indicated. Diluted
earnings per common share assume the foregoing and, in addition, the
exercise of all stock options and restricted units.
(10) Includes the current portion of long-term debt.
(11) Consolidated depreciation and amortization excluding amortization of
deferred financing costs.
27
<PAGE>
<PAGE>
GENTEK PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma balance sheet and statement of
operations of the GenTek Business have been derived from the historical
financial statements of General Chemical Group included in this Information
Statement. These statements should be read in conjunction with "The GenTek
Business: Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the General Chemical Group (to be GenTek after the
Spinoff) Consolidated Financial Statements included in the "F-pages" of this
Information Statement.
The pro forma balance sheet of the GenTek Business has been prepared
on the basis that the Spinoff, the acquisitions of Noma and Defiance, and all
related transactions, including the initial borrowings under the GenTek
Financing Facility and the application of a portion of the proceeds of such
borrowings to repay certain indebtedness of General Chemical Group to third
parties, had occurred at December 31, 1998. The pro forma statement of
operations for the year ended December 31, 1998 has been prepared on the basis
that these transactions had occurred as of January 1, 1998.
The pro forma adjustments, as described in the notes to the pro forma
balance sheet and statement of operations, are based on currently available
information and certain adjustments that management believes are reasonable.
This pro forma financial information does not necessarily represent what the
financial position or results of operations of the GenTek Business would
actually have been if these transactions had in fact occurred on such date, or
as of the beginning of such periods, or to be indicative of the financial
position or results of operations of the GenTek Business for any future date or
period.
The historical financial statements of Noma are stated in Canadian
dollars and presented in accordance with Canadian GAAP. For purposes of the pro
forma presentation, Noma's historical financial data have been reconciled to US
GAAP and translated into US dollars. See Noma Industries Limited Consolidated
Financial Statements included in Annex B of this Information Statement.
28
<PAGE>
<PAGE>
GenTek Pro Forma Balance Sheet
<TABLE>
<CAPTION>
December 31, 1998
---------------------------------------------------------------------------------
GCG
Historical Defiance Noma(*) Adjustments Pro Forma
---------------------------------------------------------------------------------
(In thousands)
Assets
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents................ $ 61,310 $ 297 $ 5,945 $ 130,512 (a) $ 12,680
446,015 (b)
(352,585)(c)
(1,814)(d)
(277,000)(e)
Receivables, net......................... 60,620 19,078 26,500 -- 106,198
Inventories.............................. 37,619 3,762 25,951 -- 67,332
Deferred income taxes.................... 11,494 601 -- -- 12,095
Other current assets..................... 826 3,044 5,740 -- 9,610
---------- --------- -------- ---------- --------
Total current assets..................... 171,869 26,782 64,136 (54,872) 207,915
Property, plant and equipment, net............... 196,526 33,913 36,796 -- 267,235
Goodwill, net of amortization.................... 71,444 4,493 16,778 162,136 (e) 254,851
Other assets..................................... 21,687 1,386 8,634 3,600 (b) 32,964
(2,343)(c)
Net assets of discontinued operations............ 75,292 -- 28 (75,292)(f) 28
---------- --------- -------- ---------- --------
Total assets............................. $ 536,818 $ 66,574 $ 126,372 $ 33,229 $762,993
---------- --------- -------- ---------- --------
---------- --------- -------- ---------- --------
Liabilities and Equity (Deficit)
Current liabilities:
Accounts payable......................... $ 42,813 $ 5,379 $ 6,986 $ $ 55,178
Accrued liabilities...................... 51,965 5,341 19,364 76,670
Income taxes payable..................... 8,960 625 9,585
Current portion of long-term debt........ 50,802 2,923 13,275 (50,270)(c) 16,730
---------- --------- -------- ---------- --------
Total current liabilities................ 154,540 13,643 40,250 (50,270) 158,163
Long-term debt................................... 306,729 10,392 7,665 449,615 (b) 473,525
(300,876)(c)
Other liabilities................................ 130,245 3,234 2,898 136,377
---------- --------- -------- ---------- --------
Total liabilities........................ 591,514 27,269 50,813 98,469 768,065
Equity (deficit)................................. (54,696) 39,305 75,559 130,512 (a) (5,072)
(3,782)(c)
(1,814)(d)
(114,864)(e)
(75,292)(f)
---------- --------- -------- ---------- --------
Total liabilities and equity (deficit)... $ 536,818 $ 66,574 $126,372 $ 33,229 $762,993
---------- --------- -------- ---------- --------
---------- --------- -------- ---------- --------
</TABLE>
29
<PAGE>
<PAGE>
- --------------------
(*) Noma's balance sheet data have been converted from C$ into US$ at the rate
of C$1.53 = US$1.00, representing the C$/US$ exchange rate on December 31,
1998.
(a) To record the receipt of $130.5 million from the Industrial Chemical
Business, which will be used to repay existing indebtedness of General
Chemical Group.
(b) To record (i) the incurrence of an estimated $449.6 million of new debt,
and (ii) the payment of an estimated $3.6 million of fees to obtain new
borrowings.
(c) To record the retirement of existing indebtedness and the extraordinary
loss related to the extinguishment, net of the portion to be paid by the
Industrial Chemical Business.
(d) To record estimated costs to be incurred prior to the Spinoff which are
directly attributable to the Spinoff and related transactions, net of the
portion to be paid by the Industrial Chemical Business.
(e) To record the acquisition of Noma and Defiance. Determination of the value
of the assets and liabilities of Defiance is in progress and management
expects to begin shortly its determination of the value of the assets and
liabilities of Noma. Management believes that any difference between the
amount allocated to goodwill on a pro forma basis and the final amount
allocated to goodwill will not have a material impact on the pro forma
results of operations. The excess of the purchase price over the net book
value of $144.4 million for Noma and $17.7 million for Defiance is
recorded as goodwill.
(f) To record the distribution of the Industrial Chemical Business.
30
<PAGE>
<PAGE>
GenTek Pro Forma Statement of Operations
<TABLE>
<CAPTION>
Year Ended December 31, 1998
--------------------------------------------------------------------------
GCG Historical Defiance Noma(*) Adjustments Pro Forma
--------------------------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net revenues .................................... $ 443,919 $93,010 $268,655 $ -- $805,584
Cost of sales ................................... 326,626 73,686 216,938 5,405 (a) 622,655
Selling, general and administrative
expense ....................................... 65,572 11,754 18,938 2,000 (b) 98,264
--------- ------- -------- ------- --------
Operating profit ................................ 51,721 7,570 32,779 (7,405) 84,665
Interest expense ................................ 14,624 999 2,369 17,896 (c) 35,888
Interest income ................................. 1,165 -- 1,165
Foreign currency transaction losses ............. 629 -- 629
Other expense, net .............................. 320 210 -- 530
--------- ------- -------- ------- --------
Income from continuing operations before income
taxes and extraordinary item .................. 37,313 6,361 30,410 (25,301) 48,783
Income tax provision ............................ (3,756) 2,129 10,148 (7,869)(d) 652
--------- ------- -------- ------- --------
Income from continuing operations (e) ........... $ 41,069 $ 4,232 $ 20,262 $(17,432) $ 48,131
--------- ------- -------- ------- --------
--------- ------- -------- ------- --------
Income from continuing operations per share ... $ 2.47(f)
</TABLE>
- --------
(*) Noma's statement of operations data have been converted from C$ into US$ at
the rate of C$1.48 = US$1.00, representing the 1998 average monthly C$/US$
exchange rate.
(a) To record incremental goodwill amortization of $5.4 million based upon an
estimated 30 year life.
(b) To record estimated incremental general and administrative expenses expected
to be incurred as a result of the GenTek Business operating as a stand-alone
entity.
(c) To record an increase in interest expense from the amounts included in the
historical financial statements to reflect the estimated interest expense
based on the incurrence of $449.6 million in debt at an assumed weighted
average borrowing rate of 7% and to reflect the amortization of debt
issuance cost associated with the new borrowings. A fluctuation of 0.125% in
the assumed weighted average borrowing rate would change the pro forma
interest expense by $613,000.
(d) To reflect the estimated tax effect of the pro forma adjustments.
(e) Excludes the impact of one-time charges directly related to the Spinoff and
the early extinguishment of debt of $9.3 million ($5.6 million net of tax).
(f) Pro forma earnings per share is computed on an estimated 20.8 million shares
of GenTek Common Stock and Class B Common Stock to be issued in the Spinoff.
31
<PAGE>
<PAGE>
THE GENTEK BUSINESS:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The GenTek Business' manufacturing segment accounted for
approximately 29% of the GenTek Business' revenues in each of 1998 and 1997, and
the performance products segment accounted for approximately 71% of revenues in
each of 1998 and 1997. The acquisitions of Defiance and Noma in 1999 have
significantly increased the revenues generated by the manufacturing segment of
the GenTek Business. On a pro forma basis giving effect to these acquisitions,
the manufacturing segment would have accounted for approximately 61% of the
GenTek Business' revenues in 1998, with the performance products segment
accounting for the other 39%.
Since 1997, the GenTek Business has made various strategic
acquisitions:
In April 1999, it acquired Noma in a transaction that values its
equity at approximately $220 million (C$330 million). Noma is a
leading North American producer of insulated wire and
wire-related products for the automotive, appliance and
electronic industries.
In February 1999, it acquired Defiance, a leading manufacturer
of specialty antifriction bearings for the transportation
industry and a provider of vehicle testing services, tooling
design and preproduction dies and components primarily for the
automotive industry.
In April 1998, it acquired Reheis, Inc. ("Reheis"), a worldwide
leader in the manufacture of the active chemical ingredients in
antiperspirants and over-the-counter antacids.
In February 1998, it acquired Sandco Automotive Ltd. ("Sandco
Automotive"), a Canadian manufacturer of stamped automobile
engine components, principally rocker arms and roller followers.
In July 1997, it acquired Peridot Holdings Inc. ("Peridot"), a
leading manufacturer and supplier of sulfuric acid and water
treatment chemicals for the industrial, pharmaceutical, water
treatment, pulp and paper and electronics markets. Peridot has
since been merged into a subsidiary of the GenTek Business.
Defiance, Reheis, Peridot and Sandco Automotive, with combined annual
revenues of nearly $200 million, have significantly expanded the GenTek
Business' portfolio of assets. Noma, with 1998 revenues of C$398.4 million (or
$265 million), adds significant scale and scope to the GenTek Business'
manufacturing segment, providing an additional platform for future growth. In
particular, Noma further expands the GenTek Business' product offerings to the
automotive industry and provides access to Noma's blue-chip customer base in the
growing consumer appliance and electronic markets. These acquisitions have been
funded through existing cash and borrowings under General Chemical Group's
credit facility.
32
<PAGE>
<PAGE>
Results of Operations
The following table sets forth the statement of operations data of
the GenTek Business for the three years ended December 31, 1998, and the
percentage of the net revenues of the GenTek Business for the relevant period
presented.
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------------------------------
1996 1997 1998
--------------------------- ----------------------- -------------------
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Net revenues ....................... $ 330.1 100% $368.5 100% $443.9 100%
Cost of sales ...................... 229.2 69 251.9 68 326.6(1) 74
-------- --- ------ --- ------ ---
Gross profit ....................... 100.9 31 116.6 32 117.3 26
Selling, general and administrative
expense ........................ 52.2(2) 16 49.1 13 65.6(3) 14
-------- --- ------ --- ------ ---
Operating profit ................... 48.7 15 67.5 19 51.7 12
Interest expense ................... 10.7 3 8.9 2 14.6 3
Interest income .................... 1.4 -- 1.5 -- 1.2 --
Foreign currency transaction --
(gains)/losses ................. (.1) -- .4 -- .6
Other expense, net ................. .3 -- .3 -- .3 --
-------- --- ------ --- ------ ---
Income from continuing operations
before income taxes and
extraordinary item ............. 39.2 12 59.5 16 37.3 9
Income tax provision ............... 18.4 6 26.2 7 (3.7)(4) --
-------- --- ------ --- ------ ---
Income from continuing operations
before extraordinary item ...... 20.8 6 33.3 9 41.1 9
Income from discontinued
operations ..................... 25.8 8 23.0 6 10.3 2
-------- --- ------ --- ------ ---
Income before extraordinary
operations ..................... 46.6 14 56.3 15 51.4 11
Extraordinary item-loss from
extinguishment of debt
(net of tax) ................... -- -- -- -- 3.7 --
-------- --- ------ --- ------ ---
Net income ......................... $ 46.6 14% $ 56.3 15% $ 47.7 11%
-------- --- ------ --- ------ ---
-------- --- ------ --- ------ ---
</TABLE>
- --------------------
Note: Amounts may not total due to rounding.
(1) Includes a one-time charge of $12.1 million ($7.6 million after tax)
primarily due to an asset impairment writedown for two of the General
Chemical Group's manufacturing facilities.
(2) Includes a one-time charge of $6.8 million ($4.1 million after-tax) due
primarily to awards made under a restricted unit plan, which replaced
certain prior equity programs.
(3) Includes incremental accruals of $9.8 million ($5.9 million after tax)
principally related to litigation and environmental spending.
(4) Includes a nonrecurring gain of $19.5 million related to an income tax
settlement.
1998 Compared with 1997
Net revenues were $443.9 million for 1998 compared with $368.5
million for 1997. This increase was due to higher sales in both the
manufacturing and performance products segments. The increase in sales of the
manufacturing segment reflects higher unit volumes. The increase in sales of the
performance products segment was due to the acquisitions of Reheis and Peridot.
33
<PAGE>
<PAGE>
Gross profit of $117.3 million was $.7 million above the prior year's
level. This increase was principally due to increases in sales resulting from
acquired businesses in the performance products segment and higher volumes in
the manufacturing segment, partially offset by a one-time charge of $12.1
million recorded in 1998, principally related to an asset impairment writedown
for two of the GenTek Business' manufacturing facilities. Excluding the effect
of one-time charges, gross profit as a percentage of sales was 29% for 1998
versus 32% for 1997, primarily due to the lower margins of the acquired
businesses.
Selling, general and administrative expense as a percentage of net
revenues was 14% in 1998 versus 13% for 1997. This increase was principally due
to incremental accruals of $9.8 million in 1998 principally related to
litigation and environmental spending.
Interest expense increased by $5.7 million in 1998 from 1997 due to
higher outstanding debt balances as a result of acquisitions.
Income from the Industrial Chemicals Business, recorded as
discontinued operations, was $10.3 million for 1998 versus $23.0 million for
1997. This decrease was due to weaker pricing and lower export soda ash volumes
to Asia.
Net income was $47.7 million for 1998 versus $56.3 million for 1997.
This decrease was due to the foregoing reasons and a $3.7 million extraordinary
item related to the early extinguishment of debt, substantially offset by a
nonrecurring gain of $19.5 million related to an income tax settlement.
1997 Compared with 1996
Net revenues were $368.5 million for 1997 compared with $330.1
million for 1996, representing an increase of 12%. Approximately half of this
increase was due to higher sales of the performance products segment as the
result of the acquisition of Peridot on July 1, 1997. The other half of the
increase was due to higher manufacturing segment sales as a result of increased
volumes and product mix improvements toward higher-value-added automotive engine
components.
Gross profit of $116.6 million for 1997 was $15.7 million, or 16%,
higher than the prior year level, principally due to the above-mentioned higher
sales levels. Gross profit as a percentage of sales was 32%, essentially at the
prior year level.
Selling, general and administrative expense as a percentage of net
revenues decreased from 16% in 1996 to 13% in 1997. This decrease was
principally due to the recording of a one-time charge in 1996 of $6.8 million
related primarily to a new General Chemical Group restricted unit plan which
replaced certain prior equity programs.
The $1.8 million decrease in interest expense for 1997 compared with
1996 was primarily due to lower outstanding debt balances during the first six
months of 1997.
Income from the Industrial Chemicals Business, recorded as
discontinued operations, was $23.0 million for 1997 versus $25.8 million for
1996. This decrease was principally due to lower pricing for soda ash and
calcium chloride.
34
<PAGE>
<PAGE>
Liquidity and Capital Resources
Cash and cash equivalents were $61.3 million at December 31, 1998 as
compared with $20.4 million at December 31, 1997 and $50.1 million at December
31, 1996. During 1998, the GenTek Business generated cash flow from continuing
operations of $57.3 million. Cash of $103.4 million was used for investing
activities, including $90.9 million used for acquisitions and $33.7 million for
capital expenditures.
Since 1997, the GenTek Business has made various strategic
acquisitions: Peridot in July 1997; Sandco Automotive in February 1998; Reheis
in April 1998; Defiance in February 1999; and Noma in April 1999. For a
description of these businesses, see "The GenTek Business." The GenTek Business
has financed these acquisitions through existing cash and bank borrowings. The
acquisition of Noma for approximately $220 million (C$330 million) is being
financed entirely by borrowings under General Chemical Group's credit facility.
Management anticipates that, excluding the impact of the acquisitions
of Noma and Defiance, the capital spending level for 1999 will approximate the
prior-year level. Currently, management expects that capital spending for Noma
and Defiance in 1999 will be consistent with their 1998 year levels. Management
believes that the GenTek Business' cash flows will be sufficient to cover its
future interest expense, capital expenditures and working capital requirements.
GenTek will use proceeds of borrowings under the GenTek Financing Facility to
finance future acquisitions and investments (other than the proceeds of the
initial borrowings which will be used to repay a portion of General Chemical
Group's existing borrowings from third parties). In the event the GenTek
Business identifies additional acquisition candidates, however, the GenTek
Business' current sources of liquidity may not be adequate. Accordingly, GenTek
may issue additional equity or debt securities, subject to market conditions.
General Chemical Group believes that, as a result of the Spinoff, GenTek may be
able to use its stock as acquisition currency. See "The Spinoff--Reasons for the
Spinoff" and "The GenTek Business--Strategy."
To reflect the independent status of GenTek and New GCG after the
Spinoff, GenTek will have its own separate financing facilities. The proceeds of
the initial borrowings under the GenTek Financing Facility and the New GCG
Financing Facilities will be used to repay a portion of General Chemical Group's
existing borrowings from third parties, including debt incurred and assumed in
connection with the recent acquisition of Noma. General Chemical Group is
currently finalizing the terms of these financing facilities with banks and
other financial institutions and expects that these facilities will be in place
on or prior to the Spinoff Date.
The specific terms of the GenTek Financing will depend on, among
other things, the market conditions for debt financing at the time of the
Spinoff. The pro forma financial statements for GenTek included in this
Information Statement have been prepared on the assumption that borrowings under
the GenTek Financing Facility will bear interest at an annual rate of 7%, which
is an assumption that management believes is reasonable for purposes of
preparing the pro forma financial statements. By comparison, the 1998 weighted
average interest rate for borrowings by General Chemical Group was 7.9%.
Management expects that the GenTek Financing Facility will impose operating and
financial restrictions on GenTek, including limitations on its ability to incur
additional indebtedness, pay dividends or make distributions in respect of the
Common Stock, create liens, or consolidate, merge or sell their assets. In
addition, it is expected that GenTek will be required to comply with specified
financial covenants and ratios.
35
<PAGE>
<PAGE>
At this time, management expects that the GenTek Financing Facility
will be for about $550 million, of which approximately $490 million will be
funded on or about the Spinoff Date, including approximately $240 million of
borrowings related to the acquisition of Noma. It is expected that $60 million
will be available for borrowings after the Spinoff.
The Noma Acquisition
General Chemical Group recently acquired all of the stock of Noma in
a transaction that values its equity at approximately $220 million (C$330
million). General Chemical Group, through its tender offer which closed on April
6, purchased 95% of Noma's outstanding shares. The remaining shares of Noma are
being acquired through the amalgamation of Noma with General Chemical Group's
wholly-owned subsidiary, Noma Acquisition Corp., pursuant to an expedited
procedure available for holders of greater than 90% of shares of a company. Noma
will be part of the manufacturing segment of the GenTek Business. The purchase
price for Noma has been financed entirely by borrowings under General Chemical
Group's credit facility.
Set forth below are the summary statement of operations data of Noma
(determined according to Canadian GAAP):
<TABLE>
<CAPTION>
December 31, 1998
---------------------------------------------------------------
1996 1997 1998 1998
---------- --------- ------- ------
(C$ in thousands) (US$)(1)
<S> <C> <C> <C> <C>
Sales ............................. $ 333,781 $ 360,259 $ 398,421 $ 268,536
Costs and expenses(2) ............. 301,885 323,858 362,030 244,008
Earnings before income taxes ...... 31,896 36,401 36,391 24,528
Earnings from continuing operations 19,135 23,505 24,491 16,507
Loss from discontinued operations . (64,601) (1,532) (1,007) (679)
--------- -------- --------- --------
Net earnings (loss) ............... $ (45,466) $ 21,973 $ 23,484 US$15,828
--------- -------- --------- --------
--------- -------- --------- --------
</TABLE>
- ---------
(1) Translated into U.S. dollars based on the rate of C$1.48 = U.S.$1.00, the
average monthly C$/US$ exchange rate in 1998.
(2) Includes cost of sales, selling and administrative expenses, depreciation
and amortization, and interest expense. Amount in 1998 includes a one-time
charge of C$6.1 million. See Consolidated Financial Statements of Noma
Industries Limited in Annex B of this Information Statement.
Year 2000 Issue
General Chemical Group has implemented a program to assess, mitigate
and remediate the potential impact of the Year 2000 problem throughout the
GenTek and Industrial Chemicals Businesses. A Year 2000 problem can occur where
date-sensitive software uses two digit year date fields, sorting the Year 2000
("00") before the Year 1999 ("99"). The Year 2000 problem can arise in hardware,
software, or any other equipment or process that uses embedded software or other
technology. The failure of such systems to properly recognize dates after
December 31, 1999 could result in data corruption and processing errors.
Following the Spinoff, GenTek will provide the Industrial Chemicals
Business with MIS and MIS-supported functions, including MIS personnel, hardware
and software on a service contract basis. This service contract will remain in
effect through approximately December 2001. During this period,
36
<PAGE>
<PAGE>
GenTek will provide to New GCG the services related to the mitigation and
remediation of the potential impact of Year 2000 problems on the Industrial
Chemicals Business.
General Chemical Group completed its assessment of its Year 2000
compliance status for the GenTek Business and the Industrial Chemicals Business
in early 1998 and began work on its remediation program immediately thereafter.
General Chemical Group's remediation program has been structured to address its
information and non-information technology hardware, software, facilities and
equipment (collectively, "Systems"). Based on current estimates, GenTek expects
to spend approximately $1.0 million to replace or reprogram existing Systems for
both the GenTek and Industrial Chemicals Businesses and complete its Year 2000
compliance program. As of December 31, 1998, approximately $0.8 million of such
amount had been spent. Management expects all material Systems to be Year 2000
compliant by March 31, 1999 and substantially all Systems to be Year 2000
compliant by December 31, 1999. In the event that GenTek's material Systems are
not Year 2000 compliant, GenTek may experience reductions or interruptions in
operations which could have a material adverse effect on GenTek's results of
operations.
In addition, General Chemical Group has implemented a program to
determine the Year 2000 compliance status of its material vendors, suppliers,
service providers and customers, including the railroad and trucking companies
used to ship its products or to transport raw materials to its manufacturing
facilities. Based on currently available information, GenTek does not anticipate
any material impact to GenTek based on the failure of such third parties to be
Year 2000 compliant. However, the process of evaluating the Year 2000 compliance
status of material third parties is continually ongoing and, therefore, no
guaranty or warranty can be made as to such third parties' future compliance
status or its potential effect on the GenTek Business. General Chemical Group
believes there exists a sufficient number of suppliers of raw materials for the
GenTek Business so that if any supplier is unable to deliver raw materials due
to Year 2000 problems, alternate sources will be available and that any supply
interruption will not be material to the GenTek Business. There can be no
assurances, however, that the GenTek Business would be able to obtain all of its
supply requirements from such alternate sources in a timely manner or on terms
comparable with those of its current suppliers. If the railroads or trucking
companies that ship its products or raw materials fail to be Year 2000
compliant, the GenTek Business may not be able to arrange alternative and timely
means to ship its goods or raw materials, which could lead to interruptions or
slowdowns in its business. GenTek is preparing for the possible use of
alternative suppliers and means of transportation, possible adjustment of raw
material and product inventory levels and contingencies with respect to
potential energy source interruptions, all in an effort to minimize the effects,
if any, of Year 2000 related interruptions or slowdowns caused by suppliers and
transporters.
Before proceeding with the acquisitions of Defiance and Noma and as
part of its acquisition-related due diligence, the GenTek Business reviewed Year
2000-related concerns for Defiance and Noma and received assurances from their
respective managements that their businesses are, or prior to year-end 1999 will
be, materially Year 2000 compliant. As part of its pre-acquisition due
diligence, the GenTek Business reviewed, for Defiance, the assessments and
reports prepared by its outside consultants and, for Noma, the periodic internal
reports prepared by its MIS personnel for senior management. The GenTek Business
began its own Year 2000 assessment for Defiance following the closing of its
acquisition and expects to begin promptly its Year 2000 assessment for Noma. In
the event that the material systems of Defiance or Noma are not Year 2000
compliant, the affected company may experience reductions or interruptions in
operations which could have a material adverse effect on the results of
operations or financial condition of the GenTek Business.
37
<PAGE>
<PAGE>
Qualitative and Quantitative Disclosures about Market Risk
The GenTek Business' cash flows and earnings are subject to
fluctuations resulting from changes in interest rates and changes in foreign
currency exchange rates and the GenTek Business selectively uses financial
instruments to manage these risks. The GenTek Business' objective in managing
its exposure to changes in foreign currency exchange rates and interest rates is
to reduce volatility on earnings and cash flow associated with such changes. The
GenTek Business has not entered, and does not intend to enter, into financial
instruments for speculation or trading purposes. Additional information
regarding the GenTek Business' financial instruments is contained in Note 14 to
the General Chemical Group (to be GenTek after the Spinoff) Consolidated
Financial Statements.
The GenTek Business measures the market risk related to its holding
of financial instruments based on changes in interest rates and foreign currency
rates using a sensitivity analysis. The sensitivity analysis measures the
potential loss in fair values, cash flows and earnings based on a hypothetical
10% change in interest and currency exchange rates. The GenTek Business used
current market rates on its debt and derivative portfolio to perform the
sensitivity analysis. Such analysis indicates that a hypothetical 10% change in
interest rates or foreign currency exchange rates would not have a material
impact on the fair values, cash flows or earnings of the GenTek Business.
However, the recent acquisition of Noma could have a material impact on the
GenTek Business' exposure in the future to fluctuations in the C$/US$ exchange
rate.
Environmental Matters
The GenTek Business' various manufacturing operations, which have
been conducted at a number of facilities for many years, are subject to numerous
laws and regulations relating to the protection of human health and the
environment in the U.S., Canada and Ireland. General Chemical Group believes
that the GenTek Business is in substantial compliance with such laws and
regulations. However, as a result of its operations, the GenTek Business is
involved from time to time in administrative and judicial proceedings and
inquiries relating to environmental matters. Based on information available at
this time with respect to potential liability involving these proceedings and
inquiries, General Chemical Group believes that any such liability would not
have a material adverse effect on the financial position or results of
operations of the GenTek Business. However, modifications or changes in
enforcement of existing laws and regulations or the adoption of new laws and
regulations in the future, particularly with respect to environmental and safety
standards, or the discovery of additional or unknown environmental contamination
could require expenditures which might be material to the financial position or
results of operations of the GenTek Business. See also "The GenTek
Business--Environmental Matters."
The GenTek Business' accruals for environmental liabilities are
recorded based on current interpretation of environmental laws and regulations
when it is probable that a liability has been incurred and the amount of such
liability can be reasonably estimated. At both December 31, 1998 and 1997,
accruals for environmental matters were $20.1 million and $16.2 million,
respectively, which do not reflect any accruals for Noma or Defiance. The GenTek
Business maintains a comprehensive insurance program, including customary
comprehensive general liability insurance for bodily injury and property damage
caused by various activities and occurrences and significant excess coverage to
insure against catastrophic occurrences. However, it does not maintain any
insurance other than as described above for potential liabilities related
specifically to remediation of existing or future environmental contamination,
if any.
38
<PAGE>
<PAGE>
The GenTek Business has an established program to ensure that its
facilities comply with environmental laws and regulations. Expenditures made
pursuant to this program for 1998 approximated $11.7 million (of which
approximately $1.0 million represented capital expenditures and approximately
$10.7 million related to ongoing operations and the management and remediation
of potential environmental contamination from prior operations). Expenditures
for 1997 approximated $7.1 million (of which approximately $1.6 million
represented capital expenditures and approximately $5.5 million related to
ongoing operations and the management and remediation of potential environmental
contamination from prior operations). Management expects similar expenditures in
1999 for the GenTek Business, other than with respect to Noma and Defiance, to
be in the range of $9.0 million to $11.0 million. The GenTek Business is
currently evaluating the additional capital expenditures that will be required
for Noma and Defiance. In addition, if environmental laws and regulations
affecting the GenTek Business' operations become more stringent, the GenTek
Business' costs for environmental compliance may increase above such range.
Other Matters
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133 "Accounting for Derivative
Instruments and Hedging Activities" ("FAS 133"). FAS 133 requires that all
derivative instruments be measured at fair value and recognized in the balance
sheet as either assets or liabilities. The GenTek Business is required to adopt
FAS 133 for its fiscal year beginning after June 15, 1999. The GenTek Business
does not expect that the adoption of FAS 133 will have a material effect on its
results of operations or financial condition.
39
<PAGE>
<PAGE>
THE GENTEK BUSINESS
General
Following the Spinoff, GenTek will own and operate the GenTek
Business, a diversified manufacturer of industrial components and performance
chemicals. The GenTek Business consists of the manufacturing and performance
products segments of General Chemical Group.
The GenTek Business' manufacturing segment specializes in the
manufacture of stamped and machined rocker arms, roller rocker arms,
roller followers and other precision, highly engineered components
for the automotive and industrial markets. The principal customers of
these products are DaimlerChrysler, Ford and General Motors. The
manufacturing segment also produces fluid-handling equipment for the
automotive service market and for industrial applications. The
manufacturing segment is currently undergoing a significant expansion
to accommodate new business awarded by U.S. auto manufacturers, as
well as pursuing business in markets outside the United States.
General Chemical Group recently acquired Defiance, a manufacturer of
specialty antifriction bearings for the transportation industry and a
provider of vehicle testing services, tooling design and
preproduction dies and components primarily for the automotive
industry. This acquisition allows for a more complete product
offering of valve-train-related engine components to the automotive
industry.
General Chemical Group recently acquired Noma, a leading North
American producer of insulated wire and wire-related products for the
automotive, appliance and electronic industries. Noma adds
significant scale and scope to the GenTek Business' manufacturing
segment, providing an additional platform for future growth. In
particular, Noma further expands the GenTek Business' product
offerings to the automotive industry and provides access to Noma's
blue-chip customer base in the growing consumer appliance and
electronic market.
The GenTek Business' performance products segment provides a broad
range of value-added products and services to four principal markets:
Pharmaceutical and Personal Care, Environmental, Technology and
Chemical Processing. Its principal products include anti-perspirant
and antacid active ingredients, water treatment chemicals, specialty
agrichemicals, advanced lithographic printing plates and related
pressroom chemicals, ultra-high-purity electronic chemicals, and a
range of chemical intermediates used in photographic, pulp and paper
and other applications. The GenTek Business also provides "closed
loop" sulfuric acid regeneration services, which significantly reduce
the waste streams generated by certain refineries and chemical
plants.
Strategy
The GenTek Business has built a strong customer base and enjoys a
significant market share for a majority of its product lines in both the
manufacturing and performance products segments. General Chemical Group believes
that the GenTek Business' strong market positions result from its competitive
strengths: its high-quality products and customer service; its technological,
marketing and distribution expertise; its low-cost manufacturing; and the
transactional and turnaround experience of its management. These strengths
provide an important foundation for future growth.
40
<PAGE>
<PAGE>
The GenTek Business aims to build on these strengths and create
additional shareholder value through a combination of value-enhancing
acquisitions and internal growth. These initiatives are discussed in more detail
throughout this section:
Pursue Value-Enhancing Acquisitions and Investments. The GenTek
Business intends to pursue a broad range of value-enhancing transactions,
including acquisitions of, or investments in, both related and unrelated
businesses. The GenTek Business will target acquisitions and investments that
will create value and enhance cash flow and earnings through the application of
management's unique blend of market focus, restructuring, turnaround and cost
reduction capabilities. The GenTek Business may also dispose of selected
businesses from time to time that do not meet its targeted return, profitability
or strategic objectives. Where GenTek disposes of businesses, it may attempt to
structure the sale in a manner that provides it with an equity interest,
controlling or otherwise, in the acquiring entity. Cash proceeds are expected to
be retained by GenTek and reinvested or used to finance acquisitions.
Since 1997, General Chemical Group has made various strategic
acquisitions: Noma, Defiance, Reheis, Peridot and Sandco Automotive. GenTek
believes that its recent acquisitions, combined with others to be made in the
future, will help to expand its market leadership positions and provide new
growth opportunities. Consistent with its strategy, the GenTek Business is
currently reviewing a number of potential acquisitions and investments. However,
the GenTek Business currently has no commitments, understandings, or
arrangements with respect to any specific acquisitions.
In implementing its strategy, GenTek expects to capitalize on its
relationship with Latona Associates Inc. ("Latona"), a management company, which
provides the GenTek Business with strategic management, business and financial
advisory services. Similar to the current arrangements with General Chemical
Group, Latona will also continue to provide the GenTek Business with a full
range of merger and acquisition advisory services, including the identification,
structuring and negotiation of suitable acquisitions, divestitures and other
value-enhancing corporate transactions. Management believes that Latona's
relationships, experience in identifying acquisition opportunities and the
extensive knowledge of Latona's personnel with respect to the GenTek Business
will be of significant advantage to GenTek in developing and executing its
acquisition and growth strategy. See "Certain Relationships and Affiliate
Transactions."
Capitalize on Favorable Market Trends. Management believes that the
current markets served by the GenTek Business will present a number of
attractive growth opportunities. For example, management expects that the GenTek
Business' water treatment products will benefit from stricter Federal drinking
water requirements, which include higher total organic carbon and solids removal
standards. The GenTek Business' sulfuric acid regeneration services, which help
refineries produce cleaner burning gasoline and reduce waste streams, should
benefit from stricter state and Federal gasoline standards. For its personal
care and pharmaceutical products, the GenTek Business expects to capitalize on
growth opportunities in Europe where consumer acceptance of antiperspirant
products continues to increase. The GenTek Business is also pursuing
opportunities to increase its pharmaceutical intermediates business and take
advantage of the growing trend by pharmaceutical companies to outsource
manufacturing of intermediates and other pharmaceutical components. In the
manufacturing segment, over the past several years, the GenTek Business' U.S.
market share has significantly increased due to the successful introduction of
highly engineered stamped engine components which provided customers with a
lower cost alternative to existing products offered by GenTek's competitors.
These volume gains have been further boosted by the growing popularity of
overhead cam engine technology, a trend management expects will continue in the
future. As a complement to the U.S. business, the GenTek Business is also
pursuing international opportunities in the motor vehicle market.
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Expand and Diversify Product Lines. The GenTek Business has recently
launched a number of new products which it believes will enhance profitability.
For example, Al+Clear'r', a new agrichemical product, improves poultry-house
sanitation and productivity and, in addition, benefits the environment by aiding
in the control of phosphorus runoff into rivers, streams, lakes and other bodies
of water. With current annual U.S. poultry production today exceeding seven
billion broilers, the GenTek Business believes that Al+Clear'r' presents a
significant growth opportunity in the poultry market as well as in related
markets, such as swine, dairy and egg-laying. In addition, the GenTek Business
recently introduced Prisma'TM', a new computer-to-plate ("CTP") printing system,
which enables printers to reduce labor and material costs and achieve
exceptional print quality. The GenTek Business has increased the purity of many
of its electronic grade chemicals and developed and produced a new line of
coagulants and coagulant aids for its water treatment chemicals product line.
Management believes that these new products, as well as other products currently
being developed, present significant growth opportunities for the GenTek
business.
Continue to Improve Operating Efficiency. The GenTek Business
continually seeks opportunities to reduce operating costs. Ongoing efforts to
improve operating efficiency have resulted in average operating profit margins
of approximately 17% over the past five years. The GenTek Business is currently
evaluating additional cost reduction alternatives, such as cogeneration
opportunities, the use of alternative raw materials, and investments in new
equipment to further reduce plant costs and increase throughput.
Manufacturing Segment
The GenTek Business' manufacturing segment is a diversified producer
of industrial components, including stamped and machined metal components for
use in automotive and industrial markets, specialty antifriction bearings and
fluid transport and handling equipment for the automotive service market and for
industrial applications.
General Chemical Group, through its tender offer which closed on
April 6, 1999, acquired approximately 95% of shares of Noma, a leading North
American producer of insulated wire and wire-related products. The remaining
shares of Noma are being acquired through the amalgamation of Noma with General
Chemical Group's wholly-owned subsidiary, Noma Acquisition Corp., pursuant to an
expedited procedure available for holders of greater than 90% of shares of a
company.
Automotive
The GenTek Business' stamped and machined engine components improve
engine efficiency by reducing engine friction and component mass. These
components are used in the increasingly popular single and double overhead cam
(OHC) engines which power cars, light trucks and sport utility vehicles (such as
Ford Expedition and F-150, Lincoln Navigator and DaimlerChrysler Minivan). The
increased use of these OHC engines has resulted in significant volume growth
through market share gains, as vehicle manufacturers are able to obtain better
fuel economy and higher horsepower using OHC engines. Management believes that
this OHC trend will continue. Additionally, the GenTek Business has participated
in the automakers' conversion of traditional overhead valve engines to
reduced-friction valve train components (using bearings) to obtain some of the
efficiency of OHC engines. The manufacturing segment's products compare
favorably with other technologies by providing comparable performance
characteristics at a lower delivered cost. This reduced cost is a function of
lower raw material cost as well as lower machining cost. In addition, these
products have received increased acceptance as automakers strive to reduce
vehicle weight and improve performance at a reasonable cost.
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In February, 1999, General Chemical Group acquired Defiance, a
manufacturer of specialty antifriction bearings for the transportation industry
and a provider of vehicle testing services, tooling design and preproduction
dies and components primarily for the automotive industry. Defiance's bearings
are used primarily in the valve trains of automotive and truck engines. In
addition, Defiance manufactures production-intent prototype metal parts which
are used by its customers for prototype and short production runs of automotive
systems.
Defiance's testing and tooling services group provides computer-aided
design, engineering and simulation services for automotive structural and
mechanical systems. Defiance provides services on a wide range of systems from
single sub-systems, such as chassis, suspensions, seats and seating assemblies,
to entire vehicles. Defiance's engineering and simulation services provide
customers with finite element modeling, kinematics, crash and variation
simulation analyses, experimental dynamics and vehicle development programs, and
allows its customers to test their automotive products for durability, stress,
noise, vibration and environmental considerations.
Industrial
GenTek's fluid transport and handling equipment is used in the
automotive service industry (by customers such as Jiffy Lube and automotive
service bays in tire stores and auto dealerships) as well as in the machine tool
industry (primarily for delivering cutting fluids to the cutting surface in
metal-cutting equipment manufactured by such companies as Bridgeport, Mori
Seiki and Cincinnati Milicron). The GenTek Business' long history and in-depth
applications knowledge have positioned the company as a high-quality producer
with a solid reputation among end users and systems integrators. The GenTek
Business also produces stamped and machined metal products and components for a
wide range of industrial applications, such as machine cranks, hose reels, metal
fasteners and components for bulldozer treads.
Noma Industries Limited
Noma, based in Toronto, Ontario, is a leading North American producer
of insulated copper wire and wire-related products. Noma's products are used by
a wide range of manufacturers in the automotive, appliance and electronic
component industries and include: wire harnesses, ignition cables, molded parts,
power cords, small and major appliance harnesses, electrical switches and a wide
array of single-and-multi-conductor wire and cable products. With modern
production facilities in Canada, the United States and Mexico, Noma offers fully
integrated design, engineering and manufacturing capabilities.
In the automotive sector, Noma is a supplier of electrical components
to the OEM and aftermarket segments of the North American motor vehicle markets;
the Company's product line includes wire harnesses, ignition cables, molded
parts, electro-mechanical assemblies, engine block heaters, battery blankets and
various electrical switches. For the appliance and electronic markets, Noma
designs, engineers and manufactures wire harnesses and power cords for office
and other electronic equipment, as well as for large and small appliances. Noma
produces a wide variety of single-and-multi-conductor wire and cable products
for industrial, commercial and residential construction and OEM applications.
End market product applications for OEM's include cordsets, harnesses, water
products (pump cable), irrigation and electric motors.
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Suppliers; Customers
The GenTek Business purchases its major raw materials for its
manufacturing segment from a number of suppliers and believes that these raw
materials will be available in sufficient supply on a competitive basis for the
foreseeable future. In addition, management believes that alternative sources
are available to fulfill the manufacturing segment's major raw material
requirements.
The manufacturing segment sells primarily to the automotive industry,
including DaimlerChrysler, Ford and General Motors. Automotive manufacturers
generally award business to their suppliers by individual engine line, often for
multiple-model years. The loss of any individual engine line contract would not
be material to the GenTek Business. However, the loss by GenTek of any one of
these customers in its entirety, an economic downturn in the automotive industry
as a whole or other events (e.g., labor disruptions) resulting in significantly
reduced operations of any of these customers could have a material adverse
impact on the results of the GenTek Business' manufacturing segment. None of
these customers accounted for 10% or more of the revenues of the GenTek Business
in 1998. In addition, the Noma and Defiance acquisitions will further diversify
the customer base of the manufacturing segment.
Seasonality; Backlogs; Competition
The manufacturing segment's business is generally not seasonal. Due
to the nature of its business, there are no significant backlogs.
The GenTek Business' manufacturing segment competes with other
automotive engine component manufacturers based on a number of factors including
design and engineering capabilities, quality, price and delivery terms.
Competitors include Eaton, Hitchiner, INA, Ingersoll-Rand and captive OEMs.
Performance Products Segment
Products and Services
The GenTek Business' performance products segment provides a broad
range of value-added products and services to four principal market segments:
Pharmaceutical and Personal Care, Environmental, Technology and Chemical
Processing. Its principal products include antiperspirant and antacid active
ingredients, water treatment chemicals, specialty agrichemicals, advanced
lithographic printing plates and related pressroom chemicals, ultra-high-purity
electronic chemicals, and a range of chemical intermediates used in
photographic, pulp and paper and other applications. The GenTek Business also
provides "closed loop" sulfuric acid regeneration services, which significantly
reduce the waste streams generated by certain refineries and chemical plants.
The GenTek Business' activities in each of its principal market
segments are discussed below.
Pharmaceutical and Personal Care. The GenTek Business is a leading
supplier of the active chemical ingredients used in the manufacture of
over-the-counter ("OTC") antacids and antiperspirants, and also supplies active
ingredients used in prescription pharmaceuticals, nutritional supplements,
nutraceuticals, veterinary health products and personal care products. Its
product line includes aluminum and zirconium complexes for use in
antiperspirants; aluminum hydroxide and magnesium hydroxide blends used in OTC
antacids for acid-neutralization; high-purity aluminum hydroxide for use as
veterinary and human vaccine adjuvants; potassium chloride used in electrolyte
replacement medications
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and intravenous solutions; pharmaceutical-grade aluminum chloride; sodium
nitrite used as a reactant in the production of artificial sweeteners; and
pharmaceutical-grade sulfuric acid used in the production of vitamin C tablets.
The GenTek Business maintains leadership positions in many of its
pharmaceutical and personal care products. In antiperspirant actives, for
example, it has introduced more than 25 new products or product categories over
the last six years. Recent new product introductions have included
nonresidue-forming antiperspirant actives designed for the growing clear
stick/gel antiperspirant market and a line of antiperspirant active ingredients
designed to appeal to European consumer preferences. Based on the capabilities
of the GenTek Business' research and development team and the numerous U.S. and
foreign patents awarded to the GenTek Business, management believes that the
GenTek Business is the technical leader in the antiperspirant actives industry.
Environmental. The GenTek Business supplies a broad range of products
and services designed to address the important environmental issues confronting
the company's customers. These value-added products and services provide
cleaner-burning gasoline and cleaner drinking water; restore algae-infested
lakes; reduce damaging phosphorous runoff from agricultural operations; and
significantly reduce industrial waste streams.
The GenTek Business' water treatment products consist primarily of
aluminum sulfate ("alum"), polymer-based enhanced coagulants, and sodium and
ammonia salts and sulfites. With a network of 34 plants strategically located
throughout the United States and Canada, the GenTek Business is the largest
North American producer of alum, which is used as a coagulant in potable water
and waste water treatment applications, and a leading supplier of flocculents (a
polymer-based material used for settling and/or separating solids from liquids).
With the assistance of the company's Technical Center in Syracuse,
New York, the GenTek Business recently introduced Al+Clear'r', an agrichemical
product for the poultry market. When applied to the litter in poultry houses,
Al+Clear'r' not only improves sanitation and productivity, but also benefits the
environment by aiding in the control of phosphorous runoff. Phosphorous runoff
from agricultural activities has been linked to contamination in lakes, rivers,
streams and other water bodies.
In the environmental market, the GenTek Business also provides
sulfuric acid regeneration services to the refining and chemical industries, and
markets pollution abatement and sulfur recovery services to selected refinery
customers. Refineries use sulfuric acid as a catalyst in the production of
alkylate, a gasoline blending component with favorable performance and
environmental properties. The alkylation process contaminates and dilutes the
sulfuric acid, thereby creating the need to dispose of or regenerate the
contaminated acid. The GenTek Business transports the contaminated acid back to
the company's facilities for recycling and redelivers the fresh, recycled acid
back to customers. This "closed loop" process offers customers significant
savings versus alternative disposal methods and also benefits the environment by
significantly reducing refineries' waste streams. Similar regeneration services
are provided to manufacturers of ion exchange resins and silicone polymers. The
GenTek Business is expanding its pollution abatement services of treating and
removing other waste streams generated by refineries, including hydrogen sulfide
and sulfur dioxide.
Technology. In the technology market, the GenTek Business provides
CTP technology and bi-metal lithographic printing plates for high-quality
commercial printing applications, as well as ultra-high-purity electronic
chemicals for the semiconductor industry.
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A GenTek Business subsidiary, Printing Developments Inc. ("PDI"),
recently introduced its Prisma'TM' CTP technology which allows printers to
transfer computer images directly to digitally imageable printing plates,
thereby eliminating intermediate film processing and reducing labor and material
costs. PDI's proprietary bi-metal plating system provides sharper color
reproduction, greater durability and superior on-press economics relative to the
polymer plates offered by other industry participants.
The GenTek Business' electronic chemicals include ultra-high-purity
acids, caustics and etchants for use in the manufacture of semiconductor
processing chips. Within the past two years, the GenTek Business completed
construction of a new plant that produces ultra-high-purity sulfuric acid with
impurities measured in the parts-per-trillion range. In addition, the GenTek
Business is the exclusive U.S. licensee for the manufacture and sale of
Spinetch'TM' etchants, a proprietary product line developed by Merck KgA of
Germany. Sales of the Spinetch'TM' etchants are not material for the GenTek
Business at this time.
Chemical Processing. The GenTek Business manufactures a broad range
of products that serve as chemical intermediates in the production of such
everyday products as newspapers, tires, paints, dyes and carpets. The company is
a leading producer of alum and polymer-based enhanced coagulants used in paper
manufacturing to impart water resistance. The GenTek Business' sodium and
ammonia sulfites are commonly used to produce fixing and developing solutions
for conventional film and x-ray processing. Sodium nitrite, of which the GenTek
Business is one of only two North American producers, is primarily used as a
reactant in the manufacture of dyes, pigments and rubber processing chemicals.
Additional chemical intermediate products include potassium fluoride and
fluoborate derivatives sold into the metal treatment, agrichemical, surfactant
and analytical reagent markets. The GenTek Business also produces sulfuric acid,
which is used in the manufacture of titanium pigments, fertilizers, synthetic
fibers, steel, petroleum and paper, as well as many other products.
Availability of Resources
The performance products segment's competitive cost position and
high-quality products are in part attributable to its control of certain raw
materials that serve as the feedstocks for many of its products. For its
sulfuric acid regeneration business, the GenTek Business has the ability to
manufacture sulfur dioxide and sulfuric acid relatively inexpensively. Sulfur
dioxide is a major raw material in the manufacture of many of the GenTek
Business' sodium salts and sulfites, and sulfuric acid is an important raw
material in the manufacture of aluminum sulfate as well as in the manufacture of
ultra-high-purity electronic chemicals. Consequently, major raw material
purchases are limited primarily to sulfuric acid where it is uneconomical for
the GenTek Business to supply itself due to distribution costs, soda ash (for
the manufacture of sodium salts, sulfites and nitrites), bauxite and hydrate
(for the manufacture of alum), sulfur (for the manufacture of sulfuric acid),
and aluminum (for the manufacture of printing plates). The GenTek Business has
the ability to purchase these raw materials from a number of suppliers and
believes that these raw materials will be available in sufficient supply on a
competitive basis for the foreseeable future.
Competition
Although the performance products segment generally has significant
market shares in the product areas in which it competes, most of its end markets
are extremely competitive. The GenTek Business' major competitors are typically
segregated by end markets and include international, regional and, in some
cases, small independent producers. The GenTek Business' ability to compete
effectively depends on its ability to maintain competitive prices and to provide
reliable and responsible service to
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its customers. General Chemical Group believes that, with certain products which
have relatively higher freight costs, the proximity of the GenTek Business'
production facility to the end market user is a key factor in being price
competitive. In general, raising prices has been difficult over the past several
years and will likely continue to be so in the near future.
In the pharmaceuticals and personal care market, the GenTek Business
competes directly with Barcroft, Giulini, Summit and Westwood. The GenTek
Business' competitors in its environmental market include the refineries that
perform their own sulfuric acid regeneration, as well as DuPont, Marsulex, Arch
Chemical, PVS and Rhodia, which also have sulfuric acid regeneration facilities
that are generally located near their major customers. In addition, the GenTek
Business competes with Geo Specialty Chemicals, U.S. Aluminates and other
regional players in the water treatment market. Competitors in the technology
market include Kodak-Polychrome and Fuji, which also provide printing-related
products. With regard to electronic chemicals, the GenTek Business' principal
competitors are Ashland and Arch Chemical. Competitors in the chemical
processing market include BASF, Calabrian, U.S. Salt, Kerley, Rhodia and Solvay
S.A.
Sales and Distribution
The GenTek Business employs over 100 experienced sales, marketing,
distribution and customer service personnel in its performance products segment.
The sales force is divided into both a general group and several specialized
groups which focus on specific products, end-users and geographic regions. This
targeted approach provides the GenTek Business with insight into emerging
industry trends and creates opportunities for product development.
The sales force markets products and services both directly to
end-users and indirectly through independent distributors. Generally, sulfuric
acid regeneration services are sold directly to end-users, often pursuant to
long-term contracts. In addition, the GenTek Business has an extensive network
of independent distributors both in the United States and internationally.
Distributors typically promote a full-line or focused range of products to a
larger market or to a market focused on specific end-users or regions. The
GenTek Business' sales contracts with its end-users and distributors are usually
for one- to three-year periods.
Customers; Seasonality; Backlogs
The performance products segment does not have any single customer,
or a small number of customers, which if lost would have a material adverse
effect on the performance products segment or the GenTek Business. The business
of the performance products segment is generally not seasonal. Due to the nature
of the performance products segment's business, there are no significant
backlogs.
Environmental Matters
The GenTek Business' various manufacturing operations, which have
been conducted at a number of facilities for many years, are subject to numerous
laws and regulations relating to the protection of human health and the
environment in the United States, Canada and Ireland. GenTek believes that it is
in substantial compliance with such laws and regulations. However, as a result
of its operations, GenTek is involved from time to time in administrative and
judicial proceedings and inquiries relating to environmental matters. These
include several currently pending administrative proceedings concerning alleged
environmental violations at GenTek's facilities. Based on information available
at this time with respect to potential liability involving these facilities,
GenTek believes that any such liability will not have a material adverse effect
on its financial condition or results of operations.
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However, modifications of existing laws and regulations or the adoption of new
laws and regulations in the future, particularly with respect to environmental
and safety standards, or discovery of any additional or unknown environmental
contamination, if any, could require capital expenditures which may be material
or otherwise adversely impact GenTek's operations.
The Comprehensive Environmental Response Compensation and
Liability Act of 1980 ("CERCLA") and similar state statutes have been construed
as imposing joint and several liability on present and former owners and
operators of contaminated sites and transporters and generators of hazardous
substances regardless of fault. General Chemical Group has received written
notice from the Environmental Protection Agency (the "EPA") that it has
been identified as a potentially responsible party ("PRP") under CERCLA at
three Superfund sites. General Chemical Group does not believe that its
liability, if any, for these sites will be material to its results of
operations or financial condition. In addition, Congress continues to
consider the reauthorization of and modifications to CERCLA. Because
Congress has not yet acted with respect to CERCLA, the Company does not
have sufficient information to ascertain the impact that any change might have
on the GenTek Business' potential liabilities, if any.
At any time, GenTek may be involved in proceedings with various
regulatory authorities which could require GenTek to pay various fines and
penalties due to violations of environmental laws and regulations at its sites,
remediate contamination at some of these sites, comply with applicable standards
or other requirements, or incur capital expenditures to modify certain pollution
control equipment or processes at its sites. Again, although the amount of any
liability that could arise with respect to these matters cannot be accurately
predicted, GenTek management believes that the ultimate resolution of these
matters will have no material adverse effect on GenTek's results of operations
or financial condition. See also "--Legal Proceedings" below.
Avtex Site at Front Royal, Virginia. On March 22, 1990, the EPA
issued to General Chemical Group a Notice of Potential Liability pursuant to
Section 107(a) of CERCLA with respect to a site located in Front Royal, Virginia
(the "Avtex Site"), owned at the time by Avtex Fibers Front Royal, Inc., which
has filed for bankruptcy. A sulfuric acid plant adjacent to the main Avtex Site
was previously owned and operated by the GenTek Business. On September 30, 1998,
the EPA issued an administrative order under Section 106 of CERCLA (the
"Order"), which requires General Chemical Group, AlliedSignal, Inc. and Avtex to
undertake certain removal actions at the acid plant. On October 19, 1998,
General Chemical Group delivered to the EPA written notice of its intention to
comply with the Order, subject to numerous defenses. The requirements of the
Order include preparation of a study to determine the extent of any
contamination at the acid plant site. The GenTek Business has provided for the
estimated costs of $1.6 million for these activities in its accrual for
environmental liabilities relating to the Order. General Chemical Group is
working cooperatively with the EPA with respect to compliance with the Order and
believes that such compliance will not have a material effect on the GenTek
Business' results of operations or financial condition.
Employees/Labor Relations
At December 31, 1998, the GenTek Business, other than Defiance and
Noma, had approximately 1,750 employees, of whom approximately 740 were
full-time salaried employees, approximately 730 were full-time hourly employees
(represented by nine different unions) and approximately 280 were hourly
employees working in nonunion facilities.
The GenTek Business' union contracts have durations which vary from
two to four years. Since 1986, the GenTek Business has been involved in numerous
labor negotiations, only three of which have resulted in work disruptions.
During these disruptions, management operated the plants and
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supplied customers without interruption until the labor disruptions were settled
and new contracts were agreed upon. Union contracts covering less than 10% of
the GenTek Business' full-time hourly employees will be up for renewal during
1999.
At December 31, 1998, Defiance had approximately 730 employees,
approximately one-third of whom were represented by one union. Noma has reported
that, as of December 31, 1998, it had approximately 4,600 employees,
approximately of whom 4,200 were hourly employees and 440 were salaried
employees. Of the hourly employees, approximately 750 were represented by two
different unions, and union contracts covering approximately 520 of them will be
up for renewal at year-end 1999.
Properties
The GenTek Business has offices, storage facilities and manufacturing
facilities at numerous locations throughout the United States, Canada and
Ireland. GenTek's headquarters are located in Hampton, New Hampshire.
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The locations and uses of the major properties of the GenTek Business
are as follows:
<TABLE>
<CAPTION>
Location Segment Use
- ---------------------------- ----------------------- ----------------------------------------------------
<S> <C> <C>
United States
Pittsburg, California Performance Products Production Facility
Richmond, California Performance Products Production Facility
North Claymont, Delaware Performance Products Production Facility, Offices and Warehouse
Augusta, Georgia Performance Products Production Facility
Livonia, Michigan Manufacturing (1) Production Facility
Westland, Michigan Manufacturing (1) Production Facility and Offices
Morton, Mississippi Manufacturing Production Facility
Berkeley Heights, Performance Products Production Facility, Offices and Warehouse
New Jersey
Newark, New Jersey Performance Products Production Facility
Hampton, New Hampshire Offices (1) Offices
Parsippany, New Jersey Offices (1) Offices
Solvay, New York Performance Products Production Facility
Defiance, Ohio Manufacturing Production Facility
Toledo, Ohio Manufacturing Production Facility
Upper Sandusky, Ohio Manufacturing (1) Production Facility
Marcus Hook, Performance Products Production Facility, Offices and Warehouse
Pennsylvania
Midlothian, Texas Performance Products Production Facility
Mineral Wells, Texas Manufacturing Production Facility
Anacortes, Washington Performance Products Production Facility
Racine, Wisconsin Performance Products Production Facility and Offices
Canada
Valleyfield, Quebec Performance Products Production Facility
Stouttville, Ontario Manufacturing Production Facility
Tillsonburg, Ontario Manufacturing (1) Production Facility
Toronto, Ontario Manufacturing Production Facility
Vaughan, Ontario Manufacturing Production Facility
Waterdown, Ontario Manufacturing Production Facility
Ireland
Dublin Performance Products Production Facility, Offices and Warehouse
Mexico
Imuris Manufacturing Production Facility
Juarez Manufacturing (1) Production Facility
Nogales Manufacturing Production Facility
</TABLE>
- --------------------------
(1) Leased.
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Legal Proceedings
General. The GenTek Business is involved in claims, litigation
administrative proceedings and investigations of various types, including the
Milwaukee and Delaware Valley litigation discussed below and certain
environmental proceedings previously discussed. Although the amount of any
liability that could arise with respect to these actions cannot be accurately
predicted, the opinion of management based upon currently-available information
is that any such liability not covered by insurance will have no material
adverse effect on GenTek's results of operations or financial condition.
Milwaukee Litigation. In March 1993, an outbreak of cryptosporidia
occurred in the public water supply of the City of Milwaukee. As a result of
that incident, several lawsuits have been filed with the Milwaukee County
Circuit Court against one or more of the City of Milwaukee, its Department of
Public Works, Sara Lee Corporation ("Sara Lee"), E.D. Wesley Co., Peck Foods
Corporation, certain hotels, numerous insurance companies, several
municipalities and General Chemical Group. The principal allegations against
General Chemical Group are that a water treatment chemical sold to the City of
Milwaukee by General Chemical Group should have removed certain bacteria
contained in the water supply and failed to do so and that General Chemical
Group consulted with the City concerning the water purification.
One of the suits (Markwiese, et al. v. Peck Foods Corporation, et al.
filed in 1993) had been certified, prior to the service of a complaint against
General Chemical Group, as a class action in favor of all persons who sustained
damage as a result of the wrongful acts of the various defendants. An appeal of
this class certification was filed by General Chemical Group and the City of
Milwaukee, and in a March 13, 1998 hearing, a new trial judge ruled that this
matter shall not proceed as a class action. If this matter proceeds to trial, it
is possible that lawyers for the plaintiffs could appeal this ruling after
conclusion of the trial. In addition to the Markwiese action, several other
lawsuits have since been filed by the same lead attorneys in the Circuit Court
of Milwaukee County against the same basic group of defendants. In total,
General Chemical Group believes the total number of individual plaintiffs in all
suits filed to date is approximately 700. The unspecified damages sought by
these various complaints is alleged to be "far in excess of $1.0 million
dollars" for personal injury, economic loss, emotional distress, pain and
suffering, medical expenses and punitive damages.
On September 17, 1998, the court preliminarily approved a class action
settlement with Sara Lee, whereby Sara Lee would pay to the plaintiffs $250,000
to cover certain expenses related to the litigation. Final approval of the
settlement was granted by the court on December 17, 1998. The remaining parties
in the litigation, including General Chemical Group, are continuing in the
discovery phase of the litigation.
General Chemical Group has denied all material allegations of the
complaints and will continue to defend these lawsuits vigorously. Management
further believes that the GenTek Business' available insurance should provide
adequate coverage in the event of an adverse result in this matter, and that
this matter will not have a material adverse effect on GenTek's results of
operations or financial condition.
Delaware Valley Litigation. In April 1998, approximately 40 employees
(and their respective spouses) of the Sun Company, Inc. refinery in Marcus Hook,
Pennsylvania, filed lawsuits in the Court of Common Pleas, Delaware County,
Pennsylvania, against General Chemical Group, alleging that sulfur dioxide and
sulfur trioxide releases from the GenTek Business' Delaware Valley facility
caused various respiratory and pulmonary injuries. Unspecified damages in excess
of $50,000 for each plaintiff are sought. The litigation has entered the
discovery phase. The GenTek Business has denied all material allegations of the
complaints and will continue to defend itself vigorously in this matter.
Management
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further believes that the GenTek Business' current accruals and available
insurance should provide adequate coverage in the event of an adverse result in
this matter and that, based on currently available information, this matter will
not have a material adverse effect on GenTek's results of operations or
financial condition.
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THE GENTEK BUSINESS:
MANAGEMENT
Management
Currently, GenTek's directors and executive officers are Mr. Paul M.
Meister, a director and the President of GenTek, and Mr. Todd M. DuChene, a
director and the Vice President and Secretary of GenTek. The Board of Directors
and management of GenTek will be reconstituted before the Spinoff Date.
The following table sets forth the directors and executive officers of
GenTek as of the Spinoff Date. Prior to the Spinoff, General Chemical Group, as
GenTek's sole shareholder, will elect the Directors of GenTek as of the Spinoff.
Following such election, the Board of Directors will designate the executive
officers of GenTek as of the Spinoff.
<TABLE>
<CAPTION>
Name Age Position
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Paul M. Montrone................... 57 Director; Chairman of the Board
Paul M. Meister.................... 46 Director; Vice Chairman of the Board
Richard R. Russell................. 56 Director; President and Chief Executive
Officer
Michael R. Herman.................. 36 Vice President and General Counsel
William C. Keightley............... 45 Vice President and Chief Financial Officer
Kevin J. O'Connor.................. 48 Controller
John W. Gildea..................... 55 Director
Scott M. Sperling.................. 41 Director
Ira Stepanian...................... 62 Director
</TABLE>
Paul Montrone will be a Director and the Chairman of the Board of
GenTek. He is the Chairman of the Board of General Chemical Group, a position
he has held since 1995, and a Director of General Chemical Group, a position
he has held since 1988, and will continue to serve as a Director and the
Chairman of the Board of New GCG following the Spinoff. Mr. Montrone was
President of General Chemical Group from 1987 to 1994. Mr. Montrone is the
Chairman of the Board and the Chief Executive Officer of Fisher Scientific
International Inc. ("Fisher").
Paul Meister will be a Director and the Vice Chairman of the Board of
GenTek. He is the Vice Chairman of the Board of General Chemical Group, a
position he has held since 1998, and a Director of General Chemical Group, a
position he has held since 1994, and will continue to serve as a Director and
the Vice Chairman of New GCG following the Spinoff. Mr. Meister is the Vice
Chairman of the Board and the Executive Vice President and Chief Financial
Officer of Fisher. Mr. Meister is also a Director of Minerals Technologies
Inc. and M&F Worldwide Corp.
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Richard Russell will be the President and Chief Executive Officer and
a Director of GenTek. He has been since 1994, and will be until the Spinoff, the
President and Chief Executive Officer and a Director of General Chemical Group.
Mr. Russell has also been the President and Chief Executive Officer of General
Chemical Corporation since 1986.
Michael Herman will be Vice President and General Counsel of GenTek.
He has been since 1997, and will be until the Spinoff, the Vice President and
General Counsel of General Chemical Corporation. Mr. Herman had served as Deputy
General Counsel of General Chemical Corporation from 1995 until 1997, and as
Associate General Counsel of General Chemical Corporation from 1992 to 1995.
William Keightley will be Vice President, Finance and Chief Financial
Officer of GenTek. He has been since March 1999, and will be until the Spinoff,
the Vice President and Chief Financial Officer of General Chemical Group. Mr.
Keightley served as Vice President, Finance of Waste Management Inc. from June
1997 to December 1998 and was Vice President, Finance of Wheelabrator
Technologies Inc. ("WTI") from May 1996 to June 1997. From prior to 1994 until
May 1996, Mr. Keightley served as Chief Financial Officer of a subsidiary of
Waste Management Inc.
Kevin O'Connor will be the Controller of GenTek. He has been since
March 1996, and will be until the Spinoff, the Controller of General Chemical
Group. Mr. O'Connor served as Controller of General Chemical Corporation from
1986 to March 1996.
John Gildea will be a Director of GenTek. He has served since 1997,
and will serve until the Spinoff, as a Director of General Chemical Group. Mr.
Gildea has been Managing Director of Gildea Management Company (investment
management firm) since prior to 1994. He is also a Director of American Service
Group, Inc., Barry's Jewelers, Inc. and Konover Property Trust.
Scott Sperling will be a Director of GenTek. He has served since
1996, and will serve until the Spinoff, as a Director of General Chemical Group.
Mr. Sperling has been a Managing Director of Thomas H. Lee Company (private
equity investment firm) since July 1994. Mr. Sperling is Vice President and
Trustee of THL Equity Trust III and General Partner of Equity Advisors III
Limited Partnership, which is the General Partner of THC Equity Trust III. Mr.
Sperling was Managing Partner of The Aeneas Group Inc., a private capital
affiliate of Harvard Management Company, from prior to 1993 to September 1994.
He is also a Director of Fisher, The Learning Company, Inc., Livent, Inc.,
Safelite Glass Corp. and several private corporations.
Ira Stepanian will be a Director of GenTek. He has served since 1996,
and will serve until the Spinoff, as a Director of General Chemical Group. He
was Chairman and Chief Executive Officer of Bank of Boston Corporation and its
principal subsidiary, The First National Bank of Boston, from prior to 1994
until 1995.
Committees of the Board
The Board of Directors of GenTek will have four standing committees:
an Audit Committee; a Compensation Committee; an Executive Committee; and a
Nominating Committee.
The Audit Committee will consist of Messrs. Gildea, Sperling and
Stepanian, with Mr. Stepanian serving as Chairman. It will be responsible for,
among other things, recommending the firm to be appointed as independent
accountants to audit GenTek's financial statements and to perform services
related to the audit; approving in advance the general nature of each
professional service
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performed by the independent public accountants; reviewing the scope and results
of the audit with the independent accountants; reviewing with the management and
the independent accountants GenTek's year-end operating results; considering the
adequacy of the internal accounting and control procedures of GenTek; reviewing
the non-audit services to be performed by the independent accountants, if any;
considering the effect of such performance on the accountants' independence;
directing and supervising, when appropriate, special investigations into matters
within the scope of the independent public accountants' duties; and performing
such other tasks related to and in furtherance of the foregoing as it may
consider necessary or appropriate or as may be assigned to it by the Board from
time to time.
The Compensation Committee will consist of Messrs. Meister and
Sperling, with Mr. Sperling serving as Chairman. It will be responsible for,
among other things, reviewing and recommending compensation arrangements for
Directors and officers; approving such arrangements for other senior level
employees; administering certain benefit and compensation plans of GenTek and
its subsidiaries; monitoring the activities of an internal committee of members
of management established to carry out policies and guidelines with respect to
such plans; and performing such other tasks related to and in furtherance of the
foregoing as it may consider necessary or appropriate or as may be assigned to
it by the Board from time to time. A subcommittee of the Compensation Committee,
comprised solely of "outside directors" (as such term is used in Section 162(m)
of the Code) who are also "Non-Employee Directors" (as such term is defined in
Rule 16b-3 of the Exchange Act), will have exclusive authority to approve any
awards of stock or options to directors of GenTek (other than Non-Employee
Directors) or other individuals who are "officers" of GenTek for purposes of
Section 16 of the Exchange Act under GenTek's Long-Term Incentive Plan
(described below) and to administer elements of the GenTek Performance Plan
(also described below) covered by Section 162(m) of the Code. The subcommittee
will also be responsible for determining whether the performance goals under the
GenTek Inc. Performance Plan have been met. In the remainder of this Information
Statement, references to the Compensation Committee shall be deemed to be
references to the subcommittee in all cases where Section 162(m) of the Code or
Section 16 of the Exchange Act would require that action be taken by the
subcommittee rather than the full Compensation Committee.
The Executive Committee will consist of Messrs. Montrone, Russell and
Stepanian, with Mr. Montrone serving as Chairman. The Executive Committee
possesses, and may exercise during the interval between meetings of the Board,
all the powers of the Board. The Committee is responsible for overseeing the
management and direction of all business and affairs of GenTek, in such manner
as the Executive Committee deems in the best interests of GenTek. Meetings may
be called by the Chief Executive Officer of GenTek or the Chairman of the
Committee.
The Nominating Committee will consist of all members of the Board,
with Mr. Montrone serving as Chairman. The Nominating Committee is responsible
for nominating persons for election to the Board. The Nominating Committee will
consider nominees properly recommended by stockholders.
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THE GENTEK BUSINESS:
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Compensation of Directors
The Non-Employee Directors of GenTek will be entitled to receive cash
and other compensation pursuant to the plans described below.
Cash Compensation. Non-Employee Directors of GenTek will receive
compensation of $40,000 per year, with no additional fees for attendance at the
company's Board or committee meetings. Employee Directors will not be paid any
fees or additional compensation for service as members of GenTek's Board or any
of its committees. All Directors are reimbursed for expenses incurred in
connection with attending GenTek's Board and committee meetings.
Retirement Plan for Non-Employee Directors. Pursuant to GenTek's
Retirement Plan for Non-Employee Directors, any Non-Employee Director who
retires from GenTek's Board with at least five years of service as a Director
(other than Messrs. Montrone and Meister) will be eligible for an annual
retirement benefit for the remainder of such Director's lifetime. The annual
retirement benefit is equal to 50% of the Director fee in effect at the date of
such Director's retirement for a Director who retires with five years of
eligible service and is increased by 10% of the Director fee in effect at the
date of such Director's retirement for each additional year of service, up to
100% of such fee for ten or more years of service as a Director or for Directors
who retire after age 70. Payment of the retirement benefits to any Director will
commence upon the later of the Director's retirement from GenTek's Board or the
attainment of age 60. Retirement benefits may be suspended or terminated if the
retired Director refuses to render consultative services and advice to GenTek or
engages in any activity which competes with GenTek's business.
Restricted Unit Plan for Non-Employee Directors. Prior to the Spinoff,
GenTek will adopt, effective as of the Spinoff, a Restricted Unit Plan for
Non-Employee Directors, pursuant to which each Non-Employee Director of GenTek
(other than Messrs. Montrone and Meister), upon becoming a Director of GenTek,
will receive a one-time grant of 5,000 restricted units under the Restricted
Unit Plan for Non-Employee Directors evidencing a right to receive shares of
GenTek Common Stock, subject to certain restrictions. GenTek will maintain a
memorandum account for each Director who received the grant of restricted units
and credit to such account the amount of any cash dividends and shares of stock
of any subsidiary distributed on the shares of GenTek Common Stock ("Dividend
Equivalents") underlying such Director's restricted units from the date of grant
until the payment date described below. No shares of GenTek Common Stock will be
issued at the time restricted units are granted, and GenTek will not be required
to set aside a fund for any such grant or for amounts credited to the memorandum
account. Pursuant to the terms of the Plan, neither the restricted units nor the
memorandum account may be sold, assigned, pledged or otherwise disposed of
twenty-five percent of the restricted units and the related Dividend Equivalents
will vest for each year of service as a Director of GenTek. Vested restricted
units and the related Dividend Equivalents will not be payable until the
Director ceases to be a member of GenTek's Board. At that time, the Director
will receive one share of GenTek Common Stock for each vested restricted unit,
provided that a Director may elect, prior to the date on which restricted units
vest, to have payment deferred to a later date. Any restricted units and related
Dividend Equivalents that have not vested at the time the Director ceases to be
a Director of GenTek will be canceled unless service has terminated because of
death or disability, in which event all such restricted units and related
Dividend Equivalents will vest immediately. When payment of restricted units is
made, Non-Employee Directors (other than Messrs. Montrone and Meister) will also
receive cash and securities equal to the related Dividend Equivalents, together
with interest on the cash based upon the average quoted rate for ten-year
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U.S. Treasury Notes. In the event of a stock dividend, stock split,
recapitalization, merger, liquidation or similar event, the Board, in its
sole discretion, may make equitable adjustments in outstanding awards
and the number of shares of GenTek Common Stock reserved for issuance under
the plan.
Executive Compensation
In general, compensation for executive officers and other key
employees of GenTek will consist of base salary, annual bonus awards (a portion
of which may be payable in restricted stock) and long-term incentive awards of
options or restricted stock that may be made from time to time under the GenTek
Inc. Long-Term Incentive Plan (described below).
Performance Plan
Prior to the consummation of the Spinoff, the Board of GenTek will
adopt, and General Chemical Group, as sole shareholder of GenTek will approve,
effective upon the consummation of the Spinoff, the GenTek Inc. Performance Plan
(the "GenTek Performance Plan"), pursuant to which executive officers and key
employees of GenTek and its subsidiaries will be eligible to receive annual or
other periodic bonuses. The GenTek Performance Plan will be administered by the
Compensation Committee of GenTek's Board of Directors. Non-Employee Directors
will not be eligible for awards under the GenTek Performance Plan.
Each year, GenTek will establish target incentive bonuses for
participants in the GenTek Performance Plan. Bonuses will be payable under the
GenTek Performance Plan for a year if GenTek meets the performance objectives
for such year selected for a participant or group of participants by the
Compensation Committee. The performance objectives may be based upon either
company-wide or operating unit performance in the following areas: earnings per
share, revenues, operating cash flow, operating earnings, working capital to
sales ratio and return on capital.
In addition, notwithstanding the foregoing, the Compensation Committee
will have the right, in its discretion, to pay to any participant an annual
bonus based on individual performance or any other criteria that the Committee
deems appropriate and, in connection with the hiring of any person or otherwise,
the Compensation Committee may provide for a minimum bonus amount in any
calendar year, regardless of whether performance objectives are attained.
The GenTek Performance Plan will vest broad powers in the Compensation
Committee to administer and interpret the Plan. The Compensation Committee's
powers will include authority, within the limitations set forth in the
Performance Plan, to select the persons to be granted awards, to determine the
time when awards will be granted, to determine and certify whether objectives
and conditions for earning awards have been met, to determine whether payment of
an award will be made at the end of an award period or deferred, and to
determine whether an award or payment of an award should be reduced or
eliminated. The GenTek Performance Plan will also generally vest broad powers in
the Compensation Committee to amend and terminate the GenTek Performance Plan.
Long-Term Incentive Plan
Prior to the consummation of the Spinoff, the Board of Directors of
GenTek will adopt and General Chemical Group, as sole stockholder of GenTek will
approve, effective upon the consummation of the Spinoff, the GenTek Inc.
Long-Term Incentive Plan (the "LTIP"). The LTIP provides for the grant of any or
all of the following types of awards: (1) stock options, including incentive
stock options; (2)
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stock appreciation rights ("SARs"); (3) restricted stock and restricted units;
(4) incentive stock and incentive units; and (5) deferred stock units (each, an
"Award").
The LTIP will also provide for the grant of a split of General
Chemical Group equity-related incentive awards held by all employees in
connection with the Spinoff. See "--General Chemical Group Stock Option and
Restricted Unit Conversion" below.
LTIP awards may be granted to key employees, including executive
officers of GenTek, its subsidiaries and affiliates, but may not be granted to
any Non-Employee Director. The number of employees participating in the LTIP
will vary from year to year. Initially, 1,600,000 shares of GenTek Common Stock
will be authorized for issuance under the LTIP, which number of shares includes
the GenTek shares issued as a result of the split of General Chemical Group
equity-related incentive awards, as described under "--General Chemical Group
Stock Option and Restricted Unit Conversion" below.
If shares subject to an option under the LTIP cease to be subject to
such option, or if shares awarded under the LTIP are forfeited or if an award
otherwise terminates without a payment being made to the participant in the form
of GenTek Common Stock, such shares will again be available for future award
under the LTIP. In the event of certain changes in GenTek's capital structure
affecting GenTek Common Stock, the Compensation Committee may make appropriate
adjustments in the number of shares that may be awarded and in the number of
shares covered by options and other awards then outstanding under the LTIP, and,
where applicable, the exercise price of outstanding awards under the LTIP. The
LTIP will be administered by the Compensation Committee.
Stock Options
The Compensation Committee may grant options to purchase shares of
GenTek Common Stock that are either "qualified," which includes those awards
that satisfy the requirements of Section 422 of the Code for incentive stock
options, or "nonqualified," which includes those awards that are not intended to
satisfy the requirements of Section 422 of the Code. Under the terms of the
LTIP, the exercise price of the options will, unless the Compensation Committee
determines otherwise, not be less than GenTek Common Stock's fair market value
at the time of grant. The exercise price of the option is payable in cash or its
equivalent or, as permitted by the Compensation Committee, by exchanging shares
of GenTek Common Stock owned by the participant, or by a combination of the
foregoing.
The options will generally have a term of ten years, unless the
Compensation Committee specifies a shorter term, and, unless the Compensation
Committee otherwise determines, will become exercisable in four equal annual
installments commencing on the first anniversary of the date of grant. If an
option holder ceases employment with GenTek as a result of the holder's (1)
death, (2) disability, (3) early retirement with the consent of the Compensation
Committee or (4) normal retirement, the holder (or his or her beneficiary or
legal representative) may exercise any option, regardless of whether then
exercisable, for a period of one year (or such greater or lesser period as
determined by the Compensation Committee at or after grant), but in no event
after the date the option otherwise expires. If an option holder's employment is
terminated for any other reason, all of his or her options will immediately
terminate, regardless of whether then exercisable (unless determined otherwise
by the Compensation Committee). The Compensation Committee may provide that a
participant who delivers shares of GenTek Common Stock to exercise an option
when the market value of the GenTek Common Stock exceeds the exercise price of
the option will be automatically granted new options for the number of shares
delivered to exercise the option ("reload options"). Reload options will be
subject to the same terms and conditions as the related option except that the
exercise price will be the fair market value on the date the reload option is
granted and such reload options will not be exercisable for six months.
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Stock Appreciation Rights
The LTIP authorizes the Compensation Committee to grant SARs in tandem
with a stock option, in addition to a stock option, or freestanding and
unrelated to a stock option. SARs entitle the participant to receive the excess
of the fair market value of a stated number of shares of GenTek Common Stock on
the date of exercise over the base price of the SAR. The base price may not be
less than 100% of the fair market value of the GenTek Common Stock on the date
the SAR is granted. The Committee shall determine when an SAR is exercisable,
the method of exercise, and whether settlement of the SAR is to be made in cash,
shares of GenTek Common Stock or a combination of the foregoing.
Restricted Stock and Restricted Units
The LTIP authorizes the Compensation Committee to grant Awards in the
form of restricted stock and restricted units. For purposes of the LTIP,
restricted stock is an Award of GenTek Common Stock and a restricted unit is a
contractual right to receive GenTek Common Stock (or cash based on fair market
value of GenTek Common Stock). Such awards will be subject to such terms and
conditions, if any, as the Compensation Committee deems appropriate. Unless
otherwise determined by the Compensation Committee, participants will be
entitled to receive either currently or at a future date, dividends or other
distributions paid with respect to restricted stock and, if and to the extent
determined by the Compensation Committee, either will be credited with or
receive, currently an amount equal to dividends paid with respect to the
corresponding number of shares covered by restricted units. Restricted stock and
restricted units become vested and nonforfeitable and the restricted period will
lapse pro rata on each of the first four anniversaries of the date of grant
unless the Compensation Committee determines otherwise. If a participant's
employment terminates because of death, disability, early retirement (with the
Compensation Committee's consent) or normal retirement, during the period in
which the transfer of shares is restricted, the restricted stock or restricted
units will become vested and nonforfeitable as to that percentage of the shares
based upon the days worked as a percentage of total days in the restricted
period (or such greater percentage as the Compensation Committee may determine).
Unless nonforfeitable on the date of termination or otherwise determined by the
Compensation Committee, a restricted stock or restricted unit award will be
forfeited on termination of employment.
Incentive Stock and Incentive Units
The LTIP allows for the grant of Awards in the form of incentive stock
and incentive units. For purposes of the LTIP, incentive stock is an Award of
GenTek Common Stock and an incentive unit is a contractual right to receive
GenTek Common Stock (or cash based on fair market value of GenTek Common Stock).
Such awards will be contingent upon the attainment, in whole or in part, of
certain performance objectives over a period to be determined by the
Compensation Committee. With regard to a particular performance period, the
Compensation Committee will have the discretion, subject to the LTIP's terms, to
determine the terms and conditions of such Awards, including the performance
objectives to be achieved during such period and the determination of whether
and to what degree such objectives have been attained. Unless otherwise
determined by the Compensation Committee, participants will be entitled to
receive, either currently or at a future date, all dividends and other
distributions paid with respect to the incentive stock and, if and to the extent
determined by the Compensation Committee, either to be credited with or receive
currently an amount equal to dividends paid with respect to the corresponding
number of shares covered by the incentive units. If a participant's employment
terminates because of death, disability, early retirement (with the Compensation
Committee's consent) or normal retirement during the measurement period, an
Award of incentive stock or incentive units will become vested and
nonforfeitable as to that percentage of the award that would have been earned
based on the attainment of performance objectives for the days worked as a
percentage
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of total days in the performance period (or such greater percentage as the
Compensation Committee may determine). Unless the Compensation Committee
determines otherwise, any incentive stock or incentive unit award will be
forfeited on termination of employment.
Deferred Stock
An Award of deferred stock confers upon a participant the right to
receive shares of GenTek Common Stock at the end of a specified deferral period.
On such date or dates established by the Compensation Committee and subject to
such terms and conditions as determined by the Compensation Committee, a
participant may be permitted to defer receipt of all or a portion of his or her
annual salary and/or annual incentive bonus ("Deferred Annual Amount") and
receive the equivalent amount in elective units based on the fair market value
of GenTek Common Stock on the date of grant. To the extent determined by the
Compensation Committee, a participant may also receive supplemental stock units
for a percentage of the Deferred Annual Amount. Deferred stock units carry no
voting rights until the shares have been issued. The Compensation Committee will
determine whether any dividend equivalents attributable to deferred units are to
be paid currently or credited to the participant's account and deemed reinvested
in deferred stock units. Deferred stock units and dividend equivalents with
respect thereto are fully vested at all times. Unless the Compensation Committee
provides otherwise, supplemental stock units and dividend equivalents with
respect thereto will become fully vested on the fourth anniversary of the date
the corresponding deferred amount would have been paid and free standing stock
units and dividend equivalents with respect thereto will become fully vested on
the third anniversary of the corresponding GenTek Common Stock in lieu of cash
Award.
If there is a "Change in Control", all Awards that are not then vested
will become vested and any restrictions or limitations will lapse. For these
purposes, a "Change in Control" shall mean the occurrence of any of the
following events: (1) the members of the Board at the beginning of any
consecutive twenty-four calendar month period (the "Incumbent Directors") cease
for any reason other than death to constitute at least a majority of the Board,
provided that any director whose election, or nomination for election by
GenTek's stockholders, was approved by a vote of at least a majority of the
members of the Board then still in office who were members of the Board at the
beginning of such twenty-four calendar month period, other than as a result of a
proxy contest, or any agreement arising out of an actual or threatened proxy
contest, will be treated as an Incumbent Director; or (2) any "person",
including a "group" (as such terms are used in Sections 13(d) and 14(d)(2) of
the Exchange Act), but excluding GenTek, any subsidiary of GenTek or any
employee benefit plan of GenTek or any subsidiary of GenTek is or becomes the
"beneficial owner" (as defined in Rule 13(d)(3) under the Exchange Act),
directly or indirectly, of securities of GenTek representing 20% or more of the
combined voting power of GenTek's then outstanding securities; or (3) the
stockholders of GenTek approve a definitive agreement (A) for the merger or
other business combination of GenTek with or into another corporation, a
majority of the directors of which were not directors of GenTek immediately
prior to the merger and in which the stockholders of GenTek immediately prior to
the effective date of such merger own a percentage of the voting power in such
corporation that is less than one-half of the percentage of the voting power
they owned in GenTek immediately prior to such transaction or (B) for the sale
or other disposition of all or substantially all of the assets of GenTek to any
other entity; provided, in each case, that such transaction has been
consummated; or (4) the purchase of GenTek Common Stock pursuant to any tender
or exchange offer made by any "person", including a "group" (as such terms are
used in Sections 13(d) and 14(d)(2) of the Exchange Act), other than GenTek, any
subsidiary of GenTek, or an employee benefit plan of GenTek or any subsidiary of
GenTek, for 20% or more of the Stock of GenTek. Notwithstanding the foregoing, a
"Change in Control" will not be deemed to occur in the event GenTek files for
bankruptcy, liquidation or reorganization under the United States Bankruptcy
Code.
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The Board or the Compensation Committee may amend, suspend or
terminate the LTIP.
Other Benefit Plans and Arrangements
The GenTek Business' employees will continue to participate in the
General Chemical Corporation Salaried Employees Pension Plan (the "Pension
Plan") -- of which GenTek will continue to be the sponsor following the Spinoff
- -- on the same terms and conditions as before the Spinoff, as well as in the
other benefit plans and arrangements that GenTek will either establish or
continue to sponsor pursuant to the Employee Benefits Agreement. In addition to
the Pension Plan, GenTek will continue to be the sponsor of existing employee
benefit plans that cover employees of the GenTek Business. At the time of or
following the Spinoff, GenTek will cause a transfer of plan assets and
liabilities, where applicable, to a corresponding "mirror" employee benefit plan
established by New GCG for the benefit of employees of the Industrial Chemicals
Business and who were participants in the GenTek sponsored plans immediately
prior to the Spinoff. For further information on the Employee Benefit Agreement
to be entered into by GenTek and New GCG on the Spinoff Date, see the section
"Arrangements Between GenTek and New GCG Relating to the Spinoff -- Employee
Benefits Agreement."
A participating employee's annual retirement benefit is determined by
the employee's credited service under the Pension Plan and average annual
earnings during the five years of the final ten years of service credited under
the Pension Plan for which such employees' earnings were highest. Annual
earnings include principally salary, overtime and short-term incentive
compensation. The Pension Plan provides that a participating employee's right to
receive benefits under the Pension Plan becomes fully vested after five years of
service. Under the Pension Plan, benefits are adjusted by a portion of the
social security benefits received by participants.
In addition, it is anticipated that GenTek's key executives will
participate in an unfunded nonqualified excess benefit plan which pays benefits
which would otherwise accrue in accordance with the provisions of the Pension
Plan, but which are not payable under the Pension Plan by reason of certain
benefit limitations imposed by the Code.
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The table below indicates the estimated maximum annual retirement
benefit a hypothetical participant would be entitled to receive under the
Pension Plan and the excess benefit plan (without regard to benefit limitations
imposed by the Code) before any deduction for social security benefits if the
retirement occurred December 31, 1998, at the age of 65, after the indicated
number of years of credited service and if average annual earnings equaled the
amounts indicated.
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE(2)
------------------------------------------------------------------------
AVERAGE ANNUAL 15 20 25 30 35
EARNINGS(1) YEARS YEARS YEARS YEARS YEARS
- ------------------------------------- --------------- -------------- ------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
$ 200,000......................... $ 60,000 $ 80,000 $100,000 $100,000 $105,000
250,000......................... 75,000 100,000 125,000 125,000 131,250
300,000......................... 90,000 120,000 150,000 150,000 157,500
400,000......................... 120,000 160,000 200,000 200,000 210,000
500,000......................... 150,000 200,000 250,000 250,000 262,500
600,000......................... 180,000 240,000 300,000 300,000 315,000
700,000......................... 210,000 280,000 350,000 350,000 367,500
800,000......................... 240,000 320,000 400,000 400,000 420,000
900,000......................... 270,000 360,000 450,000 450,000 472,500
1,000,000......................... 300,000 400,000 500,000 500,000 525,000
</TABLE>
(1) Compensation qualifying as annual earnings under the Pension Plan
approximate the amounts set forth as Salary and Bonus in the Summary
Compensation table for the individuals listed on such table.
(2) The number of years of credited service under the Pension Plan for
Messrs. Russell, Passino, Tanis, Wilkinson and Klink is approximately 22,
19, 11, 14 and 24, respectively.
Summary Compensation Table
The following table summarizes compensation awarded or paid by
General Chemical Group and its subsidiaries during the periods indicated below
to GenTek's Chief Executive Officer and the four most highly compensated other
executive officers of General Chemical Group at year-end 1998 who will be
employees of GenTek subsidiaries after the Spinoff (collectively, the "Named
Executive Officers"). The Named Executive Officers (other than the Chief
Executive Officer) will not be executive officers of GenTek after the Spinoff
and will be employees of General Chemical Corporation, a subsidiary of GenTek.
See "The GenTek Business: Management." GenTek expects, however, that its senior
management will receive compensation similar to that received by the senior
management of General Chemical Group in the past.
All stock compensation in prior years has been in the form of Common
Stock, or options to purchase Common Stock, of General Chemical Group.
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<PAGE>
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation Awards
-------------------------------------------------------------------------
All Other
Name and Fiscal Salary Bonus Options Compensation
Principal Position(1) Year ($) ($) (#) ($)
- --------------------- ------ ------- ------- ------- ---------------
<S> <C> <C> <C> <C> <C>
Richard R. Russell 1998 400,000 75,000 -- 26,000
President and Chief 1997 400,000 375,000 -- 46,000
Executive Officer 1996 400,000 425,000 400,000 49,000
Ralph M. Passino 1998 250,000 50,000 -- 16,000
Vice President and 1997 250,000 225,000 -- 28,000
General Manager, 1996 250,000 265,000 65,000 30,000
Manufacturing Group
James N. Tanis 1998 250,000 50,000 -- 16,000
Vice President and 1997 250,000 225,000 -- 28,000
General Manager, 1996 250,000 225,000 65,000 28,000
Performance Products
James A. Wilkinson 1998 220,000 40,000 -- 14,000
Vice President, 1997 220,000 110,000 -- 20,000
Manufacturing 1996 220,000 100,000 20,000 18,000
Bodo B. Klink 1998 205,000 35,000 -- 13,000
Vice President, Business 1997 205,000 120,000 5,000 20,000
Development and Services 1996 195,000 150,000 20,000 20,000
</TABLE>
- --------------------------
(1) Except for Mr. Russell, who will be the President and Chief Executive
Officer of GenTek, none of the Named Executive Officers will be an officer
of GenTek. The positions indicated in the table are such persons'
positions with General Chemical Group.
Option Grants
The following table sets forth information concerning individual
grants of stock options by General Chemical Group to Named Executive Officers
through year-end 1998 for the purchase of General Chemical Group Common Stock.
For a discussion of the treatment of General Chemical Group stock option plans
in connection with the Spinoff with respect to the executive officers of GenTek,
see "--Executive Compensation" above.
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<PAGE>
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------------------------------------------
Value of Unexercised
Shares In-the-Money
Acquired Options at 12/31/98 ($)(1)
on Value ----------------------------
Name Exercise Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- -------- ------------ ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Richard R. Russell -- -- -- 400,000 0 0
Ralph M. Passino -- -- 24,000 41,000 0 0
James N. Tanis -- -- 24,000 41,000 0 0
James A. Wilkinson -- -- 12,000 8,000 0 0
Bodo B. Klink -- -- 12,000 13,000 0 0
</TABLE>
General Chemical Group Stock Option and Restricted Unit Conversion
Pursuant to the Employee Benefits Agreement, effective on the Spinoff
Date, holders of outstanding options to purchase General Chemical Group common
stock and holders of restricted stock units will have their interests adjusted
as described below.
Stock Options. Employees of GenTek who hold General Chemical Group
stock options will receive options to purchase under the GenTek LTIP the same
number of shares of GenTek as entitled by their GCG stock options. The exercise
price of their existing General Chemical Group stock options will be adjusted,
and the exercise price of their GenTek stock options will be established, in a
manner that preserves (1) the difference between the exercise price and value of
the shares covered by the General Chemical Group stock option and (2) the ratio
of the exercise price per share to the fair market value of the share covered by
the option. All other terms of such adjusted options will remain unchanged.
Individuals who continue to provide employment, consulting and similar services
to both GenTek and New GCG will similarly retain their options to acquire shares
of Common Stock of General Chemical Group and will receive additional options to
acquire shares of Common Stock of GenTek, in each case as adjusted in the manner
described above.
Restricted Units. Each restricted unit, whether held by employees of
GenTek or New GCG, will, following the Spinoff Date, represent a similar award
with respect to a share of each of GenTek and New GCG.
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<PAGE>
BENEFICIAL OWNERSHIP OF GENTEK
AND GENERAL CHEMICAL GROUP COMMON STOCK
The table below sets forth, to the best knowledge and belief of
GenTek and General Chemical Group, certain information regarding the beneficial
ownership of shares of Common Stock of General Chemical Group by (1) each person
who beneficially owns more than 5% of such shares, (2) each of the Directors of
General Chemical Group, (3) each of the Named Executive Officers and (4) all
Directors and executive officers as a group.
As of the Spinoff, the authorized, issued and outstanding capital
stock of GenTek will be substantially identical to that of General Chemical
Group. As a result, the issued and outstanding capital stock of GenTek will
consist of shares of Common Stock, entitling its holder to one vote for each
share, and Class B Common Stock, entitling its holder to ten votes for each
share. Holders of Class B Common Stock may convert each such share of Class B
Stock at any time and from time to time into one share of Common Stock. Paul M.
Montrone holds or controls (including the Montrone Trusts) 9,758,421 shares of
Class B Common Stock of General Chemical Group representing all of the issued
and outstanding shares of Class B Common Stock of General Chemical Group. In
order to obtain the private letter ruling from the IRS concerning the tax-free
nature of the Spinoff, General Chemical Group requested, and Mr. Montrone and
the Montrone Trusts agreed to, the Class B Conversion, which will result in the
conversion of 5,800,000 shares of Class B Common Stock into Common Stock of
General Chemical Group on or prior to the Record Date. As a result of such
conversion, the voting power of the shares held or controlled by Mr. Montrone
and the Montrone Trusts will decrease from 89.9% to 80.6%. General Chemical
Group believes that, without the Class B Conversion, the Spinoff could have
adverse tax consequences to General Chemical Group. See "Description of Capital
Stock of GenTek."
The ownership information presented below: (1) reflects the
distribution ratio of one share of GenTek Common Stock for every share of Common
Stock of General Chemical Group; and (2) assumes no change in record ownership
of Common Stock of General Chemical Group since March 15, 1999, other than as
indicated in the notes to this table.
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<PAGE>
<TABLE>
<CAPTION>
Beneficial Ownership Beneficial Ownership of
of GenTek General Chemical Group
---------------------------- -----------------------------
Name of Common Percent of Common Percent of
Beneficial Owner Stock Class (1) Stock Class (1)
- ----------------- ------ ---------- ------- ----------
<S> <C> <C> <C> <C>
5% Shareholders
Paul M. Montrone(2)(3)(4)(5) ...... 9,811,421 47.3% 9,811,421 47.3%
1996 and February 1998
GRATs(3)(5) ................... 3,552,502 17.1 3,552,502 17.1
Thomson Horstmann & Bryant,
Inc.(6) ....................... 889,250 4.3(13) 889,250 4.3(13)
Franklin Resources, Inc.(7) ....... 878,100 4.2(13) 878,100 4.2(13)
C.A. Delaney Capital Management
Ltd.(8)........................ 755,132 3.6(13) 755,132 3.6(13)
J O Hambro Capital Management
Limited(9) .................... 753,400 3.6(13) 753,400 3.6(13)
J.P. Morgan & Co. Incorporated(10). 747,700 3.6(13) 747,700 3.6(13)
Equitable Life Assurance
Society(11) ..................... 650,000 3.1(13) 650,000 3.1(13)
John W. Gildea (12) ............... 590,996 2.9(13) 590,996 2.9(13)
Directors and Officers
Paul M. Montrone (2)(3)(4)(5) ..... 9,811,421 47.3% 9,811,421 47.3%
John W. Gildea (12) ............... 590,996 2.9(13) 590,996 2.9(13)
Richard R. Russell (14) ........... 76,972 * 76,972 *
Ralph M. Passino (15) ............. 76,986 * 76,986 *
James N. Tanis (16) ............... 69,986 * 69,986 *
James A. Wilkinson (17) ........... 46,693 * 46,693 *
Bodo W. Klink (18) ................ 39,157 * 39,157 *
Paul M. Meister (19) .............. 17,500 * 17,500 *
Scott M. Sperling (20) ............ 25,000 * 25,000 *
Ira Stepanian (20) ................ 25,000 * 25,000 *
All directors and Named Executive
Officers as a group (10 persons)
(21)............................. 10,779,711 52.0(13) 10,779,711 52.0(13)
</TABLE>
- --------------------------
* Less than 1%.
(1) The percentage ownership of Common Stock of each company has been
calculated assuming a total of 20,731,613 shares are issued and
outstanding, which reflects 10,973,192 shares of Common Stock and
9,758,421 shares of Class B Common Stock, the number of shares of General
Chemical Group issued and outstanding as of March 15, 1999. For percentage
ownership based on Common Stock only, see note (21) to this table.
The Class B Conversion, which will take place on or prior to the Record
Date, will result in the conversion of 5,800,000 shares of Class B Common
Stock into Common Stock so that, on the Spinoff Date, each of GenTek and
General Chemical Group will have 16,773,192 shares of
66
<PAGE>
<PAGE>
Common Stock and 3,958,421 shares of Class B Common Stock (i.e., a total
of 20,731,631 shares) issued and outstanding.
(2) Includes 2,205,919 shares of Class B Common Stock held directly by Mr.
Montrone. Also includes the shares of Class B Common Stock, the shares
owned by the 1996 GRAT, the February 1998 GRAT, the December 1998 GRAT and
the 1999 GRAT. By virtue of his position as co-trustee of the December
1998 GRAT and the 1999 GRAT and his relationship with the trustee of the
1996 GRAT and the February 1998 GRAT, as well as his status as the settlor
and annuity beneficiary of such GRATs, Mr. Montrone may be deemed
beneficial owner of all the shares held by such GRATs. The address for Mr.
Montrone is c/o The General Chemical Group Inc., Liberty Lane, Hampton,
New Hampshire 03842. See also "Certain Relationships and Affiliate
Transactions--Stockholder Agreements."
(3) A grantor retained annuity trust formed in 1996 (the "1996 GRAT") owns
2,044,021 shares of Class B Common Stock. A grantor retained annuity trust
formed in February 1998 (the "February 1998 GRAT") owns 1,508,481 shares
of Class B Common Stock. Mr. Montrone was the settlor, and is the annuity
beneficiary, of both the 1996 GRAT and the February 1998 GRAT. Sandra G.
Montrone, the wife of Mr. Montrone, is the sole trustee of the 1996 GRAT
and the sole trustee with investment and voting discretion of the February
1998 GRAT. By virtue of her position as sole trustee, Ms. Montrone may be
deemed the beneficial owner of all shares held by the 1996 GRAT and the
February 1998 GRAT. Wilmington Trust Company is the administrative trustee
of the February 1998 GRAT. The address for the 1996 GRAT and the February
1998 GRAT is c/o Sandra G. Montrone, as trustee, Liberty Lane, Hampton,
New Hampshire 03842.
(4) Two grantor retained annuity trusts, one formed in December 1998 (the
"December 1998 GRAT") and another formed in March 1999 (the "1999 GRAT"),
of which Mr. and Ms. Montrone are co-trustees, each own 2,000,000 shares
of Class B Common Stock. Wilmington Trust Company is the administrative
trustee of the December 1998 GRAT and the 1999 GRAT. By virtue of their
position as co-trustees, each of Mr. and Ms. Montrone may be deemed
beneficial owner of all shares held by the December 1998 GRAT and the 1999
GRAT.
(5) Does not include 100,000 shares of Common Stock held by a charitable
foundation, of which Mr. Montrone is a Director and Ms. Montrone is a
Director and officer. By virtue of their positions with the charitable
foundation, Mr. and Ms. Montrone may be deemed to be beneficial owners of
the shares of Common Stock held by the charitable foundation. Mr. and Ms.
Montrone disclaim any beneficial ownership of the 100,000 shares of Common
Stock held by the charitable foundation.
(6) The information presented herein is based solely upon a Schedule 13G
filing made with the SEC by Thomson Horstmann Bryant, Inc. ("Horstmann")
on January 28, 1999. According to such filing, Horstmann as sole voting
power over 572,600 of the above shares, shared voting power over 15,600 of
the above shares and sole dispositive power over all of the above shares.
The address of Horstmann is Park 80 West, Plaza Two, Saddle Brook, New
Jersey 07663.
(7) The information presented herein is based solely upon a Schedule 13G
filing made with the SEC by Franklin Resources, Inc. ("Franklin") on
January 28, 1999. According to such filing, Franklin filed such Schedule
13G on behalf of the following group of persons: (i) Franklin itself
(parent holding company); (ii) Mr. Charles B. Johnson (principal
shareholder of parent holding company); (iii) Mr. Rupert H. Johnson, Jr.
(principal shareholder of parent holding company); and (iv) Franklin
Mutual Advisors, Inc. (investment advisor). According to the Schedule 13G
filing,
67
<PAGE>
<PAGE>
Franklin Mutual Advisors, Inc. possesses sole voting and dispositive power
over all of the above shares. Neither Franklin nor Messrs. Charles or
Rupert Johnson possess sole voting or sole dispositive power over any of
the above shares. The address of Franklin, Mr. Charles B. Johnson and Mr.
Rupert H. Johnson, Jr. is 777 Mariners Island Boulevard, 6th Floor, San
Mateo, CA 94404. The address of Franklin Mutual Advisers, Inc. is 51 John
F. Kennedy Parkway, Short Hills, NJ 07078.
(8) The information presented herein is based solely upon information provided
by C.A. Delaney Capital Management Ltd. ("Delaney Capital") to General
Chemical Group in February 1999. According to Delaney Capital, Spectrum
United Canadian Growth Fund and the private clients, for which Delaney
Capital acts as the investment manager, are registered holders of 493,500
of the above shares and 261,632 of the above shares, respectively.
According to a Schedule 13G filing made with the SEC by Delaney Capital on
February 13, 1998, Delaney Capital possess sole voting and dispositive
power over the shares whose registered holders are Spectrum United
Canadian Growth Fund and private clients. The address of Delaney Capital
is BCE Place, Canada Trust Tower, 161 Bay Street, P.O. Box 713, Suite
5100, Toronto, Ontario, Canada M5J 251.
(9) The information presented herein is based solely upon a Schedule 13G
filing made with the SEC by J O Hambro Capital Management Limited
("Hambro") on April 2, 1999. According to such filing, Hambro filed such
Schedule 13G on behalf of the following group of persons: (i) J O Hambro
Capital Management (Holdings) Limited ("Hambro Holdings"), the ultimate
holding company of Hambro; (ii) Hambro itself, as co-investment advisor to
North Atlantic Smaller Companies Investment Trust plc ("NASCIT") and
American Opportunity Trust plc ("American Opportunity Trust"), and as
investment advisor to Oryx International Growth Fund Limited ("Oryx") as
well as private clients; (iii) Mr. Christopher H.B. Mills, as executive
director of NASCIT, director of Hambro and Oryx, and co-investment adviser
to NASCIT and American Opportunity Trust; (iv) Growth Financial Services
Limited ("GFS"), as provider of management services to NASCIT; (v) NASCIT;
(vi) American Opportunity Trust; (vii) Oryx; and (viii) Consulta (Channel
Islands) Limited ("Consulta"), as investment advisor of Oryx. According to
the Schedule 13G filing, Holdings, Hambro and Mr. Christopher H.B. Mills
each possesses shared voting and dispositive power over all of the above
shares; GFS and NASCIT each possesses shared voting and dispositive power
over 350,000 of the above shares; American Opportunity Trust possesses
shared voting and dispositive power over 110,000 of the above shares; and
Oryx and Consulta each possesses shared voting and dispositive power over
75,000 of the above shares. None of the above persons possess sole voting
or sole dispositive power over any of the above shares. The address of
Holdings, Hambro, Mr. Christopher H.B. Mills (business address), NASCIT
and American Opportunity Trust is 10 Park Place, London SW1A, 1LP,
England. The address of GFS is 77 Middle Street, Brockham, Surrey RHS 7HL,
England. The address of Oryx and Consulta is Bermuda House, St. Julian's
Avenue, St. Peter Port, Guernsey.
(10) The information presented herein is based solely upon a Schedule 13G/A
filing made with the SEC by J.P. Morgan & Co. Incorporated ("J.P. Morgan")
on February 22, 1999. According to such filing, J.P. Morgan possesses sole
voting power over 656,200 of the above shares and sole dispositive power
over all of the above shares. The address of J.P. Morgan is 60 Wall
Street, New York, NY 10260.
(11) The information presented herein is based solely upon a Schedule 13D
filing made with the SEC by Equitable Life Assurance Society ("Equitable")
on May 2, 1997. According to such filing, Equitable possesses sole voting
and sole dispositive power over all of such shares. The address of
Equitable is City Place House, 55 Basinghall Street, London EC2V 5DR,
England.
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<PAGE>
(12) The information presented herein is based solely upon a Schedule 13D
filing made with the SEC on February 16, 1999 by Mr. John W. Gildea, a
director of General Chemical Group, on behalf of himself and Network Fund
III, Ltd. ("Network"). Network is an investment fund managed by Gildea
Management Company, of which Mr. Gildea is the Chairman of the Board of
Directors, Chief Executive Officer and sole stockholder. According to such
filing, Network possesses sole voting power over 470,996 shares of the
above shares and sole dispositive power over 470,996 of the above shares
while Mr. Gildea possesses sole voting and sole dispositive power over all
of the above shares. The address of Mr. Gildea is 115 East Putnam Avenue,
Greenwich, CT 06830. The address for Network is P.O. Box 219, Butterfield
House, Grand Cayman, Cayman Islands, BWI.
(13) The percentage ownership has been calculated based on the total number of
Common Stock and Class B Common Stock issued and outstanding. If based on
Common Stock only, percentage ownership of Common Stock for each of
Horstmann, Franklin, Delaney Capital, Hambro, J.P. Morgan, Equitable and
Mr. Gildea is 8.1%, 8.0%, 6.9%, 6.9%, 6.8%, 5.9% and 5.4%, respectively.
If such calculation is based on Common Stock outstanding after the Class B
Conversion, the percentage ownership of Common Stock for each of
Horstmann, Franklin, Delaney Capital, Hambro, J.P. Morgan, Equitable and
Mr. Gildea is 5.3%, 5.2%, 4.5%, 4.5%, 4.4%, 3.8% and 3.5%, respectively.
(14) Includes 20,000 shares of Common Stock held by Mr. Russell directly, 1,000
shares of Common Stock held by Mr. Russell's daughter, an aggregate of
55,972 restricted units granted pursuant to the General Chemical Group's
Restricted Unit Plan, of which 11,194 restricted units vested on each of
November 15, 1996, May 15, 1997 and May 15, 1998 and 22,390 restricted
units will vest on May 15, 1999. Mr. Russell disclaims any beneficial
ownership of the 1,000 shares of Common Stock held by his daughter.
(15) Consists of 9,000 shares of Common Stock held by Mr. Passino's wife and
children, an aggregate of 27,986 restricted units granted pursuant to the
General Chemical Group's Restricted Unit Plan, of which 5,597 restricted
units vested on each of November 15, 1996, May 15, 1997 and May 15, 1998
and 11,195 restricted units will vest on May 15, 1999, options to purchase
40,000 shares of Common Stock, which options vested 12,000 shares on each
of May 15, 1997 and May 15, 1998 and 16,000 shares will vest on May 15,
1999. Mr. Passino disclaims any beneficial ownership of the 9,000 shares
of Common Stock held by his wife and children.
(16) Includes 2,000 shares of Common Stock held by Mr. Tanis directly, an
aggregate of 16,791 restricted units granted pursuant to the General
Chemical Group's Restricted Unit Plan, of which 5,597 restricted units
vested on each of November 15, 1996, May 15, 1997 and May 15, 1998 and
11,195 restricted units will vest on May 15, 1999. Also includes options
to purchase 40,000 shares of Common Stock, which options vested 12,000
shares on each of May 15, 1997 and May 15, 1998 and 16,000 shares will
vest on May 15, 1999.
(17) Includes 13,633 shares of Common Stock held by Mr. Wilkinson directly,
4,353 shares held by Mr. Wilkinson's spouse, 8,707 restricted units
vesting on May 15, 1999 and options to purchase 20,000 shares of Common
Stock, which options vested 6,000 shares on each of May 15, 1997 and May
15, 1998 and will vest 8,000 shares on May 15, 1999.
(18) Includes 500 shares of Common Stock held by Mr. Klink directly, an
aggregate of 18,657 restricted units granted pursuant to the General
Chemical Group's Restricted Unit Plan, of which 3,732 restricted units
vested on each of November 15, 1996, May 15, 1997 and May 15, 1998 and
7,461 restricted units will vest on May 15, 1999. Also includes options to
purchase 20,000 shares of
69
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<PAGE>
Common Stock, which options vested 6,000 shares on each of May 15, 1997
and May 15, 1998, and 8,000 shares will vest on May 15, 1999.
(19) Includes 10,000 shares of Common Stock owned by Mr. Meister directly, an
aggregate of 7,500 restricted units granted pursuant to the General
Chemical Group's Restricted Unit Plan, of which 1,500 restricted units
vested on each of November 15, 1996, May 15, 1997 and May 15, 1998 and
3,000 restricted units will vest on May 15, 1999.
(20) Includes 5,000 restricted units granted pursuant to General Chemical
Group's Restricted Unit Plan for Non-Employee Directors and options to
purchase 20,000 shares of Common Stock.
(21) Of such shares, 9,811,421 are beneficially owned by Mr. Montrone (see
notes (2), (3), (4) and (5)) and 590,996 are beneficially owned by Mr.
Gildea (see note (12)).
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CERTAIN RELATIONSHIPS AND AFFILIATE TRANSACTIONS
Agreements with Latona
Latona is a management company that, since 1995, has been providing
General Chemical Group with strategic management, business and financial
advisory services, including guidance and advice related to financings, security
offerings, recapitalizations, restructurings, acquisitions and tax and employee
benefit matters. In 1998 and 1999, Latona has received or will receive $6.3
million and $7.65 million, respectively, of fees for services provided to
General Chemical Group, which amounts also include fees for advisory services
provided by Latona with respect to acquisitions, business combinations and other
strategic transactions. Paul M. Montrone, the controlling stockholder and
Chairman of the Board of General Chemical Group, also controls Latona. In
addition, Paul M. Meister, a director of General Chemical Group and GenTek, is a
Managing Director of Latona.
In connection with the Spinoff, Latona has agreed to provide its
services separately to each of GenTek and New GCG and to split its current fee
between the two companies. As a result, each of GenTek and New GCG will pay
Latona, in 1999, an annual fee of $4.5 million and $1.5 million, respectively,
payable quarterly in advance, adjusted annually after 1999 for increases in the
U.S. Department of Labor, Bureau of Labor Statistics, Consumer Price Index. In
addition, if Latona provides advisory services to GenTek or New GCG in
connection with any acquisition, business combination or other strategic
transaction, GenTek or New GCG, as the case may be, will pay Latona additional
fees, comparable to those received by investment banking firms for such services
(subject to the approval of a majority of such company's independent directors).
Latona's agreements with GenTek and New GCG will be substantially
similar to General Chemical Group's existing agreement with Latona and will
extend through 2004. The agreements may be terminated by GenTek or New GCG (as
the case may be) or Latona if the other party ceases, or threatens to cease, to
carry on its business, or commits a material breach of the agreement which is
not remedied within 30 days of notice of such breach. Each of GenTek and New GCG
may terminate its agreement if Mr. Montrone ceases to hold, directly or
indirectly, shares of its capital stock constituting at least 20% of the
aggregate voting power of its capital stock. Proposals regarding amendments to,
waivers of, extensions of or other changes in the terms of the agreement with
Latona, as well as any transactions perceived to involve potential conflicts of
interest, will be dealt with on a case-by-case basis, taking into account
relevant factors including the requirements of the NYSE and prevailing corporate
practices.
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Stockholder Agreements
Paul M. Montrone, the Chairman of the Board of General Chemical
Group, holds or controls (including through the Montrone Trusts) all of the
Class B Common Stock and approximately 47.1% of the total outstanding shares of
stock of General Chemical Group. In order to obtain the private letter ruling of
the IRS concerning the tax-free nature of the Spinoff, General Chemical Group
requested the conversion of, and Mr. Montrone and the Montrone Trusts agreed to
convert, some shares of Class B Common Stock into Common Stock of General
Chemical Group. As a result of such conversion, the voting power of the shares
held or controlled by Mr. Montrone and the Montrone Trusts will decrease from
89.9% to 80.6%. General Chemical Group believes that, without the Class B
Conversion, the Spinoff could have adverse tax consequences to General Chemical
Group. See also "Beneficial Ownership of GenTek and General Chemical Group
Common Stock."
Pursuant to a registration rights agreement with General Chemical
Group, Mr. Montrone and the Montrone Trusts may request, at any time until April
1, 2004, the registration of their shares of Common Stock of GenTek (including
shares of Common Stock received upon conversion of any Class B Common Stock) for
sale under the Securities Act. GenTek will be required to accept up to three
requests for registration and, in addition, to include the shares of Mr.
Montrone and the Montrone Trusts in a proposed registration of shares of GenTek
Common Stock under the Securities Act in connection with the sale of shares of
Common Stock by GenTek or any other stockholder of GenTek. GenTek will be
responsible to pay the expenses of the registration of shares of Mr. Montrone
and the Montrone Trusts, other than brokerage and underwriting commissions and
taxes relating to the sale of the shares. See "The Spinoff," "Beneficial
Ownership of GenTek and General Chemical Group Common Stock" and "Risk
Factors--Control by and Relationship with Principal Stockholder; Potential
Conflicts of Interest."
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ARRANGEMENTS BETWEEN
GENTEK AND NEW GCG
RELATING TO THE SPINOFF
After the Spinoff, GenTek and New GCG will not own any securities in
each other and will be separate, stand-alone public companies.
The general terms and conditions of the Spinoff will be set forth in
a Separation Agreement between General Chemical Group and GenTek (the
"Separation Agreement"). In addition, General Chemical Group and GenTek expect
to enter into the agreements described in this section to facilitate the
separation of the GenTek and Industrial Chemicals Businesses and an orderly
transition in establishing GenTek and New GCG as separate, stand-alone
companies. The agreements summarized below have been filed as exhibits to the
Form 10 filed under the Exchange Act. The following summarizes the material
terms of such agreements but is qualified by reference to the filed agreements.
Separation Agreement
The Separation Agreement provides for, among other things, the
principal corporate transactions required to effect the Spinoff, the conditions
that must be satisfied prior to the Spinoff Date and the allocation between
GenTek and New GCG of certain assets and liabilities. The Separation Agreement
also contemplates the execution by the parties of the following additional
agreements that address particular matters related to the Spinoff: Employee
Benefits Agreement; Transition Support Agreement; Sublease Agreements; Tax
Sharing Agreement; and Intellectual Property Agreement.
Reorganization. The Separation Agreement will set forth the corporate
transactions to be accomplished at or before the Spinoff to separate the GenTek
Business from the Industrial Chemicals Business. Following a series of
pre-Spinoff intra-group transactions, the GenTek Business will be held by
General Chemical Group through GenTek and the Industrial Chemicals Business will
be held by General Chemical Group through New Hampshire Oak and General Chemical
Industrial Products Inc.
Distribution. On or before the Spinoff Date, General Chemical Group
will deliver to the Distribution Agent a certificate or certificates
representing all of the shares of GenTek Common Stock, and will instruct the
Distribution Agent to distribute to each holder of record of Common Stock of
General Chemical Group on the Record Date a certificate or certificates
representing one share of GenTek Common Stock for each share of Common Stock of
General Chemical Group so held. In addition, shares of Class B Common Stock of
GenTek will be distributed, at a ratio of one-for-one, to the holders of record
of Class B Common Stock of General Chemical Group on the Record Date.
Satisfaction of Conditions; Termination. The Board of Directors of
General Chemical Group has the sole discretion to establish and change the
Record Date, the Spinoff Date and any appropriate procedures in connection with
the Spinoff. The Board of Directors of General Chemical Group may amend, modify
or abandon the Spinoff at any time prior to the Spinoff Date. The Spinoff will
not occur unless the following conditions have been satisfied: (1) all necessary
regulatory approvals have been received; (2) the Form 10 has become effective
under the Exchange Act; (3) the persons mentioned under "The GenTek Business:
Management" as members of the Board of Directors of GenTek have been elected as
directors, and the GenTek Articles of Incorporation and Bylaws are in effect;
(4) the necessary changes to the composition of the Board of Directors of
General Chemical Group have been made so that the composition of the Board of
Directors of New GCG shall, after the Spinoff, be as described in the section
entitled "Summary"; (5) GenTek's Common Stock has been approved for listing on
the NYSE, subject to official notice of issuance; (6) the IRS private letter
ruling concerning the tax-free nature of
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the Spinoff has been issued and has not been subsequently withdrawn or modified;
(7) GenTek and New GCG have entered into new financing facilities, and the
proceeds of borrowings under those facilities have been applied to repay debt of
General Chemical Group; (8) the Board of Directors of General Chemical Group has
received a report of an independent appraiser confirming that General Chemical
Group's surplus is sufficient to permit, without violation of Section 170 of the
Delaware General Corporation Law, the distribution of GenTek Common Stock and
Class B Common Stock; (9) the Class B Conversion has taken place so that, as of
the Record Date, the issued and outstanding Class B Common Stock will represent
less than 20% of the total number of shares of outstanding Common Stock and
Class B Common Stock of General Chemical Group; and (10) no order, injunction or
decree issued by any court of competent jurisdiction or other legal restraint or
prohibition preventing consummation of the Spinoff shall be in effect.
Separation of Assets and Liabilities. The Separation Agreement
provides that the following will become exclusively the assets of GenTek at or
prior to the Spinoff: (1) the capital stock of General Chemical Corporation; (2)
the capital stock of Noma, Reheis, Defiance, Toledo Technologies Inc., Balcrank
Products Inc., PDI and certain subsidiaries that are engaged in the GenTek
Business (the "GenTek Subsidiaries"); and (3) any other assets that are not used
principally in the Industrial Chemicals Business (collectively, the "GenTek
Assets"). Pursuant to the Separation Agreement, New GCG will hold exclusively
the following assets: (1) the capital stock of New Hampshire Oak, General
Chemical Industrial Products Inc., General Chemical Canada Ltd. and certain
other subsidiaries that are engaged in the Industrial Chemicals Business (the
"Industrial Subsidiaries"); (2) all of General Chemical Corporation's 51%
interest in General Chemical (Soda Ash) Partners, and all rights of the managing
partner of such partnership; and (3) all other assets used principally in the
Industrial Chemicals Business (collectively, the "Industrial Assets").
The Separation Agreement further provides that, as of the Spinoff,
all liabilities of the GenTek Business will become exclusively the liabilities
of GenTek (collectively, the "GenTek Liabilities"), including all liabilities:
(1) incurred in the conduct or operation of GenTek Business or the ownership or
use of GenTek Assets, whether arising before, at or after the Spinoff; (2) of
the GenTek Subsidiaries, whether or not incurred in the conduct or operation of
the GenTek Business or the ownership of the GenTek Assets; (3) of GenTek arising
under the Separation Agreement or any other agreements with New GCG relating to
the Spinoff; (4) undertaken by General Chemical Group in connection with its
acquisition of Noma, Defiance, Reheis, Peridot and Sandco Automotive; and (5)
arising under or in connection with the Form 10, but only to the extent such
liabilities relate to statements in, or omissions from, the Form 10 regarding
GenTek or the GenTek Business.
Pursuant to the Separation Agreement, all liabilities of General
Chemical Group, other than the GenTek Liabilities (collectively, the "Industrial
Liabilities"), will remain exclusively the liabilities of New GCG, including all
liabilities: (1) incurred in the conduct or operation of Industrial Chemicals
Business or the ownership or use of Industrial Assets; (2) set forth on the
balance sheet of the Industrial Chemicals Business; (3) arising under or in
connection with the Form 10, except for liabilities relating to information or
statements in, or omissions from, the Form 10 regarding GenTek or the GenTek
Business; (4) of New GCG arising under the Separation Agreement or any other
agreements with GenTek relating to the Spinoff; and (5) of New GCG or any
Industrial Subsidiary that do not relate either to the GenTek Business or the
Industrial Chemicals Business, including liabilities relating to any business
formerly owned or operated by any of them (other than any such business that had
been engaged in the GenTek Business) or arising out of the sale thereof.
Payments Received. From and after the Spinoff Date, both GenTek and
New GCG will promptly transfer to the other, from time to time, any property
received that is an asset of the other.
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Funds received by one upon the payment of accounts receivable that belong to the
other will be paid promptly to the other party.
Amendments; Further Assurances. The Separation Agreement may only be
amended or rights thereunder waived by an instrument signed by the party to be
charged with the amendment or waiver. GenTek and New GCG will use their
reasonable efforts to (i) execute and deliver such further instruments and
documents and take such actions as the other party may reasonably request in
order to effectuate the purposes of the Separation Agreement and their other
agreements relating to the Spinoff, and (ii) take all actions and do all things
reasonably necessary under applicable laws and agreements or otherwise to
consummate and make effective the transactions contemplated by the Separation
Agreement and their other agreements relating to the Spinoff.
No Representations or Warranties. Except as stated in the Separation
Agreement or other agreements entered into for the Spinoff, no party to such
agreements or any other agreement or document contemplated by the Separation
Agreement or any other agreements entered into for the Spinoff has or shall be
deemed to have made any representation or warranty as to (i) the assets,
businesses or liabilities retained, transferred or assumed as contemplated
thereby, (ii) any consents or approvals required in connection with the transfer
or assumption by such party of any asset or liability contemplated by the
Separation Agreement, (iii) the value of or freedom from any lien, claim, equity
or other encumbrance of, or any other matter concerning, any assets of such
party, or (iv) the absence of any defenses or right of setoff or freedom from
counterclaim with respect to any claim or other asset of any party. Except as
may expressly be set forth in the Separation Agreement or other agreements
entered into for the Spinoff, all such assets were, or are being, transferred,
or are being retained, on an "as is," "where is" basis and the respective
transferees will bear the economic and legal risks that any conveyance will
prove to be insufficient to vest in the transferee a title that is free and
clear of any lien, claim or other encumbrance.
Guaranteed Liabilities. GenTek will use all reasonable efforts
(excluding payment of money) to obtain as promptly as practicable after the
Spinoff Date the release of New GCG from its obligations regarding the GenTek
Liabilities on which New GCG is an obligor by reason of any guarantee of
obligations for borrowed money. New GCG will use all reasonable efforts
(excluding the payment of money) to obtain as promptly as practicable after the
Spinoff Date the release of GenTek from its obligations with respect to the
Industrial Liabilities on which GenTek is an obligor by reason of any guarantee
or contractual commitment of obligations for borrowed money.
Cross Indemnification. At and after the Spinoff, New GCG will
indemnify, defend and hold harmless GenTek and its directors, officers,
employees and agents (the "GenTek Indemnitees") from and against any and all
damage, loss, liability and expense (including, without limitation, reasonable
expenses of investigation and reasonable attorneys' fees and expenses in
connection with any and all actions or threatened actions) (collectively, the
"Indemnifiable Losses") incurred or suffered by any of the GenTek Indemnitees
and arising out of, or due to the failure of New GCG to pay, perform or
otherwise discharge, any of the Industrial Liabilities. At and after the
Spinoff, GenTek will indemnify, defend and hold harmless New GCG and its
directors, officers, employees and agents (the "Industrial Indemnitees") from
and against any and all Indemnifiable Losses incurred or suffered by any of the
Industrial Indemnitees and arising out of, or due to the failure of GenTek to
pay, perform or otherwise discharge, any of the GenTek Liabilities. In
circumstances in which the indemnity is unavailable or insufficient, for any
reason, to hold harmless an indemnified party in respect of any Indemnifiable
Losses, each indemnifying party, in order to provide for just and equitable
contribution, will contribute to the amount paid or payable by such indemnified
party as a result of such Indemnifiable Losses, in such proportion as is
appropriate to reflect the relative fault of the indemnifying party or parties
on the one hand and the indemnified party on the other in connection with the
statements or omissions or alleged
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statements or omissions that resulted in such Indemnifiable Losses, as well as
any other relevant equitable considerations. In addition, New GCG will agree to
use its efforts to maintain directors' and officers' liability insurance
coverage at least equal to General Chemical Group's current directors' and
officers' liability insurance coverage for a period of six years for directors
and officers of General Chemical Group who will become directors and officers of
GenTek as of the Spinoff Date for their acts as directors and officers of
General Chemical Group for periods prior to the Spinoff Date.
Non-Competition and Non-Solicitation. Each of GenTek and New GCG will
covenant that, subject to certain exceptions, neither will compete with the
other prior to the fifth anniversary of the Spinoff Date. GenTek and New GCG
have also agreed not to hire, or solicit for employment, any director, officer
or supervisory-level employee of the other until the third anniversary of the
Spinoff Date.
Employee Benefits Agreement
In connection with the Spinoff, New GCG and GenTek will enter into an
employee benefits agreement (the "Employee Benefits Agreement") that will
separate the assets and liabilities under General Chemical's employee benefit
plans and other employment-related liabilities between New GCG and GenTek. As a
general matter, New GCG and GenTek will each (i) continue to employ their
respective employees and (ii) assume the liabilities existing at the time of the
Spinoff for their respective employees and former employees. The Employee
Benefits Agreement also will provide for the treatment of certain retirement
plans, investment and savings programs, medical and life insurance benefits,
retiree medical and life insurance benefits and stock awards.
GenTek or New GCG will, effective as of the date of the Spinoff,
establish or maintain pension plans, health and welfare plans, a savings
(401(k)) plan, and executive compensation plans to mirror the plans that General
Chemical Group or its subsidiaries currently sponsor for their employees. The
Employee Benefits Agreement will provide for the separation of the amounts
necessary to fund the projected benefit obligations under the General Chemical
Group pension plans of GenTek's current and former employees, on the one hand,
and New GCG's current and former employees, on the other hand, determined on an
equitable basis in accordance with the actuarial assumptions used by the
applicable General Chemical Group pension plan with respect to its last
completed actuarial report. Similar principles will apply with respect to any
employee benefit plan maintained outside of the United States.
GenTek will establish the LTIP pursuant to which stock options, stock
appreciation rights, and other equity-related incentive awards, as well as cash
performance awards, may be granted. Pursuant to the Employee Benefits Agreement,
effective as of the Spinoff Date, the outstanding General Chemical Group
equity-related awards held by current or former employees of GenTek will also
receive similar awards with respect to GenTek stock. Their awards will be
adjusted so as to preserve (a) the difference between the exercise price and the
value of shares of General Chemical Group prior to the Spinoff Date and (b) the
ratio of the exercise price per share of GenTek and New GCG to the fair market
of the GenTek or New GCG share relating to the award.
Transition Support Agreement
Pursuant to a transition support agreement (the "Transition Support
Agreement"), for a period of up to twelve months following the Spinoff, GenTek
will agree to provide New GCG with tax, legal, accounting, treasury, purchasing
services, human resources, insurance management and claims administration, and
certain other administrative services, and New GCG will agree to provide GenTek
with certain services as they may agree upon. In addition, following the
Spinoff, GenTek will provide the Industrial Chemicals Business with MIS and
MIS-supported functions, including MIS personnel,
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hardware and software, on a service contract basis. This arrangement will remain
in effect through approximately December 2001. GenTek will provide the
Industrial Chemicals Business with the general administrative and MIS services
and functions for a fee that will reflect a pro rata allocation, based on the
extent of services and functions provided, of GenTek's overall costs and
expenses for such services and functions, plus an appropriate margin. See also
"The GenTek Business Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Year 2000 Issue" and "The Industrial Chemicals
Business."
Upon not less than 60 days prior written notice, either GenTek or New
GCG may direct the other to discontinue any services provided under the
Transition Support Agreement, except with respect to MIS and related functions.
The Transition Support Agreement may be terminated by either party for a
material uncured breach by the other party, the insolvency of the other party,
or the change of control of the other party. The agreement will also provide
that generally neither party will be liable to the other party for any costs,
losses, damages or claims related to services provided by it under the
Transition Support Agreement, other than for gross negligence or willful
misconduct.
Sublease Agreement
As of the Spinoff, New GCG will use a portion of the office space
located in Parsippany, New Jersey pursuant to an agreement (the "Sublease
Agreement") for the sublease by General Chemical Corporation (a subsidiary of
GenTek after the Spinoff) to General Chemical Industrial Products Inc. The
sublease payments will reflect a pro rata allocation, based upon the square
footage of the subleased premises, of General Chemical Corporation's overall
rental and other occupancy costs. The Sublease Agreement will also provide for
customary maintenance and ancillary services.
Tax Sharing Agreement
Prior to the Spinoff, General Chemical Group and GenTek will enter
into a tax sharing agreement (the "Tax Sharing Agreement") which will provide,
among other things, that (1) except for taxes described in clauses (2) and (3)
below, GenTek will be responsible for, and will indemnify and hold New GCG and
its subsidiaries harmless from and against, all taxes of the affiliated group
filing consolidated Federal income tax returns of which General Chemical Group
is the common parent, and of any consolidated, combined or unitary state, local
or foreign tax group that includes GenTek or any of its subsidiaries, to the
extent that such taxes are attributable to periods ending on or before the
Spinoff Date; (2) New GCG and GenTek generally will each be responsible for, and
will hold one another harmless from and against, 50% of any taxes attributable
to the Spinoff or the Reorganization, including any taxes resulting from the
application of section 355(e) of the Code to the Spinoff or the Reorganization,
except that each of GenTek and New GCG will be responsible for, and will
indemnify and hold the other harmless from and against, 100% of such taxes if
such taxes are attributable to an act of such company or any of its
subsidiaries; (3) GenTek will make a payment to New GCG equal to its share of
current taxes (including estimated taxes) of the affiliated group filing
consolidated Federal income tax returns of which General Chemical Group is the
common parent, and of any consolidated, combined or unitary state, local or
foreign tax group that includes GenTek or any of its subsidiaries, for all
periods ending on or before the Spinoff Date, to the extent not already paid
under the existing General Chemical Group tax sharing agreement; and (4)
separate company taxes generally will be borne by the company that is
responsible for such taxes under local law. The Tax Sharing Agreement will also
establish, as between GenTek and New GCG, procedures for the conduct and
settlement of certain tax audits and related proceedings and the determination
of the amount of the tax sharing payments described above. The Tax Sharing
Agreement will not be binding on the IRS or any other taxing authority and will
not affect the several liability of GenTek and New GCG and their respective
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subsidiaries to the IRS for Federal income taxes of the General Chemical Group
consolidated group relating to periods beginning prior to the Spinoff Date.
The Tax Sharing Agreement will also restrict the ability of GenTek
and New GCG to take certain actions which could adversely affect the tax-free
nature of the Spinoff and the Reorganization, including as a result of the
recognition of gain under section 355(e) of the Code. In particular, the Tax
Sharing Agreement will provide that in the event Paul Montrone and the Montrone
Trusts no longer control 50% of the voting power of stock of GenTek or New GCG,
both GenTek and New GCG generally will be prohibited from entering into any
transaction or series of transactions, on or prior to the second anniversary of
the date of the Spinoff, pursuant to which one or more persons would acquire,
directly or indirectly, a 50% or greater interest, by vote or value, in GenTek
or New GCG, respectively. The Tax Sharing Agreement will provide that each of
GenTek and New GCG may enjoin the other company from engaging in any such
restricted action.
Intellectual Property Agreement
Pursuant to an Intellectual Property Agreement to be entered into by
GenTek and New GCG (the "Intellectual Property Agreement"), after the Spinoff,
New GCG will have the rights to and interest in the copyrights, trademarks,
trade secrets and other intellectual property (the "Intellectual Property") of
General Chemical Group used prior to the Spinoff primarily in the Industrial
Chemicals Business, and GenTek will have the rights to and interest in all other
Intellectual Property of General Chemical Group. As of the Spinoff, each of
GenTek and New GCG will license to the other party, on a non-exclusive basis,
those items of Intellectual Property that it owns and the other party needs to
use for the continued operations of its business.
General Chemical Corporation, a wholly-owned subsidiary of GenTek
after the Spinoff, will enter into a license with New GCG regarding the General
Chemical name and logo. General Chemical Corporation, which owns the Licensed
Property, will grant to New GCG, for a one-time up-front fee, a perpetual
license to use the Licensed Property in connection with the soda ash and calcium
chloride activities and operations of the Industrial Chemicals Business,
including as the trading name of New GCG and with respect to General Chemical
Industrial Products Inc.'s functions as the managing partner of GCSAP.
Purchases of Soda Ash and Calcium Chloride
The GenTek Business currently is, and after the Spinoff will continue
to be, an end user of soda ash. After the Spinoff, GenTek expects to continue to
purchase soda ash from the Industrial Chemicals Business to meet its own supply
needs and for resale to distributors and customers who purchase multiple GenTek
products. These purchases will be on terms similar to those for the GenTek
Business' purchases of soda ash from the Industrial Chemicals Business prior to
the Spinoff. GenTek will also purchase calcium chloride for resale to its
distributors and customers who purchase multiple products of the GenTek
Business. These purchases of soda ash and calcium chloride will not be material
to the GenTek Business.
Currently, General Chemical Corporation, which will be a subsidiary
of GenTek after the Spinoff, is party to contracts with end users and
distributors of soda ash and calcium chloride. In connection with the
pre-Spinoff reorganization, General Chemical Corporation will use reasonable
efforts to assign all of its soda ash and calcium chloride sales contracts to
General Chemical Industrial Products Inc., except for contracts with
distributors that also cover products of the GenTek Business. Any contracts that
are not assigned to General Chemical Industrial Products Inc. prior to the
Spinoff will
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remain with General Chemical Corporation. General Chemical Industrial Products
Inc. will provide soda ash and calcium chloride to GenTek to enable it to
satisfy any such unassigned contracts, on terms substantially similar to those
provided in the unassigned contracts. Once these contracts with end users and
distributors expire, it is anticipated that, if acceptable to these customers,
New GCG will enter into new contracts with them directly.
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RISK FACTORS
In addition to the other information in this Information Statement,
the following factors should be carefully considered in evaluating GenTek and
the GenTek Business.
Cyclicality
The results of operations of each of the GenTek Business'
manufacturing segment and performance products segment are subject to
fluctuations based on general economic conditions. During prior recessionary
periods or general economic downturns in the U.S. or worldwide, the
manufacturing and performance products industries have been adversely affected.
There can be no assurance that any future recessionary period or general
economic downturn will not materially and adversely affect GenTek's operating
results or financial condition.
Competition
The GenTek Business' manufacturing segment competes with other
automotive engine component manufacturers based on a number of factors,
including design and engineering capabilities, quality, delivery terms and
price. Competitors include Eaton, Hitchiner, INA, Ingersoll-Rand and captive
OEMs. The markets for Noma's products are highly competitive, with competition
based on price, quality and ability to meet customer delivery requirements. See
"The GenTek Business--Manufacturing Segment."
Although the GenTek Business' performance products segment generally
has leading market share positions in the end markets in which it competes, most
of these end markets are highly competitive. Therefore, raising prices has been
difficult over the past several years and will likely continue to be so in the
near future. The major competitors of the GenTek Business' performance products
segment are typically segregated by end markets and include several large
multinational competitors, such as Arch Chemicals, BASF, Solvay S.A. and Rhodia,
as well as some regional and small independent producers. See "The GenTek
Business--Performance Products Segment."
Environmental Considerations
The GenTek Business' various chemical manufacturing operations, which
have been conducted at a number of facilities for many years, are subject to
numerous laws and regulations relating to the protection of human health and the
environment in the U.S., Canada and Ireland. The GenTek Business believes that
it is in substantial compliance with such laws and regulations. However, due to
the nature of its operations, the GenTek Business is involved from time to time
in administrative and judicial proceedings and inquiries relating to
environmental matters. Based on information available at this time with respect
to potential liability involving these proceedings and inquiries, GenTek
believes that any such liability would not have a material adverse effect on its
financial position or results of operations. However, modifications or changes
in enforcement of existing laws and regulations or the adoption of new laws and
regulations in the future, particularly with respect to environmental and safety
standards, or the discovery of additional or unknown environmental contamination
could require expenditures which might be material to GenTek's results of
operations or financial condition.
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Additionally, CERCLA and similar state Superfund statutes have been
construed as imposing joint and several liability, under certain circumstances,
on present and former owners and operators of contaminated sites and
transporters and generators of hazardous substances for remediation of
contaminated properties regardless of fault. General Chemical Group has received
written notice from the EPA that it has been identified as a PRP under CERCLA at
three Superfund sites. General Chemical Group does not believe that its
liability, if any, arising therefrom will be material to its results of
operations or financial condition. See "The GenTek Business: Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Environmental Matters" and "The GenTek Business--Environmental
Matters."
Operating Hazards
The GenTek Business' revenues are dependent on the continued
operation of its various manufacturing facilities. In particular, the operation
of chemical manufacturing plants involves many risks, including the breakdown,
failure or substandard performance of equipment, natural disasters, the need to
comply with directives of government agencies and dependence on the ability of
railroads and other shippers to transport raw materials and finished products in
a timely manner. The occurrence of material operational problems, including but
not limited to these events, at one or more of GenTek Business' facilities could
have a material adverse effect on the results of operations or financial
condition of the GenTek Business.
In particular, the GenTek Business' operations are also subject to
various hazards incident to the production of chemicals, including the use,
handling, processing, storage and transportation of certain hazardous materials.
These hazards can cause personal injury and loss of life, severe damage to and
destruction of property and equipment, environmental damage and suspension of
operations. For example, there was a release of sulfur trioxide at the GenTek
Business' Richmond, California facility in 1993, which was caused by the rupture
of a pressure relief device on a railcar. Substantially all of the legal
proceedings relating to this incident, for which a nonrecurring charge of $9
million was taken in 1994, have been concluded. The GenTek Business believes it
is unlikely that an incident of similar magnitude can be reasonably expected to
occur, although no assurance to such effect can be given.
Labor Relations
The GenTek Business has been involved in work stoppages, strikes or
other labor disruptions. Since 1986, the GenTek Business has been involved in
numerous labor negotiations, only three of which have resulted in work
disruptions. Union contracts covering a small number of employees of the GenTek
Business will be up for renewal during 1999. The GenTek Business will be
involved in other labor negotiations from time to time. There can be no
assurance that these negotiation processes will not involve material disruptions
to the GenTek Business. See "The GenTek Business--Employees; Labor Relations."
Year 2000
General Chemical has implemented a program to assess, mitigate and
remediate the potential impact of the Year 2000 problem throughout the GenTek
Business. General Chemical Group completed its assessment of its Year 2000
compliance status in early 1998 and began work on its remediation program
immediately thereafter. General Chemical Group's remediation program has been
structured to address its Systems. In the event that GenTek's material Systems
are not Year 2000 compliant, GenTek may experience reductions or interruptions
in operations which could have a material adverse
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effect on GenTek's results of operations. See "The GenTek Business: Management's
Discussion and Analysis of Financial Condition and Results of Operations--Year
2000 Issue."
In addition, General Chemical Group has implemented a program to
determine the Year 2000 compliance status of its material vendors, suppliers,
service providers and customers, including the railroad and trucking companies
used to ship its products or to transport raw materials to its manufacturing
facilities. Based on currently available information, GenTek does not anticipate
any material impact to GenTek based on the failure of such third parties to be
Year 2000 compliant. However, the process of evaluating the Year 2000 compliance
status of material third parties is continually ongoing and, therefore, no
guaranty or warranty can be made as to such third parties' future compliance
status and its potential effect on the GenTek Business. GenTek believes there
exists a sufficient number of suppliers of raw materials for its business so
that if any supplier is unable to deliver raw materials due to Year 2000
problems, alternate sources will be available and that any supply interruption
will not be material to the GenTek Business. There can be no assurances,
however, that GenTek would be able to obtain all of its supply requirements from
such alternate sources in a timely way or on terms comparable with those of its
current suppliers. If the railroads or trucking companies that ship its products
or raw materials fail to be Year 2000 compliant, the GenTek Business may not be
able to arrange alternative and timely means to ship its goods or raw materials,
which could lead to interruptions or slowdowns in its business. GenTek is
preparing for the possible use of alternative suppliers and means of
transportation, possible adjustment of raw material and product inventory levels
and contingencies with respect to potential energy source interruptions, all in
an effort to minimize the effects, if any, of Year 2000 related interruptions or
slowdowns caused by suppliers and transporters.
Before proceeding with the acquisitions of Defiance and Noma and as
part of its acquisition-related due diligence, the GenTek Business reviewed Year
2000-related concerns for Defiance and Noma and received assurances from their
respective managements that their businesses are, or prior to year-end 1999 will
be, materially Year 2000 compliant. As part of its pre-acquisition due
diligence, the GenTek Business reviewed, for Defiance, the assessments and
reports prepared by its outside consultants and, for Noma, the periodic internal
reports prepared by its MIS personnel for senior management. The GenTek Business
began its own Year 2000 assessment for Defiance following the closing of its
acquisition and expects to begin promptly its Year 2000 assessment for Noma. In
the event that the material systems of Defiance or Noma are not Year 2000
compliant, the affected company may experience reductions or interruptions in
operations which could have a material adverse effect on the results of
operations or financial condition of the GenTek Business.
Risks Associated with Acquisitions
GenTek intends to pursue value-enhancing acquisitions to increase its
cash flow and earnings, expand its product portfolio and leverage its low-cost
manufacturing position. The GenTek Business will devote substantial time and
resources to acquisition-related activities. Identifying appropriate acquisition
candidates and negotiating and consummating acquisitions can be a lengthy and
costly process. GenTek cannot predict whether or when suitable acquisition
candidates will become available, the likelihood that any acquisition will be
completed or whether the acquisitions will be consummated on terms favorable to
GenTek. If GenTek is able to identify and consummate acquisitions, the
integration of such acquisitions may be a difficult, costly and lengthy process;
GenTek may encounter substantial unanticipated costs or other problems
associated with such integration. Although management believes that GenTek is
qualified to pursue an acquisition-driven growth strategy (as evidenced by its
recent acquisitions), the risks associated with acquisitions could have a
material adverse effect on GenTek's results of operations or financial
condition. See "The GenTek Business--Strategy."
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Leverage and Debt Service Requirements
After giving pro forma effect to the Spinoff and an initial borrowing
under the GenTek Financing Facility, GenTek's long-term debt is expected to be
approximately $490 million, which includes approximately $240 million of
borrowings incurred or assumed in connection with the Noma acquisition. While
GenTek believes that future operating cash flow, together with financing
arrangements, will be sufficient to finance current operating requirements, it
is possible that GenTek's leverage and debt service requirements could make it
more vulnerable to economic downturns. GenTek's indebtedness could restrict its
ability to obtain additional financing in the future and, because GenTek may be
more leveraged than certain of its competitors, could place it at a competitive
disadvantage. In addition, GenTek expects that the GenTek Financing Facility
will have covenants that will impose operating and financial restrictions on
GenTek. These covenants could adversely affect GenTek's ability to finance its
future operations, potential acquisitions or capital needs or to engage in
business activities that may be in its interest. See "The GenTek Business:
Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
No Operating History as Independent Entity
The GenTek Business has never operated as a separate, stand-alone
entity and has historically shared with the Industrial Chemicals Business
various financial, administrative and managerial expertise. The Industrial
Chemicals Business will have no obligation to support the GenTek Business after
the Spinoff, except to the extent described in "Arrangements Between GenTek and
New GCG Relating to the Spinoff." After the Spinoff, the GenTek Business will
maintain its own lines of credit and banking relationships and be responsible
for its own financial reporting and control functions. There can be no assurance
that, as a separate, stand-alone company, the GenTek Business' results and
profits will be comparable to those before the Spinoff. See "Arrangements
Between GenTek and New GCG Relating to the Spinoff."
Federal Income Tax Consequences of Changes in Control Following the Spinoff
If the Spinoff is considered part of a plan or a series of related
transactions pursuant to which one or more persons acquire, directly or
indirectly, a 50% or greater interest, by vote or value, in either New GCG or
GenTek, New GCG and, possibly, GenTek will recognize gain under section 355(e)
of the Code. The amount of such gain would be substantial and would result in
significant tax liabilities to New GCG and/or GenTek. Pursuant to the Tax
Sharing Agreement, New GCG and GenTek will each be responsible for, and will
indemnify one another for, 50% of any taxes resulting from the application of
section 355(e) of the Code, except that, if such taxes are attributable to an
act of New GCG or GenTek (or any of their respective subsidiaries), such party
will be responsible for, and will indemnify the other for, 100% of such taxes.
See "Arrangements Between GenTek and New GCG Relating to the Spinoff--Tax
Sharing Agreement." As a result of the possible adverse tax consequences
described above, New GCG and GenTek may be restricted, following the Spinoff, in
their ability to effect certain acquisitions, stock issuances and other
transactions that would result in a change of control of either of them.
Absence of a Public Trading Market; Possible Volatility of Stock Price
There currently is no public trading market for the Common Stock of
GenTek. Although GenTek Common Stock is expected to be approved for listing
(subject to notice of issuance) on the NYSE under the symbol "GK", there can be
no predictions, estimates or assurances about the trading price of the GenTek
Common Stock after the Spinoff. The combined trading prices of the New GCG
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Common Stock and the GenTek Common Stock may be less than, equal to or greater
than the trading price of Common Stock of General Chemical Group prior to the
Spinoff. In addition, until the GenTek Common Stock is fully distributed, an
orderly trading market develops and the market has fully evaluated the separate
operations of New GCG and GenTek, the trading price of GenTek Common Stock, as
well as that of New GCG Common Stock, may fluctuate significantly.
In addition, recently the stock market has experienced extreme price
and volume fluctuations which have affected the market price for many companies
in similar industries. These broad market fluctuations may adversely affect the
market price of GenTek Common Stock.
Shares Eligible for Future Sale
Sales of substantial amounts of GenTek Common Stock in the public
market, in addition to those currently outstanding, could adversely affect the
market price of such Common Stock. After the Spinoff, Mr. Montrone will hold or
control (including through the Montrone Trusts) 5,853,000 shares of Common Stock
and 3,958,421 shares of the Class B Common Stock of GenTek. Although shares of
Class B Common Stock are subject to significant restrictions on transfer, their
holders can convert them into Common Stock, on a one-for-one basis, at any time.
In addition, Mr. Montrone and the Montrone Trusts will have the right to demand
the registration of their shares of Common Stock under the Securities Act under
certain circumstances, which would allow the public offer and sale of such
shares of Common Stock. If such stockholders sell or otherwise dispose of a
substantial amount of the Common Stock in the public market, the prevailing
market price for the Common Stock could be adversely affected.
Control by and Relationship with Principal Stockholder; Potential Conflicts of
Interest
Holders of GenTek Common Stock are entitled to one vote per share and
holders of Class B Common Stock of GenTek are entitled to ten votes per share.
Upon completion of the Spinoff, Paul M. Montrone, Chairman of the Board of
Directors of GenTek, will beneficially own or control 80.6% of the combined
voting power of the Common Stock and Class B Common Stock of GenTek. Therefore,
Mr. Montrone alone will have sufficient voting power (without the consent of any
other stockholder) to elect the entire Board of Directors of GenTek and, in
general, to determine the outcome of any corporate transactions or other matters
submitted to the stockholders for approval, including mergers and sales of
assets, and to prevent, or cause, a change of control of GenTek. Mr. Montrone's
control of GenTek will deter non-negotiated tender offers or other efforts to
obtain control of GenTek, thereby depriving shareholders of opportunities to
sell shares at prices higher than those prevailing in the market.
In order to obtain the private letter ruling of the IRS concerning
the tax-free nature of the Spinoff, General Chemical Group requested the
conversion of, and Mr. Montrone and the Montrone Trusts agreed to convert, some
of their shares of Class B Common Stock into Common Stock of General Chemical
Group. As a result of such conversion, the voting power of the shares held or
controlled by Mr. Montrone and the Montrone Trusts will decrease from 89.9% to
80.6%. General Chemical Group believes that, without the Class B Conversion, the
Spinoff could have adverse tax consequences to General Chemical Group. See "The
Spinoff," "Beneficial Ownership of GenTek and General Chemical Group Common
Stock," "Certain Relationships and Affiliate Transactions" and "Description of
Capital Stock of GenTek."
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DESCRIPTION OF CAPITAL STOCK OF GENTEK
As of the Spinoff, the authorized, issued and outstanding capital
stock of GenTek will be substantially identical to those of General Chemical
Group. The following section describes the capital stock of GenTek as of the
Spinoff Date. The terms and conditions of the capital stock of GenTek will be
identical to those of General Chemical Group.
Authorized and Outstanding Capital Stock
As of the Spinoff, the authorized capital stock of GenTek will
consist of 100 million shares of Common Stock, 40 million shares of Class B
Common Stock and 10 million shares of undesignated preferred stock issuable in
series by the Board of Directors (the "Preferred Stock"). As of the Spinoff,
16,773,192 shares of Common Stock and 3,958,421 shares of Class B Common Stock
will be issued and outstanding, and no shares of Preferred Stock will be issued
or outstanding. As of the Spinoff, all outstanding shares of Common Stock and
Class B Common Stock will be fully paid and nonassessable. The following summary
description of the capital stock of GenTek is qualified in its entirety by
reference to its Amended and Restated Certificate of Incorporation (the
"Certificate"), and its Amended and Restated Bylaws (the "Bylaws"), copies of
which are filed as exhibits to the Form 10.
Common Stock and Class B Common Stock
Except for the disparity in voting power, the conversion provisions
and the transfer restrictions, shares of Common Stock and Class B Common Stock
are substantially identical, including their participation in dividends and in
liquidating distributions.
Voting. Each share of Common Stock entitles the holder of record to
one vote and each share of Class B Common Stock entitles the holder to ten votes
at each annual or special meeting of stockholders, in the case of any written
consent of stockholders, and for all other purposes. The holders of Common Stock
and Class B Common Stock will vote as a single class on all matters submitted to
a vote of the stockholders, except as otherwise provided by law. Neither the
holders of Common Stock nor the holders of Class B Common Stock have cumulative
voting or preemptive rights. GenTek may, as a condition to counting the votes
cast by any holder of Class B Common Stock at any annual or special meeting of
stockholders, in the case of any written consent of stockholders, or for any
other purpose, require such holder to furnish such affidavits or other proof as
it may reasonably request to establish that the Class B Common Stock held by
such holder has not, by virtue of the provisions of the Certificate, been
automatically converted into Common Stock, as discussed below.
Dividends. The holders of Common Stock and Class B Common Stock will
be entitled to receive dividends and other distributions as may be declared
thereon by the Board of Directors out of assets or funds legally available
therefor, subject to the rights of the holders of any series of Preferred Stock
and any other provision of the Certificate. The Certificate provides that if at
any time a cash dividend or other distribution in cash or other property is paid
on either the Common Stock or the Class B Common Stock, an equivalent dividend
or other distribution in cash or other property will also be made with respect
to the Class B Common Stock or Common Stock, as the case may be. The Certificate
provides that if dividends are declared that are payable in shares of Common
Stock or Class B Common Stock, such dividends shall be payable at the same rate
on both classes of stock, provided that the dividends payable in shares of
Common Stock shall be payable only to holders of Common Stock and the dividends
payable in shares of Class B Common Stock shall be payable only to holders of
Class B Common Stock. The Certificate provides that shares of Common Stock or
Class B Common Stock may not be split up, subdivided, combined or reclassified,
unless at the same time the shares of
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the other class are also split up, subdivided, combined or reclassified in a
manner which maintains the same proportionate equity ownership between the
holders of Common Stock and Class B Common Stock as existed immediately prior to
the transaction.
Liquidation. In the event of any liquidation, dissolution or winding
up, the holders of Common Stock and the holders of Class B Common Stock will be
entitled to receive the assets and funds available for distribution after
payments to creditors and to the holders of any Preferred Stock that may at the
time be outstanding, in proportion to the number of shares held by them,
respectively, without regard to class.
Equal Per Share Consideration Upon Merger. In the event of any
corporate merger, consolidation, purchase or acquisition of property or stock or
other reorganization in which any consideration is to be received by the holders
of Common Stock or Class B Common Stock, the holders of Common Stock and Class B
Common Stock will be entitled to receive an equal amount of consideration for
each share tendered in such merger, consolidation, purchase or acquisition or
other reorganization.
Transfer Restrictions of Class B Common Stock. The Certificate
provides that no person holding record or beneficial ownership of shares of
Class B Common Stock (a "Class B Holder") may transfer shares of Class B Stock,
except to a Permitted Transferee. A Permitted Transferee generally means an
affiliate of the Class B Holder. In certain circumstances, changes in ownership
or control of a Class B Holder will result in the automatic conversion of such
holder's Class B Common Stock into Common Stock. The Certificate also provides
that GenTek may require as a condition to registering the transfer of any shares
of its Class B Common Stock the furnishing of such affidavits and other proof as
GenTek reasonably may request to establish that such proposed transferee is a
Permitted Transferee. In addition, upon any purported transfer of shares of
Class B Common Stock not permitted under the Certificate, all shares of Class B
Common Stock purported to be so transferred will be deemed to be converted into
shares of Common Stock, and stock certificates formerly representing such shares
of Class B Common Stock will thereafter represent an identical number of shares
of Common Stock.
Conversion Rights of Class B Holders. Class B Holders may convert
each share of such Class B Common Stock at any time and from time to time into
one fully paid and nonassessable share of Common Stock. The Certificate requires
that GenTek reserve sufficient shares of Common Stock for issuance in connection
with such conversion rights.
All outstanding shares of Class B Common Stock automatically convert
into shares of Common Stock on a share-for-share basis if the total number of
shares of issued and outstanding Class B Stock is less than 10% of the total of
all shares of Common Stock and Class B Common Stock then issued and outstanding.
Upon any such conversion, stock certificates formerly representing shares of
Class B Common Stock will thereafter represent an identical number of shares of
Common Stock.
Undesignated Preferred Stock
The Board of Directors is authorized to issue up to 10 million shares
of Preferred Stock in classes or series and to fix the designations, powers,
preferences and the relative, participating, optional or other special rights of
the shares of each series and any qualifications, limitations and restrictions
thereon as set forth in the Certificate. Any such Preferred Stock may rank prior
to the Common Stock as to dividend rights, liquidation preference or both, may
have full or limited voting rights and may be convertible into shares of Common
Stock.
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The purpose of authorizing the Board of Directors to issue Preferred
Stock is, in part, to eliminate delays associated with a stockholder vote on
specific issuances. The issuance of Preferred Stock could have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from acquiring or seeking to acquire, a significant portion of the
outstanding stock of the company.
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CERTAIN PROVISIONS OF THE CERTIFICATE OF
INCORPORATION AND BYLAWS OF GENTEK
General
The Certificate and Bylaws of GenTek are substantially identical to
the Amended and Restated Certificate and the Bylaws, as amended, of General
Chemical Group.
A number of provisions of the Certificate and Bylaws deal with
matters of corporate governance and the rights of stockholders. Certain of these
provisions may be deemed to have an anti-takeover effect and may discourage
takeover attempts not first approved by the Board of Directors (including
takeovers which certain stockholders may deem to be in their best interests). To
the extent takeover attempts are discouraged, temporary fluctuations in the
market price of the Common Stock of each company, which may result from actual
or rumored takeover attempts, may be inhibited. These provisions also could
delay or frustrate the removal of incumbent directors or the assumption of
control by stockholders, even if such removal or assumption would be beneficial
to stockholders of the company. These provisions also could discourage or make
more difficult a merger, tender offer or proxy contest, even if they could be
favorable to the interests of stockholders, and could potentially depress the
market price of the Common Stock. The Board of Directors believes that these
provisions are appropriate to protect the interests of the company and all of
its stockholders. The Board of Directors has no present plans to adopt any other
measures or devices which may be deemed to have an "anti-takeover effect".
Meetings of Stockholders
The Certificate and Bylaws provide that a special meeting of
stockholders may be called only by the Chairman of the Board of Directors, the
President or a majority of directors, unless otherwise required by law. The
Certificate and Bylaws provide that only those matters set forth in the notice
of the special meeting may be considered or acted upon at that special meeting,
unless otherwise provided by law. In addition, the Bylaws set forth certain
advance notice and informational requirements and time limitations on any
director nomination or any new business which a stockholder wishes to propose
for consideration at an annual meeting of stockholders.
Indemnification and Limitation of Liability
The Bylaws provide that directors and officers shall be, and at the
discretion of the Board of Directors, nonofficer employees may be, indemnified
by the company to the fullest extent authorized by Delaware law, as it now
exists or may in the future be amended, against all expenses and liabilities
reasonably incurred in connection with service for or on behalf of the company
and further permits the advancing of expenses incurred in defending claims. The
Bylaws also provide that the right of directors and officers to indemnification
shall be a contract right and shall not be exclusive of any other right now
possessed or hereafter acquired under any Bylaw, agreement, vote of stockholders
or otherwise. The Certificate contains a provision permitted by Delaware law
that generally eliminates the personal liability of directors for monetary
damages for breaches of their fiduciary duty, including breaches involving
negligence or gross negligence in business combinations, unless the director has
breached his duty of loyalty, failed to act in good faith, engaged in
intentional misconduct or a knowing violation of law, paid a dividend or
approved a stock repurchase in violation of the Delaware General Corporation Law
or obtained an improper personal benefit. This provision does not alter a
director's liability under the Federal securities laws. In addition, this
provision does not affect the availability of equitable remedies, such as an
injunction or rescission, for breach of fiduciary duty.
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Amendment of the Certificate
The Certificate provides that an amendment thereof must first be
approved by a majority of the members of the Board of Directors and (with
certain exceptions) thereafter approved by the affirmative vote of a majority of
the total votes eligible to be cast by holders of voting stock, voting together
as a single class; provided, however, that the affirmative vote of 80% of the
total votes eligible to be cast by the holders of voting stock, voting together
as a single class, is required to amend provisions relating to the limitation of
liability of directors and amendments to the Certificate.
Amendment of Bylaws
The Certificate provides that the company's Bylaws may be adopted,
amended or repealed by the Board of Directors and any Bylaws adopted by the
directors may be altered, amended or repealed by the Directors or by the
stockholders. Such action by the Board of Directors requires the affirmative
vote of the directors. Such action by the stockholders requires the affirmative
vote of a majority of the total votes eligible to be cast by holders of voting
stock, except that if such amendment to the Bylaws is not recommended by the
Board of Directors, then such action by stockholders requires the affirmative
vote of at least two-thirds of the total votes eligible to be cast by holders of
voting stock.
Statutory Business Combination Provision
Although the Certificate and the Bylaws contain provisions with the
anti-takeover effects mentioned above, the Certificate includes an election not
to be governed by Section 203 of the Delaware General Corporation Law, which
prohibits certain business combinations with certain stockholders for a period
of three years after they acquire 15% or more of the outstanding voting stock of
a corporation.
Dividends
After the Spinoff, the Board of Directors of GenTek will be
responsible for deciding if a dividend will be paid and the amount of the
dividend. Currently, GenTek anticipates paying a regular quarterly cash dividend
of $.05 per share of Common Stock after the Spinoff. The dividend policy of
GenTek is, however, subject to change. Dividend decisions will be based on,
among other factors, GenTek's operating results and financial requirements and
the restrictions imposed by its financing facilities. The payment and level of
cash dividends, if any, declared by GenTek to holders of its Common Stock and
Class B Common Stock after the Spinoff will be subject to the discretion of its
Board of Directors.
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THE INDUSTRIAL CHEMICALS BUSINESS:
SELECTED FINANCIAL DATA
The following selected financial data of the Industrial Chemicals
Business have been derived from and should be read in conjunction with "The
Industrial Chemicals Business: Discussion of Results" and the Industrial
Chemicals Business Combined Financial and notes thereto included in Annex A of
this Information Statement.
The statement of operations data set forth below for each of the
three years ended December 31, 1998 and the balance sheet data at December 31,
1997 and 1998 are derived from, and are qualified by reference to, the audited
Industrial Chemicals Business Combined Financial Statements and notes thereto
included in Annex A of this Information Statement. The statement of operations
data for the fiscal years ended December 31, 1994 and 1995 and the balance sheet
data at December 31, 1994, 1995 and 1996 are derived from financial statements
of the Industrial Chemicals Business not included in this Information Statement.
The Industrial Chemicals Business Combined Financial Statements for the three
years ended December 31, 1998 have been audited by Deloitte & Touche LLP,
independent auditors.
Because the Industrial Chemicals Business did not actually operate as
a separate stand-alone business during the periods depicted, it may have
recorded different results had it been operated independently of the GenTek
Business. Therefore, the financial position presented below is not necessarily
indicative of the results of operations or financial position that would have
resulted if the Industrial Chemicals Business had been a separate, stand-alone
business during the periods shown, or of its future performance as a separate,
stand-alone business. Per share data for net income has not been presented
because the Industrial Chemicals Business was operated through General Chemical
Group for the periods presented.
For a description of the basis of presentation of the historical
financial data of the Industrial Chemicals Business, see Note 1 to the
Industrial Chemicals Business Combined Financial Statements.
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Industrial Chemicals Business:
Selected Financial Data
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net revenues .................... $254,139 $265,333 $298,945 $289,700 $261,469
Gross profit .................... 75,159 78,794 100,143 84,931 59,131
Operating profit ................ 60,960 62,296 77,924(1) 68,281 41,049(2)
Minority interest ............... 16,957 19,458 31,635 24,253 16,666
Income before interest expense
and income taxes ............. 43,442 44,224 46,963 44,587 24,342
Interest expense (3) ............ 12,193 13,777 13,001 12,747 11,747
Income before income taxes ...... 31,249 30,447 33,962 31,840 12,595
Income tax provision ............ 11,480 9,490 9,682 9,576 3,171
Net income ...................... $ 19,769 $ 20,957 $ 24,280 $ 22,264 $ 9,424
Balance Sheet Data (at end of
period):
Cash, cash equivalents and short-
term investments ............. $ 558 $ 928 $ 1,609 $ 1,352 $ 1,127
Adjusted working capital (4) .... 23,791 27,970 27,628 44,517 38,728
Total assets .................... 207,647 212,493 241,086 262,175 248,714
Divisional equity ............... 53,768 53,354 62,795 85,505 75,292
</TABLE>
- ------------------
(1) Includes a one-time charge of $5.7 million ($3.5 million after tax) due
primarily to awards made under the Restricted Unit Plan, reflecting the
portion earned under prior equity programs. General Chemical Group
recorded a one-time charge of $12.1 million ($7.6 million after tax), and
the amount mentioned in the previous sentence related to the Industrial
Chemicals Business.
(2) Includes incremental accruals of $2.3 million ($1.4 million after tax)
principally related to litigation and environmental spending.
(3) Includes allocated interest expense from the General Chemical Group.
(4) Adjusted working capital consists of total current assets (excluding cash
and short-term investments) less total current liabilities (excluding the
current portion of long-term debt).
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THE INDUSTRIAL CHEMICALS BUSINESS:
PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma balance sheet and statement of
operations have been derived from the Combined Financial Statements of the
Industrial Chemicals Business included in Annex A of this Information Statement.
These statements should be read in conjunction with "The Industrial Chemicals
Business: Discussion of Results" and the Industrial Chemicals Business Combined
Financial Statements and notes thereto included in Annex A of this Information
Statement.
The pro forma balance sheet has been prepared assuming that the
Spinoff and all related transactions, including the initial borrowing under the
New GCG Financing Facilities and the repayment of General Chemical Group's
existing borrowings from third parties, had occurred at December 31, 1998. The
pro forma statement of operations for the year ended December 31, 1998 has been
prepared assuming the Spinoff and related transactions had occurred as of
January 1, 1998.
The pro forma adjustments, as described in the notes to the pro forma
balance sheet and statement of operations, are based on currently available
information and certain adjustments that General Chemical Group believes are
reasonable. This pro forma financial information does not necessarily represent
what the financial position or results of operations of the Industrial Chemicals
Business would actually have been had the Spinoff in fact occurred on such date
or as of the beginning of such period or to be indicative of the Industrial
Chemicals Business' financial position or results of operation for any future
date or period.
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The Industrial Chemicals Business:
Pro Forma Balance Sheet
<TABLE>
<CAPTION>
December 31, 1998
--------------------------------------------
Historical Adjustments Pro Forma
---------- ----------- ---------
(In thousands)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents ............... $ 1,127 $ 146,250(a) $ 15,000
(130,512)(b)
(1,865)(c)
Receivables, net ......................... 58,601 -- 58,601
Inventories .............................. 25,508 -- 25,508
Deferred income taxes .................... 4,392 -- 4,392
Other current assets ..................... 1,659 -- 1,659
-------- --------- --------
Total current assets ................... 91,287 13,873 105,160
Property, plant and equipment,
net ......................................... 141,808 -- 141,808
Other assets ................................ 15,619 3,750(a) 19,369
-------- --------- --------
Total assets ........................... $248,714 $ 17,623 $266,337
======== ========= ========
Liabilities and Equity (Deficit)
Current liabilities:
Accounts payable ......................... $ 24,298 $ -- $ 24,298
Accrued liabilities ...................... 25,146 -- 25,146
Income taxes payable ..................... 1,988 -- 1,988
-------- --------- --------
Total current liabilities .............. 51,432 51,432
Long-term debt .............................. 150,000(a) 150,000
Other liabilities ........................... 78,561 -- 78,561
-------- --------- --------
Total liabilities ...................... 129,993 150,000 279,993
Minority interest ........................... 43,429 -- 43,429
Divisional equity (deficit) ................. 75,292 (130,512)(b) (57,085)
(1,865)(c)
-------- --------- --------
Total liabilities and equity
(deficit)............................... $248,714 $ 17,623 $266,337
======== ========= ========
</TABLE>
- -----------------
(a) To record the incurrence of an estimated $150 million of new debt and to
record $3.7 million of fees to obtain the new borrowings.
(b) To reflect the amount of proceeds from the new debt which will be used to
repay existing indebtedness of GCG.
(c) To record the Industrial Chemical Business' share of the estimated costs to
be incurred prior to the Spinoff which are directly attributable to the
Spinoff and related transactions ($3.1 million, $1.9 million net of tax).
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The Industrial Chemicals Business:
Pro Forma Statement of Operations
<TABLE>
<CAPTION>
Year Ended December 31, 1998
--------------------------------------------
Historical Adjustments Pro Forma
---------- ----------- ---------
(In thousands)
<S> <C> <C> <C>
Net revenues ................................ $261,469 $ -- $261,469
Cost of sales ............................... 202,338 202,338
Selling, general and administrative expense.. 18,082 1,000(a) 19,082
-------- ------- --------
Operating profit ............................ 41,049 (1,000) 40,049
Interest expense ............................ 11,747 3,653(b) 15,400
Interest income ............................. 930 -- 930
Foreign currency transaction losses ......... 447 -- 447
Other expense, net .......................... 524 -- 524
-------- ------- --------
Income before minority interest and
income taxes .............................. 29,261 (4,653) 24,608
Minority interest ........................... 16,666 16,666
-------- ------- --------
Income before income taxes .................. 12,595 (4,653) 7,942
Income tax provision ........................ 3,171 (1,840)(c) 1,331
-------- ------- --------
Net income(d) ............................. $ 9,424 $(2,813) $ 6,611
======== ======= ========
</TABLE>
- -----------------
(a) To record estimated incremental general and administrative expenses
expected to be incurred as a result of the Spinoff.
(b) To record the estimated change in interest expense based upon an estimated
$150 million of debt expected to be outstanding at the date of the Spinoff,
at an assumed average borrowing rate of 10% and reflect the amortization of
debt issuance costs associated with the new borrowings. A fluctuation in
the assumed borrowing rate of 0.125% would change pro forma interest
expense by $187,500.
(c) To reflect the estimated tax effect of the pro forma adjustments.
(d) Excludes the impact of the Industrial Chemical Business' share of one-time
charges directly related to the Spinoff and the early extinguishment of
debt of $3.1 million ($1.9 million net of tax).
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THE INDUSTRIAL CHEMICALS BUSINESS:
DISCUSSION OF RESULTS
Overview
The Industrial Chemicals Business is a leading global producer of
soda ash and North American producer of calcium chloride. The Industrial
Chemicals Business produces natural soda ash at its facility in Green River,
Wyoming, and synthetic soda ash and calcium chloride at its facility in
Amherstburg, Ontario.
The Industrial Chemicals Business' principal product is soda ash, and
the profitability of its operations is affected by the market price of soda ash
more than any other factor. The price of soda ash has fluctuated in recent years
due to numerous factors, such as changes in industry capacity and global demand
for soda ash, and the change in price and/or availability of substitutes for
end-products using soda ash. In 1997 and 1998, due in part to unfavorable soda
ash prices, the Industrial Chemicals Business experienced decreases in profits
compared to the prior year levels. The Industrial Chemicals Business estimates
that 1999 soda ash prices for U.S. producers will be approximately $69 per ton,
or approximately $6 per ton below the 1998 level. For a discussion of factors
affecting the prices of and demand for soda ash, see "The Industrial Chemicals
Business--The Soda Ash and Calcium Chloride Industries--Soda Ash Industry."
The Industrial Chemicals Business produces natural soda ash by
refining mined trona deposits at its plant in Green River, Wyoming. The Green
River basin contains the largest known, economically recoverable trona deposits
in the world. The Industrial Chemicals Business' Green River facility, includ-
ing the plants and leases for mining trona ore, are owned and operated through
GCSAP, a partnership in which the Industrial Chemicals Business owns a 51%
partnership interest and of which the Industrial Chemicals Business is the
managing partner. See "The Industrial Chemicals Business--General Chemical (Soda
Ash) Partners."
The discussion of the results of the Industrial Chemicals Business in
this section relate to periods during which General Chemical Group operated both
the Industrial Chemicals and GenTek Businesses. The Industrial Chemicals
Business has not been operated as a separate, stand-alone business and has
historically shared with the GenTek Business various financial, administrative
and managerial expertise relevant to operating as an independent public company.
After the Spinoff, as a separate, stand-alone business, the Industrial Chemicals
Business' results and profits may not be comparable to those before the Spinoff.
The Combined Financial Statements of the Industrial Chemicals
Business include an allocation of certain assets, liabilities and expenses from
General Chemical Group. In the opinion of management, expenses have been
allocated to the Industrial Chemicals Business on a reasonable and consistent
basis using management's estimate of services provided to the Industrial
Chemicals Business by General Chemical Group. However, such allocations are not
necessarily indicative of the level of expenses which might have been incurred
had the Industrial Chemicals Business been operated as a separate, stand-alone
entity during the periods presented or expected to be incurred after the
Spinoff. For further information on the basis of presentation of the historical
financial data of the Industrial Chemicals Business, see Note 1 to such Combined
Financial Statements.
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Results of Operations
The following table sets forth unaudited statement of operations data
of the Industrial Chemicals Business for the three years ended December 31,
1996, 1997 and 1998 and the corresponding percentage of the net revenues of the
Industrial Chemicals Business for the relevant period presented.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------
1996 1997 1998
--------------- --------------- --------------
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Net revenues ............... $298.9 100% $289.7 100% $261.5 100%
Gross profit ............... 100.1 33 84.9 29 59.1 23
Selling, general and
administrative expense 22.2(1) 7 16.7 6 18.1 7
Operating profit ........... 77.9 26 68.3 23 41.0(2) 16
Interest expense ........... 13.0 4 12.7 4 11.7 4
Minority interest .......... 31.6 11 24.3 8 16.7 6
Net income ................. $ 24.3 8% $ 22.3 8% $ 9.4 4%
====== === ====== === ====== ===
</TABLE>
- -----------------
Note: Amounts may not total due to rounding.
(1) Includes a one-time charge of $5.7 million ($3.5 million after-tax)
primarily related to awards made under a restricted unit plan, which
replaced certain prior equity programs. General Chemical Group recorded a
one-time charge of $12.1 million ($7.6 million after tax), and the amount
mentioned in the previous sentence related to the Industrial Chemicals
Business.
(2) Includes incremental accruals of $2.3 million ($1.4 million after tax)
principally related to litigation and environmental spending.
1998 Compared with 1997
Net revenues for 1998 were $261.5 million, which was $28.2 million,
or 10%, below the prior year level. This decrease reflects lower volumes for
soda ash, particularly exports to Asia, as well as lower pricing for soda ash
and calcium chloride.
Gross profit for 1998 was $59.1 million, compared with $84.9 million
in the same period in 1997. Gross profit as a percentage of sales for 1998
decreased to 23% from 29% in 1997. These decreases were primarily due to the
above-mentioned lower soda ash volumes and unfavorable pricing.
Selling, general and administrative expense as a percentage of net
revenues increased to 7% in 1998 from 6% in 1997 primarily due to the lower
sales volume.
Minority interest for 1998 was $16.7 million compared with $24.3
million for 1997, reflecting lower earnings due to lower export volumes and
weaker soda ash pricing.
Interest expense for 1998 of $11.7 million was $1.0 million lower
than the comparable prior year level due to lower borrowing rates.
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1997 Compared with 1996
Net revenues for 1997 were $289.7 million, which was $9.2 million, or
3%, below the prior year level. This decrease was due to lower pricing for soda
ash and calcium chloride, partially offset by higher soda ash volume.
Gross profit decreased 15% to $84.9 million for 1997 compared with
$100.1 million for 1996. Gross profit as a percentage of sales decreased to 29%
from 33% in 1996. These decreases were primarily due to the above-mentioned
lower pricing for soda ash and calcium chloride, partially offset by higher soda
ash volume.
Selling, general and administrative expense as a percentage of net
revenues decreased to 6% in 1997 from 7% in 1996. This decrease was due to the
recording in 1996 of a one-time charge of $5.7 million related primarily to a
new restricted unit plan created by General Chemical Group which replaced
certain prior equity programs. General Chemical Group recorded a one-time charge
of $12.5 million ($7.6 million after tax), and the amount mentioned in the
previous sentence related to the Industrial Chemicals Business.
Minority interest for 1997 was $24.3 million compared with $31.6
million for 1996, reflecting lower earnings due to lower soda ash pricing.
Interest expense of $12.7 million for 1997 was essentially at the
1996 year level.
Liquidity and Capital Resources
Cash and cash equivalents were $1.1 million at December 31, 1998
compared with $1.4 million at December 31, 1997. During 1998, the Industrial
Chemicals Business generated cash flow from operating activities of $37.8
million, of which $18.5 million was used to make capital expenditures and $19.6
million was transferred to General Chemical Group.
The Industrial Chemicals Business had working capital of $39.9
million at December 31, 1998 as compared with $45.9 million at December 31,
1997, principally due to lower accounts receivable, partially offset by higher
inventories and lower accounts payable.
To date, the Industrial Chemicals Business' primary sources of
liquidity have been cash generated from operations and borrowings under General
Chemical Group's credit facility. Following the Spinoff, the Industrial
Chemicals Business' liquidity needs will arise primarily from its working
capital requirements, capital expenditures and interest and principal payment
obligations. The Industrial Chemicals Business believes that its existing
capital resources, cash flow generated from future operations and drawings under
its bank credit facility will enable it to maintain its planned operating,
capital expenditure and debt service requirements for the foreseeable future.
The Industrial Chemicals Business' ability to satisfy its capital
requirements will be dependent upon its future financial performance, which in
turn will be subject to general economic conditions and to financial, business
and other factors, including factors beyond its control.
To reflect the independent status of GenTek and New GCG after the
Spinoff, each of GenTek and New GCG will have its own separate financing
facilities, the proceeds of the initial borrowings of which will be used in part
to repay General Chemical Group's existing borrowings from third parties.
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At this time, General Chemical Group expects that, after the Spinoff,
the New GCG Financing Facilities will be for about $185 million, of which $150
million will be funded on or about the Spinoff Date. The New GCG Financing
Facilities will include approximately $100 million of senior subordinated notes
and $50 million of borrowings under a revolving credit facility extended by a
bank syndicate. New GCG expects to have approximately $35 million of
availability under its revolving facility for borrowings after the Spinoff and
approximately $15 million of cash on hand.
General Chemical Group is finalizing the New GCG Financing
Facilities, and the specific terms of its indebtedness will depend on, among
other things, the market conditions for debt financing at the time of the
Spinoff. The pro forma financial statements for the Industrial Chemicals
Business included in this Information Statement have been prepared on the
assumption that borrowings under the New GCG Financing Facilities will bear
interest at an annual rate of approximately 10%, an assumption management
believes is reasonable for purposes of preparing the pro forma financial
statements. By comparison, the 1998 weighted interest rate for borrowings by
General Chemical Group was 7.9%. Management expects that the New GCG Financing
Facilities will impose operating and financial restrictions on New GCG,
including by limitations on their ability to incur additional indebtedness, pay
dividends or make distributions in respect of their Common Stock, create liens,
or consolidate, merge or sell their assets. In addition, it is expected that New
GCG will be required to comply with specified financial covenants and ratios.
After the Spinoff, New GCG will be highly leveraged and its leverage
will be substantial in relation to its total capitalization. New GCG's leverage
and debt service requirements will make it more vulnerable to economic
downturns, including soda ash price declines, and may limit its ability to
withstand competitive pressures. In addition, New GCG's level of debt poses
risks that it may impair its additional financing in the future for working
capital, capital expenditures, acquisitions or general corporate purposes. As
previously noted, the New GCG Financing Facility is expected to impose operating
and financial restrictions on the company. These covenants could adversely
affect New GCG's ability to finance its future operations, potential
acquisitions or capital needs or to engage in business activities that may be in
its interest.
Year 2000
Following the Spinoff, GenTek will provide the Industrial Chemicals
Business with MIS and MIS-supported functions, including personnel, hardware and
software, through December 31, 2001, on a service contract basis. During this
period, GenTek will provide to New GCG the services related to the remediation
of the Year 2000 problem for the Industrial Chemicals Business. A Year 2000
problem will occur where date-sensitive software uses two digit year date
fields, sorting the Year 2000 ("00") before the Year 1999 ("99"). The Year 2000
problem can arise in hardware, software, or any other equipment or process that
uses embedded software or other technology. The failure of such systems to
properly recognize dates after December 31, 1999 could result in data corruption
and processing errors.
General Chemical Group completed its assessment of its Year 2000
compliance status in early 1998 and began work on its remediation program
immediately thereafter. GenTek, which will be principally responsible for
overseeing the MIS functions of the Industrial Chemicals Business through 2001,
intends to continue General Chemical Group's Year 2000 remediation program for
both the GenTek and the Industrial Chemicals Businesses and is expected to
effect all conversion efforts needed to prevent the potential impact of Year
2000 problems. The Transition Support Agreement provides that generally GenTek
will not be liable to us for any costs, losses, damages or claims related to any
Year 2000 services provided by it under the Transition Support Agreement, other
than for gross negligence or wilful misconduct. See "Arrangements between GenTek
and New GCG relating to the Spinoff. New
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GCG intends to work with GenTek on the separation of MIS functions of the GenTek
and Industrial Chemicals Businesses after resolution of Year 2000 problems. New
GCG anticipates that it will recruit its own MIS staff during 2001 and that by
approximately December 2001 a separation of its MIS functions will be completed.
General Chemical Group's remediation program has been structured to
address its Systems. Based on current estimates, it is expected that
approximately $1.0 million will be spent to replace or reprogram existing
Systems and complete the Year 2000 compliance program for the MIS serving both
the GenTek and Industrial Chemicals Businesses. Management has indicated that it
expects all material Systems to be Year 2000 compliant by March 31, 1999 and
substantially all Systems to be Year 2000 compliant by December 31, 1999. In the
event that material Systems are not Year 2000 compliant, New GCG may experience
reductions or interruptions in operations which could have a material adverse
effect on New GCG's results of operations.
In addition, New GCG will work with GenTek to determine the Year 2000
compliance status of the Industrial Chemicals Business' material vendors,
suppliers and service providers, including the railroad and trucking companies
used to ship its products. Based on currently available information, management
does not anticipate any material impact to New GCG based on the failure of such
third parties to be Year 2000 compliant. However, the process of evaluating the
Year 2000 compliance status of material third parties is continually ongoing
and, therefore, no guaranty or warranty can be made as to such third parties'
future compliance status or its potential effect on the Industrial Chemicals
Business. Management believes there exists a sufficient number of suppliers of
raw material for the Industrial Chemicals Business so that alternate sources
will be available if any supplier is unable to deliver raw materials due to Year
2000 problems. There can be no assurances, however, that such alternate sources
will be able to supply all the Industrial Chemicals Business' requirements in a
timely manner or on terms comparable with those of its current suppliers. If the
railroads or trucking companies that ship the Industrial Chemicals Business'
products fail to be Year 2000 compliant, the Industrial Chemicals Business may
not be able to arrange alternative and timely means to ship its goods, which
could lead to interruptions or slowdowns in its business. The Industrial
Chemicals Business is preparing for the possible use of alternative suppliers
and means of transportation, possible adjustment of raw material and product
inventory levels and contingencies with respect to potential energy source
interruptions, all in an effort to minimize the effects, if any, of Year 2000
related interruptions or slowdowns caused by suppliers and transporters.
Qualitative and Quantitative Disclosures about Market Risk
The Industrial Chemicals Business does not expect to enter into
financial instruments for trading purposes. The Industrial Chemicals Business
anticipates periodically entering into interest rate swap agreements to
effectively convert all or a portion of its floating-rate debt to fixed-rate
debt in order to reduce its exposure to movements in interest rates. Such
agreements would involve the exchange of fixed and floating interest rate
payments over the life of the agreement without the exchange of the underlying
principal amounts. The Industrial Chemicals Business also anticipates
periodically entering into currency and interest rate swap agreements to
partially reduce its exposure to movements in currency exchange rates,
particularly Canadian dollars. The impact of fluctuations in interest rates on
the interest rate swap agreements is expected to be fully offset by the opposite
impact on the related debt. Gains and losses on the currency portion of the
currency and interest rate swap partially offset the foreign exchange gain or
loss on the related debt. Swap agreements will only be entered into with strong
creditworthy parties.
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Environmental Matters
The Industrial Chemicals Business' mining and production operations,
which have been conducted at the Green River and Amherstburg sites for many
years, are subject to numerous laws and regulations relating to the protection
of human health and the environment in the U.S. and Canada. The Industrial
Chemicals Business believes that it is in substantial compliance with such laws
and regulations. However, as a result of its operations, the Industrial
Chemicals Business is involved from time to time in administrative and judicial
proceedings and inquiries relating to environmental matters. In addition,
modifications or changes in enforcement of existing laws and regulations or the
adoption of new laws and regulations in the future, particularly with respect to
environmental and safety standards, or the discovery of additional or unknown
environmental contamination could require expenditures which might be material
to New GCG's results of operations or financial condition. See "The Industrial
Chemicals Business--Environmental Matters."
The Industrial Chemicals Business has an established program to
ensure that its facilities comply with environmental laws and regulations.
Expenditures made pursuant to this program for 1998 approximated $1.7 million
(of which approximately $0.6 million represented capital expenditures and
approximately $1.1 million related to ongoing operations and the management and
remediation of potential environmental contamination from prior operations).
Expenditures for 1997 amounted to $4.0 million (of which approximately $2.8
million represented capital expenditures and approximately $1.2 million related
to ongoing operations and the management and remediation of potential
environmental contamination from prior operations). If environmental laws and
regulations affecting the Industrial Chemicals Business' operations become more
stringent, the Industrial Chemicals Business' costs for environmental compliance
may increase above such range.
Other Matters
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("FAS 133"). FAS 133 requires that all
derivative instruments be measured at fair value and recognized in the balance
sheet as either assets or liabilities. New GCG is required to adopt FAS 133 for
its fiscal years beginning after June 15, 1999. Management does not expect that
the adoption of FAS 133 will have a material effect on its results of operations
or financial condition.
Forward Looking Statements
This Information Statement includes forward-looking statements and
information about New GCG and the Industrial Chemicals Business that are based
on the beliefs, plans, expectations and assumptions of General Chemical Group
and on information currently available to it. The words "may," "should,"
"expect," "anticipate," "intend," "plan," "continue," "believe," "seek,"
"estimate" and similar expressions used in this Information Statement are
intended to identify forward-looking statements. The forward-looking statements
in this Information Statement involve certain risks, uncertainties and
assumptions. Many of these factors are beyond the ability of General Chemical
Group to control or predict. As a result, the future actions, financial
condition, results of operations and stock price of New GCG could differ
materially from those expressed in any forward-looking statements.
The following factors, among others, in some cases have affected, and
in the future could affect, the actions, financial condition, results of
operations and stock price of the Industrial Chemicals Business: (1) fluctuation
of world soda ash prices due to changes in supply and demand; (2) international
economic conditions and U.S. dollar exchange rates; (3) reduced soda ash demand
from
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increased use of recycled glass or glass substitutes; (4) the Industrial
Chemicals Business' lack of complete control over the GCSAP, in which the
Industrial Chemicals Business owns a 51% interest; (5) increases in the cost of
energy, transportation or labor; (6) environmental contamination at its
facilities; (7) future modifications to existing environmental, safety and human
health regulations; (8) Year 2000 concerns; (9) the Industrial Chemicals
Business' ability to operate as an independent business following the Spinoff;
and (10) certain potential adverse tax consequences of a change of control
following the Spinoff.
General Chemical Group undertakes no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise. In light of these risks, uncertainties and
assumptions, the forward-looking events discussed in this Information statement
might not occur.
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THE INDUSTRIAL CHEMICALS BUSINESS
General
The Industrial Chemicals Business is the second largest soda ash
producer in North America and one of the top five producers globally, accounting
for 23% of sales by North American producers and 8% of global sales in 1998. The
Industrial Chemicals Business has total soda ash production capacity of 3.3
million tons, consisting of 2.8 million tons of natural production and 500,000
tons of synthetic production. The Industrial Chemicals Business is also the
second largest North American producer of calcium chloride, a co-product of the
synthetic soda ash process, accounting for 27% of sales by North American
producers in 1998. The Industrial Chemicals Business' soda ash is used in many
familiar consumer products found in virtually every home, including glass, soap,
powdered detergent, paper, textiles and food. Calcium chloride is mainly used
for dust control and roadbed stabilization during the summer, for de-icing roads
during the winter, in completion fluids for oil recovery and in various other
industrial applications.
The Industrial Chemicals Business produces natural soda ash from
trona ore at its Green River, Wyoming facility, where it has access to the
largest and most economically recoverable trona deposits in the world. Industry
sources estimate that U.S. natural soda ash cash production costs are typically
less than half those of synthetic soda ash producers. The Industrial Chemicals
Business believes that its lower costs give it a significant advantage, even
after shipping costs, over synthetic soda ash producers in most regions of the
world. The Industrial Chemicals Business operates its Green River facility
through General Chemical (Soda Ash) Partners, a partnership of which General
Chemical Group owns a 51% equity interest and is the managing partner. The other
partners of GCSAP are subsidiaries of Owens-Illinois, Inc. ("Owens-Illinois")
and TOSOH Corporation ("TOSOH"). Owens-Illinois is one of the world's largest
consumers of soda ash. TOSOH is a major chemical company and a distributor of
soda ash in the Japanese market.
The Industrial Chemicals Business produces synthetic soda ash and
calcium chloride, as a co-product, at its Amherstburg, Ontario facility. The
synthetic process is used outside the U.S. due to the scarcity of economically
available trona deposits in the rest of the world. Proximity to the major
Canadian and eastern U.S. markets, control of raw materials and successful
marketing of the calcium chloride co-product make the Amherstburg facility among
the most efficient synthetic soda ash plants in the world.
Competitive Strengths
Management believes that the principal competitive strengths of the
Industrial Chemicals Business are:
Low-Cost, High-Quality Production Base. The Industrial Chemicals
Business has one of the lowest production costs in the global soda ash industry
primarily due to its location in the Green River Basin in Wyoming and its
consistent improvement in production efficiency. Since taking control of the
Green River facility in 1986, the Industrial Chemicals Business has
approximately doubled annual productivity per employee. In the past two years,
through process improvements, the Industrial Chemicals Business has increased
its Green River soda ash production capabilities from 2.4 million to 2.8 million
tons annually. In addition, the quality and consistency of soda ash produced in
Green River make it preferred for certain applications throughout the world. As
a result of its market focus, product
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quality and prudent incremental increases in capacity, the Industrial Chemicals
Business, plants have operated at over 90% of effective capacity in each of the
past five years.
Strategic, Economic Partners. The Industrial Chemicals Business is
partners with major soda ash purchasers who realize economic benefits from
purchasing from the Industrial Chemicals Business instead of from its
competitors. Owens-Illinois, a 25% partner in GCSAP, is one of the largest
consumers of soda ash in the world. TOSOH, a 24% partner in GCSAP, is a
distributor of soda ash in the Japanese market. The Industrial Chemicals
Business also sells soda ash to Church & Dwight Co., Inc. ("Church & Dwight")
for use in baking soda, detergents and personal care products. Church & Dwight
is a leading producer of sodium bicarbonate, commonly known as baking soda,
under its Arm & Hammer'r' brand. GCSAP and Church & Dwight jointly own trona
mineral leases under which GCSAP mines trona for the production of soda ash sold
to Church & Dwight. In 1998, the Industrial Chemicals Business sold
approximately 500,000 tons of soda ash directly to Owens-Illinois and Church &
Dwight, plus additional amounts to Owens-Illinois and TOSOH through ANSAC, as
described below.
ANSAC Export Cooperative. The Industrial Chemicals Business is a
member of the American Natural Soda Ash Company ("ANSAC"), the export
cooperative of U.S. soda ash producers. Membership in ANSAC further enhances the
U.S. producers' low-cost position by leveraging ANSAC's global sales and
marketing operations and creating distribution economies of scale. Since the
creation of ANSAC in 1984, U.S. exports of soda ash grew at an approximate 8%
annual rate from 1.6 million tons to a peak of 4.6 million tons in 1997.
Experienced Management Team. The Industrial Chemicals Business is led
by an experienced and incentivized executive and operating management team with
an average of over 15 years of industry experience. The management team has
strengthened relationships with major customers, improved the efficiency of its
operations, accessed new markets and developed new products.
Strategy
The Industrial Chemicals Business aims to enhance its market position
and improve its profitability by continued efforts to:
Capitalize on Low-Cost, High-Quality Position. The Industrial
Chemicals Business intends to capitalize on its position as one of the world's
low-cost, high-quality producers of soda ash to increase its market share across
global markets. The Industrial Chemicals Business believes that its low-cost
global position, product quality and consistency, improved production
capabilities from its recent investment program, and the marketing and
distribution efficiencies associated with its membership in ANSAC will enable it
to increase its sales volumes into export markets. Management also believes that
the Industrial Chemicals Business is well-positioned to increase its sales
volumes and profitability as soda ash demand grows in developing market
economies.
Build on Relationships with Strategic, Economic Partners. In the
second quarter of 1998, Owens-Illinois, one of the largest consumers of soda ash
in the world, acquired ACI International Limited, a 25% partner in GCSAP. The
Industrial Chemicals Business estimates that, in 1998, Owens-Illinois
(including ACI International Limited) had global soda ash requirements of 2
million tons, of which only approximately 10% was purchased from GCSAP. The
Industrial Chemicals Business expects that, in light of the economic benefits of
being a GCSAP partner, Owens-Illinois will consider increased purchases from
GCSAP in the future. The Industrial Chemicals Business has already experienced
increased sales volume to Owens-Illinois in the first quarter of 1999.
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Continue to Expand Product Applications and Sales Regions. In the
past two years, the Industrial Chemicals Business has modified its Green River
facility to produce food grade soda ash and customized products for certain
customers who need low chloride, low calcium or specific particle size soda ash.
In addition, the Industrial Chemicals Business has developed patented technology
(its Hydrator'r' technology) to liquefy bulk soda ash at customer locations
directly from the railcar or truck, providing significant efficiencies for our
customers.
The Industrial Chemicals Business has also successfully introduced
Cal-Dry'TM', a calcium chloride-based product, to petroleum refineries for
distillate-drying applications and Corguard'TM', a corrosion inhibiting de-icing
product with a broad range of applications. In addition, the Industrial
Chemicals Business has recently successfully sold calcium chloride products in
Latin America and the Middle East, markets that the Industrial Chemicals
Business believes will offer us substantial growth opportunities in the future.
The Industrial Chemicals Business expects to build off of these recent successes
and further expand its calcium chloride product applications and sales regions.
Pursue Selective Acquisitions, Alliances and Consolidation
Opportunities. The Industrial Chemicals Business believes that selective
strategic acquisitions, alliances and consolidation opportunities are available
to strengthen and complement its soda ash and calcium chloride businesses. The
Industrial Chemicals Business believes that these opportunities can increase its
profitability and enhance its leadership position by adding economies of scale
and cost synergies, broadening its revenue base, and leveraging its management
expertise, production base and sales and marketing organizations.
The Soda Ash and Calcium Chloride Industries
Soda Ash Industry
Global consumption of soda ash during 1998 was approximately 36
million tons with U.S. producers estimated to have produced approximately 11.2
million tons and exported about 4.0 million tons, or about 36% of total U.S.
production. From 1984 to 1997, U.S. exports of soda ash grew at an approximate
8% annual rate from 1.6 million tons to 4.6 million tons, before declining in
1998 to approximately 4.0 million tons primarily as a result of the economic
turmoil in Asia and Latin America.
While growth in soda ash consumption is primarily driven by global
economic activity, U.S. producers of soda ash have gained global market share as
a result of the lower production costs and higher quality of U.S. natural soda
ash. Almost all of the soda ash produced outside the United States is synthetic
soda ash, which involves significantly higher production costs than the natural
process used in the United States. Industry sources estimate that U.S. natural
soda ash cash production costs are typically less than half those of synthetic
soda ash producers. This production cost differential is generally sufficient to
offset the increased freight costs for transporting U.S.-produced soda ash into
export markets allowing U.S. producers of natural soda ash to successfully
compete in most regions with local sources of synthetically produced soda ash.
GCSAP, along with the other five U.S. producers of natural soda ash,
is a member of ANSAC, a soda ash export cooperative organized in 1984 pursuant
to an exemption from U.S. antitrust laws provided under the Webb-Pommerene Act.
Through ANSAC, all six U.S. producers export soda ash to all parts of the world
except Canada and E.U. member countries. The primary export markets served by
ANSAC are Asia and Latin America, and to a lesser extent the Middle East, Africa
and Eastern Europe. Each individual member's allocation of ANSAC volume is based
on the member's total nameplate capacity, with any member's expansion phased-in
over a multi-year period for allocation purposes. ANSAC is the exclusive
distributor of the soda ash of its members; however, members can
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distribute soda ash directly to their international affiliates for their own
consumption, subject to certain limitations. Certain countries, however, have
from time to time considered limiting or prohibiting sales of products through
export cooperatives such as ANSAC on grounds that they are anti-competitive,
though management is not aware of any pending or threatened activity in this
regard that would be material to the Industrial Chemicals Business.
While total Western European demand for soda ash is estimated at 7.3
million tons annually, U.S. producers' shipments into Western Europe during 1998
totaled only an estimated 0.3 million tons. The lower exports to Western Europe
are attributable to the stronger U.S. dollar, more aggressive pricing by local
producers and the leveling of provisional antidumping duties in 1995 by the
European Commission against five of the six U.S. soda ash producers, including
General Chemical Group. The removal of provisional antidumping duties in
November 1997 permits U.S. producers, subject to currency fluctuations and
economic conditions generally, to be more competitive in shipping soda ash into
E.U. member countries.
Management expects that in the future, U.S. producers will continue
to capitalize on both the growth in world markets and the closure of older,
higher-cost synthetic soda ash plants outside of North America. Since 1993, nine
producers have closed fourteen plants outside of North America with an estimated
aggregate capacity of 2.9 million tons of soda ash.
Soda Ash -- Consumption
Soda ash is consumed primarily in the production of glass,
sodium-based chemicals, powdered detergents, pulp and paper and in the treatment
of water. The following table sets forth estimated 1998 global consumption by
end-use (1):
<TABLE>
<S> <C>
Glass:
Flat............................... 21%
Beverage container................. 19
Food and other container........... 7
Other.............................. 7
---
Sub-total glass................ 54
Chemicals............................. 24
Water treatment and other............. 15
Powdered detergents................... 7
---
100%
</TABLE>
-----------------
(1) Derived from industry sources; based on volume.
Glass Production. Approximately one-half of global soda ash industry
demand is attributable the production of glass, including: (1) flat glass
(commercial, residential and automobile windows) and mirrors; (2) beverage
container; (3) food and other container; and (4) other glass (fiberglass;
television tubes; lighting; tableware; glassware and laboratory ware).
Historically, domestic consumption of soda ash in the glass container
industry has been adversely affected by competition from alternative materials
and the growing trend toward the use of cullet (broken, recycled glass).
Management believes that the use of plastic containers will continue to
negatively impact the growth in domestic demand for soda ash, although the
continued growth of specialty uses for glass containers may provide additional
opportunities. According to the U.S.
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Geological Survey, there was no increase in the domestic rate of glass recycling
from 1996 to 1997, the most recent year for which data is available. In
developing economies, demand for glass is expected to continue to grow as
infrastructure requirements expand and standards of living improve.
Chemicals. Sales of soda ash into the sodium-based chemicals market
represent approximately one-fourth of global consumption. The chemical industry
uses soda ash in a variety of industrial applications. For example, soda ash is
used in the production of sodium bicarbonate, sodium phosphates, sodium
silicates and chrome chemicals. Many of these products ultimately find use in
higher-growth, specialty applications in the beverage, coatings, food and
personal care sectors.
Water Treatment and Other. Additional markets for soda ash include
water treatment, pulp and paper, metallurgical applications and other industrial
end uses, which together represent approximately one-seventh of global soda ash
consumption. In the water treatment market, soda ash can be used to control pH
levels and also provides the sodium ion needed for water softening. In this
market, soda ash competes with caustic soda, which is manufactured as a
co-product with chlorine. Due to strong demand for chlorine in recent years,
caustic soda has been oversupplied and its prices have fallen. In the past year,
chlorine demand has weakened. Although caustic soda prices have not recently
increased, in the past lower chlorine production has resulted in higher caustic
soda prices. Increased prices for caustic soda would lead to increased use of
soda ash as a substitute.
Powdered Detergents. Soda ash is used as a component of powdered
detergents, and this market represents approximately one-tenth of global soda
ash consumption. Soda ash is often the prime alkali used to make phosphates and
silicates for dry detergent applications. "Light" soda ash is preferred by
certain manufacturers for its lower bulk density, higher absorptivity rates and
faster rates of reaction. There has been a recent trend toward increased use of
liquid detergent in the United States, a trend offset by the growing use of dry
detergent outside of the United States.
Soda Ash -- Pricing and Capacity Utilization
The price of soda ash has fluctuated in recent years and is affected
by numerous factors beyond the control of the Industrial Chemicals Business,
such as changes in global industry capacity, global demand for soda ash and the
price and/or availability of substitutes for end-products using soda ash. Global
demand for soda ash has been subject to fluctuations based on, among other
factors, worldwide economic conditions, the rate of economic growth in
developing regions such as Asia and Latin America and currency fluctuations.
Management believes that consumption of soda ash will continue to
grow, primarily as a result of: (1) growth in the end-use markets for soda ash;
(2) export growth; and (3) new end-use applications for soda ash.
From 1988 to 1991, U.S. soda ash prices increased from $67 to $84 per
ton, mainly due to the surge in demand from certain export markets, including
Asia and Latin America. From 1991, U.S. soda ash prices declined to a low of $70
per ton in 1994 because of a number of capacity expansions before returning to
$83 per ton in 1996 as a result of the continued export growth. Since 1996, U.S.
soda ash prices have fallen to an estimated $75 per ton in 1998, primarily due
to capacity expansions totaling 1.2 million tons brought onstream in late 1996
(including a 700,000 ton expansion by FMC Corporation and a 300,000 ton
expansion by Solvay Minerals) and reduced export demand in Asia. The Industrial
Chemicals Business expects the average soda ash price per ton for U.S. producers
to be approximately $69 in 1999.
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<PAGE>
The following chart presents the average U.S. price per ton of soda
ash and global capacity utilized during the period from 1988 to 1998.
<TABLE>
<CAPTION>
Global
Average U.S. Price Capacity
Year Per Ton(1) Utilization(2)
- ----- ------------------- --------------
<C> <C> <C>
1988........................... $ 67 92%
1989........................... 77 97
1990........................... 83 97
1991........................... 84 91
1992........................... 81 95
1993........................... 74 88
1994........................... 70 91
1995........................... 74 90
1996........................... 83 89
1997........................... 77 91
1998........................... 75 87
</TABLE>
- --------------------------
(1) Based on data from the U.S. Geological Survey (not adjusted for inflation),
net of all shipping costs.
(2) Based on 95% of name plate capacity, as reported by industry sources.
Soda Ash -- Capacity Expansions
Since 1982, no new natural soda ash plants have been built in North
America. During this period, capacity expansion in the United States has been
achieved by expansion of existing facilities and improved operating
efficiencies. Expansions in the U.S. have generally been offset by the closure
of older, higher-cost synthetic soda ash plants outside the United States.
Recently, however, American Soda, LLP, a joint venture between American Alkali
and The Williams Companies, has announced its intention to solution mine
nahcolite reserves in White River, Colorado, for processing into soda ash and
sodium bicarbonate. The reported capacity of soda ash production at this
facility will be up to 1.0 million tons per year. The construction of this
facility, which has not yet begun, is contingent upon obtaining all of the
necessary regulatory approvals, permits and mineral leases, as well as the
commercial demonstration of the project as a viable production process.
Regarding existing soda ash producers, at the end of 1998, Oriental
Chemical Co. completed an 800,000 ton expansion of its Green River facility.
Upon completion of the expansion, due to current soda ash market conditions,
Oriental Chemical Co. "mothballed" 900,000 tons of other capacity at the
facility. In addition, Solvay Minerals announced the delay of its previously
planned 400,000 ton U.S. expansion, originally scheduled for completion in late
1998, until the fourth quarter of 2000.
Calcium Chloride Industry
North American demand for calcium chloride was estimated at 1.2
million tons in 1998. Demand for calcium chloride is seasonal and dependent on
weather conditions in the Northeast and Midwest United States and eastern
Canada. During the summer, liquid calcium chloride is used on unpaved roads for
dust control and roadbed stabilization. In winter, calcium chloride is used in
flake and
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liquid form for de-icing roads. Other applications include retail ice control,
concrete additive, water treatment and oil field uses. Certain of these other
uses are new and represent international growth opportunities outside of
traditional de-icing and dust control markets.
Sales and Marketing
Soda Ash. The Industrial Chemicals Business' specially trained soda
ash sales and marketing force consists of six professionals with an average of
over 20 years of industry experience. Key accounts are covered by senior sales
force managers and in many cases, executive management, all of whom work closely
with clients to satisfy their product needs and develop long term relationships.
Additionally, sales and marketing efforts are pursued at all levels, from the
top level management to the plant level.
The Industrial Chemicals Business' technical staff works with
customers to ensure product quality and to troubleshoot customer manufacturing
issues. In addition, the Industrial Chemicals Business' distribution group works
with the sales force and customers to efficiently distribute product and, in
some cases, actively manage customers' inventories for them. Products are
typically distributed directly to the customer by either rail or truck. The
Industrial Chemicals Business operates a rail fleet of approximately 2,500 rail
cars to service its customers. Virtually all of these rail cars are leased.
In the soda ash market, the Industrial Chemicals Business maintains
a diverse client base that includes numerous Fortune 500 companies. The
Industrial Chemicals Business sells to a range of companies in the glass
manufacturing, chemicals and detergents markets, including Albright & Wilson
Americas Ltd., Ball-Foster Glass Container Co., LLC, Church & Dwight, Consumers
Packaging, Inc., Ford Motor Company, Guardian Industries Corp., Occidental
Chemical Corporation, Owens-Illinois and Procter & Gamble Co. As of December 31,
1998, the Industrial Chemicals Business' top 10 soda ash customers accounted for
approximately 36% of revenues and had purchased from the Industrial Chemicals
Business for an average of 30 years.
Traditionally, large soda ash customers have made their soda ash
purchases pursuant to annual agreements rather than on a spot basis. In
accordance with industry practice, price and other terms are typically
negotiated in the fourth quarter of each year to cover purchases for the
following full year period based on soda ash supply and demand. Certain of the
Industrial Chemicals Business' customers have a contractual right to reopen
their agreed pricing during the contract year if they receive a more favorable
bona fide offer from another supplier. In the past, exercises of such rights
have been infrequent and have not had a material impact on the Industrial
Chemicals Business' results of operations and financial condition, although
there can be no assurance that no such impact will occur in the future.
Calcium Chloride. The Industrial Chemicals Business sells calcium
chloride to a broad range of industrial and municipal customers, principally
through its strategic distribution network. This network includes repackers and
applicators who use calcium chloride in roadbed stabilization, dust control and
de-icing. In addition, a dedicated calcium chloride sales force, consisting of
nine professionals in the United States and Canada with an average of 14 years
of industry experience, sells directly to several industrial accounts.
Management believes that the Industrial Chemicals Business' long standing
reputation for service, its strategic location, the size and extent of its
storage and distribution facilities, and its dedicated sales force and its
network of specialty distributors will allow the Industrial Chemicals Business
to enhance its position in the highway and road maintenance market.
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Properties
The Industrial Chemicals Business' headquarters are located in
Hampton, New Hampshire. The locations and uses of its major properties are as
follows:
<TABLE>
<CAPTION>
Location Use
--------------------------- -------------------------------------
<S> <C> <C>
United States................ Hampton, New Hampshire (1) Headquarters
Parsippany, New Jersey (1) Offices
Green River, Wyoming Trona Mine and Manufacturing Facility
Canada....................... Amherstburg, Ontario Manufacturing Facility and
Undeveloped Lots
Brooks, Ontario Calcium Chloride Brine Fields
Mississauga, Ontario (1) Offices
</TABLE>
- --------------------------
(1) Leased.
Manufacturing and Distribution
The Industrial Chemicals Business produces soda ash at two
facilities: the GCSAP plant in Green River, Wyoming, which produces natural soda
ash; and its plant in Amherstburg, Ontario, which produces synthetic soda ash
and calcium chloride as a co-product. Since 1986, management has instituted
operating improvements at both facilities which have lowered production costs.
For example, at the Green River facility the Industrial Chemicals Business has
eliminated labor-intensive conventional mining techniques through the
implementation of bore mining technology. These and other initiatives have
resulted in productivity per employee approximately doubling at the Green River
facility since 1986.
In addition to management's focus on costs, product quality has
continually improved. Management's commitment to quality was recognized in 1993
when the Green River facility became the first U.S. soda ash facility to be
awarded ISO 9002 certification by the International Standards Organization. The
Amherstburg facility achieved this certification in 1994. In 1997, Green River
became the first soda ash facility to receive QS-9000 certification (a more
rigorous quality program than ISO 9002).
Currently, the Industrial Chemicals Business' soda ash production
capacity is 3.3 million tons, with 500,000 tons produced in the Amherstburg
facility. In 1999, the Industrial Chemicals Business received an operating
permit for nameplate capacity of 2.8 million tons at the Green River facility.
The Industrial Chemicals Business mines trona, the raw material precursor of
natural soda ash, at Green River under leases with the U.S. Government, the
State of Wyoming and Union Pacific Resources Corporation. Management estimates
that the extractable trona reserves under these leases have a remaining life of
approximately 100 years. For production at the Amherstburg facility, the
Industrial Chemicals Business solution mines its own salt and purchase limestone
from a major limestone producer.
At the Green River facility, the Industrial Chemicals Business
produces dense natural soda ash by converting trona to soda ash (sodium
carbonate). In the production process, trona is calcined (heated), yielding soda
ash plus water and carbon dioxide. The impure soda ash is dissolved in water and
the insoluble impurities are removed. Upon concentration of the solution, soda
ash monohydrate
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is precipitated, leaving soluble impurities in solution. The monohydrate is
subsequently passed through a centrifuge and dryer, yielding dense soda ash. Due
to the physical properties of dense soda ash, it is the preferred material for
glass manufacture.
The synthetic soda ash production process utilized at the Amherstburg
facility is more energy and labor intensive than natural soda ash production
and, hence, more costly. In the synthetic manufacture of soda ash, limestone and
salt are combined to produce sodium bicarbonate and co-product calcium chloride
or ammonium chloride. The sodium bicarbonate intermediate is then filtered and
calcined (heated) to result in soda ash. The soda ash is cooled, dried and then
taken to storage. Using this process, the Industrial Chemicals Business is able
to produce both dense and light soda ash. Light soda ash is preferred in certain
detergent and chemicals processes for its lower bulk density, higher
absorptivity rates and faster rates of reaction. Management believes that the
Amherstburg facility is one of the world's most efficient synthetic soda ash
plants. It is profitable due to its operating efficiency, the successful
marketing of the co-product calcium chloride and our proximity to major Canadian
and eastern U.S. soda ash markets.
The Industrial Chemicals Business' calcium chloride operations have
twelve terminals in the United States and Canada. The Industrial Chemicals
Business' repacker and applicator distribution network consists of 31 locations
where product is stored. In general, product is immediately shipped after
production from the Green River and Amherstburg facilities.
Reserves and Control of Resources
Green River. The Industrial Chemicals Business mines trona ore under
leases with the U.S. government, the State of Wyoming and the Union Pacific
Resources Corporation. The Industrial Chemicals Business' leases typically have
terms of ten years or longer. The trona reserves and mine are located in the
Green River, Wyoming area. In the Green River basin, the Green River formation
was deposited in a lake that began in the early Eocene geologic period
(approximately 35 million years ago) as a large body of fresh water, shrank in
size and became saline, expanded and then became fresh water again. In general,
the sediments deposited during the saline phase of this lake, which included the
trona deposits, are called the Wilkins Peak Member, and the overlying and
underlying fresh water deposits are called the Laney Shale Member and Tipton
Shale Member, respectively.
The Wilkins Peak Member contains at least 42 beds of trona in an area
of about 1,300 square miles, at depths ranging from about 400 feet to 3,500
feet. The major beds, those that are known to exceed 4 feet in thickness and to
underlie at least 100 square miles, are numbered 1 through 25, beginning with
the bottommost beds. One bed, No. 17, is currently being mined at the Green
River facility at a depth of about 1,600 feet. The underground mine is
accessible by one service and personnel shaft, one production shaft and three
ventilation shafts. The trona deposits are mined through continuous mining and
bore mining techniques which use machines to rip the ore from the seam. Both
methods use the room and pillar technique mine plan.
Surface operations include facilities for crushing, calcining,
dissolving, classifying, clarifying, crystallizing, drying (conversion of
monohydrate to anhydrous), storing and loading.
The Industrial Chemicals Business' estimated proven reserves within
bed No. 17, which it is currently mining, consist of approximately 85 million
tons of extractable ore. At the 1998 operating rate of 2.3 million tons of soda
ash per year (4.2 million tons of trona ore), there is approximately a 21-year
supply within bed No. 17. For the three years ended December 31, 1998, annual
production of trona ore averaged approximately 4.1 million tons. In addition,
estimated recoverable reserves contain three other
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major minable trona beds containing approximately 324 million tons of
extractable ore. These beds, which may require significant capital to access,
will provide more than 79 years of added reserves based on current operating
rates.
Amherstburg. At the synthetic soda ash plant in Amherstburg, Ontario,
Canada, the Industrial Chemicals Business uses salt and limestone as its primary
raw materials. Based on current production levels, the Industrial Chemicals
Business has approximately 28 years of salt reserves. Owned limestone reserves
total approximately 15 years, with an option on an additional six years of
reserves. However, the Industrial Chemicals Business is not currently utilizing
its limestone reserves and are instead purchasing all of its limestone
requirements from a third party under a long-term contract.
Competition
Soda Ash. The worldwide soda ash industry is comprised of a number of
domestic and international producers, some of which produce large volumes of
soda ash in multiple geographic regions. Solvay S.A., with natural soda ash
operations in the U.S. and multiple synthetic facilities in Eastern and Western
Europe, is the world's single largest producer of soda ash, with total estimated
capacity of approximately 8.6 million tons. If completed, FMC Corporation's
pending acquisition of Tg Soda Ash, Inc. will increase FMC's combined capacity
to more than 4.8 million tons.
Given the global nature of the soda ash industry and major soda ash
consumers, the Industrial Chemicals Business competes with both international
and North American soda ash producers. The international soda ash producers
include Brunner Mond plc, Penrice Soda Products Pty Ltd. (currently owned by IMC
Global), Solvay S.A. and various Eastern European and Asian producers.
Soda ash capacity outside of North America is distributed regionally
as follows:
<TABLE>
<CAPTION>
Capacity in
Region Thousands of Tons (1)
- ------------------------------------------------------- ---------------------
<S> <C>
Eastern Europe......................................... 6,900
Western Europe......................................... 7,600
China.................................................. 8,500
Other Asian Countries.................................. 4,600
Rest of World.......................................... 2,000
------
Total Capacity Outside North America............. 29,600
======
</TABLE>
- -----------------------
(1) Estimated 1998 annual nameplate capacity; derived from industry sources.
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<PAGE>
The North American soda ash producers are listed below:
<TABLE>
<CAPTION>
Capacity in
Thousands of
Owner/Managing Partner Location Tons (1) Partner(s)
- ------------------------------------ ------------------- ------------- --------------------------------
<S> <C> <C> <C>
General Chemical .................... Green River, 2,800 ACI (25%)(2), TOSOH (24%)
Wyoming
Amherstburg, 500
Ontario -----
3,300
FMC Corporation...................... Green River, 3,550 Sumitomo (10%), Nippon Sheet
Wyoming Glass (10%)
Oriental Chemical Co. (3)............ Green River, 2,200 Union Pacific Resources Corp.
Wyoming (49%)
Solvay Minerals, Inc................. Green River, 2,300 Asahi Glass (20%)
Wyoming
IMC Global Inc.(4)................... Searles Lake, 1,500
California
Tg Soda Ash, Inc.(5)................. Green River, 1,300
Wyoming ------
Total North American
Capacity...................... 14,150
======
</TABLE>
- --------------------------
(1) Estimated 1998 annual nameplate capacity; derived from industry sources.
(2) Since April 1998, held by Owens-Illinois through its wholly owned
subsidiary ACI International Limited.
(3) Excludes 900,000 tons of mothballed capacity, but includes 800,000 tons of
new capacity. See "Industries--Capacity Expansion" above.
(4) Currently held by IMC Global Inc. through its wholly-owned subsidiary,
North American Chemical Company. In December 1998, IMC Global Inc.
announced that it intends to sell 60% of North American Chemical Company
and certain international synthetic soda ash businesses to Mincorp LLC.
(5) Currently, 100% owned by Elf Aquitaine S.A. In January 1999, FMC
Corporation announced that it had signed a letter of intent to acquire Tg
Soda Ash, Inc.
Due to the low-cost position of natural soda ash production in North
America and increasing worldwide demand for soda ash, both international
customers and producers have made substantial investments in the Green River
Basin. Most recently, in January 1999, FMC Corporation, the largest Wyoming
producer of soda ash, announced that it had signed a letter of intent to
purchase another Wyoming producer, Tg Soda Ash, Inc. In December 1998, Mincorp
LLC, a holding company formed by Citigroup Venture Capital, agreed to purchase
60% of North American Chemical Company, which operates a soda ash production
facility in California, as well as 60% of certain international synthetic soda
ash businesses, from IMC Global. Citigroup Venture Capital also controls Brunner
Mond plc, a United Kingdom-based manufacturer of soda ash with two synthetic
facilities in the United Kingdom, one in the Netherlands and one natural soda
ash facility in Magadi, Kenya.
Calcium Chloride. The Industrial Chemicals Business is the largest
producer of calcium chloride in Canada and the second largest producer in North
America with 450,000 tons of capacity.
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Major competitors are The Dow Chemical Company ("Dow Chemical"), TETRA
Technologies, Inc. ("TETRA"), Ambar, Inc. and various local producers in Canada.
In the United States, the Industrial Chemicals Business is the third largest
distributor of calcium chloride behind Dow Chemical and TETRA. It is estimated
that Dow Chemical has 700,000 tons of capacity. The next largest U.S. producer
is TETRA, which operates four plants with estimated total capacity of 350,000
tons. In addition, Ambar Inc., an oil services company, purchased an existing
salt evaporation facility in Michigan for conversion to calcium chloride
production. During 1997, the facility came onstream with announced capacity of
300,000 tons, although some portion of this production will likely be used by
Ambar for internal consumption in its oil service business in the Gulf Coast
region.
General Chemical (Soda Ash) Partners
Since 1986, the Green River plant has been owned by GCSAP, a
partnership of which General Chemical Group, through a subsidiary, has been the
managing partner and owns a 51% equity interest. In connection with the Spinoff,
General Chemical Group will substitute General Chemical Industrial Products Inc.
as the managing partner of GCSAP and the holder of its 51% interest in the
partnership. ACI International Limited and TOSOH, through wholly-owned
subsidiaries, respectively own 25% and 24% of GCSAP's equity interests. ACI
International Limited, a major world producer of container glass and a customer
of GCSAP, was acquired in April 1998 by Owens-Illinois, a worldwide producer of
packaging materials. Management believes that Owens-Illinois and ACI
International Limited as a combined entity will be one of the largest single
purchasers of soda ash with annual domestic and international requirements of
approximately 2 million tons. TOSOH is a leading chemical company and a
distributor of soda ash in the Japanese market whose operations previously
included a 300,000 ton synthetic soda ash facility in Nanyo, Japan. In 1997,
TOSOH closed its synthetic soda ash facility and began purchasing soda ash
through ANSAC.
General Chemical Group, through a subsidiary, has been the managing
partner of GCSAP since 1986 when it was formed. As managing partner, it has had
and will continue to have overall responsibility for management of GCSAP,
including with respect to all operational, sales, marketing and financial
matters. However, certain significant actions of GCSAP must be approved by a
majority or, in certain instances, all of the partners. Historically, the
recommendations of the managing partner with respect to such matters have been
accepted. The partnership shall terminate on December 31, 2011, unless extended
for an additional five years or unless the partners decide to terminate it at
any time.
The partnership agreement requires GCSAP to make quarterly cash
distributions to each of the three partners. The partnership agreement also
prohibits the partners from transferring their equity interests (either directly
or through the sale of the subsidiary holding the partnership interest) or
withdrawing from the partnership without the consent of the other partners. The
obligations of each GCSAP partner are guaranteed by its parent. Pursuant to a
guaranty agreement, each parent company has agreed to certain restrictions on
its ability to sell the stock of its partner subsidiary. In addition, if the
parent company of any GCSAP partner proposes to transfer ownership of its GCSAP
partner subsidiary, the non-transferring parent companies may either (a) acquire
the transferred GCSAP partner, or its partnership interest, pursuant to a right
of first refusal or (b) require the transferring parent company, or the proposed
purchaser, to acquire the partnership interest held by their own GCSAP partner
subsidiaries.
ALCAD Partnership
GCSAP and Church & Dwight are partners in ALCAD, a partnership that
owns certain trona reserves which were contributed to ALCAD at its formation.
Church & Dwight is a leading producer
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of sodium bicarbonate, commonly known as baking soda, sold under the Arm &
Hammer'r' brand. The trona is mined and processed by GCSAP under a tolling
agreement with ALCAD and all of the soda ash produced is purchased by Church &
Dwight under a sales contract. The Industrial Chemicals Business has entered
into similar partnerships with other customers in the past and may do so in the
future.
Seasonality and Backlogs
Sales of soda ash are generally not seasonal, except for sales to the
glass container industry, which increase significantly in the summer due to
stronger beverage demand. Sales of calcium chloride are concentrated in late
spring and summer for dust control and late fall and winter for de-icing. As a
result, sales are generally lowest in the first quarter and highest in the
second quarter.
Due to the nature of the Industrial Chemicals Business, there are no
significant backlogs.
Environmental Matters
The Industrial Chemicals Business' mining and production operations,
which have been conducted at the Green River and Amherstburg facilities for many
years, are subject to numerous laws and regulations relating to the protection
of human health and the environment in the U.S. and Canada. Additionally, CERCLA
and similar state Superfund statutes have been construed as imposing joint and
several liability, under certain circumstances, on present and former owners and
operators of contaminated sites and transporters and generators of hazardous
substances for remediation of contaminated properties regardless of fault.
Management believes that the Industrial Chemicals Business is in substantial
compliance with such laws and regulations. However, as a result of its
operations, the Industrial Chemicals Business is involved from time to time in
administrative and judicial proceedings and inquiries relating to environmental
matters. To date, none of such proceedings or inquiries has had a material
adverse effect on its results of operations or financial condition of the
Industrial Chemicals Business. In addition, based on information available at
this time, management believes that no pending proceeding or inquiry would have
a material adverse effect on the financial position or results of operations of
the Industrial Chemicals Business. However, modifications or changes in
enforcement of existing laws and regulations or the adoption of new laws and
regulations in the future, particularly with respect to environmental and safety
standards, or discovery of any additional or unknown environmental
contamination, if any, could require capital expenditures which may be material
or otherwise adversely impact the results of operations or financial condition
of the Industrial Chemicals Business.
The Industrial Chemicals Business has established a program to ensure
that its facilities comply with environmental laws and regulations. See "The
Industrial Chemicals Business: Discussion of Results--Environmental Matters".
After the Spinoff, General Chemical Group, as the former parent of
GenTek and the GenTek Business, may under certain circumstances be found liable
for obligations of GenTek related to the use or transport of hazardous
substances or environmental contamination at facilities of the GenTek Business
for periods prior to the Spinoff. Although GenTek has agreed to indemnify and
hold harmless General Chemical Group with respect to all such liabilities and to
bear all of General Chemical Group's expenses for defending any claims relating
to these matters, the results of operations or financial condition of the
Industrial Chemicals Business could be materially adversely affected in the
event GenTek is unable or unwilling to perform its indemnification obligations.
See "Arrangements between GenTek and New GCG Relating to the Spinoff."
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Employees/Labor Relations
As of December 31, 1998, the Industrial Chemicals Business had
approximately 1,026 employees, 291 of whom were full-time salaried employees,
722 were full-time hourly employees and 13 were hourly employees working in
nonunion facilities.
Three union contracts, covering approximately 734 employees at the
Green River, Wyoming and Amherstburg, Ontario facilities, have durations of
three years and will be up for renewal during 1999. Since 1986, the Industrial
Chemicals Business has been involved in 12 labor negotiations, only one of
which, in 1993, has resulted in a work disruption. During that disruption,
management operated the plants and supplied customers without interruption until
the labor disruption was settled and a new contract was agreed upon. Management
believes that the Industrial Chemicals Business will be able to negotiate new
labor agreements on satisfactory terms, although there can be no assurance that
the Industrial Chemicals Business will be able to do so or that the negotiation
process will not involve material disruptions to the business.
Legal Proceedings
The Industrial Chemicals Business is involved in claims, litigation,
administrative proceedings and investigations of various types in several
jurisdictions. Although the amount of any liability which could arise with
respect to these actions cannot be accurately predicted, in the opinion of
management and based upon currently available information, any such liability
not covered by insurance would have no material adverse effect on the results of
operation or financial condition of the Industrial Chemicals Business.
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<PAGE>
THE INDUSTRIAL CHEMICALS BUSINESS:
MANAGEMENT
Management
The following table sets forth the directors and executive officers
of New GCG as of the Spinoff Date. Prior to the Spinoff, four of the current
eight members of the Board of Directors of General Chemical Group will resign,
with Paul Montrone, Paul Meister, Philip Beekman and Gerald Lewis remaining as
directors. Such remaining directors will, prior to the Spinoff, designate John
Kehoe and Joseph Volpe as members of the Board of Directors of New GCG. The
Board of Directors will then designate New GCG's executive officers.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Paul M. Montrone........................ 57 Director; Chairman of the Board
Paul M. Meister......................... 46 Director; Vice Chairman of the Board
John M. Kehoe, Jr....................... 65 Director; President and Chief Executive Officer
DeLyle W. Bloomquist.................... 40 Chief Operating Officer
Stewart A. Fisher....................... 38 Vice President and Chief Financial Officer
Douglas Strobel......................... 36 Controller
Philip E. Beekman....................... 67 Director
Gerald J. Lewis......................... 65 Director
Joseph Volpe............................ 59 Director
</TABLE>
- -------------------
Paul Montrone has served as the Chairman of the Board of General
Chemical Group since 1995, and a Director of New General Chemical Group since
1988. Mr. Montrone will continue to serve in such capacities following the
Spinoff. He was President of General Chemical Group from 1987 to 1994. Mr.
Montrone will also be Chairman of the Board of GenTek after the Spinoff. Mr.
Montrone is the Chairman of the Board and Chief Executive Officer of Fisher.
Paul Meister has served as the Vice Chairman of the Board of General
Chemical Group since 1998, and a Director of General Chemical Group since 1996.
Mr. Meister will continue to serve in such capacities following the Spinoff. Mr.
Meister will be Vice Chairman of the Board of GenTek after the Spinoff. Mr.
Meister has been Vice Chairman of the Board and Executive Vice President and
Chief Financial Officer of Fisher. Mr. Meister is also a Director of Mineral
Technologies Inc. and M&F Worldwide Corp.
John Kehoe will be the President and Chief Executive Officer and a
Director of New GCG after the Spinoff. Mr. Kehoe is the President and Chief
Executive Officer of WTI, a position he has held since January 1993. Mr. Kehoe
was Vice President of WTI from December 1991 until December 1992 and was
Managing Director of WTI from June 1988 to November 1990.
116
<PAGE>
<PAGE>
DeLyle Bloomquist will be Vice President and Chief Operating Officer
of New GCG. Mr. Bloomquist has been since 1996, and will be until the Spinoff,
the Vice President and General Manager, Industrial Chemicals of General Chemical
Group. Mr. Bloomquist was the Director of General Chemical Group's Corporate
Distribution Department between 1995 and 1996. Between 1993 and 1995, he served
as Controller-Industrial Chemicals of General Chemical Group.
Stewart Fisher will be Vice President and Chief Financial Officer of
General Chemical Group. Mr. Fisher has served as the Treasurer of General
Chemical Group since June 1998 and as Assistant Treasurer from 1996 to 1998.
Douglas Strobel will be the Controller of New GCG after the Spinoff.
He has been since 1996, and will be until the Spinoff, Group Controller,
Industrial Chemicals for General Chemical Group. Mr. Strobel served as Business
Controller, Sulfur Products for General Chemical Corporation from 1992 until
1996. Prior to 1992, he was Manager, Financial Planning for General Chemical
Corporation.
Philip Beekman has served as a Director of General Chemical Group
since 1996 and will continue to serve as a Director of New GCG following the
Spinoff. Mr. Beekman has been President of Owl Hollow Enterprises (consulting
and investment) since prior to 1994, and was Chairman of the Board and Chief
Executive Officer of Hook-SupeRx, Inc. (retail) from prior to 1994 to 1994. Mr.
Beekman is also a Director of Linens 'n Things Inc. and Kendle International
Inc.
Gerald Lewis has served as a Director of General Chemical Group since
1996 and will continue to serve as a Director of New GCG following the Spinoff.
Judge Lewis has been Chairman of Lawsuit Resolution Services since 1997. He was
of counsel to the law firm of Latham & Watkins from prior to 1994 to 1997.
Joseph Volpe will be a Director of New GCG after the Spinoff. He will
be a member of the Audit Committee, the Compensation Committee and the
Nominating Committee of the Board of New GCG. He has been the General Manager of
the New York Metropolitan Opera since 1990.
Committees of the Board
The Board of Directors of New GCG will have three standing
committees: an Audit Committee; a Compensation Committee; and a Nominating
Committee.
The Audit Committee will consist of Messrs. Beekman, Lewis, and
Volpe, with Judge Lewis serving as Chairman. It is responsible for, among other
things, recommending the firm to be appointed as independent accountants to
audit New GCG's financial statements and to perform services related to the
audit; reviewing the scope and results of the audit with the independent
accountants; approving in advance the general nature of each professional
service performed by the independent public accountants; reviewing with the
management and the independent accountants New GCG's year-end operating results;
considering the adequacy of the internal accounting and control procedures of
New GCG; reviewing the non-audit services to be performed by the independent
accountants, if any; considering the effect of such performance on the
accountants' independence; directing and supervising, when appropriate, special
investigations into matters within the scope of the independent public
accountants' duties; and performing such other tasks related to and in
furtherance of the foregoing as it may consider necessary or appropriate or as
may be assigned to it by the Board from time to time.
The Compensation Committee will consist of Messrs. Beekman, Meister
and Volpe, with Mr. Beekman serving as Chairman. It is responsible for reviewing
and recommending compensation
117
<PAGE>
<PAGE>
arrangements for Directors and officers; approving such arrangements for other
senior level employees; administering certain benefit and compensation plans of
New GCG and its subsidiaries; monitoring the activities of an internal committee
of members of management established to carry out policies and guidelines with
respect to such plans; and performing such other tasks related to and in
furtherance of the foregoing as it may consider necessary or appropriate or as
may be assigned to it by the Board from time to time. A subcommittee of the
Compensation Committee, comprised solely of "outside directors" (as such term is
used in Section 162(m) of the Code) who are also "Non-Employee Directors" (as
such term is defined in Rule 16b-3 of the Exchange Act) has exclusive authority
to approve any awards of stock or options to directors of New GCG (other than
Non-Employee Directors) or other individuals who are "officers" of the Company
for purposes of Section 16 of the Exchange Act under The General Chemical Group
Inc. Long-Term Incentive Plan and to administer elements of The General Chemical
Group Inc. 1998 Annual Performance Incentive Plan covered by Section 162(m) of
the Code.
The Nominating Committee will consist of all members of the Board,
with Paul Montrone serving as Chairman. The Nominating Committee is responsible
for nominating persons for election to the Board. The Nominating Committee will
consider nominees properly recommended by stockholders.
118
<PAGE>
<PAGE>
ANNUAL MEETING AND SHAREHOLDER PROPOSALS
GenTek's annual shareholders' meeting is expected to be held in
Delaware in May of each year. If a shareholder wishes to have a proposal
considered at the 2000 meeting and included in the Proxy Statement for that
meeting, the proposal must be received by GenTek in writing on or before
November 30, 1999.
AVAILABLE INFORMATION
GenTek has filed the Form 10 with the SEC concerning the shares of
GenTek Common Stock being received by General Chemical Group shareholders in the
Spinoff. This Information Statement does not contain all of the information set
forth in the Form 10 and the exhibits and schedules thereto. With respect to
each contract, agreement or other document filed as an exhibit to the Form 10,
reference is made to such exhibit for a more complete description of the matter
involved, and each statement made in this document concerning the contents of
any such contract, agreement or other document shall be deemed qualified in its
entirety by such reference.
The Form 10 and the exhibits and schedules thereto filed by each of
GenTek and New GCG may be inspected and copied at the public reference
facilities maintained by the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as at the Regional Offices of the SEC at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661,
and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such
information can be obtained by mail from the Public Reference Branch of the SEC
at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Such
materials can also be inspected at the offices of the New York Stock Exchange,
20 Broad Street, New York, New York 10005, or accessed electronically by means
of the SEC's home page on the Internet (http://www.sec.gov).
Following the Spinoff, GenTek will be required to comply with the
reporting requirements of the Exchange Act and will file annual, quarterly and
other reports with the SEC. GenTek will also be subject to the proxy
solicitation requirements of the Exchange Act and, accordingly, will furnish
audited financial statements to its shareholders in connection with its annual
meetings of shareholders.
119
<PAGE>
<PAGE>
INDEX TO DEFINED TERMS
<TABLE>
<CAPTION>
Page
No.
----
<C> <C>
1996 GRAT....................................................................67
1999 GRAT....................................................................67
ANSAC.......................................................................103
Avtex Site...................................................................48
Award........................................................................58
Bylaws.......................................................................85
Canadian GAAP................................................................12
CERCLA.......................................................................48
Certificate..................................................................85
Church & Dwight ............................................................103
Class B Conversion...........................................................19
Code.........................................................................21
CTP..........................................................................42
December 1998 GRAT...........................................................67
Defiance.....................................................................11
Distribution Agent............................................................9
EPA..........................................................................48
Exchange Act.................................................................20
February 1998 GRAT...........................................................67
Fisher ......................................................................53
Form 10......................................................................20
General Chemical Group........................................................1
GenTek Business...............................................................9
GenTek Financing Facility....................................................18
GenTek........................................................................1
Industrial Assets............................................................74
Industrial Chemicals Business.................................................9
Industrial Liabilities.......................................................74
IRS...........................................................................4
LTIP.........................................................................57
Montrone Trusts..............................................................19
Named Executive Officers ....................................................62
New GCG.......................................................................1
New GCG Financing Facilities.................................................19
New General Chemical Group....................................................1
New Hampshire Oak.............................................................4
Noma.........................................................................11
Non-Employee Directors.......................................................55
NYSE.........................................................................22
OTC..........................................................................44
Owens-Illinois..............................................................102
PDI..........................................................................46
Pension Plan.................................................................61
Peridot......................................................................32
Preferred Stock..............................................................85
PRP..........................................................................48
</TABLE>
120
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Page
No.
----
<S> <C>
Record Date...................................................................9
Reheis.......................................................................32
Reorganization...............................................................18
Sandco Automotive ...........................................................32
SARs.........................................................................58
SEC..........................................................................20
Securities Act...............................................................23
Separation Agreement.........................................................73
Spinoff Date.................................................................18
Systems......................................................................37
Tax Sharing Agreement........................................................77
TOSOH.......................................................................102
Transition Support Agreement ................................................76
WTI .........................................................................54
</TABLE>
121
STATEMENT OF DIFFERENCES
------------------------
The trademark symbol shall be expressed as............................. 'TM'
The registered trademark symbol shall be expressed as.................. 'r'
<PAGE>
<PAGE>
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
THE GENERAL CHEMICAL GROUP INC.
(TO BE GENTEK AFTER THE SPINOFF)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report............................................................................. F-2
Consolidated Statements of Operations for the three years ended December 31, 1998........................ F-3
Consolidated Balance Sheets at December 31, 1997 and 1998................................................ F-4
Consolidated Statements of Cash Flows for the three years ended December 31, 1998........................ F-5
Consolidated Statements of Changes in Equity (Deficit) for the three years ended
December 31, 1998..................................................................................... F-6
Notes to Consolidated Financial Statements............................................................... F-7-28
</TABLE>
The General Chemical Group Inc. ("GCG") has announced plans to
separate its Manufacturing and Performance Products Segments from its Industrial
Chemicals Segment through a distribution of stock of GenTek Inc. to stockholders
of GCG (the "Spinoff"). In connection with the Spinoff, GCG will transfer the
Manufacturing and Performance Products Segments to a wholly-owned subsidiary,
GenTek Inc. ("GenTek"), and distribute the stock of GenTek to stockholders of
GCG. After the Spinoff, GenTek and GCG will be separate, independent companies,
with their common stock traded on the New York Stock Exchange. GCG will own and
operate the Industrial Chemicals Segment, and GenTek will own and operate the
businesses comprising the Manufacturing and Performance Products Segments.
The Spinoff is treated as a reverse spinoff for financial statement
purposes because the greater proportion of GCG's assets and operations will be
held by GenTek after the Spinoff. Therefore, the Spinoff will be reflected, for
financial statement presentation, as if General Chemical Group formed a new
company consisting of the Industrial Chemicals Segment (i.e., "new" GCG) and
distributed the stock of that company as a dividend to General Chemical Group's
stockholders, with the assets and operations of the Manufacturing and
Performance Products Segments remaining with General Chemical Group after the
Spinoff. Accordingly, General Chemical Group's financial statements reflect the
financial position and results of operations of the Manufacturing and
Performance Products Segments as continuing operations and the financial
position and results of operations of the Industrial Chemicals Business as
discontinued operations. On an ongoing basis, the GenTek financial statements
will consist of the Manufacturing and Performance Products Segments and the new
GCG financial statements will consist of the Industrial Chemicals Segment.
F-1
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
THE GENERAL CHEMICAL GROUP INC.:
We have audited the accompanying consolidated balance sheets of The
General Chemical Group Inc. and subsidiaries as of December 31, 1997 and 1998,
and the related consolidated statements of operations, changes in equity
(deficit) and cash flows for each of the three years in the period ended
December 31, 1998. Our audits also included the financial statement schedule in
the Index at Item 15. These financial statements and financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on the financial statements and the financial statement
schedule 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 disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of The General Chemical
Group Inc. and subsidiaries at December 31, 1997 and 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1998 in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as
whole, presents fairly in all material respects the information set forth
therein.
Deloitte & Touche LLP
Parsippany, New Jersey
February 11, 1999
(March 18, 1999 as to Notes 1, 3 and 17)
F-2
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
(TO BE GENTEK AFTER THE SPINOFF)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------
1996 1997 1998
------------ ---------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net revenues ................................................. $ 330,120 $ 368,516 $ 443,919
Cost of sales ................................................ 229,237 251,912 326,626
Selling, general and administrative expense .................. 52,160 49,078 65,572
--------- --------- ---------
Operating profit ......................................... 48,723 67,526 51,721
Interest expense ............................................. 10,747 8,855 14,624
Interest income .............................................. 1,404 1,475 1,165
Foreign currency transaction (gains) losses .................. (83) 442 629
Other expense, net ........................................... 263 169 320
--------- --------- ---------
Income from continuing operations before income taxes and
extraordinary item ..................................... 39,200 59,535 37,313
Income tax provision ......................................... 18,425 26,261 (3,756)
--------- --------- ---------
Income from continuing operations before extraordinary
item.................................................... 20,775 33,274 41,069
Income from discontinued operations (net of tax) ............. 25,833 23,041 10,299
--------- --------- ---------
Income before extraordinary item ......................... 46,608 56,315 51,368
Extraordinary item - loss from extinguishment of debt (net of
tax, $2,395) ................................................ -- -- 3,661
--------- --------- ---------
Net income .................................................. $ 46,608 $ 56,315 $ 47,707
========= ========= =========
EARNINGS PER COMMON SHARE - BASIC:
Income from continuing operations ............................ $ .98 $ 1.55 $ 1.95
Income from discontinued operations (net of tax) ............. 1.21 1.08 .49
Extraordinary item - loss from extinguishment of debt (net of
tax) ........................................................ -- -- .17
--------- --------- ---------
Net income ................................................ $ 2.19 $ 2.63 $ 2.27
========= ========= =========
EARNINGS PER COMMON SHARE - ASSUMING DILUTION:
Income from continuing operations ............................ $ .95 $ 1.48 $ 1.88
Income from discontinued operations (net of tax) ............. 1.18 1.02 .47
Extraordinary item - loss from extinguishment
of debt (net of tax) ........................................ -- -- .17
--------- --------- ---------
Net income ................................................ $ 2.13 $ 2.50 $ 2.18
========= ========= =========
</TABLE>
See the accompanying notes to the consolidated financial statements.
F-3
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
(TO BE GENTEK AFTER THE SPINOFF)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1997 1998
------------- -------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................................... $ 20,401 $ 61,310
Receivables, net ........................................................ 49,803 60,620
Inventories ............................................................. 25,328 37,619
Deferred income taxes ................................................... 9,850 11,494
Other current assets .................................................... 153 826
--------- ---------
Total current assets ................................................ 105,535 171,869
Property, plant and equipment, net ....................................... 160,154 196,526
Goodwill, net of amortization ............................................ 19,192 71,444
Other assets ............................................................. 19,432 21,687
Net assets of discontinued operations .................................... 85,505 75,292
--------- ---------
Total assets ........................................................ $ 389,818 $ 536,818
========= =========
LIABILITIES AND EQUITY (DEFICIT)
Current liabilities:
Accounts payable ........................................................ $ 32,116 $ 42,813
Accrued liabilities ..................................................... 48,846 51,965
Income taxes payable .................................................... 2,662 8,960
Current portion of long-term debt ....................................... 17,392 50,802
--------- ---------
Total current liabilities ........................................... 101,016 154,540
Long-term debt ........................................................... 240,612 306,729
Other liabilities ........................................................ 142,429 130,245
--------- ---------
Total liabilities ................................................... 484,057 591,514
--------- ---------
Equity (deficit):
Preferred Stock, $.01 par value; authorized 10,000,000 shares; none
issued or outstanding ............................................... -- --
Common Stock, $.01 par value; authorized 100,000,000 shares; issued:
12,558,697 and 12,654,489 shares at December 31, 1997 and 1998,
respectively ........................................................ 126 127
Class B Common Stock, $.01 par value; authorized 40,000,000 shares;
issued and outstanding: 9,758,421 shares at December 31, 1997 and
1998 ................................................................ 97 97
Capital deficit ......................................................... (183,814) (182,563)
Accumulated other comprehensive income .................................. (2,197) (2,446)
Retained earnings ....................................................... 118,855 162,378
Treasury stock, at cost: 1,362,898 and 1,641,166 shares at December
31, 1997 and 1998, respectively ....................................... (27,306) (32,289)
--------- ---------
Total equity (deficit) .............................................. (94,239) (54,696)
--------- ---------
Total liabilities and equity (deficit) .............................. $ 389,818 $ 536,818
========= =========
</TABLE>
See the accompanying notes to the consolidated financial statements.
F-4
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
(TO BE GENTEK AFTER THE SPINOFF)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
1996 1997 1998
--------- ---------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ................................................. $ 46,608 $ 56,315 $ 47,707
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization ........................ 14,099 16,296 23,065
Net loss on disposition/impairment of long-term assets 673 431 11,910
Unrealized exchange (gain) loss ...................... 31 1,405 1,313
Restricted unit plan costs ........................... 11,319 1,302 1,309
Loss on extinguishment of debt ....................... -- -- 6,056
Income from discontinued operations .................. (25,833) (23,041) (10,299)
(Increase) decrease in receivables ................... (2,412) (4,835) 1,216
Increase in inventories .............................. (2,441) (1,597) (2,596)
Increase (decrease) in accounts payable .............. (216) 1,944 6,241
Decrease in accrued liabilities ...................... (14,312) (1,656) (1,871)
Increase in income taxes payable ..................... 459 1,440 6,298
Increase (decrease) in other liabilities and
assets, net........................................ 10,862 8,175 (33,081)
--------- --------- ---------
Net cash provided by continuing operations ........... 38,837 56,179 57,268
--------- --------- ---------
Cash flows from investing activities:
Capital expenditures ....................................... (19,231) (26,203) (33,737)
Proceeds from sales or disposals of long-term assets ....... 43 63 767
Payments from related parties .............................. 14,000 -- --
Cash provided (used) by discontinued operations ............ 16,392 331 20,512
Acquisition of businesses net of cash acquired* ............ -- (30,130) (90,935)
--------- --------- ---------
Net cash provided by (used for) investing activities ....... 11,204 (55,939) (103,393)
--------- --------- ---------
Cash flows from financing activities:
Net proceeds from initial public offering .................. 40,600 -- --
Proceeds from long-term debt ............................... 20,000 49,000 389,858
Repayment of long-term debt ................................ (76,886) (45,536) (293,778)
Payments to acquire treasury stock ......................... (123) (27,183) (5,485)
Exercise of stock options .................................. -- -- 445
Dividends .................................................. (1,668) (5,368) (4,184)
--------- --------- ---------
Net cash provided by (used for) financing activities ... (18,077) (29,087) 86,856
--------- --------- ---------
Effect of exchange rate changes on cash ..................... 30 (843) 178
--------- --------- ---------
Increase (decrease) in cash and cash equivalents ............ 31,994 (29,690) 40,909
Cash and cash equivalents at beginning of period ............ 18,097 50,091 20,401
--------- --------- ---------
Cash and cash equivalents at end of period .................. $ 50,091 $ 20,401 $ 61,310
========= ========= =========
Supplemental information:
Cash paid for income taxes ................................. $ 23,051 $ 35,179 $ 19,754
========= ========= =========
Cash paid for interest ..................................... $ 22,809 $ 20,923 $ 29,353
========= ========= =========
* Purchase of businesses net of cash acquired:
Working Capital, other than cash ....................... $ 3,110 $ (14,303)
Plant, property and equipment .......................... (43,007) (36,436)
Other assets ........................................... (19,593) (41,622)
Noncurrent liabilities ................................. 29,360 1,426
--------- ---------
Net cash used to acquire businesses .................... $ (30,130) $ (90,935)
========= =========
</TABLE>
See the accompanying notes to the consolidated financial statements.
F-5
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
(TO BE GENTEK AFTER THE SPINOFF)
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
FOR THE THREE YEARS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
ACCUMULATED
CLASS B OTHER
COMMON COMMON TREASURY CAPITAL COMPREHENSIVE RETAINED COMPREHENSIVE
STOCK STOCK STOCK DEFICIT INCOME (LOSS) EARNINGS TOTAL INCOME
------- ------ -------- ------- ------------- -------- ----- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 ...... $ 197 $ -- $ -- $(237,140) $ (1,362) $ 22,969 $(215,336)
Net income ...................... -- -- -- -- -- 46,608 46,608 $46,608
Foreign currency translation .... -- -- -- -- (73) -- (73) (44)
-------
Comprehensive income ............ -- -- -- -- -- -- -- $46,564
=======
Dividends (Per Share $.125) ..... -- -- -- -- -- (2,780) (2,780)
Proceeds from initial public
offering....................... 25 -- -- 40,575 -- -- 40,600
Conversion of Common Stock to
Class B Common Stock........... (197) 197 -- -- -- -- --
Conversion of Class B Common
Stock to Common Stock ......... 54 (54) -- -- -- -- --
Restricted Unit Plan grants,
cancellations, tax benefits and
other ......................... 1 -- -- 11,350 -- -- 11,351
Purchase of Treasury stock ...... -- -- (123) -- -- -- (123)
----- ----- --------- --------- -------- --------- ---------
Balance at December 31, 1996 ...... 80 143 (123) (185,215) (1,435) 66,797 (119,753)
Net income ...................... -- -- -- -- -- 56,315 56,315 $56,315
Foreign currency translation .... -- -- -- -- (762) -- (762) (461)
-------
Comprehensive income ............ -- -- -- -- -- -- -- $55,854
=======
Dividends (Per Share $.20) ...... -- -- -- -- -- (4,257) (4,257)
Conversion of Class B Common
Stock to Common Stock.......... 46 (46) -- -- -- -- --
Restricted Unit Plan grants,
cancellations, tax benefits and
other ......................... -- -- -- 1,401 -- -- 1,401
Purchase of Treasury stock ...... -- -- (27,183) -- -- -- 27,183)
----- ----- --------- --------- -------- --------- ---------
Balance at December 31, 1997 ...... 126 97 (27,306) (183,814) (2,197) 118,855 (94,239)
Net income ...................... -- -- -- -- -- 47,707 47,707 $47,707
Foreign currency translation .... -- -- -- -- (249) -- (249) (150)
-------
Comprehensive income ............ -- -- -- -- -- -- -- $47,557
=======
Dividends (Per Share $.20) ...... -- -- -- -- -- (4,184) (4,184)
Restricted Unit Plan grants,
cancellations, tax benefits and
other ......................... 1 -- -- 1,313 -- -- 1,314
Purchase of Treasury stock ...... -- -- (4,983) (62) -- -- (5,045)
----- ----- --------- --------- -------- --------- ---------
Balance at December 31, 1998 ...... $ 127 $ 97 $ (32,289) $(182,563) $ (2,446) $ 162,378 $ (54,696)
===== ===== ========= ========= ========= ========= =========
</TABLE>
See the accompanying notes to the consolidated financial statements.
F-6
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
(TO BE GENTEK AFTER THE SPINOFF)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1 - BASIS OF PRESENTATION
The General Chemical Group Inc. ("GCG" or "the Company") has
announced plans to separate its Manufacturing and Performance Products Segments
from its Industrial Chemicals Segment through a distribution of stock of GenTek
Inc. to the shareholders of GCG (the "Spinoff"). In connection with the Spinoff,
GCG will transfer the Manufacturing and Performance Products Segments to a
wholly-owned subsidiary, GenTek Inc. ("GenTek"), and distribute the stock of
GenTek to shareholders of GCG. After the Spinoff, GenTek and GCG will be
separate, independent companies; GCG will own and operate the Industrial
Chemicals Segment, and GenTek will own and operate the businesses comprising the
Manufacturing and Performance Products Segments.
The Spinoff is treated as a reverse spinoff for financial statement
purposes because a greater proportion of GCG's assets and operations will be
held by GenTek after the Spinoff. Therefore, the Spinoff will be reflected, for
financial statement presentation, as if General Chemical Group formed a new
company consisting of the Industrial Chemicals Segment (i.e., "new" GCG) and
distributed the stock of that company as a dividend to General Chemical Group's
stockholders, with the assets and operations of the Performance Products and
Manufacturing Segments remaining with General Chemical Group after the Spinoff.
On March 9, 1999, the Board of Directors of GCG approved the Spinoff subject to,
among other things, GCG obtaining a private letter ruling from the Internal
Revenue Service (the "IRS") that the distribution will be tax-free. On March 18,
1999, GCG received a favorable ruling from the IRS. Accordingly, General
Chemical Group's financial statements reflect the financial position and results
of operations of the Performance Products and Manufacturing Segments as
continuing operations and the financial position and results of operations of
the Industrial Chemicals Business as discontinued operations. On an ongoing
basis, the GenTek financial statements will consist of the Performance Products
and Manufacturing Segments and the new GCG financial statements will consist of
the Industrial Chemicals Segment.
For the purpose of governing certain ongoing relationships between
General Chemical Group and GenTek after the Spinoff and to provide mechanisms
for an orderly transition, General Chemical Group and GenTek have entered into
various agreements. Management believes that the agreements will be comparable
to those which would have been reached in arm's length negotiations with
unaffiliated parties.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Inventories are valued at the lower of cost or market, using the
last-in, first-out ("LIFO") method for most domestic production inventories and
the first-in, first-out ("FIFO") or average-cost method for all other
inventories. Production inventory costs include material, labor and factory
overhead.
Property, plant and equipment are carried at cost and are depreciated
principally using the straight line method. Estimated lives range from 5 to 35
years for buildings and leasehold improvements and one to 20 years for machinery
and equipment.
F-7
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
(TO BE GENTEK AFTER THE SPINOFF)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
The Company evaluates the recovery of long-lived assets not held for
sale by measuring the carrying value of these assets against the estimated
undiscounted future cash flows associated with them. At the time such
evaluations indicate that the future cash flows are not sufficient to recover
the carrying value of such assets, the assets are adjusted to their fair values,
which have been determined on a discounted cash flow basis. During 1998, based
on these evaluations, the Company recorded an $11,600 impairment charge, which
is included in cost of sales, primarily related to two of its manufacturing
facilities in its Performance Products Segment.
Goodwill, which represents the excess of purchase price over fair
value of net assets acquired, is amortized on a straight line basis over a
period which ranges from 25 to 35 years. The Company assesses the recoverability
of this intangible asset by determining whether the amortization of the goodwill
balance over its remaining life can be recovered through undiscounted future
operating cash flows of the acquired operation. On December 31, 1997 and 1998,
goodwill totalled $19,192 and $71,444, respectively, net of accumulated
amortization of $400 and $2,671, respectively, which is included in other assets
on the balance sheet.
Accruals for environmental liabilities are recorded based on current
interpretations of environmental laws and regulations when it is probable that a
liability has been incurred and the amount of such a liability can be reasonably
estimated. Liabilities for environmental matters were $16,244 and $20,116 at
December 31, 1997 and 1998, respectively. These amounts do not include estimated
third-party recoveries nor have they been discounted.
The Company does not hold or issue financial instruments for trading
purposes. Amounts to be paid or received under interest swap agreements are
recognized as increases or reductions in interest expense in the periods to
which they relate.
All highly liquid instruments purchased with a maturity of three
months or less are considered to be cash equivalents.
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("FAS 133"). FAS 133 requires that all
derivative instruments be measured at fair value and recognized in the balance
sheet as either assets or liabilities. The Company is required to adopt FAS 133
for fiscal years beginning after June 15, 1999. The Company does not expect the
adoption of FAS 133 will have a material effect on the Company's results of
operations or financial condition.
The capital deficit at December 31, 1995 of $237,140 arose as a
result of dividends and distributions exceeding accumulated earnings and capital
contributions.
Certain prior-period amounts have been reclassified to conform with
the current presentation.
F-8
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
(TO BE GENTEK AFTER THE SPINOFF)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 3 - DISCONTINUED OPERATIONS
Discontinued operations represent the Company's Industrial Chemical
Business, which is a leading North American producer and supplier of soda ash
and calcium chloride. The primary end markets for soda ash include glass
production, sodium-based chemicals, detergents, pulp and paper and water
treatment. Calcium chloride is mainly used for dust control and roadbed
stabilization during the summer and melting ice during the winter.
An allocation of certain assets, liabilities and expenses have been
made related to discontinued operations. In the opinion of management, expenses
have been allocated to the discontinued operations in a reasonable and
consistent basis using management's estimate of services provided to the
discontinued business by GCG. General corporate overhead expenses have not been
allocated to discontinued operations. However, such allocations are not
necessarily indicative of the level of expenses which might have been incurred
had the Industrial Chemicals Business been operating as a stand-alone entity
during the periods presented or expected to be incurred after the spinoff.
The Industrial Chemical Business participates in GCG's centralized
cash management and financing program, and income from discontinued operations
includes an allocation of net interest expense from GCG. To the extent the
Industrial Chemicals Business has experienced temporary cash needs for working
capital purposes or capital expenditures, such funds have historically been
provided by GCG. Net interest expense has been allocated to the Industrial
Chemicals Business assuming that the Industrial Chemicals Business' pro rata
base borrowing requirements would be $150,000. The allocations were made
consistently in each year, and management believes the allocations are
reasonable. However, these interest costs would not necessarily be indicative of
what the actual costs would have been had the Industrial Chemicals Business
operated as a separate, stand-alone public entity. Subsequent to the Spinoff,
the Industrial Chemicals Business will be responsible for these cash management
functions using its own resources or purchased services and will be responsible
for the costs associated with operating a public company.
The Industrial Chemicals Business' financial results include the
costs incurred by The General Chemical Group pension and postretirement benefit
plans for employees and retirees of the Industrial Chemicals Business. Also, the
provision for income taxes has been determined as if the Industrial Chemicals
Business had filed separate tax returns under its existing structure for the
periods presented.
F-9
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
(TO BE GENTEK AFTER THE SPINOFF)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
The assets and liabilities of the Industrial Chemical Business are
classified on the balance sheet as "Net assets of discontinued operations" and
consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1997 1998
-----------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ......................... $ 1,352 $ 1,127
Receivables, net................................... 72,917 58,601
Inventories........................................ 20,630 25,508
Deferred income taxes ............................. 4,295 4,392
Other current assets .............................. 2,217 1,659
-------- --------
Total current assets.......................... 101,411 91,287
Property, plant and equipment, net..................... 144,035 141,808
Other assets........................................... 16,729 15,619
-------- --------
Total assets from discontinued operations..... 262,175 248,714
-------- --------
LIABILITIES
Current liabilities:
Accounts payable................................... 29,216 24,298
Accrued liabilities................................ 24,412 25,146
Income taxes payable .............................. 1,914 1,988
-------- --------
Total current liabilities..................... 55,542 51,432
Other liabilities...................................... 77,827 78,561
Minority interest...................................... 43,301 43,429
-------- --------
Total liabilities from discontinued operations 176,670 173,422
-------- --------
Net assets of discontinued operations.................. $ 85,505 $ 75,292
-------- --------
</TABLE>
F-10
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
(TO BE GENTEK AFTER THE SPINOFF)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
The results from operations of the Industrial Chemicals Business are
reflected in the Statements of Operations as "Income from Discontinued
Operations" and are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1996 1997 1998
---------------------------------------
<S> <C> <C> <C>
Net revenues.............................................. $298,945 $289,700 $261,469
Cost of sales............................................. 198,802 204,769 202,338
Selling, general and administrative expense............... 19,650 15,365 16,634
-------- -------- --------
Operating profit.......................................... 80,493 69,566 42,497
Interest expense.......................................... 13,001 12,747 11,747
Interest income........................................... 1,029 1,029 930
Foreign currency transaction (gains) losses............... (86) 185 447
Other expense, net........................................ 441 285 524
-------- -------- --------
Income before minority interest and income taxes ......... 68,166 57,378 30,709
Minority interest......................................... 31,635 24,253 16,666
-------- -------- --------
Income before income taxes................................ 36,531 33,125 14,043
Income tax provision...................................... 10,698 10,084 3,744
-------- -------- --------
Net income.................................. $ 25,833 $ 23,041 $ 10,299
======== ======== ========
</TABLE>
NOTE 4 - CAPITAL STOCK
The Company's authorized capital stock consists of 100,000,000 shares
of Common Stock, par value $.01 per share, of which 11,195,799 and 11,013,323
were outstanding at December 31, 1997 and 1998, respectively, and 40,000,000
shares of Class B Common Stock, par value $.01 per share, which has ten votes
per share, is subject to significant restrictions on transfer and is convertible
at any time into Common Stock on a share-for-share basis, of which 9,758,421
shares were outstanding at December 31, 1997 and 1998, respectively. The Common
Stock and Class B Common Stock are substantially identical, except for the
disparity in voting power, restriction on transfer and conversion provisions.
The Company's Preferred Stock, par value $.01 per share, consists of
10,000,000 authorized shares, none of which were outstanding at December 31,
1997 and 1998.
During the second quarter of 1997, a former stockholder converted all
4.4 million shares of Class B Common Stock into an identical number of shares of
Common Stock. On April 23, 1997, the Company purchased approximately 1.3 million
shares of Common Stock from the same stockholder, at a price of $20 per share.
During 1997 and 1998, the Company purchased 1,356,573 and 278,268 shares of
Common Stock, respectively. These purchases were funded from the Company's cash
balance and have been recorded as treasury stock.
F-11
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
(TO BE GENTEK AFTER THE SPINOFF)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 5 - EARNINGS PER SHARE
The computation of basic earnings per share is based on the weighted
average number of common shares and contingently issuable shares outstanding
during the period. The computation of diluted earnings per share assumes the
foregoing and, in addition, the exercise of all stock options and restricted
units, using the treasury stock method.
The components of the denominator for basic earnings per common share
and diluted earnings per common share are reconciled as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Basic earnings per common share:
Weighted average common shares
outstanding.................................. 21,317,657 21,424,401 21,048,240
========== ========== ==========
Diluted earnings per common share:
Weighted average common
shares outstanding........................... 21,317,657 21,424,401 21,048,240
Options and Restricted Units 580,891 1,078,241 807,404
---------- ---------- ----------
Denominator for diluted earnings per common share 21,898,548 22,502,642 21,855,644
========== ========== ==========
</TABLE>
Options to purchase 10,000 and 398,500 of common stock were issued
during 1997 and 1998, respectively, but were not included in the computation of
diluted earnings per common share because the exercise price was greater than
the average market price of the common shares. The options, which expire during
2007 and 2008, were still outstanding at December 31, 1998.
NOTE 6 - ACQUISITIONS
On July 1, 1997 a wholly owned subsidiary acquired for $30,130 all of
the outstanding stock of Peridot Holdings, Inc. ("Peridot"), a manufacturer and
supplier of sulfuric acid and water treatment chemicals. On February 6, 1998,
another wholly-owned subsidiary acquired for $6,999 all of the outstanding stock
of Sandco Automotive Ltd. ("Sandco"), a manufacturer of engine parts for the
North American automobile industry and its aftermarket. On April 1, 1998, the
Company acquired for $83,936 all of the outstanding stock of Reheis Inc.
("Reheis"), a leading producer and supplier of the active chemical ingredients
in antiperspirants and over-the-counter antacids, as well as a supplier of
pharmaceutical intermediates and other products. Funding for these transactions
was provided by existing cash and borrowings under the Company's revolving
credit facility. The acquisitions are accounted for under the purchase method,
and accordingly, the net assets and results of operations are included in the
financial statements from the date of their respective acquisitions. The
allocation of purchase price of Sandco and Reheis are based on valuation
information available to the Company which is subject to change as such
information is finalized. Goodwill is being amortized on a straight line basis
over a period which ranges from 25 to 35 years. Had each of the acquisitions
occurred as of January 1, 1997, net sales would have been $457,195 and $459,684
for 1997 and 1998, respectively; income before extraordinary items would
F-12
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
(TO BE GENTEK AFTER THE SPINOFF)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
have been $54,309 ($2.41 per share) and $50,717 ($2.32 per share) for 1997 and
1998, respectively; and net income would have been $54,309 ($2.41 per share) and
$47,056 ($2.15 per share) for 1997 and 1998, respectively.
NOTE 7 - INCOME TAXES
Income from continuing operations before income taxes is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------
1996 1997 1998
-------- ------- -------
<S> <C> <C> <C>
United States.............................. $36,433 $58,314 $34,150
Foreign.................................... 2,767 1,221 3,163
-------- ------- -------
Total.......................... $39,200 $59,535 $37,313
======== ======= =======
</TABLE>
The components of the income tax provision are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------
1996 1997 1998
-------- ------- -------
<S> <C> <C> <C>
United States:
Current.............................. $12,363 $24,669 $(3,532)
Deferred............................. 2,262 (3,120) (3,776)
Foreign:
Current.............................. 1,117 589 911
Deferred............................. (65) (97) (18)
State:
Current.............................. 2,262 4,890 3,470
Deferred............................. 486 (670) (811)
-------- ------- -------
Total.......................... $18,425 $26,261 $(3,756)
======== ======= =======
</TABLE>
A summary of the components of deferred tax assets and liabilities
is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1997 1998
------- --------
<S> <C> <C>
Postretirement benefits.................... $19,390 $19,507
Nondeductible accruals..................... 35,888 43,830
Other...................................... 2,472 3,372
-------- --------
Deferred tax assets 57,750 66,709
-------- --------
Property, plant and equipment.............. 28,788 32,977
Pensions................................... 1,860 2,007
Inventory.................................. 3,754 3,437
Other...................................... 1,048 2,965
-------- --------
Deferred tax liabilities............. 35,450 41,386
-------- --------
Net deferred tax assets........ $22,300 $25,323
======== ========
</TABLE>
F-13
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
(TO BE GENTEK AFTER THE SPINOFF)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
The difference between the Company's effective income tax rate and
the United States statutory rate is reconciled below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------
1996 1997 1998
----- ------ ------
<S> <C> <C> <C>
U.S. federal statutory rate..................... 35.0% 35.0% 35.0%
State income taxes, net of federal benefit...... 4.3 4.5 4.5
Tax effect of foreign operations................ 6.7 4.1 (5.8)
Reversal of provision for disputed items........ -- -- (44.1)
Other........................................... 1.0 .5 .3
----- ------ ------
Total..................................... 47.0% 44.1% (10.1)%
===== ====== ======
</TABLE>
In connection with the Spinoff, GenTek will enter into a tax sharing
agreement with GCG. The agreement will require GenTek to indemnify and hold
harmless GCG for consolidated tax liabilities attributable to periods before the
Spinoff.
The IRS examinations of the Company's federal income tax returns for
1990 and 1991 resulted in the issuance of a deficiency notice during 1995. The
Company filed an administrative appeal with the IRS in 1995 contesting the items
denoted in the deficiency notice. At December 31, 1997, the Company had accrued
$25,388 for this notice, which was included in other liabilities on the balance
sheet. During 1998 the Company entered into a settlement agreement with the IRS
settling all items denoted in the original deficiency notice. The settlement
agreement binds the IRS for all years subsequent to 1989 on the items denoted in
the original deficiency notice. The Company recorded an income tax benefit of
$19,527 in connection with the reversal of amounts previously accrued in
connection with the deficiency notice settlement agreement.
F-14
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
(TO BE GENTEK AFTER THE SPINOFF)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 8 - PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
The Company maintains several defined benefit pension plans covering
substantially all employees. A participating employee's annual postretirement
pension benefit is determined by the employee's credited service and, in most
plans, final average annual earnings with the Company. Vesting requirements are
five years in the U.S. and two years in Canada. The Company's funding policy is
to annually contribute the statutorily required minimum amount as actuarially
determined. The Company also maintains several plans providing postretirement
benefits covering substantially all hourly and certain salaried employees. The
Company funds these benefits on a pay-as-you-go basis. The long-term portion of
accrued postretirement benefit cost related to continuing operations of $48,184
and $48,766 at December 31, 1997 and 1998, respectively, is included in other
liabilities on the balance sheet.
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER POSTRETIREMENT BENEFITS
DECEMBER 31, DECEMBER 31,
---------------------------------------------------------------
UNITED STATES: 1996 1997 1998 1996 1997 1998
------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Components of Net Periodic Benefit Cost
Service Cost............................... $4,748 $ 5,217 $ 5,645 $ 1,455 $1,575 $1,568
Interest Cost.............................. 13,125 13,873 14,935 3,587 3,896 4,046
Expected Return on Plan Assets.............(12,241) (13,466) (15,156) -- -- --
Amortization of Net
Prior Service Cost.................... 841 843 910 (1,604) (1,604) (1,604)
(Gain)/Loss........................... 80 46 10 (757) (587) (628)
------ ------ ------ ------ ------ -------
Net Periodic Benefit Cost................... $6,553 $6,513 $6,344 $2,681 $3,280 $3,382
====== ====== ====== ====== ====== =======
</TABLE>
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER POSTRETIREMENT BENEFITS
DECEMBER 31, DECEMBER 31,
-------------------- ---------------------------
1997 1998 1997 1998
-------- --------- -------- --------
<S> <C> <C> <C> <C>
Change in Benefit Obligation
Benefit Obligation at Prior Measurement Date......... $187,760 $203,495 $55,578 $57,522
Service Cost......................................... 5,217 5,533 1,575 1,568
Interest Cost........................................ 13,873 14,856 3,896 4,046
Actuarial (Gain)/Loss................................ 960 22,332 (1,800) (948)
Benefits Paid........................................ (9,077) (10,648) (2,318) (2,989)
Plan Amendments...................................... 699 -- -- --
Business Combinations................................ 4,063 1,333 591 --
-------- --------- -------- --------
Benefit Obligation at Measurement Date............... $203,495 $236,901 $57,522 $59,199
======== ========= ======== ========
</TABLE>
F-15
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
(TO BE GENTEK AFTER THE SPINOFF)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER POSTRETIREMENT BENEFITS
DECEMBER 31, DECEMBER 31,
-------------------------------- ------------------------------
1997 1998 1997 1998
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Change in Plan Assets
Fair Value of Assets at Prior Measurement
Date.......................................... $166,661 $193,301 $ -- $ --
Actual Return on Plan Assets ................. 29,122 17,124 -- --
Employer Contributions ....................... 2,470 3,065 2,318 2,989
Benefits Paid................................. (9,077) (10,649) (2,318) (2,989)
Business Combinations ........................ 4,125 1,147 -- --
--------- --------- --------- --------
Fair Value of Assets at Measurement Date ..... 193,301 203,988 $ -- $ --
========= ========= ========= =========
Reconciliation of Funded Status
Funded Status ................................ (10,194) (32,913) (57,522) (59,199)
Unrecognized Net
Transition (Asset)/Obligation ........... -- 13 -- --
Prior Service Cost ...................... 7,091 6,178 (11,104) (9,500)
(Gain)/Loss.............................. (23,796) (3,540) (8,309) (8,629)
--------- --------- --------- --------
Net Amount Recognized ........................ $(26,899) $(30,262) $(76,935) $(77,328)
========= ========= ========= ========
</TABLE>
The assumptions used in accounting for the plans in 1996, 1997 and
1998 were:
<TABLE>
<CAPTION>
PENSION PLANS
---------------------------------------
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Discount rate............................................ 7-1/2% 7-1/2% 6-3/4%
Long-term rate of return on assets....................... 9% 9% 9%
Average rate of increase in employee compensation........ 5% 5% 5%
</TABLE>
The assumption used in accounting for the medical plans in 1998 was
an 8 percent health care cost trend rate (decreasing to 6-3/4 percent in the
year 2001 and beyond). A one percent increase in the health care trend rate
would increase the accumulated postretirement benefit obligation by $3,881 at
year end 1998 and the net periodic cost by $330 for the year. A one percent
decrease in the health care trend rate would decrease the accumulated
postretirement benefit obligation by $4,206 at year end 1998 and the net
periodic cost by $357 for the year.
The assumption used in accounting for the plans in 1997 was a 10
percent health care cost trend rate (decreasing to 7-1/2 percent in the year
2000 and beyond).
The dates used to measure plan assets and liabilities were October
31, 1997 and 1998 for all plans. Pension plan assets are invested primarily in
stocks, bonds, short-term securities and cash equivalents.
F-16
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
(TO BE GENTEK AFTER THE SPINOFF)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER POSTRETIREMENT BENEFITS
DECEMBER 31, DECEMBER 31,
----------------------------------------- --------------------------------------------
CANADA: 1996 1997 1998 1996 1997 1998
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Components of Net Periodic Benefit Cost
Service Cost ......................... $1,494 $1,352 $1,463 $ 310 $ 302 $ 332
Interest Cost ........................ 3,727 3,868 3,789 864 1,032 1,014
Expected Return on Plan Assets ....... (4,662) (4,877) (4,881) -- -- --
Amortization of Net
Prior Service Cost ............... 92 90 84 -- -- --
(Gain)/Loss ...................... 467 432 458 -- -- --
------- ------ ------ ------- ------- -------
Net Periodic Benefit Cost ............ $1,118 $ 865 $ 913 $ 1,174 $ 1,334 $ 1,346
======= ====== ====== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
OTHER POSTRETIREMENT
PENSION BENEFITS BENEFITS
DECEMBER 31, DECEMBER 31,
-----------------------------------------------------
1997 1998 1997 1998
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Change in Benefit Obligation
Benefit Obligation at Prior Measurement Date.......... $50,714 $55,493 $13,297 $ 14,631
Service Cost.......................................... 1,349 1,457 302 330
Interest Cost......................................... 3,857 3,773 1,029 1,010
Actuarial (Gain)/Loss................................. 3,977 5,823 592 (934)
Foreign Currency Translation.......................... (899) (3,701) (235) (977)
Benefits Paid......................................... (3,505) (3,240) (354) (370)
-------- -------- --------- ---------
Benefit Obligation at Measurement Date................ $55,493 $59,605 $14,631 $ 13,690
======== ======== ========= =========
Change in Plan Assets
Fair Value of Assets at Prior Measurement Date........ $59,940 $66,181 $ -- $ --
Actual Return on Plan Assets.......................... 10,611 2,633 -- --
Employer Contributions................................ 1,085 1,643 370 354
Foreign Currency Translation.......................... (1,950) (4,412) -- --
Benefits Paid......................................... (3,505) (3,240) (370) (354)
-------- -------- --------- ---------
Fair Value of Assets at Measurement Date.............. $66,181 $62,805 $ -- $ --
======== ======== ========= =========
Reconciliation of Funded Status
Funded Status......................................... $11,576 $ 3,201 $(14,631) $(13,691)
Unrecognized Net......................................
Prior Service Cost................................ 834 695 -- --
(Gain)/Loss....................................... 6,392 13,560 1,340 316
-------- -------- --------- ---------
Net Amount Recognized................................. $18,802 $17,456 $(13,291) $(13,375)
======== ======== ========= =========
</TABLE>
F-17
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
(TO BE GENTEK AFTER THE SPINOFF)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
The assumptions used in accounting for the plans in 1996, 1997
and 1998 were
<TABLE>
<CAPTION>
PENSION PLANS
--------------------------------
1996 1997 1998
------- -------- -------
<S> <C> <C> <C>
Estimated discount rate..................................... 8% 7-1/2% 6-3/4%
Estimated long-term rate of return on assets................ 9% 9% 9%
Average rate of increase in employee compensation........... 5-1/4% 5-1/4% 5-1/4%
</TABLE>
The assumption used in accounting for the medical plans in 1998 was
an 8.4 percent health care cost trend rate (decreasing to 6 percent in the year
2003 and beyond). A one percent increase in the health care trend rate would
increase the accumulated postretirement benefit obligation by $2,803 at year end
1998 and the net periodic cost by $289 for the year. A one percent decrease in
the health care trend rate would decrease the accumulated postretirement benefit
obligation by $2,209 at year end 1998 and the net periodic cost by $223 for the
year.
The assumption used in accounting for the plans in 1997 was a 10
percent health care cost trend rate (decreasing to 7-1/2 percent in the year
2003 and beyond).
The dates used to measure plan assets and liabilities were October
31, 1997 and 1998 for all plans. Plan assets are invested primarily in stocks,
bonds, short-term securities and cash equivalents.
Following the Spinoff, the Industrial Chemicals Business and the
GenTek Business will assume the responsibility for pension and other
postretirement benefits for retirees whose last work assignment was with their
respective business and the active employees of each or their respective
businesses. Separate defined benefit plans will be established for both
companies, with assets included in trusts under qualified pension plans being
divided between the trusts. Each domestic plan will receive the legally required
funding as specified under the Employee Retirement Income Security Act of 1974
and foreign plans will receive funding as specified under the applicable
statutory requirements.
GCG's net periodic benefit cost for pension and other postretirement
benefits disclosed above includes amounts related to the Industrial Chemicals
Business retirees who participated in certain of the Company's defined benefits
and postretirement benefits plans. GCG's periodic benefit cost has been
allocated to the Industrial Chemicals Business and is included in "Discontinued
Operations" in the Statement of Operations. Periodic benefit cost allocated to
discontinued operations was $5,400, $5,380 and $4,618 for 1998, 1997 and 1996,
respectively.
F-18
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
(TO BE GENTEK AFTER THE SPINOFF)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Future minimum rental payments for operating leases (primarily for
transportation equipment, offices and warehouses) related to continuing
operations having initial or remaining noncancellable lease terms in excess of
one year as of December 31, 1998 are as follows:
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31,
- ------------
<S> <C>
1999 ..................................................... $ 5,180
2000 ..................................................... 4,286
2001 ..................................................... 2,188
2002 ..................................................... 1,901
2003 and thereafter ...................................... 1,883
-------
$15,438
=======
</TABLE>
Rental expense for the years ended December 31, 1996, 1997 and 1998
was $4,239, $4,621, and $5,632, respectively.
Parent Guaranty and Transfer Agreement. A restated parent guaranty
and transfer agreement between New Hampshire Oak, a wholly-owned subsidiary of
GCG and the parent of General Chemical Corporation ("GCC"), ACI International
Limited and TOSOH America, Inc. provides that in the event that either New
Hampshire Oak, ACI International Limited or TOSOH America, Inc. (such entities
being referred to as a "transferring parent" or "nontransferring parent" as the
context requires) proposes to sell or otherwise transfer or cause to be sold or
transferred the voting securities of GCC, the Andover Group, Inc. or TOSOH
Wyoming, Inc. (the respective subsidiaries constituting the partners of GCSAP)
as the case may be, the nontransferring parents will have the following options:
(1) to purchase the transferring parent's subsidiary's interest in GCSAP at fair
market value; (2) to require the transferring parent to purchase the
nontransferring parents' subsidiaries' interest in GCSAP at fair market value;
(3) to buy the voting securities to be sold by the transferring parent on the
same terms and conditions and at the same price as the transferring parent
proposes to sell or otherwise transfer or cause to be sold or transferred such
voting securities; or (4) to cause the proposed transferee to purchase the
nontransferring parents' subsidiaries' interest in GCSAP for a price reflecting
the price to be paid by the proposed transferee for such voting securities. In
the event that New Hampshire Oak ceases to own at least 51 percent of GCC while
GCC is a partner, GCC shall pay to The Andover Group, Inc. $2,833.
Environmental Matters. Accruals for environmental liabilities are
recorded based on current interpretations of applicable environmental laws and
regulations when it is probable that a liability has been incurred and the
amount of such liability can be reasonably estimated. Estimates are established
based upon information available to management to date, the nature and extent of
the environmental liability, the Company's experience with similar activities
undertaken, estimates obtained from outside consultants and the legal and
regulatory framework in the jurisdiction in which the liability arose. The
potential costs related to environmental matters and their estimated impact on
future operations are difficult to predict due to the uncertainties regarding
the extent of any required remediation, the complexity and interpretation of
applicable laws and regulations, possible modification of existing laws and
regulations or the adoption of new laws or regulations in the future, and the
numerous alternative remediation methods and their related varying costs. The
material components of the Company's environmental accruals include potential
costs, as applicable, for investigation, monitoring, remediation and ongoing
maintenance activities at any affected site. Accrued liabilities for
environmental matters
F-19
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
(TO BE GENTEK AFTER THE SPINOFF)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
were $16,244 and $20,116 at December 31, 1997 and 1998, respectively. These
amounts do not include estimated third-party recoveries nor have they been
discounted.
Avtex Site at Front Royal, Virginia. On March 22, 1990, the EPA
issued to the Company a Notice of Potential Liability pursuant to Section 107(a)
of CERCLA (the "Notice") with respect to a site located in Front Royal, Virginia
(the "Avtex Site"), owned at the time by Avtex Fibers Front Royal, Inc., which
has filed for bankruptcy. A sulfuric acid plant adjacent to the main Avtex Site
was previously owned and operated by the Company. On September 30, 1998, the EPA
issued an administrative order under Section 106 of CERCLA (the "Order"), which
requires the Company, AlliedSignal, Inc. and Avtex to undertake certain removal
actions at the acid plant. On October 19, 1998, the Company delivered to the EPA
written notice of its intention to comply with the Order, subject to numerous
defenses. The requirements of the Order include preparation of a study to
determine the extent of any contamination at the acid plant site. The Company
has provided for the estimated costs of $1,600 for these activities in its
accrual for environmental liabilities relating to the Order. The Company is
working cooperatively with the EPA with respect to compliance with the Order and
believes that such compliance will not have a material effect on the Company's
results of operations or financial condition.
In addition to the matters discussed above, the Company is involved
in other claims, litigation, administrative proceedings and investigations and
remediation relative to environmental matters. Although the amount of any
ultimate liability which could arise with respect to these matters cannot be
accurately predicted, it is the opinion of management, based upon currently
available information and the accruals established, that any such liability will
have no material adverse effect on the Company's financial condition, results of
operations or cash flows.
NOTE 10 - RELATED PARTY TRANSACTIONS
MANAGEMENT AGREEMENT
GCG is party to a management agreement with Latona Associates (which
is controlled by a stockholder of GCG) under which GCG receives corporate
supervisory and administrative services and strategic guidance for a quarterly
fee of $1,018, $1,099 and $1,195 per quarter for the years 1996, 1997 and 1998,
respectively.
In addition, in connection with any acquisition or business
combination with respect to which Latona Associates advises the Company, the
Company has agreed to pay Latona Associates additional fees comparable with fees
received by investment banking firms for such services. During 1998, the Company
paid Latona $500 in connection with the acquisition of Reheis. This agreement
expires on December 31, 2004.
F-20
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
(TO BE GENTEK AFTER THE SPINOFF)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 11 - ADDITIONAL FINANCIAL INFORMATION
The following are summaries of selected balance sheet items:
Receivables
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1998
--------- --------
<S> <C> <C>
Trade ........................................ $ 51,730 $ 62,810
Other ........................................ 1,626 1,536
Allowance for doubtful accounts .............. (3,553) (3,726)
-------- --------
$ 49,803 $ 60,620
======== ========
Inventories
<CAPTION>
DECEMBER 31,
--------------------------
1997 1998
--------- --------
<S> <C> <C>
Raw materials .............................. $ 8,093 $11,395
Work in process ............................ 3,090 6,049
Finished products .......................... 9,999 15,706
Supplies and containers .................... 4,146 4,469
------- -------
$25,328 $37,619
======= =======
</TABLE>
Inventories valued at LIFO amounted to $16,835 and $17,450 at
December 31, 1997 and 1998, respectively, which were below estimated replacement
cost by $615 and $730, respectively. The impact of LIFO liquidations in 1996,
1997 and 1998 was not significant.
Property, Plant and Equipment
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1998
--------- --------
<S> <C> <C>
Land and improvements .............................. $ 20,876 $ 26,219
Machinery and equipment ............................ 194,992 261,260
Buildings and leasehold improvements ............... 31,637 43,912
Construction in progress ........................... 10,111 19,178
--------- ---------
257,616 350,569
Less accumulated depreciation and amortization ..... (97,462) (154,043)
--------- ---------
$ 160,154 $ 196,526
========= =========
Accrued Liabilities
<CAPTION>
DECEMBER 31,
--------------------------
1997 1998
--------- --------
<S> <C> <C>
Wages, salaries and benefits ................... $17,820 $17,616
Taxes, other than income taxes ................. 2,867 3,256
Other .......................................... 28,159 31,093
------- -------
$48,846 $51,965
======= =======
</TABLE>
F-21
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
(TO BE GENTEK AFTER THE SPINOFF)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 12 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
MATURITIES DECEMBER 31, DECEMBER 31,
---------- ------------ ------------
1997 1998
------------ ------------
<S> <C> <C> <C>
Bank Term Loan A - floating rate ............ 2000-2004 $ -- $100,000
Bank Term Loan B - floating rate ............ 1999-2006 -- 199,000
Bank Term Loan - floating rate .............. 1999-2001 65,217 --
Senior Subordinated Notes - 9.25% ........... 2003 100,000 --
Canada Senior Notes - 9.09% ................. 1999 50,787 48,269
$130,000 U.S. Revolving Credit Facility
- floating rate ........................ 42,000 --
General Chemical Canada Limited Revolving
Credit Facility - floating rate......... 2000 -- 3,877
Other Debt - floating rate .................. -- 6,385
-------- --------
Total Debt ............................. 258,004 357,531
Less: Current Portion ................. 17,392 50,802
-------- --------
Net Long-Term Debt ..................... $240,612 $306,729
======== ========
</TABLE>
Aggregate maturities of long-term debt for each of the years in the
five year period ending December 31, 2003 are $50,802, $11,780, $19,700, $13,250
and $23,250.
On June 15, 1998 the Company entered into a new credit facility
consisting of a $100,000 Term Loan ("Term Loan A") maturing on June 15, 2004, a
$200,000 Term Loan ("Term Loan B") maturing on June 15, 2006 and a $300,000
Revolving Credit Facility maturing on June 15, 2004. The term loans and
revolving credit facility bear interest at a rate equal to a spread over a
reference rate chosen by the Company from various options. The rate in effect at
December 31, 1998 for Term Loan A and Term Loan B was 6.25 percent and 7.25
percent, respectively. Term Loan A is payable in consecutive quarterly
installments commencing March 31, 2000. Term Loan B is payable in consecutive
quarterly installments commencing September 30, 1998. The facility is secured by
a first priority security interest in all of the capital stock of the Company's
domestic subsidiaries and 65 percent of the capital stock of the Company's
foreign subsidiaries.
General Chemical Canada Limited has a $15,000 (Canadian Dollar)
Revolving Credit Facility maturing June 22, 2000. This facility bears interest
at a rate equal to a spread over a reference rate chosen by General Chemical
Canada Limited from various options.
Commitment fees paid for the above-mentioned facilities were $414,
$274, and $446 for 1996, 1997 and 1998, respectively.
F-22
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
(TO BE GENTEK AFTER THE SPINOFF)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 13 - STOCK OPTION PLAN AND RESTRICTED UNIT PLAN
The Company's 1996 Stock Option and Incentive Plan (the "Plan")
provides for the issuance of up to 2,200,000 shares of Common Stock. The Plan
authorizes the granting of incentive and nonqualified stock options, stock
appreciation rights, restricted and unrestricted stock and performance share
awards to executives, directors and other key persons. Any incentive stock
options granted under the Plan must have an exercise price at least equal to the
market value of the shares on the day the option is granted and a maximum term
of 10 years.
Information with respect to all stock options is summarized below:
<TABLE>
<CAPTION>
AVERAGE OPTION
SHARES PRICE PER SHARE
------ ---------------
<S> <C> <C>
Options Outstanding at December 31,1995 ............ -- $ --
Options Granted .............................. 1,281,000 17.66
Options Exercised ............................ -- --
Options Forfeited ............................ 10,000 17.50
---------
Options Outstanding at December 31,1996 ............ 1,271,000 17.66
Options Granted .............................. 100,000 22.70
Options Exercised ............................ -- --
Options Forfeited ............................ 29,800 18.23
---------
Options Outstanding at December 31, 1997 ........... 1,341,200 18.02
Options Granted .............................. 398,500 23.72
Options Exercised ............................ 25,200 17.67
Options Forfeited ............................ 35,000 18.24
---------
Options Outstanding at December 31, 1998 ........... 1,679,500 $19.37
---------
</TABLE>
The Company applies APB Opinion 25 in accounting for the Plan. Had
compensation cost for this plan been determined under FASB Statement No. 123,
the Company's net income for 1996 would have been reduced to $45,623 with basic
earnings per common share of $2.14 and diluted earnings per share of $2.08. Net
income for 1997 would have been reduced to $55,140 with basic earnings per
common share of $2.57 and diluted earnings per share of $2.45. Net income for
1998 would have been reduced to $45,857 with basic earnings per common share of
$2.18 and diluted earnings per share of $2.10. For purposes of this calculation,
the fair value of each option grant was estimated on the grant date using the
Black-Scholes option-pricing model with the following assumptions used for 1996,
1997 and 1998, respectively: dividend yield of 1.0 percent, 0.7 percent and 1.5
percent, respectively; expected volatility of 27 percent, 41 percent and 42
percent, respectively; weighted average risk-free interest rate of 6.42 percent,
5.50 percent and 4.65 percent, respectively; and, weighted average expected
lives of six years. All options granted to date under the stock option plan have
an exercise price equal to the market price of the Company's stock on the grant
date.
The Company's Restricted Unit Plan provides for the issuance of
850,000 units, with each unit representing one share of Common Stock to be
issued to the participant upon the occurrence of certain conditions ("vesting")
unless the participant elects to defer receipt thereof. All awards are subject
to a five year vesting schedule under which a portion of each participant's
award vests annually over a five year period. Dividend equivalents on
outstanding units accrue to the benefit of the participants and are paid at the
time dividends are paid to Common Stock shareholders. These units were awarded
during the second quarter of 1996 in replacement
F-23
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
(TO BE GENTEK AFTER THE SPINOFF)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
of the rights earned by participants beginning in 1989 under the Phantom Equity
Plan and certain other prior equity programs of the Company which were then
terminated. The Company recorded a charge to income of $11,319, $1,302 and
$1,309 for 1996, 1997 and 1998, respectively, with a contra credit to capital
deficit.
NOTE 14 - FINANCIAL INSTRUMENTS
SWAP AGREEMENTS
The Company does not enter into financial instruments for trading
purposes. The Company periodically enters into interest rate swap agreements to
effectively convert all or a portion of its floating-rate debt to fixed-rate
debt in order to reduce the Company's risk to movements in interest rates. Such
agreements involve the exchange of fixed and floating interest rate payments
over the life of the agreement without the exchange of the underlying principal
amounts. Accordingly, the impact of fluctuations in interest rates on these
interest rate swap agreements is fully offset by the opposite impact on the
related debt. Swap agreements are only entered into with strong creditworthy
counterparties. The swap agreements in effect were as follows:
<TABLE>
<CAPTION>
NOTIONAL INTEREST RATE
DECEMBER 31, AMOUNT MATURITIES RECEIVE(1) PAY(2)
--------------------- --------- ----------- ------------ --------
<S> <C> <C> <C> <C>
1997 .................. $ 75,000 1998-1999 5.8% 6.8%
1998 .................. 100,000 1999-2006 5.6% 6.6%
</TABLE>
(1) Three-month LIBOR.
(2) Represents the weighted average rate.
At December 31, 1998, the Company was also party to a currency and
interest rate swap, which partially hedges the Company's Canadian subsidiary's
52,000 U.S. dollar 9.09 percent Senior Notes. The agreement, which matures in
1999, provides for the payment of 48,400 Canadian dollars at a fixed rate of
7.54 percent in exchange for the receipt of 35,000 U.S. dollars at a fixed rate
of 9.09 percent. Unrealized gains and losses on the currency portion of the swap
are recognized and offset the foreign exchange gain or loss on the related debt
in the consolidated statements of operations. Net amounts paid or received on
the interest portion of the swap are accrued as adjustments to interest expense.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments are
as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1998
-------------------- --------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Long-term debt ..................... $258,004 $262,918 $357,531 $357,737
Unrealized gain (loss) on swap
agreements ......................... $ -- $ 521 $ -- $ 309
</TABLE>
The fair values of cash and cash equivalents, receivables and
payables approximate their carrying values due to the short-term nature of the
instruments.
F-24
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
(TO BE GENTEK AFTER THE SPINOFF)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
The fair value of the Company's long-term debt was based on quoted
market prices for publicly traded notes and discounted cash flow analyses on its
nontraded debt. The fair value of the Company's interest rate swap agreements is
the estimated amount the Company would have to pay or receive to terminate the
swap agreements based upon quoted market prices as provided by financial
institutions which are counterparties to the swap agreements.
NOTE 15 - GEOGRAPHIC AND INDUSTRY SEGMENT INFORMATION
The accounting policies of the segments are the same as those
described in the summary of significant accounting policies.
Geographic area information for continuing operations is summarized
as follows:
<TABLE>
<CAPTION>
TOTAL REVENUES OPERATING PROFIT IDENTIFIABLE ASSETS
----------------------------------- --------------------------------- ---------------------
1996 1997 1998 1996 1997 1998 1997 1998
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
United States (1) . $ 318,946 $ 358,774 $ 423,441 $ 46,052 $ 66,342 $ 47,734 $ 298,926 $ 437,892
Foreign (2) ....... 17,228 15,710 26,173 2,671 1,184 3,987 5,387 23,634
Elimination (3) ... (6,054) (5,968) (5,695) -- -- -- -- --
--------- --------- --------- --------- --------- --------- --------- ---------
$ 330,120 $ 368,516 $ 443,919 $ 48,723 $ 67,526 $ 51,721 $ 304,313 $ 461,526
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
- ---------------
(1) Includes export sales of $4,946, $5,430 and $4,914 for the years ended
December 31, 1996, 1997 and 1998, respectively.
(2) Principally Canada.
(3) Sales between geographic areas are recorded at prices comparable to market
prices charged to third-party customers and are eliminated in
consolidation.
Industry segment information for continuing operations is summarized
as follows:
<TABLE>
<CAPTION>
TOTAL REVENUES OPERATING PROFIT
----------------------------------- -----------------------------------
1996 1997 1998 1996 1997 1998
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Performance Products .......... $ 240,895 $ 260,351 315,787 $ 43,202 $ 48,292 $ 25,711
Manufacturing ................. 89,225 108,165 128,132 12,472 23,531 30,649
--------- --------- --------- --------- --------- ---------
Total Segment .............. 330,120 368,516 443,919 55,674 71,823 56,360
Eliminations and other
corporate expenses ......... -- -- -- (6,951) (4,297) (4,639)
--------- --------- --------- --------- --------- ---------
Consolidated .................. $ 330,120 $ 368,516 443,919 48,723 67,526 51,721
========= ========= =========
Interest expense .............. 10,747 8,855 14,624
Other income, net ............. (1,224) (864) (216)
--------- --------- ---------
Consolidated income from
continuing operations before
income taxes and
extraordinary item ......... $ 39,200 $ 59,535 $ 37,313
========= ========= =========
</TABLE>
F-25
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
(TO BE GENTEK AFTER THE SPINOFF)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
Net revenues by operating segment include intersegment sales, which
are generally recorded at prices comparable to market prices charged to
third-party customers. Other expense, net includes interest income, foreign
currency translation (gains) losses and other nonoperating expense.
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES DEPRECIATION AND AMORTIZATION
--------------------------- -----------------------------
1996 1997 1998 1996 1997 1998
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Performance Products $17,612 $23,563 $24,260 $11,332 $13,688 $19,763
Manufacturing ...... 1,619 2,640 9,477 2,767 2,608 3,302
------- ------- ------- ------- ------- -------
Consolidated ....... $19,231 $26,203 $33,737 $14,099 $16,296 $23,065
======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
IDENTIFIABLE ASSETS
-------------------
1997 1998
-------- --------
<S> <C> <C>
Performance Products $245,734 $381,202
Manufacturing ...... 56,586 78,267
Corporate .......... 1,993 2,057
-------- --------
Consolidated ....... $304,313 $461,526
======== ========
</TABLE>
F-26
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
(TO BE GENTEK AFTER THE SPINOFF)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 16 - UNAUDITED QUARTERLY INFORMATION
<TABLE>
<CAPTION>
1997
---------------------------------------------------------------
FIRST SECOND THIRD FOURTH YEAR
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Net revenues ................................. $ 86,000 $ 88,212 $ 97,456 $ 96,848 $ 368,516
Income from continuing operations ............ 7,310 9,379 8,941 7,644 33,274
Income from discontinued operations .......... 4,404 7,879 6,161 4,597 23,041
Net income ................................... 11,714 17,258 15,102 12,241 56,315
Earnings per common share - basic:
Income from continuing operations ........... .34 .44 .42 .36 1.55
Income from discontinued operations ......... .21 .37 .29 .21 1.08
---------- ---------- ---------- ---------- -----------
Net income ............................... .55 .81 .71 .57 2.63
Earnings per common share - assuming dilution:
Income from continuing operations ........... .32 .42 .40 .34 1.48
Income from discontinued operations ......... .20 .35 .27 .20 1.02
---------- ---------- ---------- ---------- -----------
Net income ............................... .52 .77 .67 .54 2.50
</TABLE>
<TABLE>
<CAPTION>
1998
-------------------------------------------------------------------------
FIRST SECOND THIRD FOURTH YEAR
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net revenues ................................. $ 100,536 $ 118,355 $ 112,562 $ 112,466 $ 443,919
Income from continuing operations before
extraordinary item .......................... 7,751 10,497 8,725 14,096 41,069
Income (loss) from discontinued operations ... 2,110 4,189 3,041 959 10,299
Income before extraordinary item ............. 9,861 14,686 11,766 15,055 51,368
Net income ................................... 9,861 11,025(1) 11,766 15,055(2) 47,707
Earnings per common share - basic:
Income from continuing operations ............ .37 .49 .42 .67 1.95
Income from discontinued operations .......... .10 .20 .14 .05 .49
Extraordinary item - loss on extinguishment
of debt (net of tax) ........................ -- .17 -- -- .17
----------- ----------- ----------- ----------- -----------
Net income ............................... .47 .52 .56 .72 2.27
Earnings per common share - assuming dilution:
Income before continuing operations .......... .35 .48 .40 .65 1.88
Income from discontinued operations .......... .10 .19 .14 .04 .47
Extraordinary item - loss from
extinguishment of debt (net of tax) ......... -- .17 -- -- .17
----------- ----------- ----------- ----------- -----------
Net income ............................... .45 .50 .54 .69 2.18
</TABLE>
Note: Basic earnings per common share calculations are based on the
weighted average number of shares outstanding during each of the
quarters. Diluted earnings per common share assume the foregoing and,
in addition, the exercise of all stock options and restricted units.
The sum of the four quarters may not equal the full year computation
due to rounding.
(1) In the second quarter of 1998, the Company recorded an extraordinary loss
of $3,661 ($.17 per share) related to the early retirement of certain
outstanding indebtedness.
F-27
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
(TO BE GENTEK AFTER THE SPINOFF)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONCLUDED)
(DOLLARS IN THOUSANDS)
(2) During the fourth quarter of 1998, the Company recorded a one-time charge
of $12,885 ($7,789 after tax or $.36 per share) primarily due to an asset
impairment writedown for two of the Company's manufacturing facilities and
incremental accruals of $11,300 ($6,831 after tax or $.31 per share)
principally related to litigation and environmental spending. During the
fourth quarter of 1998, the Company also recorded a non-recurring gain of
$19,500 ($.89 per share) related to an income tax settlement.
NOTE 17 - SUBSEQUENT EVENTS
In January 1999, as further discussed in Note 1, the Company
announced plans to separate its Performance Products and Manufacturing Segments
from its Industrial Chemicals Segment through the Spinoff. The Company proposes
to accomplish the Spinoff by transferring the Performance Products and
Manufacturing Segments to its subsidiary, GenTek, and distributing the stock of
GenTek to shareholders of General Chemical Group. After the Spinoff, the Company
and GenTek would be separate, independent companies; the Company would own and
operate the Industrial Chemicals Segment, and GenTek would own and operate the
Performance Products Segment and the Manufacturing Segment. As a result, the
Company's activities and operations will be significantly different following
the Spinoff. Certain members of the Board of Directors of the Company will
resign and be elected as directors of GenTek as of the Spinoff. In addition, the
senior management of GenTek will include the effective officers of General
Chemical Group currently responsible for the GenTek Business.
The Company currently anticipates that the consummation of the
Spinoff will occur in the second quarter of 1999. The Spinoff, however, is
subject to a number of conditions, including, among other things, (i) the
receipt of a favorable private letter ruling from the Internal Revenue Service
concerning the tax-free nature of the Spinoff, (ii) appropriate equity and debt
market conditions for the Spinoff, (iii) various regulatory approvals, (iv)
closing under new financing facilities for each of GenTek and the Company and
the application of a portion of their proceeds to repay debt of the Company, and
(v) approval by the Board of the Company of the final terms of the Spinoff,
including the formal declaration of a dividend to the Company's shareholders.
On February 23, 1999, the Company completed its previously-announced
acquisition of Defiance, Inc. ("Defiance") in a transaction that valued
Defiance's equity at approximately $57,000. Defiance, headquartered in
Cleveland, Ohio, manufactures specialty antifriction bearings and provides
vehicle testing services, tooling design and pre-production dies and components
primarily for the automotive industry. Funding for this transaction will be
provided by existing cash and borrowings on the Company's credit facilities. The
Company will account for this transaction using the purchase method.
On March 1, 1999, the Company announced an offer to acquire all of
the outstanding common stock of Noma Industries Limited ("Noma") in a
transaction that values Noma's equity at approximately U.S. $220,000. Noma is
headquartered in Toronto, Canada, and is a leading manufacturer of electrical
wire and components for the automotive, appliance and electronics industries.
Funding for this transaction will be provided from the Company's existing bank
credit facilities. The Company will account for this transaction using the
purchase method.
F-28
<PAGE>
<PAGE>
ANNEX A
INDEX TO THE COMBINED FINANCIAL STATEMENTS
INDUSTRIAL CHEMICALS BUSINESS OF THE GENERAL CHEMICAL GROUP INC.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report....................................................................................A-2
Combined Statements of Operations for the three years ended December 31, 1998...................................A-3
Combined Balance Sheets at December 31, 1997 and 1998...........................................................A-4
Combined Statements of Cash Flows for the three years ended December 31, 1998...................................A-5
Combined Statements of Changes in Divisional Equity for the three years ended
December 31, 1998............................................................................................A-6
Notes to Combined Financial Statements.......................................................................A-7-18
</TABLE>
The General Chemical Group Inc. ("GCG") has announced plans to
separate its Manufacturing and Performance Products Segments from its Industrial
Chemicals Segment through a distribution of stock of GenTek Inc. to stockholders
of GCG (the "Spinoff"). In connection with the Spinoff, GCG will transfer the
Manufacturing and Performance Products Segments to a wholly-owned subsidiary,
GenTek Inc. ("GenTek"), and distribute the stock of GenTek to stockholders of
GCG. After the Spinoff, GenTek and GCG will be separate, independent companies,
with their common stock traded on the New York Stock Exchange. GCG will own and
operate the Industrial Chemicals Segment, and GenTek will own and operate the
businesses comprising the Manufacturing and Performance Products Segments.
The Spinoff is treated as a reverse spinoff for financial statement
purposes because a greater proportion of GCG's assets and operations will be
held by GenTek after the Spinoff. Therefore, the Spinoff will be reflected, for
financial statement presentation, as if General Chemical Group formed a new
company consisting of the Industrial Chemicals Segment (i.e., "new" GCG) and
distributed the stock of that company as a dividend to General Chemical Group's
stockholders, with the assets and operations of the Manufacturing and
Performance Products Segments remaining with General Chemical Group after the
Spinoff. Accordingly, General Chemical Group's financial statements reflect the
financial position and results of operations of the Manufacturing and
Performance Products Segments as continuing operations and the financial
position and results of operations of the Industrial Chemicals Business as
discontinued operations. On an ongoing basis, the GenTek financial statements
will consist of the Manufacturing and Performance Products Segments and the new
GCG financial statements will consist of the Industrial Chemicals Segment.
Subsequent to the Spinoff, the Industrial Chemicals Segment will
represent the continuing operations of The General Chemical Group Inc.
A-1
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
THE GENERAL CHEMICAL GROUP INC.
We have audited the accompanying combined balance sheets of the
Industrial Chemicals Business of The General Chemical Group Inc. as of December
31, 1997 and 1998, and the related combined statements of operations, changes in
divisional equity and cash flows for each of the three years in the period ended
December 31, 1998. Our audits also included the financial statement schedule in
the Index at Item 15. These financial statements and financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and financial statement
schedule 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 disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements present fairly, in all
material respects, the combined financial position of the Industrial Chemicals
Business at December 31, 1997 and 1998, and the combined results of their
operations and their combined cash flows for each of the three years in the
period ended December 31, 1998 in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic combined financial statements taken as
whole, presents fairly in all material respects the information set forth
therein.
Deloitte & Touche LLP
Parsippany, New Jersey
February 11, 1999
A-2
<PAGE>
<PAGE>
INDUSTRIAL CHEMICALS BUSINESS OF THE GENERAL CHEMICAL GROUP INC.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1996 1997 1998
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Net revenues................................................. $ 298,945 $ 289,700 $ 261,469
Cost of sales................................................ 198,802 204,769 202,338
Selling, general and administrative expense.................. 22,219 16,650 18,082
----------- ----------- -----------
Operating profit........................................ 77,924 68,281 41,049
Interest expense............................................. 13,001 12,747 11,747
Interest income.............................................. 1,029 1,029 930
Foreign currency transaction (gains) losses.................. (86) 185 447
Other expense, net........................................... 441 285 524
----------- ----------- -----------
Income before minority interest and income taxes........ 65,597 56,093 29,261
Minority interest............................................ 31,635 24,253 16,666
----------- ----------- -----------
Income before income taxes.............................. 33,962 31,840 12,595
Income tax provision......................................... 9,682 9,576 3,171
----------- ----------- -----------
Net income.............................................. $ 24,280 $ 22,264 $ 9,424
=========== =========== ===========
</TABLE>
See the accompanying notes to the combined financial statements.
A-3
<PAGE>
<PAGE>
INDUSTRIAL CHEMICALS BUSINESS OF THE GENERAL CHEMICAL GROUP INC.
COMBINED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1997 1998
---- ----
(IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash and cash equivalents....................................... $ 1,352 $ 1,127
Receivables, net................................................ 72,917 58,601
Inventories..................................................... 20,630 25,508
Deferred income taxes........................................... 4,295 4,392
Other current assets............................................ 2,217 1,659
---------- ----------
Total current assets......................................... 101,411 91,287
Property, plant and equipment, net................................ 144,035 141,808
Other assets...................................................... 16,729 15,619
---------- -----------
Total assets................................................. $ 262,175 $ 248,714
========== ==========
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable................................................ $ 29,216 $ 24,298
Accrued liabilities............................................. 24,412 25,146
Income taxes payable............................................ 1,914 1,988
---------- ----------
Total current liabilities.................................... 55,542 51,432
Other liabilities................................................. 77,827 78,561
----------- -----------
Total liabilities............................................ 133,369 129,993
Minority interest................................................. 43,301 43,429
Divisional equity................................................. 85,505 75,292
----------- -----------
Total liabilities and equity................................. $ 262,175 $ 248,714
=========== ===========
</TABLE>
See the accompanying notes to the combined financial statements.
A-4
<PAGE>
<PAGE>
INDUSTRIAL CHEMICALS BUSINESS OF THE GENERAL CHEMICAL GROUP INC.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1996 1997 1998
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ......................................................... $ 24,280 $ 22,264 $ 9,424
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization .................................. 15,646 16,798 16,999
Net loss on disposition of long-term assets .................... 497 696 460
(Increase) decrease in receivables ............................. (9,714) (12,085) 12,189
(Increase) decrease in inventories ............................. 2,966 (940) (5,754)
Increase (decrease) in accounts payable ........................ 3,030 3,631 (3,460)
Increase (decrease) in accrued liabilities ..................... 4,342 (5,234) 909
Increase (decrease) in income taxes payable .................... 820 (2,394) (32)
Increase in minority interest .................................. 10,294 4,729 128
Increase (decrease) in other liabilities and
assets, net ................................................ (1,737) 2,293 6,946
-------- -------- --------
Net cash provided by operating activities .................. 50,424 29,758 37,809
-------- -------- --------
Cash flows from investing activities:
Capital expenditures ............................................... (34,934) (30,468) (18,498)
Proceeds from sales or disposals of long-term assets ............... 30 7 101
-------- -------- --------
Net cash used for investing activities ..................... (34,904) (30,461) (18,397)
-------- -------- --------
Cash flows from financing activities:
Net transactions with The General Chemical
Group Inc. ................................................. (14,839) 446 (19,637)
-------- -------- --------
Net cash provided by (used for) financing activities ........... (14,839) 446 (19,637)
-------- -------- --------
Increase (decrease) in cash and cash equivalents ........................ 681 (257) (225)
Cash and cash equivalents at beginning of period ........................ 928 1,609 1,352
-------- -------- --------
Cash and cash equivalents at end of period .............................. $ 1,609 $ 1,352 $ 1,127
======== ======== ========
</TABLE>
See the accompanying notes to the combined financial statements.
A-5
<PAGE>
<PAGE>
INDUSTRIAL CHEMICALS BUSINESS OF THE GENERAL CHEMICAL GROUP INC.
COMBINED STATEMENTS OF CHANGES IN DIVISIONAL EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------
1996 1997 1998
---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year................................. $ 53,354 $ 62,795 $ 85,505
Net income.................................................. 24,280 22,264 9,424
Transfers (to) from The General Chemical
Group Inc............................................... (14,839) 446 (19,637)
---------- ---------- ----------
Balance at end of year....................................... $ 62,795 $ 85,505 $ 75,292
========== ========== ==========
</TABLE>
See the accompanying notes to the combined financial statements.
A-6
<PAGE>
<PAGE>
INDUSTRIAL CHEMICALS BUSINESS OF THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Industrial Chemical Business (the "Company") within The General
Chemical Group Inc. ("GCG") is a leading North American supplier of soda ash and
calcium chloride to a broad range of industrial and municipal customers. The
primary end markets for soda ash include glass production, sodium-based
chemicals, powdered detergents, water treatment and other industrial end uses.
Calcium chloride is mainly used for dust control and roadbed stabilization
during the summer and melting ice during the winter.
GCG plans to distribute in the second quarter of 1999 to General
Chemical Group Stockholders all of the outstanding stock of its GenTek Business
("GenTek Inc." or "GenTek") in a spin-off transaction (the "Spinoff"). General
Chemical Group will have no ownership interest in GenTek subsequent to the
Spinoff.
For the purpose of governing certain ongoing relationships between
General Chemical Group and GenTek after the Spinoff and to provide mechanisms
for an orderly transition, General Chemical Group and GenTek have entered into
various agreements. Management believes that the agreements are comparable to
those which would have been reached in arms' length negotiations with
unaffiliated parties.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
The accompanying combined financial statements reflect the results of
operations, financial position, changes in divisional net equity and cash flows
of the Industrial Chemical Business, including General Chemical (Soda Ash)
Partners ("GCSAP") of which the Industrial Chemical Business owns 51 percent.
The combined financial statements reflect the assets and liabilities and the
historical results of operations of the Industrial Chemical Business. All
intercompany balances and transactions between the Industrial Chemical Business
operations have been eliminated. The financial information included herein does
not necessarily reflect the combined results of operations, financial position,
changes in divisional net equity and cash flows of the Industrial Chemical
Business had the Industrial Chemical Business been a separate stand alone entity
for the periods presented.
The combined financial statements include an allocation of certain
assets, liabilities and expenses from GCG, including allocations of general
corporate overhead expenses of $2,569, $1,285 and $1,448 for the years 1996,
1997 and 1998, respectively. In the opinion of management, expenses have been
allocated to the Industrial Chemical Business in a reasonable and consistent
basis using management's estimate of services provided to the Industrial
Chemical Business by GCG. However, such allocations are not necessarily
indicative of the level of expenses which might have been incurred had the
Industrial Chemical Business been operating as a stand-alone entity during the
periods presented or expected to be incurred after the Spinoff.
The Industrial Chemical Business participates in GCG's centralized
cash management and financing program, and the accompanying financial statements
include an allocation of net interest expense from GCG. To the extent the
Industrial Chemical Business has experienced temporary cash needs for working
capital purposes or capital expenditures, such funds have historically been
provided by GCG. The net effect of cash
A-7
<PAGE>
<PAGE>
INDUSTRIAL CHEMICALS BUSINESS OF THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS)
transfers to or from GCG are reflected in divisional net equity. Net interest
expense has been allocated assuming that the Industrial Chemicals Business
allocated share of GCG's debt would be $150,000. The allocations were made
consistently in each year, and management believes the allocations are
reasonable. However, these interest costs would not necessarily be indicative of
what the actual costs would have been had the Industrial Chemical Business
operated as a separate, stand-alone public entity. Subsequent to the Spinoff,
the Industrial Chemical Business will be responsible for these cash management
functions using its own resources or purchased services and will be responsible
for the costs associated with operating a public company.
The Industrial Chemical Business' financial results include the costs
incurred by The General Chemical Group pension and postretirement benefit plans
for employees and retirees of the Industrial Chemical Business.
Taxes on income are computed as if the Industrial Chemicals Business
were a stand-alone company. The provision for income taxes has been determined
as if the Industrial Chemical Business had filed separate tax returns under its
existing structure for the periods presented.
Inventories are valued at the lower of cost or market, using the
last-in, first-out ("LIFO") method for most domestic production inventories and
the first-in, first-out ("FIFO") or average-cost method for all other
inventories. Production inventory costs include material, labor and factory
overhead.
Property, plant and equipment are carried at cost and are depreciated
principally using the straight line method, using estimated lives which range
from 2 to 30 years. Mines and machinery and equipment of GCSAP are depreciated
using the units-of-production method. Approximately 54 percent of machinery and
equipment and 80 percent of mines and quarries are depreciated using the units
of production method.
The Company evaluates the recovery of long-lived assets not held for
sale by measuring the carrying value of these assets against the estimated
undiscounted future cash flows associated with them. At the time such
evaluations indicate that the future cash flows are not sufficient to recover
the carrying value of such assets, the assets are adjusted to their fair values,
which have been determined on a discounted cash flow basis.
The Company provides for the expected costs to be incurred for the
eventual reclamation of mining properties pursuant to local law. Land
reclamation costs are being accrued over the estimated remaining life of the
reserves currently under lease. At December 31, 1997 and 1998, the Company had
accruals of $24,746 and $25,684, respectively, for land reclamation. These
amounts are included in other liabilities on the balance sheet.
The Company recognizes deferred tax assets and liabilities based on
differences between financial statement and tax bases of assets and liabilities
using presently enacted tax rates.
The Company does not hold or issue derivative financial instruments
for trading purposes or any other purposes.
All highly liquid instruments purchased with a maturity of three
months or less are considered to be cash equivalents.
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("FAS 133"). FAS 133
A-8
<PAGE>
<PAGE>
INDUSTRIAL CHEMICALS BUSINESS OF THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS)
requires that all derivative instruments be measured at fair value and
recognized in the balance sheet as either assets or liabilities. The Company is
required to adopt FAS 133 for fiscal years beginning after June 15, 1999. The
Company does not expect the adoption of FAS 133 will have a material effect on
the Company's results of operations or financial condition.
NOTE 2 - INCOME TAXES
Income before income taxes is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1996 1997 1998
------------------ --------------- ---------------
<S> <C> <C> <C>
United States.......... $ 18,280 $ 18,746 $ 8,141
Foreign................ 15,682 13,094 4,454
--------------- --------------- --------------
Total............. $ 33,962 $ 31,840 $ 12,595
=============== =============== ==============
</TABLE>
The components of the income tax provision are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------
1996 1997 1998
------------- --------------- -------------
<S> <C> <C> <C>
United States:
Current................. $ 5,145 $ 1,018 $ 3,850
Deferred................ (2,224) 2,884 (2,691)
Foreign:
Current................. 6,179 5,073 1,503
Deferred................ (726) (739) (94)
State:
Current................. 1,939 706 1,552
Deferred................ (631) 634 (949)
--------- --------- ---------
Total................. $ 9,682 $ 9,576 $ 3,171
========= ========= =========
</TABLE>
A-9
<PAGE>
<PAGE>
INDUSTRIAL CHEMICALS BUSINESS OF THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS)
A summary of the components of deferred tax assets and liabilities is
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1997 1998
---------- -----------
<S> <C> <C>
Postretirement benefits......................... $ 12,575 $ 12,597
Nondeductible accruals.......................... 12,808 13,363
Foreign operations.............................. 4,302 4,291
Other........................................... 105 105
-------- --------
Deferred tax assets.......................... 29,790 30,356
-------- --------
Property, plant and equipment................... 15,029 15,739
Pensions........................................ 5,377 4,733
Inventory....................................... (631) (681)
Other........................................... 40 40
-------- --------
Deferred tax liabilities..................... 19,815 19,831
-------- --------
Valuation allowance............................. 11,434 11,423
-------- --------
Net deferred tax assets...................... $ (1,459) $ (898)
======== ========
</TABLE>
The Company has deferred tax assets related to foreign tax credits of
$11,434 and $11,423 at December 31, 1997 and 1998, respectively, against which a
full valuation allowance has been recorded. The Company reversed $1,426, $4,656
and $11 of previously recorded valuation allowances during 1996, 1997 and 1998,
respectively, primarily related to foreign tax credits that had expired.
The difference between the effective income tax rate and the United
States statutory rate is reconciled below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------
1996 1997 1998
------------ ------------ -------------
<S> <C> <C> <C>
U.S. federal statutory rate.................... 35.0% 35.0% 35.0%
State income taxes, net of federal benefit..... 2.5 2.7 3.1
Tax effect of foreign operations............... 2.5 1.1 2.4
Depletion...................................... (11.9) (9.1) (16.6)
Other................................. 0.4 0.4 1.3
---------- --------- ---------
Total.......................... 28.5% 30.1% 25.2%
========== ========= =========
</TABLE>
In connection with the Spinoff, the Company will enter into a tax
sharing agreement with GenTek. The agreement will require GenTek to indemnify
and hold harmless the Company for consolidated income tax liabilities
attributable to periods before the Spinoff.
A-10
<PAGE>
<PAGE>
INDUSTRIAL CHEMICALS BUSINESS OF THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 3 - PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
The Industrial Chemical Business participates in The General Chemical
Group's domestic and foreign pension plans. At the Spinoff, the Industrial
Chemical Business will assume the responsibility for pension benefits for
retirees whose last work assignment was with the Industrial Chemical Business
and for employees of the Industrial Chemical Business. Following the Spinoff,
the Industrial Chemical Business will establish separate defined benefit plans
for the employees and retirees of the Industrial Chemical Business. Assets
included in trusts under qualified pension plans will be divided after the
Spinoff between the trusts for The General Chemical Group's qualified pension
plans and the Industrial Chemical Business' qualified pension plans. Each such
domestic plan will receive the legally required funding under the Employee
Retirement Income Security Act of 1974 and foreign plans will receive funding as
specified under the applicable statutory requirement. The Industrial Chemical
Business also participates in The General Chemical Group's sponsored
postretirement benefit plan substantially covering all hourly and certain
salaried employees of The General Chemical Group. The General Chemical Group
funds these benefits on a pay-as-you-go basis. At the Spinoff, the Industrial
Chemical Business will assume the responsibility for postretirement benefits for
retirees whose last work assignment was with the Industrial Chemical Business
and for the employees of the Industrial Chemical Business. The disclosures for
the General Chemical Group's Pension Plans and Other Postretirement Benefits are
as follows:
<TABLE>
<CAPTION>
OTHER
PENSION BENEFITS POSTRETIREMENT BENEFITS
DECEMBER 31, DECEMBER 31,
------------------------------- -------------------------------
1996 1997 1998 1996 1997 1998
---------- ---------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
UNITED STATES:
Components of Net Periodic Benefit Cost
Service Cost............................ $ 4,748 $ 5,217 $ 5,645 $ 1,455 $ 1,575 $ 1,568
Interest Cost............................. 13,125 13,873 14,935 3,587 3,896 4,046
Expected Return on Plan Assets............ (12,241) (13,466) (15,156) -- -- --
Amortization of Net
Prior Service Cost..................... 841 843 910 (1,604) (1,604) (1,604)
(Gain)/Loss............................ 80 46 10 (757) (587) (628)
--------- --------- --------- ------- ------- -------
Net Periodic Benefit Cost................. $ 6,553 $ 6,513 $ 6,344 $ 2,681 $ 3,280 $ 3,382
========= ========= ========= ======= ======= =======
</TABLE>
A-11
<PAGE>
<PAGE>
INDUSTRIAL CHEMICALS BUSINESS OF THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
OTHER
PENSION BENEFITS POSTRETIREMENT BENEFITS
DECEMBER 31, DECEMBER 31,
---------------------------- -------------------------
1997 1998 1997 1998
-------------- ------------- ------------ -----------
<S> <C> <C> <C> <C>
Change in Benefit Obligation
Benefit Obligation at Prior Measurement Date........ $ 187,760 $203,495 $ 55,578 $ 57,522
Service Cost........................................ 5,217 5,533 1,575 1,568
Interest Cost....................................... 13,873 14,856 3,896 4,046
Actuarial (Gain)/Loss............................... 960 22,332 (1,800) (948)
Benefits Paid....................................... (9,077) (10,648) (2,318) (2,989)
Plan Amendments..................................... 699 -- -- --
Business Combinations............................... 4,063 1,333 591 --
----------- --------- ---------- ---------
Benefit Obligation at Measurement Date.............. $ 203,495 $236,901 $ 57,522 $ 59,199
=========== ========= ========== =========
Change in Plan Assets
Fair Value of Assets at Prior Measurement Date...... $ 166,661 $193,301 $ -- $ --
Actual Return on Plan Assets........................ 29,122 17,124 -- --
Employer Contributions.............................. 2,470 3,065 2,318 2,989
Benefits Paid....................................... (9,077) (10,649) (2,318) (2,989)
Business Combinations............................... 4,125 1,147 -- --
----------- ---------- ---------- ----------
Fair Value of Assets at Measurement Date............ $ 193,301 $ 203,988 -- --
=========== ========== ========== ==========
Reconciliation of Funded Status
Funded Status....................................... $ (10,194) $ (32,913) $ (57,522) $ (59,199)
Unrecognized Net
Transition (Asset)/Obligation.................... -- 13 -- --
Prior Service Cost............................... 7,091 6,178 (11,104) (9,500)
(Gain)/Loss...................................... (23,796) (3,540) (8,309) (8,629)
------------ ------------ ----------- ----------
Net Amount Recognized............................... $ (26,899) $ (30,262) $ (76,935) $ (77,328)
============ ============ =========== ==========
</TABLE>
A-12
<PAGE>
<PAGE>
INDUSTRIAL CHEMICALS BUSINESS OF THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS)
The assumptions used in accounting for the plans in 1996, 1997 and 1998
were
<TABLE>
PENSION PLANS
----------------------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Discount rate.............................................. 7 1/2% 7 1/2% 6 3/4%
Long-term rate of return on assets......................... 9% 9% 9%
Average rate of increase in employee compensation.......... 5% 5% 5%
</TABLE>
The assumption used in accounting for the medical plans in 1998 was an 8
percent health care cost trend rate (decreasing to 6 3/4 percent in the year
2001 and beyond). A one percent increase in the health care trend rate would
increase the accumulated postretirement benefit obligation by $3,881 at year
end 1998 and the net periodic cost by $330 for the year. A one percent decrease
in the health care trend rate would decrease the accumulated postretirement
benefit obligation by $4,206 at year end 1998 and the net periodic cost by $357
for the year.
The assumption used in accounting for the plans in 1997 was a 10 percent
health care cost trend rate (decreasing to 7 1/2 percent in the year 2000 and
beyond).
The dates used to measure plan assets and liabilities were October
31, 1997 and 1998 for all plans. Pension plan assets are invested primarily in
stocks, bonds, short-term securities and cash equivalents.
<TABLE>
<CAPTION>
OTHER
PENSION BENEFITS POSTRETIREMENT BENEFITS
DECEMBER 31, DECEMBER 31,
---------------------------- ---------------------------
1996 1997 1998 1996 1997 1998
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
CANADA:
Components of Net Periodic Benefit Cost
Service Cost.............................. $1,494 $1,352 $1,463 $ 310 $ 302 $ 332
Interest Cost............................. 3,727 3,868 3,789 864 1,032 1,014
Expected Return on Plan Assets............ (4,662) (4,877) (4,881) -- -- --
Amortization of Net
Prior Service Cost..................... 92 90 84 -- -- --
(Gain)/Loss............................ 467 432 458 -- -- --
------ ------ ------ ------ ------ ------
Net Periodic Benefit Cost................. $1,118 $ 865 $ 913 $1,174 $1,334 $1,346
====== ====== ====== ====== ====== ======
</TABLE>
A-13
<PAGE>
<PAGE>
INDUSTRIAL CHEMICALS BUSINESS OF THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
OTHER
PENSION BENEFITS POSTRETIREMENT BENEFITS
DECEMBER 31, DECEMBER 31,
------------------------- ------------------------
1997 1998 1997 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Change in Benefit Obligation
Benefit Obligation at Prior Measurement Date......... $ 50,714 $ 55,493 $ 13,297 $ 14,631
Service Cost......................................... 1,349 1,457 302 330
Interest Cost........................................ 3,857 3,773 1,029 1,010
Actuarial (Gain)/Loss................................ 3,977 5,823 592 (934)
Foreign Currency Translation......................... (899) (3,701) (235) (977)
Benefits Paid........................................ (3,505) (3,240) (354) (370)
---------- ---------- ---------- ----------
Benefit Obligation at Measurement Date............... $ 55,493 $ 59,605 $ 14,631 $ 13,690
========== ========== ========== ==========
Change in Plan Assets
Fair Value of Assets at Prior Measurement Date....... $ 59,940 $ 66,181 $ -- $ --
Actual Return on Plan Assets......................... 10,611 2,633 -- --
Employer Contributions............................... 1,085 1,643 370 354
Foreign Currency Translation......................... (1,950) (4,412) -- --
Benefits Paid........................................ (3,505) (3,240) (370) (354)
---------- ---------- ---------- ----------
Fair Value of Assets at Measurement Date............. $ 66,181 $ 62,805 $ -- $ --
========== ========== ========== ==========
Reconciliation of Funded Status
Funded Status........................................ $ 11,576 $ 3,201 $ (14,631) $ (13,691)
Unrecognized Net.................................
Prior Service Cost.......................... 834 695 -- --
(Gain)/Loss................................. 6,392 13,560 1,340 316
---------- ---------- ---------- ----------
Net Amount Recognized................................ $ 18,802 $ 17,456 $ (13,291) $ (13,375)
========== ========== ========== ==========
</TABLE>
The Canadian prepaid pension cost is included in other assets on the
balance sheet.
The assumptions used in accounting for the plans in 1996, 1997 and 1998
were
<TABLE>
<CAPTION>
PENSION PLANS
--------------------------------------
1996 1997 1998
------- ------- --------
<S> <C> <C> <C>
Estimated discount rate.................................... 8% 7 1/2% 6 3/4%
Estimated long-term rate of return on assets............... 9% 9% 9%
Average rate of increase in employee compensation.......... 5 1/4% 5 1/4% 5 1/4%
</TABLE>
A-14
<PAGE>
<PAGE>
INDUSTRIAL CHEMICALS BUSINESS OF THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS)
The assumption used in accounting for the medical plans in 1998 was an 8.4
percent health care cost trend rate (decreasing to 6 percent in the year 2003
and beyond). A one percent increase in the health care trend rate would increase
the accumulated postretirement benefit obligation by $2,803 at year end 1998 and
the net periodic cost by $289 for the year. A one percent decrease in the health
care trend rate would decrease the accumulated postretirement benefit obligation
by $2,209 at year end 1998 and the net periodic cost by $223 for the year.
The assumption used in accounting for the plans in 1997 was a 10 percent
health care cost trend rate (decreasing to 7 1/2 percent in the year 2003 and
beyond).
The dates used to measure plan assets and liabilities were October 31, 1997
and 1998 for all plans. Pension plan assets are invested primarily in stocks,
bonds, short-term securities and cash equivalents.
The Industrial Chemical Business' share of The General Chemical Group's
consolidated net periodic benefit cost related to pension benefits, which has
been recorded in the accompanying statement of operations in 1998, 1997 and 1996
was $3,282, $3,277 and $3,269, respectively. The Industrial Chemical Business'
share of GCG's consolidated net periodic benefit cost related to postretirement
benefits, which has been recorded in the accompanying statement of operations in
1998, 1997 and 1996 was $2,118, $2,103 and $1,349, respectively. The Industrial
Chemical Business' share of the accrued pension obligation, which has been
recorded in the accompanying balance sheet at December 31, 1998 and December 31,
1997 was $8,873 and $8,424, respectively. The actual amount transferred will be
measured at the Spinoff date and may be different from these amounts.
The Industrial Chemical Business' share of the long-term portion of the
accrued postretirement benefit obligation as of December 31, 1998 and 1997 was
$38,766 and $38,526, respectively, and is included in other liabilities on the
balance sheet. The actual amount transferred will be measured at the Spinoff
date and may be different from these amounts.
The Industrial Chemicals Business' share of GCG's pension assets as of
December 31, 1997 and 1998 was $16,422 and $15,312, respectively, is included in
other assets on the balance sheet.
NOTE 4 - COMMITMENTS AND CONTINGENCIES
Future minimum rental payments for operating leases (primarily for
transportation equipment, offices and warehouses) having initial or remaining
noncancellable lease terms in excess of one year as of December 31, 1998 are as
follows:
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31,
------------
<S> <C>
1999............................ $ 9,570
2000............................ 3,366
2001............................ 350
2002............................ 299
2003 and thereafter ............ 213
--------
$ 13,798
========
</TABLE>
A-15
<PAGE>
<PAGE>
INDUSTRIAL CHEMICALS BUSINESS OF THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS)
Rental expense for the years ended December 31, 1996, 1997 and 1998 was
$11,175, $12,772 and $13,913, respectively.
Parent Guaranty and Transfer Agreement. A restated parent guaranty and
transfer agreement between New Hampshire Oak, a wholly owned subsidiary of GCG
and the parent of General Chemical Corporation (GCC), ACI International Limited
and TOSOH America, Inc. provides that in the event that either New Hampshire
Oak, ACI International Limited or TOSOH America, Inc. (such entities being
referred to as a "transferring parent" or "nontransferring parent" as the
context requires) proposes to sell or otherwise transfer or cause to be sold or
transferred the voting securities of GCC, the Andover Group, Inc. or TOSOH
Wyoming, Inc. (the respective subsidiaries constituting the partners of GCSAP)
as the case may be, the nontransferring parents will have the following options:
(1) to purchase the transferring parent's subsidiary's interest in GCSAP at fair
market value; (2) to require the transferring parent to purchase the
nontransferring parents' subsidiaries' interest in GCSAP at fair market value;
(3) to buy the voting securities to be sold by the transferring parent on the
same terms and conditions and at the same price as the transferring parent
proposes to sell or otherwise transfer or cause to be sold or transferred such
voting securities; or (4) to cause the proposed transferee to purchase the
nontransferring parents' subsidiaries' interest in GCSAP for a price reflecting
the price to be paid by the proposed transferee for such voting securities. In
the event that New Hampshire Oak ceases to own at least 51 percent of GCC while
GCC is a partner, GCC shall pay to The Andover Group, Inc. $2,833.
The Company is involved in other claims, litigation, administrative
proceedings and investigations and remediation relative to environmental
matters. Although the amount of any ultimate liability which could arise with
respect to these matters cannot be accurately predicted, it is the opinion of
management, based upon currently available information and the accruals
established, that any such liability will have no material adverse effect on the
Company's financial condition, results of operations or cash flows.
NOTE 5 - RELATED PARTY TRANSACTIONS
MANAGEMENT AGREEMENT
The General Chemical Group Inc. is party to a management agreement with
Latona Associates (which is controlled by a stockholder of GCG) under which GCG
receives corporate supervisory and administrative services and strategic
guidance for a quarterly fee. The Industrial Chemical Business' share of this
management fee is $388, $361 and $285 per quarter for the years 1996, 1997 and
1998, respectively.
OTHER TRANSACTIONS
The Industrial Chemicals business supplies soda ash to General Chemical
Corporation ("GCC"), a wholly owned subsidiary of The General Chemical Group.
For the years ended December 31, 1996, 1997 and 1998, sales to GCC amounted to
$5,665, $5,240 and $5,325, respectively.
A-16
<PAGE>
<PAGE>
INDUSTRIAL CHEMICALS BUSINESS OF THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 6 - ADDITIONAL FINANCIAL INFORMATION
The following are summaries of selected balance sheet items:
Receivables
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1997 1998
---------- ----------
<S> <C> <C>
Trade..................................... $ 68,655 $ 54,857
Other..................................... 6,951 6,402
Allowance for doubtful accounts........... (2,689) (2,658)
---------- ---------
$ 72,917 $ 58,601
========== =========
</TABLE>
Inventories
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1997 1998
---------- ----------
<S> <C> <C>
Raw materials............................. $ 2,782 $ 3,480
Work in process........................... 205 1,839
Finished products......................... 11,210 13,297
Supplies and containers................... 6,433 6,892
---------- ----------
$ 20,630 $ 25,508
========== ==========
</TABLE>
Inventories valued at LIFO amounted to $2,475 and $5,632 at December 31,
1997 and 1998, respectively, which were below estimated replacement cost by
$3,136 and $2,011, respectively. The impact of LIFO liquidations in 1996, 1997
and 1998 was not significant.
Property, Plant and Equipment
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1997 1998
---------- ----------
<S> <C> <C>
Land and improvements................................ $ 19,924 $ 19,915
Machinery and equipment.............................. 192,411 178,049
Buildings and leasehold improvements................. 16,607 12,492
Construction in progress............................. 7,413 5,200
Mines and quarries .................................. 13,658 14,395
---------- ----------
250,013 230,051
Less accumulated depreciation and amortization (105,978) (88,243)
---------- ----------
$ 144,035 $ 141,808
========== ==========
</TABLE>
Accrued Liabilities
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1997 1998
---------- ----------
<S> <C> <C>
Wages, salaries and benefits......................... $ 6,497 $ 11,064
Taxes, other than income taxes....................... 8,004 7,638
Other................................................ 9,911 6,444
---------- ----------
$ 24,412 $ 25,146
========== ==========
</TABLE>
A-17
<PAGE>
<PAGE>
INDUSTRIAL CHEMICALS BUSINESS OF THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS - (CONCLUDED)
(DOLLARS IN THOUSANDS)
NOTE 7 - FINANCIAL INSTRUMENTS
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values of cash and cash equivalents, receivables and
payables approximate their carrying values due to the short-term nature of the
instruments.
NOTE 8 - GEOGRAPHIC INFORMATION
<TABLE>
<CAPTION>
IDENTIFIABLE
TOTAL REVENUES OPERATING PROFIT ASSETS
------------------------------ -------------------------------- ---------------------
1996 1997 1998 1996 1997 1998 1997 1998
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
United States (1)... $230,489 $220,525 $191,884 $ 57,927 $ 50,847 $ 32,403 $167,192 $156,784
Foreign (2)......... 111,117 106,052 93,296 19,997 17,434 8,646 94,983 91,930
Elimination (3)..... (42,661) (36,877) (23,711) -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------- --------
$298,945 $289,700 $261,469 $ 77,924 $ 68,281 $ 41,049 $262,175 $248,714
======== ======== ======== ======== ======== ======== ========= ========
</TABLE>
(1) Total revenues include export sales of $66,467, $74,032 and $60,710 for
the years ended December 31, 1996, 1997 and 1998, respectively.
(2) Principally Canada.
(3) Sales between geographic areas are recorded at prices comparable to market
prices charged to third-party customers and are eliminated in
consolidation.
A-18
<PAGE>
<PAGE>
Annex B
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOMA INDUSTRIES LIMITED
<TABLE>
<CAPTION>
Page
----
<S> <C>
Auditors' Report.................................................................................... B-2
Consolidated Balance Sheets as at December 31, 1997 and 1998........................................ B-3
Consolidated Statements of Earnings for each of the years in the three year period
ended December 31, 1998.......................................................................... B-4
Consolidated Statements of Retained Earnings (Deficit) for each of the years in the three year
period ended December 31, 1998................................................................... B-5
Consolidated Statement of Changes in Financial Position for each of the years in the
three year period ended December 31, 1998........................................................ B-6
Notes to Consolidated Financial Statements.......................................................... B-7-26
</TABLE>
B-1
<PAGE>
<PAGE>
Auditors' Report
To the Board of Directors of
Noma Industries Limited
We have audited the consolidated balance sheets of Noma Industries
Limited as at December 31, 1998 and 1997 and the consolidated statements of
earnings, retained earnings (deficit) and changes in financial position for each
of the years in the three year period ended December 31, 1998. 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 an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.
In our opinion, these consolidated financial statements present
fairly, in all material respects, the financial position of the Company as at
December 31, 1998 and 1997 and the results of its operations and the changes in
its financial position for each of the years in the three year period ended
December 31, 1998 in accordance with generally accepted accounting principles.
Canadian generally accepted accounting principles differ in some
respects from those applicable in the United States of America (Note 17).
Deloitte & Touche LLP
Chartered Accountants
Toronto, Ontario
February 19, 1999 (except for Note 17 which is as of March 12, 1999)
B-2
<PAGE>
<PAGE>
NOMA INDUSTRIES LIMITED
Consolidated Balance Sheets
December 31, 1997 and 1998
(Thousands of Canadian dollars)
<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
ASSETS
CURRENT
Cash........................................................ $ 15,310 $ 9,115
Accounts receivable (Note 3)................................ 11,388 21,544
Inventories................................................. 32,478 39,790
Sundry assets............................................... 9,544 6,274
Assets of discontinued operations (Note 4).................. 33,381 919
--------- ---------
102,101 77,642
FIXED ASSETS (Note 5).......................................... 53,065 56,419
GOODWILL AND OTHER ASSETS (Note 6)............................. 28,458 27,296
NOTES RECEIVABLE (Note 4)...................................... 4,950 6,050
ASSETS OF DISCONTINUED OPERATIONS (Note 4)..................... 9,696 2,237
FUTURE INCOME TAXES (Note 11).................................. 1,956 3,330
--------- ---------
$ 200,226 $ 172,974
========= =========
LIABILITIES
CURRENT
Accounts payable and accrued liabilities.................... $ 46,287 $ 39,472
Current portion of long-term debt (Note 8).................. 1,200 1,265
Liabilities of discontinued operations (Note 4)............. 25,628 3,113
--------- ---------
73,115 43,850
LONG-TERM DEBT (Note 8)........................................ 36,044 11,752
FUTURE INCOME TAXES (Note 11).................................. 3,810 3,185
--------- ---------
112,969 58,787
--------- ---------
SHAREHOLDERS' EQUITY
CAPITAL STOCK (Note 9)......................................... 88,158 91,833
RETAINED EARNINGS (DEFICIT).................................... (1,271) 22,213
UNREALIZED FOREIGN EXCHANGE ADJUSTMENT......................... 370 141
--------- ---------
87,257 114,187
--------- ---------
$ 200,226 $ 172,974
========= =========
</TABLE>
B-3
<PAGE>
<PAGE>
NOMA INDUSTRIES LIMITED
Consolidated Statements of Earnings
Years ended December 31, 1996, 1997 and 1998
(Thousands of Canadian dollars except for per share data)
<TABLE>
<CAPTION>
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
SALES ............................................... $ 333,781 $ 360,259 $ 398,421
------------ ------------ ------------
COSTS AND EXPENSES
Cost of sales, selling and administrative
expenses....................................... 293,041 312,834 344,379
Depreciation and amortization (Note 10) .......... 5,900 6,910 8,055
Special charge (Note 8) .......................... -- -- 6,082
Interest expense ................................. 2,944 4,114 3,514
------------ ------------ ------------
301,885 323,858 362,030
------------ ------------ ------------
EARNINGS BEFORE INCOME TAXES AND
DISCONTINUED OPERATIONS .......................... 31,896 36,401 36,391
INCOME TAXES (Note 11) .............................. 12,761 12,896 11,900
------------ ------------ ------------
EARNINGS FROM CONTINUING OPERATIONS ................. 19,135 23,505 24,491
LOSS FROM DISCONTINUED OPERATIONS (Note 4) .......... (64,601) (1,532) (1,007)
------------ ------------ ------------
NET EARNINGS (LOSS) ................................. $ (45,466) $ 21,973 $ 23,484
============ ============ ============
EARNINGS PER SHARE - CONTINUING OPERATIONS
Class A .......................................... $ 0.56 $ 0.69 $ 0.71
Class B .......................................... $ 0.56 $ 0.69 $ 0.71
------------ ------------ ------------
EARNINGS (LOSS) PER SHARE
Class A .......................................... $ (1.33) $ 0.64 $ 0.68
Class B .......................................... $ (1.33) $ 0.64 $ 0.68
------------ ------------ ------------
AVERAGE NUMBER OF SHARES OUTSTANDING
Class A .......................................... 28,034,272 28,104,118 28,618,259
Class B .......................................... 6,265,708 6,203,800 6,068,000
------------ ------------ ------------
</TABLE>
B-4
<PAGE>
<PAGE>
Consolidated Statements of Retained Earnings (Deficit)
Years ended December 31, 1996, 1997 and 1998
(Thousands of Canadian dollars)
<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- --------
<S> <C> <C> <C>
BALANCE AT BEGINNING OF YEAR................ $ 27,328 $ (22,223) $ (1,271)
NET EARNINGS (LOSS)......................... (45,466) 21,973 23,484
--------- --------- --------
(18,138) (250) 22,213
DIVIDENDS................................... 4,085 1,021 --
--------- --------- --------
BALANCE AT END OF YEAR...................... $ (22,223) $ (1,271) $ 22,213
========= ========= ========
</TABLE>
B-5
<PAGE>
<PAGE>
NOMA INDUSTRIES LIMITED
Consolidated Statements of Changes in Financial Position
Years ended December 31, 1996, 1997 and 1998
(Thousands of Canadian dollars)
<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
CASH PROVIDED BY (USED FOR)
OPERATING
Earnings from continuing operations .............. $ 19,135 $ 23,505 $ 24,491
Non-cash items
Depreciation and amortization .................. 5,900 6,910 8,055
Future income taxes ............................ 87 157 (1,999)
Net change in non-cash working capital items
Accounts receivable .......................... 6,108 (3,306) (2,220)
Inventories .................................. (1,375) (4,295) (7,312)
Sundry assets ................................ (1,726) (3,369) 3,270
Accounts payable and accrued liabilities ..... (173) 8,481 (6,815)
-------- -------- --------
Cash provided by operating activities ............ 27,956 28,083 17,470
-------- -------- --------
INVESTING
Purchase of fixed assets, net of disposal ........ (8,010) (19,889) (8,361)
Secured notes receivable ......................... -- (4,950) (1,100)
Other, net ....................................... (2,407) (2,740) (1,252)
-------- -------- --------
Cash used for investing activities ............... (10,417) (27,579) (10,713)
-------- -------- --------
FINANCING
Repayment of long-term debt ...................... (7,504) (10,950) (25,800)
Sale (repurchase) of accounts receivable ......... 21,208 1,658 (7,936)
Redemption of subsidiary's shares ................ (12,600) -- --
Issuance of long-term debt ....................... -- 11,444 710
Dividends paid ................................... (4,085) (1,021) --
Issuance of capital stock ........................ 40 134 3,675
-------- -------- --------
Cash provided by (used for) financing activities.. (2,941) 1,265 (29,351)
-------- -------- --------
(DECREASE) INCREASE IN CASH FROM
CONTINUING OPERATIONS ............................ 14,598 1,769 (22,594)
CASH PROVIDED BY DISCONTINUED OPERATIONS ............ 1,938 11,073 16,399
-------- -------- --------
CASH (USED) PROVIDED IN THE YEAR .................... 16,536 12,842 (6,195)
CASH (BANK INDEBTEDNESS) AT BEGINNING OF
YEAR ............................................. (14,068) 2,468 15,310
-------- -------- --------
CASH AT END OF YEAR ................................. $ 2,468 $ 15,310 $ 9,115
======== ======== ========
</TABLE>
B-6
<PAGE>
<PAGE>
NOMA INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
December 31, 1996, 1997 and 1998
1. SIGNIFICANT ACCOUNTING POLICIES
Generally accepted accounting principles
These consolidated financial statements have been prepared in
accordance with Canadian generally accepted accounting principles and are
presented in Canadian dollars.
Principles of consolidation
These consolidated financial statements include the accounts of the
Company and all of its subsidiary companies.
Inventories
Inventories are valued at the lower of cost, determined on a first-in,
first-out basis, and net realizable value.
Depreciation and amortization
(i) Fixed assets are recorded at cost net of related investment tax
credits and depreciated on a straight-line basis at rates which are intended to
extinguish the cost of these assets over their estimated useful lives as
follows:
<TABLE>
<S> <C>
Buildings 2.5% per annum
Machinery and equipment 10% per annum
Data processing equipment 25% per annum
Moulds, dies and tooling 25% per annum
</TABLE>
Leasehold improvements are amortized over five years or the remaining
life of the respective leases, whichever is the shorter period.
(ii) Patent costs and trademarks are amortized on a straight-line
basis over a period of seventeen and ten years, respectively.
(iii) Goodwill is amortized on a straight-line basis over forty years.
The balance is reviewed on an annual basis and in the event of a permanent
impairment to goodwill, such as material change in the business practices or
significant operating losses, the Company would record a reduction in the
unamortized portion of goodwill.
(iv) Deferred finance charges are amortized on a straight-line basis
over the life of the related debt.
B-7
<PAGE>
<PAGE>
NOMA INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
December 31, 1996, 1997 and 1998
Unrealized foreign exchange
The accounts of the Company's self-sustaining foreign operations are
translated into Canadian dollars using the current rate method. Assets and
liabilities are translated at the year-end exchange rate and revenues and
expenses are translated at average exchange rates. Gains and losses arising from
the translation of the financial statements of the foreign operations are
deferred in an "Unrealized Foreign Exchange Adjustment" account in shareholders'
equity.
Income taxes
Effective January 1, 1998, the Company adopted the liability method of
tax allocation for accounting for income taxes as provided for in the new
recommendations of The Canadian Institute of Chartered Accountants. Under the
liability method of tax allocation, future tax assets and liabilities are based
on temporary differences between the financial reporting and tax bases of assets
and liabilities and are measured using the enacted tax rates and laws that are
anticipated to be in effect when the differences are expected to reverse.
Management's estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. ADOPTION OF NEW ACCOUNTING STANDARDS
Income taxes
Effective January 1, 1998, the Company implemented the recommendations
of CICA Handbook Section 3465, "Income Taxes". There is no material impact on
the financial statements resulting from this change either in the current year
or in the prior years. (See Note 11)
Segment disclosures
Effective December 31, 1998, the Company adopted the recommendations
of CICA Handbook Section 1701, "Segment Disclosures". The basis for segmentation
is based on the management approach which reflects the manner in which
management organizes the segments within the enterprise for making operating
decisions and assessing performance. This Section requires the Company to
disclose certain information about operating segments, about their products and
services, the geographic areas in which they operate, and their major customers.
The prior years' segment information has been restated to conform with the
requirements of this Section. (See Note 14)
B-8
<PAGE>
<PAGE>
NOMA INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
December 31, 1996, 1997 and 1998
3. ACCOUNTS RECEIVABLE
In 1996, the Company, and certain of its subsidiaries, sold an
interest in a designated pool of accounts receivable to an independent trust
(the "Trust"). As these accounts receivable are collected, they are replaced by
new receivables or the cash proceeds are repaid to the Trust. No gain or loss
has been recognized on these sales. As at December 31, 1998, the accounts
receivable sold under this agreement totalled $19,089,000 (1997 - $38,875,000).
This agreement expires in 2001 and may be terminated by the Company at any time.
Under conditions of default, the Trust may also terminate the agreement.
4. DISCONTINUED OPERATIONS
During the year, the Company disposed of the businesses included in
its Consumer Electrical group for proceeds of $21,456,000. These proceeds, which
approximated book value, included cash of $20,356,000 and a secured note
receivable of $1,100,000. In late 1996, the Company adopted a plan of
disposition for the businesses included in its Christmas Products group, which
plan was substantially carried out during 1997 and fully completed in 1998.
The results of the discontinued operations are as follows:
(Tabular amounts in thousands of Canadian dollars)
<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- --------
<S> <C> <C> <C>
Revenue ............................................................ $ 194,798 $ 129,222 $ 25,692
========= ========= ========
Loss from discontinued operations
Before interest and income taxes ................................ $ 21,334 $ 1,818 $ 2,012
Allocated interest expense ...................................... 4,522 612 276
Provision for income taxes recoverable .......................... (7,255) (898) (1,281)
Provision for estimated loss on discontinuance of the Christmas
Products Group, including estimated costs and operating
losses to projected dates of discontinuance (net of a provision
for income taxes recoverable of $541,000) ..................... 46,000 -- --
--------- --------- --------
Loss from discontinued operations, net of income tax recovery ...... $ 64,601 $ 1,532 $ 1,007
========= ========= ========
Assets and liabilities of discontinued operations
Current assets .................................................. $ 62,298 $ 33,381 $ 919
Non-current assets .............................................. 15,527 9,696 2,237
--------- --------- --------
$ 77,825 $ 43,077 $ 3,156
========= ========= ========
Current liabilities ............................................. $ 47,771 $ 25,628 $ 3,113
========= ========= ========
</TABLE>
B-9
<PAGE>
<PAGE>
NOMA INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
December 31, 1996, 1997 and 1998
In 1998, a note receivable of $1,100,000 secured by all of the assets
of the purchaser pursuant to a General Security Agreement arose on the sale of
the Consumer Electrical businesses. This note bears interest at 8% per annum and
is repayable $400,000 on December 9, 2000 and $700,000 on June 9, 2001.
In 1997, a note receivable of $4,950,000 secured by all of the assets
of the purchaser pursuant to a General Security Agreement arose on the sale of
the Canadian Christmas business. This note bears interest at 9% per annum and is
repayable in three equal annual payments, commencing February 15, 2000.
5. FIXED ASSETS
(Tabular amounts in thousands of Canadian dollars)
<TABLE>
<CAPTION>
1997 1998
----------------------- -------------------------
Accumulated Accumulated
Cost Depreciation Cost Depreciation
-------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Buildings................................ $ 18,128 $ 5,192 $ 19,602 $ 5,728
Machinery and equipment.................. 66,706 31,276 75,539 38,070
Leasehold improvements................... 2,590 1,401 2,470 1,142
Moulds, dies and tooling................. 1,680 1,050 2,240 1,386
Land..................................... 2,880 -- 2,894 --
-------- -------- --------- --------
$ 91,984 $ 38,919 $ 102,745 $ 46,326
-------- -------- --------- --------
Net book value........................... $ 53,065 $ 56,419
======== ========
</TABLE>
B-10
<PAGE>
<PAGE>
NOMA INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
December 31, 1996, 1997 and 1998
6. GOODWILL AND OTHER ASSETS
(Tabular amounts in thousands of Canadian dollars)
<TABLE>
<CAPTION>
1997 1998
--------- --------
<S> <C> <C>
Goodwill................................................................ $ 26,472 $ 25,725
Long-term portion of leases receivable.................................. 832 718
Deferred finance and other charges...................................... 873 610
Patents and trademarks.................................................. 281 243
-------- --------
$ 28,458 $ 27,296
======== ========
</TABLE>
Goodwill has a cost of $29,875,000 (1997 - $29,875,000) and is net of
accumulated amortization of $4,150,000 (1997 - $3,403,000).
Leases receivable bear interest at 8% per annum.
7. CREDIT FACILITY
The Company has an operating credit facility of $45,000,000 secured by
inventory, accounts receivable of United States subsidiaries and a floating
charge on the assets of the Company and its Canadian subsidiaries. In addition,
the Company has a credit facility of $5,000,000 to finance expansion. This
additional facility is secured by a fixed and floating charge on the assets of
the Company and its Canadian subsidiaries which is subordinate to the lenders of
the operating credit facility and to the interest of the Trust which has
acquired the accounts receivable as described in Note 3.
B-11
<PAGE>
<PAGE>
NOMA INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
December 31, 1996, 1997 and 1998
8. LONG-TERM DEBT
(Tabular amounts in thousands of Canadian dollars)
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Industrial Development Revenue Bond
$8,000,000 U.S., due on April 1, 2012, bearing interest
at U.S. variable rates, secured by a charge on real
property.............................................................. $ 11,444 $ 12,265
Texas Capital Fund
$489,583 U.S., non-interest bearing, repayable in
monthly instalments of $2,083 U.S. until August 1,
2018, secured by a charge on real property............................ -- 752
Series B 10.9% Sinking Fund Debentures
secured by a floating charge on the assets of the
Company and certain of its Canadian subsidiaries and
due December 31, 2009................................................. 25,800 --
-------- --------
37,244 13,017
Less current portion..................................................... 1,200 1,265
-------- --------
$ 36,044 $ 11,752
======== ========
</TABLE>
The principal payments required in the next five years are:
<TABLE>
<S> <C>
1999 $ 1,265
2000 1,265
2001 1,418
2002 1,265
2003 1,265
</TABLE>
Pursuant to a directors' resolution in 1997, the Company has been
authorized to issue $50,000,000 of Series C Sinking Fund Debentures, none of
which have been issued.
During 1998, the Series B Sinking Fund Debentures were redeemed for
cash consideration of $30,682,000. The resulting premium on redemption including
transaction costs was charged to 1998 earnings.
B-12
<PAGE>
<PAGE>
NOMA INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
December 31, 1996, 1997 and 1998
9. CAPITAL STOCK
<TABLE>
<CAPTION>
CLASS A CLASS B
Shares Shares
(Number - Unlimited) (Number - Unlimited) Total
---------------------- ----------------------- ----------------------
Thousands Thousands Thousands
of of of
Shares Canadian Shares Canadian Shares Canadian
Issued dollars Issued dollars Issued dollars
---------- ------- --------- --------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1995
Outstanding ........ 27,676,210 $87,184 6,614,770 $ 800 34,290,980 $87,984
Employee purchase and
option programmes... 9,000 40 -- -- 9,000 40
Conversion ............ 410,500 50 (410,500) (50) -- --
---------- ------- --------- --------- ---------- -------
December 31, 1996
Outstanding ........ 28,095,710 $87,274 6,204,270 $ 750 34,299,980 $88,024
Employee purchase and
option programmes... 29,250 134 -- -- 29,250 134
Conversion ............ 1,420 -- (1,420) -- -- --
---------- ------- --------- --------- ---------- -------
December 31, 1997
Outstanding ........ 28,126,380 87,408 6,202,850 750 34,329,230 88,158
Employee purchase and
option programmes... 211,950 975 -- 211,950 975
Conversion ............ 235,500 27 (235,500) (27) -- --
Exercise of warrants... 450,000 2,700 -- 450,000 2,700
---------- ------- --------- --------- ---------- -------
December 31, 1998
Outstanding ........ 29,023,830 $91,110 5,967,350 $ 723 34,991,180 $91,833
========== ======= ========= ========= ========== =======
</TABLE>
A. First and second preference shares with an unlimited authorized
number, may be issued in series in amounts and with such rights, privileges,
restrictions and conditions attaching thereto as determined by the Board of
Directors at the time of issuance. No preference shares were outstanding at the
end of 1998 and 1997.
B. The Class A shares are non-voting and entitled to a preferential
non-cumulative quarterly dividend of one-eighth cent per share, thereafter
dividends are paid equally on both Class A and Class B shares. The Class B
shares are convertible to Class A shares on a one to one basis.
C. The Company has reserved 3,000,000 Class A non-voting shares for
incentive stock option plans and options have been granted under the plans for
1,509,150 shares for cash at prices between $3.35 and $8.40. The options expire
from 1999 to 2003.
B-13
<PAGE>
<PAGE>
NOMA INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
December 31, 1996, 1997 and 1998
D. In 1994, the Company issued 450,000 warrants to purchase Class A
non-voting shares for $6.00 per share. In 1998, these warrants were exercised.
E. Fully-diluted earnings per share are as follows:
<TABLE>
<CAPTION>
1996 1997 1998
------- ------ ------
<S> <C> <C> <C>
Earnings per share - continuing operations
Class A....................................................... $ 0.54 $ 0.66 $ 0.69
Class B....................................................... $ 0.54 $ 0.66 $ 0.68
======= ====== ======
Earnings (loss) per share
Class A....................................................... $ (1.33) $ 0.62 $ 0.66
Class B....................................................... $ (1.33) $ 0.62 $ 0.65
======= ====== ======
</TABLE>
10. DEPRECIATION AND AMORTIZATION
(Tabular amounts in thousands of Canadian dollars)
<TABLE>
<CAPTION>
1996 1997 1998
------- ------ ------
<S> <C> <C> <C>
Depreciation..................................................... $ 4,803 $ 5,530 $ 6,672
Amortization of:
Goodwill...................................................... 716 748 748
Leasehold improvements........................................ 142 241 304
Deferred finance and other charges............................ 207 346 286
Patents and trademarks........................................ 32 45 45
------- ------- -------
$ 5,900 $ 6,910 $ 8,055
======= ======= =======
</TABLE>
B-14
<PAGE>
<PAGE>
NOMA INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
December 31, 1996, 1997 and 1998
11. INCOME TAXES
(Tabular amounts in thousands of Canadian dollars)
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
1996 1997 1998
------- ------ ------
<S> <C> <C> <C>
Current income tax expense on income before discontinued
operations.................................................... $ 12,674 $ 12,739 $ 13,899
Future income tax (benefit) expense on income before
discontinued operations....................................... 87 157 (1,999)
-------- -------- --------
12,761 12,896 11,900
Income tax benefit related to discontinued operations............ (7,796) (898) (1,281)
-------- -------- --------
$ 4,965 $ 11,998 $ 10,619
======== ======== ========
</TABLE>
The components of the future tax asset (liability) classified by the
source of temporary differences and carryforwards that gave rise to the asset
(liability) are as follows:
<TABLE>
<CAPTION>
1997 1998
------ ------
<S> <C> <C>
Future income tax assets:
Reserves.................................................................... $ 1,109 $ 1,668
Tax loss carryforwards...................................................... 509 629
Other....................................................................... 338 1,033
-------- --------
1,956 3,330
Future income tax liability:
Plant, equipment and intangibles............................................ (3,810) (3,185)
-------- --------
$ (1,854) $ 145
======== ========
</TABLE>
B-15
<PAGE>
<PAGE>
NOMA INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
December 31, 1996, 1997 and 1998
The provision for income taxes reported differs from the amount
computed by applying the Canadian statutory rate to income before taxes for the
following reasons:
<TABLE>
<CAPTION>
1996 1997 1998
------- ------ ------
<S> <C> <C> <C>
Income taxes on earnings from continuing operations at
44.6% (1997 - 44.6%; 1996 - 44.6%)............................ $ 14,232 $ 16,242 $ 16,238
-------- -------- --------
Less:
Manufacturing and processing allowance........................ 1,540 2,548 2,308
Loss carryforwards............................................ -- -- 2,845
Foreign rate differential..................................... 911 300 389
Other......................................................... (980) 498 (1,204)
-------- -------- --------
1,471 3,346 4,338
-------- -------- --------
$ 12,761 $ 12,896 $ 11,900
======== ======== ========
</TABLE>
The Company has approximately U.S. $63,000,000 of income tax losses
available in the United States to reduce future years' taxable income which have
not been recognized in these financial statements. These losses expire beginning
in 2004.
12. FINANCIAL INSTRUMENTS
Foreign exchange risk
The Company enters into forward exchange contracts, in U.S. dollars,
to hedge net cash flow on purchases and sales. The Company believes that its
exposure to credit, liquidity and cash flow risks for the contracts is minimal.
The Company does not hold or issue derivative financial instruments for trading
or speculative purposes.
As the current replacement cost of these outstanding financial
instruments is not carried on the consolidated balance sheets, unrealized gains
or losses are not recognized on changes in current replacement values.
B-16
<PAGE>
<PAGE>
NOMA INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
December 31, 1996, 1997 and 1998
Further information on outstanding financial instruments is as
follows:
(Tabular amounts in thousands of Canadian dollars)
<TABLE>
<CAPTION>
Notional Amounts
Maturing in 1997 1998
---------------------- --------- ---------
Less than 1 to 5
1 Year Years Total Total
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Forward exchange contracts............... $ 56,368 $ 97,364 $ 128,247 $ 153,732
======== ======== ========= =========
</TABLE>
As at December 31, 1998, the Company has forward exchange contracts of
$104,500,000 (1997 - $90,500,000) in U.S. currency.
Current credit exposure
<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
Forward exchange contracts...................................... $ 700 $ 4,489
========= ==========
</TABLE>
Current credit exposure is limited to the amount of the loss that
would be incurred if all of the Company's counterparties were to default at the
same time. The exposure shown above is the current replacement value of only
those contracts which are in a gain position.
Fair value of financial instruments
The estimated fair values of financial instruments as at December 31,
1998 and 1997 are based on relevant market prices and information available at
the time. The fair values are not necessarily indicative of the amounts that the
Company might receive or incur in actual market transactions. As a significant
number of the Company's assets and liabilities, including inventory, fixed
assets and goodwill, do not meet the definition of financial instruments, the
fair value estimates do not reflect the fair value of the Company as a whole.
B-17
<PAGE>
<PAGE>
NOMA INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
December 31, 1996, 1997 and 1998
The carrying value of financial assets and liabilities approximate
fair value with the following exceptions:
(Tabular amounts in thousands of Canadian dollars)
<TABLE>
<CAPTION>
1997 1998
------------------------------ --------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------ -------------- ------------ ----------
<S> <C> <C> <C> <C>
Financial assets
Off balance sheet financial instruments.......... $ -- $ -- $ -- $ 2,299
Financial liabilities
Long-term debt
Texas Capital Fund............................. -- -- 751 389
Series B Sinking Fund Debentures............... 25,800 31,644 -- --
</TABLE>
The fair value of long-term debt was estimated based on discounted
cash flows, using current market interest rates and the Company's credit rating.
The Industrial Development Revenue Bond is subject to U.S. variable rates, which
therefore reflect rates currently available for debt with similar risk and
maturities. Accordingly, the fair value of the debt is not materially different
from the recorded value.
Off balance sheet financial instruments include forward exchange
contracts. The foreign exchange instruments were valued based on the
differential between contract rates and year end forward rates.
Concentration of credit risk
Accounts receivable are from customers primarily in North America.
Significant individual customers, including those in the securitization
agreement, are generally less than ten percent of the outstanding balance at any
time during the year and at year end no individual customer exceeded ten
percent.
Interest rate risk
The Company is subject to interest rate risk on its floating rate
Industrial Development Revenue Bond.
B-18
<PAGE>
<PAGE>
NOMA INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
December 31, 1996, 1997 and 1998
13. COMMITMENTS AND CONTINGENCIES
A. The Company is obligated under the conditions of operating leases
for facilities and equipment with annual rentals as follows:
(Tabular amounts in thousands of Canadian dollars)
<TABLE>
<S> <C>
1999................................. $ 1,816
2000................................. 1,058
2001................................. 614
2002................................. 447
2003................................. 451
Thereafter........................... 1,038
-------
$ 5,424
=======
</TABLE>
B. The Company has outstanding letters of credit of $12,407,000 (1997
- - $4,127,000), and forward currency purchase and sale contracts of $153,732,000
(1997 - $128,247,000) to hedge future U.S. dollar cash flows.
C. The Company and certain of its subsidiaries are party to a number
of legal proceedings. The Company believes that each such proceeding constitutes
routine matters incident to the business conducted by the Company and its
subsidiaries, and that the ultimate disposition of these matters will not have a
material adverse effect on its consolidated earnings, cash flow and/or financial
position.
14. SEGMENTED INFORMATION
The Company and its subsidiaries conduct business in primarily two
business segments: Wire and Cable and Electrical Assemblies.
Wire and cable
The Company's Wire and Cable segment manufactures single and
multi-conductor wire and cable for industrial, commercial and residential
construction and original equipment manufacturer applications.
Electrical assemblies
The Company's Electrical Assemblies segment manufactures wiring
harnesses, power cords, ignition cables, insert and overmolded parts,
electromechanical assemblies, engine block heaters and electrical switches for
motor vehicle industries and their aftermarkets as well as wiring harnesses and
power cords for appliance, electronic and office equipment manufacturers.
B-19
<PAGE>
<PAGE>
NOMA INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
December 31, 1996, 1997 and 1998
The Company evaluates performance and allocates resources based on
contributions before interest and income taxes. The accounting policies of the
segments are the same as those described in the summary of significant
accounting policies. Intersegment sales are recorded at cost plus a margin
factor and are eliminated upon consolidation.
The Company's reportable segments are strategic business units. They
are managed separately because of the nature of the business activities of each
segment. Each segment offers different products and services and requires
different technology and marketing strategies.
B-20
<PAGE>
<PAGE>
NOMA INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
December 31, 1996, 1997 and 1998
14. SEGMENTED INFORMATION - (Continued)
(Tabular amounts in thousands of Canadian Dollars)
<TABLE>
<CAPTION>
Wire and Cable Electrical Assemblies
------------------------------------- -------------------------------------
1996 1997 1998 1996 1997 1998
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Sales to outside customers........... $ 83,737 $ 90,737 $ 99,167 $ 250,044 $ 269,522 $ 299,254
Inter-segment sales.................. 24,223 24,283 17,553 -- -- --
--------- --------- --------- --------- --------- ---------
Total sales.......................... $ 107,960 $ 115,020 $ 116,720 $ 250,044 $ 269,522 $ 299,254
========= ========= ========= ========= ========= =========
Contribution before the undernoted... $ 8,353 $ 9,033 $ 7,373 $ 26,487 $ 31,482 $ 38,614
========= ========= ========= ========= ========= =========
Series B Debenture redemption
premium...........................
Interest expense.....................
Income taxes.........................
Earnings from continuing operations..
Loss from discontinued operations....
Net earnings (loss)..................
Assets identified with continuing
operations........................ $ 21,113 $ 32,265 $ 42,931 $ 80,719 $ 91,694 $ 98,937
Assets of discontinued operations.... -- -- -- -- -- --
--------- --------- --------- --------- --------- ---------
Total assets......................... $ 21,113 $ 32,265 $ 42,931 $ 80,719 $ 91,694 $ 98,937
========= ========= ========= ========= ========= =========
Fixed asset expenditures, net........ $ 1,212 $ 10,528 $ 4,289 $ 6,845 $ 9,330 $ 3,878
========= ========= ========= ========= ========= =========
Depreciation and amortization........ $ 2,204 $ 2,255 $ 2,853 $ 3,696 $ 4,655 $ 5,202
========= ========= ========= ========= ========= =========
<CAPTION>
Other Consolidated
------------------------------------- -------------------------------------
1996 1997 1998 1996 1997 1998
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Sales to outside customers........... $ 333,781 $ 360,259 $ 398,421
========= ========= =========
Inter-segment sales..................
Total sales..........................
Contribution before the undernoted... $ 34,840 $ 40,515 $ 45,987
========= ========= =========
Series B Debenture redemption
premium........................... $ -- $ -- $ 6,082 $ -- $ -- $ 6,082
Interest expense..................... 2,944 4,114 3,514 2,944 4,114 3,514
Income taxes......................... 12,761 12,896 11,900 12,761 12,896 11,900
-------- --------- --------- --------- --------- ---------
15,705 17,010 21,496 15,705 17,010 21,496
-------- --------- --------- --------- --------- ---------
Earnings from continuing operations.. -- -- -- 19,135 23,505 24,491
Loss from discontinued operations.... (64,601) (1,532) (1,007) (64,601) (1,532) (1,007)
-------- --------- --------- --------- --------- ---------
Net earnings (loss).................. $ (45,466) $ 21,973 $ 23,484
========= ========= =========
Assets identified with continuing
operations........................ $ 10,766 $ 33,190 $ 27,950 $ 112,598 $ 157,149 $ 169,818
Assets of discontinued operations.... 77,825 43,077 3,156 77,825 43,077 3,156
--------- --------- --------- --------- ---------- ---------
Total assets......................... $ 88,591 $ 76,267 $ 31,106 $ 190,423 $ 200,226 $ 172,974
========= ========= ========= ========= ========== =========
Fixed asset expenditures, net........ $ (47) $ 31 $ 194 $ 8,010 $ 19,889 $ 8,361
========= ========= ========= ========= ========== =========
Depreciation and amortization........ $ -- $ -- $ -- $ 5,900 $ 6,910 $ 8,055
========= ========= ========= ========= ========== =========
</TABLE>
B-21
<PAGE>
<PAGE>
NOMA INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
December 31, 1996, 1997 and 1998
Geographic segments
(Tabular amounts in thousands of Canadian dollars)
Sales to outside customers attributed to:
<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- --------
<S> <C> <C> <C>
Canada........................................ $ 118,307 $ 119,003 $ 127,367
United States................................. 214,070 235,222 253,537
Europe........................................ 1,187 4,258 6,664
Other foreign countries....................... 217 1,776 10,853
--------- --------- --------
Total sales................................... $ 333,781 $ 360,259 $398,421
========= ========= ========
</TABLE>
Capital assets and intangibles located in:
<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- --------
<S> <C> <C> <C>
Canada........................................ $ 53,298 $ 52,840 $ 53,280
United States................................. 8,738 22,029 23,560
Mexico........................................ 3,199 4,668 5,304
--------- -------- --------
Total capital assets and intangibles.......... $ 65,235 $ 79,537 $ 82,144
========= ======== ========
</TABLE>
Sales to outside customers are attributed to countries based on
location of customer. Capital assets and intangibles are based on the geographic
location of the subsidiary.
Information about major customers
Revenue in 1998 from one customer of the Company's electrical
assemblies segment represented approximately $96,680,000 (1997 - $86,550,000;
1996 - $77,757,000) of the Company's total revenues.
15. YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when information
using year 2000 dates is processed. In addition, similar problems may arise in
some systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 Issue may be experienced before, on, or after
January 1, 2000, and, if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure which could
affect an entity's ability to conduct normal business operations. It is not
possible to be certain that all aspects of the Year 2000 Issue affecting the
entity, including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
B-22
<PAGE>
<PAGE>
NOMA INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
December 31, 1996, 1997 and 1998
16. COMPARATIVE FIGURES
Certain of the 1997 comparative figures have been restated to conform
with current year's presentation.
17. RECONCILIATION OF CANADIAN GAAP TO U.S. GAAP
The Company's consolidated financial statements are prepared in
accordance with Canadian generally accepted accounting principles ("CDN GAAP"),
which conform in all material respects with United States generally accepted
accounting principles ("U.S. GAAP"), except as described below:
A. The Company has forward exchange contracts to sell U.S. dollars at
varying rates, which are accounted for as hedges under CDN GAAP. Under U.S.
GAAP, these contracts are not considered hedges, and gains and losses are
determined at the reporting date and recorded in net income for the period.
B. Under CDN GAAP, losses realized on the early redemption of
long-term debt are included in earnings from operations. Under U.S. GAAP,
the premium on redemption of the Series B Sinking Fund Debentures is
considered an extraordinary item which is recorded net of tax.
C. Accounts receivable in the accompanying balance sheets and
statements of changes in financial position are net of cash received on the
sale of certain receivables. Under U.S. GAAP, these transfers would not be
treated as sales. Accordingly, as at December 31, 1998, accounts receivable
from continuing operations and short-term indebtedness would increase by
$19,089,000. As at December 31, 1997, accounts receivable from continuing
operations, assets of discontinued operations and short-term indebtedness
would increase by $27,025,000, $11,850,000 and $38,875,000, respectively.
In addition, accounts receivable used in operating activities would
decrease by $7,936,000 in 1998, increase by $1,658,000 in 1997 and increase
by $21,208,000 in 1996 and cash provided by financing activities increase
by $7,936,000 in 1998, decrease by $1,658,000 in 1997 and decrease by
$21,208,000 in 1996.
D. The following additional disclosures are required in the financial
statements under U.S. GAAP: Interest paid during the years ended December
31, 1998, 1997 and 1996 was $3,790,000, $4,726,000 and $7,466,000,
respectively. Allowances for doubtful accounts on accounts receivable as at
December 31, 1998 and 1997 are $644,000 and $669,000, respectively. Accrued
liabilities and other non-trade payables included in accounts payable and
accrued liabilities are $27,801,000 and $27,662,000, respectively. Foreign
exchange gains (losses) for the years ended December 31, 1998, 1997 and
1996 are $728,000, ($809,000) and $801,000, respectively.
E. In June 1997, the Financial Accounting Standards Board issued SFAS
No.130, Reporting Comprehensive Income. For the Company's 1998 fiscal year
comprehensive income was insignificant.
F. In June 1998, SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities was issued and is effective for fiscal years
beginning after June 15, 1999. SFAS No. 133 requires the recognition of all
derivatives in the consolidated balance sheet as either assets or
liabilities measured at fair
B-23
<PAGE>
<PAGE>
NOMA INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
December 31, 1996, 1997 and 1998
value. The Company will adopt SFAS No. 133 effective for the 2000 calendar
year end. The Company has not yet determined the impact SFAS No. 133 will
have on its financial position and results of operations when such
statement is adopted.
G. The following table reconciles net income for the year as reported
in the consolidated statements of earnings to what would have been reported
had the financial statements been prepared in accordance with U.S. GAAP as
described above.
(thousands of Canadian dollars, except per share amounts)
<TABLE>
<CAPTION>
1996 1997 1998
--------- -------- --------
<S> <C> <C> <C>
Net earnings (loss) for year (CDN GAAP).................. $ (45,466) $ 21,973 $ 23,484
Foreign currency contracts (A)........................... 905 (2,971) 2,603
Premium on redemption of long-term debt (B).............. -- -- 6,082
Income tax impact of the above adjustments............... (326) 1,070 (3,126)
--------- -------- --------
Earnings (loss) before extraordinary item................ (44,887) 20,072 29,043
Extraordinary item - premium on redemption of long-
term debt (net of taxes) (B).......................... -- -- 3,892
--------- -------- --------
Net earnings (loss) in conformity with U.S. GAAP......... $ (44,887) $ 20,072 $ 25,151
========= ======== ========
</TABLE>
Basic earnings per share are as follows:
<TABLE>
<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Earnings per share from continuing operations
Class A......................................................... $ 0.57 $ 0.63 $ 0.86
Class B......................................................... $ 0.57 $ 0.62 $ 0.86
======= ======= =======
Earnings (loss) per share - discontinued operations
Class A........................................................ $ (1.88) $ (0.04) $ (0.03)
Class B......................................................... $ (1.88) $ (0.04) $ (0.03)
======= ======= =======
Earnings (loss) per share - extraordinary item (net of taxes)
Class A......................................................... $ -- $ -- $ (0.11)
Class B......................................................... $ -- $ -- $ (0.11)
======= ======= =======
Earnings (loss) per share
Class A......................................................... $ (1.31) $ 0.59 $ 0.72
Class B......................................................... $ (1.31) $ 0.58 $ 0.72
======= ======= =======
</TABLE>
B-24
<PAGE>
<PAGE>
NOMA INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
December 31, 1996, 1997 and 1998
Diluted earnings per share are as follows:
<TABLE>
<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Earnings per share from continuing operations
Class A......................................................... $ 0.57 $ 0.62 $ 0.85
Class B......................................................... $ 0.57 $ 0.62 $ 0.85
======= ====== =======
Earnings (loss) per share - discontinued operations
Class A......................................................... $ (1.88) $ (0.04) $ (0.03)
Class B......................................................... $ (1.88) $ (0.04) $ (0.03)
======= ====== =======
Earnings (loss) per share - extraordinary item (net of taxes)
Class A......................................................... $ -- $ -- $ (0.11)
Class B......................................................... $ -- $ -- $ (0.11)
======= ====== =======
Earnings (loss) per share
Class A......................................................... $ (1.31) $ 0.58 $ 0.71
Class B......................................................... $ (1.31) $ 0.58 $ 0.71
======= ====== =======
</TABLE>
Earnings per Class A and Class B shares are determined using the
weighted average number of shares outstanding during the period. Diluted
earnings per Class A and Class B shares reflect the dilutive effects of the
Class A share options and warrants outstanding at the end of the period.
The components of the denominators used for basic earnings per share
and diluted earnings per share are reconciled as follows:
<TABLE>
<CAPTION>
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Basic earnings per share:
Class A - weighted average shares outstanding ..... 28,034,272 28,104,118 28,618,259
Class B - weighted average shares outstanding ..... 6,265,708 6,203,800 6,068,000
---------- ---------- ----------
Weighted average common shares outstanding ........ 34,299,980 34,307,918 34,686,259
========== ========== ==========
Diluted earnings per share:
Class A - weighted shares outstanding ............. 28,034,272 28,104,118 28,618,259
Options and warrants .............................. 12,357 100,470 481,684
---------- ---------- ----------
Class A - weighted average common and
common equivalent shares outstanding ........... 28,046,629 28,204,588 29,099,943
---------- ---------- ----------
Class B - weighted average shares outstanding ..... 6,285,708 6,203,800 6,068,000
---------- ---------- ----------
Weighted average common and common
equivalent shares outstanding ................... 34,332,337 34,408,388 35,167,943
========== ========== ==========
</TABLE>
B-25
<PAGE>
<PAGE>
NOMA INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
December 31, 1996, 1997 and 1998
H. The following table indicates the items in the balance sheet that
would be affected had the financial statements been prepared in accordance
with U.S. GAAP.
(Tabular amounts in thousands of Canadian dollars)
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Accounts receivable............................. $ 38,413 $ 40,633
Sundry assets................................... 9,765 8,801
Assets of discontinued operations............... 45,231 919
Goodwill and other assets....................... 28,970 29,625
Future income tax asset - short-term............ 154 --
Future income tax asset - long-term............. 1,956 3,330
Short-term indebtedness......................... 38,875 19,089
Accounts payable................................ 18,625 11,671
Accrued liabilities............................. 28,313 29,334
Future income tax liability - short-term........ -- 358
Future income tax liability - long-term......... 3,987 3,787
Long-term liabilities........................... 19 657
Retained earnings (deficit)..................... (1,271) 23,880
</TABLE>
B-26
STATEMENT OF DIFFERENCES
------------------------
The section symbol shall be expressed as ............................. 'SS'
<PAGE>
<PAGE>
ANNEX II
INDEX TO FINANCIAL STATEMENT SCHEDULES
Schedule II -- Valuation and Qualifying Accounts
Schedules required by Article 12 of Regulation S-X, other than those
listed above, are omitted because of the absence of the conditions under which
they are required or because the required information is included in the
consolidated financial statements or notes thereto.
THE GENERAL CHEMICAL GROUP INC.
(To be GenTek Inc. after the Spinoff)
Schedule II
Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Balance at Additions
Beginning of Charged Deductions Balance at
Period to Income from Reserves End of Period
----------- --------- ------------- -------------
(In thousands)
<<S> <C> <C> <C> <C>
Year ended December 31, 1996
Allowance for doubtful accounts....... $ 3,652 $ 55 $ (288) $ 3,419
Year ended December 31, 1997
Allowance for doubtful accounts....... $ 3,419 $ 134 $ - $ 3,553
Year ended December 31, 1998
Allowance for doubtful accounts....... $ 3,553 $ 584 $ (411) $ 3,726
</TABLE>
<TABLE>
<CAPTION>
Balance at Additions
Beginning of Charged Deductions Balance at
Period to Income from Reserves End of Period
----------- --------- ------------- -------------
(In thousands)
<S> <C> <C> <C> <C>
Year ended December 31, 1996
Environmental Liabilities............. $16,628 $ 6,771 $(7,080) $16,319
Year ended December 31, 1997
Environmental Liabilities............. $16,319 $ 5,546 $(5,621) $16,244
Year ended December 31, 1998
Environmental Liabilities............. $16,244 $10,674 $(6,802) $20,116
</TABLE>
II-1
<PAGE>
<PAGE>
THE INDUSTRIAL CHEMICALS BUSINESS
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Translation
Balance at Additions Deductions Adjustment Balance
Beginning Charged from During at End of
of Period to Income Reserves Period Period
---------- --------- ---------- ----------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996
Allowance for doubtful accounts...... $ 2,022 $ 119 $ (193) $ -- $ 1,948
Year ended December 31, 1997
Allowance for doubtful accounts...... $ 1,948 $ 756 $ 8 $ (23) $ 2,689
Year ended December 31, 1998
Allowance for doubtful accounts...... $ 2,689 $ 3 $ -- $ (34) $ 2,658
</TABLE>
II-2
<PAGE>
<PAGE>
Exhibit Index
<TABLE>
<CAPTION>
Exhibit
No. Description Page No.
- ------- ----------- --------
<S> <C> <C>
2.01 Separation Agreement among The General Chemical Group Inc., GenTek Inc.,
General Chemical Industrial Products Inc. and General Chemical Filed herewith
Corporation............................................................ electronically
3.01 Amended and Restated Certificate of Incorporation of GenTek Filed herewith
Inc.................................................................... electronically
3.02 Amended and Restated Bylaws of GenTek Inc.............................. Filed herewith
electronically
10.01 GenTek Inc. Restricted Unit Plan for Non-Employee Directors............ Filed herewith
electronically
10.02 GenTek Inc. Retirement Plan for Non-Employee Directors................. Filed herewith
electronically
10.03 GenTek Inc. Performance Plan........................................... Filed herewith
electronically
10.04 GenTek Inc. Long-Term Incentive Plan................................... Filed herewith
electronically
10.05 Employee Benefits Agreement among The General Chemical Group Inc.,
General Chemical Industrial Products Inc. and General Chemical Filed herewith
Corporation............................................................ electronically
10.06 Tax Sharing Agreement between GenTek Inc. and The General Filed herewith
Chemical Group Inc..................................................... electronically
10.07 Intellectual Property Agreement among General Chemical Corporation,
The General Chemical Group Inc., GenTek Inc. and General Chemical Filed herewith
Industrial Products Inc................................................ electronically
10.08 Management Agreement between GenTek Inc. and Latona Associates Filed herewith
Inc.................................................................... electronically
10.09 Registration Rights Agreement between Paul M. Montrone and the General
Chemical Group Inc., as assumed by GenTek Inc. with respect to Filed herewith
Common Stock of GenTek Inc............................................. electronically
21.01 Subsidiaries of GenTek Inc............................................. Filed herewith
electronically
27.01 Financial Data Schedule................................................ Filed herewith
electronically
</TABLE>
<PAGE>
<PAGE>
Exhibit 2.01
===============================================================================
SEPARATION AGREEMENT
among
THE GENERAL CHEMICAL GROUP INC.,
GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC.,
GENTEK INC.
and
GENERAL CHEMICAL CORPORATION
dated as of
April __, 1999
===============================================================================
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
DEFINITIONS
ARTICLE II
PRE-SPINOFF TRANSACTIONS;
CERTAIN COVENANTS
Section 2.01. Corporate Restructuring Transactions..................................................10
Section 2.02. Certificate of Incorporation and Bylaws of GenTek.....................................12
Section 2.03. Election of Directors.................................................................12
Section 2.04. Appointment of Officers...............................................................12
Section 2.05. Certain Provisions Relating to Assigned Agreements....................................12
Section 2.06. Consents..............................................................................13
Section 2.07. Registration Statement................................................................13
Section 2.08. State Securities Laws.................................................................14
Section 2.09. Listing Application...................................................................14
Section 2.10. Certain Financial and Other Arrangements..............................................14
Section 2.11. Director and Officer Resignations.....................................................14
Section 2.12. Employees.............................................................................14
Section 2.13. Instruments of Transfers of Assets and Assumptions of Liabilities.....................15
ARTICLE III
THE SPINOFF
Section 3.01. The Spinoff...........................................................................15
Section 3.02. Spinoff Procedures; Deferral of Record Date and Spinoff Date..........................15
Section 3.03. Notice to NYSE........................................................................16
Section 3.04. Mailing of Information Statement......................................................16
Section 3.05. Distribution of GenTek Stock..........................................................16
Section 3.06. Conditions to the Spinoff.............................................................17
</TABLE>
i
<PAGE>
<PAGE>
ARTICLE IV
COVENANTS
<TABLE>
<S> <C> <C>
Section 4.01. Further Assurances....................................................................19
Section 4.02. Assumption and Satisfaction of Liabilities............................................19
Section 4.03. Property Received.....................................................................19
Section 4.04. Transfers Not Effected Prior to the Spinoff; Transfers Deemed
Effective as of the Spinoff Date......................................................19
Section 4.05. No Representations or Warranties......................................................20
Section 4.06. Removal of Certain Guarantees.........................................................21
Section 4.07. Public Announcements..................................................................21
Section 4.08. Termination of Intercompany Agreements................................................21
Section 4.09. Non-Competition.......................................................................21
Section 4.10. Non-Solicitation of Employees.........................................................22
ARTICLE V
ACCESS TO INFORMATION
Section 5.01. Access to Books and Records...........................................................23
Section 5.02. Reimbursement.........................................................................23
Section 5.03. Confidentiality.......................................................................23
Section 5.04. Witness Services......................................................................24
Section 5.05. Retention of Books and Records........................................................24
Section 5.06. Privileged Matters....................................................................25
ARTICLE VI
INSURANCE
Section 6.01. General...............................................................................26
Section 6.02. Treatment of Reserves.................................................................26
Section 6.03. Uninsured Retentions; Claims Management...............................................26
Section 6.04. Directors' and Officers' Insurance....................................................27
</TABLE>
ii
<PAGE>
<PAGE>
ARTICLE VII
INDEMNIFICATION
<TABLE>
<S> <C> <C>
Section 7.01. Indemnification by GCG................................................................28
Section 7.02. Indemnification by GenTek.............................................................28
Section 7.03. Procedures for Indemnification........................................................28
Section 7.04. Adjustments for Insurance Proceeds....................................................29
Section 7.05. Contribution..........................................................................30
Section 7.06. Remedies Cumulative...................................................................30
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Termination...........................................................................30
Section 8.02. Expenses..............................................................................31
Section 8.03. Notices...............................................................................31
Section 8.04. Governing Law.........................................................................32
Section 8.05. Choice of Forum.......................................................................32
Section 8.06. Amendments; Waivers, etc..............................................................32
Section 8.07. Assignment............................................................................32
Section 8.08. Third Party Beneficiaries.............................................................33
Section 8.09. Severability..........................................................................33
Section 8.10. Section Headings......................................................................33
Section 8.11. Integration...........................................................................33
Section 8.12. Counterparts..........................................................................33
</TABLE>
iii
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES AND ANNEXES
- ---------------------
<S> <C>
Schedule I GenTek Assets
Schedule II GenTek Liabilities
Schedule III Industrial Chemicals Assets
Schedule IV Industrial Chemicals Liabilities
Annex A: GenTek Assets -- Real Property
Annex B: Industrial Chemicals Assets -- Real Property
<CAPTION>
EXHIBITS
- --------
<S> <C>
EXHIBIT A Canadian Purchase Agreement
EXHIBIT B Employee Benefits Agreement
EXHIBIT C GCG Management Agreement
EXHIBIT D GenTek Management Agreement
EXHIBIT E Intellectual Property Agreement
EXHIBIT F Sublease Agreement
EXHIBIT G Tax Sharing Agreement
EXHIBIT H Transition Support Agreement
EXHIBIT I Amended and Restated Certificate of Incorporation of GenTek Inc.
EXHIBIT J Amended and Restated Bylaws of GenTek Inc.
</TABLE>
iv
<PAGE>
<PAGE>
SEPARATION AGREEMENT
THIS SEPARATION AGREEMENT, dated as of April __, 1999, among THE GENERAL
CHEMICAL GROUP INC., a Delaware corporation ("GCG"), GENERAL CHEMICAL INDUSTRIAL
PRODUCTS INC., a Delaware corporation ("GCIP"), GENTEK INC., a Delaware
corporation ("GenTek"), and GENERAL CHEMICAL CORPORATION, a Delaware corporation
("GCC").
RECITALS
A. The Board of Directors of GCG has resolved to separate GCG's performance
products and manufacturing businesses from GCG's industrial chemicals business
by (a) having the performance products and manufacturing businesses be owned by
GenTek, and the industrial chemicals business be owned by GCG, and (b)
afterwards, distributing as a dividend to holders of stock of GCG all of the
stock of GenTek. Such distribution is intended to be a distribution described in
section 355 of the Internal Revenue Code of 1986, as amended.
B. Following such separation and distribution, each of GenTek and GCG will
be publicly-owned companies, with GenTek owning all of the stock of GCC and GCG
owning indirectly all of the stock of GCIP.
C. The parties hereto desire to set forth the terms and conditions of such
separation and distribution, including the principal corporate transactions
required to effect the foregoing.
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
The following terms, as used herein, have the following meanings:
"Affiliate" means, when used with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control with
such Person. "Control" of any Person shall consist of the power to direct the
management and policies of such Person (whether through the ownership of voting
securities, by contract, as trustee or executor, or otherwise) and shall be
deemed to exist upon the ownership of securities entitling the holder thereof to
exercise more than 50% of the voting power in the
<PAGE>
<PAGE>
election of directors of such Person (or other persons performing similar
functions). Notwithstanding anything in this definition to the contrary, it is
hereby agreed and understood that, for purposes of this Agreement and the
Ancillary Agreements, after the Spinoff, GenTek and GCG shall not be Affiliates
of each other, nor of any holder of GCG or GenTek Class B Common Stock
(including such holder's Permitted Transferees (as defined in GCG's or GenTek's
certificate of incorporation)). It is expressly stipulated that GCG and GCSAP
are Affiliates of each other.
"Agreement" means this Separation Agreement, as it may be amended,
supplemented or restated from time to time, together with all Exhibits and
Schedules hereto.
"Ancillary Agreements" means the Canadian Purchase Agreement, the Employee
Benefits Agreement, the GCG Management Agreement, the GenTek Management
Agreement, the Intellectual Property Agreement, the Sublease Agreement, the Tax
Sharing Agreement, the Transition Support Agreement and the agreements and
instruments contemplated by Section 2.13.
"Books and Records" means all books, records, manuals, agreements,
financial data, customer and supplier lists, price lists, correspondence,
distribution lists, supplier lists, production data, sales and promotional
materials and records, purchasing materials and records, personnel records,
manufacturing and quality control records and procedures, blue prints, research
and development files, litigation files, computer files, microfiche, tape
recordings and other materials (in any form or medium).
"Canadian Companies" means the following wholly-owned Subsidiaries of GCC:
NHO Canada Holding Inc., a Delaware corporation; General Chemical Canada
Holding, Inc., an Ontario company; and GCCL.
"Canadian Purchase Agreement" means the Purchase and Sale Agreement to be
entered into between GenTek Canada and GCCL substantially in the form of Exhibit
A, as the same may be amended, supplemented or restated from time to time.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the United States Securities and Exchange Commission.
"Consents" has the meaning set forth in Section 2.06.
2
<PAGE>
<PAGE>
"Corporate Restructuring Transactions" means the transactions to be
undertaken prior to the Spinoff to separate the Industrial Chemicals Business
from the GenTek Business, as contemplated by Section 2.01.
"DGCL" means the Delaware General Corporation Law, as in effect from time
to time.
"Distribution Agent" means ChaseMellon Shareholder Services, L.L.C., or
such other trust company or bank designated by GCG, to act as the agent
responsible for the distribution of the GenTek Common Stock and GenTek Class B
Common Stock to the Holders in the Spinoff.
"Employee Benefits Agreement" means the Employee Benefits Agreement to be
entered into among the parties hereto substantially in the form of Exhibit B, as
the same may be amended, supplemented or restated from time to time.
"Exchange Act" means the Securities Exchange Act of 1934, as in effect from
time to time.
"GAAP" means the accounting principles and practices generally accepted
from time to time in the United States.
"GCC" has the meaning set forth in the Introduction.
"GCCL" means General Chemical Canada Limited, an Ontario company.
"GCG" has the meaning set forth in the Introduction.
"GCG Class B Common Stock" means the Class B common stock, par value $0.01
per share, of GCG.
"GCG Common Stock" means the common stock, par value $0.01 per share, of
GCG.
"GCG Group" means (i) prior to the Spinoff, GCG and the Persons listed
under item A of Schedule III, and (ii) after the Spinoff, GCG, its Subsidiaries
and Allied-Brown Chemicals Inc., a Philippines company. In the event GenTek and
GCG jointly determine, pursuant to Section 2.01, that HN Investment shall be
owned by GCG after the Spinoff, HN Investment shall also be included in the GCG
Group prior to the Spinoff.
3
<PAGE>
<PAGE>
"GCG Indemnitees" means each member of the GCG Group and each of its past,
present and future directors, officers, employees and agents.
"GCG Management Agreement" means the Management Agreement to be entered
into between GCG and Latona Associates Inc. substantially in the form of Exhibit
C, as the same may be amended, supplemented or restated from time to time.
"GCG Uninsured Retention" means, with respect to any claim under the
Primary Casualty Program relating to an Industrial Chemicals Liability, any and
all amounts which, under the operation of the Primary Casualty Program, the
insured party or beneficiary shall be obligated to contribute (by means of the
application of a deductible or payment under a reimbursement obligation,
indemnity agreement, large loss rating agreement or other similar instrument) in
respect of such claim to the appropriate insurance carrier or to a Person
entitled to reimbursement or indemnity under contractual or other arrangements;
provided that, for purposes of determining the amount of any GCG Uninsured
Retention, the benefits of application of any maximum premium limits, stop-loss
aggregates, reimbursement or indemnity limits (or other provisions under the
Primary Casualty Program which would have the effect of aggregating deductibles
of self-insured retentions or limiting the indemnification or reimbursement
amounts) shall be allocated appropriately to reduce the uninsured retentions of
the GenTek Group and/or the GCG Group.
"GCIP" has the meaning given in the Introduction.
"GCSAP" means the General Chemical (Soda Ash) Partners, a partnership
governed by and operated pursuant to the GCSAP Partnership Agreement.
"GCSAP Partnership Agreement" means the Second Amended and Restated
Partnership Agreement, dated June 30, 1992 (and amended on May 28, 1993), among
GCC, The Andover Group, Inc. and TOSOH Wyoming, Inc., relating to GCSAP, as the
same may be amended, supplemented or restated from time to time.
"GenTek" has the meaning set forth in the Introduction.
"GenTek Assets" means the assets, properties and rights set forth on
Schedule I.
"GenTek Business" means the business and operations of the manufacturing
and performance products segments of GCG and its Subsidiaries, as described in
the Information Statement.
4
<PAGE>
<PAGE>
"GenTek Canada" means GenTek Canada Performance Chemicals Ltd., an Ontario
corporation.
"GenTek Class B Common Stock" means the Class B common stock, par value
$0.01 per share, of GenTek.
"GenTek Common Stock" means the common stock, par value $0.01 per share, of
GenTek.
"GenTek Group" means (i) prior to the Spinoff, GenTek and the Persons
listed under item A of Schedule I, and (ii) after the Spinoff, GenTek and its
Subsidiaries. In the event GenTek and GCG jointly determine, pursuant to Section
2.01, that HN Investment shall be owned by GenTek or GCC after the Spinoff, HN
Investment shall also be included in the GenTek Group prior to the Spinoff..
"GenTek Indemnitees" means each member of the GenTek Group, and each of its
past, present and future directors, officers, employees and agents.
"GenTek Management Agreement" means the Management Agreement to be entered
into between GenTek and Latona Associates Inc. substantially in the form of
Exhibit D, as the same may be amended, supplemented or restated from time to
time.
"GenTek Liabilities" means the Liabilities set forth on Schedule II.
"GenTek Product or Service" means any product produced, offered for sale,
sold or distributed by the GenTek Business, or any service provided, offered for
sale or sold to third parties by the GenTek Business, in each case as of the
Spinoff Date; provided that no Industrial Chemicals Product shall be a GenTek
Product or Service. "GenTek Products and Services" means all such products and
services.
"GenTek Uninsured Retention" means, with respect to any claim under the
Primary Casualty Program relating to a GenTek Liability, any and all amounts
which, under the operation of the Primary Casualty Program, the insured party or
beneficiary shall be obligated to contribute (by means of the application of a
deductible or payment under a reimbursement obligation, indemnity agreement,
large loss rating agreement or other similar instrument) in respect of such
claim to the appropriate insurance carrier or to a Person entitled to
reimbursement or indemnity under contractual or other arrangements; provided
that, for purposes of determining the amount of any GenTek Uninsured Retention,
the benefits of application of any maximum premium limits, stop-loss aggregates,
reimbursement or indemnity limits (or other provisions under the Primary
Casualty Program which would have the effect of aggregating deductibles of
self-insured
5
<PAGE>
<PAGE>
retentions or limiting the indemnification or reimbursement amounts) shall be
allocated appropriately to reduce the uninsured retentions of the GenTek and/or
the GCG Group).
"Governmental Authority" means any government, any political subdivision,
any governmental agency, bureau, department, board or commission, any court or
tribunal or any other governmental instrumentality, whether federal, state or
local, domestic or foreign.
"Group" means the GenTek Group or the GCG Group.
"Guaranteed GCG Liabilities" has the meaning set forth in Section 4.06.
"Guaranteed GenTek Liabilities" has the meaning set forth in Section 4.06.
"Holders" means the holders of record, as of 5:00 p.m. (Eastern Standard
Time) on the Record Date, of GCG Common Stock and/or GCG Class B Common Stock.
"HN Investment" means HN Investment Holdings, Inc., a Delaware corporation.
"Indemnification Notice" has the meaning set forth in Section 7.03.
"Indemnified Party" means any party that is seeking indemnification or
payment from any other Person pursuant to Section 7.01 or Section 7.02.
"Indemnifying Party" means any party that is or may be required to
indemnify, defend or hold harmless any other Person pursuant to Section 7.01 or
Section 7.02.
"Industrial Chemicals Assets" means the assets, properties and rights set
forth on Schedule III.
"Industrial Chemicals Business" means the business and operations of the
industrial chemicals segment of GCG and its Subsidiaries, consisting of, among
other things, the production and supply of soda ash and calcium chloride, as
further described in the Information Statement.
"Industrial Chemicals Liabilities" means the Liabilities set forth on
Schedule IV.
6
<PAGE>
<PAGE>
"Industrial Chemicals Products" means natural soda ash, synthetic soda ash,
calcium chloride, and any other industrial chemical produced, offered for sale,
sold or otherwise distributed by the Industrial Chemicals Business as of the
Spinoff Date.
"Information Statement" means the information statement included in the
Registration Statement and to be sent to the Holders relating to GenTek and the
Spinoff.
"Intellectual Property Agreement" means the Intellectual Property Agreement
to be entered into among the parties hereto substantially in the form of Exhibit
E, as the same may be amended, supplemented or restated from time to time.
"IRS Ruling" means the private letter ruling of the Internal Revenue
Service, dated March 16, 1999 and received by GCG on March 18, 1999, regarding
certain U.S. federal income tax consequences of the Spinoff and related
transactions, including the Corporate Restructuring Transactions.
"Law" means all laws, statutes and ordinances and all regulations, rules,
orders, decrees and other pronouncements of Governmental Authorities.
"Liabilities" means any debt, liability, obligation, responsibility, loss,
damage (compensatory, punitive or other), fine, penalty, or sanction, whether
absolute, contingent or otherwise.
"Losses" means, with respect to any Person, any and all losses,
liabilities, penalties, claims, damages, Taxes, demands, costs and expenses
(including reasonable attorneys' and accountants' fees and expenses) that are
assessed or imposed upon, or incurred or suffered by, such Person, including
reasonable attorneys' fees and expenses incurred in enforcing any
indemnification rights pursuant to this Agreement or any judgment, order,
proclamation or other decision of any Governmental Authority or arbitration
tribunal. Notwithstanding the foregoing, "Losses" of a Person shall exclude
punitive and consequential damages incurred or suffered by such Person but shall
include amounts paid or required be paid by such Person as punitive or
consequential damages to another Person.
"NHO" means New Hampshire Oak, Inc., a Delaware corporation.
"NYSE" means the New York Stock Exchange.
"Person" means an individual, corporation, trust, joint venture,
association, partnership or other entity, or any governmental or political
subdivision or an agency or instrumentality thereof.
7
<PAGE>
<PAGE>
"Philippine Companies" means Alchemco Philippines, Inc. and Allied-Brown
Chemicals, Inc., each a Philippine company.
"Primary Casualty Program" means, collectively, the series of programs
pursuant to which various insurance carriers have provided and are providing
insurance coverage to GCG Entities with respect to known or unknown claims
relating to workers' compensation, automobile liability, general liability,
products liability and umbrella liabilities. GCG Entities shall consist of GCG;
Subsidiaries of GCG prior to the Spinoff; all Persons, businesses and facilities
acquired by GCG or its Subsidiaries prior to the Spinoff; and all Persons,
businesses and facilities sold or otherwise divested by GCG and its Subsidiaries
prior to the Spinoff, including all discontinued or abandoned businesses or
facilities.
"Privilege" has the meaning set forth in Section 5.06(a).
"Privileged Information" has the meaning set forth in Section 5.06(a).
"Record Date" means the date established by the Board of Directors of GCG,
or any duly authorized committee thereof, as the record date for the purpose of
determining the holders of record of GCG Common Stock and GCG Class B Common
Stock entitled to receive GenTek Common Stock and GenTek Class B Common Stock,
respectively, in the Spinoff. Subject to Section 3.02, the Record Date has been
established as April __, 1999.
"Registration Statement" means the Registration Statement on Form 10 filed
with the Commission (file number 001-14789) to register the GenTek Common Stock
under Section 12(b) of the Exchange Act, as initially filed with the Commission
on January 27, 1999, as amended and restated by Amendment No. 1 filed with the
Commission on March 22, 1999 and Amendment No. 2 filed with the Commission on
April __, 1999, and declared effective by the Commission on April __, 1999, and
all subsequent amendments and supplements thereto, including all exhibits
thereto and information incorporated by reference therein.
"Spinoff" means the distribution of the GenTek Common Stock and the GenTek
Class B Common Stock to the Holders, as contemplated by this Agreement and more
fully described in the Information Statement.
"Spinoff Date" means the date established by the Board of Directors of GCG,
or any duly authorized committee thereof, as the date on which the Spinoff shall
be effected. Subject to Section 3.02, the Spinoff Date has been established as
April __, 1999.
8
<PAGE>
<PAGE>
"Sublease Agreement" means the Sublease Agreement to be entered into
between GCC and GCIP substantially in the form of Exhibit F, as the same may be
amended, supplemented or restated from time to time.
"Subsidiary" means any corporation, partnership, limited liability company,
joint venture or other entity in which another Person owns or controls, directly
or indirectly, capital stock or other equity interests (i) representing at least
50% of the outstanding voting stock or other equity interests or (ii) sufficient
to elect or designate a majority of the Board of Directors (or Persons
performing similar functions), in each case irrespective of whether at the time
holders of any other class or classes of securities (including stock or other
ownership interest) of such corporation, partnership, limited liability company,
joint venture or other entity shall or might have the right to acquire
additional voting stock or other equity interest, or voting power, upon the
occurrence of any contingency. It is expressly stipulated that GCSAP is a
Subsidiary of any Person holding at least 50% of the partnership interest in
GCSAP.
"Supply Agreements" means the agreements, whether existing or entered into
after the Spinoff, between members of the GenTek Group, on the one hand, and
members of the GCG Group, on the other hand, for the supply of soda ash or
calcium chloride, or both, by the GCG Group to the GenTek Group, other than the
supply for consumption thereof by the GenTek Group.
"Tax" or "Taxes" means any federal, state, local, foreign or other income,
alternative, minimum, accumulated earnings, personal holding company, franchise,
capital stock, net worth, capital, profits, windfall profits, gross receipts,
value added, sales (including, but not limited to, bulk sales), use, goods and
services, excise, customs duties, transfer, conveyance, mortgage, registration,
stamp, documentary, recording, premium, severance, environmental (including, but
not limited to, taxes under section 59A of the Code), real property, personal
property, ad valorem, intangibles, rent, occupancy, license, utilities,
occupational, employment, unemployment insurance, social security, disability,
workers' compensation, payroll, health care, withholding, estimated or other
similar tax, duty or other governmental charge or assessment or deficiencies
thereof, including, but not limited to, all interest and penalties thereon and
additions thereto whether disputed or not.
"Tax Sharing Agreement" means the Tax Sharing Agreement to be entered into
between GenTek and GCG substantially in the form of Exhibit G, as the same may
be amended, supplemented or restated from time to time.
"Transition Support Agreement" means the Transition Support Agreement to be
entered into between GenTek and GCG substantially in the form of Exhibit H, as
the same may be amended, supplemented or restated from time to time.
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ARTICLE II
PRE-SPINOFF TRANSACTIONS;
CERTAIN COVENANTS
Section 2.01. Corporate Restructuring Transactions. (a) On or prior to the
Spinoff Date (but in all events prior to the Spinoff), each of the parties
shall, and each shall cause other members of its Group to, take such actions as
are necessary or desirable so that, (x) the GenTek Business (including all
GenTek Assets and GenTek Liabilities) shall be owned or held by members of the
GenTek Group, and (y) the Industrial Chemicals Business (including all
Industrial Chemicals Assets and Industrial Chemicals Liabilities) shall be owned
or held by members of the GCG Group. Without limiting the generality of the
forgoing, in order to effect the foregoing separation, the parties shall, and
each shall cause other members of its Group to, effect and consummate the
following distributions, contributions, transfers and other transactions and
such other distributions, transfers, contributions and other transactions as the
parties agree upon:
(i) NHO shall contribute and transfer to GCC all of the capital
stock of Defiance Inc., a Delaware corporation, Toledo Technologies,
Inc., a Delaware corporation, Balcrank Products, Inc., a Delaware
corporation, and Printing Developments Inc., a Delaware corporation.
(ii) GenTek Canada and GCCL shall consummate the purchase and
sale contemplated by the Canadian Purchase Agreement
(iii) GCC shall contribute and transfer to GCIP all of the
Industrial Chemicals Assets owned or held by GCC (including all of
GCC's interest in GCSAP, including its 51% general partner interest in
GCSAP and its rights as the managing partner of GCSAP, and all the
stock of the Canadian Companies), and GCIP shall assume all Industrial
Chemical Liabilities of GCC.
(iv) GCC shall distribute and transfer to NHO all of the capital
stock of GCIP.
(v) NHO shall contribute and transfer to GenTek all of the
capital stock of GCC.
(vi) NHO shall distribute and transfer to GCG all of the capital
stock of GenTek.
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(b) As a result and following the transactions set forth in Section
2.01(a), and in all events prior to the Spinoff:
(i) GCC shall be the sole beneficial and record owner of all of
the capital stock of Defiance Inc. (a Delaware corporation), Toledo
Technologies Inc. (a Delaware corporation), Balcrank Products, Inc. (a
Delaware corporation), and Printing Developments Inc. (a Delaware
corporation), together with the rights, powers and privileges incident
thereto;
(ii) GCIP shall be sole beneficial and record owner of (x) 51% of
the partnership interest in GCSAP (together with all rights of the
managing partner of GCSAP) and all of capital stock of NHO Canada
Holding Inc. (a Delaware corporation), and (y) the Industrial
Chemicals Assets of GCC, together with the rights, powers and
privileges incident thereto;
(iii) GCIP shall have assumed and be responsible for all of the
Industrial Chemicals Liabilities of GCC, and the duties, obligations
and responsibilities incident thereto; and
(iv) GenTek Canada shall be the sole beneficial owner of the
GenTek Assets of GCCL, together with the rights, powers and privileges
incident thereto, and assume and be responsible for the GenTek
Liabilities of GCCL, and the duties, obligations and responsibilities
incident thereto, in accordance with the Canadian Purchase Agreement.
(c) On or prior to the Spinoff Date, GCC shall deliver to GCIP all
such documents as may be reasonably requested by GCIP to evidence the
contribution and transfer to GCIP all of GCC's beneficial ownership
interest in each of the Philippine Companies, including all rights
regarding dividends, liquidation proceeds and voting of shares of the
Philippine Companies owned or held by GCC. At the request of GCIP, GCC
shall deliver (x) to GCIP its irrevocable proxy granting GCIP the authority
to exercise (at its discretion) all voting rights of shares of the
Philippine Companies, and (y) to the Philippine Companies its instructions
to deliver to GCIP all dividends and other distributions (including any
liquidation proceeds) by such companies with respect to their shares of
stock held by GCC.
(d) On or prior to the Spinoff Date, GenTek and GCG shall jointly
determine whether HN Investment will be a member of the GenTek Group or the
GCG Group (in which case the stock of HN Investment Holdings, Inc. will be
deemed a GenTek Asset or an Industrial Chemicals Asset, as the case may
be). In the event the parties determine that HN Investment will be a member
of the GenTek Group, then GCG shall contribute and transfer all of the
capital stock of HN Investment to NHO, which will then contribute and
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transfer such stock to GCC at the time of the contribution and transfer
contemplated by clause (ii) of Section 2.01(a).
Section 2.02. Certificate of Incorporation and Bylaws of GenTek. On or
prior to the Spinoff Date (but in all events prior to the Spinoff), GenTek and
GCG shall each take all necessary actions to amend and restate the certificate
of incorporation and bylaws of GenTek so that, as of the Spinoff Date, the
certificate of incorporation and bylaws of GenTek will be substantially in the
forms set forth in Exhibits I and J, respectively.
Section 2.03. Election of Directors. On or prior to the Spinoff Date (but
in all events prior to the Spinoff), GenTek and GCG shall take all necessary
action so that as of the Spinoff Date the composition of the Boards of Directors
of GenTek and GCG shall each be as set forth in the Information Statement.
Section 2.04. Appointment of Officers. On or prior to the Spinoff Date (but
in all events prior to the Spinoff), GenTek and GCG shall take all necessary
actions so that, as of the Spinoff Date, each of GenTek and GCG will have the
executive officers set forth in the Information Statement.
Section 2.05. Certain Provisions Relating to Assigned Agreements. (a)
Subject to the provisions of Section 2.05(c), any agreement, commitment or
understanding to which any member of the GenTek Group or the GCG Group is a
party that inures to the benefit of both the GenTek Business and the Industrial
Chemicals Business shall be assigned in part, at the expense and risk of the
assignee, on or prior to the Spinoff Date or as soon as reasonably practicable
thereafter, so that each party (or other members of such party's Group) shall be
entitled to the rights and benefits inuring to its business under such
agreement, commitment or understanding; except: (i) as otherwise specifically
contemplated by any Ancillary Agreement; and (ii) for agreements, commitments
and understanding with customers of, or distributors for, the products of both
the GenTek Business and the Industrial Chemicals Business which shall continue
to inure to the benefit of the applicable member of the GenTek Group or GCG
Group, as the case may be, party or entitled to such agreement, commitment or
understanding.
(b) The assignee of any agreement, commitment or understanding assigned, in
whole or in part, under this Agreement (an "Assignee") shall, as a condition to
such assignment, assume and agree to pay, perform, and fully discharge all
obligations of the assignor under such agreement, commitment or understanding
(whether such obligations arose or were incurred prior to, on or subsequent to
the Spinoff Date and irrespective of whether such obligations have been asserted
as of the Spinoff Date) or, in the case of a partial assignment under Section
2.05(a), such Assignee's related portion of such obligations as determined in
accordance with the terms of the relevant agreement, where determinable on the
face thereof, and otherwise as determined in accordance with the
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practice of the parties prior to the Spinoff. Furthermore, at the request of the
assignor of any such agreement, commitment or understanding, the Assignee shall
use its reasonable efforts to cause such assignor to be released from its
obligations under the assigned agreement, commitment or understanding (or in the
case of partial assignment Section 2.05(a), to the extent such agreement,
commitment or understanding is assigned).
(c) Notwithstanding anything in this Agreement to the contrary, this
Agreement shall not constitute an agreement to assign any agreement, commitment
or understanding in whole or in part, or any rights thereunder if the agreement
to assign or attempt to assign, without the consent of a third party, would
constitute a breach thereof or in any way adversely affect the rights of the
Assignee thereof until such consent is obtained. If an attempted assignment
thereof were to be ineffective or were to adversely affect the rights of any
party hereto so that the Assignee would not, in fact, receive all such rights,
the parties hereto will cooperate with each other to effect any arrangement
designed reasonably to provide for the Assignee the benefits of, and to permit
the Assignee to assume liabilities under, any such agreement, commitment or
understanding.
Section 2.06. Consents. The parties hereto shall use their best efforts to
obtain all consents and approvals of other Persons (including consents and
approvals of, and filings with and notices to, any Governmental Authority)
required to consummate the Spinoff, the Corporate Restructuring Transactions and
the other transactions contemplated by this Agreement or any Ancillary Agreement
(the "Consents").
Section 2.07. Registration Statement. (a) GenTek and GCG have prepared, and
GenTek has filed with the Commission, the Registration Statement, and the
Registration Statement has become effective pursuant to the Exchange Act by
order of the Commission. The Registration Statement includes the Information
Statement setting forth appropriate disclosure concerning GenTek, the Spinoff
and such other matters as are required to be disclosed therein by the Exchange
Act and the rules and regulations promulgated thereunder, and the Registration
Statement otherwise complies with the Exchange Act and the rules and regulations
promulgated thereunder.
(b) GenTek and GCG shall prepare, and GenTek shall file with the
Commission, such amendments or supplements to the Registration Statement as
GenTek or GCG shall deem necessary or desirable. In the event of the issuance of
any order suspending such effectiveness or preventing or suspending the use of
the Registration Statement or the Information Statement, unless the Spinoff is
abandoned by GCG pursuant to Section 8.01, GenTek and GCG shall promptly use
their best efforts to obtain the withdrawal of any such order.
Section 2.08. State Securities Laws. Prior to the Spinoff Date, the parties
shall take all such action as may be necessary or desirable under the securities
laws of states of
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the United States or of other jurisdictions in order to effect the Spinoff,
including to permit the distribution of the GenTek Common Stock in the Spinoff
and the continuance of sales and dealings therein.
Section 2.09. Listing Application. Prior to the Spinoff Date, GenTek and
GCG shall prepare and file with the NYSE listing applications and related
documents and shall take all such other actions with respect thereto as shall be
necessary or desirable in order to cause the NYSE to continue the listing of the
GCG Common Stock and to list the GenTek Common Stock on the NYSE.
Section 2.10. Certain Financial and Other Arrangements. Except as otherwise
specifically contemplated by the Ancillary Agreements, all intercompany
accounts, receivables, payables and loans (including in respect of any cash
balances, any cash balances representing deposited checks or drafts for which
only a provisional credit has been allowed or any cash held in any centralized
cash management system) between any member of the GenTek Group, on the one hand,
and any member of the GCG Group, on the other hand, (i) existing and
determinable on the Spinoff Date shall be paid in full on the Spinoff Date, and
(ii) existing but not determinable on the Spinoff Date shall be paid in full
within 60 days after the Spinoff Date.
Section 2.11. Director and Officer Resignations. Subject to the provisions
of Sections 2.03 and 2.04 or except as otherwise agreed to by GenTek and GCG
prior to the Spinoff Date, the parties shall use their best efforts to cause (i)
all employees of the GenTek Group to resign, effective as of the Spinoff Date,
as directors or officers of, or from similar positions with, members of the GCG
Group, and (ii) all employees of the GCG Group to resign, effective as of the
Spinoff Date, as directors or officers of, or from similar positions with,
members of the GenTek Group.
Section 2.12. Employees. (a) Except as otherwise specifically contemplated
by any Ancillary Agreement or agreed upon by the parties, (i) GCG shall, and
shall cause other members of the GCG Group to, use all reasonable efforts to
cause the employees engaged in the GenTek Business but employed by members of
the GCG Group to make available their employment services to the GenTek Group as
of the Spinoff Date, and (ii) members of the GenTek Group shall offer employment
to such employees, as of the Spinoff Date, at wage or salary levels and with
employee benefits that are in the aggregate substantially equivalent to, and not
less favorable to such employees than, those provided to such employees prior to
the Spinoff Date.
(b) Except as otherwise specifically contemplated by any Ancillary
Agreement or agreed upon by the parties, (i) GenTek shall, and shall cause other
members of the GenTek Group to, use all reasonable efforts to cause the
employees engaged in the Industrial Chemicals Business but employed by members
of the GenTek Group to make
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available their employment services to the GCG Group as of the Spinoff Date, and
(ii) members of the GCG Group shall offer employment to such employees, as of
the Spinoff Date, at wage or salary levels and with employee benefits that are
in the aggregate substantially equivalent to, and not less favorable to such
employees than, those provided to such employees prior to the Spinoff Date.
Section 2.13. Instruments of Transfers of Assets and Assumptions of
Liabilities. (a) On or prior to the Spinoff Date, each of the parties shall, and
(where applicable) shall cause other members of its Group to, execute and
deliver such agreements and instruments as are necessary or appropriate to
effect and consummate the Corporate Restructuring Transactions, the transfer of
the GenTek Assets to the applicable member of the GenTek Group, the transfer of
the Industrial Chemicals Assets to the applicable member of the GCG Group, the
assumption of GenTek Liabilities of GCCL by GenTek Canada in accordance with the
Canadian Purchase Agreement, and the assumption of the Industrial Chemicals
Liabilities of GCC by GCIP.
(b) GenTek shall deliver to GCG and Paul M. Montrone its written
acknowledgment and agreement, in form and substance reasonably satisfactory to
GCG and Paul M. Montrone, that (i) all shares of stock of GenTek distributed in
the Spinoff in respect of the stock of GCG held by Paul M. Montrone and his
Permitted Transferees (as defined in GenTek's certificate of incorporation in
effect as of the Spinoff Date) are entitled to the rights and benefits of the
Registration Rights Agreement dated April __, 1999 between GCG and Paul M.
Montrone, and (ii) insofar as such shares of stock of GenTek are concerned,
GenTek is bound by and subject to all the terms and conditions of such
Registration Rights Agreement to the same extent as GCG.
ARTICLE III
THE SPINOFF
Section 3.01. The Spinoff. Upon the terms and subject to the conditions of
this Agreement, GenTek and GCG shall effect and consummate the Spinoff in
accordance with this Agreement and as described in the Information Statement.
Section 3.02. Spinoff Procedures; Deferral of Record Date and Spinoff Date.
GCG's Board of Directors, or any duly authorized committee thereof, may (in its
sole discretion and subject to and in accordance with the provisions of the
Exchange Act and the rules and regulations promulgated therein, rules of the
NYSE and provisions of the DGCL) abandon the Spinoff, change the Record Date and
the Spinoff Date and amend or modify the terms and conditions of the Spinoff and
any procedures relating to the Spinoff (including the procedures set forth in
this Agreement). Without limiting the generality of
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the foregoing, if all the conditions precedent to the Spinoff set forth in this
Agreement have not theretofore been fulfilled or waived, or GCG does not
reasonably anticipate that they will be fulfilled or waived, on or prior to the
date established as the Spinoff Date, GCG may, by resolution of its Board of
Directors (or a committee thereof, so authorized), defer the Spinoff Date to a
later date. If GCG's Board of Directors (or a committee thereof, so authorized)
so defers the Spinoff Date after the public announcement of the Spinoff Date,
GCG shall promptly thereafter issue, in accordance with the rules of the NYSE
and provisions of the DGCL, a public announcement regarding such deferment and
shall take such other actions as may be deemed necessary or desirable with
respect to the dissemination of such information.
Section 3.03. Notice to NYSE. GCG shall, to the extent possible, give the
NYSE not less than ten days advance notice of the Record Date in compliance with
Rule 10b-17 under the Exchange Act.
Section 3.04. Mailing of Information Statement. As soon as practicable
after the Registration Statement is declared effective under the Exchange Act
and GCG's Board of Directors (or a duly authorized committee thereof) has
determined the Record Date, GenTek and GCG shall mail or otherwise disseminate
the Information Statement to the Holders.
Section 3.05. Distribution of GenTek Stock. (a) Upon the terms and subject
to the conditions of this Agreement, on or before the Spinoff Date but effective
immediately following 5:00 p.m. (Eastern Standard Time) on the Spinoff Date, GCG
shall:
(i) deliver to the Distribution Agent, for the benefit of the
Holders of GCG Common Stock, the share certificate or share
certificates representing the GenTek Common Stock;
(ii) deliver to the Distribution Agent, for the benefit of the
Holders of GCG Class B Common Stock, the share certificate or share
certificates representing the GenTek Class B Common Stock; and
(iii) instruct the Distribution Agent to distribute promptly to
each Holder one share of GenTek Common Stock for every one share of
GCG Common Stock held by such Holder as of 5:00 p.m. (Eastern Standard
Time) on the Record Date and one share of GenTek Class B Common Stock
for every one share of GCG Class B Common Stock held by such Holder as
of 5:00 p.m. (Eastern Standard Time) on the Record Date.
(b) GenTek shall provide, or cause to be provided, to the Distribution
Agent sufficient certificates representing GenTek Common Stock and GenTek
Class B Common
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Stock in such denominations as the Distribution Agent may request in order to
effect the Spinoff. All shares of GenTek Common Stock and GenTek Class B Common
Stock issued pursuant to the Spinoff shall be validly issued, fully paid and
nonassessable and free of any preemptive (or similar) rights.
Section 3.06. Conditions to the Spinoff. The consummation of the Spinoff
shall be subject to the fulfillment, or waiver by GenTek and GCG, on or prior to
the Spinoff Date, of each of the following conditions:
(a) No Litigation. No action or proceeding shall be pending by any
Person on the Spinoff Date before any Governmental Authority to restrain,
enjoin or otherwise prevent the consummation of the Spinoff or the other
transactions contemplated by this Agreement or any Ancillary Agreement or
to recover any material damages or to obtain other material relief as a
result of the Spinoff.
(b) No Prohibitions. No Law shall be enacted, issued, promulgated or
proposed (whether temporary, preliminary or pending) that would restrict,
prevent or prohibit consummation of the Spinoff or the other transactions
contemplated by this Agreement or any Ancillary Agreement or would have a
material adverse effect on the condition (financial or otherwise),
properties, business, results of operations or prospects of the GenTek
Group or the GCG Group.
(c) Consents from Governmental Authorities. The parties shall have
obtained all required Consents, the failure of which to obtain would, in
the opinion of GCG, have a material adverse effect on the condition
(financial or otherwise), properties, business, results of operations or
prospects of the GenTek Group or the GCG Group, and such Consents shall be
in full force and effect.
(d) Effective Date of Registration Statement. No order suspending such
effectiveness or preventing or suspending the use of the Registration
Statement or the Information Statement shall have been entered, and no
proceeding shall have been initiated or threatened by the Commission with
respect thereto.
(e) NYSE Listing. The NYSE shall have approved the continued listing
of the GCG Common Stock and, subject to official notice of issuance, the
listing of the GenTek Common Stock on the NYSE.
(f) Tax Ruling. The IRS Ruling shall not have been subsequently
withdrawn or modified and shall be in full force and effect as of the
Spinoff Date.
(g) New Financing Arrangements. Members of the GenTek Group shall have
entered into debt financing arrangements satisfactory to GenTek; members of
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the GCG Group shall have entered into debt financing arrangements
satisfactory to GCG; and a portion of the proceeds of such facilities shall
have been applied to repay (or defease) in full, together with all
applicable prepayment premiums and accrued interest, (i) the borrowings
incurred by GCG under a bank credit agreement with The Chase Manhattan Bank
as agent and (ii) the indebtedness of GCCL represented by its 9.09% Senior
Notes due May 20, 1999 and borrowings incurred by GCCL under a credit
facility provided to GCCL by Toronto Dominion Bank.
(h) Section 170 of DGCL. The Board of Directors of GCG shall have
received a report of an independent appraiser, in form and substance
reasonably satisfactory to the Board of Directors of GCG, confirming that
GCG's surplus is sufficient to permit, without violation of Section 170 of
the DGCL, the distribution of the GenTek Common Stock and the GenTek Class
B Common Stock.
(i) Mailing of Information Statement. The Information Statement shall
have been mailed or otherwise disseminated to the Holders.
(j) Conversion of GCG Class B Common Stock. On or prior to the Record
Date, holders of GCG Class B Common Stock shall have converted a number of
their shares of GCG Class B Common Stock into GCG Common Stock such that
the number of issued and outstanding shares of GCG Common Stock on the
Record Date represents more than 80% of the total number of shares of GCG
Common Stock and GCG Class B Common Stock then issued and outstanding.
(k) Equity Represented by Common Stock. GCG shall have received a
report of a valuation or appraisal firm, in form and substance reasonably
satisfactory to GCG, confirming that (i) following the conversion of GCG
Class B Common Stock into GCG Common Stock contemplated by Section 3.06(j),
the issued and outstanding shares of GCG Common Stock will represent more
than 80% of the equity value of GCG and (ii) the GenTek Common Stock
distributed to the Holders in connection with the Spinoff will represent
more than 80% of the equity value of GenTek as of the Spinoff Date.
(l) Ancillary Agreements. Each of the parties shall have executed and
delivered, and (where applicable) caused other members of its Group to
execute and deliver, the Canadian Purchase Agreement, the Employee Benefits
Agreement, the GCG Management Agreement, the GenTek Management Agreement,
the Intellectual Property Agreement, the Sublease Agreement, the Tax
Sharing Agreement and the Transition Support Agreement.
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(m) Covenants. Each of the parties shall have performed and complied
in all material respects with all agreements and covenants required by this
Agreement to be performed on or prior to the Spinoff Date.
ARTICLE IV
COVENANTS
Section 4.01. Further Assurances. Each of the parties shall use all
reasonable efforts to (i) execute and deliver such instruments and documents as
the other party may reasonably request in order to consummate the transactions
contemplated by this Agreement and the Ancillary Agreements, and (ii) take or
cause to be taken all actions, and do or cause to be done all other things,
necessary or desirable to consummate the transactions contemplated by this
Agreement and the Ancillary Agreements.
Section 4.02. Assumption and Satisfaction of Liabilities. Except as
otherwise specifically contemplated by any Ancillary Agreement, from and after
the Spinoff Date, (i) each member of the GCG Group shall assume, pay, perform
and discharge all Industrial Chemicals Liabilities of such member of the GCG
Group in accordance with their terms as and when they become due and otherwise
in accordance with the practice of the parties prior to the Spinoff, and (ii)
each member of the GenTek Group shall assume, pay, perform and discharge the
GenTek Liabilities of such member of the GenTek Group in accordance with their
terms as and when they become due and otherwise in accordance with the practice
of the parties prior to the Spinoff.
Section 4.03. Property Received. Except as otherwise specifically
contemplated by any Ancillary Agreement, from and after the Spinoff Date, each
of GenTek and GCG shall, and shall cause other members of its Group to, promptly
transfer to the appropriate member of the other's Group (as directed by GenTek
or GCG, as the case may be) any property received that is an asset of the other.
Except as otherwise specifically contemplated by any Ancillary Agreement, if a
party or a member of such party's Group receives any funds upon the payment of
accounts receivable that belong to the other Group, such party shall or shall
cause to be transferred to the appropriate member of the other's Group (as
directed by GenTek or GCG, as the case may be) such funds by wire transfer not
more than 45 days after receipt thereof.
Section 4.04. Transfers Not Effected Prior to the Spinoff; Transfers Deemed
Effective as of the Spinoff Date. To the extent that any transfers contemplated
by Article II are not consummated prior to the Spinoff, the parties shall
cooperate (and shall cause other members of their Group to cooperate) to effect
such transfers as promptly as practicable following the Spinoff. Nothing herein
shall be deemed to require the transfer
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of any assets or the assumption of any Liabilities (including any
authorizations, approvals or consents of, or licenses granted by, any
Governmental Authority) which by their terms or operation of Law cannot be
transferred or assumed; provided that the parties shall cooperate (and shall
cause the other members of their Group to cooperate) to seek to obtain any
necessary consents or approvals for the transfer of all assets and Liabilities
contemplated to be transferred pursuant to Article II. If any such transfer of
assets or Liabilities has not been consummated, after the Spinoff Date the party
retaining such asset or Liability (or, as applicable, other members of such
party's Group) shall hold such asset in trust for the use and benefit of the
party entitled thereto (at the expense of the party entitled thereto) or retain
such Liability for the account of the party by whom such Liability is to be
assumed pursuant hereto, as the case may be, and take such other action as may
be reasonably requested by the party to whom such asset is to be transferred or
by whom such Liability is to be assumed, as the case may be, in order to place
such party, insofar as is reasonably possible, in the same position as would
have existed had such asset or Liability been transferred or assumed as
contemplated hereby. As and when any such asset or Liability becomes
transferable or assumable, such transfer shall be effected forthwith.
Section 4.05. No Representations or Warranties. (a) Each of the parties
understands and agrees that no party hereto is (whether in this Agreement, in
any Ancillary Agreement or otherwise) making any representation or warranty,
express, implied or otherwise, including any representation or warranty as to
(i) the assets, businesses or liabilities retained, transferred or assumed, (ii)
any consents, authorizations or approvals of third parties (including
Governmental Authorities) required for the transfer or assumption by such party
of any asset or Liability, (iii) the value of any asset or freedom of any asset
from any lien, claim, equity, encumbrance or other security interest or adverse
claim, (iv) the absence of any defenses or right of setoff or freedom from
counterclaim with respect to any claim or asset, or (v) the legal sufficiency to
convey title to any asset.
(b) Each party hereto understands and agrees that there are no
representations or warranties, express, implied or otherwise, as to the
merchantability or fitness of any of the assets either transferred to or
retained by the GenTek Group or GCG Group, as the case may be, pursuant to this
Agreement or any Ancillary Agreement, and all such assets so transferred or
retained shall be transferred or retained on an "AS IS, WHERE IS" basis, and the
party to whom any such assets are transferred, or who retains assets, shall bear
the economic and legal risk that any conveyances of such assets shall prove to
be insufficient or that the title of such party or any other member of its Group
to any such assets shall be other than good and marketable and free and clear of
any lien, claim, encumbrance or other security interest or adverse claim.
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Section 4.06. Removal of Certain Guarantees. GenTek shall use all
reasonable efforts (excluding payment of money) to obtain, as promptly as
practicable after the Spinoff Date, the release of members of the GCG Group from
their obligations regarding the GenTek Liabilities on which any member of the
GCG Group is an obligor by reason of any guarantee of obligations for borrowed
money, including obligations evidenced by bonds, debentures or other similar
instruments and obligations under acceptance, letter of credit or similar
facilities (the "Guaranteed GenTek Liabilities"). GCG shall use all reasonable
efforts (excluding the payment of money) to obtain, as promptly as practicable
after the Spinoff Date, the release of members of the GenTek Group from their
obligations with respect to GCG Liabilities on which any member of the GenTek
Group is an obligor by reason of any guarantee of obligations for borrowed
money, including obligations evidenced by bonds, debentures or other similar
instruments and obligations under acceptance, letter of credit or similar
facilities (the "Guaranteed GCG Liabilities").
Section 4.07. Public Announcements. GenTek and GCG shall cooperate and
consult with each other before issuing any press release or otherwise making any
public statement or announcement regarding the Spinoff and the transactions
contemplated hereby, and shall not issue any such press release or otherwise
make any such public statement or announcement without the prior consent of the
other party, which shall not be unreasonably withheld; provided that a party
may, without the prior consent of any other party, issue such press release or
otherwise make such public statement or announcement as may be required by Law
or the rules of the NYSE if it has used all reasonable efforts to consult with
such other party and to obtain its consent but has been unable to do so in a
timely manner.
Section 4.08. Termination of Intercompany Agreements. Effective as of 5:00
p.m. (Eastern Standard Time) on the Spinoff Date, all agreements between any
member of the GenTek Group, on the one hand, and any member of the GCG Group, on
the other hand, shall be deemed terminated, except for this Agreement and the
Ancillary Agreements and except as otherwise specifically contemplated by this
Agreement or any Ancillary Agreement.
Section 4.09. Non-Competition. (a) In consideration of a payment of $10,000
by GCG, until the fifth anniversary of the Spinoff Date, GenTek and GCC shall
not, and shall cause their Subsidiaries not to, directly or indirectly, (i)
produce, sell or otherwise distribute any Industrial Chemicals Product, or (ii)
own, engage in, conduct, manage, operate, control, participate or have any
interest in any Person that produces, sells or otherwise distributes any
Industrial Chemicals Product; provided that this Section 4.09(a) shall not
prevent members of the GenTek Group from (A) owning 5% or less of the securities
of any Person if such securities are listed on any national securities exchange
or authorized for quotation on the Automated Quotations System of the National
Association of Securities Dealers, Inc., (B) producing any Industrial Chemicals
Product
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exclusively for its own consumption, (C) selling or otherwise distributing any
Industrial Chemicals Product purchased by the GenTek Group pursuant to the
Supply Agreements, (D) if the members of the GCG Group terminate the Supply
Agreements for any reason other than a breach thereof by members of the GenTek
Group, selling or otherwise distributing Industrial Chemicals Products up to a
total amount of 120,000 tons in any one year, or (E) acquiring and holding any
interest in any Person that produces, sells or otherwise distributes any
Industrial Chemicals Product if (x) less than 5% of the total revenues of such
Person in the 12 months prior to such acquisition arose out of, or were
otherwise related to, the production, sale or distribution of Industrial
Chemicals Products and (y) the production, sale or distribution of Industrial
Chemicals Products by such Person was not the principal consideration in the
acquisition of an interest in such Person by GenTek or any of its Subsidiaries.
(b) In consideration of a payment of $10,000 by GenTek, until the fifth
anniversary of the Spinoff Date, GCG and GCIP shall not, and shall cause their
Subsidiaries not to, directly or indirectly, (i) produce, provide, sell or
otherwise distribute any GenTek Product or Service, or (ii) own, engage in,
conduct, manage, operate, control, participate, or have any interest in any
Person that produces, provides, sells or otherwise distributes any GenTek
Product or Service; provided that this Section 4.09(b) shall not prevent members
of the GCG Group from (A) owning 5% or less of the securities of any Person if
such securities are listed on any national securities exchange or authorized for
quotation on the Automated Quotations System of the National Association of
Securities Dealers, Inc., or (B) acquiring and holding any interest in any
Person that produces, provides, sells or otherwise distributes any GenTek
Product or Service (x) exclusively for its own consumption or (y) if (1) less
than 5% of the total revenues of such Person in the 12 months prior to such
acquisition arose out of, or were otherwise related to, the production,
provision, sale or distribution of GenTek Products and Services and (2) the
production, provision, sale or distribution of GenTek Products and Services by
such Person was not the principal consideration in the acquisition of an
interest in such Person by the GCG or any of its Subsidiaries.
Section 4.10. Non-Solicitation of Employees. (a) In consideration of a
payment of $5,000 by GCG, until the third anniversary of the Spinoff Date,
neither GenTek nor any of its Affiliates shall, without the prior written
consent of GCG (given by its President, Vice President or equivalent officer),
directly or indirectly, hire or engage, or solicit (in writing or orally) for
employment or other services, whether as an employee, officer, director, agent,
consultant or independent contractor, any person who, at the time of such
hiring, engagement or solicitation, is a director, officer or supervisory (or
more senior) level employee of GCG or any of its Affiliates.
(b) In consideration of a payment of $5,000 by GenTek, until the third
anniversary of the Spinoff Date, neither GCG nor any of its Affiliates shall,
without the
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prior written consent of GenTek (given by its President, Vice President or
equivalent officer), whether directly or indirectly, hire or engage, or solicit
(in writing or orally) for employment or other services, whether as an employee,
officer, director, agent, consultant or independent contractor, any person who,
at the time of such hiring, engagement or solicitation, is a director, officer
or supervisory (or more senior) level employee of GenTek or any of its
Affiliates.
ARTICLE V
ACCESS TO INFORMATION
Section 5.01. Access to Books and Records. Except to the extent otherwise
specifically contemplated by this Article V or any Ancillary Agreement, from and
after the Spinoff Date, each of GenTek and GCG shall (and shall cause other
members of its Group to) afford to each other party and its authorized
accountants, counsel and other designated representatives reasonable access and
duplicating rights (all such duplicating costs to be borne by the requesting
party) during normal business hours, subject to appropriate restrictions for
classified, privileged or confidential information, to the Books and Records of
such party and each other member of such party's Group relating to periods prior
to the Spinoff Date.
Section 5.02. Reimbursement. Except to the extent otherwise specifically
contemplated by this Agreement or any Ancillary Agreement, a party providing
Books and Records to any other party (or such party's representatives) under
this Article V shall be entitled to reimbursement from such other party, upon
the presentation of invoices therefor, for all costs and expenses reasonably
incurred in providing such Books and Records.
Section 5.03. Confidentiality. (a) Each of the GenTek Group and the GCG
Group shall not (and shall cause its advisors and other representatives not to)
use or permit the use of, and shall hold (and shall cause its advisors and other
representatives to hold), in strict confidence, all information concerning the
other Group in its possession, custody or control to the extent such information
(i) relates to the periods, or is obtained, prior to the Spinoff Date, (ii)
relates to, or is obtained pursuant to, any Ancillary Agreement, (iii) is
obtained pursuant to Section 5.01 or (iv) is obtained in the course of
performing services for the other Group pursuant to any Ancillary Agreement.
Neither the GenTek Group nor the GCG Group shall (and each shall cause its
advisors and other representatives not to) otherwise release or disclose such
information to any other Person, without the prior written consent of the other
Group, unless compelled to disclose such information by judicial or
administrative process or unless such disclosure is required by
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Law and such Group has used commercially reasonable efforts to consult with the
other affected party or parties prior to such disclosure.
(b) To the extent that a party hereto is compelled by judicial or
administrative process to disclose such information under circumstances in which
any evidentiary privilege would be available, such party agrees to assert such
privilege in good faith prior to making such disclosure. Each of the parties
shall consult with each relevant other party in connection with any such
judicial or administrative process, including in determining whether any
privilege is available, and shall not object to each such relevant party and its
counsel participating in any hearing or other proceeding (including any appeal
of an initial order to disclose) in respect of such disclosure and assertion of
privilege.
(c) Notwithstanding anything in this Section 5.03 to the contrary, no party
shall be prohibited from using or permitting the use of, or required to hold in
confidence, any information to the extent that (i) such information has been or
is in the public domain through no fault of such party, (ii) such information
is, after the Spinoff Date, lawfully acquired from other sources by such party,
or (iii) this Agreement or any Ancillary Agreement permits the use or disclosure
of such information by such party.
Section 5.04. Witness Services. At all times from and after the Spinoff
Date, each of GenTek and GCG shall use its reasonable efforts to make available
to the other party's Group, upon reasonable written request, the officers,
directors, employees and agents of members of its Group for fact finding,
consultation or interviews and as witnesses to the extent that (i) such persons
may reasonably be required in connection with the prosecution or defense of any
action in which the requesting party or any member of its Group may from time to
time be involved, and (ii) there is no conflict in the action between the
requesting party or any member of its respective Group and the party to which a
request is made pursuant to this Section 5.04 or any member of such party's
Group. Except as otherwise agreed, a party providing witness services to any
other party under this Section 5.04 shall be entitled to reimbursement from the
recipient of such services, upon the presentation of invoices therefor, for
reasonable costs and expenses incurred in connection with providing such witness
services (including travel expenses and attorneys' fees and expenses for such
witnesses, but not salary expenses). For purposes of this Section 5.04, "action"
means any action, suit, arbitration, inquiry, proceeding or investigation by or
before any Governmental Authority or any arbitration tribunal.
Section 5.05. Retention of Books and Records. Except when a longer period
is required by Law or is specifically contemplated elsewhere in this Agreement
or by any Ancillary Agreement, each party shall, and shall cause the other
members of its Group to, retain in accordance with GCG's current document
retention policy (effective as of June 1, 1998) all material information
(including all material Books and Records) relating to the other Group and the
other Group's operations and businesses prior to the Spinoff Date.
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Notwithstanding the foregoing, prior to the termination of the periods for
retention of documents contemplated by GCG's current policy, any party hereto
may offer, and after the termination of such periods each party hereto shall
offer, in writing to deliver to the other parties all or a portion of such
information as it relates to members of the offering party's Group and, if such
offer is accepted in writing within 90 days after receipt thereof, the offering
party shall promptly arrange for the delivery of such information (or copies
thereof) to each accepting party (at the expense of such accepting party). If
such offer is not so accepted, the offered information may be destroyed or
otherwise disposed of by the offering party at any time thereafter.
Section 5.06. Privileged Matters. (a) Each party shall, and shall cause the
other members of its Group to, use its reasonable efforts to maintain, preserve,
protect and assert all privileges including all privileges arising under or
relating to the attorney-client relationship (including the attorney-client and
attorney work product privileges), that relate directly or indirectly to any
member of any other Group for any period prior to the Spinoff Date ("Privilege"
or "Privileges"). Each party shall use its reasonable efforts not to waive, or
permit the other members of its Group to waive, any such Privilege that could be
asserted under applicable Law without the prior written consent of the other
parties. With respect to each party, the rights and obligations created by this
Section 5.06 shall apply to all information as to which a member of its Group
did assert or, but for the Spinoff, would have been entitled to assert the
protection of a Privilege ("Privileged Information"), including any and all
information that (i) was generated or received prior to the Spinoff Date but
which, after the Spinoff, is in the possession of a member of the other Group,
or (ii) is generated or received after the Spinoff Date but refers to or relates
to Privileged Information that was generated or received prior to the Spinoff
Date.
(b) Upon receipt by a party or any member of its Group of any subpoena,
discovery or other request that arguably calls for the production or disclosure
of Privileged Information, or if a party or any member of its Group obtains
knowledge that any current or former employee of such party or any member of its
Group has received any subpoena, discovery or other request which arguably calls
for the production or disclosure of Privileged Information, such party shall
promptly notify the other parties of the existence of the request and shall
provide the other parties a reasonable opportunity to review the information and
to assert any rights it may have under this Section 5.06 or otherwise to prevent
the production or disclosure of Privileged Information. No party shall, or shall
permit any member of its Group to, produce or disclose any information arguably
covered by a Privilege under this Section 5.06 unless (i) each other party has
provided its express written consent to such production or disclosure, or (ii) a
court of competent jurisdiction has entered an order which is not then
appealable or a final, nonappealable order finding that the information is not
entitled to protection under any applicable privilege (it being understood that
the parties not providing their consent to the
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production or disclosure of such information shall bear the costs and expenses
incident to such court proceedings).
(c) The parties understand and agree that the transfer of any Books and
Records or other information between members of the GenTek Group, on the one
hand, and members of the GCG Group, on the other hand, including pursuant to any
Ancillary Agreement, shall be made in reliance on the agreements of GenTek and
GCG, as set forth in Section 5.03 and this Section 5.06, to maintain the
confidentiality of Privileged Information and to assert and maintain all
applicable Privileges. The Books and Records being transferred pursuant to this
Agreement or any Ancillary Agreement, the access to information being granted
pursuant to Section 5.01 or any Ancillary Agreement, the agreement to provide
witnesses and individuals pursuant to Section 5.04 and the transfer of
Privileged Information to any party pursuant to this Agreement shall not be
deemed a waiver of any Privilege that has been or may be asserted under this
Section 5.06 or otherwise.
ARTICLE VI
INSURANCE
Section 6.01. General. Except as otherwise agreed by the parties, all
policies of liability, fire, workers' compensation and other forms of insurance
insuring the GenTek Assets and GenTek Business shall be maintained by GCG until
the Spinoff Date, unless GenTek shall have earlier obtained appropriate
coverage. GCG shall, if so requested by GenTek, use reasonable efforts to assist
GenTek in obtaining such insurance coverages in such amounts as are agreed upon
by the parties. Following the Spinoff Date, each of the parties shall cooperate
with and assist the other party in the prevention of conflicts or gaps in
insurance coverage and/or collection of proceeds.
Section 6.02. Treatment of Reserves. On or before the Spinoff Date, the
parties shall transfer to GenTek all reserves for GenTek Liabilities relating to
GenTek Uninsured Retentions and to GCG all reserves for Industrial Chemicals
Liabilities relating to GCG Uninsured Retentions. GenTek and GCG shall cooperate
and take all such actions as may be necessary in connection with the allocation
of uninsured retentions.
Section 6.03. Uninsured Retentions; Claims Management. (a) GenTek shall be
responsible for payment of all GenTek Liabilities (including, if required, for
the negotiation and posting of any bond or collateral guaranteeing payment to
insurance carriers or Persons with indemnification or reimbursement obligations)
relating to GenTek Uninsured Retentions. Within 30 days following receipt from
GCG or an insurance carrier (in which case GenTek shall promptly notify GCG of
such receipt) of an invoice with
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supporting documentation evidencing payment of such GenTek Liabilities by GCG or
such insurance carrier, GenTek shall reimburse GCG or such insurance carrier for
such payment.
(b) GCG shall be responsible for payment of all Industrial Chemicals
Liabilities (including, if required, for the negotiation and posting of any bond
or collateral guaranteeing payment to insurance carriers or Persons with
indemnification or reimbursement obligations) relating to GCG Uninsured
Retentions. Within 30 days following receipt from GenTek or an insurance carrier
(in which case GCG shall promptly notify GenTek of such receipt) of an invoice
with supporting documentation evidencing payment of such Industrial Chemicals
Liability, by GenTek or such insurance carrier, GenTek shall reimburse GenTek or
such insurance carrier for such payment.
(c) GCG shall have claims' management responsibility and settlement
authority, in accordance with established claim procedures with applicable
insurance carriers, for all claims to the extent such claims relate to
Industrial Chemicals Liabilities; provided that if any such claim involves
GenTek Uninsured Retentions, GCG may settle such claim only with the prior
agreement of GenTek (which agreement shall not be unreasonably withheld). In
connection with such claims' management, GenTek shall cooperate with GCG and
provide to GCG any applicable insurance information in GenTek's possession
required for GCG to present claims for payment to the appropriate insurance
carrier or carriers.
(d) GenTek shall have claims' management responsibility and settlement
authority, in accordance with established claims procedures with applicable
insurance carriers, for all claims to the extent such claims relate to GenTek
Liabilities; provided that if any such claim involves GCG Uninsured Retentions,
GenTek may settle such claim only with the prior agreement of GCG (which
agreement shall not be unreasonably withheld). In connection with such claims'
management, GCG shall cooperate with GenTek and provide to GenTek any applicable
insurance information in GCG's possession required for GenTek to present claims
for payment to the appropriate insurance carrier or carriers.
(e) On or promptly following the Spinoff Date, members of the GCG Group
shall turn over to GenTek all of their files on insured claims relating to
GenTek Liabilities and members of the GenTek Group shall turn over to GCG all of
their files on insured claims relating to GCG Liabilities.
Section 6.04. Directors' and Officers' Insurance. GCG shall use its best
efforts to maintain, at its own cost, directors' and officers' liability
insurance coverage at least equal to its current directors' and officers'
liability insurance coverage until the sixth anniversary of the Spinoff Date for
the directors and officers of GCG and its Subsidiaries prior to the Spinoff who
are directors or officers of the GenTek Group at the Spinoff Date
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for such persons' acts as directors or officers of members of the GCG Group
during the period prior to the Spinoff Date. GenTek shall use its best efforts
to maintain, at its own cost, directors' and officers' liability insurance
coverage at least equal to GCG's current directors' and officers' liability
insurance coverage for the directors and officers of the GenTek Group at the
Spinoff Date for such persons' acts as directors or officers of members of the
GenTek Group.
ARTICLE VII
INDEMNIFICATION
Section 7.01. Indemnification by GCG. Except and to the extent otherwise
specifically contemplated by any Ancillary Agreement, GCG and GCIP shall,
jointly and severally, indemnify, defend and hold harmless the GenTek
Indemnitees from and against any and all Losses of the GenTek Indemnitees
arising out of, by reason of or otherwise in connection with (i) any Industrial
Chemicals Liability, or (ii) any breach by any member of the GCG Group of any
provision of this Agreement or any Ancillary Agreement.
Section 7.02. Indemnification by GenTek. Except and to the extent otherwise
specifically contemplated by any Ancillary Agreement, GenTek and GCC shall,
jointly and severally, indemnify, defend and hold harmless the GCG Indemnitees
from and against any and all Losses of the GCG Indemnitees arising out of, by
reason of or otherwise in connection with (i) any GenTek Liability, or (ii) any
breach by any member of the GenTek Group of any provision of this Agreement or
any Ancillary Agreement.
Section 7.03. Procedures for Indemnification. (a) As promptly as
practicable after receipt by an Indemnified Party of notice of any Loss in
respect of which an Indemnifying Party may be liable under this Article VII, the
Indemnified Party shall give notice thereof (the "Indemnification Notice") to
the Indemnifying Party. The Indemnification Notice shall state the reason for
the indemnification claim and (if known) the amount or estimate of the amount
that may be due under this Article VII, and shall provide relevant documentary
or other evidence regarding such claim and the proposed indemnification amount.
The failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its indemnification obligations under this Article VII,
except to the extent such failure results in a lack of actual notice to the
Indemnifying Party and the Indemnifying Party is materially prejudiced as a
result of failure to receive such notice. Within 60 days after receipt of an
Indemnification Notice in accordance with this Section 7.03(a), the Indemnifying
Party shall deliver to the Indemnified Party a notice of its acceptance of or
disagreement with such indemnification claim.
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(b) In the case of any claim asserted by a third party (including any
Governmental Authority), the Indemnified Party shall (i) notify the Indemnifying
Party of such claim within 30 days after receipt of such claim (but at least 15
days prior to the expiration of the period during which the defendant may assert
its defense, if such period expires earlier), it being understood that the
failure to give such notice shall not relieve the Indemnifying Party of its
indemnification obligations under this Article VII, except to the extent such
failure results in a lack of actual notice to the Indemnifying Party and the
Indemnifying Party is materially prejudiced as a result of failure to receive
such notice, and (ii) permit the Indemnifying Party, at its option and expense,
to take over and assume the defense of any such claim by counsel satisfactory to
the Indemnified Party and to settle or otherwise dispose of the same; provided
that if the Indemnifying Party does so take over and assume the defense, (x) the
Indemnified Party may at its discretion at all times participate, at its own
expense, in such defense by counsel of its own choice, and (y) the Indemnifying
Party shall, at all times and to the maximum extent possible, keep the
Indemnified Party informed of the status of such claim and the proceedings
related thereto; provided, further, that an Indemnifying Party shall not be
entitled to assume the defense of any such third-party claim (and shall be
liable for reasonable fees and expenses of counsel to the Indemnified Party for
defending such claim) if, in the Indemnified Party's reasonable judgment, a
conflict of interest exists between the Indemnified Party and the Indemnifying
Party in respect of such claim. The Indemnifying Party shall not, in defense of
any such claim, except with the prior written consent of the Indemnified Party,
(A) enter into any settlement or compromise that does not include, as an
unconditional term thereof, the giving by the claimant or plaintiff in question
to the Indemnified Party and its Affiliates a release of all liabilities in
respect of such claims, or (B) agree to any non-monetary relief that adversely
affects the business of the Indemnified Party. If the Indemnifying Party does
not accept the defense of any claim within 30 days of delivery of the notice,
the Indemnified Party shall have the right to defend against any such claim by
counsel of its own choice and shall be entitled to settle or agree to pay in
full such claim or demand; provided that if an Indemnified Party does so take
over and assume the defense, the Indemnified Party shall, at all times and to
the maximum extent possible, keep the Indemnifying Party informed of the status
of such claim and the proceedings related thereto.
Section 7.04. Adjustments for Insurance Proceeds. If Losses by an
Indemnified Party are covered by an insurance policy or by an indemnification or
reimbursement obligation of another Person, the Indemnified Party shall use
commercially reasonable efforts to collect insurance or indemnity or
reimbursement payments with respect thereto. If the Indemnified Party recovers
such insurance proceeds or indemnity or reimbursement payments prior to being
indemnified and held harmless by the Indemnifying Party with respect to such
Losses, the payment made by the Indemnifying Party with respect to such Losses
shall be reduced by the net amount of insurance proceeds or indemnity or
reimbursement payments received by the Indemnified Party, less reasonable
attorneys' fees
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and other expenses incurred by the Indemnified Party in connection with such
recovery. If the Indemnified Party recovers such insurance proceeds or indemnity
or reimbursement payments after being indemnified and held harmless by the
Indemnifying Party with respect to such Losses, the Indemnified Party shall,
within 30 days of receipt thereof, pay to the Indemnifying Party the net amount
of insurance proceeds or indemnity or reimbursement payments (less reasonable
attorney's fees and other expenses incurred in connection with such recovery)
received by the Indemnified Party.
Section 7.05. Contribution. To the extent that any indemnification provided
for under Section 7.01 or Section 7.02 is unavailable to an Indemnified Party or
is insufficient in respect of any Losses of such Indemnified Party, then the
Indemnifying Party under Section 7.01 or Section 7.02, as the case may be, in
lieu of indemnifying such Indemnified Party thereunder, in order to provide for
just and equitable contribution, shall contribute to the amount paid or payable
by such Indemnified Party as a result of such Losses in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party on the one
hand and the Indemnified Party on the other hand in connection with the action,
inaction, statement or omission or alleged action, inaction, statement or
omission that resulted in such Losses as well as any other relevant equitable
considerations.
Section 7.06. Remedies Cumulative. The remedies provided in this Article
VII shall be cumulative and shall not preclude assertion by any Indemnified
Party of any other rights or the seeking of any and all other remedies against
any Indemnifying Party.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Termination. (a) The Spinoff may be abandoned, and this
Agreement terminated, at any time prior to 5:00 p.m. (Eastern Standard Time) on
the Spinoff Date by and in the sole discretion of GCG, without the approval of
GenTek or the other parties hereto, upon written notice to GenTek. In the event
of such termination prior to the Spinoff, no party shall have any liability of
any kind to any other party or any other Person.
(b) After the Spinoff Date, this Agreement may be terminated only by the
written agreement of all of the parties hereto. The obligations of GenTek and
GCC, on the one hand, and GCG and GCIP, on the other hand, under Article VII
shall survive any termination of this Agreement pursuant to this Section
8.01(b).
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Section 8.02. Expenses. Except as specifically contemplated elsewhere in
this Agreement or by any Ancillary Agreement, GenTek and GCG shall bear and pay
the fees, costs and expenses incurred in connection with the Spinoff and the
consummation of the transactions contemplated hereby in the proportions provided
therefor in the pro forma financial statements contained in the Information
Statement; provided that, in any event, any premiums associated with the
repayment of borrowings of GCG under its bank credit agreement, with The Chase
Manhattan Bank as agent, in connection with the Spinoff shall be borne 75% by
GenTek and 25% by GCG.
Section 8.03. Notices. All notices, consents, requests, instructions,
approvals and other communications provided for, or in connection with, in this
Agreement shall be in writing and shall be deemed validly given upon personal
delivery or one day after being sent by overnight courier service or by telecopy
(so long as for notices or other communications sent by telecopy, the
transmitting telecopy machine records electronic confirmation of the due
transmission of the notice), at the following address or telecopy number, or at
such other address or telecopy number as a party may designate to the other
parties:
If to GenTek or GCC, to:
90 East Halsey Road
Parsippany, NJ 07054
Telecopy: [973- ]
Attention: General Counsel
with a copy to:
Liberty Lane
Hampton, New Hampshire 03842
Telecopy: [603- ]
Attention: Corporate Secretary
If to GCG or GCIP, to:
90 East Halsey Road
Parsippany, NJ 07054
Telecopy: [973- ]
Attention: General Counsel
with a copy to:
Liberty Lane
Hampton, New Hampshire 03842
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Telecopy: [603- ]
Attention: Corporate Secretary
Section 8.04. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to the conflicts of laws provisions thereof.
Section 8.05. Choice of Forum. Each of the parties hereby irrevocably
submits to the exclusive jurisdiction of the courts of the State of New York and
the Federal courts of the United States of America located in the State, City,
and County of New York solely in respect of the interpretation and enforcement
of the provisions of this Agreement and of the documents referred to in this
Agreement, and in respect of the transactions contemplated hereby and thereby,
and hereby waives, and agrees not to assert, as a defense in any action, suit,
or proceeding for the interpretation or enforcement hereof or of any such
document, that it is not subject thereto or that such action, suit, or
proceeding may not be brought or is not maintainable in said courts or that the
venue thereof may not be appropriate or that this Agreement or any such document
may not be enforced in or by such courts, and the parties hereto irrevocably
agree that all claims with respect to such action or proceeding shall be heard
and determined in such a court. Each of the parties hereby consents to and
grants any such court jurisdiction over the person of such parties and over the
subject matter of any such dispute and agrees that mailing of process or other
papers in connection with any such action or proceeding in the manner provided
in Section 8.03 in such other manner as may be permitted by law, shall be valid
and sufficient service thereof.
Section 8.06. Amendments; Waivers, etc. (a) Subject to Section 3.02,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by an instrument in writing, signed by the party against
which enforcement of such amendment, discharge, waiver or termination is sought.
(b) No failure or delay by any party in exercising any right, power or
privilege under this Agreement shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies provided herein shall be cumulative and not exclusive of any rights or
remedies provided by law.
Section 8.07. Assignment. (a) This Agreement shall not be assignable or
otherwise transferable by a party without the prior consent of the other
parties, and any attempt to so assign or otherwise transfer this Agreement
without such consent shall be void and of no effect; provided that any party
hereto may assign all or any portion of its rights under this Agreement to (i)
any other member of its Group, (ii) any lender to such party or any member of
its Group as security for obligations to such lender in respect of
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the financing arrangements entered into by members of such party's Group in
connection with the Spinoff, and any refinancings, extensions, refundings or
renewals thereof, and (iii) to any purchaser or transferee of all or
substantially all of the assets of such party that executes, and delivers to the
other parties hereto, a written assumption of the obligations of such party
under this Agreement; provided, further, that no assignment hereunder shall
affect the Liabilities of any such assignor under this Agreement.
(b) This Agreement shall be binding upon the respective successors and
assigns of the parties hereto.
Section 8.08. Third Party Beneficiaries. Except as provided in Article VII
hereof (relating to GenTek Indemnitees or GCG Indemnitees), nothing in this
Agreement shall be construed as giving any Person, other than the parties hereto
and their successors and permitted assigns, any right, remedy or claim under or
in respect of this Agreement or any provision hereof.
Section 8.09. Severability. If any provision of this Agreement is held to
be invalid or unenforceable for any reason, it shall be adjusted rather than
voided, if possible, in order to achieve the intent of the parties hereto to the
maximum extent possible. In any event, the invalidity or unenforceability of any
provision of this Agreement in any jurisdiction shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of this Agreement, including that provision, in any
other jurisdiction.
Section 8.10. Section Headings. The article and section headings of this
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.
Section 8.11. Integration. This Agreement, including the Schedules and
Exhibits hereto, and the other documents delivered pursuant hereto constitute
the full and entire understanding and agreement of the parties and supersede any
and all prior agreements, arrangements and understandings relating to the
subject matters hereof and thereof.
Section 8.12. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument.
33
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
THE GENERAL CHEMICAL GROUP INC.
By
---------------------------
Name:
Title:
GENERAL CHEMICAL INDUSTRIAL
PRODUCTS INC.
By
---------------------------
Name:
Title:
GENTEK INC.
By
---------------------------
Name:
Title:
GENERAL CHEMICAL CORPORATION
By
---------------------------
Name:
Title:
34
<PAGE>
<PAGE>
Schedule I
to
Separation Agreement
GENTEK ASSETS
A. All of the capital stock of each of the following companies (except as
indicated):
1. GCC.
2. Defiance, Inc., a Delaware corporation.
3. Toledo Technologies Inc., a Delaware Corporation, and its Subsidiaries:
1279597 Ontario Inc., a Canadian company; and Sandco Automotive Ltd., a
Canadian company.
4. Printing Developments Inc., a Delaware corporation.
5. Balcrank Products, Inc., a Delaware corporation.
6. GenTek Canada; GenTek Canada Holding Inc., a Delaware corporation;
and GenTek Canada Holding Ltd., an Ontario corporation.
7. Waterside Urban Renewal Corporation, a New Jersey corporation.
8. HMC Patents Holding Company, a Delaware corporation.
9. Reheis Inc., a Delaware corporation, and its Subsidiaries:
Reheis International Inc., a Delaware corporation; Reheis Overseas,
an Irish company; Reheis Commercial, a Cayman Islands company; Reheis
Holdings Inc., a Delaware corporation; Ilminster Company, an Irish
company; and Reheis Ireland, an Irish company.
10. Noma Acquisition Corp., a Delaware corporation; Noma Industries
Limited, an Ontario company; Noma Inc., an Ontario company; Noma
Corporation, a Delaware corporation; Electronic Interconnect Systems,
Inc., a Massachusetts corporation; all of the capital stock of
Craftco Enterprises, Inc., a Mississippi corporation, owned by Noma
Corporation; all of the capital stock of Patelec Noma Systems, Inc.,
a Delaware corporation, owned by Noma Corporation; Fleck
Manufacturing, Inc., an Ontario company; Sistemas y Connexiones,
S.A., a Mexican company; and all holding companies acquired by Noma
Acquisition Corp. in connection with its tender offer for shares of
Noma Industries Limited.
B. Rights under the Acquisition Agreement, dated February 26, 1999, among
GCG, Noma Acquisition Corp. and Noma Industries Limited, any and all
other agreements, understandings or commitments regarding the
acquisition of Noma Industries Limited (including any undertakings of
stockholders of Noma Industries Limited regarding such acquisition)
and all other rights regarding the acquisition of Noma Industries
Limited; and any shares of capital stock or other securities of, or
interest in, Noma Industries Limited owned or held by GCG or any of
its Subsidiaries.
I-1
<PAGE>
<PAGE>
Schedule I
to
Separation Agreement
C. The real estate properties and facilities, whether owned or leased,
listed in Annex A to this Separation Agreement.
D. Rights under all contracts, arrangements, licenses, leases and other
agreements of GCG or any of its Subsidiaries primarily relating to the
GenTek Business.
E. The assets, properties and rights purchased by GenTek Canada from GCCL
pursuant to the Canadian Purchase Agreement.
F. Machinery, equipment, furniture, furnishings, automobiles, trucks,
vehicles, tools, dies, molds and parts and similar property owned, or
used or held for use, by GCG or any of its Subsidiaries primarily in
connection with the GenTek Business.
G. Inventories of raw materials, work in process, finished products,
goods, spare parts, replacement and component parts, and office and
other supplies owned, or used or held for use, by GCG or any of its
Subsidiaries (including GCC) primarily in connection with the GenTek
Business.
H. Rights in and to products sold or leased by GCG or any of its
Subsidiaries primarily in connection with the GenTek Business.
I. Credits, prepaid expenses, deferred charges, advance payments,
security deposits and prepaid items of, or for the benefit of, GCG or
any of its Subsidiaries primarily in connection with the GenTek
Business.
J. Notes and accounts receivable of or held by GCG or any of its
Subsidiaries primarily in connection with the GenTek Business, and all
notes, bonds and other evidences of indebtedness of and rights to
receive payments from any Person held by GCG or any of its
Subsidiaries primarily in connection with the GenTek Business.
K. All approvals, permits, licenses, consents or franchises, including
all applications therefor, of any Governmental Authority to or for the
benefit of GCG or any of its Subsidiaries primarily in connection with
the GenTek Business.
L. Books and Records of GCG and its Subsidiaries primarily relating to
the GenTek Business.
M. Guarantees, warranties, indemnities and similar rights in favor of GCG
and its Subsidiaries primarily relating to the GenTek Business or a
GenTek Asset.
I-2
<PAGE>
<PAGE>
Schedule I
to
Separation Agreement
N. All of the assets, properties and rights expressly allocated to
members of the GenTek Group under this Agreement or any of the
Ancillary Agreements.
O. Except as otherwise specifically contemplated by any Ancillary
Agreement, the assets, properties and rights of GCG and its
Subsidiaries as of the Spinoff Date that do not primarily relate to,
or are not primarily used or held for use, in connection with the
Industrial Chemicals Business.
I-3
<PAGE>
<PAGE>
Schedule II
to
Separation Agreement
GENTEK LIABILITIES
A. Liabilities arising out of or incurred in the conduct or operation of
the GenTek Business or the ownership or use of any GenTek Asset,
whether arising before, at or after the Spinoff.
B. Obligations and commitments regarding the acquisition of Noma
Industries Limited, including the Acquisition Agreement, dated
February 26, 1999, among GCG, Noma Acquisition Corp., Noma Industries
Limited, and any other agreement, understanding or commitment of GCG
or any of its Subsidiaries regarding the acquisition of Noma
Industries Limited (including obligations or commitments pursuant to
any tender offer for the purchase of shares of Noma Industries Limited
or made to any Governmental Authority regarding such acquisition).
C. Liabilities under any contract, arrangement, license, lease or other
agreement of GCG or any of its Subsidiaries primarily relating to the
GenTek Business.
D. Liabilities assumed or undertaken by GenTek Canada pursuant to the
Canadian Purchase Agreement.
E. Liabilities arising under or in connection with the Registration
Statement or the Information Statement, but only to the extent such
Liabilities relate to statements in, or omissions from, the
Registration Statement or the Information Statement regarding GenTek
or the GenTek Business.
F. Liabilities incurred, undertaken or assumed by GCG or any of its
Subsidiaries in connection with the acquisitions of Defiance Inc.,
Reheis, Inc., Sandco Automotive Ltd. and Peridot Holdings, Inc.
G. Liabilities with respect to any accounts payable of GCG or any of its
Subsidiaries arising out of the operation of the GenTek Business or
the ownership or use of any GenTek Asset.
H. Liabilities of GenTek or any other member of the GenTek Group arising
under this Agreement or any of the Ancillary Agreements.
I. Liabilities of any member of the GenTek Group, other than GCC,
relating to any business or property formerly owned or operated by it
or them or arising out of the sale or other disposition thereof that,
but for such sale or other disposition, would have been deemed part of
the GenTek Business or GenTek Assets.
II-1
<PAGE>
<PAGE>
Schedule III
to
Separation Agreement
INDUSTRIAL CHEMICALS ASSETS
A. All of the capital stock of each of the following companies (except as
indicated):
1. NHO.
2. Bayberry Management Corporation, a Delaware corporation.
3. 51% partnership interest in GCSAP.
4. GCIP.
5. Each of the Canadian Companies.
6. Alchemco Philippines, Inc., a Philippine company.
7. 30% of the capital stock of Allied-Brown Chemicals Inc., a
Philippine company.
8. General Chemical International Inc., a Delaware corporation, and
its subsidiary,
General Chemical (Great Britain) Ltd., an English company.
9. General Chemical (Soda Ash) Inc., a Delaware corporation.
B. All rights in respect of GCSAP, including 51% partnership interest in
GCSAP; and all rights of the Managing Partner of GCSAP.
C. The real estate properties and facilities, whether owned or leased,
listed in Annex B to this Separation Agreement.
D. Rights under all contracts, arrangements, licenses, leases and other
agreements of GCG or any of its Subsidiaries (including GCC) primarily
relating to the Industrial Chemicals Business.
E. The assets reflected on the audited balance sheet of the Industrial
Chemicals Business as at December 31, 1998 (other than the assets
disposed of in the ordinary course of business).
F. Assets acquired by GCG or its Subsidiaries from December 31, 1998 to
the close of business on the Spinoff Date that are of a type or nature
that would have resulted in such assets being included as an asset on
the balance sheet of the Industrial Chemicals Business as at December
31, 1998 had such assets been acquired on or prior to December 31,
1998, determined on a basis consistent with the determination of
assets included on the Industrial Chemicals Balance Sheet.
G. Machinery, equipment, furniture, furnishings, automobiles, trucks,
vehicles, tools, dies, molds and parts and similar property owned, or
used or held for use, by GCG or any of its Subsidiaries (including
GCC) primarily in connection with the Industrial Chemicals Business.
III-1
<PAGE>
<PAGE>
Schedule III
to
Separation Agreement
H. Inventories of raw materials, work in process, finished products,
goods, spare parts, replacement and component parts, and office and
other supplies owned, or used or held for use, by GCG or any of its
Subsidiaries (including GCC) primarily in connection with the
Industrial Chemicals Business.
I. Rights in and to products sold or leased by GCG or any of its
Subsidiaries (including GCC) primarily in connection with the
Industrial Chemicals Business.
J. Credits, prepaid expenses, deferred charges, advance payments,
security deposits and prepaid items of, or for the benefit of, GCG or
any of its Subsidiaries (including GCC) primarily in connection with
the Industrial Chemicals Business.
K. Notes and accounts receivable of or held by GCG or any of its
Subsidiaries (including GCC) primarily in connection with the
Industrial Chemicals Business, and all notes, bonds and other
evidences of indebtedness of and rights to receive payments from any
Person held by GCG or any of its Subsidiaries (including GCC)
primarily in connection with the Industrial Chemicals Business.
L. All approvals, permits, licenses, consents or franchises, including
all applications therefor, of any Governmental Authority to or for the
benefit of GCG or any of its Subsidiaries (including GCC) primarily in
connection with the Industrial Chemicals Business.
M. Books and Records of GCG and its Subsidiaries (including GCC)
primarily relating to the Industrial Chemicals Business.
N. Guarantees, warranties, indemnities and similar rights in favor of GCG
and its Subsidiaries (including GCC) primarily relating to the
Industrial Chemicals Business or an Industrial Chemicals Asset.
O. All of the assets, properties and rights expressly allocated to
members of the GCG Group under this Agreement or any of the Ancillary
Agreements.
P. Except as otherwise specifically contemplated by any Ancillary
Agreement, the assets of GCG and its Subsidiaries as of the Spinoff
Date that are used primarily in the Industrial Chemicals Business.
III-2
<PAGE>
<PAGE>
Schedule IV
to
Separation Agreement
INDUSTRIAL CHEMICALS LIABILITIES
A. Liabilities reflected on the audited balance sheet of the Industrial
Chemicals Business as at December 31, 1998, including the notes
thereto.
B. Liabilities arising out of or incurred in the conduct or operation of
the Industrial Chemicals Business or the ownership or use of any
Industrial Chemicals Asset, whether arising before, at or after the
Spinoff.
C. Liabilities under any contract, arrangement, license, lease or other
agreement of GCG or any of its Subsidiaries (including GCC) primarily
relating to the Industrial Chemicals Business.
D. Liabilities arising under or in connection with the Registration
Statement or the Information Statement except for Liabilities relating
to information or statements in, or omission from, the Registration
Statement or the Information Statement regarding GenTek or the GenTek
Business.
E. Liabilities with respect to any accounts payable of GCG or any of its
Subsidiaries (including GCC) arising out of the operation of the
Industrial Chemicals Business or ownership or use of any Industrial
Chemicals Asset.
F. Liabilities of GCG or any of its Subsidiaries arising under this
Agreement or any of the Ancillary Agreements.
G. Liabilities of GCC (i) neither arising out of, nor incurred in, the
conduct or operation of the GenTek Business or the ownership or use of
any GenTek Asset, and (ii) relating to any business or property
formerly owned or operated by it or them or arising out of the sale or
other disposition thereof, other than such businesses or properties
that, but for such sale or other disposition, would have been deemed
part of the GenTek Business or GenTek Assets.
IV-1
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<PAGE>
Annex A
to
Separation Agreement
GenTek Assets
Real Property
U.S. - Performance Products
- ---------------------------
Arkansas -- Ashdown
Arkansas -- Pine Bluff
California -- Pittsburg
California -- Richmond
Colorado -- Denver
Delaware -- North Claymont
Florida -- Jacksonville
Florida -- Port St. Joe
Florida -- Tampa
Georgia -- Augusta
Georgia -- Cedar Springs
Georgia -- East Point
Georgia -- Macon
Georgia -- Savannah
Illinois -- East St. Louis
Illinois -- Schaumberg
Louisiana -- Marrero
Maryland -- Curtis Bay
Massachusetts -- Fall River
Michigan -- Detroit
Michigan -- Kalamazoo
New Jersey -- Berkeley Heights
New Jersey -- Newark
New Jersey -- Parsippany
New York -- East Syracuse
New York -- Syracuse
Ohio -- Cleveland
Ohio -- Middletown
Pennsylvania -- Johnsonburg
Pennsylvania -- Marcus Hook
South Carolina -- Catawba
Texas -- Midlothian
Tennessee -- Springfield
Virginia -- Covington
A-1
<PAGE>
<PAGE>
Annex A
to
Separation Agreement
Virginia -- Hopewell
Washington -- Anacortes
Washington -- Tacoma
Washington -- Vancouver
Wisconsin -- Menasha
Wisconsin -- Racine
Wisconsin -- Wisconsin Rapids
Canada - Performance Products
- -----------------------------
British Columbia -- Burnaby
New Brunswick -- Dalhousie Plant
Ontario -- Nellie Lake
Ontario -- Thorold
Ontario -- Thunder Bay
Quebec -- Valleyfield
Ireland
- -------
Ireland -- Dublin
U.S. - Manufacturing
- --------------------
Michigan -- Livonia
Michigan -- St. Clair Shores
Michigan -- Troy
Michigan -- Westland
Mississippi -- Morton
North Carolina -- Ashville
Ohio -- Cleveland
Ohio -- Defiance
Ohio -- Millbury
Ohio -- Perrysburgh
Ohio -- Toledo
Ohio -- Upper Sandusky
Texas -- El Paso
Texas -- Mineral Wells
A-2
<PAGE>
<PAGE>
Annex A
to
Separation Agreement
Canada - Manufacturing
- ----------------------
Ontario -- Guelph
Ontario -- Hamilton
Ontario -- Mississauga (Crestlawn Drive)
Ontario -- Stouffville
Ontario -- Tillsonburg
Ontario -- Toronto
Ontario -- Vaughan
Mexico
- ------
Imrus
Juarez
Nogales
A-3
<PAGE>
<PAGE>
Annex B
to
Separation Agreement
--------------------
Industrial Chemical Assets
Real Property
--------------------------
U.S.
- ---
Wyoming -- Green River
Canada
- ------
Alberta -- Brooks
Alberta -- Drumheller
Ontario -- Amherstburg
Ontario -- Mississauga (Hammerson Properties)
Philippines
- -----------
Philippines -- Manila
B-1
<PAGE>
<PAGE>
Exhibit 3.01
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
GENTEK INC.
The name of the corporation is GenTek Inc. (the "Corporation"). The
Corporation was incorporated by the filing of its original Certificate of
Incorporation with the Secretary of State of the State of Delaware on January
25, 1999. This Amended and Restated Certificate of Incorporation, which both
amends and restates the provisions of the Corporation's Certificate of
Incorporation, was duly adopted in accordance with the provisions of Sections
242 and 245 of the General Corporation Law of the State of Delaware and by the
written consent of the Corporation's sole stockholder in accordance with Section
228 of the General Corporation Law of the State of Delaware. The Certificate of
Incorporation of the Corporation is hereby amended and restated to read in its
entirety as follows:
ARTICLE I
NAME
The name of the Corporation is GenTek Inc.
ARTICLE II
REGISTERED OFFICE
The address of the registered office of the Corporation in the State
of Delaware is 1209 Orange Street, in the City of Wilmington, County of New
Castle. The name of its registered agent at such address is the Corporation
Trust Company.
<PAGE>
<PAGE>
ARTICLE III
PURPOSES
The nature of the business or purposes to be conducted or promoted by
the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware ("DGCL").
ARTICLE IV
CAPITAL STOCK
Section 1. Number of Shares
The total number of shares of capital stock which the Corporation
shall have the authority to issue is One Hundred Fifty Million (150,000,000)
shares, of which (a) One Hundred Million (100,000,000) shares shall be common
stock, par value $.01 per share (the "Common Stock"), (b) Forty Million
(40,000,000) shares shall be Class B common stock, par value $.01 per share,
(the "Class B Stock"), and (c) Ten Million (10,000,000) shares shall be
preferred stock, par value $.01 per share (the "Undesignated Preferred Stock").
As set forth in this Article IV, the Board of Directors or any authorized
committee thereof is authorized from time to time to establish and designate one
or more series of Undesignated Preferred Stock, to fix and determine the
variations in the relative rights and preferences as between the different
series of Undesignated Preferred Stock in the manner hereinafter set forth in
this Article IV, and to fix or alter the number of shares comprising any such
series and the designation thereof to the extent permitted by law.
The number of authorized shares of the class of Undesignated
Preferred Stock may be increased or decreased (but not below the number of
shares outstanding) by the affirmative vote of the holders of a majority of the
Common Stock and the Class B Stock, voting together as a single class, without a
vote of the holders of the Undesignated Preferred Stock, pursuant to the
resolution or resolutions establishing the class of Undesignated Preferred Stock
or this Amended and Restated Certificate of Incorporation, as it may be amended
from time to time.
Section 2. General
The designations, powers, preferences and rights of, and the
qualifications, limitations and restrictions upon, each class or series of stock
shall be determined in accordance with, or as set below in, Sections 3 and 4 of
this Article IV.
2
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<PAGE>
Section 3. Common Stock and Class B Common Stock
(a) Authorization of Two Classes
As of the date and time this Amended and Restated Certificate of
Incorporation shall become effective under the laws of the State of Delaware,
there shall be two classes of common stock, par value $.01 per share. The first
class shall be denominated Common Stock and shall consist of One Hundred Million
(100,000,000) shares. The second class shall be denominated Class B Stock and
shall consist of Forty Million (40,000,000) shares.
(b) Powers, Preferences and Rights
Except as otherwise required by law, the powers, preferences and
rights of the Common Stock and the Class B Stock shall be as set forth herein.
Except as otherwise required by law or as set forth herein, the powers,
preferences and rights of the Common Stock and the Class B Stock shall be
identical.
(c) Voting Rights
Each share of Common Stock shall entitle the holder thereof to one
(1) vote and each share of Class B Stock shall entitle the holder thereof to ten
(10) votes. Except as set forth herein, all actions submitted to a vote of
stockholders shall be voted on by the holders of Common Stock and Class B Stock
(as well as the holders of any series of Undesignated Preferred Stock, if any,
entitled to vote thereon) voting together as a single class.
The holders of Common Stock and Class B Stock shall each be entitled
to vote separately as a single class with respect to matters which require class
votes under the DGCL, with holders of Class B Stock voting on matters affecting
Class B Stock and holders of Common Stock voting on matters affecting Common
Stock.
Except as otherwise provided by law or pursuant to this Article IV or
by vote or votes of the Board of Directors providing for the issue of any series
of Undesignated Preferred Stock, the holders of the Common Stock and the Class B
Stock shall have sole voting power for all purposes, each holder of the Common
Stock and Class B Stock being entitled to vote as provided in this Section 3(c).
Neither the holders of shares of Common Stock nor the holders of
shares of Class B Common Stock shall have cumulative voting rights.
3
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<PAGE>
The Corporation may, as a condition to counting the votes cast by any
holder of shares of Class B Stock at any annual or special meeting of
stockholders, in the case of any written consent of stockholders in lieu of a
meeting, or for any other purpose, require the furnishing of such affidavits or
other proof as it may reasonably request to establish that the shares of Class B
Stock held by such holder have not, by virtue of the provisions of Section 3(h),
been converted into shares of Common Stock.
(d) Dividends
(i) If and when a dividend on the Common Stock or the Class B
Stock is declared by the Board of Directors, whether payable in cash, in
property or in shares of stock of the Corporation, an equivalent dividend shall
also be declared on the Class B Stock or the Common Stock, as the case may be.
If dividends are declared that are payable in shares of Common Stock or Class B
Stock, such dividends shall be payable at the same rate on both classes of
stock, provided that the dividends payable in shares of Common Stock shall be
payable only to holders of Common Stock and the dividends payable in shares of
Class B Stock shall be payable only to holders of Class B Stock.
(ii) Subject to provisions of law and the rights of holders of
the Undesignated Preferred Stock, the holders of the Common Stock and the Class
B Stock shall be entitled to receive dividends at such time and in such amounts,
subject to Section 3(d)(i), as may be determined by the Board of Directors and
declared out of any funds lawfully available therefor, and shares of
Undesignated Preferred Stock shall not be entitled to share therein except as
otherwise expressly provided in the vote or votes of the Board of Directors
providing for the issue of such Undesignated Preferred Stock.
(e) Stock Splits and Other Transactions
Shares of Common Stock or Class B Stock may not be split up,
subdivided, combined or reclassified, unless at the same time the shares of such
other class are proportionately so split up, subdivided, combined or
reclassified in a manner which maintains the same proportionate equity ownership
between the holders of Common Stock and Class B Stock as comprised on the record
date for any such transaction.
(f) Liquidation, Dissolution or Winding Up
In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, after payments of or provision
for payment of the debts and other liabilities of the Corporation and the
preferential amounts to which the holders of any stock ranking prior to the
Common Stock and the Class B Stock in the distribution of assets shall be
entitled upon such liquidation, dissolution or winding up, the holders of
4
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<PAGE>
the Common Stock and the Class B Stock shall be entitled to receive an equal
amount with respect to each share owned.
(g) Conversion of Class B Stock
(i) The holder of each share of Class B Stock shall have the
right at any time, and from time to time, at such holder's option, to convert
such shares into one fully paid and nonassessable share of Common Stock on and
subject to the terms and conditions set forth in this Section 3(g).
(ii) In order to exercise the conversion rights set forth in
Section 3(g)(i), the holder of any shares of Class B Stock to be converted shall
present and surrender the certificate or certificates representing such shares
during normal business hours at the principal executive offices of the
Corporation or, if an agent for the registration of the transfer of shares of
Common Stock is then duly appointed and acting (the "Transfer Agent"), then at
the office of the Transfer agent, accompanied by a written notice of the
election by the record holder thereof to convert, and (if so required by the
Corporation or the Transfer Agent) by instruments of transfer, in form
reasonably satisfactory to the Corporation or the Transfer Agent. A conversion
shall be deemed to have occurred at the close of business on the date when the
Corporation or the Transfer Agent, as the case may be, has received the
prescribed written notice, the required certificate or certificates and any such
instruments of transfer (the "Conversion Date"). Such notice shall also state
the name or names (with address) in which the certificate or certificates for
shares of Common Stock issuable on such conversion shall be registered. The
person or persons in whose name or names any certificate or certificates for
shares of Common Stock shall be issuable on such conversion shall be, for the
purpose of receiving dividends and for all other corporate purposes whatsoever,
deemed to have become the holder or holders of record of the shares of Common
Stock represented thereby on the Conversion Date.
(iii) As promptly as practicable after the presentation and
surrender for conversion, as herein provided, of any certificate of shares of
Class B Stock, the Corporation shall issue and deliver at such office or agency,
to or upon the written order of the holder thereof, certificates for the number
of shares of Common Stock issuable upon such conversion. In case any certificate
for shares of Class B Stock shall be surrendered for conversion of only a part
of the shares represented thereby, the Corporation shall deliver at such office
or agency, to or upon the written order of the holder thereof, a certificate or
certificates for the number of shares of Class B Stock represented by such
surrendered certificate which are not being converted. The issuance of
certificates for shares of Common Stock issuable upon the conversion of shares
of Class B Stock by the registered holder thereof shall be made without charge
to the converting holder for any tax imposed on the Corporation in respect of
the issue thereof.
5
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<PAGE>
The Corporation shall not, however, be required to pay any tax which may be
payable with respect to any transfer involved in the issue and delivery of any
certificate in a name other than that of the registered holder of the shares
being converted, and the Corporation shall not be required to issue or deliver
any such certificate unless and until the person requesting the issue thereof
shall have paid to the Corporation the amount of such tax or has established to
the satisfaction of the Corporation that such tax has been paid.
(iv) Upon any conversion of shares of Class B Stock into shares
of Common Stock pursuant hereto, no adjustment with respect to dividends shall
be made; only those dividends that are payable on the shares so converted as
have been declared but not yet paid to holders of record of shares of Class B
Stock with respect to a record date prior to the conversion date shall be
payable with respect to the shares of Class B Stock so converted; and only those
dividends shall be payable on shares of Common Stock issued upon such conversion
as have been declared and are payable to holders of record of shares of Common
Stock with respect to a record date on or after such conversion date.
(v) In case of any consolidation or merger of the Corporation as
a result of what stockholders of the Corporation shall be entitled to receive
cash, stock, other securities or other property with respect to or in exchange
for stock of the Corporation, each holder of Common Stock and Class B Stock
shall be entitled to receive an equal amount of consideration for each share of
Common Stock or Class B Stock surrendered in such merger.
(vi) Shares of the Class B Stock converted into shares of Common
Stock shall be retired and shall resume the status of authorized but unissued
shares of Class B Stock.
(vii) The Corporation covenants that it will at all times
reserve and keep available, solely for the purpose of issuance upon conversion
of the outstanding shares of Class B Stock, such number of shares of Common
Stock as shall be issuable upon the conversion of all such outstanding shares of
Class B Stock.
(h) Limitations on Transfer of Class B Stock
(i) No record or beneficial owner of shares of Class B Stock may
transfer, and the Corporation shall not register the transfer of, shares of
Class B Stock, whether by sale, assignment, gift, bequest, appointment or
otherwise, except to a "Permitted Transferee" as provided herein.
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A. In the case of a holder of record of the Class B Stock
(the "Class B Holder") who is a natural person and the beneficial owner of the
shares of Class B Stock to be transferred, Permitted Transferees shall mean:
1. The spouse of such Class B Holder, any lineal
descendant of a grandparent of such Class B Holder or of a grandparent of
such spouse, or any spouse of such lineal descendant (herein collectively
referred to as "Class B Holder's Family Members");
2. The trustee or trustees of a trust (including a
voting trust) solely (except for remote contingent interests) for the
benefit of such Class B Holder and/or one or more of such Class B Holder's
Family Members; provided, however, that if at any time such trust ceases
to meet the requirements of this Section 3(h)(i)A.2, all shares of Class B
Stock then held by such trustee or trustees shall, upon receipt by such
trustee or trustees of a notice from the Corporation that it has obtained
actual knowledge that the trust no longer meets the requirements of this
Section 3(h)(i)A.2, be automatically converted into Common Stock on a
share-for-share basis, and stock certificates formerly representing such
shares of Class B Stock shall thereupon and thereafter be deemed to
represent a like number of shares of Common Stock;
3. A corporation, of which all of the record and
beneficial owners of outstanding capital stock are, or a partnership in
which all of the partners are, and all of the partnership interests are
owned by, the Class B Holder and/or one or more of the Permitted
Transferees of such Class B Holder as determined under this Section 3(h);
provided, however, that if by reason of any change in the ownership of
such stock or partners or partnership interests, such corporation or
partnership would no longer qualify as a Permitted Transferee of such
Class B Holder, then all shares of Class B Stock then held by such
corporation or partnership shall, upon receipt by such partnership or
corporation of a notice from the Corporation that it has obtained actual
knowledge that such corporation or partnership no longer qualifies as a
Permitted Transferee, be automatically converted into shares of Common
Stock on a share-for-share basis, and stock certificates formerly
representing such shares of Class B Stock shall thereupon and thereafter
be deemed to represent a like number of shares of Common Stock;
4. The executor, administrator or personal
representative of the estate of a deceased Class B Holder or the trustee
of the estate of a bankrupt or insolvent Class B Holder or the guardian or
conservator of a Class B Holder adjudged disabled or incompetent by a
court of competent jurisdiction, acting in his capacity as such; and
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5. Any private foundation created or established by a
Class B Holder or any Permitted Transferee of a Class B Holder.
B. In the case of a Class B Holder holding the shares of
Class B Stock as trustee pursuant to a trust (including a voting trust) other
than an irrevocable trust as described in Section 3(h)(i)C below, Permitted
Transferees shall mean:
1. any successor trustee of such trust;
2. the person or persons who established such trust;
and
3. a Permitted Transferee of any person who
established such trust.
C. In the case of a Class B Holder holding the shares of
Class B Stock as trustee pursuant to a trust which was irrevocable as of the
Record Date (a "Transferee Trust"), Permitted Transferees shall mean:
1. any successor trustee of such Transferee Trust;
2. any person to whom or for whose benefit the
principal or income may be distributed either during or at the end of the
term of such Transferor Trust whether by power of appointment or
otherwise; and
3. a Permitted Transferee of any person who
established such trust.
D. In the case of a Class B Holder which is a partnership
and the beneficial owner of the shares of Class B Stock proposed to be
transferred, Permitted Transferees shall mean:
1. any partner of such partnership who was also a
partner of such partnership as of the Record Date;
2. any person transferring shares of Class B Stock to
such partnership after the Record Date; provided, however, that such
transfer to the partnership was made in accordance with this Section 3(h),
and further provided that such transferor may not receive shares of Class
B Stock in excess of the shares transferred to such partnership; and
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3. any Permitted Transferee of such person referred
to in Sections 3(h)(i)D.1 or 3(h)(i)D.2 above, provided that in the case
of Section 3(h)(i)D.2, the number of shares which such Permitted
Transferee is entitled to receive pursuant to this Section 3(h)(i)D.3
shall not exceed the number of shares such person would have been entitled
to receive pursuant to Section 3(h)(i)D.2.
E. In the case of a Class B Holder which is a corporation
and the beneficial owner of the shares proposed to be transferred, Permitted
Transferees shall include only:
1. any stockholder of such corporation as of the
Record Date that is generally entitled to vote in the selection of
Directors of such corporation (a "Voting Stockholder"), provided that such
corporation does not have more than 20 Voting Stockholders of record as of
the Record Date;
2. any stockholder of such corporation on the Record
Date who receives shares of Class B Stock pro rata to such Stockholder's
stock ownership in such corporation through a dividend or through a
distribution made upon liquidation of such corporation;
3. any person transferring shares of Class B Stock to
such corporation after the Record Date; provided, however, that such
transferor may not receive shares of Class B Stock in excess of the shares
transferred by the transferor to such corporation;
4. any Permitted Transferee of such stockholder or
person referred to in Sections 3(h)(i)E.1, 2 or 3 above, provided that in
the case of Section 3(h)(i)E.3 the number of shares which such Permitted
Transferee is entitled to receive pursuant to this Section 3(h)(i)E.4
shall not exceed the number of shares such person would have been entitled
to receive pursuant to Section 3(h)(i)E.3; and
5. the survivor of a merger or consolidation of such
corporation but only if all of the record and beneficial owners of the
outstanding capital stock of such survivor immediately after the merger or
consolidation are Permitted Transferees of such corporation; provided,
however, that if by reason of any change in the ownership of such stock
such surviving corporation would no longer qualify as a Permitted
Transferee, then all shares of Class B Stock then held by such surviving
corporation shall, upon receipt by such surviving corporation of a notice
from the Corporation that it has obtained actual knowledge that the
surviving corporation no longer qualifies as a Permitted Transferee, be
automatically converted into shares of Common Stock on a share-for-share
basis, and stock certificates formerly
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representing such shares of Class B Stock shall thereupon and thereafter
be deemed to represent a like number of shares of Common Stock.
F. In the case of a Class B holder who is executor or
administrator of the estate of a deceased Class B holder, guardian or
conservator of the estate of a disabled or incompetent Class B holder or who is
a trustee of the estate of a bankrupt or insolvent Class B Holder, Permitted
Transferees shall include only a Permitted Transferee of such deceased,
disabled, bankrupt or insolvent Class B Holder.
(ii) Notwithstanding anything to the contrary set forth herein,
any Class B Holder may pledge such holder's shares of Class B Stock to a pledgee
pursuant to a bona fide pledge of shares as collateral security for indebtedness
due to the pledgee, provided that such shares shall be transferred to or
registered in the name of the pledgee and shall remain subject to the provisions
of this Section 3(h). In the event of foreclosure or other similar action by the
pledgee, such pledged shares of Class B Stock may only be transferred to the
pledgor or a Permitted Transferee of the pledgor or converted into shares of
Common Stock, as the pledgee may elect or as may be governed by the applicable
pledge agreement.
(iii) For purposes of this Section 3(h):
A. the "Record Date" with respect to shares of Class B
Stock is any of the following dates: (i) the date on which such share of Class B
Stock is issued; (ii) the date on which such share is owned by New Hampshire
Oak, Inc., a Delaware corporation and the sole stockholder of the Corporation on
the date hereof, or by The General Chemical Group Inc., a Delaware corporation
and the sole stockholder of New Hampshire Oak, Inc.; and (iii) the date on which
such share is received by a stockholder of The General Chemical Group Inc. in
connection with a distribution of Common Stock and Class B Stock to stockholders
of The General Chemical Group Inc.;
B. any limitation on the number of shares of Class B Stock
permitted to be transferred imposed by this Section 3(h) shall be adjusted
appropriately for any stock splits, stock dividends or other similar
recapitalizations effected during any time period in question;
C. the term "spouse" shall refer to any then present or
former spouse;
D. the relationship of any person that is derived by or
through legal adoption shall be considered a natural one;
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E. each joint owner of shares of Class B Stock shall be
considered a Class B Holder of such shares;
F. a minor for whom shares of Class B Stock are held
pursuant to a Uniform Gifts to Minors Act or similar law shall be considered a
Class B Holder of such shares;
G. unless otherwise specified, the term "person" means
both natural persons and legal entities; and
H. the term "private foundation" shall have the meaning
set forth in Section 509(a) of the Internal Revenue Code of 1986, as amended, or
any successor statute.
(iv) Any transfer of shares of Class B Stock not permitted
hereunder shall result in the automatic conversion of the transferee's shares of
Class B Stock into an equal number of shares of Common Stock, effective as of
the date on which certificates representing such shares of Class B Stock are
presented for transfer on the stock transfer record books of the Corporation;
provided, however, that if the Corporation should determine that such shares
were not so presented for transfer within twenty (20) days after the date of
such transfer, sale, assignment or other disposition, the transfer date shall be
the actual date of such transfer, sale, assignment or other disposition, as
determined in good faith by the Board of Directors or its appointed agent. The
Corporation may, in its discretion from time to time or as a condition to the
transfer or the registration of transfer of shares of Class B Stock to a
purported Permitted Transferee, require the furnishing of such affidavits or
other proof as it deems necessary to establish that a holder of Class B Stock or
proposed transferee is a Permitted Transferee. Unless notification to the
contrary is provided at the time shares of Class B Stock are presented for
transfer, the transfer shall be presumed by the Corporation to be a transfer to
a person other than a Permitted Transferee.
(i) Registration of Class B Stock in Name of Beneficial Owner
Shares of Class B Stock shall be registered in the name(s) of the
beneficial owner(s) thereof (as hereafter defined) and not in "street" or
"nominee" names. For the purposes of Sections 3(h) and 3(i), the term
"beneficial owner(s)" of any shares of Class B Stock shall mean the person or
persons who possess the power to vote or dispose, or to direct the voting or
disposition, of such shares and "beneficially owned" shares shall refer to
shares owned by a beneficial owner. The Corporation shall note on the
certificates representing the shares of Class B Stock that there are
restrictions on transfer and registration of transfer imposed by Sections 3(h)
and 3(i).
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(j) Termination of Class B Stock
All outstanding shares of Class B Stock shall automatically, without
further act or deed on the part of this Corporation or any other person, be
converted into shares of Common Stock on a share-for-share basis at such time as
the total number of shares of Class B Stock issued and outstanding constitutes
less than 10% of the total of all shares of Common Stock and Class B Stock then
issued and outstanding. In the event of any automatic conversion of Class B
Stock pursuant to this Section 3(j), certificates formerly representing
outstanding shares of Class B Stock will thereafter be deemed to represent a
like number of shares of Common Stock.
Section 4. Undesignated Preferred Stock
Subject to any limitations prescribed by law, the Board of Directors
or any authorized committee thereof is expressly authorized to provide for the
issuance of the shares of Undesignated Preferred Stock in one or more series of
such stock, and by filing a certificate pursuant to applicable law of the State
of Delaware, to establish or change from time to time the number of shares to be
included in each such series, and to fix the designations, powers, preferences
and the relative, participating, optional or other special rights of the shares
of each series and any qualifications, limitations and restrictions thereof. Any
action by the Board of Directors or any authorized committee thereof under this
Section 4 shall require the affirmative vote of a majority of the Directors then
in office or a majority of the members of such committee. The Board of Directors
or any authorized committee thereof shall have the right to determine or fix one
or more of the following with respect to each series of Undesignated Preferred
Stock to the extent permitted by law:
(a) The distinctive serial designation and the number of shares
constituting such series;
(b) The dividend rates or the amount of dividends to be paid on
the shares of such series, whether dividend shall be cumulative and, if so, from
which date or dates, the payment date or dates for dividends, and the
participating and other rights, if any, with respect to dividends;
(c) The voting powers, full or limited, if any, of the shares of
such series;
(d) Whether the shares of such series shall be redeemable and,
if so, the price or prices at which, and the terms and conditions on which, such
shares may be redeemed;
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(e) The amount or amounts payable upon the shares of such series
and any preferences applicable thereto in the event of voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
(f) Whether the shares of such series shall be entitled to the
benefit of a sinking or retirement fund to be applied to the purchase or
redemption of such shares, and if so entitled, the amount of such fund and the
manner of its application, including the price or prices at which such shares
may be redeemed or purchased through the application of such fund;
(g) Whether the shares of such series shall be convertible into,
or exchangeable for, shares of any other class or classes or of any other series
of the same or any other class or classes of stock of the Corporation and, if so
convertible or exchangeable, the conversion price or prices, or the rate or
rates of exchange, and the adjustments thereof, if any, at which such conversion
or exchange may be made, and any other terms and conditions of such conversion
or exchange;
(h) The price or other consideration for which the shares of
such series shall be issued;
(i) Whether the shares of such series which are redeemed or
converted shall have the status of authorized but unissued shares of
Undesignated Preferred Stock (or series thereof) and whether such shares may be
reissued as shares of the same or any other class or series of stock; and
(j) Such other powers, preferences, rights, qualifications,
limitations and restrictions thereof as the Board of Directors or any authorized
committee thereof may deem advisable.
ARTICLE V
BUSINESS COMBINATION STATUTE
The Corporation hereby expressly elects not to be governed by Section
203 of the DGCL entitled "Business Combinations With Interested Stockholders".
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ARTICLE VI
STOCKHOLDER ACTION
No action that is required or permitted to be taken by the
stockholders of the Corporation at any annual or special meeting of stockholders
may be effected by written consent of stockholders in lieu of a meeting of
stockholders, unless the action to be effected by written consent of
stockholders and the taking of such action by such written consent have
expressly been approved in advance by the Board of Directors. Except as
otherwise required by law and subject to the rights of the holders of any series
of Undesignated Preferred Stock, special meetings of the stockholders of the
Corporation may be called only by (i) the Board of Directors pursuant to a
resolution approved by the affirmative vote of a majority of the Directors then
in office, (ii) the Chairman of the Board, if one is elected, or (iii) the
President. Only those matters set forth in the notice of the special meeting may
be considered or acted upon at a special meeting of stockholders of the
Corporation, unless otherwise provided by law. Advance notice of any matters or
nominations which stockholders intend to propose for action at an annual meeting
shall be given at the time and in the manner provided in the By-Laws.
ARTICLE VII
DIRECTORS
Section 1. General
The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors except as otherwise provided
herein or required by law.
Section 2. Election of Directors
Election of Directors need not be by written ballot unless the
By-Laws of the Corporation shall so provide.
Section 3. Number of Directors
The number of Directors of the Corporation shall be fixed by
resolution duly adopted from time to time by the Board of Directors or by the
affirmative vote of a majority (or such greater proportion as may be required by
law) of the total votes eligible to be cast by holders of voting stock, voting
together as a single class.
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Notwithstanding the foregoing, whenever, pursuant to the provisions
of Article IV of this Amended and Restated Certificate of Incorporation, the
holders of any one or more series of Undesignated Preferred Stock shall have the
right, voting separately as a series or together with holders of other such
series, to elect Directors at an annual or special meeting of stockholders, the
election, term of office, filling of vacancies and other features of such
directorships shall be governed by the terms of this Amended and Restated
Certificate of Incorporation and any certificate of designations applicable
thereof, and such Directors so elected shall not be divided into classes.
During any period when the holders of any series of Undesignated
Preferred Stock have the right to elect additional Directors as provided for or
fixed pursuant to the provisions of Article IV hereof, then upon commencement
and for the duration of the period during which such right continues: (i) the
then otherwise total authorized number of Directors of the Corporation shall
automatically be increased by such specified number of Directors, and the
holders of such Undesignated Preferred Stock shall be entitled to elect the
additional Directors so provided for or fixed pursuant to said provisions; and
(ii) each such additional Director shall serve until such Director's successor
shall have been duly elected and qualified, or until such Director's right to
hold such office terminates pursuant to said provisions, whichever occurs
earlier, subject to such Director's earlier death, disqualification, resignation
or removal. Except as otherwise provided by the Board in the resolution or
resolutions establishing such series, whenever the holders of any series of
Undesignated Preferred Stock having such right to elect additional Directors are
divested of such right pursuant to the provisions of such stock, the terms of
office of all such additional Directors elected by the holders of such stock, or
elected to fill any vacancies resulting from the death, resignation,
disqualification or removal of such additional Directors, shall forthwith
terminate and the total and authorized number of Directors of the Corporation
shall be reduced accordingly.
Section 4. Vacancies
Subject to the rights, if any, of the holders of any series of
Undesignated Preferred Stock to elect Directors and to fill vacancies in the
Board of Directors relating thereof, any and all vacancies in the Board of
Directors, however occurring, including, without limitation, by reason of an
increase in size of the Board of Directors, or the death, resignation,
disqualification or removal of a Director, shall be filled by the affirmative
vote of a majority of the remaining Directors then in office, even if less than
a quorum of the Board of Directors, or by the affirmative vote of a majority of
the total votes eligible to be cast by holders of voting stock, voting together
as a single class. In the event of a vacancy in the Board of Directors, the
remaining Directors, except as otherwise provided by law, may exercise the
powers of the full Board of Directors until the vacancy is filled.
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Section 5. Removal
Subject to the rights, if any, of any series of Undesignated
Preferred Stock to elect Directors and to remove any Director whom the holders
of any such stock have the right to elect, any Director (including persons
elected by Directors to fill vacancies in the Board of Directors) may be removed
from office for any reason whatsoever by the affirmative vote of at least a
majority of the total votes which would be eligible to be cast by stockholders
in the election of such Director.
ARTICLE VIII
LIMITATION OF LIABILITY
A Director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability (i) for any breach of the Director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL or (iv) for any
transaction from which the Director derived an improper personal benefit. If the
DGCL is amended after the effective date of this Amended and Restated
Certificate of Incorporation to authorize corporation action further eliminating
or limiting the personal liability of Directors, then the liability of a
Director of the Corporation shall be eliminated or limited to the fullest extent
permitted by the DGCL, as so amended.
Any repeal or modification of this Article VIII, either by the
stockholders of the Corporation or through an amendment to the DGCL, shall not
adversely affect any right or protection existing at the time of such repeal or
modification with respect to any acts or omissions occurring before such repeal
or modification of a person serving as a Director at the time of such repeal or
modification.
ARTICLE IX
AMENDMENT OF BY-LAWS
Section 1. Amendment by Directors
Except as otherwise provided by law, the By-Laws of the Corporation
may be amended or repealed by the Board of Directors.
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Section 2. Amendment by Stockholders
The By-Laws of the Corporation may be amended or repealed at any
annual meeting of stockholders, or special meeting of stockholders called for
such purpose, by the affirmative vote of at least two-thirds of the total votes
eligible to be cast on such amendment or repeal by holders of voting stock,
voting together as a single class; provided, however, that if the Board of
Directors recommends that stockholders approve such amendment or repeal at such
meeting of stockholders, such amendment or repeal shall only require the
affirmative vote of a majority of the total votes eligible to be cast on such
amendment or repeal by holders of voting stock, voting together as a single
class.
ARTICLE X
AMENDMENT OF CERTIFICATE OF INCORPORATION
The Corporation reserves the right to amend or repeal this Amended
and Restated Certificate of Incorporation in the manner now or hereafter
prescribed by statute and this Amended and Restated Certificate of
Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation. No amendment or repeal of this Amended and Restated
Certificate of Incorporation shall be made unless the same is first approved by
the Board of Directors pursuant to a resolution adopted by the Board of
Directors in accordance with Section 242 of the DGCL, and, except as otherwise
provided by law, thereafter approved by the stockholders. Whenever any vote of
the holders of voting stock is required, and in addition to any other vote of
holders of voting stock that is required by this Amended and Restated
Certificate of Incorporation or by law, the affirmative vote of a majority (or
such greater proportion as may be required by law) of the total votes eligible
to be cast by holders of voting stock with respect to such amendment or repeal,
voting together as a single class, at a duly constituted meeting of stockholders
called expressly for such purpose shall be required to amend or repeal any
provision of, or adopt any provisions of this Amended and Restated Certificate
of Incorporation; provided, however, that the affirmative vote of not less than
eighty percent (80%) of the total votes eligible to be cast by the holders of
voting stock, voting together as a single class, shall be required to amend or
repeal any of the provisions of Article VIII or this Article X of this Amended
and Restated Certificate of Incorporation.
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IN WITNESS WHEREOF, the undersigned has executed this Amended and
Restated Certificate of Incorporation this ____ day of _________, 1999.
By
------------------------------
Name:
Office:
18
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Exhibit 3.02
================================================================================
GENTEK INC.
AMENDED AND RESTATED
BY-LAWS
As Adopted on _________________, 1999
================================================================================
<PAGE>
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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ARTICLE I Stockholders................................................................1
SECTION 1. Annual Meeting..............................................................1
SECTION 2. Matters to be Considered at Annual Meetings.................................1
SECTION 3. Special Meetings............................................................3
SECTION 4. Matters to be Considered at Special Meetings................................3
SECTION 5. Notice of Meetings; Adjournments............................................4
SECTION 6. Quorum......................................................................5
SECTION 7. Voting and Proxies..........................................................5
SECTION 8. Action at Meeting...........................................................6
SECTION 9. Stockholder Lists...........................................................6
SECTION 10. Presiding Officer...........................................................6
SECTION 11. Voting Procedures and Inspectors of Elections...............................7
ARTICLE II Directors...................................................................7
SECTION 1. Powers......................................................................7
SECTION 2. Number and Terms............................................................7
SECTION 3. Director Nominations........................................................8
SECTION 4. Qualification..............................................................10
SECTION 5. Vacancies..................................................................10
SECTION 6. Removal; Resignation.......................................................10
SECTION 7. Chairman of the Board......................................................10
SECTION 8. Regular Annual Meetings....................................................10
SECTION 9. Special Meetings...........................................................11
SECTION 10. Notice of Meetings.........................................................11
SECTION 11. Quorum.....................................................................12
SECTION 12. Action at Meeting..........................................................12
SECTION 13. Action by Consent..........................................................12
SECTION 14. Manner of Participation....................................................12
SECTION 15. Committee..................................................................12
SECTION 16. Compensation of Directors..................................................13
SECTION 17. Reliance on Accounts and Reports, etc......................................13
ARTICLE III Officers...................................................................13
SECTION 1. Enumeration................................................................13
SECTION 2. Appointment................................................................13
SECTION 3. Qualification..............................................................14
SECTION 4. Tenure.....................................................................14
SECTION 5. Resignation................................................................14
SECTION 6. Removal....................................................................14
</TABLE>
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<TABLE>
<CAPTION>
Page
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<S> <C> <C>
SECTION 7. Absence or Disability......................................................14
SECTION 8. Vacancies..................................................................14
SECTION 9. President..................................................................14
SECTION 10. Vice Presidents and Assistant Vice Presidents..............................14
SECTION 11. Treasurer and Assistant Treasurers.........................................15
SECTION 12. Secretary and Assistant Secretaries........................................15
SECTION 13. Additional Officers........................................................15
SECTION 14. Powers and Duties..........................................................15
ARTICLE IV Capital Stock..............................................................16
SECTION 1. Certificates of Stock......................................................16
SECTION 2. Transfers..................................................................16
SECTION 3. Record Holders.............................................................16
SECTION 4. Record Date................................................................17
SECTION 5. Registered Stockholders....................................................17
SECTION 6. Replacement of Certificates................................................17
ARTICLE V Indemnification............................................................17
SECTION 1. Definitions................................................................17
SECTION 2. Officers...................................................................18
SECTION 3. Non-Officer Employees......................................................18
SECTION 4. Good Faith.................................................................19
SECTION 5. Successful Defense.........................................................19
SECTION 6. Prior to Final Disposition.................................................19
SECTION 7. Contractual Nature of Rights...............................................20
SECTION 8. Non-Exclusivity of Rights..................................................20
SECTION 9. Insurance..................................................................20
SECTION 10. Severability...............................................................21
ARTICLE VI Miscellaneous Provisions...................................................21
SECTION 1. Fiscal Year................................................................21
SECTION 2. Seal.......................................................................21
SECTION 3. Execution of Instruments...................................................21
SECTION 4. Voting and Transfer of Securities..........................................21
SECTION 5. Resident Agent.............................................................22
SECTION 6. Corporate Records..........................................................22
SECTION 7. Certificate................................................................22
SECTION 8. Amendment of By-Laws.......................................................22
SECTION 9. Construction...............................................................22
</TABLE>
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AMENDED AND RESTATED
BY-LAWS
OF
GENTEK INC.
(hereinafter called the "Corporation")
As adopted on _____, 1999
ARTICLE I
Stockholders
SECTION 1. Annual Meeting. The annual meeting of stockholders shall
be held at the hour, date and place within or without the United States which is
fixed by the majority of the Board of Directors, the Chairman of the Board, if
one is elected, or the President, which time, date and place may subsequently be
changed at any time by vote of the Board of Directors. If no annual meeting has
been held for a period of thirteen months after the Corporation's last annual
meeting of stockholders, a special meeting in lieu thereof may be held, and such
special meeting shall have, for the purposes of the By-Laws or otherwise, all
the force and effect of an annual meeting. Any and all references hereafter in
these By-Laws to an annual meeting or annual meetings also shall be deemed to
refer to any special meeting(s) in lieu thereof.
SECTION 2. Matters to be Considered at Annual Meetings. At any annual
meeting of stockholders (the "Annual Meeting"), only such business shall be
conducted, and only such proposals shall be acted upon, as shall have been
properly brought before such Annual Meeting. To be considered as properly
brought before an Annual Meeting, business must be: (a) specified in the notice
of meeting; (b) otherwise properly brought before the meeting by, or at the
direction of, the Board of Directors; or (c) otherwise properly brought before
the meeting by any holder of record (both as of the time notice of such proposal
is given by the stockholder as set forth below and as of the record date for the
Annual Meeting in question) of any shares of capital stock of the Corporation
entitled to vote at such Annual Meeting who complies with the requirements set
forth in this Section 2.
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In addition to any other applicable requirements, for business to be
properly brought before an Annual Meeting by a stockholder of record of any
shares of capital stock entitled to vote at such Annual Meeting, such
stockholder shall (i) give timely notice as required by this Section 2 to the
Secretary of the Corporation and (ii) be present at such meeting, either in
person or by a representative. The first Annual Meeting shall be held in the
year 2000, and for such first Annual Meeting a stockholder's notice shall be
timely if delivered to, or mailed to and received by, the Corporation at its
principal executive office not later than the close of business on the later of
(A) the 75th day prior to the scheduled date of such Annual Meeting or (B) the
15th day following the day on which public announcement of the date of such
Annual Meeting is first made by the Corporation. For all subsequent Annual
Meetings, a stockholder's notice shall be timely if delivered to, or mailed to
and received by, the Corporation at its principal executive office not less than
75 days nor more than 20 days prior to the anniversary date of the immediately
preceding Annual Meeting (the "Anniversary Date") and in any event at least 45
days before the first anniversary of the date on which the Corporation first
mailed its proxy materials for the prior year's Annual Meeting; provided,
however, that in the event the Annual Meeting is scheduled to be held on a date
more than 30 days before the Anniversary Date or more than 60 days after the
Anniversary Date, a stockholder's notice shall be timely if delivered to, or
mailed to and received by, the Corporation at its principal executive office not
later than the close of business on the later of (A) the 75th day prior to the
scheduled date of such Annual Meeting or (B) the 15th day following the day on
which public announcement of the date of such Annual Meeting is first made by
the Corporation.
For purposes of these By-Laws, "public announcement" shall mean: (i)
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or a comparable national news service; (ii) a report or other document
filed publicly with the Securities and Exchange Commission (including, without
limitation, a Form 8-K); or (iii) a letter or report sent to stockholders of
record of the Corporation at the time of the mailing of such letter or report.
A stockholder's notice to the Secretary shall set forth as to each
matter proposed to be brought before an Annual Meeting: (i) a brief description
of the business the stockholder desires to bring before such Annual Meeting and
the reasons for conducting such business at such Annual Meeting; (ii) the name
and address, as they appear on the Corporation's stock transfer books, of the
stockholder proposing such business; (iii) the class and number of shares of the
Corporation's capital stock beneficially owned by the stockholder proposing such
business; (iv) the names and addresses of the beneficial owners, if any, of any
capital stock of the Corporation registered in such stockholder's name on such
books, and the class and number of shares of the Corporation's capital stock
beneficially owned by such beneficial owners; (v) the names and addresses of
other stockholders known by the stockholder proposing such business to support
such proposal,
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and the class and number of shares of the Corporation's capital stock
beneficially owned by such other stockholders; and (vi) any material interest of
the stockholder proposing to bring such business before such meeting (or any
other stockholders known to be supporting such proposal) in such proposal.
If the Board of Directors or a designated committee thereof
determines that any stockholder proposal was not made in a timely fashion in
accordance with the provisions of this Section 2 or that the information
provided in a stockholder's notice does not satisfy the information requirements
of this Section 2 in any material respect, such proposal shall not be presented
for action at the Annual Meeting in question. If neither the Board of Directors
nor such committee makes a determination as to the validity of any stockholder
proposal in the manner set forth above, the presiding officer of the Annual
Meeting shall determine whether the stockholder proposal was made in accordance
with the terms of this Section 2. If the presiding officer determines that any
stockholder proposal was not made in a timely fashion in accordance with the
provisions of this Section 2 or that the information provided in a stockholder's
notice does not satisfy the information requirements of this Section 2 in any
material respect, such proposal shall not be presented for action at the Annual
Meeting in question. If the Board of Directors, a designated committee thereof
or the presiding officer determines that a stockholder proposal was made in
accordance with the requirements of this Section 2, the presiding officer shall
so declare at the Annual Meeting and ballots shall be provided for use at the
meeting with respect to such proposal.
Notwithstanding the foregoing provisions of these By-Laws, a
stockholder shall also comply with all applicable requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations promulgated thereunder with respect to the matters set forth in
these By-Laws, and nothing in these By-Laws shall be deemed to affect any rights
of stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to the Exchange Act and the rules and regulations promulgated
thereunder.
SECTION 3. Special Meetings. Except as otherwise required by law and
subject to the rights, if any, of the holders of any series of Preferred Stock,
special meetings of the stockholders of the Corporation may be called by (i) the
Chairman of the Board of Directors, (ii) the President or (iii) the Board of
Directors pursuant to a resolution approved by the affirmative vote of a
majority of the Directors then in office.
SECTION 4. Matters to be Considered at Special Meetings. Only those
matters set forth in the notice of the special meeting may be considered or
acted upon at a special meeting of stockholders of the Corporation, unless
otherwise provided by law.
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SECTION 5. Notice of Meetings; Adjournments. A written notice of all
Annual Meetings stating the hour, date and place of such Annual Meetings shall
be given by the Secretary or an Assistant Secretary (or other person authorized
by these By-Laws or by law) not less than ten days nor more than 60 days before
the Annual Meeting, to each stockholder entitled to vote thereat and to each
stockholder who, by law or under the Amended and Restated Certificate of
Incorporation of the Corporation (as the same may hereafter be amended and/or
restated, the "Certificate") or under these By-Laws, is entitled to such notice,
by delivering such notice to him or by mailing it, postage prepaid, addressed to
such stockholder at the address of such stockholder as it appears on the
Corporation's stock transfer books. Such notice shall be deemed to be delivered
when hand delivered to such address or deposited in the mail so addressed, with
postage prepaid.
Notice of all special meetings of stockholders shall be given in the
same manner as provided for Annual Meetings, except that the written notice of
all special meetings shall state the purpose or purposes for which the meeting
has been called.
Notice of an Annual Meeting or special meeting of stockholders need
not be given to a stockholder if a written waiver of notice is signed before or
after such meeting by such stockholder or if such stockholder attends such
meeting, unless such attendance was for the express purpose of objecting at the
beginning of the meeting to the transaction of any business because the meeting
was not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any Annual Meeting or special meeting of stockholders needs
be specified in any written waiver of notice.
The Board of Directors may postpone and reschedule any previously
scheduled Annual Meeting or special meeting of stockholders and any record date
with respect thereto, regardless of whether any notice or public disclosure with
respect to any such meeting has been sent or made pursuant to Section 2 of this
Article I or Section 3 of Article II hereof or otherwise. In no event shall the
public announcement of an adjournment, postponement or rescheduling of any
previously scheduled meeting of stockholders commence a new time period for the
giving of a stockholder's notice under Section 2 of Article I and Section 3 of
Article II of these By-Laws.
When any meeting is convened, the presiding officer may adjourn the
meeting if (a) no quorum is present for the transaction of business, (b) the
Board of Directors determines that adjournment is necessary or appropriate to
enable the stockholders to consider fully information which the Board of
Directors determines has not been made sufficiently or timely available to
stockholders, or (c) the Board of Directors determines that adjournment is
otherwise in the best interests of the Corporation. When any Annual Meeting or
special meeting of stockholders is adjourned to another hour, date or place,
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notice need not be given of the adjourned meeting other than an announcement at
the meeting at which the adjournment is taken of the hour, date and place to
which the meeting is adjourned; provided, however, that if the adjournment is
for more than 30 days, or if after the adjournment a new record date is fixed
for the adjourned meeting, notice of the adjourned meeting shall be given in
accordance with these By-Laws to each stockholder of record entitled to vote
thereat and each stockholder who, by law or under the Certificate or these
By-Laws, is entitled to such notice.
SECTION 6. Quorum. The holders of shares of voting stock representing
a majority of the voting power of the outstanding shares of voting stock issued,
outstanding and entitled to vote at a meeting of stockholders, represented in
person or by proxy at such meeting, shall constitute a quorum; but if less than
a quorum is present at a meeting, the holders of voting stock representing a
majority of the voting power present at the meeting or the presiding officer may
adjourn the meeting from time to time, and the meeting may be held as adjourned
without further notice, except as provided in Section 5 of this Article I. At
such adjourned meeting at which a quorum is present, any business may be
transacted which might have been transacted at the meeting as originally
noticed. The stockholders present at a duly constituted meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
SECTION 7. Voting and Proxies. Unless otherwise provided by law,
every holder of record of shares of stock entitled to vote at a meeting of
stockholders shall be entitled to the number of votes his or her shares are
entitled to pursuant to the Certificate that are outstanding in the name of such
holder on the books of the Corporation at the close of business on such record
date. No vote of the stockholders need to be taken by written ballot, unless
otherwise required by law or these By-Laws or by action of the Board of
Directors.
Stockholders may vote either in person or by written proxy, but no
proxy shall be voted or acted upon after three years from its date, unless the
proxy provides for a longer period. Proxies shall be filed with the Secretary of
the meeting before being voted. Except as otherwise limited therein or as
otherwise provided by law, proxies shall entitle the persons authorized thereby
to vote at any adjournment of such meeting, but they shall not be valid after
final adjournment of such meeting. A proxy with respect to stock held in the
name of two or more persons shall be valid if executed by or on behalf of any
one of them unless at or prior to the exercise of the proxy the Corporation
receives a specific written notice to the contrary from any one of them. A proxy
purporting to be executed by or on behalf of a stockholder shall be deemed
valid, and the burden of providing invalidity shall rest on the challenger. A
stockholder may authorize a valid proxy by executing a written instrument signed
by such stockholder, or by causing his or her
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signature to be affixed to such writing by any reasonable means including, but
not limited to, by facsimile signature, or by transmitting or authorizing the
transmission of a telegram, cablegram or other means of electronic transmission
to the person designated as the holder of the proxy, a proxy solicitation firm
or a like authorized agent. A stockholder may revoke any proxy which is not
irrevocable by attending the meeting and voting in person or by filing an
instrument in writing revoking the proxy or by filing another duly executed
proxy bearing a later date with the Secretary. Proxies by telegram, cablegram or
other electronic transmission must either set forth or be submitted with
information from which it can be determined that the telegram, cablegram or
other electronic transmission was authorized by the stockholder. Any copy,
facsimile telecommunication or other reliable reproduction of a writing or
transmission created pursuant to this Section 7 may be substituted or used in
lieu of the original writing or transmission for any and all purposes for which
the original writing or transmission could be used, provided that such copy,
facsimile telecommunication or other reproduction shall be a complete
reproduction of the entire original writing or transmission.
SECTION 8. Action at Meeting. When a quorum is present, any matter
before any meeting of stockholders shall be decided by the vote of a majority of
the voting power of shares of voting stock, present in person or represented by
proxy at such meeting and entitled to vote on such matter, expect where a larger
vote is required by law, by the Certificate or by these By-Laws. Any election by
stockholders shall be determined by a plurality of the votes cast, except where
a larger vote is required by law, by the Certificate or by these By-Laws. The
Corporation shall not directly or indirectly vote any shares of its own stock;
provided, however, that the Corporation may vote shares which it holds in a
fiduciary capacity to the extent permitted by law.
SECTION 9. Stockholder Lists. The Secretary or an Assistant Secretary
(or the Corporation's transfer agent or other person authorized by these By-Laws
or by law) shall prepare and make, at least ten days before every Annual Meeting
or special meeting of stockholders, a complete list of the stockholders entitled
to vote at the meeting, arranged in alphabetical order, and showing the address
of each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the hour, date and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
SECTION 10. Presiding Officer. The Chairman of the Board, if one is
elected, or if not elected or in his or her absence or disability, the
President, or in the absence or
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disability of the Chairman and the President, a presiding officer chosen by a
majority of the stockholders present in person or by proxy, shall preside at all
Annual Meetings or special meetings of stockholders and shall have the power,
among other things, to adjourn such meeting at any time and from time to time,
subject to Sections 5 and 6 of this Article I. The order of business and all
other matters of procedure at any meeting of the stockholders shall be
determined by the presiding officer.
SECTION 11. Voting Procedures and Inspectors of Elections. The Board
of Directors shall, in advance of any meeting of stockholders, appoint one or
more inspectors to act at the meeting and make a written report thereof. The
Board of Directors may designate one or more persons as alternate inspectors to
replace any inspector who fails to act. If no inspector or alternate is able to
act at a meeting of stockholders, the presiding officer shall appoint one or
more inspectors to act at the meeting. Any inspector may, but need not, be an
officer, employee or agent of the Corporation. Each inspector, before entering
upon the discharge of his or her duties, shall take and sign an oath faithfully
to execute the duties of inspector with strict impartiality and according to the
best of his or her ability. The inspectors shall perform such duties as are
required by the General Corporation Law of the State of Delaware, as amended
from time to time (the "DGCL"), including the counting of all votes and ballots.
The inspectors may appoint or retain other persons or entities to assist in the
performance of the duties of the inspectors. The presiding officer may review
all determinations made by the inspector(s), and in so doing the presiding
officer shall be entitled to exercise his or her sole judgment and discretion
and he or she shall not be bound by any determinations made by the inspector(s).
All determinations by the inspector(s) and, if applicable, the presiding officer
shall be subject to further review by any court of competent jurisdiction.
ARTICLE II
Directors
SECTION 1. Powers. Except as otherwise provided by the Certificate or
required by law, the business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors and the Board of Directors may
exercise all powers of the Corporation.
SECTION 2. Number and Terms. The number of Directors of the
Corporation shall be fixed by resolution duly adopted from time to time by the
Board of Directors or by a vote of the stockholders duly adopted at the Annual
Meeting or any special meeting called for that purpose. Expect as otherwise
provided by law, the Certificate or these
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By-laws, Directors shall hold office until their successors are elected and
qualified or until their earlier resignation or removal.
SECTION 3. Director Nominations. Nominations of candidates for
election as Directors of the Corporation at any Annual Meeting may be made only
(a) by, or at the direction of, a majority of the Board of Directors or a
Nominating Committee thereof, if one has been appointed or (b) by any holder of
record (both as of the time notice of such nomination is given by the
stockholder as set forth below and as of the record date for the Annual Meeting
in question) of any shares of the capital stock of the Corporation entitled to
vote at such Annual Meeting who complies with the timing, informational and
other requirements set forth in this Section 3. Any stockholder who has complied
with the timing, informational and other requirements set forth in this Section
3 and who seeks to make such a nomination, or his, her or its representative,
must be present in person at the Annual Meeting. Only persons nominated in
accordance with the procedures set forth in this Section 3 shall be eligible for
election as Directors at an Annual Meeting.
Nominations, other than those made by, or at the direction of, the
Board of Directors or such Nominating Committee, shall be made pursuant to
timely notice in writing to the Secretary of the Corporation as set forth in
this Section 3. For the first Annual Meeting, a stockholder's notice shall be
timely if delivered to, or mailed to and received by, the Corporation at its
principle executive office not later than the close of business on the later of
(A) the 75th day prior to the scheduled date of such Annual Meeting or (B) the
15th day following the day on which public announcement of the date of such
Annual Meeting is first made by the Corporation. For all subsequent Annual
Meetings, a stockholder's notice shall be timely if delivered to, or mailed to
and received by, the Corporation at its principal executive office not less than
75 days nor more than 120 days prior to the anniversary date of the immediately
preceding Annual Meeting (the "Anniversary Date") and in any event at least 45
days before the first anniversary of the date on which the Corporation first
mailed its proxy materials for the prior year's Annual Meeting; provided,
however, that in the event the Annual Meeting is scheduled to be held on a date
more than 30 days before the Anniversary Date or more than 60 days after the
Anniversary Date, a stockholder's notice shall be timely if delivered to, or
mailed and received by, the Corporation at its principal executive office not
later than the close of business on the later of (i) the 75th day prior to the
scheduled date of such Annual Meeting or (ii) the 15th day following the day on
which public announcement of the date of such Annual Meeting is first made by
the Corporation.
A stockholder's notice to the Secretary shall set forth as to each
person whom the stockholder proposes to nominate for election or re-election as
a Director: (i) the name, age, business address and residence address of such
person; (ii) the principal occupation or employment of such person; (iii) the
class and number of shares of the Corporation's
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capital stock which are beneficially owned by such person on the date of such
stockholder's notice; and (iv) the consent of each nominee to serve as a
Director if elected. A stockholder's notice to the Secretary shall further set
forth as to the stockholder giving such notice: (i) the name and address, as
they appear on the Corporation's stock transfer books, of such stockholder and
of the beneficial owners (if any) of the Corporation's capital stock registered
in such stockholder's name and the name and address of other stockholders known
by such stockholder to be supporting such nominee(s); (ii) the class and number
of shares of the Corporation's capital stock which are held of record,
beneficially owned or represented by proxy by such stockholder and by any other
stockholders known by such stockholder to be supporting such nominee(s) on the
record date for the Annual Meeting in question (if such date shall then have
been made publicly available) and on the date of such stockholder's notice; and
(iii) a description of all arrangements or understandings between such
stockholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
such stockholder.
If the Board of Directors or a designated committee thereof
determines that any stockholder nomination was not made in accordance with the
terms of this Section 3 or that the information provided in a stockholder's
notice does not satisfy the informational requirements of this Section 3 in any
material respect, such nomination shall not be considered at the Annual Meeting
in question. If neither the Board of Directors nor such committee makes a
determination as to whether a nomination was made in accordance with the
provisions of this Section 3, the presiding officer of the Annual Meeting shall
determine whether a nomination was made in accordance with such provisions. If
the presiding officer determines that any stockholder nomination was not made in
accordance with the terms of this Section 3 or that the information provided in
a stockholder's notice does not satisfy the informational requirements of this
Section 3 in any material respect, such nomination shall not be considered at
the Annual Meeting in question. If the Board of Directors, a designated
committee thereof or the presiding officer determines that a nomination was made
in accordance with the terms of this Section 3, the presiding officer shall so
declare at the Annual Meeting and ballots shall be provided for use at the
meeting with respect to such nominee.
Notwithstanding anything to the contrary in the second paragraph of
this Section 3, in the event that the number of Directors to be elected to the
Board of Directors of the Corporation is increased and there is no public
announcement by the corporation naming all of the nominees for Director or
specifying the size of the increased Board of Directors at least 75 days prior
to the Anniversary Date, a stockholder's notice required by this Section 3 shall
also be considered timely, but only with respect to nominees for any new
positions created by such increase, if such notice shall be delivered to, or
mailed to and received by, the Corporation at its principal executive office not
later
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than the close of business on the 15th day following the day on which such
public announcement is first made by the Corporation.
No person shall be elected by the stockholders as a Director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 3. Election of Directors at the annual meeting need not be by written
ballot, unless otherwise provided by the Board of Directors or presiding officer
at such annual meeting. If written ballots are to be used, ballots bearing the
names of all the persons who have been nominated for election as Directors at
the annual meeting in accordance with the procedures set forth in this Section
shall be provided for use at the annual meeting.
SECTION 4. Qualification. No Director need be a stockholder of the
Corporation.
SECTION 5. Vacancies. Subject to the rights, if any, of the holders
of any series of Preferred Stock to elect Directors and to fill vacancies in the
Board of Directors relating thereto, any and all vacancies in the Board of
Directors, however occurring, including, without limitation, by reason of an
increase in size of the Board of Directors, or the death, resignation,
disqualification or removal of a Director, shall be filled solely by the
affirmative vote of a majority of the remaining Directors then in office, even
if less than a quorum of the Board of Directors. Any Director appointed in
accordance with the preceding sentence shall hold office until such Director's
successor shall have been duly elected and qualified or until his or her earlier
resignation or removal. In the event of a vacancy in the Board of Directors, the
remaining Directors, except as otherwise provided by law, may exercise the
powers of the full Board of Directors until the vacancy is filled.
SECTION 6. Removal; Resignation. (a) Directors may be removed from
office in the manner provided in the Certificate.
(b) Any Director may resign by delivering his or her written
resignation to the Chairman of the Board, if one is elected, the President or
the Secretary. Such resignation shall be effective upon delivery unless it is
specified to be effective at some other time or upon the happening of some other
event.
SECTION 7. Chairman of the Board. The Chairman of the Board, if one
is elected, shall preside, when present, at all meetings of the stockholders and
of the Board of Directors. The Chairman of the Board shall have such other
powers and shall perform such other duties as the Board of Directors may from
time to time designate.
SECTION 8. Regular Annual Meetings. The regular annual meeting of the
Board of Directors shall be held, without notice, on the same date and at the
same place as
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the Annual Meeting following the close of such meeting of stockholders. Other
regular meetings of the Board of Directors may be held at such hour, date and
place as the Board of Directors may by resolution from time to time determine
without notice other than such resolution.
SECTION 9. Special Meetings. Special meetings of the Board of
Directors may be called, orally or in writing, by or at the request of a
majority of the Directors, the Chairman of the Board, if one is elected, or the
President. The person calling any such special meeting of the Board of Directors
may fix the hour, date and place thereof.
SECTION 10. Notice of Meetings. Notice of the hour, date and place of
all special meetings of the Board of Directors shall be given to each Director
by the Secretary or an Assistant Secretary, or in case of the death, absence,
incapacity or refusal of such persons, by the Chairman of the Board, if one is
elected, or the President or such other officer designated by the Chairman of
the Board, if one is elected, or the President. Notice of any special meeting of
the Board of Directors shall be given to each Director in person, by telephone,
or by telex, telecopy, telegram, or other written form of electronic
communication, sent to his or her business or home address, at least 24 hours in
advance of the meeting or by written notice mailed to his or her business or
home address, at least 48 hours in advance of the meeting. Such notice shall be
deemed to be delivered when hand delivered to such address, read to such
Director by telephone, deposited in the mail so addressed, with postage thereon
prepaid if mailed, dispatched or transmitted if telexed or telecopied, or when
delivered to the telegraph company if sent by telegram.
When any Board of Directors meeting, either regular or special, is
adjourned for 30 days or more, notice of the adjourned meeting shall be given as
in the case of an original meeting. It shall not be necessary to give any notice
of the hour, date or place of any meeting adjourned for less than 30 days or of
the business to be transacted thereat, other than an announcement at the meeting
at which such adjournment is taken of the hour, date and place to which the
meeting is adjourned.
A written waiver of notice signed before or after a meeting by a
Director and filed with the records of the meeting shall be deemed to be
equivalent to notice of the meeting. The attendance of a Director at a meeting
shall constitute a waiver of notice of such meeting, except where a Director
attends a meeting for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because such meeting is not lawfully
called or convened. Except as otherwise required by law, by the Certificate or
by these By-Laws, neither the business to be transacted at, nor the purpose of,
any meeting of the Board of Directors need be specified in the notice of waiver
of notice of such meeting.
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SECTION 11. Quorum. At any meeting of the Board of Directors, a
majority of the Directors then in office shall constitute a quorum for the
transaction of business, but if less than a quorum is present at a meeting, a
majority of the Directors present may adjourn the meeting from time to time, and
the meeting may be held as adjourned without further notice, except as provided
in Section 10 of this Article II. Any business which might have been transacted
at the meeting as originally noticed may be transacted at such adjourned meeting
at which a quorum is present.
SECTION 12. Action at Meeting. At any meeting of the Board of
Directors at which a quorum is present, a majority of the Directors present may
take any action on behalf of the Board of Directors, unless otherwise required
by law, by the Certificate or by these By-Laws.
SECTION 13. Action by Consent. Any action required or permitted to be
taken at any meeting of the Board of Directors may be taken without a meeting if
all members of the Board of Directors consent thereto in writing. Such written
consent shall be filed with the records of the meetings of the Board of
Directors and shall be treated for all purposes as a vote at a meeting of the
Board of Directors.
SECTION 14. Manner of Participation. (a) To the extent consistent
with applicable law, the Certificate and these By-Laws, the Board of Directors
may adopt such rules and regulations for the conduct of meetings of the Board of
Directors as it may deem appropriate.
(b) Directors may participate in meetings of the Board of Directors
by means of conference telephone or similar communications equipment by means of
which all Directors participating in the meeting can hear each other, and
participation in a meeting in accordance herewith shall constitute presence in
person at such meeting for purposes of these By-Laws.
SECTION 15. Committee. The Board of Directors may designate from its
number one or more committees, including, without limitation, an Executive
Committee, a Compensation Committee, a Nominating Committee and an Audit
Committee, consisting of such number of Directors as from time to time it may
fix. The Board of Directors may delegate thereto some or all of its powers
except those which by law, by the Certificate or by these By-Laws may not be
delegated. Except as the Board of Directors may otherwise determine, any such
committee may make rules for the conduct of its business, but unless otherwise
provided by the Board of Directors or in such rules, its business shall be
conducted so far as possible in the same manner as is provided by these By-Laws
for the Board of Directors. All members of such committees shall hold such
offices at the pleasure of the Board of Directors. Thereafter, members of each
such Committee may be
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designated at the annual meeting of the Board of Directors. Each member of any
such Committee shall hold office until his or her successor shall have been
designated or until he or she shall cease to be a Director, or until his or her
earlier death, resignation or removal (whether as a Director or as a member of
such Committee by the Board of Directors). Any Committee to which the Board of
Directors delegates any of its powers or duties shall keep minutes of its
meetings and shall report such proceedings to the Board of Directors at the
meeting of the Board of Directors next following any such proceedings. The Board
of Directors shall have power to rescind any action of any committee, to the
extent permitted by law, but no such rescission shall have retroactive effect.
Any such Committee may be abolished or re-designated from time to time by the
Board of Directors.
SECTION 16. Compensation of Directors. Directors shall receive such
compensation for their services as shall be determined by a majority of the
Board of Directors; provided that Directors who are employees of the Corporation
and who receive compensation for their services as employees, shall not receive
any salary or other compensation for their services as Directors of the
Corporation.
SECTION 17. Reliance on Accounts and Reports, etc. A Director, or a
member of any Committee designated by the Board of Directors, shall, in the
performance of his or her duties, be fully protected in relying in good faith
upon the records of the Corporation and upon information, opinions, reports or
statements presented to the Corporation by any of the Corporation's officers or
employees, or Committees designated by the Board of Directors, or by any other
person as to the matters the member reasonably believes are within such other
person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation.
ARTICLE III
Officers
SECTION 1. Enumeration. The officers of the Corporation shall consist
of a President, a Treasurer, a Secretary and such other officers, including,
without limitation, the Chairman of the Board of Directors and one or more Vice
Presidents (including Executive Vice Presidents or Senior Vice Presidents),
Assistant Vice Presidents, Assistant Treasurers and Assistant Secretaries, as
the Board of Directors may determine.
SECTION 2. Appointment. At the regular annual meeting of the Board
following the annual meeting of stockholders, the Board of Directors shall
appoint the President, the Treasurer and the Secretary. Other officers may be
appointed by the Board
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of Directors at such regular annual meeting of the Board of Directors or at any
other regular or special meeting of the Board of Directors.
SECTION 3. Qualification. No officer need be a stockholder or a
Director. Any person may occupy more than one office of the Corporation at any
time. Any officer may be required by the Board of Directors to give bond for the
faithful performance of his or her duties in such amount and with such sureties
as the Board of Directors may determine.
SECTION 4. Tenure. Except as otherwise provided by the Certificate or
by these By-Laws, each of the officers of the Corporation shall hold office
until his or her successor is elected and qualified or until his or her earlier
resignation or removal.
SECTION 5. Resignation. Any officer may resign by delivering his or
her written resignation to the Corporation addressed to the President or the
Secretary, and such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
SECTION 6. Removal. Except as otherwise provided by law, the Board of
Directors may remove any officer with or without cause by the affirmative vote
of a majority of the Directors then in office.
SECTION 7. Absence or Disability. In the event of the absence or
disability of any officer, the Board of Directors may designate another officer
to act temporarily in place of such absent or disabled officer.
SECTION 8. Vacancies. Any vacancy in any office, whether occurring by
death, resignation, removal or otherwise, shall be filled by the Board of
Directors.
SECTION 9. President. Unless otherwise provided by the Board of
Directors or the Certificate, the President shall be the Chief Executive Officer
of the Corporation and shall, subject to the direction of the Board of
Directors, have general supervision and control of the Corporation's business.
If there is no Chairman of the Board or if he or she is absent, the President
shall preside, when present, at all meetings of stockholders and, if a Director,
of the Board of Directors. The President shall have such other powers and
perform such other duties as the Board of Directors may from time to time
designate.
SECTION 10. Vice Presidents and Assistant Vice Presidents. Any Vice
President (including any Executive Vice President or Senior Vice President) and
any Assistant Vice President shall have such powers and shall perform such
duties as the Board of Directors or the Chief Executive Officer may from time to
time designate.
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SECTION 11. Treasurer and Assistant Treasurers. The Treasurer shall,
subject to the direction of the Board of Directors and except as the Board of
Directors or the Chief Executive Officer may otherwise provide, have general
charge of the financial affairs of the Corporation and shall cause to be kept
accurate books of account. The Treasurer shall have custody of all funds,
securities, and valuable documents of the Corporation. He or she shall have such
other duties and powers as may be designated from time to time by the Board of
Directors or the Chief Executive Officer.
Any Assistant Treasurer shall have such powers and perform such
duties as the Board of Directors or the Chief Executive Officer may from time to
time designate.
SECTION 12. Secretary and Assistant Secretaries. The Secretary shall
record all the proceedings of the meetings of the stockholders and the Board of
Directors (including committees of the Board) in books kept for that purpose. In
his or her absence from any such meeting, a temporary secretary chosen at the
meeting shall record the proceedings thereof. The Secretary shall have charge of
the stock ledger (which may, however, be kept by any transfer or other agent of
the Corporation). The Secretary shall have custody of the seal of the
Corporation, and the Secretary, or an Assistant Secretary, shall have authority
to affix it to any instrument requiring it, and, when so affixed, the seal may
be attested by his or her signature or that of an Assistant Secretary. The
Secretary shall have such other duties and powers as may be designated from time
to time by the Board of Directors or the Chief Executive Officer. In the absence
of the Secretary, any Assistant Secretary may perform his or her duties and
responsibilities.
Any Assistant Secretary shall have such powers and perform such
duties as the Board of Directors or the Chief Executive Officer may from time to
time designate.
SECTION 13. Additional Officers. The Board of Directors may appoint
such other officers and agents as it may deem appropriate, and such other
officers and agents shall hold their offices for such terms and shall exercise
such powers and perform such duties as may be determined from time to time by
the Board of Directors. The Board of Directors from time to time may delegate to
any officer or agent the power to appoint subordinate officers or agents and to
prescribe their respective rights, terms of office, authorities and duties. Any
such officer or agent may remove any such subordinate officer or Agent appointed
by him or her, for or without cause.
SECTION 14. Powers and Duties. Subject to these By-Laws and to such
limitations as the Board of Directors may from time to time prescribe, the
officers of the Corporation shall each have such powers and duties as generally
pertain to their respective officers, as well as such powers and duties as from
time to time may be conferred by the Board of Directors or the Chief Executive
Officer or as may be required by law.
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ARTICLE IV
Capital Stock
SECTION 1. Certificates of Stock. Each stockholder shall be entitled
to a certificate of the capital stock of the Corporation in such form as may
from time to time be prescribed by the Board of Directors. Such certificate
shall be signed by the Chairman of the Board of Directors, the President or a
Vice President and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary. The Board of Directors may appoint one or more
transfer agents and one or more registrars, and may require all certificates
representing shares to bear the signature of any such transfer agents or
registrars. The Corporation seal and the signatures by Corporation officers, the
transfer agent or the registrar may be facsimiles. In case any officer, transfer
agent or registrar who has signed or whose facsimile signature has been placed
on such certificate shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the Corporation
with the same effect as if he or she were such officer, transfer agent or
registrar at the time of its issue. Every certificate for shares of stock which
are subject to any restriction on transfer and every certificate issued when the
Corporation is authorized to issue more than one class or series of stock shall
contain such legend with respect thereto as is required by law.
SECTION 2. Transfers. Subject to any restrictions on transfer and
unless otherwise provided by the Board of Directors, shares of stock may be
transferred only on the books of the Corporation by the surrender to the
Corporation or its transfer agent of the certificate theretofore properly
endorsed or accompanied by a written assignment or power of attorney properly
executed, with transfer stamps (if necessary) affixed, and with such proof of
the authenticity of signature as the Corporation or its transfer agent may
reasonably require. Subject to the provisions of the Certificate and these
By-Laws, the Board of Directors may prescribe such additional rules and
regulations as it may deem appropriate relating to the issue, transfer and
registration of shares of the Corporation.
SECTION 3. Record Holders. Except as may otherwise be required by
law, by the Certificate or by these By-Laws, the Corporation shall be entitled
to treat the record holder of stock as shown on its books as the owner of such
stock for all purposes, including the payment of dividends and the right to vote
with respect thereto, regardless of any transfer, pledge or other disposition of
such stock, until the shares have been transferred on the books of the
Corporation in accordance with requirements of these By-Laws.
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It shall be the duty of each stockholder to notify the Corporation of
his or her post office address and any changes thereto.
SECTION 4. Record Date. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date: (a) in the case of determination of stockholders entitled to notice of or
to vote at any meeting of stockholders, shall, unless otherwise required by law,
not be more than 60 nor less than ten days before the date of such meeting; and
(b) in the case of any other action, shall not be more than 60 days prior to
such other action. If no record date is fixed: (i) the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held; and (ii) the record
date for determining stockholders for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto.
SECTION 5. Registered Stockholders. Prior to due surrender of a
certificate for registration of transfer, the Corporation may treat the
registered owner as the person exclusively entitled to receive dividends and
other distributions, to vote, to receive notice and otherwise to exercise all
the rights and powers of the owner of the shares represented by such
certificate, and the Corporation shall not be bound to recognize any equitable
or legal claim to or interest in such shares on the part of any other person,
whether or not the Corporation shall have notice of such claim or interests.
SECTION 6. Replacement of Certificates. In case of the alleged loss,
destruction or mutilation of a certificate of stock, a duplicate certificate may
be issued in place thereof, upon such terms as the Board of Directors may
prescribe.
ARTICLE V
Indemnification
SECTION 1. Definitions. For purposes of this Article: (a) "Officer"
means any person who serves or has served as a Director or officer of the
Corporation or in any other office filled by election or appointment by the
stockholders or the Board of Directors of
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the Corporation and any heirs, executors, administrators or personal
representatives of such person; (b) "Non-Officer Employee" means any person who
serves or has served as an employee of the Corporation, but who is not or was
not an Officer, and any heirs, executors, administrators or personal
representatives of such person; (c) "Proceeding" means any threatened, pending,
or completed action, suit or proceeding (or part thereof), including by or in
the right of the Corporation, and whether civil, criminal, administrative,
arbitrative or investigative, any appeal of such an action, suit or proceeding,
and any inquiry or investigation which could lead to such an action, suit, or
proceeding; and (d) "Expenses" means any liability fixed by a judgement, order,
decree or award in a Proceeding, any amount reasonably paid in settlement of a
Proceeding and any professional fees and other expenses and disbursements
reasonably incurred in a Proceeding or in settlement of a Proceeding, including
fines, taxes and penalties relating thereto.
SECTION 2. Officers. Except as provided in Section 4 of this Article
V, each Officer of the Corporation shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the DGCL, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader rights
than said law permitted the Corporation to provide prior to such amendment)
against any and all Expenses incurred by such Officer in connection with any
Proceeding in which such Officer is involved as a result of serving or having
served (a) as an Officer or employee of the Corporation, (b) as a Director,
officer or employee of any subsidiary of the Corporation, or (c) in any capacity
with any other corporation, organization, partnership, joint venture, trust or
other entity at the written request or direction of the Corporation, including
service with respect to employee or other benefit plans, and shall continue as
an Officer after he or she has ceased to be an Officer and shall inure to the
benefit of his or her heirs, executors, administrators and personal
representatives; provided, however, that the Corporation shall indemnify any
such Officer seeking indemnification in connection with a Proceeding initiated
by such Officer only if such Proceeding was authorized by the Board of Directors
of the Corporation.
SECTION 3. Non-Officer Employees. Except as provided in Section 4 of
this Article V, each Non-Officer Employee of the Corporation may, in the
discretion of the Board of Directors, be indemnified by the Corporation to the
fullest extent authorized by the DGCL, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader rights than said law
permitted the Corporation to provide prior to such amendment) against any or all
Expenses incurred by such Non-Officer Employee in connection with any Proceeding
in which such Non-Officer Employee is involved as a result of serving or having
served (a) as a Non-Officer Employee of the Corporation,
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(b) as a Director, officer or employee of any subsidiary of the Corporation, or
(c) any capacity with any other corporation, organization, partnership, joint
venture, trust or other entity at the request or direction of the Corporation,
including service with respect to employee or other benefit plans, and shall
continue as to a Non-Officer Employee after he or she has ceased to be a
Non-Officer Employee and shall inure to the benefit of their other heirs,
personal representatives, executors and administrators; provided, however, that
the Corporation may indemnify and such Non-Officer Employee seeking
indemnification in connection with a proceeding initiated by such Non-Officer
Employee only if such Proceeding was authorized by the Board of Directors of the
Corporation.
SECTION 4. Good Faith. No indemnification shall be provided pursuant
to this Article V to an Officer or to a Non-Officer Employee with respect to a
matter as to which such person (A) shall have been finally adjudicated in any
Proceeding not to have acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of the Corporation, and
(B) with respect to any criminal Proceeding, had reasonable cause to believe his
or her conduct was unlawful; except that in the case of a Proceeding by or in
the right of the Corporation to procure a judgment in its favor (1) such
indemnification shall be limited to expenses (including attorneys' fees)
actually and reasonably incurred by such person in the defense or settlement of
such action or suit, and (2) no indemnification shall be made in respect of any
such Proceeding as to which such Officer or Non-Officer Employee, as the case
may be, shall have been adjudged to be liable to the Corporation unless and only
to the extent that the Delaware Court of Chancery or the court in which such
action or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
Officer or Non-Officer Employee is fairly and reasonably entitled to indemnity
for such expenses which the Delaware Court of Chancery or such other court shall
deem proper. In the event that a Proceeding is compromised or settled prior to
final adjudication so as to impose any liability or obligation upon an Officer
or Non-Officer Employee, no indemnification shall be provided pursuant to this
Article V to said Officer or Non-Officer Employee with respect to a matter if
there be a determination that with respect to such matter such person (A) did
not act in good faith and in a manner he or she reasonably believed to be in, or
not opposed to, the best interest of the Corporation, and (B) with respect to
any criminal Proceeding, had reasonable cause to believe his or her conduct was
unlawful. Unless ordered by a court, the determination contemplated by the
preceding sentence shall be made with respect to a person who is an Officer at
the time of such determination (1) by a majority vote of the Directors who are
not parties to such Proceeding (the "Disinterested Directors"), even though less
than a quorum, or (2) by a majority vote of a committee of Disinterested
Directors designated by majority vote of Disinterested Directors, even though
less than a quorum, or (3) if there are no Disinterested Directors or if the
Disinterested Directors so direct, by independent legal counsel chosen by the
Board of Directors in a written opinion, or (4) by the stockholders.
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SECTION 5. Successful Defense. Notwithstanding anything in Section 4
of this Article V, to the extent that an Officer or Non-Officer Employee of the
Corporation has been successful on the merits or otherwise in defense of any
Proceeding or in defense of any claim, issue or matter therein, he or she shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith.
SECTION 6. Prior to Final Disposition. Unless otherwise determined by
(i) the Board of Directors, (ii) if more than half of the Directors are involved
in a Proceeding, by a majority vote of a committee of one or more Disinterested
Director(s) chosen in accordance with the procedures specified in Section 4 of
this Article V, or (iii) if directed by the Board of Directors, by independent
legal counsel in a written opinion, any indemnification extended to an Officer
or Non-Officer Employee pursuant to this Article V shall include payment by the
Corporation or a subsidiary of the Corporation of Expenses as the same are
incurred in defending a Proceeding in advance of the final disposition of such
Proceeding upon receipt of an undertaking by such Officer or Non-Officer
Employee seeking indemnification to repay such payment if such Officer or Non-
Officer Employee shall be adjudicated or determined not to be entitled to
indemnification under this Article V.
SECTION 7. Contractual Nature of Rights. The foregoing provisions of
this Article V shall be deemed to be a contract between the Corporation and each
Officer and Non-Officer Employee who serves in such capacity at any time while
this Article V is in effect, and any repeal or modification thereof shall not
affect any rights or obligations then existing with respect to any state of
facts then or theretofore existing or any Proceeding theretofore or thereafter
bought based in whole or in part upon any such state of facts. If a claim for
indemnification or advancement of expenses hereunder by an Officer or Non-
Officer Employee is not paid in full by the Corporation within 60 days after a
written claim for indemnification or documentation of expenses has been received
by the Corporation, such Officer or Non-Officer Employee may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim, and if successful in whole or in part, such Officer or Non-Officer
Employee shall also be entitled to be paid the expenses of prosecuting such
claim. The failure of the corporation (including its board of directors or any
committee thereof, independent legal counsel, or stockholders) to make a
determination concerning the permissibility of such indemnification or
advancement of expenses under this Article V shall not be a defense to the
action and shall not create a presumption that such indemnification or advance
is not permissible.
SECTION 8. Non-Exclusivity of Rights. The provisions in respect of
indemnification and the payment of expenses incurred in defending a proceeding
in
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advance of its final disposition set forth in this Article V shall not be
exclusive of any right which any person may have or hereafter acquire under any
statute, provision of the Certificate or these By-Laws, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding
office; provided, however, that in the event the provisions of this Article V in
any respect conflict with the terms of any agreement between the Corporation or
any of its subsidiaries and any person entitled to indemnification and the
payment of expenses under this Article V, then the provision which is more
favorable to the relevant individual shall govern.
SECTION 9. Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any Officer or Non-Officer Employee against any
liability of any character asserted again or incurred by the Corporation of any
such Officer or Non-Officer Employee, or arising out of any such status,
whether or not the Corporation would have the power to indemnify such person
against such a liability under the DGCL or the provisions of this Article V.
SECTION 10. Severability. If this Article V or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify each Director or officer and may
indemnify each employee or agent of the Corporation as to costs, charges and
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Corporation, to the fullest extent permitted by any applicable
portion of this Article V that shall not have been invalidated and to the
fullest extent permitted by applicable law.
ARTICLE VI
Miscellaneous Provisions
SECTION 1. Fiscal Year. Except as otherwise determined by the Board
of Directors, the fiscal year of the Corporation shall end on the last day of
December of each year.
SECTION 2. Seal. The Board of Directors shall have power to adopt and
alter the seal of the Corporation.
SECTION 3. Execution of Instruments. All deeds, leases, transfers,
contracts, bonds, notes and other obligations to be entered into the Corporation
in the ordinary
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course of its business without Director action may be executed on behalf of the
Corporation by the Chairman of the Board, if one is elected, the President or
the Treasurer or any other officer, employee or agent of the Corporation as the
Board of Directors or Executive Committee may authorize from time to time.
SECTION 4. Voting and Transfer of Securities. Unless the Board of
Directors otherwise provides, the Chairman of the Board, if one is elected, the
President or the Treasurer may waive notice of and act on behalf of this
Corporation, or appoint another person or persons to act as proxy or attorney in
fact for this Corporation with or without discretionary power and/or power of
substitution, at any meeting of stockholders or shareholders of any other
corporation or organization, any of whose securities are held by this
Corporation. Unless the Board of Directors otherwise provides, the Chairman of
the Board, if one is elected, the President or the Treasurer or any other
officers such officers designate may sell, transfer, endorse, and assign any
shares of stock, bonds or other securities owned by or held in the name of the
Corporation, and may make, execute and deliver in the name of the Corporation,
under its corporate seal, any instruments that may be appropriate to effect any
such sale, transfer, endorsement or assignment.
SECTION 5. Resident Agent. The Board of Directors may appoint a
resident agent upon whom legal process may be served in any action or proceeding
against the Corporation.
SECTION 6. Corporate Records. The original or attested copies of the
Certificate, By-Laws and records of all meetings of the incorporators,
stockholders and the Board of Directors and the stock transfer books, which
shall contain the names of all stockholders, their record addresses and the
amount of stock held by each, may be kept outside the State of Delaware and
shall be kept at the principal office of the Corporation, at the office of its
counsel or at an office of its transfer agent or at such other place or places
as may be designated from time to time by the Board of Directors.
SECTION 7. Certificate. All references in these By-Laws to the
Certificate shall be deemed to refer to the Amended and Restated Certificate of
Incorporation of the Corporation, as amended and in effect from time to time.
SECTION 8. Amendment of By-Laws. (a) Except as provided otherwise, by
law, these By-Laws may be amended or repealed by the Board of Directors.
(b) These By-Laws may be amended or repealed at any annual meeting of
stockholders, or special meeting of stockholders called for such purpose, by the
affirmative vote of at least two-thirds of the total votes eligible to be cast
on such amendment or repeal by holders of voting stock, voting together as a
single class;
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provided, however, that if the Board of Directors recommends that stockholders
approve such amendment or repeal at such meeting of stockholders, such amendment
or repeal shall only require the affirmative vote of a majority of the total
votes eligible to be cast on such amendment or repeal by holders of voting
stock, voting together as a single class.
SECTION 9. Construction. In the event of any conflict between the
provisions of these By-Laws as in effect from time to time and the provisions of
the Certificate as in effect from time to time, the provisions of the
Certificate shall be controlling.
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Exhibit 10.01
THE GENTEK INC.
RESTRICTED UNIT PLAN FOR
NON-EMPLOYEE DIRECTORS
1. PURPOSE
The purpose of The GenTek Inc. Restricted Unit Plan for Non-Employee
Directors (the "Plan") is to provide certain compensation to eligible directors
of GenTek Inc. (the "Corporation"), and to encourage the highest level of
director performance by providing such directors with a proprietary interest in
the Corporation's success and progress by granting them units ("Units"),
evidencing a right to receive shares of the Corporation's common stock, par
value $.0l per share ("Common Stock"). The Units shall be restricted in
accordance with the terms and conditions set forth below ("Restricted Units").
The Plan shall become effective as of April __, 1999 (the "Plan Effective
Date").
2. ADMINISTRATION
The Plan shall be administered by the Corporation's Board of
Directors (the "Board") or by a committee of the Board (the "Committee"). Any
action that may be taken by the Board, other than those specified in Sections 8
and 9, may be taken by the Committee. The Committee shall consist of not less
than two members of the Board who are "Non-Employee Directors" within the
meaning of Rule 16b-3, as amended ("Rule 16b-3"), under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or any successor provision
thereto. Questions involving eligibility for grants of Restricted Units,
entitlement to Restricted Units, or the operation of the Plan shall be referred
to the Board or the Committee. All determinations of the Board or the Committee
shall be conclusive. The Board and the Committee may obtain such advice or
assistance as it deems appropriate from persons not serving on the Board.
3. SHARES ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
Shares Issuable. The maximum number of shares of Stock reserved and
available for issuance under the Plan shall be 50,000 shares of Common Stock,
subject to adjustment as provided for in Section 9 hereof. Such number of shares
of Common Stock shall be issued to participants in the Plan at the direction of
the Committee in satisfaction of their awards under the Plan. For purposes of
the above limitation, shares of Common Stock underlying any Restricted Units
which are forfeited, cancelled, reacquired by the Company or otherwise
terminated shall be added back to the shares of Common Stock available for
issuance under the Plan. Subject to such overall limitation, shares may be
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issued up to such maximum number pursuant to any award. Shares issuable under
the Plan may be (a) authorized but unissued shares or (b) issued shares that
have been reacquired by the Company, as determined from time to time by the
Board.
4. GRANT OF UNITS
To be eligible to participate in the Plan, a director must not be an
officer or employee of the Corporation or any of its subsidiaries or any
corporation which is the direct or indirect beneficial owner of 50% or more of
the outstanding Common Stock of the Corporation. Every eligible director shall
be granted 5,000 Restricted Units, effective as of the date of such eligible
director's election to the Board or the closing date of the Company's initial
public offering of Common Stock, whichever is later. No shares of Common Stock
shall be issued at the time the award of Restricted Units is made. Each eligible
director to whom Restricted Units are granted is hereinafter referred to as a
"Participant". Each grant of Restricted Units shall be evidenced by a written
agreement duly executed and delivered by or on behalf of the Corporation and the
Participant.
5. RESTRICTED UNIT ACCOUNT
The Corporation will establish and maintain a Restricted Unit account
for and on behalf of each Participant and will record in such account the number
of Restricted Units awarded to the Participant. There will be credited to the
account of a participant an amount equal to the cash dividend paid upon one
share of Common Stock for each Unit whenever the Corporation pays a cash
dividend upon its Common Stock (such amounts being referred to herein as "Cash
Dividend Equivalents"). Cash Dividend Equivalents will accrue amounts equivalent
to interest based on the average interest rate on ten-year U.S. Treasury Notes,
as reported by the Federal Reserve Board on a weekly basis and published in The
Wall Street Journal. Interest amounts, unless otherwise determined by the Board,
will be credited quarterly in arrears based on the unweighted arithmetical
average of such Treasury Note rates published on the last day of each week in
such calendar quarter. Whenever the Corporation distributes with respect to its
Common Stock shares of the stock of a subsidiary of the Corporation, or any
other security (other than shares of Common Stock), each Participant's account
will be credited with a right to receive a number of such shares for each Unit
equal to the number of such shares distributed per share of Common Stock (such
credits being referred to herein as "Non-Cash Dividend Equivalents"). No shares
of stock will be issued to any Participant at the time they are credited to the
Participant's account.
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6. RESTRICTIONS AND VESTING
(a) Restrictions. Subject to the provisions of this Section 5 and
Section 6, the following restrictions shall apply: (i) none of the Restricted
Units, Cash Dividend Equivalents or Non-Cash Dividend Equivalents may be sold,
transferred, assigned, pledged, or otherwise encumbered or disposed of, other
than by will or the laws of descent and distribution, and (ii) the Restricted
Units and related Cash Dividend Equivalents and Non-Cash Dividend Equivalents in
a Participant's account shall not vest in the Participant unless the Participant
has remained a non-employee director of the Corporation from the date of the
award until the vesting date applicable to such Restricted Units.
(b) Vesting Award. The Restricted Units in the account of a
Participant (including Cash Dividend Equivalents and Non-Cash Dividend
Equivalents with respect to such Restricted Units) normally will vest in the
Participant as to one-fourth of such Units for each year of service as a
non-employee director of the Corporation.
(c) Termination of Directorship. Except as provided in Sections 5(d),
the balance of the Restricted Units (including Cash Dividend Equivalents and
Non-Cash Dividend Equivalents with respect to such Restricted Units) in the
account that have not vested at the time the Participant ceases to be a
non-employee director of the Corporation will thereupon immediately be
cancelled.
(d) Special Vesting. If a Participant ceases to be a non-employee
director of the Corporation by reason of death or disability, the balance of
non-vested Restricted Units (including Cash Dividend Equivalents and Non-Cash
Dividend Equivalents with respect to such Restricted Units) in his account will
vest immediately. "Disability" shall mean a medically determinable physical or
mental impairment which renders a Participant substantially unable to function
as a director of the Corporation. Such Restricted Units will be considered as
having vested as of the last day of the Participant's directorship.
7. PAYMENT OF RESTRICTED UNITS
(a) Payment Date. The value of all Restricted Units that vest in the
Participant under the provisions of the Plan (and Cash and Non-Cash Dividend
Equivalents with respect to such vested Restricted Units) will be payable by the
Corporation to the Participant or the Participant's beneficiary or estate on the
last day of the calendar month in which such Participant ceases to be a director
of the Corporation, or if such day is not a business day, then on the next
following regular business day.
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(b) Payment Deferred. If the Participant desires that payment of an
installment of vested Restricted Units (and related Cash Dividend Equivalents
and Non-Cash Dividend Equivalents) be made at some date later than the date set
forth in Section 6(a), he shall notify the Secretary of the Corporation in
writing of the date (which shall be at least one year after the date the
Participant ceases to be a director of the Corporation) on which payment shall
be made. In no event may payment occur later than the death of the Participant.
This notice, which shall be irrevocable, must be delivered to the Secretary of
the Corporation prior to the end of the calendar year preceding the calendar
year in which the installment of Restricted Units vests or in the case of the
installment of Restricted Units that vest during the director's first year of
service, within 30 days after joining the Board.
(c) Form of Payment. The Corporation will deliver to the Participant
on the payment date (i) one share of Common Stock for each Restricted Unit in
the account, (ii) cash equal to the Cash Dividend Equivalents (and amounts
equivalent to interest thereon) in the account, and (iii) shares of stock equal
to the Non-Cash Dividend Equivalents in the account.
8. REGULATORY COMPLIANCE AND LISTING
The issuance or delivery of any shares of Common Stock or other stock
may be postponed by the Corporation for such period as may be required to comply
with any applicable requirements under the Federal securities laws, any
applicable listing requirements of any national securities exchange and
requirements under any other law or regulation applicable to the issuance or
delivery of such shares, and the Corporation shall not be obligated to issue or
deliver any shares of Common Stock or other stock if the issuance or delivery of
such shares shall constitute a violation of any provision of any law or of any
regulation of any governmental authority or any national securities exchange.
The Corporation shall use reasonable efforts to comply with any such
requirements.
9. ADJUSTMENT IN EVENT OF CHANGES IN CAPITALIZATION
In the event of a recapitalization, stock split, stock dividend,
combination or exchange of shares, merger, consolidation, rights offering,
separation, reorganization or liquidation, or any other change in the corporate
structure or shares of the Corporation, the Board may make such equitable
adjustments (taking into account Section 4 hereof) in the number of Units
authorized to be granted as Restricted Units, to the class of stock covered by
such Units, or to any outstanding Restricted Units, as it may deem appropriate
in order to prevent dilution or enlargement of rights.
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10. TERMINATION OR AMENDMENT OF THE PLAN
The Board may at any time terminate the Plan and may from time to
time alter or amend the Plan or any part thereof (including any amendment deemed
necessary to ensure that the Corporation may comply with any regulatory
requirement referred to in Section 7), provided that, unless otherwise required
by law, the rights of a Participant with respect to Restricted Units granted
prior to such termination, alteration or amendment may not be impaired without
the consent of such Participant and, further, to the extent required by Rule
16b-3, any applicable law or any other governing rules or regulations, no
alteration or amendment may be made without the approval of the Corporation's
stockholders.
11. CHANGE OF CONTROL PROVISIONS
Upon the occurrence of a Change of Control as defined in this Section
11:
(a) Restrictions and conditions on all Restricted Units and related
dividend equivalents shall automatically be deemed waived, and the recipients of
such Restricted Units and related dividend equivalents shall become entitled to
receipt of the Common Stock subject to such Restricted Units and related
dividend equivalents.
(b) The Committee may at any time prior to a Change of Control waive
any restrictions or conditions of any Restricted Units and related dividend
equivalents to the extent it shall in its sole discretion determine.
(c) "Change of Control" shall mean the occurrence of any one of the
following events:
(i) any "person," as such term is used in Sections 13(d) and 14(d) of
the Act (other than the Company, any of its Subsidiaries, any trustee,
fiduciary or other person or entity holding securities under any employee
benefit plan or trust of the Company or any of its Subsidiaries, or any
record or beneficial holder of any Stock or Class B Common Stock of the
Company as of the Effective Date or any descendant, other family member,
any affiliate thereof or any trust for the benefit of any of the foregoing
(collectively, the "Excluded Holders")), together with all "affiliates"
and "associates" (as such terms are defined in Rule 12b-2 under the Act)
of such person, shall become the "beneficial owner" (as such term is
defined in Rule 13d-3 under the Act), directly or indirectly, of
securities of the Company representing (A) 35% or more of the combined
voting power of the Company's then outstanding securities having the right
to vote in an election of a majority of the Company's Board of Directors
("Voting Securities") (other than as a result of an acquisition of
securities
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directly from the Company) and (B) more of the combined voting power of
the Company's Voting Securities than is possessed by the Voting Securities
beneficially owned by the Excluded Holders; or
(ii) persons who, as of the Effective Date, constitute the Company's
Board of Directors (the "Incumbent Directors") cease for any reason,
including, without limitation, as a result of a tender offer, proxy
contest, merger or similar transaction, to constitute at least a majority
of the Board, provided that any person becoming a director of the Company
subsequent to the Effective Date whose election or nomination for election
was approved by a vote of at least a majority of the Incumbent Directors
shall, for purposes of this Plan, be considered an Incumbent Director; or
(iii) the stockholders of the Company shall approve (A) any
consolidation or merger of the Company or any Subsidiary where the
shareholders of the Company, immediately prior to the consolidation or
merger, would not, immediately after the consolidation or merger,
beneficially own (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, shares representing in the aggregate a majority of
the voting shares of the corporation issuing cash or securities in the
consolidation or merger (or of its ultimate parent corporation, if any),
(B) any sale, lease, exchange or other transfer (in one transaction or a
series of transactions contemplated or arranged by any party as a single
plan) of all or substantially all of the assets of the Company or (C) any
plan or proposal for the liquidation or dissolution of the Company.
Notwithstanding the foregoing, a "Change of Control" shall not be
deemed to have occurred for purposes of the foregoing clause (i) solely as the
result of an acquisition of securities by the Company which, by reducing the
number of shares of Stock or other Voting Securities outstanding, increases the
proportionate voting power represented by the Voting Securities beneficially
owned by any person to 35% or more of the combined voting power of all then
outstanding Voting Securities; provided, however, that if any person referred to
in the preceding clause of this sentence shall thereafter become the beneficial
owner of any additional shares of Stock or other Voting Securities (other than
pursuant to a stock split, stock dividend, or similar transaction), then a
"Change of Control" shall be deemed to have occurred for purposes of the
foregoing clause (i).
12. MISCELLANEOUS
(a) Nothing in the Plan shall be deemed to create any obligation on
the part of the Board to nominate any director for reelection by the
stockholders of the Corporation.
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(b) To the extent required by Rule 16b-3, the provisions of Section 4
shall not be amended more than once in any six-month period, other than to
comport with changes in the Internal Revenue Code of 1986, or the Employee
Retirement Income Security Act of 1974, as either of them may be amended from
time to time.
(c) The shares of Common Stock as to which Restricted Units are
granted under the Plan may be either authorized but unissued shares or issued
shares that have been or may be reacquired by the Corporation, as determined
from time to time by the Board.
(d) All questions pertaining to the construction, validity and effect
of the Plan, or to the rights of any person under the Plan, shall be determined
in accordance with the laws of the State of Delaware.
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Exhibit 10.02
THE GENTEK INC.
RETIREMENT PLAN FOR
NON-EMPLOYEE DIRECTORS
1. ELIGIBILITY
Each member of the Board of Directors (the "Board") of GenTek Inc.
(the "Corporation") who is not an employee of the Corporation or any of its
subsidiaries and who at the time of retirement from the Board, as defined in
paragraph 6(f), shall have at least five years of Eligible Service (as defined
in the next sentence) shall be eligible (an "Eligible Director") to receive a
retirement benefit under The GenTek Inc. Retirement Plan for Non-Employee
Directors (the "Plan"). Eligible Service means service as a non-employee
director on the Board from and after April __, 1999. The Plan shall become
effective as of April __, 1999.
2. AMOUNT OF BENEFIT
(a) An Eligible Director who at the time of retirement from the Board
shall have attained the mandatory retirement age for non-employee directors
(currently age 70) shall be entitled to receive for the remainder of such
Eligible Director's lifetime a retirement benefit at an annual rate equal to the
annual basic retainer in effect for non-employee directors at the time of such
retirement.
(b) An Eligible Director who at the time of retirement from the Board
shall not have attained the mandatory retirement age for non-employee directors
shall be entitled to receive, beginning on the first day of the month following
the Eligible Director's 60th birthday and payable for the remainder of such
Eligible Director's lifetime a retirement benefit at an annual rate equal to 50%
of the annual basic retainer in effect for non-employee directors at the time of
such retirement, plus an additional 10% of such retainer for each year of
Eligible Service in excess of five years, up to 100% of such retainer for ten or
more years of Eligible Service.
3. TIME OF PAYMENT
The retirement benefit determined in accordance with paragraph 2
shall be paid to an Eligible Director commencing upon such Eligible Director's
retirement from the Board or the first day of the month following the Eligible
Director's 60th birthday, if later, in installments that are as nearly equal as
possible at the same times as payments of retainers are made to non-employee
directors serving on the Board at the time of the
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payment, but in no event less frequently than quarterly. If an Eligible Director
elects to waive receipt of such payments or elects to waive all remaining
payments due to him under the Plan, such Director shall so advise the
Corporation. Such a waiver shall be irrevocable.
4. SERVICES OF ELIGIBLE DIRECTOR UPON RETIREMENT
Upon retirement from the Board, an Eligible Director eligible to
receive payments under the Plan (a) shall be available at such reasonable times
and places as the Corporation may request to render consultative services and
advice to the Corporation and (b) shall not engage in any activity in
competition with the Corporation's business. If such Eligible Director fails to
render such services and advice (unless unable to do so because of a physical or
mental impairment) or engages in such competition, the Corporation shall be
entitled, at its option after considering all the circumstances, to suspend or
terminate future payments to such Director under the Plan.
5. PAYMENTS UPON DEATH
Upon the death of an Eligible Director, such Eligible Director's
surviving lawful spouse, if any, will be entitled to receive benefits until such
spouse's death equal to 50% of (i) the amount the Eligible Director would have
been entitled to receive had such Director retired on the date of his death or
(ii) the amount the Eligible Director was receiving or eligible to receive at
the time of his death, as the case may be. If the Eligible Director dies after
his 60th birthday, payments to his surviving lawful spouse shall commence on the
first day of the month following his death. If the Eligible Director dies before
his 60th birthday, payments to his surviving spouse shall commence on the first
day of the month in which he would have attained his 60th birthday. Except as
set forth in the preceding sentence, nothing in the Plan shall create any
benefit, cause of action, right of sale, transfer, assignment, pledge,
encumbrance, or other such right in any heirs or the estate of any Eligible
Director.
6. MISCELLANEOUS
(a) The right to receive any payment under the Plan shall not be
transferable or assignable.
(b) The Corporation shall not be required to set aside funds for the
payment of its obligations under the Plan.
(c) The Board may at any time amend or terminate the Plan, provided,
that no amendment or termination shall impair the rights of an Eligible Director
to receive upon
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retirement from the Board the payments which would have been made to such
Director had the Plan not been amended or terminated (based upon such Director's
Eligible Service to the date of such amendment or termination) or the rights of
an Eligible Director (or such Director's surviving spouse) to receive any
remaining payments due under the Plan.
(d) Nothing in the Plan shall be deemed to create any obligation on
the part of the Board to nominate any Director for reelection by the
stockholders of the Corporation.
(e) The Board or a committee designated by the Board (the
"Committee") shall administer and interpret the Plan. Any questions involving
entitlement to payments under the Plan shall be referred to the Board or to the
Committee for resolution. The determination of the Board or the Committee shall
be conclusive as to any such questions. The Board and the Committee may obtain
such advice or assistance as they deem appropriate from persons not serving on
the Board or the Committee.
(f) As used in the Plan, the phrase "retirement from the Board" shall
include any termination of service (other than by death) of an Eligible Director
except any termination which the Board or the Committee determines to have
resulted from gross cause. "Gross cause" shall include fraud, misappropriation
of or other intentional misconduct damaging to the property or business of the
Corporation or any of its subsidiaries, or commission of a crime.
(g) The Corporation shall have the power to withhold, or require an
Eligible Director (or such Director's surviving spouse) to remit to the
Corporation, an amount sufficient to satisfy Federal, state and local
withholding tax requirements on any amount payable under the Plan, and the
Corporation may defer the payment of any amount until such requirements are
satisfied.
(h) All questions pertaining to the construction, validity and effect
of the Plan, or to the rights of any person under the Plan, shall be determined
in accordance with the laws of the State of Delaware.
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Exhibit 10.03
THE GENTEK INC.
PERFORMANCE PLAN
(Effective As of April __, 1999)
ARTICLE I
Introduction
The purpose of The GenTek Inc. Performance Plan is to provide incentives
to key Employees of the Corporation to enhance the value of the Corporation.
Awards will generally be earned based upon the Corporation's financial and
operating performance measured against pre-established Incentive Targets, and
will be made in cash.
ARTICLE II
Definitions
2.1. "Board" shall mean the Board of Directors of the Corporation.
2.2. "Cause" shall mean (a) the Participant's failure substantially to
perform his or her duties as an Employee; or (b) the Participant's engaging in
misconduct that is injurious to the Corporation.
2.3. "Change of Control" shall mean the occurrence of any one of the
following events:
(i) any "person," as such term is used in Sections 13(d) and 14(d) of
the Act (other than the Corporation, any of its Subsidiaries, any
trustee, fiduciary or other person or entity holding securities under any
employee benefit plan or trust of the Corporation or any of its
Subsidiaries, or any record or beneficial holder of any Stock or Class B
Common Stock of the Corporation as of the Effective Date or any
descendant, other family member, any affiliate thereof or any trust for
the benefit of any of the foregoing (collectively, the "Excluded
Holders")), together with all "affiliates" and "associates" (as such
terms are defined in Rule 12b-2 under the Act) of such person, shall
become the "beneficial owner" (as such term is defined in Rule 13d-3
under the Act), directory or indirectly, of securities of the Corporation
representing (A) 35% or more of the combined voting power of the
Corporation's
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then outstanding securities having the right to vote in an election of a
majority of the Corporation's Board of Directors ("Voting Securities")
(other than as a result of an acquisition of securities directly from the
Corporation) and (B) more of the combined voting power of the
Corporation's Voting Securities than is possessed by the Voting
Securities beneficially owned by the Excluded Holders;
(ii) persons who, as of the Effective Date, constitute the
Corporation's Board of Directors (the "Incumbent Directors") cease for
any reason, including, without limitation, as a result of a tender offer,
proxy contest, merger or similar transaction, to constitute at least a
majority of the Board, provided that any person becoming a director of
the Corporation subsequent to the Effective Date whose election or
nomination for election was approved by a vote of at least a majority of
the Incumbent Directors shall, for purposes of this Plan, be considered
an Incumbent Director; or
(iii)the stockholders of the Corporation shall approve (A) any
consolidation or merger of the Corporation or any Subsidiary where the
shareholders of the Corporation, immediately prior to the consolidation
or merger, would not, immediately after the consolidation or merger,
beneficially own (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, shares representing in the aggregate a majority
of the voting shares of the corporation issuing cash or securities in the
consolidation or merger (or of its ultimate parent corporation, if any),
(B) any sale, lease, exchange or other transfer (in one transaction or a
series of transactions contemplated or arranged by any party as a single
plan) of all or substantially all of the assets of the Corporation or (C)
any plan or proposal of the liquidation or dissolution of the
Corporation.
Notwithstanding the foregoing, a "Change of Control" shall not be deemed
to have occurred for purposes of the foregoing clause (i) solely as the result
of an acquisition of securities by the Corporation which, by reducing the number
of shares of Stock or other Voting Securities outstanding, increases the
proportionate voting power represented by the Voting Securities beneficially
owned by any person to 35% or more of the combined voting power of all then
outstanding Voting Securities; provided, however, that if any person referred to
in the preceding clause of this sentence shall thereafter become the beneficial
owner of any additional shares of Stock or other Voting Securities (other than
pursuant to a stock split, stock dividend, or similar transaction), then a
"Change of Control" shall be deemed to have occurred for purposes of the
foregoing clause (i).
2.4. "Code" shall mean the Internal Revenue Code of 1986, as amended, or
any successor statute thereto.
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2.5. "Committee" shall mean the Compensation Committee of the Board or,
if no such Committee is in office at the relevant time, the Board.
2.6. "Corporation" shall mean GenTek Inc.
2.7. "Covered Employee" shall mean each Employee who is a "covered
employee" for the relevant fiscal year of the Corporation within the meaning of
Section 162(m) of the Code.
2.8. "Deferred Award" shall mean the amount, if any, relating to an
Earned Performance Award, the payment of which has been deferred in accordance
with Article VI.
2.9. "Earned Performance Award" shall mean the portion of a Performance
Award determined to have been earned by the Participant pursuant to Section 4.3.
2.10. "Employee" shall mean an employee or the Corporation or a
Subsidiary.
2.11. "First Payment Date" shall, unless otherwise determined by the
Committee, mean the date upon which the first installment of an Earned
Performance Award shall vest pursuant to Section 4.4, which date shall occur as
soon as practicable after the completion of the audit by the Corporation's
independent public accountants of the Corporation's financial statement for the
related Performance Segment.
2.12. "Incentive Formula" shall mean, as the context so requires, the
formula determined by the Committee pursuant to Section 4.2 to be used to
determine the earned portion of each Performance Segment or the formula
determined by the Committee pursuant to Section 5.1 to be used to determine the
amount of any annual bonus earned by a Covered Employee.
2.13. "Incentive Target" shall mean one or more performance targets
established by the Committee that are based upon measures of Corporation-wide
and/or operating unit performance in any of the following areas: earnings per
share, revenues, operating cash flow, operating earnings, working capital to
sales ratio or return on capital.
2.14. "Long-Term Participant" shall mean any Employee who participates
in the Long-Term Program.
2.15. "Long-Term Program" shall mean the portion of the Plan relating to
the grant and exercise of the Performance Awards.
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2.16. "Participant" shall mean any Employee who participates in the Plan.
2.17. "Payment Date" shall mean the First Payment Date, the Second
Payment Date or the Third Payment Date, as the case may be.
2.18. "Performance Award" for any Performance Period shall mean an award
allocated by the Committee, at the time of grant, among the years in such
Performance Period.
2.19. "Performance Period" shall mean a period of one or more fiscal
years of the Corporation selected by the Committee.
2.20. "Performance Segment" with respect to any Performance Award shall
mean the portion of such Performance Award allocated by the Committee to a
particular year in the Performance Period.
2.21. "Plan" shall mean The GenTek Inc. Performance Plan.
2.22. "Second Payment Date" with respect to any Performance Period shall
mean the first anniversary of the First Payment Date with respect to such
Performance Period.
2.23. "Short-Term Program" shall mean the portion of the Plan relating to
the award and payment of the annual bonuses to Covered Employees.
2.24. "Subsidiary" shall mean any corporation in which the Corporation
owns, directly or indirectly, more than 50% of the voting power of the
outstanding voting securities of such corporation or partnership.
2.25. "Third Payment Date" with respect to any Performance Period shall
mean the second anniversary of the First Payment Date with respect to such
Performance Period.
2.26. "Total Disability" shall mean the permanent inability of an
Employee, as a result of accident or sickness, to perform any and every duty
pertaining to such Employee's occupation or employment for which the Employee is
suited by reason of the Employee's previous training, education and experience.
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ARTICLE III
Eligibility
3.1. Long-Term Program. For each Performance Period, the Committee in its
discretion shall select those key Employees who shall be Long-Term Participants.
An Employee may be selected as a Long-Term Participant for more than one
Performance Period.
3.2. Short-Term Program. For each fiscal year of the Corporation, those
Employees who are Covered Employees for such fiscal year shall participate in
the Short-Term Program.
ARTICLE IV
Awards
4.1. Grant of Awards. Prior to the beginning of the first year in a
Performance Period (or such later date selected by the Committee), the Committee
shall grant a Performance Award to each Employee designated as a Long-Term
Participant for such Performance Period. If an Employee becomes a Long-Term
Participant after the beginning of a Performance Period, the Committee shall
determine whether, and on what terms and conditions, such Employee shall be
entitled to a Performance Award for such Performance Period.
4.2. Establishment of Incentive Target and Incentive Formula. The
Committee shall determine the Incentive Target and the Incentive Formula
applicable to the Performance Segment for such year. Unless otherwise determined
by the Committee, such Incentive Formula shall specify the formula for
determining (a) the percentage (if any) of the Performance Segment that will be
earned if actual performance is less than the applicable Incentive Target and
(b) the additional amount payable to the Participant at the time the related
Performance Award becomes vested if actual performance exceeds the applicable
Incentive Target. The Committee may, at any time and from time to time, adjust
the Incentive Target and/or Incentive Formula applicable to a Performance
Segment.
4.3. Performance Awards Earned Based on Achievement of Incentive Target.
Unless otherwise determined by the Committee, a Participant's Earned Performance
Award in respect of each year in a Performance Period shall be calculated by the
Committee following the end of such year in accordance with the Incentive
Formula
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applicable to such year. Except as otherwise provided in Section 4.5 or 4.6 or
unless otherwise determined by the Committee, a Participant shall have no vested
rights whatsoever relating to all or part of any Earned Performance Award unless
the Participant is an Employee on the relevant Payment Date or Dates.
4.4. Vesting of Performance Award. A Participant shall have no rights
with regard to any portion of a Performance Award until such time as such
portion of the Performance Award becomes earned and vested. Except as otherwise
provided in this Section 4.4 or in Section 4.5 or 4.6, unless otherwise
determined by the Committee, an Earned Performance Award shall vest in
cumulative installments as follows:
<TABLE>
<CAPTION>
Percentage of
Earned
Performance Award
-----------------
<S> <C>
First Payment Date 25%
Second Payment Date 25%
Third Payment Date 50%
</TABLE>
4.5. Accelerated Vesting of Performance Award. Notwithstanding anything
to the contrary in Section 4.4, each Earned Performance Award shall vest at the
time described below:
(a) Death and Total Disability. If a Participant's employment
terminates due to the Participant's death or Total Disability following
the completion of any year during a Performance Period in which a portion
of any Performance Award held by the Participant was earned, any portion
of such Participant's Earned Performance Award that has not previously
vested shall vest immediately.
(b) Change of Control. In the event that a Change of Control occurs
while the Participant is an Employee and following the completion of the
first year during a Performance Period in which a portion of the
corresponding Performance Award was earned, the Committee in its
discretion may determine that any portion of such Participant's Earned
Performance Award that has not previously vested shall vest and that all
or any portion of any unearned Performance Award shall be earned and
vested at such time or times as the Committee may determine.
(c) Plan Termination. Unless otherwise determined by the Committee,
if the Committee elects to terminate the Plan pursuant to Section 8.1,
following the completion of any year during a Performance Period in which
a portion of any
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Performance Award was earned, the portion of each Participant's Earned
Performance Award that has not previously vested shall continue to vest
on the applicable Payment Date provided the Participant is an Employee on
such Payment Date. If the Plan is terminated, the Committee shall
determine whether uncompleted years in each Performance Period shall be
(i) completed in accordance with the Plan, (ii) terminated without
providing for any unearned portion of any Performance Award to be earned
subsequently or (iii) be terminated as of a date determined by the
Committee, in which case the achievement of each Incentive Target shall
be determined as of such date (with such adjustments to each Incentive
Target as the Committee deems appropriate) and the Earned Performance
Award shall be determined by multiplying the Performance Award by a
fraction, the numerator of which is the number of days in such year
elapsed prior to the date of Plan termination and the denominator of
which is 365.
4.6. Forfeiture of Performance Award. Except as otherwise provided in
Section 4.5, if a Participant is not an Employee on any Payment Date, the
Long-Term Participant shall forfeit all rights with respect to any unvested
Performance Award or unvested Earned Performance Award, provided that unless the
Long-Term Participant's employment is terminated for Cause, the Committee may,
in its discretion, determine that any portion of any Performance Award held by
such Long-Term Participant shall become fully earned and vested. If a Long-Term
Participant's employment is terminated for Cause (as determined by the Committee
in its sole discretion), the Long-Term Participant shall forfeit all rights with
respect to any Performance Award.
4.7. Maximum Amount Payable. The maximum amount payable as a Performance
Award under this Article IV to each Covered Employee with respect to each fiscal
year shall be established by the Committee as the time at which the Incentive
Targets are established under Section 4.2, provided that in no event shall such
amount exceed, when added to any annual bonus payable under Article V for such
fiscal year, the lesser of (i) $2,000,000 and (ii) 200% of the base salary of
such Covered Employee as in effect at the date the Incentive Targets are
established.
ARTICLE V
Annual Bonuses for Covered Employees
5.1. Establishment of Incentive Targets and Incentive Formula. The
Committee shall establish the Incentive Targets upon which, and the Incentive
Formula pursuant to which, annual bonuses shall be payable, if at all, under the
Plan to a Covered Employee with respect to the Company's performance during such
fiscal year.
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5.2. Maximum Amount Payable. The maximum amount payable as an annual
bonus under the Plan to each Covered Employee with respect to each fiscal year
shall be established by the Committee at the time at which the Incentive Targets
are established under Section 5.1, provided that in no event shall such amount
exceed, when added to any amount payable as a Performance Award under Article IV
for such fiscal year, the lesser of (i) $2,000,000 and (ii) 200% of the base
salary of such Covered Employee as in effect at the date the Incentive Targets
are established.
5.3. Payment of Awards. If following the end of a fiscal year the
Committee determines that the relevant Incentive Targets for such fiscal year
have been satisfied, in whole or in part, the Committee shall authorize the
payment to each of the Covered Employees of the amount specified for such
Covered Employee pursuant to Section 5.2 (or such lesser amount as the
Committee, in its sole discretion, shall determine to be appropriate).
5.4. No Limitation to Corporate Action. Nothing in this Article V shall
preclude the Committee or the Board, as each or either shall deem necessary or
appropriate, form authorizing the payment to the Covered Employees of
compensation outside the parameters of the Plan, including, without limitation,
base salaries, awards under any other plan of the Corporation and/or its
Subsidiaries (whether or not approved by stockholders), any other bonuses
(whether or not based on the attainment of performance objectives) and retention
or other special payments.
ARTICLE VI
Limitations on and Deferral of Payment
6.1. Election to Defer. With the consent of the Committee a Participant
who is one of "a select group of management or highly compensated employees"
within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee
Retirement Income Security Act of 1974, as amended, may designate that payment
of all or a portion of an amount of any annual bonus payable under Article V and
the amount determined by the Committee to be payable relating to a vested Earned
Performance Award, whether payable as of the First Payment Date, Second Payment
Date or Third Payment Date, be deferred (a) until a specified date, (b) until
the termination of his or her employment, or (c) with the consent of the
Committee, until such other time or times designated by the Participant pursuant
to payment options determined by the Committee. The Participant shall make such
election by furnishing written notice to the Committee, no later than the last
day of the year prior to the year in which the amount to be deferred would
otherwise have been paid, specifying the deferral period and the period (not
exceeding five years)
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over which payments shall be made after such deferral; provided, however, that
any deferral of any amount payable with respect to any portion of an Earned
Performance Award shall not be effective if the Participant is not an Employee
on the applicable Payment Date.
6.2. Interest on Deferred Amounts. Each Deferred Award shall be credited
with interest additions, based on the average interest rate on ten-year U.S.
Treasury Notes as reported by the Federal Reserve Board on a weekly average
basis and published in The Wall Street Journal. Interest additions, unless
otherwise determined by the Committee, will be credited quarterly in arrears
based on the unweighted arithmetical average of such Treasury Note rates
published on the last day of each week in such calendar quarter.
6.3. Payment. The Deferred Awards due each Participant, together with
interest thereon, shall be paid to such Participant (or, in the event of his or
her death, to his or her designated beneficiary or, if none, to his or her
estate) in a lump sum on the date, or in installments on the dates, specified in
his or her election. If payments are made in installments, the amount of each
installment shall be determined as of the day on which an installment becomes
due by dividing the aggregate value of his or her Deferred Award including
accrued interest by the number of installments remaining to be paid, including
the installment then due.
6.4. Acceleration of Distributions Due to Hardship. A Participant who
believes he or she is suffering from hardship may apply to the Committee for
payment of the Deferred Award to alleviate such hardship. Upon receipt of the
Participant's application, the Committee may direct distribution to the
Participant of such portion of his or her Deferred Award as the Committee may
determine is required to alleviate such hardship. "Hardship" shall mean a need
for financial assistance in meeting emergencies which would cause great hardship
to such Participant or members of his or her immediate family.
6.5. Claims Procedure. All claims for benefits relating to a Deferred
Award shall be filed in writing with the Committee in accordance with such
procedures as the Committee shall reasonably establish. If a claim is denied,
the Committee generally will provide the Participant with a written explanation
of the denial within ninety (90) days after the claim is filed. If the
Participant does not agree with the denial, the Participant may file with the
Committee a written request for review within sixty (60) days of the date the
Participant receives the denial. Within sixty (60) days thereafter, the
Committee will provide the Participant with a written decision on review.
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ARTICLE VII
Plan Administration
7.1. Powers of the Committee. The Committee shall have the authority,
subject to the terms of the Plan, to determine each Participant's Performance
Award and Earned Performance Award, to determine the reasonableness of awards,
to make all other determinations under the Plan and to interpret and administer
the Plan, taking into account its purposes and such other factors as the
Committee may deem relevant; provided, however, that, with respect to individual
Participants who are not Covered Employees, the Committee may delegate authority
to administer the Plan to another committee consisting of one or more members of
the Board of the Corporation (the "Employee Committee"). Unless the context
otherwise requires, the term "Committee" shall refer to both the Committee and
the Employee Committee. Neither the Committee nor any member thereof nor the
Corporation shall be liable for any action or determination made in good faith
with respect to the Plan or the rights of any Participant under the Plan.
7.2. Duties of the Committee. Subject to the limitations of the Plan, the
Committee from time to time shall establish rules for the administration of the
Plan and the transaction of its business. All actions and determinations of the
Committee shall be conclusive and binding on all Participants, their
beneficiaries and estates.
7.3. Action Taken in Good Faith. The members of the Committee and the
Corporation and its officers, directors and employees shall be entitled to rely
upon all certificates and reports made by any accountant, and upon all opinions
given by any legal counsel, and the members of the Committee, the Corporation
and its officers, directors and employees shall be fully protected in respect of
any action taken or suffered by them in good faith in reliance upon any such
certificates, reports, opinions or other advice of any accountant or legal
counsel, and all action so taken or suffered shall be conclusive upon each of
them and upon all Participants and their beneficiaries.
7.4. Indemnification. In addition to all other rights of indemnification
that may exist, the Corporation shall indemnify the Committee, the Employee
Committee, each of their respective members, and officers and employees of the
Corporation who assist in the administration and operation of the Plan for any
liability, joint and/or several, arising out of or connected with their duties
hereunder, except such liability as may arise from their gross negligence or
willful misconduct.
7.5. Expenses of Administration. The Corporation shall pay all expenses
of administration of the Plan, including, without limitation, all expenses
incurred by the
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Committee, accounting and legal fees and expenses, and any other expenses
related to the administration of the Plan.
ARTICLE VIII
Miscellaneous
8.1. Term and Amendment of the Plan. The Plan shall be effective as of
April __, 1999 and shall continue until terminated. Subject to the provisions of
Section 4.5(c), the Committee may terminate or amend the Plan in any respect at
any time by resolution of a majority of its members.
8.2. Other Deferrals. Notwithstanding anything in the Plan to the
contrary, the Committee may defer any payment to be made hereunder that, when
added to all other payments made to a Participant, would result in
non-deductible payments to the Corporation as a result of Section 280G of the
Code or any law having similar effect. In the case of the deferral of any amount
pursuant to this Section 8.2., the Committee shall provide for the payment of
interest on such amounts in accordance with Section 6.2 (except that, in the
case of a payment and deferred to avoid the effect of Section 280G, if a lower
interest rate will achieve such result, then the lower interest rate necessary
to achieve such effect at the earliest date shall be applied).
8.3. Tax Withholding. The Corporation shall have the power to withhold,
or require a Participant to remit to the Corporation, an amount sufficient to
satisfy Federal, state and local withholding tax requirements on any amount
payable under the Plan, and the Corporation may defer the payment of any amount
until such requirements are satisfied.
8.4. Inalienability of Interests. The Participant's interests under the
Plan shall not be subject to alienation, assignment, garnishment, execution or
levy of any kind, and any attempt to cause any benefits to be so subjected shall
not be recognized. The Participant shall have only the rights of a general
creditor of the Corporation with respect to his or her interests under the Plan.
8.5. Limited Effect. Neither the establishment of the Plan nor
participation in the Plan shall give a Participant the right to remain in the
employ of the Corporation.
8.6. Effect on Other Plans, Programs or Arrangements. The adoption of the
Plan shall have no effect on awards made or to be made or compensation paid or
to be paid
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pursuant to other plans, programs, or arrangements covering employees of the
Corporation, its Subsidiaries or Parent, or any predecessors or successors
thereto.
8.7. Governing Law. All questions pertaining to the construction,
validity and effect of the Plan, or to the rights of any person under the Plan,
shall be determined in accordance with the laws of the State of Delaware.
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Exhibit 10.04
GENTEK INC.
LONG-TERM INCENTIVE PLAN
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
SECTION 1. GENERAL PURPOSE OF THE PLAN: DEFINITIONS..............................................1
SECTION 2. ADMINISTRATION OF PLAN: COMMITTEE AUTHORITY TO
SELECT PARTICIPANTS AND DETERMINE AWARDS..............................................3
(a) Committee........................................................................3
(b) Powers of Committee..............................................................4
SECTION 3. STOCK ISSUABLE UNDER THE PLAN; MERGERS;
SUBSTITUTION..........................................................................5
(a) Stock Issuable...................................................................5
(b) Recapitalizations................................................................5
(c) Mergers..........................................................................6
(d) Substitute Awards................................................................6
SECTION 4. ELIGIBILITY...........................................................................7
SECTION 5. STOCK OPTIONS.........................................................................7
(a) Stock Options Granted to Employees and Key Persons...............................7
(b) Reload Options..................................................................11
(c) Non-transferability of Options..................................................11
(d) Form of Settlement..............................................................11
SECTION 6. STOCK APPRECIATION RIGHTS............................................................11
(a) Nature of Stock Appreciation Rights.............................................11
(b) Grant and Exercise of Stock Appreciation Rights.................................12
(c) Terms and Conditions of Stock Appreciation Rights...............................12
SECTION 7. RESTRICTED STOCK AWARDS..............................................................13
(a) Nature of Restricted Stock Awards...............................................13
(b) Rights as a Stockholder.........................................................13
(c) Restrictions....................................................................13
(d) Vesting of Restricted Stock.....................................................13
(e) Waiver, Deferral and Reinvestment of Dividends..................................13
SECTION 8. UNRESTRICTED STOCK AWARDS............................................................14
(a) Grant or Sale of Unrestricted Stock.............................................14
(b) Elections to Receive Unrestricted Stock in Lieu of Compensation.................14
</TABLE>
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<TABLE>
Page
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SECTION 9. PERFORMANCE SHARE AWARDS.............................................................14
(a) Nature of Performance Share Awards..............................................14
(b) Restrictions on Transfer........................................................15
(c) Rights as a Shareholder.........................................................15
(d) Termination.....................................................................15
(e) Acceleration, Waiver, Etc.......................................................15
SECTION 10. DIVIDEND EQUIVALENT RIGHTS...........................................................15
(a) Dividend Equivalent Rights......................................................15
(b) Interest Equivalents............................................................16
SECTION 11. TAX WITHHOLDING......................................................................16
(a) Payment by Participant..........................................................16
(b) Payment in Stock................................................................16
SECTION 12. TRANSFER, LEAVE OF ABSENCE, ETC. ....................................................17
SECTION 13. AMENDMENTS AND TERMINATION...........................................................17
SECTION 14. STATUS OF PLAN.......................................................................18
SECTION 15. CHANGE OF CONTROL PROVISIONS.........................................................18
SECTION 16. GENERAL PROVISIONS...................................................................20
(a) No Distribution; Compliance with Legal Requirements.............................20
(b) Delivery of Stock Certificates..................................................20
(c) Other Compensation Arrangements; No Employment Rights...........................20
SECTION 17. EFFECTIVE DATE OF PLAN...............................................................21
SECTION 18. GOVERNING LAW........................................................................21
</TABLE>
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GENTEK INC.
LONG-TERM INCENTIVE PLAN
SECTION 1.
GENERAL PURPOSE OF THE PLAN: DEFINITIONS
The name of the plan is the GenTek Inc. Long-Term Incentive Plan (the
"Plan"). The purpose of the Plan is to encourage and enable the officers,
employees, Directors and other key persons of GenTek Inc. (the "Company") and
its Subsidiaries upon whose judgment, initiative and efforts the Company largely
depends for the successful conduct of its business to acquire a proprietary
interest in the Company. It is anticipated that providing such persons with a
direct stake in the Company's welfare will assure a closer identification of
their interests with those of the Company, thereby stimulating their efforts on
the Company's behalf and strengthening their desire to remain with the Company.
The following terms shall be defined as set forth below:
"Act" means the Securities Exchange Act of 1934, as amended.
"Award" or "Awards," except where referring to a particular category
of grant under the Plan, shall include Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock
Awards, Unrestricted Stock Awards, Performance Share Awards and Dividend
Equivalent Rights.
"Board" means the Board of Directors of the Company.
"Cause" means, with respect to a Participant, (i) such Participant is
convicted of, pleads guilty or nolo contendere to, or confesses to any
felony or any act of fraud, misappropriation or embezzlement, (ii) such
Participant engages in a fraudulent act to the material damage or
prejudice of the Company or any Subsidiary or in conduct or activities
materially damaging to the property, business or reputation of the Company
or any Subsidiary, all as determined by the Committee, (iii) any material
act or omission by such Participant involving malfeasance or negligence in
the performance of such Participant's duties to the Company or any
Subsidiary to the material detriment of the Company or any Subsidiary, as
determined by the Committee, which, if capable of correction (as
determined by the Committee), has not been corrected by such person within
30 days after written notice from the Company of any such act or omission,
(iv) failure by such person to comply in any material respect with the
terms of his employment agreement, if any, or any written policies or
directives of the
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Company (including, but not limited to, policies relating to avoidance of
discrimination and harassment) as determined by the Committee, which has
not been corrected by such person within 30 days after written notice from
the Company of such failure, or (v) material breach by such person of his
noncompetition agreement with the Company, if any, as determined by the
Board; provided that in the case of a Participant who is a party to an
employment agreement with the Company or a Subsidiary that provides for a
definition of "cause", "Cause" as given in such agreement.
"Change of Control" is defined in Section 15.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.
"Committee" means the Committee of the Board referred to in Section
2.
"Disability" means an individual's inability to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or
which has lasted or can be expected to last for a continuous period of not
less than 12 months.
"Dividend Equivalent Right" means Awards granted pursuant to Section
10.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the related rules, regulations and interpretations.
"Effective Date" means the Effective Time (as defined in the ERA).
"Fair Market Value" on any given date means the last reported sale
price at which Stock is traded on such date or, if no Stock is traded on
such date, the next preceding date on which Stock was traded, as reflected
on the principal stock exchange or, if applicable, any other national
stock exchange on which the Stock is traded or admitted to trading.
"Incentive Stock Option" means any Stock Option designated and
qualified as an "incentive stock option" as defined in Section 422 of the
Code.
"Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
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"Option" or "Stock Option" means any option to purchase shares of
Stock granted pursuant to Section 5.
"Participant" means an officer, employee, director or other key
person of the Company and its Subsidiaries who has received an Award under
the Plan.
"Performance Share Award" means Awards granted pursuant to Section 9.
"Restricted Stock Award" means Awards granted pursuant to Section 7.
"Stock" means the Common Stock, par value $.01 per share, of the
Company, subject to adjustments pursuant to Section 3.
"Stock Appreciation Right" means any Award granted pursuant to
Section 6.
"Subsidiary" means any corporation or other entity (other than the
Company) in any unbroken chain of corporations or other entities,
beginning with the Company if each of the corporations or entities (other
than the last corporation or entity in the unbroken chain) owns stock or
other interests possessing 50% or more of the economic interest or the
total combined voting power of all classes of stock or other interests in
one of the other corporations or entities in the chain.
"Unrestricted Stock Award" means any Award granted pursuant to
Section 8.
SECTION 2.
ADMINISTRATION OF PLAN: COMMITTEE AUTHORITY TO
SELECT PARTICIPANTS AND DETERMINE AWARDS
(a) Committee. The Plan shall be administered by the Compensation
Committee of the Board, or any other committee so designated by the Board and
which shall consist of two or more members, at least two of whom shall be
"Non-Employee Director" within the meaning of Rule 16b-3, as promulgated under
the Act. In the absence of a committee of the Board so designated to administer
the Plan, the Plan shall be administered by the Board.
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(b) Powers of Committee. The Committee shall have the power and
authority to grant Awards consistent with the terms of the Plan, including the
power and authority:
(i) to select the officers, employees and key persons of the Company
and its Subsidiaries to whom Awards may from time to time be granted;
(ii) to determine the time or times of grant, and the extent, if any,
of Incentive Stock Options, Non-Qualified Stock Options, Stock
Appreciation Rights, Restricted Stock Awards, Unrestricted Stock Awards,
Performance Share Awards and Dividend Equivalent Rights, or any
combination of the foregoing, granted to any one or more participants;
(iii) to determine the number of shares of Stock to be covered by any
Award;
(iv) to determine and modify from time to time the terms and
conditions, including restrictions, not inconsistent with the terms of the
Plan, of any Award, which terms and conditions may differ among individual
Awards and participants, and to approve the form of written instruments
evidencing the Awards;
(v) to accelerate at any time the exercisability or vesting of all or
any portion of any Award;
(vi) subject to the provisions of Section 5(a)(iii), to extend at any
time the period in which Stock Options may be exercised;
(vii) to determine at any time whether, to what extent, and under
what circumstances Stock and other amounts payable with respect to an
Award shall be deferred either automatically or at the election of the
participant and whether and to what extent the Company shall pay or credit
amounts constituting interest (at rates determined by the Committee) or
dividends or deemed dividends on such deferrals; and
(viii) at any time to adopt, alter and repeal such rules, guidelines
and practices for administration of the Plan and for its own acts and
proceedings as it shall deem advisable; to interpret the terms and
provisions of the Plan and any Award (including related written
instruments); to make all determinations it deems advisable for the
administration of the Plan; to decide all disputes arising in connection
with the Plan; and to otherwise supervise the administration of the Plan.
Any decision or action taken by the Board or the Committee, as the
case may be, arising out of or in connection with the construction,
administration interpretation and
4
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effect of the Plan and of its rules and regulations, or of any Award, shall, to
the fullest extent permitted by law, be within its sole and absolute discretion
and shall be conclusive and binding on the Company, any Subsidiary, all
Participants and any person claiming under or through any Participant.
SECTION 3.
STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
(a) Stock Issuable. Subject to Section 3(b), the number of shares of
Stock reserved and available for issuance under the Plan shall be 1,600,000
shares. For purposes of this limitation, the shares of Stock underlying any
Awards which are forfeited, canceled, reacquired by the Company, satisfied
without the issuance of Stock or otherwise terminated (other than by exercise)
shall be added back to the shares of Stock available for issuance under the
Plan. Subject to such overall limitation, shares of Stock may be issued up to
such maximum number pursuant to any type or types of Award. The shares available
for issuance under the Plan may be authorized but unissued shares of Stock
or shares of Stock reacquired by the Company. In the case of any Stock
Appreciation Rights that are granted in tandem with any Options, upon the
exercise of a Stock Appreciation Right settled in shares of Stock, the right to
purchase an equal number of shares of Stock covered by a related Stock Option,
shall be deemed to have been surrendered and will no longer be exercisable, and
said number of shares of Stock shall no longer be available under the Plan.
(b) Recapitalizations. If, through or as a result of any merger,
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization (including, but not limited to, an
extraordinary all-cash dividend), reclassification, stock dividend, stock split,
reverse stock split or other similar transaction, the outstanding shares of
Stock are increased or decreased or are exchanged for a different number or kind
of shares or other securities of the Company, or additional shares or new or
different shares or other securities of the Company or other non-cash assets are
distributed with respect to such shares of Stock or other securities, such that
an adjustment is required to preserve, or prevent the enlargement of the rights
and obligations of the Participant, the Committee shall make an appropriate or
proportionate adjustment in (i) the maximum number of shares reserved for
issuance under the Plan, (ii) the number and kind of shares or other securities
subject to any then outstanding Awards under the Plan, and (iii) the grant,
exercise or conversion price with respect to the foregoing. No fractional shares
of Stock shall be issued under the Plan resulting from any such adjustment, but
the Committee in its discretion may make a cash payment in lieu of fractional
shares.
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(c) Mergers. Upon consummation of a consolidation or merger or sale
of all or substantially all of the assets of the Company in which outstanding
shares of Stock are exchanged for securities, cash or other property of an
unrelated corporation or business entity or in the event of a liquidation of the
Company, the Board, or the board of directors of any corporation assuming the
obligations of the Company, may, in its discretion, take any one or more of the
following actions, as to outstanding Stock Options and Stock Appreciation
Rights: (i) provide that such Stock Options shall be assumed or equivalent
options shall be substituted, by the acquiring or succeeding corporation (or an
affiliate thereof), (ii) upon written notice to the optionees, provide that all
unexercised Stock Options and Stock Appreciation Rights will terminate
immediately prior to the consummation of such transaction unless exercised by
the optionee within a specified period following the date of such notice,
and/or (iii) in the event of a business combination under the terms of which
holders of the Stock of the Company will receive upon consummation thereof a
cash payment for each share surrendered in the business combination, make or
provide for a cash payment to the optionees equal to the difference between (A)
the value (as determined by the Committee) of the consideration payable per
share of Stock pursuant to the business combination (the "Merger Price") times
the number of shares of Stock subject to such outstanding Stock Options and
Stock Appreciation Rights (to the extent then exercisable at prices not in
excess of the Merger Price) and (B) the aggregate exercise price of all such
outstanding Stock Options and Stock Appreciation Rights in exchange for the
termination of such Stock Options and Stock Appreciation Rights.
(d) Substitute Awards. The Committee may grant Awards under the Plan
in substitution for stock and stock based awards held by employees of another
corporation who become employees of the Company or a Subsidiary as the result of
a merger or consolidation of the employing corporation with the Company or a
Subsidiary or the acquisition by the Company or a Subsidiary of property or
stock of the employing corporation. The Committee may direct that the substitute
awards be granted on such terms and conditions as the Committee considers
appropriate in the circumstances.
(e) Conversion Awards. Pursuant to the Employee Benefits Agreement,
dated as of April, 1999, by and between General Chemical Group and the Company
(the "EBA") Conversion Awards (as defined in the EBA) shall be granted to
holders of awards under the General Chemical Group, Inc. 1996 Stock Option and
Incentive Plan, as provided and subject to the terms and conditions of the EBA.
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SECTION 4.
ELIGIBILITY
Each full or part-time officers, director and other employees and key
person of the Company and its Subsidiaries who is or may be responsible for or
contribute to the management, growth or profitability of the Company and its
Subsidiaries, as are selected from time to time by the Committee, in its sole
discretion. Independent Directors are also eligible to participate in the Plan
but only to the extent provided in Section 5(c) and Sections 8(c) and (d) below.
SECTION 5.
STOCK OPTIONS
Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.
Stock Options granted under the Plan may be either Incentive Stock
Options or Non-Qualified Stock Options. Incentive Stock Options may be granted
only to employees of the Company or any Subsidiary that is a "subsidiary
corporation" within the meaning of Section 424(f) of the Code. To the extent
that any Option does not qualify as an Incentive Stock Option, it shall be
deemed a Non-Qualified Stock Option.
No Incentive Stock Option shall be granted under the Plan after the
tenth anniversary of the Effective Date.
(a) Stock Options Granted to Employees and Key Persons. The Committee
in its discretion may grant Stock Options to eligible employees and key persons
of the Company or any Subsidiary. Stock Options granted pursuant to this Section
5(a) shall be subject to the following terms and conditions and shall contain
such additional terms and conditions, not inconsistent with the terms of the
Plan, as the Committee shall deem desirable:
(i) Exercise Price. The exercise price per share for the Stock
covered by a Stock Option granted pursuant to this Section 5(a) shall be
determined by the Committee at the time of grant but shall not be less
than 100% of the Fair Market Value on the date of grant in the case of
Incentive Stock Options, or 50% of the Fair Market Value on the date of
grant, in the case of Non-Qualified Stock Options. If an employee owns or
is deemed to own (by reason of the attribution rules applicable
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under Section 424(d) of the Code) more than 10% of the combined voting
power of all classes of stock of the Company or any parent or subsidiary
corporation and an Incentive Stock Option is granted to such employee, the
option price of such Incentive Stock Option shall be not less than 110% of
the Fair Market Value on the grant date.
(ii) Grant of Discount Options in Lieu of Cash Bonus. Upon the
request of an eligible employee and with the consent of the Committee, and
upon such terms and conditions as the Committee determines appropriate,
such employee may elect each calendar year to receive a Non-Qualified
Stock Option in lieu of any cash bonus to which he may become entitled
during the following calendar year pursuant to any other plan or
arrangement of the Company, but only if such employee makes an irrevocable
election to waive receipt of all or a portion of such cash bonus. Such
election shall be made on or before the date set by the Committee which
date shall be no later than 15 days (or such shorter period permitted by
the Committee) preceding January 1 of the calendar year for which the cash
bonus would otherwise be paid. A Non-Qualified Stock Option shall be
granted to each employee who made such an irrevocable election on the date
the waived cash bonus would otherwise be paid. The number of shares of
Stock subject to the Stock Option shall be determined by dividing the
amount of the waived cash bonus by the difference between the Fair Market
Value of the Stock on the date the Stock Option is granted and the
exercise price per Stock Option. The Stock Option shall be granted for
whole number of shares so determined; the value of any fractional share
shall be paid in cash.
(iii) Option Term. The term of each Stock Option shall be fixed by
the Committee, but no Incentive Stock Option shall be exercisable more
than ten years after the date the option is granted. If an employee owns
or is deemed to own (by reason of the attribution rules of Section 424(d)
of the code) more than 10% of the combined voting power of all classes of
stock of the Company or any Subsidiary or parent corporation and an
Incentive Stock Option is granted to such employee, the term of such
option shall be no more than five years from the date of grant.
(iv) Exercisability: Rights of a Stockholder. Stock Options shall
become vested and exercisable at such time or times, whether or not in
installments, as shall be determined by the Committee at or after the
grant date. The Committee may at any time accelerate the exercisability of
all or any portion of any Stock Option. An optionee shall have the rights
of a stockholder only as to shares acquired upon the exercise of a Stock
Option and not as to unexercised Stock Options.
(v) Method of Exercise. Stock Options may be exercised in whole or in
part, by giving written notice of exercise to the Company, specifying the
number of shares
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to be purchased. Payment of the purchase price may be made by one or more
of the following methods:
(A) In cash, by certified or bank check or other instrument
acceptable to the Committee;
(B) In the form of shares of Stock that are not then subject
to restrictions under any plan and that have been held by the
optionee for at least six months, if permitted by the Committee in
its discretion. Such surrendered shares shall be valued at Fair
Market Value on the exercise date; or
(C) By the optionee delivering to the Company a properly
executed exercise notice together with irrevocable instructions to a
broker to promptly deliver to the Company cash or a check payable and
acceptable to the Company to pay the purchase price; provided that in
the event the optionee chooses to pay the purchase price as so
provided, the optionee and the broker shall comply with such
procedures and enter into such agreements of indemnity and other
agreements as the Committee shall prescribe as a condition of such
payment procedure.
Payment instruments will be received subject to collection. The delivery
of certificates representing the shares of Stock to be purchased pursuant
to the exercise of a Stock Option will be contingent upon receipt from the
optionee (or a purchaser acting in his stead in accordance with the
provisions of the Stock Option) by the Company of the full purchase price
for such shares and the fulfillment of any other requirements contained in
the Stock Option or applicable provisions of laws.
(vi) Termination by Reason of Death. Any Stock Option held by an
optionee whose employment by (or other business relationship with) the
Company and its Subsidiaries is terminated by reason of death may
thereafter be exercised by the legal representative or legatee of the
optionee, to the extent it was exercisable on the date of death for a
period of 12 months (or such longer period as the Committee shall specify
at any time) from the date of death, or until the expiration of the stated
term of the Option, if earlier. To the extent that any portion of any
Stock Option is not exercisable on the date of death, such portion of the
Stock Option shall immediately terminate and be of no force or effect.
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(vii) Termination by Reason of Disability.
(A) Any Stock Option held by an optionee whose employment by
(or other business relationship with) the Company and its
Subsidiaries is terminated by reason of Disability may thereafter be
exercised, to the extent it was exercisable on the date of
termination of employment (or business relationship) for a period of
12 months (or such longer period as the Committee shall specify at
any time) from the date of such termination of employment (or
business relationship), or until the expiration of the stated term
of the Option, if earlier. To the extent that any portion of any
Stock Option is not exercisable on the date of such termination of
employment (or business relationship), such portion of the Stock
Option shall immediately terminate and be of no force or effect.
(B) The Committee shall have sole authority and discretion to
determine whether a participant's employment (or business
relationship) has been terminated by reason of Disability.
(C) Except as otherwise provided by the Committee at any time,
the death of an optionee during the period provided in this Section
5(a)(vii) for the exercise of a Stock Option shall extend such period
for 12 months from the date of death, subject to termination on the
expiration of the stated term of the Option, if earlier.
(viii) Termination for Cause. If any optionee's employment by (or
business relationship with) the Company and its Subsidiaries is terminated
for Cause, any Stock Option held by such optionee, including any Stock
Option that is immediately exercisable at the time of such termination,
shall immediately terminate and be of no further force and effect;
provided, however, that the Committee may, in its sole discretion, provide
that such Stock Option can be exercised for a period of up to 30 days from
the date of termination of employment (or business relationship), or until
the expiration of the stated term of the Option, if earlier.
(ix) Other Termination. Unless otherwise determined by the Committee,
if an optionee's employment by (or business relationship with) the Company
and its Subsidiaries terminates any reason other than death, Disability or
for Cause, any Stock Option held by such optionee may thereafter be
exercised to the extent it was exercisable on the date of termination of
employment (or business relationship), for three months (or such longer
period as the Committee shall specify at any time) from the date of
termination of employment (or business relationship), or until the
expiration of the stated term of the Option, if earlier. To the extent
that any portion of any Stock Option is not exercisable on the date of
such termination of employment (or
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business relationship), such portion of the Stock Option shall immediately
terminate and be of no force or effect.
(x) Annual Limit on Incentive Stock Options. To the extent required
for "incentive stock option" treatment under Section 422 of the Code, the
aggregate Fair Market Value (determined as of the time of grant) of the
shares of Stock with respect to which Incentive Stock Options granted
under this Plan and any other plan of the Company or its parent and
subsidiary corporations become exercisable for the first time by an
optionee during any calendar year shall not exceed $100,000. To the extent
that any Stock Option exceeds this limit, it shall constitute a
Non-Qualified Stock Option.
(b) Reload Options. At the discretion of the Committee, Options
granted under Section 5(a) may include a "reload" feature pursuant to which an
optionee exercising an option by the delivery of a number of shares of Stock in
accordance with Section 5(a)(v)(B) hereof would automatically be granted an
additional Option (with an exercise price equal to the Fair Market Value of the
Stock on the date the additional Option is granted and with the same expiration
date as the original Option being exercised, and with such other terms as the
Committee may provide) to purchase that number of shares of Stock equal to the
number delivered to exercise the original Option.
(c) Non-transferability of Options. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee. Notwithstanding the foregoing, the
Committee may provide in an option agreement that the optionee may transfer,
without consideration for the transfer, his Stock Options to members of his
immediate family, to trusts for the benefit of such family members and to
partnerships in which such family members are the only partners.
(d) Form of Settlement. Shares of Stock issued upon exercise of a
Stock Option shall be free of all restrictions under the Plan, except as
otherwise provided in the Plan.
SECTION 6.
STOCK APPRECIATION RIGHTS
(a) Nature of Stock Appreciation Rights. A Stock Appreciation Right
is an Award entitling the recipient to receive an amount in cash or shares of
Stock or a combination thereof having a value equal to the excess of the Fair
Market Value of the
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Stock on the date of exercise over the exercise price per Stock Appreciation
Right set by the Committee at the time of grant, which price shall not be less
than 50% of the Fair Market Value of the Stock on the date of grant (or over the
option exercise price per share, if the Stock Appreciation Right was granted in
tandem with a Stock Option) multiplied by the number of shares of Stock with
respect to which the Stock Appreciation Right shall have been exercised, with
the Committee having the right to determine the form of payment.
(b) Grant and Exercise of Stock Appreciation Rights. Stock
Appreciation Rights may be granted to any eligible employee or key person of the
Company or any Subsidiary by the Committee in tandem with, or independently of,
any Stock Option granted pursuant to Section 5 of the Plan. In the case of a
Stock Appreciation Right granted in tandem with a Non-Qualified Stock Option,
such Stock Appreciation Right may be granted either at or after the time of the
grant of such Option. In the case of a Stock Appreciation Right granted in
tandem with an Incentive Stock Option, such Stock Appreciation Right may be
granted only at the time of the grant of such Option.
A Stock Appreciation Right or applicable portion thereof granted in
tandem with a Stock Option shall terminate and no longer be exercisable upon the
termination or exercise of the related Option.
(c) Terms and Conditions of Stock Appreciation Rights. Stock
Appreciation Rights shall be subject to such terms and conditions as shall be
determined from time to time by the Committee, subject to the following:
(i) Stock Appreciation Rights granted in tandem with Options shall be
exercisable at such time or times and to the extent that the related Stock
Options shall be exercisable.
(ii) Upon exercise of a Stock Appreciation Right, the applicable
portion of any related Option shall be surrendered.
(iii) Stock Appreciation Rights granted in tandem with an Option
shall be transferable only when and to the extent that the underlying
Option would be transferable. Stock Appreciation Rights not granted in
tandem with an Option shall not be transferable otherwise than by will or
the laws of descent or distribution. All Stock Appreciation Rights shall
be exercisable during the participant's lifetime only by the participant
or the participant's legal representative.
(iv) No Stock Appreciation Right may be exercised for a period of six
months after the date of grant.
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SECTION 7.
RESTRICTED STOCK AWARDS
(a) Nature of Restricted Stock Awards. The Committee may grant
Restricted Stock Awards to any employee or key person of the Company or any
Subsidiary. A Restricted Stock Award is an Award entitling the recipient to
acquire, at par value or such other purchase price determined by the Committee,
shares of Stock subject to such restrictions and conditions as the Committee may
determine at the time of grant ("Restricted Stock"). Conditions may be based on
continuing employment (or other business relationship) and/or achievement of
pre-established performance goals and objectives.
(b) Rights as a Stockholder. Upon execution of a written instrument
setting forth the Restricted Stock Award and paying any applicable purchase
price, a participant shall have the rights of a stockholder with respect to the
voting of the Restricted Stock, subject to such conditions contained in the
written instrument evidencing the Restricted Stock Award. Unless the Committee
shall otherwise determine, certificates evidencing the Restricted Stock shall
remain in the possession of the Company until such Restricted Stock is vested as
provided in Section 7(d) below.
(c) Restrictions. Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided herein or in the written instrument evidencing the
Restricted Stock Award. If a participant's employment (or other business
relationship) with the Company and its Subsidiaries terminates for any reason
whatsoever, the Company shall have the right to repurchase Restricted Stock with
respect to which conditions have not lapsed at their purchase price, or to
require forfeiture of such shares to the Company if acquired at no cost, from
the participant or the participant's legal representative.
(d) Vesting of Restricted Stock. The Committee at the time of grant
shall specify the date or dates and/or the attainment of pre-established
performance goals, objectives and other conditions on which the
non-transferability of the Restricted Stock and the Company's right of
repurchase or forfeiture shall lapse. Subsequent to such date or dates and/or
the attainment of such pre-established performance goals, objectives and other
conditions, the shares on which all restrictions have lapsed shall no longer be
Restricted Stock and shall be deemed "vested."
(e) Waiver, Deferral and Reinvestment of Dividends. The written
instrument evidencing the Restricted Stock Award may require or permit the
immediate payment, waiver, deferral or investment of dividends paid on the
Restricted Stock.
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SECTION 8.
UNRESTRICTED STOCK AWARDS
(a) Grant or Sale of Unrestricted Stock. The Committee may, in its
sole discretion, grant (or sell at a purchase price determined by the Committee)
an Unrestricted Stock Award to any employee or key person of the Company or any
Subsidiary, pursuant to which such employee or key person may receive shares of
Stock free of any restrictions ("Unrestricted Stock") under the Plan.
Unrestricted Stock Awards may be granted or sold as described in the preceding
sentence in respect of past services or other valid consideration, or in lieu
of any cash compensation due to such employee or key person.
(b) Elections to Receive Unrestricted Stock in Lieu of Compensation.
Upon the request of an employee or a key person of the Company or any Subsidiary
and with the consent of the Committee, and upon such terms and conditions as the
Committee determines appropriate each employee or key person may, pursuant to an
irrevocable written election delivered to the Company no later than the date or
dates specified by the Committee, receive a portion of the cash compensation
otherwise due to such employee or key person in the form of shares of
Unrestricted Stock (valued at Fair Market Value on the date or dates the cash
compensation would otherwise be paid).
SECTION 9.
PERFORMANCE SHARE AWARDS
(a) Nature of Performance Share Awards. A Performance Share Award is
an Award entitling the recipient to acquire shares of Stock upon the attainment
of specified performance goals. The Committee may make Performance Share Awards
independent of or in connection with the granting of any other Award under the
Plan. Performance Share Awards may be granted under the Plan to any employee or
key person of the Company or any Subsidiary, including those who qualify for
awards under other performance plans of the Company. The Committee in its sole
discretion shall determine whether and to whom Performance Share Awards shall be
made, the performance goals applicable under each such Award, the periods during
which performance is to be measured, and all other limitations and conditions
applicable to the awarded Performance Shares; provided, however, that the
Committee may rely on the performance goals and other standards applicable to
other performance unit plans of the Company in setting the standards for
Performance Share Awards under the Plan.
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(b) Restrictions on Transfer. Performance Share Awards and all rights
with respect to such Awards may not be sold, assigned, transferred, pledged or
otherwise encumbered.
(c) Rights as a Shareholder. A participant receiving a Performance
Share Award shall have the rights of a shareholder only as to shares actually
received by the participant under the Plan and not with respect to shares
subject to the Award but not actually received by the participant. A participant
shall be entitled to receive a stock certificate evidencing the acquisition of
shares of Stock under a Performance Share Award only upon satisfaction of all
conditions specified in the written instrument evidencing the Performance Share
Award (or in a performance plan adopted by the Committee).
(d) Termination. Except as may otherwise be provided by the Committee
at any time prior to termination of employment (or other business relationship),
a participant's rights in all Performance Share Awards shall automatically
terminate upon the participant's termination of employment (or business
relationship) with the Company and its Subsidiaries for any reason whatsoever.
(e) Acceleration, Waiver, Etc. At any time prior to the participant's
termination of employment (or other business relationship) by the Company and
its Subsidiaries, the Committee may in its sole discretion accelerate, waive or,
subject to Section 13, amend any or all of the goals, restrictions or conditions
imposed under any Performance Share Award.
SECTION 10.
DIVIDEND EQUIVALENT RIGHTS
(a) Dividend Equivalent Rights. A Dividend Equivalent Right is an
Award entitling the recipient to receive credits based on cash dividends that
would be paid on the shares of Stock specified in the Dividend Equivalent Right
(or other award to which it relates) if such shares were held by the recipient.
A Dividend Equivalent Right may be granted hereunder to an eligible employee or
key person, as a component of another Award or as a freestanding award. A
Dividend Equivalent Right may also be granted to an Independent Director
pursuant to Section 8(d). The terms and conditions of Dividend Equivalent Rights
shall be specified in the grant. Such grant may specify that dividend
equivalents credited to the holder of a Dividend Equivalent Right may be paid
currently or may be deemed to be reinvested in additional shares of Stock, which
may thereafter accrue additional equivalents. Any such reinvestment shall be at
Fair Market Value on the date of reinvestment or such other price as may then
apply under a dividend reinvestment plan
15
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<PAGE>
sponsored by the Company, if any. Dividend Equivalent Rights may be settled in
cash or shares of Stock or a combination thereof, in a single installment or
installments. A Dividend Equivalent Right granted as a component of another
Award may provide that such Dividend Equivalent Right shall be settled upon
exercise, settlement, or payment of, or lapse of restrictions on, such other
award, and that such Dividend Equivalent Right shall expire or be forfeited or
annulled under the same conditions as such other award. A Dividend Equivalent
Right granted as a component of another Award may also contain terms and
conditions different from such other award.
(b) Interest Equivalents. Any Award under this Plan that is settled
in whole or in part in cash on a deferred basis may provide in the grant for
interest equivalents to be credited with respect to such cash payment. Interest
equivalents may be compounded and shall be paid upon such terms and conditions
as may be specified by the grant.
SECTION 11.
TAX WITHHOLDING
(a) Payment by Participant. Each participant shall, no later than the
date as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of, any Federal, state, or local
taxes of any kind required by law to be withheld with respect to such income.
The Company and its Subsidiaries shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
participant.
(b) Payment in Stock. A participant may elect to have such tax
withholding obligation satisfied, in whole or in part, by (i) authorizing the
Company to withhold from shares of Stock to be issued pursuant to any Award a
member of shares with an aggregate Fair Market Value (as of the date the
withholding is effected) that would satisfy the withholding amount due, or (ii)
transferring to the Company shares of Stock owned by the participant with an
aggregate Fair Market Value (as of the date the withholding is effected) that
would satisfy the withholding amount due. With respect to any participant who is
subject to Section 16 of the Act, the following additional restrictions shall
apply:
(A) the election to satisfy tax withholding obligations
relating to an Award in the manner permitted by this Section 11(b)
shall be made either (1) during the period beginning on the third
business day following the date of release of quarterly or annual
summary statements of sales and earnings of the
16
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Company and ending on the twelfth business day following such date,
or (2) at least six months prior to the date as of which the receipt
of such an Award first becomes a taxable event for Federal income tax
purposes;
(B) such election shall be irrevocable;
(C) such election shall be subject to the consent or
disapproval of the Committee; and
(D) the Stock withheld to satisfy tax withholding must pertain
to an Award which has been held by the participant for at least six
months from the date of grant of the Award.
Notwithstanding the foregoing, the provision of Section 11(b)(A)(1) shall not be
applicable until the Company has been subject to the reporting requirements of
Section 13(a) of the Act for at least a year prior to the election and has filed
all reports and statements required to be filed pursuant to that Section for
that year.
SECTION 12.
TRANSFER, LEAVE OF ABSENCE, ETC.
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer to the employment of the Company from a Subsidiary or
from the Company to a Subsidiary, or from one Subsidiary to another; or
(b) an approved leave of absence for military service or sickness, or
for any other purpose approved by the Company, if the employee's right to
re-employment is guaranteed either by a statute or by contract or under the
policy pursuant to which the leave of absence was granted or if the Committee
otherwise so provides in writing.
SECTION 13.
AMENDMENTS AND TERMINATION
The Board may, at any time, amend or discontinue the Plan and the
Committee may, at any time, amend or cancel any outstanding Award (or provide
substitute Awards
17
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at the same or reduced exercise or purchase price or with no exercise or
purchase price in a manner not inconsistent with the terms of the Plan, but
such price, if any, must satisfy the requirements which would apply to the
substitute or amended Award if it were then initially granted under this Plan)
for the purpose of satisfying changes in law or for any other lawful purpose,
but no such action shall adversely affect rights under any outstanding Award
without the holder's consent. If and to the extent determined by the Committee
to be required by the Act to ensure that Awards granted under the Plan are
exempt under Rule 16b-3 promulgated under the Act, or that Incentive Stock
Options granted under the Plan are qualified under Section 422 of the Code, Plan
amendments shall be subject to approval by the Company stockholders entitled to
vote at a meeting of stockholders.
SECTION 14.
STATUS OF PLAN
With respect to the portion of any Award which has not been exercised
and any payments in cash, Stock or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the Company unless the Committee shall otherwise expressly determine
in connection with any Award or Awards. In its sole discretion, the Committee
may authorize the creation of trusts or other arrangements to meet the Company's
obligations to deliver Stock or make payments with respect to Awards hereunder,
provided that the existence of such trusts or other arrangements is consistent
with the foregoing sentence.
SECTION 15.
CHANGE OF CONTROL PROVISIONS
Upon the occurrence of a Change of Control as defined in this Section
15:
(a) Each outstanding Stock Option and Stock Appreciation Right shall
automatically become fully exercisable.
(b) Each Restricted Stock Award and Performance Share Award shall be
subject to such terms, if any, with respect to a Change of Control as have been
provided by the Committee in connection with such Award.
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(c) "Change of Control" shall mean the occurrence of any one of the
following events:
(i) any "person," as such term is used in Sections 13(d) and 14(d) of
the Act (other than the Company, any of its Subsidiaries, any trustee,
fiduciary or other person or entity holding securities under any employee
benefit plan or trust of the Company or any of its Subsidiaries, or any
record or beneficial holder of any Stock or Class B Common Stock of the
Company as of the Effective Date or any descendant, other family member,
any affiliate thereof or any trust for the benefit of any of the foregoing
(collectively, the "Excluded Holders"), together with all "affiliates" and
"associates" (as such terms are defined in Rule 12b-2 under the Act) of
such person, shall become the "beneficial owner" (as such term is defined
in Rule 13d-3 under the Act), directly or indirectly, of securities of the
Company representing (A) 35% or more of the combined voting power of the
Company's then outstanding securities having the right to vote in an
election of a majority of the Company's Board of Directors ("Voting
Securities") (other than as a result of an acquisition of securities
directly from the Company), and (B) more of the combined voting power of
the Company's Voting Securities than is possessed by the Voting Securities
beneficially owned by the Excluded Holders; or
(ii) persons who, as of the Effective Date, constitute the Company's
Board of Directors (the "Incumbent Directors") cease for any reason,
including, without limitation, as a result of a tender offer, proxy
contest, merger or similar transaction, to constitute at least a majority
of the Board, provided that any person becoming a director of the Company
subsequent to the Effective Date whose election or nomination for
election was approved by a vote of at least a majority of the Incumbent
Directors shall, for purposes of this Plan, be considered an Incumbent
Director; or
(iii) the stockholders of the Company shall approve (A) any
consolidation or merger of the Company or any Subsidiary where the
shareholders of the Company, immediately prior to the consolidation or
merger, would not, immediately after the consolidation or merger,
beneficially own (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, shares representing in the aggregate a majority of
the voting shares of the corporation issuing cash or securities in the
consolidation or merger (or of its ultimate parent corporation, if any),
(B) any sale, lease, exchange or other transfer (in one transaction or a
series of transactions contemplated or arranged by any party as a single
plan) of all or substantially all of the assets of the Company or (C) any
plan or proposal for the liquidation or dissolution of the Company.
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Notwithstanding the foregoing, a "Change of Control" shall not be
deemed to have for purposes of the foregoing clause (i) solely as the result of
an acquisition of securities by the Company which, by reducing the number of
shares of Stock or other Voting Securities outstanding, increases the
proportionate voting power represented by the Voting Securities beneficially
owned by any person to 35% or more of the combined voting power of all then
outstanding Voting Securities; provided, however, that if any person referred to
in the preceding clause of this sentence shall thereafter become the beneficial
owner of any additional shares of Stock or other Voting Securities (other than
pursuant to a stock split, stock dividend, or similar transaction), then a
"Change of Control" shall be deemed to have occurred for purposes of the
foregoing clause (i).
SECTION 16.
GENERAL PROVISIONS
(a) No Distribution; Compliance with Legal Requirements. The
Committee may require each person acquiring Stock pursuant to an Award to
represent to and agree with the Company in writing that such person is acquiring
the shares without a view to distribution thereof. No shares of Stock shall be
issued pursuant to an Award until all applicable securities law and other legal
and stock exchange or similar requirements have been satisfied. The Committee
may require the placing of such stop-orders and restrictive legends on
certificates for Stock and Awards as it deems appropriate.
(b) Delivery of Stock Certificates. Delivery of stock certificates to
participants under this Plan shall be deemed effected for all purposes when the
Company or a stock transfer agent of the Company shall have mailed such
certificates in the United States mail, addressed to the participant, at the
participant's last known address on file with the Company.
(c) Other Compensation Arrangements; No Employment Rights. Nothing
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, and such arrangements may be
either generally applicable or applicable only in specific cases. The adoption
of this Plan and the grant of Awards do not confer upon any employee any right
to continued employment with the Company or any Subsidiary.
20
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SECTION 17.
EFFECTIVE DATE OF PLAN
This Plan shall become effective upon the Effective Date.
SECTION 18.
GOVERNING LAW
This Plan shall be governed by Delaware law except to the extent such
law is preempted by federal law.
21
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Exhibit 10.05
================================================================================
EMPLOYEE BENEFITS AGREEMENT
between
GENERAL CHEMICAL GROUP INC.
and
GENTEK INC.
dated as of
April __, 1999
================================================================================
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS
ARTICLE II
EMPLOYEES; ASSUMPTION OF LIABILITIES
Section 2.1 Employees; Transition Individuals........................................................7
Section 2.2 Assumption of Liabilities................................................................7
ARTICLE III
U.S. PLANS GENERALLY
Section 3.1 Sponsorship of Certain Plans.............................................................8
Section 3.2 Terms of Participation...................................................................8
Section 3.3 Participation in Plans Prior to the Spinoff..............................................9
Section 3.4 Termination of Participating Company Status..............................................9
ARTICLE IV
U.S. DEFINED BENEFIT PLANS
Section 4.1 Sponsorship by GenTek of Certain Pension Plans..........................................10
Section 4.2 Assumption of Pension Plan Liabilities and Allocation of Interests......................10
ARTICLE V
U.S. DEFINED CONTRIBUTION PLANS
Section 5.1 Sponsorship by GenTek of Certain Savings Plans..........................................12
Section 5.2 Assumption of Liabilities and Transfer of Assets........................................12
Section 5.3 Non-Employer Stock Funds................................................................12
Section 5.4 Miscellaneous Funds.....................................................................13
ARTICLE VI
U.S. HEALTH AND WELFARE PLANS
Section 6.1 Sponsorship by GenTek of Certain Welfare Plans..........................................13
</TABLE>
i
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<PAGE>
<TABLE>
<S> <C>
Section 6.2 Assumption of Welfare Plan Liabilities..................................................13
Section 6.3 Vendor Contracts........................................................................14
Section 6.4 Post-Retirement Health and Welfare Benefits.............................................15
Section 6.5 COBRA and HIPAA.........................................................................15
Section 6.6 Leave of Absence Programs...............................................................15
Section 6.7 Workers' Compensation Program...........................................................16
Section 6.8 Post-Spinoff Transitional Arrangements..................................................17
ARTICLE VII
EXECUTIVE PLANS
Section 7.1 GCG Incentive Plans.....................................................................17
Section 7.2 Deferred Compensation Plans.............................................................19
Section 7.3 Other Executive Agreements..............................................................19
ARTICLE VIII
GENERAL
Section 8.1 Payment of and Accounting Treatment for Expenses........................................20
Section 8.2 Sharing of Participant Information......................................................20
Section 8.3 Plan Audits.............................................................................20
Section 8.4 Requests for Internal Revenue Service Rulings and
U.S. Department of Labor Opinions...................................................22
Section 8.5 Collective Bargaining...................................................................22
Section 8.6 Consent of Third Parties................................................................22
Section 8.7 Foreign Plans...........................................................................22
Section 8.8 Effect If Spinoff Does Not Occur........................................................22
Section 8.9 Relationship of Parties.................................................................23
Section 8.10 Affiliates..............................................................................23
Section 8.11 Indemnification.........................................................................23
Section 8.12 Survival................................................................................23
Section 8.13 Notices.................................................................................23
Section 8.14 Interpretation..........................................................................23
Section 8.15 Governing Law...........................................................................24
Section 8.16 No Assignment...........................................................................24
</TABLE>
Schedule I
GenTek Deferred Compensation Plans
ii
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<PAGE>
Schedule II
GCG Plans
Schedule III
GenTek Individual Agreements
Schedule IV
GenTek Plans
iii
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EMPLOYEE BENEFITS AGREEMENT
EMPLOYEE BENEFITS AGREEMENT, dated as of April __, 1999 between
General Chemical Group Inc., a Delaware corporation ("GCG"), and GenTek Inc., a
Delaware corporation ("GenTek").
RECITALS
A. The Board of Directors of GCG has deemed it appropriate and
advisable to separate GCG's performance products and manufacturing businesses
from GCG's industrial chemicals business by (a) having the performance products
and manufacturing businesses be owned by GenTek, and the industrial chemicals
business be owned by GCG and (b) afterwards, distributing as a dividend to
holders of stock of GCG all of the stock of GenTek, all as set forth in the
Separation Agreement. Following such separation and distribution, each of GCG
and GenTek will be publicly owned companies.
B. GCG and GenTek are parties to a Separation Agreement, dated as of
____, 1999 (as the same may be amended, supplemented or restated from time to
time, the "Separation Agreement"), which sets forth the terms and conditions of
such separation and distribution.
C. In connection with such separation and distribution and as provided
by the Separation Agreement, GCG and GenTek have agreed to enter into this
Agreement to allocate between themselves certain liabilities and obligations for
their respective employees and to provide for certain other matters regarding
employees, and employee compensation, benefit and other matters, all upon the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, capitalized terms used herein shall
have the following respective meanings:
"Actuary" means Hewitt Associates LLC.
<PAGE>
<PAGE>
"Aggregate Spread" means the difference between the GCG Pre-Spinoff
Stock Price and the exercise price of a GCG Stock Option, multiplied by the
number of shares covered by such GCG Stock Option remaining unexercised as of
the close of business on the Spinoff Date.
"Agreement" means this Employee Benefits Agreement, as it may be
amended, supplemented or restated from time to time, together with all exhibits
and schedules hereto.
"ASO Contract" means an administrative services only contract, related
prior practice, or related understanding with a third-party administrator that
pertains to any GCG Welfare Plan or GenTek Welfare Plan.
"Code" means the Internal Revenue Code of 1986, as amended.
"Conversion Award" has the meaning given in Section 7.1(c).
"Effective Time" means the close of business on the Spinoff Date or a
later date and time as otherwise agreed to by the parties.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"GCG" has the meaning given in the introduction of this Agreement.
"GCG Award" means an award under a GCG Incentive Plan.
"GCG Common Stock" has the meaning given in the Separation Agreement.
"GCG Group" has the meaning given in the Separation Agreement.
"GCG Incentive Plans" means executive incentive compensation plans
sponsored by GCG including, but not limited to, the GCG 1996 Stock Option and
Incentive Plan, the GCG Performance Plan, and the GCG Restricted Stock Plan.
"GCG Mirror Pension Plan" has the meaning given in Section 4.1.
"GCG Mirror Pension Trust" has the meaning given in Section 4.2(c)(i).
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"GCG Mirror Plans" has the meaning given in Section 3.1.
"GCG Mirror Savings Plan" has the meaning given in Section 5.1.
"GCG Mirror Welfare Plans" has the meaning given in Section 6.1.
"GCG Plan" means the employee benefit plans solely benefitting
Industrial Individuals whether currently existing or established pursuant to
this Agreement, as set forth on Schedule II hereto.
"GCG Post-Spinoff Stock Price" means the opening price per share of GCG
Common Stock as reported on the NYSE on the first full trading day following the
Spinoff Date.
"GCG Pre-Spinoff Stock Price" means the closing price per share for GCG
Common Stock on the business day occurring before the Spinoff Date on the NYSE,
provided that if any such closing stock price is an ex-dividend price with
respect to the special dividend of GenTek Common Stock to be made in connection
with the Spinoff, any such closing stock price shall be increased by the GenTek
Post-Spinoff Stock Price.
"GCG RSU" has the meaning given in Section 7.1(e).
"GCG Stock Option" has the meaning given in Section 7.1(d).
"GenTek" has the meaning given in the introduction to this Agreement.
"GenTek Businesses" has the meaning given in the Separation Agreement.
"GenTek Common Stock" has the meaning given in the Separation
Agreement.
"GenTek Deferred Compensation Plans" means the nonqualified deferred
compensation plans as set forth on Schedule I.
"GenTek Directors Plan" has the meaning given in Section 7.1(f).
"GenTek Employee" means any individual (i) who, on the Spinoff Date, is
actively employed by, or on an approved leave of absence or lay-off with right
of recall from, GCG or any of its Subsidiaries and (ii) who is not an Industrial
Employee.
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"GenTek Former Employee" means any individual (i) who, on the Spinoff
Date, is neither then actively employed by, nor then on an approved leave of
absence nor lay-off with the right of recall from, GCG or any of its
Subsidiaries, and (ii) (A) whose employment services and functions, immediately
prior to the termination of his or her active employment with GCG or any of its
Subsidiaries, primarily related to the GenTek Business or (B) who, immediately
prior to the termination of his or her active employment with GCG or any of its
Subsidiaries, was actively employed by any member of the GenTek Group other than
GCC.
"GenTek Final Asset Transfer" has the meaning given in Section
4.2(c)(ii).
"GenTek Group" has the meaning given in the Separation Agreement.
"GenTek Incentive Plan" means the GenTek Performance Plan and the
GenTek Long-Term Incentive Plan, the latter in the form filed as Exhibits to the
Registration Statement (as such Plans may be amended or modified prior to the
Spinoff Date), which Plans shall be established as provided herein and pursuant
to which Conversion Awards shall be granted on the terms and subject to the
conditions provided herein and in such Plans.
"GenTek Individual" means any individual who is either a GenTek
Employee or a GenTek Former Employee.
"GenTek Individual Agreement" means an individual employment contract
or other similar agreement that specifically pertains to any GenTek Individual,
including but not limited to the employment agreements set forth on Schedule III
hereto.
"GenTek Initial Asset Transfer" has the meaning given in Section
4.2(c)(i).
"GenTek Liabilities" has the meaning given in Section 2.2(b).
"GenTek Pension Plan" has the meaning given in Section 4.1.
"GenTek Pension Trust" has the meaning given in Section 4.2(c)(i).
"GenTek Plans" means employee benefit plans benefitting GenTek
Individuals whether currently existing or established pursuant to this
Agreement, as set forth on Schedule IV hereto.
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"GenTek Post-Spinoff Stock Price" means the opening price per share of
GenTek Common Stock as reported on the NYSE on the first full trading day
following the Spinoff Date.
"GenTek Savings Plans" has the meaning given in Section 5.1.
"GenTek Subsidiary Plan" means any GenTek Plan that is, prior to the
Spinoff, sponsored by any member of the GenTek Group other than GCG.
"GenTek Welfare Plans" has the meaning given in Section 6.1.
"HMO" means a health maintenance organization that provides benefits
under the GCG Mirror Welfare Plans or the GenTek Welfare Plans, as applicable.
"HMO Agreements" means contracts, letter agreements, practices, and
understandings with HMOs that provide medical services under the GCG Mirror
Welfare Plans or the GenTek Welfare Plans, as applicable.
"Industrial Employee" means any individual who, on the Spinoff Date,
(i) is actively employed by GCG or any of its Subsidiaries and whose employment
services and functions primarily relate to the Industrial Chemicals Business or
(ii) is on an approved leave of absence or lay-off with right of recall from GCG
or any of its Subsidiaries and whose employment services and functions prior to
such leave of absence or lay-off primarily related to the Industrial Chemicals
Business.
"Industrial Chemicals Business" has the meaning given in Separation
Agreement.
"Industrial Former Employee" means any individual (i) who, on the
Spinoff Date, is neither actively employed by, nor on an approved leave of
absence nor lay-off with a right of recall from GCG or any of its Subsidiaries,
and (ii) who is not a GenTek Former Employee.
"Industrial Individual" means any individual who is either an
Industrial Employee or an Industrial Former Employee.
"Industrial Liabilities" has the meaning given in Section 2.2(a).
"Liabilities" has the meaning given in the Separation Agreement.
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"Non-Employer Stock Fund" has the meaning given in Section 5.3.
"Non-parties" has the meaning given in Section 8.3(b)(ii).
"NYSE" means the New York Stock Exchange.
"Participating Company" means any Person (other than an individual)
that is a participating employer in a Plan sponsored by a member of the GCG
Group or a member of the GenTek Group, as the context requires.
"Pension Plan Asset Transfer Amount" means, in the case of a transfer
of assets and liabilities from the GenTek Pension Plan to the GCG Mirror Pension
Plan, (i) the amount necessary to fund the projected benefit obligations under
the GenTek Pension Plan of the Industrial Individuals, determined in accordance
with the actuarial assumptions (including, without limitation, the mortality
tables, turnover assumptions and discount rates) used by the GenTek Pension Plan
with respect to the last completed actuarial report of such Plan, plus (ii) the
applicable share of any assets in excess of the liabilities calculated in
accordance with the preceding parts of this sentence under the GenTek Pension
Plan to be allocated between the GenTek Pension Plan and the GCG Mirror Pension
Plan, using the principles enumerated in section 414(l)(2) of the Code (assuming
for this purpose that the amount of assets required to be transferred on the
basis of projected benefit obligations in accordance with the preceding part of
this sentence were the amount of assets required to be allocated to the
applicable GenTek Plan under section 414(l)(1) of the Code); provided, that if
the GenTek Pension Plan has insufficient assets to fund all liabilities on a
Plan termination basis, the Pension Plan Asset Transfer Amount shall mean the
minimum amount required to be transferred to such plan in accordance with
section 414(l) of the Code and the regulations thereunder.
"Person" has the meaning given in the Separation Agreement.
"Plan" means any plan, policy, program, payroll practice, on-going
arrangement, contract, trust, insurance policy or other agreement or funding
vehicle, whether written or unwritten, providing compensation or benefits to
employees, officers or directors or former employees, officers or directors, or
any of their beneficiaries or dependents, of the GenTek Group or the GCG Group.
"Separation Agreement" has the meaning given in recital B.
"Spinoff" has the meaning given in the Separation Agreement.
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"Spinoff Date" has the meaning given in the Separation Agreement.
"Transition Period" means, for purposes of this Agreement, the period
beginning immediately after the Spinoff Date and ending on the first anniversary
of such date or such earlier date as may be agreed to by the parties.
"U.S." means the United States, its territories and possessions.
ARTICLE II
EMPLOYEES; ASSUMPTION OF LIABILITIES
Section 2.1 Employees; Transition Individuals.
(a) General. Effective as of the Spinoff Date, Industrial Employees
shall be employees of the GCG Group and all other employees shall be employees
of the GenTek Group.
(b) Non-Termination of Employment. Except as otherwise expressly
provided herein, no provision of this Agreement or the Separation Agreement
shall be construed to create any right, or accelerate entitlement, to any
compensation or benefit whatsoever on the part of any Industrial Individual or
GenTek Individual or other future, present, or former employee of the GCG Group
or the GenTek Group under any GCG Plan or GenTek Plan or otherwise. Without
limiting the generality of the foregoing, neither the Spinoff nor the
termination of the Participating Company status of a member of the GenTek Group
or GCG Group shall cause any employee to be deemed to have incurred a
termination of employment which entitles such individual to the commencement of
benefits under any of the GCG Plans or the GenTek Plans.
(c) No Right to Continued Employment. Nothing contained in this
Agreement shall confer on any GenTek Employee or Industrial Employee any right
to continued employment.
Section 2.2 Assumption of Liabilities.
(a) By GCG. Subject to the satisfaction by GenTek of its obligations
hereunder, GCG hereby assumes and agrees to pay, perform, fulfill, and
discharge, in accordance with their respective terms, all of the following,
regardless of when or where such Liabilities arose or arise or were or are
incurred (collectively, the "Industrial Liabilities"):
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(i) all Liabilities to or relating to Industrial Individuals,
including dependents and beneficiaries;
(ii) all other Liabilities relating to, arising out of, or
resulting from obligations, liabilities, and responsibilities expressly
assumed or retained by a member of the GCG Group, or a GCG Plan,
pursuant to this Agreement.
(b) By GenTek. Subject to the satisfaction by GCG of its obligations
hereunder, GenTek hereby assumes and agrees to pay, perform, fulfill, and
discharge, in accordance with their respective terms, all of the following,
regardless of when or where such Liabilities arose or arise or were or are
incurred (collectively, the "GenTek Liabilities"):
(i) all Liabilities to or relating to GenTek Individuals,
including dependents and beneficiaries;
(ii) all Liabilities under any GenTek Individual Agreement; and
(iii) all other Liabilities relating to, arising out of, or
resulting from obligations, liabilities, and responsibilities expressly
assumed or retained by a member of the GenTek Group, or a GenTek Plan,
pursuant to this Agreement.
ARTICLE III
U.S. PLANS GENERALLY
Section 3.1 Sponsorship of Certain Plans. Following the Effective Time,
GenTek shall be the "plan sponsor" (as defined in Section 3(16)(B) of ERISA) of
the GenTek Plans and GCG shall be the plan sponsor of the GCG Plans. Effective
as of the Spinoff Date, GCG shall adopt the employee benefit plans provided by
this Agreement, which shall be substantially similar in all material respects to
the corresponding GenTek Plan (a "GCG Mirror Plan"), and in the case of any
GenTek Plan that is not a GenTek Subsidiary Plan and in which Industrial
Individuals are participants or beneficiaries as of the Effective Time, GenTek
shall transfer the required amount of such Plan's assets and liabilities to the
applicable GCG Mirror Plan pursuant to and in accordance with this Agreement.
Section 3.2 Terms of Participation. With respect to GenTek Individuals or
the Industrial Individuals, as the case may be, the GenTek Plans and the GCG
Plans shall be in all respects successors in interest to the corresponding Plans
of GCG or GenTek or other members of their respective group, as the case may be,
for such persons and shall recognize as of the Effective Time all rights and
entitlements of and shall not provide
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benefits that duplicate benefits provided by the corresponding Plans for such
persons. GCG and GenTek shall agree on methods and procedures, including
amending the respective Plan documents, to prevent GenTek Individuals or
Industrial Individuals from receiving duplicative benefits from the GCG Plans
and the GenTek Plans. GCG shall not permit any GCG Mirror Plan to commence
benefit payments to any GCG Individual until it receives notice from GenTek
regarding the date on which payments under the corresponding GenTek Plan shall
cease and the GCG Mirror Plan has received a transfer of asset from the
corresponding GenTek Plan, if applicable. Each GenTek Plan, in the case of
GenTek Individuals, and each GCG Mirror Plan, in the case of Industrial
Individuals, shall provide that all service, all compensation, and all other
benefit-affecting determinations that, as of the Effective Time, were recognized
under the corresponding Plan for the respective group (for periods immediately
before the Effective Time) shall, as of immediately after the Spinoff Date,
receive full recognition, credit, and validity and be taken into account under
such GenTek Plan or GCG Mirror Plan, as the case may be, to the same extent as
if such items occurred under such GenTek Plan or GCG Mirror Plan, as the case
may be, except to the extent that duplication of benefits would result. All
beneficiary designations made under a Plan shall be transferred to and be in
full force and effect under the corresponding GenTek Plans or GCG Mirror Plan,
as the case may be, until such beneficiary designations are replaced or revoked
by the person who made the beneficiary designation. Notwithstanding the
foregoing, nothing in this Agreement other than those provisions specifically
set forth herein to the contrary shall preclude GenTek or GCG, at any time after
the Effective Time, from amending, merging, modifying, terminating, eliminating,
reducing, or otherwise altering in any respect any GenTek Plan or GCG Mirror
Plan, any benefit under any Plan or any trust, insurance policy or funding
vehicle related to any GenTek Plan or GCG Plan.
Section 3.3 Participation in Plans Prior to the Spinoff.
(a) Participation in Plans. Subject to the terms and conditions of this
Agreement, each member of the GCG Group or the GenTek Group that is a
Participating Company in any of the Plans shall continue as such until the
Effective Time.
(b) Obligations as Plan Sponsor. The plan sponsor of each Plan shall
continue until the Effective Time (or such earlier time as GCG and GenTek may
agree in order to facilitate the transactions contemplated by this Agreement) to
administer, or cause to be administered, in accordance with their terms and
applicable Law, the applicable Plans.
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(c) Obligations as Participating Company. Each Participating Company in
any Plan shall perform the duties of a Participating Company as set forth in
such Plans or any procedures adopted pursuant thereto.
Section 3.4 Termination of Participating Company Status. Effective as of
the Effective Time, GenTek and each other member of the GenTek Group shall cease
to be a Participating Company in the GCG Plans, and GCG and each other member of
the GCG Group shall cease to be a member in the GenTek Plans. Any member of the
GenTek Group that is a Participating Company in any GenTek Plan, and any member
of the GCG Group that is a Participating Company in any GCG Plan, as of the
Effective Time shall not cease to be a Participating Company therein as a result
of the Spinoff.
ARTICLE IV
U.S. DEFINED BENEFIT PLANS
Section 4.1 Sponsorship by GenTek of Certain Pension Plans. Following the
Effective Time, GenTek shall be the plan sponsor of each of the GenTek Plans
that is a defined benefit pension plan (as defined by Section 3(35) of ERISA)
(the "GenTek Pension Plans") and GCG shall be the plan sponsor of each of the
GCG Plans that is a defined benefit pension plan (the "GCG Pension Plans"). In
the case of any GenTek Pension Plans that have Industrial Individuals as
participants or beneficiaries as of the Effective Time, GenTek shall cause a
transfer of the required amount of GenTek Pension Plan assets and liabilities to
a defined benefit pension plan, to be adopted by GCG effective as of the
Effective Time (or as soon as practicable thereafter), that shall be
substantially similar in all material respects to the corresponding GenTek
Pension Plan (the "GCG Mirror Pension Plan"), as provided in Section 4.2.
Section 4.2 Assumption of Pension Plan Liabilities and Allocation of
Interests.
(a) Assumption of Liabilities. Effective as of the date of the GenTek
Initial Asset Transfer, all Liabilities to or relating to Industrial Individuals
under any GenTek Pension shall cease to be Liabilities of the GenTek Pension
Plan and shall be assumed in full and in all respects by the corresponding GCG
Mirror Pension Plan.
(b) Calculation of Pension Plan Asset Allocation. As soon as
practicable after the Effective Time, the Actuary shall calculate and certify
the Pension Plan Asset Transfer Amount for the GCG Mirror Pension Plan as of the
date of transfer. Such calculation shall be subject to audit as provided in
Section 8.3(a).
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(c) Transfer of Assets to GCG Mirror Pension Trust.
(i) As soon as practicable following the Spinoff Date, GenTek
shall cause to be transferred from the trust established under any
applicable GenTek Pension (the "GenTek Pension Trust") to the trust
established under the corresponding GCG Mirror Pension Plan (the "GCG
Mirror Pension Trust") an initial amount of assets (the "GenTek Initial
Asset Transfer"). The amount of the GenTek Initial Asset Transfer shall
be equal to approximately [___]% of the anticipated Pension Plan Asset
Transfer Amount with respect to the GenTek Pension, as determined in
good faith by the Actuary.
(ii) As soon as practicable after the calculation of the GCG
Mirror Pension Plan Asset Transfer Amount pursuant to Section 4.2(b),
GenTek will cause the appropriate amount of assets to be transferred
from any applicable GenTek Pension Trust to the corresponding GCG
Mirror Pension Trust (the "GenTek Final Asset Transfer"). The amount
of assets to be transferred in the GenTek Final Asset Transfer, if any,
shall be equal to (A) the Pension Plan Asset Transfer Amount with
respect to the GCG Mirror Pension Plan, less (B) the GenTek Initial
Asset Transfer, less (C) the aggregate amount of any actual benefit
payments made in respect of Industrial Individuals from and after the
Spinoff Date by the GenTek Pension Plan plus (D) interest thereon,
compounded monthly, from the Spinoff Date to the date of the GenTek
Final Asset Transfer at an annual rate equal to the discount rate used
by the GenTek Pension Plan for purposes of determining the present
value of the underlying benefit liabilities. If the GenTek Initial
Asset Transfer exceeds the Pension Plan Asset Transfer Amount, such
excess plus interest, compounded monthly at an annual rate equal to
the discount rate used by the GenTek Pension Plan for purposes of
determining the present value of the underlying benefit liabilities,
shall be transferred to the GenTek Pension Trust.
(iii) The assets to be transferred from any applicable GenTek
Pension Trust to a corresponding GCG Mirror Pension Trust in either the
GenTek Initial Asset Transfer or the GenTek Final Asset Transfer shall
be made in cash or in assets which represent a reasonable cross-section
of the asset classes in the GenTek Pension Trust. If any assets are to
be transferred from any GCG Mirror Pension Trust to a GenTek Pension
Trust, such assets shall consist of cash.
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ARTICLE V
U.S. DEFINED CONTRIBUTION PLANS
Section 5.1 Sponsorship by GenTek of Certain Savings Plans. Following the
Effective Time, GenTek shall be the plan sponsor of each of the GenTek Plans
that is a defined contribution plan (as defined by Section 3(34) of ERISA) (the
"GenTek Savings Plans") and GCG shall be the plan sponsor of each of the GCG
Plans that is a defined contribution plan (the "GCG Savings Plans"). In the case
of any GenTek Savings Plan that has Industrial Individuals as participants or
beneficiaries as of the Effective Time, GenTek shall cause a transfer of the
required amount of GenTek Savings Plan's assets and liabilities to a defined
contribution plan, adopted by GCG and effective as of the Effective Time (or as
soon as practicable thereafter), which shall be substantially similar in all
material respects to the corresponding GenTek Savings Plan (the "GCG Mirror
Savings Plan"), as provided in Section 5.2.
Section 5.2 Assumption of Liabilities and Transfer of Assets. As soon as
practicable following the Effective Time (i) the GCG Mirror Savings Plan shall
assume and be solely responsible for all Liabilities to or relating to
Industrial Individuals under any GenTek Savings Plan; (ii) the GCG Mirror
Savings Plan shall assume and be solely responsible for all ongoing rights of or
relating to Industrial Employees for future participation (including the right
to make contributions through payroll deductions) in the GCG Mirror Savings
Plan; and (iii) GenTek shall cause the accounts (i.e., records, assets and
liabilities) of the Industrial Individuals under any GenTek Savings Plan which
is held by its related trust as of the Effective Time to be transferred to the
corresponding GCG Mirror Savings Plan and its related trust, and GCG shall cause
such transferred accounts to be accepted by such plan and related trust. Assets
related to the accounts of all Industrial Individuals shall be transferred from
the GenTek Savings Plans to the GCG Mirror Savings Plan in cash or in kind, at
GenTek's discretion, and to the extent practicable, shall be invested in
comparable investment options in the GCG Mirror Savings Plan as such accounts
were invested immediately before the Effective Time.
Section 5.3 Non-Employer Stock Funds. Effective as of the Spinoff Date, a
GenTek Common Stock fund shall be added as an investment option to any GenTek
Savings Plan with a GCG Common Stock fund for an investment option and such
GenTek Savings Plan shall provide for both a GCG Common Stock fund and a GenTek
Common Stock fund as investment options. A GenTek Common Stock fund in any GCG
Savings Plan or GCG Mirror Savings Plan and a GCG Common Stock fund in any
GenTek Savings Plans are each referred to as a "Non-Employer Stock Fund" with
respect to the applicable plan. Each Non-Employer Stock Fund shall be maintained
under the respective
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Plan at least through December 31, 2000. The GCG Savings Plan, GCG Mirror
Savings Plans and any GenTek Savings Plans shall each provide that, after the
Spinoff Date, no new contributions may be invested in, and no amounts may be
transferred from other investment options to, the Non-Employer Stock Fund under
the respective Plan.
Section 5.4 Miscellaneous Funds. In the event that GenTek determines that
it is not feasible or appropriate to transfer in-kind the assets of a particular
investment fund from a GenTek Savings Plan to a GCG Mirror Savings Plan, then
the value of the assets as of the close of business on the Spinoff Date (plus
earnings attributable to such amount from the Spinoff Date to the date the
assets are actually transferred) shall be transferred in cash to the GCG Mirror
Savings Plan and GCG shall, to the extent practicable, cause such cash to be
invested in such plan and related trust in the same manner and proportion as it
was invested in the transferring GenTek Savings Plan or otherwise at the
direction of each affected participant.
ARTICLE VI
U.S. HEALTH AND WELFARE PLANS
Section 6.1 Sponsorship by GenTek of Certain Welfare Plans. Following the
Effective Time, GenTek shall be the plan sponsor of the GenTek Plans that are
employee welfare benefit plans (as defined by Section 3(1) of ERISA) (the
"GenTek Welfare Plans") and GCG shall be the plan sponsor of the GCG Plans that
are employee welfare benefit plans (the "GCG Welfare Plans"). In the case of any
GenTek Welfare Plan that has Industrial Individuals as participants or
beneficiaries as of the Effective Time, GenTek shall cause a transfer of the
required amount of GenTek Welfare Plan assets and Liabilities, if applicable, to
an employee welfare benefit plan to be adopted by GCG and effective as of the
Effective Time (or as soon as practicable thereafter), which shall be
substantially similar in all material respects to the corresponding GenTek
Welfare Plan (the "GCG Mirror Welfare Plan").
Section 6.2 Assumption of Welfare Plan Liabilities. As soon as practicable
after the Spinoff Date, all Liabilities for or relating to Industrial
Individuals under a GenTek Welfare Plan shall cease to be Liabilities of GenTek
or the GenTek Plans and shall be assumed by GCG and the corresponding GCG Mirror
Welfare Plans; provided that GenTek shall either (i) transfer to GCG or cause to
be transferred or allocated for the benefit of GCG or the Industrial Individuals
an amount equal to the value of any assets set aside by GenTek or any member of
the GenTek Group for the payment of Industrial Individual welfare benefits, or
to meet such obligations in respect of, any such welfare benefits or (ii)
represent in writing to GCG that no such assets have been set aside.
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Section 6.3 Vendor Contracts.
(a) ASO Contracts, Group Insurance Policies, HMO Agreements and Letters
of Understanding.
(i) GenTek shall use its commercially reasonable best efforts to
permit GCG and the other members of the GCG Group to participate in the
terms and conditions of each ASO Contract, group insurance policy, HMO
agreement or letters of understanding and arrangements in existence as
of the date of this Agreement from immediately after the Spinoff Date
through the end of the Transition Period. GenTek shall cause any ASO
Contract, group insurance policy, HMO agreement or letter of
understanding to which GenTek or any other members of the GenTek Group
is a party as of the Spinoff Date, to allow GCG and the other members
of the GCG Group to participate in the terms and conditions thereof.
Nothing contained in this Section 6.3(a) shall preclude GenTek from
choosing to enter into ASO Contracts, group insurance policies, HMO
agreements or other letters of understandings and arrangements with new
or different vendors.
(ii) GCG and GenTek shall cooperate to determine the manner in
which the GCG Group's participation in the terms and conditions of ASO
Contracts, Group Insurance Policies, HMO Agreements, letters of
understanding and arrangements as set forth above shall be effectuated.
(b) Effect of Change in Rates. GCG and GenTek shall use their
reasonable best efforts to cause each of the insurance companies, HMOs, paid
provider organizations and third-party administrators providing services and
benefits under the GenTek Welfare Plans to maintain the premium and/or
administrative rates based on the aggregate number of participants in both the
GenTek Welfare Plans, after the Effective Time, and the corresponding GCG Mirror
Welfare Plans through the end of the Transition Period, separately rated or
adjusted for the demographics, experience or other relevant factors related to
the covered participants of the GCG Group and the GenTek Group, respectively. To
the extent they are not successful in such efforts, GCG and GenTek shall each
bear the revised premium or administrative rates for health and welfare benefits
attributable to the individuals covered by their respective Plans.
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Section 6.4 Post-Retirement Health and Welfare Benefits.
(a) By GCG. GCG shall be solely responsible for any and all Liabilities
relating to any post-retirement health and welfare benefits available to any
Industrial Individual, whether or not such Industrial Individual qualified for
such benefits under the terms and conditions of the GenTek Welfare Plans as of
the Effective Time.
(b) By GenTek. GenTek shall be solely responsible for any and all
Liabilities relating to any post-retirement health and welfare benefits
available to any GenTek Individual, whether or not such GenTek Individual
qualified for such benefits under the terms and conditions of a GenTek Welfare
Plan or a GCG Welfare Plan as of the Effective Time.
Section 6.5 COBRA and HIPAA.
(a) By GCG. GCG shall be responsible for administering compliance with
the continuation coverage requirements for "group health plans" under Title X of
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and the
portability requirements under the Health Insurance Portability and
Accountability Act of 1996 with respect to Industrial Individuals for the period
commencing immediately after the Effective Time.
(b) By GenTek. GenTek shall be responsible for administering compliance
with the continuation coverage requirements for "group health plans" under Title
X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and
the portability requirements under the Health Insurance Portability and
Accountability Act of 1996 with respect to GenTek Individuals for the period
commencing immediately after the Effective Time.
Section 6.6 Leave of Absence Programs.
(a) By GCG. GCG shall be responsible for the administration and
compliance of all leaves of absences and related programs (including compliance
with the Family and Medical Leave Act) affecting Industrial Individuals for the
period commencing immediately after the Effective Time.
(b) By GenTek. GenTek shall be responsible for the administration and
compliance of all leaves of absences and related programs (including compliance
with the
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Family and Medical Leave Act) affecting GenTek Individuals for the period
commencing immediately after the Effective Time.
Section 6.7 Workers' Compensation Program.
(a) By GCG. Effective as soon as practicable after the Spinoff Date,
GCG shall assume all Liabilities for Industrial Individuals related to any and
all workers' compensation matters under any law of any state, territory, or
possession of the U.S. or the District of Columbia and GCG shall be fully
responsible for the administration of all such claims; provided that GenTek
shall transfer to GCG or cause to be transferred or allocated for the benefit of
GCG or the Industrial Individuals an amount equal to the value of any assets set
aside by GenTek or any member of the GenTek Group (including any reserves
established under any contract providing coverage against any such claims) for
the payment of, or to meet the obligations in respect of, any such workers'
compensation benefits. If GCG is unable to assume any such Liability or the
administration of any such claim because of the operation of applicable state
law or for any other reason, GCG shall fully indemnify GenTek for all such
Liabilities, including the reasonable costs of any administration that GCG has
not been able to assume.
(b) By GenTek. Effective as soon as practicable after the Spinoff Date,
GenTek shall assume all Liabilities for GenTek Individuals related to any and
all workers' compensation matters under any law of any state, territory, or
possession of the U.S. or the District of Columbia and GenTek shall be fully
responsible for the administration of all such claims; provided that GCG shall
transfer to GenTek or cause to be transferred or allocated for the benefit of
GenTek or the GenTek Individuals an amount equal to the value of any assets set
aside by GCG or any member of the GCG Group (including any reserves established
under any contract providing coverage against any such claims) for the payment
of, or to meet the obligations in respect of, any such workers' compensation
benefits. If GenTek is unable to assume any such Liability or the administration
of any such claim because of the operation of applicable state law or for any
other reason, GenTek shall fully indemnify GCG for all such Liabilities,
including the reasonable costs of any administration that GenTek has not been
able to assume.
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Section 6.8 Post-Spinoff Transitional Arrangements.
(a) Continuance of Elections, Co-Payments and Maximum Benefits.
(i) GCG shall cause the GCG Mirror Welfare Plans to recognize and
maintain all coverage and contribution elections made by Industrial
Individuals under the GenTek Welfare Plans in effect for the period
immediately prior to the Spinoff Date and shall apply such elections
under the GCG Mirror Welfare Plans for the remainder of the period or
periods for which such elections are by their terms applicable.
(ii) GCG shall cause the GCG Mirror Welfare Plans to recognize and
give credit for (A) all amounts applied to deductibles, out-of-pocket
maximums, and other applicable benefit coverage limits with respect to
such expenses which have been incurred by Industrial Individuals under
the GenTek Welfare Plans for the remainder of the benefit limit year in
which the Spinoff occurs, and (B) all benefits paid to Industrial
Individuals under the GenTek Welfare Plans, during and prior to the
benefit limit year in which the Spinoff occurs, for purposes of
determining when such persons have reached their lifetime maximum
benefits under the GCG Mirror Welfare Plans.
(iii) GCG shall (A) provide coverage to Industrial Individuals
under the GCG Mirror Welfare Plans without the need to undergo a
physical examination or otherwise provide evidence of insurability, and
(B) recognize and maintain all irrevocable assignments and elections
made by Industrial Individuals in connection with their life insurance
coverage under the GenTek Welfare Plans and any predecessor plans.
ARTICLE VII
EXECUTIVE PLANS
Section 7.1 GCG Incentive Plans.
(a) Amendments to and Adoption of Incentive Plans. GCG and GenTek
shall, as soon as practicable but as of the Spinoff Date, take such actions
necessary to effectuate the provisions of this Section 7.1.
(b) Establishment of GenTek Compensation Plans. GenTek shall adopt, or
shall cause to be adopted before the Effective Time, with the approval of GCG as
sole
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shareholder of GenTek, the GenTek Annual Performance Incentive Plan and the
GenTek Long-Term Incentive Plan.
(c) Conversion Awards. Each individual who holds a GCG Award that is
outstanding as of the Effective Time shall continue to hold such GCG Award and
shall receive, effective immediately after the Effective Time, an award of a
similar nature with respect to GenTek Common Stock (the "Conversion Award"). The
number of shares covered by, and the exercise or reference appreciation price of
the Conversion Award to be determined by applying the rules set forth in this
Section 7.1. To the extent possible, no holder of a Conversion Award having any
particular terms shall be treated any differently from any other holder of a
Conversion Award having the same terms. Each Conversion Award with respect to
GenTek Common Stock shall be issued under the GenTek Incentive Plans, and shall
have the same terms and conditions as the corresponding GCG Award to which it
relates (except as adjusted as provided herein). GCG and GenTek shall each treat
employment with such other corporation or employment with such corporation for
purpose of continued vesting, etc., of any GCG RSU or Conversion Award.
(d) Stock Options. With respect to a GCG Award consisting of an option
to acquire GCG Common Stock (a "GCG Stock Option"), the number of shares of
GenTek Common Stock covered by the Conversion Award shall equal the number of
shares of GCG Common Stock covered by the GCG Award. The exercise price of a
Conversion Award stock option for shares of GenTek Common Stock shall equal (A)
the exercise price of the individual's GCG Stock Option (before any adjustment
for the Spinoff) multiplied by (B) a fraction, (x) the numerator of which is the
GenTek Post-Spinoff Stock Price, and (y) the denominator of which is the sum of
the GCG Post-Spinoff Stock Price and the GenTek Post-Spinoff Stock Price. The
resulting exercise price for an individual's GCG Stock Option shall be equal to
the difference of (C) the exercise price of the individual's GCG Stock Option
(before any adjustment for the Spinoff), less (D) the exercise price of the
individual's Conversion Award stock option as determined pursuant to the formula
stated in the previous sentence. Notwithstanding any other provision of this
Section 7.1(d), any Conversion Award stock option or GCG Stock Option may be
modified as deemed necessary by either the Board of Directors of GenTek or the
Board of Directors of GCG, respectively, in order to preserve the Aggregate
Spread with respect to an individual's combined GCG Stock Option and Conversion
Award stock option based on the aggregate GCG Post-Spinoff Price and the GenTek
Post-Spinoff Price or to avoid any adverse accounting charge.
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(e) Conditional Share Award. The holder of each GCG Award consisting of
a restricted share unit award (a "GCG RSU"), regardless of whether the holder
thereof is a GCG Individual or a GenTek Individual, shall retain such GCG RSU
and shall receive a GenTek Common Stock Restricted Stock Unit award for the same
number of shares of GenTek covered by such GCG RSU. GCG and GenTek shall each
treat employment with such other corporation or employment with such corporation
for purpose of continued vesting, etc., of any GCG RSU or Conversion Award.
(f) Non-Employee Director Plans. As soon as practicable after the date
hereof and effective as of the Spinoff Date, GenTek shall take, or cause to be
taken, all action necessary to assume, adopt and administer an equity
compensation plan for non-employee directors of GenTek (the "GenTek Directors
Plan") and to provide Conversion Awards in accordance with the principles set
forth in this Section.
(g) Consultants. In the case of any individual who it is anticipated
will provide services to both GCG and GenTek following the Spinoff, GCG and
GenTek may agree that such persons shall continue to hold any GCG Stock Option
and receive a Conversion Award, in each case applying the principles set forth
in Section 7.1(c).
(h) Administrative Matters. GCG and GenTek shall adopt such procedures
and information-sharing practices necessary or appropriate to permit the other
to administer any incentive or stock option plan it maintains and under which an
employee of the other has an award (including, for example, timely informing the
other of any termination of employment that affects the exercise period or
payment date of an award).
Section 7.2 Deferred Compensation Plans.
(a) GenTek Deferred Compensation Plans. The Liability with respect to
any Industrial Individual who is participating under any GenTek Deferred
Compensation Plan by reason of being the subject of a deferred compensation
agreement as of the Effective Time shall be the sole responsibility of GCG;
provided that GenTek shall transfer to GCG or cause to be transferred or
allocated for the benefit of GCG or the Industrial Individual an amount equal to
the value of the assets, if any, set aside by GenTek or any member of the GenTek
Group for the payment of, or to meet the obligations in respect of, any such
deferred compensation obligation.
(b) Non-employee Directors Retirement Plan. As soon as practicable
following the Spinoff Date, but effective as of the Spinoff Date, GenTek shall
adopt a non-qualified retirement plan for the benefit of its non-employee
directors, which shall be substantially
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<PAGE>
similar to the non-qualified retirement plan for non-employee directors of GCG;
provided that there shall be no transfer of any amounts set aside by GCG to
GenTek for the payment of any non-employee director compensation, deferred or
otherwise.
Section 7.3 Other Executive Agreements.
Supplemental Retirement and Welfare Agreements. The Liability with
respect to any GenTek Individual who is the subject of a contract or agreement
that is either an excess benefit plan (as defined in ERISA Section 3(36)) or
individual or other arrangement providing for retirement, death or disability
benefits as of the Spinoff Date shall be the sole responsibility of GenTek;
provided, however, there shall be no transfer of assets from GCG to GenTek with
respect to such Liabilities.
ARTICLE VIII
GENERAL
Section 8.1 Payment of and Accounting Treatment for Expenses. All
Liabilities (and the accounting treatment related thereto) through the Effective
Time regarding matters addressed herein shall be handled and administered by GCG
and GenTek in accordance with past GCG accounting and financial practices and
procedures of GCG pertaining to such matters prior to the Spinoff.
Section 8.2 Sharing of Participant Information. GCG and GenTek shall share,
and each shall cause the other members of its respective group to share, with
each other and their respective agents and vendors, all participant information
necessary for the efficient and accurate administration of each of the GCG Plans
and the GenTek Plans following the Spinoff Date. GCG and GenTek and their
respective authorized agents shall, subject to applicable laws on
confidentiality, be given reasonable and timely access to, and may make copies
of, all information relating to the subjects of this Agreement in the custody of
the other party, to the extent necessary for such administration.
Section 8.3 Plan Audits.
(a) Audit Rights with Respect to the Allocation or Transfer of Plan
Assets. The allocation of pension plan assets and liabilities pursuant to this
Agreement shall, at the election of GenTek, be audited on behalf of both GCG and
GenTek by Hewitt Associates LLC or such other actuarial and benefit consulting
firm mutually selected by the parties. The actuarial and benefit consulting firm
shall provide its written report to both GCG and GenTek. Each of GCG and GenTek,
and their respective advisors and consultants, shall
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have the right to make such presentations and present such information to such
actuarial and benefit consulting firm as deemed appropriate. GenTek and GCG
shall equally pay or shall be responsible for the payment of the costs of such
audit. To the extent such audit recommends a change to the value of assets
allocated to a GenTek Plan or a GCG Plan such recommendation shall be conclusive
and binding on GenTek and GCG.
(b) Audit Rights with Respect to Information Provided.
(i) Each of GCG and GenTek, and its their duly authorized
representatives, shall have the right to conduct audits at any time
upon reasonable prior notice, at its own expense, with respect to all
information provided to it or to any Plan record keeper or third-party
administrator by the other party; provided, that audits with respect to
the allocation or transfer of Plan assets and liabilities shall be
subject only to Section 8.3(a). The auditing party shall have the right
to make copies of any records at its expense, subject to the
confidentiality provisions set forth in the Separation Agreement, which
are incorporated by reference herein. The party being audited shall
provide the auditing party's representatives with reasonable access
during normal business hours to its operations, computer systems and
paper and electronic files, and provide work space to its
representatives. After any audit is completed, the party being audited
shall have the right to review a draft of the audit findings and to
comment on those findings in writing within five business days after
receiving such draft.
(ii) The auditing party's audit rights under this Section 8.3(b)
shall include the right to audit, or participate in an audit
facilitated by the party being audited, of any subsidiaries and
affiliates of the party being audited and of any benefit providers and
third parties with whom the party being audited has a relationship, or
agents of such party, to the extent any such persons are affected by or
addressed in this Agreement (collectively, the "Non-parties"). The
party being audited shall, upon written request from the auditing
party, provide an individual (at the auditing party's expense) to
supervise any audit of any such benefit provider or third party. The
auditing party shall be responsible for supplying, at its expense,
additional personnel sufficient to complete the audit in a reasonably
timely manner.
(c) Audits Regarding Vendor Contracts. From immediately after the
Spinoff Date until 90 days after the end of the Transition Period, GCG and
GenTek and their duly authorized representatives shall have the right to conduct
joint audits with respect to any vendor contracts that relate to both the GCG
Health and Welfare Plans and the GenTek
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Health and Welfare Plans. The scope of such audits shall encompass the review of
all correspondence, account records, claim forms, canceled drafts (unless
retained by the bank), provider bills, medical records submitted with claims,
billing corrections, vendor's internal corrections of previous errors and any
other documents or instruments relating to the services performed by the vendor
under the applicable vendor contracts. GCG and GenTek shall agree on the
performance standards, audit methodology, auditing policy and quality measures
and reporting requirements relating to the audits described in this Section
8.3(c) and the manner in which costs incurred in connection with such audits
shall be shared.
Section 8.4 Requests for Internal Revenue Service Rulings and U.S.
Department of Labor Opinions. GenTek and GCG shall cooperate on any issue
relating to this Agreement for which GCG or GenTek elects to seek a
determination letter or private letter ruling from the Internal Revenue Service
or an advisory opinion from the U.S. Department of Labor.
Section 8.5 Collective Bargaining. To the extent any provision of this
Agreement is contrary to the provisions of any applicable collective bargaining
agreement to which any member of the GCG Group or the GenTek Group is a party,
the terms of such collective bargaining agreement shall prevail. Should any
provisions of this Agreement be deemed to relate to a topic determined by an
appropriate authority to be a mandatory subject of collective bargaining, GCG or
GenTek may be obligated to bargain with the union representing affected
employees concerning those subjects. Neither party will agree to a modification
of any applicable collective bargaining agreement without the consent of the
other. In the event a force surplus affecting members of a bargaining unit in
both the GCG Group (on the one hand) and the GenTek Group (on the other hand)
directly results, due to the provisions of such a collective bargaining
agreement, in an employee involuntarily leaving the payroll of the party not
declaring the surplus, then the party declaring the surplus shall bear the cost
of any severance payable to such employee.
Section 8.6 Consent of Third Parties. If any provision of this Agreement is
dependent on the consent of any third party (such as a vendor or a union) and
such consent is withheld, GCG and GenTek shall use their reasonable best efforts
to implement the applicable provisions of this Agreement to the full extent
practicable. If any provision of this Agreement cannot be implemented due to the
failure of such third party to consent, GCG and GenTek shall negotiate in good
faith to implement the provision in a mutually satisfactory manner. The phrase
"reasonable best efforts" as used in this Agreement shall not be construed to
require the incurrence of any non-routine or unreasonable expense or liability
or the waiver of any right.
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Section 8.7 Foreign Plans. With respect employee matters outside of the
U.S., GCG and GenTek shall negotiate in good faith and, if and to the extent
appropriate, may enter into one or more separate employee benefits agreements,
for all operations outside the U.S. applying the general principles for matters
within the U.S. set forth in this Agreement (mutatis mutandis). For purposes of
this Agreement, "outside the U.S." means the U.S., including its territories and
possessions.
Section 8.8 Effect If Spinoff Does Not Occur. If the Spinoff does not
occur, then all actions and events that are, under this Agreement, to be taken
or occur, effective as of the Effective Time, immediately after the Spinoff
Date, or otherwise in connection with the Spinoff, shall not be taken or occur
except to the extent specifically agreed by GenTek and GCG.
Section 8.9 Relationship of Parties. Nothing in this Agreement shall be
deemed or construed by the parties or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
parties, it being understood and agreed that no provision contained herein, and
no act of the parties, shall be deemed to create any such relationship between
the parties other than the relationship set forth herein.
Section 8.10 Affiliates. Each of GCG and GenTek shall cause to be
performed, and hereby guarantees the performance of, all actions, agreements and
obligations set forth in this Agreement to be performed by members of the GCG
Group or members of the GenTek Group, respectively, where relevant.
Section 8.11 Indemnification. Effective as of the Spinoff Date, Article VII
of the Separation Agreement shall control with respect to any issues of
indemnification between GCG and GenTek.
Section 8.12 Survival. This Agreement shall survive the Spinoff Date and
the end of the Transition Period.
Section 8.13 Notices. Any notice, demand, claim, or other communication
under this Agreement shall be in writing and shall be given in accordance with
the provisions for giving notice under the Separation Agreement.
Section 8.14 Interpretation. Words in the singular shall be held to include
the plural and vice versa, and words of one gender shall be held to include the
other gender as the context requires. The terms "hereof," "herein," and
"herewith" and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole
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(including all Exhibits hereto) and not to any particular provision of this
Agreement. The word "including" and words of similar import when used in this
Agreement shall mean "including, without limitation," unless the context
otherwise requires or unless otherwise specified. The word "or" shall not be
exclusive.
Section 8.15 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws.
Section 8.16 No Assignment.
(a) This Agreement shall not be assignable or otherwise transferable by
a party without the prior consent of the other party, and any attempt to so
assign or otherwise transfer this Agreement without such consent shall be void
and of no effect; provided that any party hereto may assign all or any portion
of its rights under this Agreement to (i) any other member of its Group, (ii)
any lender to such party or any member of its Group as security for obligations
to such lender in respect of the financing arrangements entered into by members
of such party's Group in connection with the Spinoff, and any refinancings,
extensions, refundings or renewals thereof, and (iii) to any purchaser or
transferee of all or substantially all of the assets of such party that
executes, and delivers to the other parties hereto, a written assumption of the
obligations of such party under this Agreement; provided, further, that no
assignment hereunder shall affect the Liabilities of any such assignor under
this Agreement.
(b) This Agreement shall be binding upon the respective successors and
assigns of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
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SCHEDULE I
GENTEK DEFERRED COMPENSATION PLANS
-- General Chemical Corp. Supplemental Retirement Plan
-- General Chemical Corp. Supplemental Savings Plan
<PAGE>
<PAGE>
Schedule II
GCG Plans
<TABLE>
<CAPTION>
Plan # Plan Name
------ ---------
<S> <C>
001 GC(SA) Partners Salaried Employees Pension Plan
002 GC(SA) Partners Salaried Employees Savings Plan
003 GC(SA) Partners Hourly Employees Pension Plan
004 GC(SA) Partners Hourly Employees Savings Plan
501 GC(SA) Partners Health Care Program
503 GC(SA) Partners Salary Continuation & Employee
Assistance Program
511 GC(SA) Partners Group Life & Disability Plan
515 GC(SA) Partners Flex Plan
</TABLE>
The following is a listing of GenTek Plans that cover Industrial
Individuals as of the Spinoff Date, of which GCG is obligated under Section 3.1
to adopt a "GCG Mirror Plan".
-- General Chemical Corp. Salaried Pension
-- General Chemical Group Savings Plan
-- General Chemical Corp. Inc. Premium Payment Plan
-- General Chemical Corp. Health Care Program
-- General Chemical Corp. Salary Continuation
Plan & Employee Assistance Plan
-- General Chemical Corp. HMO Plan
-- General Chemical Corp. Flex Plan
-- General Chemical Corp. Supplemental Retirement Plan
-- General Chemical Corp. Supplemental Savings Plan
-- General Chemical Corp. Medical Expense Reimbursement Plan
<PAGE>
<PAGE>
SCHEDULE III
GENTEK INDIVIDUAL AGREEMENTS
<PAGE>
<PAGE>
SCHEDULE IV
GENTEK PLANS
Domestic Plans
<TABLE>
<CAPTION>
Plan # Plan Name
------ ---------
<S> <C>
005 General Chemical Group Savings Plan
108 General Chemical Corp. Salaried Pension
109 General Chemical Corp. Hourly Pension Plan
110 Toledo Stamping Hourly Pension Plan
112 Salaried Employees Pension Plan of Toledo Stamping &
Manufacturing Co.
131 General Chemical Group Inc. Retirement Plan
049 General Chemical Group Inc. Savings & Profit Sharing
Plan*
General Chemical Savings Plan (eff. 9/1/98)
004 Toledo Stamping & Co. Termination pay plan converted
to DC 6/97
006 GCC Hourly Employees Savings Plan
508 General Chemical Group Welfare Benefit Plan
511 General Chemical Group Life and Disability plans
510 Printing Developments Inc. Employers Health Insurance
Plan
General Chemical Group Inc. Premium Payment Plan
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<S> <C>
General Chemical Corporation Inc. Premium Payment
Plan
501 General Chemical Corporation Health Care Program
503 General Chemical Corporation Salary Continuation Plan &
Employee Assist. Plan
505 General Chemical Corporation HMO Plan
513 General Chemical Corporation Flex Plan
Toledo Technologies Inc. MESZ 401(k) plan
003 Peridot Chemicals NJ New Union Employees Pension Plan
001 Peridot Chemical Company Inc. 401(k) plan & trust*
005 General Chemical Salaried Savings plan (9/1/98)
010 Peridot Chemicals NJ Curtis Bay Union Employees
Pension Plan
001 Peridot Chemicals NJ Savings and Investment Plan &
Trust*
005 General Chemical Salaried Savings plan (9/1/98)
501 Peridot Chemicals NJ employees Health Plan
501 General Chemical Corporation Health Care Program
001 Reheis, Inc. Profit Sharing and Retirement Plan Trust
030 Reheis Pension Plan for Hourly Employees
040 Reheis, Inc. 401(k) Plan For Hourly Employees
503 Reheis, Inc. Group Health Plan
502 Reheis, Inc. Group Life Plan
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<S> <C>
510 Reheis, Inc. Flexible Spending
All programs
</TABLE>
Non-Qualified Plans
<TABLE>
<CAPTION>
Plan # Plan Name
------ ---------
<S> <C>
-- General Chemical Corporation Supplemental Retirement
Plan
-- General Chemical Corporation Supplemental Savings Plan
-- General Chemical Corporation Medical Expense
Reimbursement Plan
</TABLE>
- ------------------------
<PAGE>
<PAGE>
Exhibit 10.06
TAX SHARING AGREEMENT
TAX SHARING AGREEMENT (the "Agreement"), dated as of April __, 1999,
between The General Chemical Group Inc., a Delaware Corporation ("GCG"), and
GenTek Inc., a Delaware Corporation ("GenTek"). Capitalized terms used herein
without definition have the meaning set forth in the Separation Agreement, dated
as of April __, 1999, among GCG, GCIP, GenTek and GCC (as the same may be
amended, supplemented or restated from time to time, the "Separation
Agreement").
RECITALS:
A. GCG is the common parent of an affiliated group of corporations,
including GenTek, filing consolidated federal income tax returns.
B. The Board of Directors of GCG has resolved to separate GCG's
performance products and manufacturing businesses from GCG's industrial
chemicals business by (a) having the performance products and manufacturing
businesses be owned by GenTek, and the industrial chemicals business be owned by
GCG and (b) afterwards, distributing as a dividend to holders of stock of GCG
all of the stock of GenTek, all as set forth in the Separation Agreement.
Following such separation and distribution, each of GCG and GenTek will be
publicly-owned companies.
C. In connection with the Corporate Restructuring Transactions and the
Spinoff, GCG and GenTek desire to provide an allocation of liability for Taxes
between GCG and the GCG Subsidiaries on the one hand and GenTek and the GenTek
Subsidiaries on the other hand, and to agree as to certain other Tax matters,
all upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, GCG and GenTek agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following words and phrases have the
following meanings:
"Adverse Tax Act" means, for any Person, (i) any action of such Person
after the Distribution Date, or (ii) a knowing or willful inaccuracy or
inaccuracies of any representation made by any Company by or on behalf of such
Company or its Subsidiaries
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to the IRS in connection with the issuance of the IRS Ruling, if such action(s)
or inaccuracy(ies) materially contribute to a Final Determination that any of
the Corporate Restructuring Transactions or the Spinoff results in the
recognition of gain to GCG as a result of any of (i) the Performance
Contribution, the Intercompany Debt Contribution I, the Intercompany Debt
Contribution II or, provided that GenTek and GCG determine that HN Investment
will be a member of the GenTek Group in accordance with Section 2.01(d) of the
Separation Agreement, the contribution and transfer by GCG to NHO of all of the
capital stock of HN Investment, failing to qualify under section 351 of the
Code, (ii) the Industrial Contribution or the GCC Contribution failing to
qualify under section 368 of the Code, or (iii) the GCIP Distribution, the
GenTek Distribution or the Spinoff failing to qualify under section 355 of the
Code, including, without limitation, by reason of any stock or securities of
GenTek or GCIP failing to qualify as "qualified property" within the meaning of
section 355(c)(2) of the Code or otherwise.
"Allocable Federal Income Tax Liability" means, for any Company and its
Subsidiaries, the Separate Consolidated Federal Income Tax Liability of such
Company and its Subsidiaries, as adjusted to reflect (i) any AMT (but only if
the affiliated group filing consolidated returns of which GCG is the common
parent is liable for the payment of AMT for the Consolidated Return year for
which the determination of Allocable Federal Income Tax Liability is relevant on
an AMT basis) and (ii) any Taxes for which GCG is obligated to indemnify GenTek
pursuant to Section 6.2 of this Agreement.
"AMT" means the alternative minimum tax imposed by section 55 of the
Code.
"Code" means the Internal Revenue Code of 1986, as amended.
"Companies" means GCG and GenTek.
"Consolidated Returns" means (i) the consolidated U.S. federal income
Tax return of GCG for the taxable period ending on December 31, 1998, and (ii)
the consolidated U.S. federal income Tax return of GCG for the taxable period
commencing on January 1, 1999 and including GenTek and the GenTek Subsidiaries
through and including the Distribution Date and including GCG and the GCG
Subsidiaries through and including December 31, 1999.
"Controlled Return" means (i) any of the Consolidated Returns, (ii) any
of the Prior Period Consolidated Returns and (iii) any combined, affiliated or
unitary income Tax returns for any taxable period beginning on or prior to the
Distribution Date that includes GenTek or any GenTek Subsidiary.
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"Distribution Date" means the date on which the Spinoff is effective for
U.S. federal income Tax purposes.
"Final Determination" means the final resolution of liability for Tax
for any taxable period or for any Tax issue as a result of (i) a final and
unappealable judgment or other order of a court of competent jurisdiction, (ii)
a closing agreement or accepted offer in compromise under sections 7121 or 7122
of the Code, or a comparable agreement under the laws of other jurisdictions,
which resolves the entire liability for such Tax or such issue for such taxable
period, or (iii) any other final disposition, including by reason of the
expiration of the applicable statute of limitations.
"GCC Contribution" means the contribution and transfer by NHO to GenTek
of all of the capital stock of GCC in connection with the Corporate
Restructuring Transactions.
"GCC Separate Company Return" means any Tax return required to be filed
by GCC after the Distribution Date that (i) is not a Controlled Return and (ii)
is required to be filed with respect to a Tax period beginning on or prior to
the Distribution Date.
"GCG" has the meaning set forth in the Introduction.
"GCG Subsidiaries" means those entities that, immediately after the
Distribution Date, will be Subsidiaries of GCG.
"GCIP Distribution" means the distribution and transfer by GCC to NHO of
all of the capital stock of GCIP in connection with the Corporate Restructuring
Transactions.
"GenTek" has the meaning set forth in the Introduction.
"GenTek Distribution" means the distribution and transfer by NHO to GCC
of all of the capital stock of GenTek in connection with the Corporate
Restructuring Transactions.
"GenTek Subsidiaries" means those entities that, immediately after the
Distribution Date, will be Subsidiaries of GenTek.
"Industrial Contribution" means the contribution and transfer by GCC to
GCIP of all of the Industrial Chemicals Assets owned or held by GCC (including
its 51 percent general partner interest in GCSAP, its rights as the managing
partner of GCSAP, and all of the stock of the Canadian Companies) and the
assumption by GCIP of all Industrial
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Chemicals Liabilities of GCC, in each case, in connection with the Corporate
Restructuring Transactions.
"Intercompany Debt Contribution I" means the contribution and transfer
by GCG to NHO of the balance of the intercompany debt existing between GCC and
GCG in connection with the Corporate Restructuring Transactions.
"Intercompany Debt Contribution II" means the contribution and transfer
by NHO to GCC of the balance of the intercompany debt existing between GCC and
GCG in connection with the Corporate Restructuring Transactions.
"IRS" means the Internal Revenue Service.
"IRS Ruling" means the private letter ruling issued to GCG by the IRS
dated March 16, 1999 and received by GCG on March 18, 1999.
"Losses" means any and all Taxes, claims, demands, liabilities,
obligations, losses, costs, expenses, fines or damages (whether absolute,
accrued, conditional or otherwise, and whether or not resulting from third party
claims), including interest and penalties with respect thereto and out-of-pocket
expenses and reasonable attorneys' and accountants' fees and expenses incurred
in the investigation or defense of any of the same or in asserting, preserving
or enforcing any rights related thereto.
"Performance Contribution" means the contribution and transfer by NHO
to GCC of all of the capital stock of Toledo Technologies, Inc., a Delaware
corporation, Balcrank Products, Inc., a Delaware corporation, Printing
Developments Inc., a Delaware corporation, Defiance Inc., a Delaware
corporation, and HN Investment, provided that the capital stock of HN Investment
shall not be included in the Performance Contribution if HN Investments is
retained as a member of the GCG Group in accordance with section 2.01(d) of the
Separation Agreement, in each case, in connection with the Corporate
Restructuring Transactions.
"Post-Distribution Tax Period" means any taxable period other than a
Pre-Distribution Tax Period.
"Pre-Distribution Tax Period" means any taxable period ending on or
before the Distribution Date and the portion ending on the Distribution Date of
any taxable period that includes (but does not end on) such date.
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"Prior Period Consolidated Return" shall mean any U.S. federal
consolidated income Tax return of GCG filed, or to be filed, for taxable periods
ending on or prior to December 31, 1997.
"Restricted Transaction" means for each of the Companies and their
respective Subsidiaries (i) any issuance of capital stock (including, without
limitation, in connection with any public offering or any acquisition by such
Company or any Subsidiary of such Company, or in connection with any merger or
consolidation of another Person into such Company or any Subsidiary of such
Company, and including any delivery of capital stock from the treasury of such
Company or any Subsidiary of such Company), but excluding any issuance of
capital stock upon exercise of employee stock options that are outstanding on
the Distribution Date; (ii) any issuance of securities or other rights that are,
or by their terms may become, convertible into, or exercisable or exchangeable
for, capital stock of such Company or any Subsidiary of such Company (including,
without limitation, warrants, convertible debt and employee stock options); or
(iii) any merger or consolidation or other business combination of such Company
or any Subsidiary of such Company into another Person or any sale or transfer of
all or substantially all of the assets of such Company or any Subsidiary of such
Company to another Person.
"Separate Consolidated Federal Income Tax Liability" means, for any
Company and its Subsidiaries and for any taxable period or portion thereof
during which such Company and its Subsidiaries is included in the Consolidated
Return or any Prior Period Consolidated Return, the U.S. federal income Tax
liability that such Company and its Subsidiaries would have incurred if such
Company and its Subsidiaries, on a stand-alone basis, had been an affiliated
group eligible to file a consolidated return for such taxable period or portion
thereof for U.S. federal income tax purposes, computed without regard to AMT,
provided that (i) the Industrial Chemicals Business conducted directly by GCC
prior to the Industrial Contribution (including, without limitation, GCC's
interest in GCSAP) shall be treated as a GCG Subsidiary for purposes of this
definition, and shall not be taken into account in determining the Separate
Consolidated Federal Income Tax Liability of GenTek and the GenTek Subsidiaries
and (ii) 50 percent of each "intercompany item" that any of GenTek, GCG or their
respective Subsidiaries is required to take into account immediately prior to
the Spinoff pursuant to Treasury Regulations section 1.1502-13 shall be taken
into account in determining the Separate Consolidated Federal Income Tax
Liability of GenTek and the GenTek Subsidiaries, and the remaining 50 percent of
each such item shall be taken into account in determining the Separate
Consolidated Federal Income Tax Liability of GCG and the GCG Subsidiaries.
"Spinoff Tax Losses" means any Losses with respect to Taxes resulting
from the Corporate Restructuring Transactions or the Spinoff, as a result of the
failure of the Corporate Restructuring Transactions or the Spinoff to qualify
under section 351, 355 or
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368 of the Code or otherwise, including, without limitation, by reason of any
stock or securities of GenTek or GCIP failing to qualify as "qualified property"
within the meaning of section 355(c)(2) of the Code.
"Subsidiary" means any corporation, partnership, limited liability
company, joint venture or other entity (i) in which another Person owns,
directly or indirectly, ownership interests sufficient to elect a majority of
the Board of Directors (or Persons performing similar functions) (irrespective
of whether at the time any other class or classes of ownership interest of such
corporation, partnership, limited liability company, joint venture or other
entity shall or might have such voting power upon the occurrence of any
contingency) or (ii) of which another Person is a general partner or an entity
performing similar functions (e.g., a trustee or managing member).
"Substantial Authority" has the meaning provided in the Treasury
Regulations under section 6662 of the Code.
"Tax" or "Taxes" means any federal, state, local, foreign or other
income, alternative, minimum, accumulated earnings, personal holding company,
franchise, capital stock, net worth, capital, profits, windfall profits, gross
receipts, value added, sales (including, but not limited to, bulk sales), use,
goods and services, excise, customs duties, transfer, conveyance, mortgage,
registration, stamp, documentary, recording, premium, severance, environmental
(including, but not limited to, taxes under section 59A of the Code), real
property, personal property, ad valorem, intangibles, rent, occupancy, license,
utilities, occupational, employment, unemployment insurance, social security,
disability, workers' compensation, payroll, health care, withholding, estimated
or other similar tax, duty or other governmental charge or assessment or
deficiencies thereof, including, but not limited to, all interest and penalties
thereon and additions thereto whether disputed or not.
"Tax Administrator" means Roy Rabinowitz, the Tax Director of GenTek, or
such other person as GenTek shall appoint with the consent of GCG, which consent
shall not be unreasonably withheld or delayed.
"Tax Dispute Accountants" means the national office of an independent
accounting firm of national reputation selected by GenTek and reasonably
acceptable to GCG.
"Tax Sharing Agreement" means any Tax allocation or Tax sharing
agreement or arrangement that, prior to the Distribution Date, may have been
entered into between any member of the GCG Group, on the one hand, and any
member of the GenTek Group, on the other hand.
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2. TERMINATION OF EXISTING TAX SHARING AGREEMENTS
The Companies shall cause each Tax Sharing Agreement, to the extent such
Tax Sharing Agreement applies to GenTek or any of the GenTek Subsidiaries, to
terminate and to have no further force and effect, as of the end of the day
immediately preceding the Distribution Date.
3. FILING RESPONSIBILITY
3.1 Consolidated Returns and Prior Period Consolidated Returns. (a) The
Companies shall join, and shall cause each of their respective Subsidiaries to
join, in the Consolidated Returns to the extent each is eligible to join in such
return under the Code and the Treasury Regulations. The Tax Administrator shall
cause the Consolidated Returns to be timely prepared and filed, and shall timely
prepare any consents and requests for extension of time within which to file the
Consolidated Returns or any related information or similar returns. Except as
specifically provided in this Section 3, GCG shall not, and shall not permit any
of its Subsidiaries to, file or amend any Controlled Return.
(b) The Tax Administrator may prepare the Consolidated Returns, and may
amend any Consolidated Return or Prior Period Consolidated Return, using any
methods or conventions, and making any other elections, that are consistent with
applicable Law, provided that if the Tax Administrator prepares the Consolidated
Returns, or any such amendment, using a method or convention, or making an
election, that is inconsistent with prior practice and the use of such different
method or convention, or the making of such other election, would have a
material adverse effect on GCG's Tax liability with respect to a
Post-Distribution Tax Period, the Tax Administrator shall obtain the prior
written approval of GCG (which approval shall not be unreasonably withheld). The
Tax Administrator shall make the Consolidated Returns, or any such amendment,
available to the Chief Financial Officer of GCG for his review (and approval if
applicable pursuant to the preceding sentence) not later than 15 days prior to
filing and if GCG has approval rights pursuant to the preceding sentence, GCG
shall provide written comments thereon within 30 days of receipt thereof. In the
event of any disagreement between the Tax Administrator and GCG with respect to
the use of any method or convention, or the making of any election, that is
subject to GCG's prior approval pursuant to this Section 3.1(b), such
disagreement shall be resolved pursuant to the procedures set forth in Section
5.2 of this Agreement. If any Controlled Return required to be submitted to GCG
pursuant to this Section 3.1(b) has not been approved by GCG prior to the due
date of such Tax return (including extensions) such Controlled Return shall be
filed in the manner determined by the Tax Administrator. In the event that any
disagreement with respect to such Controlled Return is resolved in a manner that
would require the payment of additional Taxes, the Tax Administrator shall
prepare and cause to be filed an amended
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Tax return reflecting such resolution and GenTek shall be liable for such Taxes
to the extent it would have been liable to pursuant to Section 4 if such
Controlled Return had been filed in the same manner as such amended Tax return.
(c) GCG shall furnish to the Tax Administrator, on a timely basis, such
information, schedules, analyses and other items as may be reasonably requested
by the Tax Administrator to prepare the Consolidated Returns.
(d) GCG shall execute and deliver all documentation reasonably required
(including, without limitation, powers of attorney) to enable the Tax
Administrator to timely file, and take all actions necessary or incidental to
the filing of, the Consolidated Returns or an amendment to any Consolidated
Return or any Prior Period Consolidated Return (including, without limitation,
the timely payment of any Taxes shown as due and payable on any such Tax
return). Subject to Section 3.1(b), the Tax Administrator shall determine in its
sole discretion whether to file an amendment to any Consolidated Return or any
Prior Period Consolidated Return, and no consent of GCG shall be required for
the filing of any such amended Tax return. GCG shall cause the Consolidated
Returns, and any amendment to any Consolidated Return or to any Prior Period
Consolidated Return to be signed promptly by an authorized officer of GCG after
(i) receiving a written certificate from the Tax Administrator to the effect
that the Tax Administrator has reviewed such Tax return or such amendment, as
the case may be, that it is in order for filing and that the Tax Administrator
has complied with Section 3.1(b) to the extent such Section applies to such Tax
return or such amendment; and (ii) any reasonable questions raised by such
officer in reviewing such return have been resolved satisfactorily.
3.2 Other Returns. (a) The Tax Administrator shall cause any Controlled
Returns (other than Controlled Returns described in Section 3.1), and any
amendment of any such Controlled Returns, to be timely prepared, filed and paid,
utilizing procedures substantially similar to those provided in Section 3.1 with
respect to Consolidated Returns and Prior Period Consolidated Returns.
(b) The Tax Administrator shall cause any GCC Separate Company Returns,
and any amendment to any thereof, to be prepared, filed and paid, utilizing
procedures substantially similar to those provided in Section 3.1 with respect
to Consolidated Returns and Prior Period Consolidated Returns.
(c) GCG and GenTek shall, and shall cause their respective Subsidiaries
to, timely prepare and file Tax returns for any taxable period beginning prior
to the Distribution Date, other than Controlled Returns and GCC Separate Company
Returns, in those jurisdictions in which each such entity is required to do so
in a manner consistent with past practice.
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4. PAYMENT OF TAXES
4.1 Consolidated Return Year Ended on December 31, 1998. (a) On or prior
to September 15, 1999, a settlement payment shall be made to GCG by GenTek equal
to the excess, if any, of (i) the Allocable Federal Income Tax Liability of
GenTek and the GenTek Subsidiaries (based on the Consolidated Return for the
year ended on December 31, 1998 as filed) over (ii) the net payments previously
made with respect to estimated Taxes by GenTek and the GenTek Subsidiaries for
the Consolidated Return year ended on December 31, 1998. On or prior to
September 15, 1999, a settlement payment shall be made to GenTek by GCG equal to
the excess, if any, of the amount described in clause (ii) of the preceding
sentence over the amount described in clause (i) of the preceding sentence.
(b) GCG shall promptly remit to the IRS any payment received by it from
GenTek pursuant to Section 4.1(a) in accordance with Section 3.1(d).
4.2 Consolidated Return Year Ending December 31, 1999. (a) On or prior
to June 30, 1999, an interim settlement payment shall be made to GCG by GenTek
equal to the excess, if any, of (i) the Separate Consolidated Federal Income Tax
Liability of GenTek and the GenTek Subsidiaries (as reasonably determined by the
Tax Administrator) over (ii) the net payments previously made with respect to
estimated Taxes by GenTek and the GenTek Subsidiaries for the Consolidated
Return year ending on December 31, 1999. On or prior to June 30, 1999, an
interim settlement payment shall be made to GenTek by GCG equal to the excess,
if any, of the amount described in clause (ii) of the preceding sentence over
the amount described in clause (i) of the preceding sentence.
(b) On or prior to September 15, 2000, an adjusting payment shall be
made to GCG by GenTek equal to the excess, if any, of (i) the Allocable Federal
Income Tax Liability of GenTek and the GenTek Subsidiaries (based on the
Consolidated Return for the year ending December 31, 1999 as filed) over (ii)
the net payments previously made with respect to estimated Taxes by GenTek and
the GenTek Subsidiaries for the Consolidated Return year ending on December 31,
1999, including payments made pursuant to Section 4.2(a). On or prior to
September 15, 2000, an adjusting payment shall be made to GenTek by GCG equal to
the excess, if any, of the amount described in clause (ii) of the preceding
sentence over the amount described in clause (i) of the preceding sentence.
(c) GCG shall promptly remit to the IRS any payment received by it from
GenTek pursuant to Section 4.2(a) or 4.2(b) in accordance with Section 3.1(d).
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4.3 Controlled Returns Other Than Consolidated Returns. Tax payments
shall be made to or by GCG by or to GenTek, as the case may be, utilizing
procedures substantially similar to, and determining the amount payable by or
to each Company with respect to Taxes shown as due and payable on any Controlled
Return (other than a Consolidated Return) beginning prior to the Distribution
Date for which the due date (including extensions) is after the Distribution
Date, and which is actually filed after the Distribution Date, using to the
extent possible methods substantially similar to those provided in Sections 4.1
and 4.2.
4.4 GCC Separate Company Returns. On or prior the due date of each GCC
Separate Company Return (including extensions), GCG shall pay, or shall cause
GCIP to pay, GCC an amount equal to the excess, if any, of (i) the amount of
Taxes shown as due and payable on such GCC Separate Company Return that are
attributable to the portion of the Industrial Chemicals Business conducted
directly by GCC prior to the Industrial Contribution (including, without
limitation, GCG's interest in GCSAP), determined as if, at all relevant times
prior to the Distribution Date such portion of the Industrial Chemicals Business
was a separate GCG Subsidiary filing a separate Tax return, over (ii) [the
accrual for current Taxes payable by GCC with respect to such GCC Separate
Company Return, as reflected on the pro forma balance sheet for GenTek and its
Subsidiaries set forth in the Information Statement, that are attributable to
such portion of the Industrial Chemicals Business.] On or prior to the due date
of such GCC Separate Company Return (including extensions), GenTek shall cause
GCC to pay GCIP an amount equal to the excess, if any, of the amount described
in clause (ii) of the preceding sentence over the amount described in clause (i)
of the preceding sentence.
4.5 Non-Consolidated Taxes. GCG and GenTek shall pay, or cause to be
paid, Taxes shown as payable on any Tax return for which GCG or GenTek, as the
case may be, has filing responsibility pursuant to Section 3.2(c).
5. SPECIAL RULES
5.1 Waiver of Carrybacks. (a) GenTek shall, and shall cause its
Subsidiaries to, waive (i) the carryback of any net operating loss from each Tax
period beginning on or after the Distribution Date to the Consolidated Returns
or Prior Period Consolidated Returns, and (ii) the carryback of any Tax loss,
deduction, credit or other benefit from each Tax period beginning on or after
the Distribution Date to any other Controlled Return, unless in each case,
GenTek obtains the prior written consent GCG.
(b) To the extent any carryback described in Section 5.1(a) of either
Company or any of its Subsidiaries (i) is approved by GCG pursuant to Section
5.1(a) or (ii) cannot be waived under applicable Law, and GCG, or any of its
Subsidiaries, actually realizes a
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Tax benefit from such carryback, GCG shall pay GenTek or the Subsidiary of
GenTek that generated such carryback the amount of such Tax benefit (net of any
taxes incurred by GCG or any of its Subsidiaries as a result of realizing such
Tax benefit), as and when such Tax benefit is actually realized based on the
convention that any such carryback will be realized only after GCG or any of its
Subsidiaries, as the case may be, has realized all other Tax losses, deductions,
credits or other benefits, or any carryover of any of the foregoing, then
available to such entity.
5.2 Dispute Resolution. In the event of a dispute between GCG and GenTek
as to any computation of federal, state, local income or franchise Tax liability
pursuant to this Agreement, or the amount of any payment with respect thereto,
the disputed item shall be submitted to the Tax Dispute Accountants. GCG and
GenTek shall present their arguments to the Tax Dispute Accountants within 30
days after such submission. The Tax Dispute Accountants shall resolve the
dispute in a fair and equitable manner and in accordance with applicable Tax
law, provided that the Tax Dispute Accountants shall not resolve a legal issue
against GenTek unless the Tax Dispute Accountants determine that GenTek's
position with respect to such legal issue does not have Substantial Authority.
The Tax Dispute Accountants' determination shall be binding on the parties. GCG
and GenTek shall each be responsible for one-half of the cost and fees of the
Tax Dispute Accountants.
5.4 Character of Payments. The Companies shall treat, and shall cause
their respective Subsidiaries to treat, all amounts paid pursuant to this
Agreement pursuant to Sections 4.1, 4.2, 4.3, 4.4 and 5.1 and all amounts paid
by one Company pursuant to Sections 8.1 and 8.2 with respect to the Allocable
Federal Income Tax Liability, or any Tax refund with respect thereto, of the
other Company, or any of its Subsidiaries, for all Tax purposes as a settlement
of liabilities existing on the day prior to the Distribution Date.
5.5 Actions of Tax Administrator. GenTek shall cause the Tax
Administrator to perform each of the Tax Administrator's obligations under this
Agreement at such times, and in such manner, as may be specified for each such
obligation pursuant to this Agreement.
6. INDEMNIFICATION
6.1 Spinoff Tax Losses. (a) GCG shall be liable for and shall indemnify,
defend and hold harmless GenTek and the GenTek Subsidiaries from and against,
any Spinoff Tax Loses that result from, or arise in connection with, an Adverse
Tax Act of GCG or any of the GCG Subsidiaries.
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(b) GenTek shall be liable for and shall indemnify, defend and hold
harmless GCG and the GCG Subsidiaries from and against, any Spinoff Tax Losses
that result from, or arise in connection with, an Adverse Tax Act of GenTek or
any of the GenTek Subsidiaries.
(c) Except as provided in Section 8.1(a), GenTek shall be liable for and
shall indemnify and hold harmless GCG and the GCG Subsidiaries from and against,
50 percent of any Spinoff Tax Losses that (i) result from, or arise in
connection with, an Adverse Tax Act of both (x) GCG or any of the GCG
Subsidiaries and (y) GenTek or any of the GenTek Subsidiaries, or (ii) do not
result from or arise in connection with an Adverse Tax Act.
6.2 Treasury Regulations Sections 1.1502-6 and 1.1502-77. GCG shall be
liable for and shall indemnify, defend and hold harmless GenTek and the GenTek
Subsidiaries from and against any Losses with respect to federal or state income
or franchise Taxes for any of the Consolidated Returns or any Prior Period
Consolidated Return for which GenTek or any of the GenTek Subsidiaries may be
liable solely as a result of the operation of Treasury Regulation sections
1.1502-6 and 1.1502-77 or any similar state statute or regulation.
6.3 Other Controlled Return Taxes. GenTek shall be liable for and shall
indemnify, defend and hold harmless GCG and the GCG Subsidiaries from and
against any Losses incurred after the Distribution Date with respect to Taxes
required to be shown as payable on any Controlled Return, other than (i) any
Spinoff Tax Losses and (ii) any Losses for which GCG has indemnification
responsibility, in whole or in part, pursuant to Section 6.2.
7. AUDITS
7.1 Controlled Returns. The Tax Administrator shall control the conduct
of all stages of any audit or administrative or judicial proceeding with respect
to any Controlled Returns. GCG shall execute and deliver all documentation
reasonably required (including, without limitation, powers of attorney) to
enable the Tax Administrator to control, and take all actions necessary or
incidental to the control of, any such audit or proceeding, provided that (i)
the Tax Administrator shall keep GCG reasonably informed as to the status of any
such audit or proceeding and (ii) the Tax Administrator shall not agree to any
settlement with respect to any such audit or proceeding that could reasonably be
expected to have a material adverse effect on GCG without the consent of GCG
which consent shall not be unreasonably withheld.
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7.2 Other Returns. GCG shall provide the Tax Administrator with notice
of, and shall provide the Tax Administrator and his or her counsel with the
opportunity to attend, any meeting with any taxing authority regarding any claim
that could give rise to liability pursuant to Section 8.1(a), GCG shall permit
the Tax Administrator to review and comment on any written submission to any
taxing authority, to the extent such submission pertains to such claim and GCG
shall not reach any settlement with respect to such claim without the consent of
the Tax Administrator, which consent shall not be unreasonably withheld.
8. CERTAIN TAX PAYMENTS; REFUNDS
8.1 Tax Payments. (a) GenTek shall pay, or cause GenTek Canada to pay,
GCCL an amount equal to any increase occurring after the Distribution Date in
any Canadian Tax liability resulting from the purchase and sale effected
pursuant to the Canadian Purchase Agreement to the extent of 37% of the
cumulative increased depreciation deductions attributable to tangible property
that GenTek Canada is able to claim as a result of such increase in Tax
liability.
(b) GenTek shall pay, or cause GenTek Canada to pay, any additional
amounts payable pursuant to this Section 8.1 promptly after each such increase
is reflected in (i) an amended Tax return or (ii) a Final Determination.
8.2 Refunds. GCG shall pay GenTek additional amounts equal to any Tax
refunds received, from time to time, with respect to any Tax shown as payable on
any Controlled Return, other than Tax refunds attributable to carryback
described in Section 5.1, in each case, reduced by an amount equal to 40% of any
interest paid to GCG in respect of such Tax refund by the IRS or any other
taxing authority. GCG shall pay such additional amounts promptly after each such
refund is received from the relevant Tax authority.
9. CERTAIN POST-SPINOFF ACTIONS
9.1 GCG. GCG shall comply with and otherwise not take any action
inconsistent with any representation or statement made, or to be made, by or on
behalf of GCG or any the GCG Subsidiaries in this Agreement or to the IRS in
connection with the IRS Ruling.
9.2 GenTek. GenTek shall comply with and otherwise not take action
inconsistent with each representation and statement made, or to be made, by or
on behalf GenTek or any of the GenTek Subsidiaries in this Agreement or to the
IRS in connection with the IRS Ruling.
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9.3 Restricted Transaction. (a) Prior to the second anniversary of the
Distribution Date, if a Change of Control has occurred, neither GCG nor GenTek
shall, or shall permit any of its Subsidiaries to, effect any Restricted
Transaction unless and until the following conditions have been satisfied or
waived, in writing, by the other Company with respect to such Restricted
Transaction:
(i) the Company that proposes to engage in such Restricted
Transaction shall have given the other Company at least 20 business days'
written notice prior to effecting such Restricted Transaction, which
notice shall describe the Restricted Transaction in detail reasonably
sufficient to permit analysis of the potential effect of the Restricted
Transaction on the U.S. federal income Tax treatment of the Corporate
Restructuring Transactions and the Spinoff, provided that such other
Company will keep confidential all information relating to such Restricted
Transaction;
(ii) the Company that proposes to engage in such Restricted
Transaction shall have afforded the other Company and its representatives
20 business days (which may overlap with the notice period in clause (i)
of this Section 9.3(a) of this Agreement) to discuss with the Company that
proposes to engage in such Restricted Transaction and its representatives
the terms of such Restricted Transaction, subject to the proviso in clause
(i) of this Section 9.3(a); and
(iii) the Company that proposes to engage in such Restricted
Transaction shall have provided to the other Company, at the request of
such other Company, an opinion of outside counsel, in form and substance
reasonably satisfactory to such other Company, to the effect that such
transaction will not adversely affect the U.S. federal income tax
treatment of the Corporate Restructuring Transactions and/or the Spinoff
as transactions described in sections 351, 355 and 368 of the Code.
(b) Each Company agrees that money damages would not be a sufficient
remedy for any breach of this Section 9.3 by such Company or its Subsidiaries,
and that in addition to all other remedies, the non-breaching Company shall be
entitled to specific performance and to injunctive or other equitable relief as
a remedy for any such breach. The breaching Company shall waive any requirement
for the securing or posting of any bond in connection with any such remedy.
(c) For purposes of this Section 9.3, a "Change in Control" shall be
deemed to occur on the first date on which the shares of capital stock of either
GenTek or GCG that are controlled by Paul M. Montrone and his "Permitted
Transferees" (as such term is defined in the certificate of incorporation of GCG
or GenTek, respectively, as in effect as of the Spinoff Date, assuming for this
purpose that any reference to "Class B Stock" in such definition is a reference
to the capital stock of GenTek or GCG, as the case may be)
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no longer possess 50 percent or more of the total combined voting power of the
capital stock of GenTek or GCG, respectively.
10. COOPERATION
Each Company agrees to cooperate, and to cause its Subsidiaries to
cooperate, to the extent reasonably requested by the other Company, in
connection with the preparation and filing of any Tax return or the conduct of
any audit, dispute, proceeding, suit or action concerning any issues or any
other matter contemplated hereunder. Such cooperation shall include making
employees available for consultation and making work papers and other records
available during regular business hours. The requesting Company shall pay the
reasonable out-of-pocket costs incurred by the other Company or any Subsidiary
thereof, in cooperating with the requesting Company pursuant to this Section 10.
11. SURVIVAL OF TERMS
The provisions of this Agreement shall survive the Spinoff and shall
remain in full force and effect until all periods of limitation, after giving
effect to any extensions or waivers, for the taxable periods of the Controlled
Returns have expired and no further carrybacks to such taxable periods are
possible and for 30 days thereafter, provided that the provisions of this
Agreement shall remain in full force and effect with respect to any pending
claim under this Agreement until the final resolution thereof.
12. GENERAL PROVISIONS
12.1 Notices. All notices, consents, requests, instructions, approvals
and other communications provided for in, or in connection with, this Agreement
shall be in writing and shall be deemed validly given upon personal delivery or
one day after being sent by overnight courier service or by telecopy (so long as
for notices or other communications sent by telecopy, the transmitting telecopy
machine records electronic confirmation of the due transmission of the notice),
at the following address or telecopy number, or at such other address or
telecopy number as a party may designate to the other parties:
If to GenTek, to:
90 East Halsey Road
Parsippany, NJ 07054
Telecopy: [973- ]
Attention: Tax Director
General Counsel
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with a copy to:
Liberty Lane
Hampton, New Hampshire 03842
Telecopy: [603- ]
Attention: Corporate Secretary
If to GCG, to:
90 East Halsey Road
Parsippany, NJ 07054
Telecopy: [973- ]
Attention: Tax Director
General Counsel
with a copy to:
Liberty Lane
Hampton, New Hampshire 03842
Telecopy: [603- ]
Attention: Corporate Secretary
12.2 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
conflicts of laws provisions thereof.
12.3 Choice of Forum. Each of the parties hereby irrevocably submits to
the exclusive jurisdiction of the courts of the State of New York and the
Federal courts of the United States of America located in the State, City, and
County of New York solely in respect of the interpretation and enforcement of
the provisions of this Agreement and of the documents referred to in this
Agreement, and in respect of the transactions contemplated hereby and thereby,
and hereby waives, and agrees not to assert, as a defense in any action, suit,
or proceeding for the interpretation or enforcement hereof or of any such
document, that it is not subject thereto or that such action, suit, or
proceeding may not be brought or is not maintainable in said courts or that the
venue thereof may not be appropriate or that this Agreement or any such document
may not be enforced in or by such courts, and the parties hereto irrevocably
agree that all claims with respect to such action or proceeding shall be heard
and determined in such a court. Each of the parties hereby consents to and
grants any such court jurisdiction over the person of such parties and over the
subject matter of any such dispute and agrees that mailing of process or other
papers in connection with any such action or proceeding in the manner provided
in Section
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12.1 in such other manner as may be permitted by law, shall be valid and
sufficient service thereof.
12.4 Amendments; Waivers, etc. (a) Neither this Agreement nor any term
hereof may be amended, waived, discharged or terminated other than by an
instrument in writing, signed by the party against which enforcement of such
amendment, discharge, waiver or termination is sought.
(b) No failure or delay by any party in exercising any right, power or
privilege under this Agreement shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies provided herein shall be cumulative and not exclusive of any rights or
remedies provided by law.
12.5 Assignment. This Agreement shall not be assignable or otherwise
transferable by a party without the prior consent of the other parties, and any
attempt to so assign or otherwise transfer this Agreement without such consent
shall be void and of no effect, provided that any party hereto may assign all or
any portion of its rights under this Agreement to (i) any other member of its
Group, (ii) any lender to such party or any member of its Group as security for
obligations to such lender in respect of the financing arrangements entered into
by members of such party's Group in connection with the Spinoff, and any
refinancings, extensions, refundings or renewals thereof, and (iii) to any
purchaser or transferee of all or substantially all of the assets of such party
that executes, and delivers to the other parties hereto, a written assumption of
the obligations of such party under this Agreement, provided, further, that no
assignment hereunder shall affect the Liabilities of any such assignor under
this Agreement.
12.6 Third Party Beneficiaries. Except as provided in Section 6 hereof,
nothing in this Agreement shall be construed as giving any Person, other than
the parties hereto and their successors and permitted assigns, any right, remedy
or claim under or in respect of this Agreement or any provision hereof.
12.7 Severability. If any provision of this Agreement is held to be
invalid or unenforceable for any reason, it shall be adjusted rather than
voided, if possible, in order to achieve the intent of the parties hereto to the
maximum extent possible. In any event, the invalidity or unenforceability of any
provision of this Agreement in any jurisdiction shall not affect the validity or
enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of this Agreement, including that provision, in any
other jurisdiction.
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12.8 Section Headings. The article and section headings of this
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.
12.9 Integration. This Agreement and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement of
the parties and supersede any and all prior agreements, arrangements and
understandings relating to the subject matters hereof and thereof.
12.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
THE GENERAL CHEMICAL GROUP INC.
By: .................................
Name:
Title:
GENTEK INC.
By: .................................
Name:
Title:
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Exhibit 10.07
INTELLECTUAL PROPERTY AGREEMENT
INTELLECTUAL PROPERTY AGREEMENT, dated as of April __, 1999, among
THE GENERAL CHEMICAL GROUP INC., a Delaware corporation ("GCG"), GENERAL
CHEMICAL INDUSTRIAL PRODUCTS INC., a Delaware corporation ("GCIP"), GENTEK INC.,
a Delaware corporation ("GenTek"), and GENERAL CHEMICAL CORPORATION, a Delaware
corporation ("GCC").
RECITALS
A. The Board of Directors of GCG has resolved to separate GCG's
performance products and manufacturing businesses from GCG's industrial
chemicals business by (a) having the performance products and manufacturing
businesses be owned by GenTek through GCC, and the industrial chemicals business
be owned by GCG through GCIP, and (b) afterwards, distributing as a dividend to
holders of stock of GCG all of the stock of GenTek. Following such separation
and distribution, each of GCG and GenTek will be publicly-owned companies.
B. The parties have entered into a Separation Agreement, dated as of
April __, 1999 (as the same may be amended, supplemented or restated from time
to time (the "Separation Agreement"), which sets forth the terms and conditions
of such separation and distribution.
C. In connection with such separation and distribution and as
provided by the Separation Agreement, the parties desire to allocate among
themselves various intellectual property rights and to provide for certain other
matters regarding their intellectual property, all upon the terms and conditions
set forth herein.
NOW, THEREFORE, the parties hereby agree as follows:
Section 1. Definitions. Terms used herein without definition shall
have the meanings given to them in the Separation Agreement. The following
terms, as used herein, have the following meanings:
"General Chemical Mark" means the several U.S. and foreign trademarks
incorporating the GENERAL CHEMICAL name, and the trade names, trademarks,
service marks and designs associated therewith, in various countries throughout
the world, and the registrations and applications for registration or renewal
therefor, including those
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identified on Schedule A hereto, together with any and all common law rights
pertaining thereto.
"Industrial Chemicals Intellectual Property" means the following
intellectual property, assets and rights owned, used or held for use (including
by license) by GCG or any of its Subsidiaries primarily in connection with the
Industrial Chemicals Business: (a) United States and foreign patents and patent
applications (including docketed patent disclosures awaiting filing, reissues,
revisions, supplementary protection certificates, divisions, continuations,
continuations-in-part; re-examinations and extensions), patent disclosures
awaiting filing determination, inventions and improvements thereto, including
the patents and patent applications identified on Schedule B; (b) trademarks,
service marks, trade names, trade dress, logos, business and product names, and
registrations and applications for registration or renewal thereof, including
the trademarks and trademark registrations identified on Schedule C; (c)
copyrights (including in software) and registrations thereof; (d) processes,
designs, formulae, trade secrets, know-how, industrial models, confidential
information, drawings, and product specifications; (e) mask works and other
semiconductor chip rights, and applications, registrations and renewals thereof;
(f) intellectual property rights similar to any of the foregoing; and (g) copies
and tangible embodiments thereof, in whatever form or medium, including
electronic media; provided that the Industrial Chemicals Intellectual Property
shall not include any of the Licensed Marks, the Licensed Patents or the
Know-How licensed pursuant to Section 7.2.
"Know-How" means technical information, processes, procedures,
compositions, drawings, plans, specifications, techniques and other know-how.
For avoidance of doubt, it is expressly stipulated that Know-How shall not
include any patents, trademarks, or copyrights or any registration of or
application for registration or renewal of any of the foregoing.
"Licensed Marks" means (i) the General Chemical Mark, and (ii) the
trademark registrations and applications identified on Schedule D hereto and the
trade names, trademarks, service marks and designs associated therewith.
"Licensed Patents" means the patents and applications identified on
Schedule E hereto, together with any and all divisions, additions,
continuations, continuations-in-part, extensions, renewals, re-examinations and
reissues thereof.
"Patent Improvements" means any and all modifications, variations,
revisions or other improvements to the Licensed Patents, including patentable or
unpatentable information, technology or improvements that may also be subject to
coverage under copyright, trade secret, unfair competition or other legal
principles.
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Section 2. General Chemical Mark and Other Licensed Marks.
2.1. Grant. (a) From and after the date hereof, upon the terms and
subject to the conditions of this Agreement, GCC hereby grants, and GenTek shall
cause other members of the GenTek Group (as applicable) to grant, to the members
of the GCG Group a non-transferable and non-exclusive right and license to use,
without right of sublicense, throughout the world:
(i) the General Chemical Mark as part of the name or trade name
of GCG, GCIP or any other member of the GCG Group; and
(ii) each Licensed Mark (A) to conduct the Industrial Chemicals
Business as and to the extent conducted as of the Spinoff Date and
(B) to produce, sell, and otherwise distribute the Industrial
Chemicals Products; and
(iii) with the prior written consent of GenTek or GCC, which
shall not be unreasonably withheld, each Licensed Mark to produce,
sell, and otherwise distribute any other product or service, provided
that neither GenTek nor GCC shall be required to give any such
consent for any product or service that is produced, sold or
distributed by any member of the GenTek Group at the time its consent
is requested.
(b) GCC shall not, and GenTek shall cause members of the GenTek Group
not to, directly or indirectly, grant any license in, or the right to use, any
Licensed Mark to any Person (other than members of the GenTek Group) that,
directly or indirectly, (i) produces, sells or otherwise distributes any
Industrial Chemicals Product or (ii) owns, engages in, conducts, manages,
operates, controls, participates or has any interest in any Person that
produces, sells or otherwise distributes any Industrial Chemicals Product.
(c) Notwithstanding anything in this Agreement to the contrary, GCC
retains the right to use, and to grant a license and the right to use to other
members of the GenTek Group, the Licensed Marks in connection with the GenTek
Business and any other business or operation; provided that GCC may not use, and
shall not grant a right or license to use to other members of the GenTek Group,
any Licensed Mark in connection with the production, sale or other distribution
of any Industrial Chemicals Product, except (i) for the sale or other
distribution of any Industrial Chemicals Product purchased by the GenTek Group
pursuant to the Supply Agreements or (ii) if members of the GCG Group terminate
the Supply Agreements for any reason other than a breach thereof by members of
the GenTek Group, for the sale or other distribution of up to a total amount of
120,000 tons in any one year of Industrial Chemicals Products.
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2.2. Royalty. In consideration of the license granted in Section 2.1,
GCG and GCIP shall, together, pay a one-time license fee of $50,000 to GCC
within 30 days of the date of this Agreement.
2.3. Restrictions on Use. Without the prior written consent of GenTek
or GCC (which may be granted or withheld at their sole discretion), GCG and GCIP
shall not, and shall cause the other members of the GCG Group not to, (i) change
or modify any Licensed Mark, or create any design variation of any Licensed
Mark, (ii) join any word, symbol, name, mark or logo with any Licensed Mark so
as to form a composite trade name or mark, or (iii) use any other trademark or
trade name that is confusingly similar to any Licensed Mark.
2.4. Changes in Licensed Marks. Upon written notice to GCG and GCIP,
GenTek or GCC may, from time to time in its sole discretion, elect to (i)
discontinue any Licensed Mark and/or (ii) replace any Licensed Mark with or use
any new or different trademark or service mark ("New Mark"). Upon such election,
any such New Mark shall be designated a part of the Licensed Marks and as such
shall be subject to the terms of this Agreement, and Schedule A and/or Schedule
D, as the case may be, shall be deemed amended automatically to include such New
Mark. All uses of the Licensed Marks by GCG Group shall faithfully reproduce the
design and appearance of such Licensed Marks, as modified by GenTek or GCC from
time to time in its discretion; provided that the GCG Group may continue to use
the design and appearance of the Licensed Mark as existing prior to any such
modification for up to 12 months following the modification thereof by GenTek or
GCC.
2.5. Quality Control. Members of the GCG Group shall use the Licensed
Marks in accordance with such quality standards as may be established by GenTek
Group and communicated to GCG or GCIP from time to time or as may be agreed to
by GenTek or GCC, on the one hand, and GCG or GCIP, on the other hand; provided
that the quality standards maintained by GCG and its Subsidiaries prior to the
Spinoff shall at all times be acceptable to GenTek and GCC. Upon reasonable
request by GenTek or GCC from time to time, GCG and GCIP shall provide to GenTek
or GCC (as applicable) representative samples of its uses of the Licensed Marks
or permit GenTek or GCC to inspect places of business of the GCG Group where the
Licensed Marks are used. In the event GenTek or GCC notifies GCG or GCIP of the
failure by a member of the GCG Group to maintain appropriate quality standards
with respect to its uses of the Licensed Marks, GCG and GCIP shall use
reasonably diligent efforts to cure the cause of such failure or, if unable to
cure it, discontinue such uses of the Licensed Marks by members of the GCG
Group.
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Section 3. Licensed Patents.
3.1. Grant. (a) From and after the date hereof, upon the terms and
subject to the conditions of this Agreement, GCC hereby grants, and GenTek shall
cause other members of the GenTek Group (as applicable) to grant, to members of
the GCG Group a non-transferable and non-exclusive right and license to use,
without right of sublicense, in, to and under the Licensed Patents, to make,
have made, use and sell the Industrial Chemicals Products throughout the world.
(b) GCC shall not, and GenTek shall cause members of the GenTek Group
not to, directly or indirectly, grant any license in, or the right to use, any
Licensed Patent to any Person (other than members of the GenTek Group) that,
directly or indirectly, (i) produces, sells or otherwise distributes any
Industrial Chemicals Product or (ii) owns, engages in, conducts, manages,
operates, controls, participates or has any interest in any Person that
produces, sells or otherwise distributes any Industrial Chemicals Product.
3.2. Improvements to Licensed Patents. Members of the GenTek Group
and the GCG Group shall keep members of the other Group regularly and fully
informed about new designs, applications and other developments relating to
Licensed Patents which become available to them and which they are not legally
prevented from communicating to the other party, including any Patent
Improvements. If members of the GCG Group, independently of the GenTek Group,
develop any Patent Improvement, whether or not patented or patentable, members
of the GenTek Group shall have a non-exclusive, worldwide, royalty-free right
and license (without right of sublicense) to use such Patent Improvement. Any
Patent Improvement developed by members of the GCG Group independently of the
GenTek Group shall be the property of the GCG Group and, if patented, shall be
prosecuted and maintained at GCG Group's expense and, except as otherwise
provided in this Section 3.2, no member of the GenTek Group shall have any
right, title or interest in, to or under such Patent Improvement.
3.3 Royalty. In consideration of the license granted in Section 3.1,
GCG and GCIP shall, together, pay a one-time license fee of $25,000 to GCC
within 30 days of the date of this Agreement.
Section 4. Ownership and Maintenance.
4.1. Ownership. (a) GCG and GCIP acknowledge and admit the validity
of the Licensed Marks and Licensed Patents and agree that they will not,
directly or indirectly, challenge the validity of any Licensed Mark or Licensed
Patent, or any registrations thereof and/or applications therefor in any
jurisdiction, or the right, title and interest of the owner(s) thereof therein
and thereto. GCG and GCIP shall not, and shall cause the other
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members of the GCG Group not to, claim any interest in any Licensed Mark or
Licensed Patent in any jurisdiction, other than the rights expressly granted
hereunder. GCG and GCIP acknowledge that (i) the Licensed Marks and Licensed
Patents are and will remain the exclusive property of the owner(s) thereof, and
(ii) all uses of the Licensed Marks and Licensed Patents shall inure solely to
the benefit of the owner(s) thereof. GCG and GCIP shall not, and shall cause the
other members of the GCG Group not to, do or suffer to be done, at any time, any
act or thing that will in any way impair the rights of GCC or other members of
the GenTek Group in and to any Licensed Mark or Licensed Patent. This Agreement
shall not affect the rights of any members of the GenTek Group to enjoin or
obtain relief against any acts by third parties of trademark infringement or
unfair competition in any jurisdiction.
(b) GCG and GCIP shall not, and shall cause the other members of the
GCG Group not to, at any time, without the prior written consent of GenTek or
GCC (which shall not be unreasonably withheld), acquire a registration or file
and prosecute a trademark or patent application or applications to register any
Licensed Mark or Licensed Patent, or any component, variation or derivation
thereof, anywhere in the world. If a member of the GCG Group at any time,
without the prior written consent of GenTek or GCC (which shall not be
unreasonably withheld), files or causes to be filed, in its own name or
otherwise on its behalf, an application to register or otherwise takes steps
under applicable Law to obtain trademark protection of any Licensed Mark or
Licensed Patent in any country, territory or jurisdiction, GCG and GCIP shall,
at the direction of GCC or GenTek, either (i) assign and transfer to GCC or
GenTek, without further consideration, all right, title and interest in or to
such Licensed Mark or Licensed Patent in such country, territory or
jurisdiction, or (ii) surrender and abandon such registration or application for
registration.
4.2. Maintenance; Registrations; Filings. (a) GCC shall, and GenTek
shall cause other members of the GenTek Group to, use commercially reasonable
efforts to maintain the Licensed Marks and Licensed Patents and all
registrations thereof and/or applications therefor in all jurisdictions in which
each is currently registered or an application therefor is pending. Members of
the GCG Group shall execute all documents as are reasonably necessary or
appropriate to aid in, and shall otherwise cooperate (at GenTek's or GCC's
expense) with the efforts of GCC or other member(s) of the GenTek Group, as
applicable to prepare, obtain, file, record and maintain all such registrations
and applications.
(b) GCG and GCIP acknowledge that no member of the GenTek Group shall
have any further maintenance obligations as to the Licensed Marks or Licensed
Patents or any registration thereof or application therefor upon giving written
notice to GCG or GCIP that it does not intend to continue such maintenance.
GenTek and GCC acknowledge that, upon GCG's or GCIP's receiving such notice, any
member of the GCG
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Group shall have the right, after receiving the written consent of GenTek or GCC
(which shall not be unreasonably withheld), to continue such maintenance at such
member's expense and in GenTek's or GCC's name (as applicable). In the event a
member of the GCG Group elects to continue such maintenance, GenTek and GCC
shall, to the extent reasonably necessary, execute all documents to aid in, and
shall otherwise cooperate with, such GCG Group member's efforts to maintain
registrations and/or prosecute applications for the Licensed Marks and Licensed
Patents. Notwithstanding anything to the contrary contained herein, after giving
such notice, no party hereto shall be liable to any other in any manner for its
failure to maintain any Licensed Mark or Licensed Patent.
Section 5. Litigation Involving Licensed Marks and Patents.
5.1. Claims Against the Parties. GCG and GCIP shall promptly notify
GenTek or GCC upon any member of the GCG Group becoming aware of an actual or
threatened claim, or the likelihood of a claim being asserted, against any
member of the GenTek Group or of the GCG Group with respect to any Licensed Mark
or Licensed Patent. Except as may be required by applicable Law, the GCG Group
shall not communicate with any third party, respond to or otherwise take any
action with respect to any such actual or potential claim without the prior
written consent of GenTek or GCC (which consent shall not be unreasonably
withheld). GenTek and GCC shall, in their sole discretion, determine what
responses and other actions to take with respect to such claim, including (i)
controlling any and all defense of such claim and (ii) authorizing any member of
the GCG Group to respond to, defend or take action with respect to such claim.
5.2. Infringements by Others. (a) Each of GCG and GCIP shall promptly
notify GenTek and GCC upon any member of the GCG Group becoming aware of any
infringement, imitation or other illegal or unauthorized use of any Licensed
Mark or Licensed Patent by a party other than the parties hereto, and shall
provide GenTek and GCC with all information known to GCG or GCIP (as applicable)
regarding such infringement, imitation or other illegal or unauthorized use.
GenTek or GCC may take such steps to stop such infringement, imitation or other
illegal or unauthorized use as it deems necessary or appropriate in its sole
discretion to protect such Licensed Mark or Licensed Patent. GenTek and GCC
shall have the right, but not any obligation, to prosecute, at their expense,
such infringement shall have full control over any such action, including the
rights to select counsel (subject to Section 5.2(c)) to settle on any terms it
deems advisable, to appeal any adverse decision rendered in any court, to
discontinue any action taken by them, and otherwise to make any decision in
respect thereto as it deems advisable in its discretion. At the request of
GenTek or GCC, GCG and GCIP shall, and shall cause the other members of the GCG
Group, to permit any action to be brought in its name if required by Law. In the
event GenTek or GCC elects to bring suit, members of the GCG Group may
thereafter join such suit at their own expense, it being understood
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that GenTek or GCC shall, at all times, have the right to control the
prosecution of any such action.
(b) If GenTek or GCC does not elect to take such steps as GCG or GCIP
reasonably believes are necessary or appropriate to protect such Licensed Mark
or Licensed Patent from infringement or other illegal or unauthorized use within
90 days of the date GenTek or GCC first received notice thereof, GCG or GCIP
may, at its own expense and upon receiving the written consent of GenTek or GCC
(which consent shall not be unreasonably withheld), take such steps to stop such
infringement or other illegal or unauthorized use as it deems necessary or
appropriate to protect the Licensed Mark or Licensed Patent.
(c) With respect to any litigation or settlement involving any
Licensed Mark or Licensed Patent, all amounts recovered by the GenTek Group or
the GCG Group, or both, shall belong to the party or parties injured by the
infringement in proportion to the expenses and damages incurred by such party or
parties in prosecuting such action (other than expenses related to the voluntary
participation in the litigation permitted by Section 5.2(a)), or as otherwise
agreed by the parties. In reaching a settlement or compromise of any dispute or
litigation (including appeals, negotiations and the right to effect a settle
ment or compromise thereof) involving any Licensed Mark or Licensed Patent,
neither any member of the GenTek Group, on the one hand, nor any member of the
GCG Group, on the other hand, shall agree to any non-monetary relief which
materially and adversely affects the business of the other Group without the
prior written approval of the other.
(d) Each party agrees to cooperate with the other party in litigation
proceedings instituted hereunder at the expense of the party requesting such
cooperation and, subject to Article V of the Separation Agreement, shall provide
all information, authority and assistance as may be necessary.
Section 6. Compliance with Law; Legends. GCG and GCIP shall, and
shall cause the other members of the GCG Group to, use the Licensed Marks in
compliance with applicable Law and use any trademark notice that GenTek or GCC
deems advisable as it may instruct GCG or GCIP from time to time. GCG and GCIP
shall, and shall cause the other members of the GCG Group to, use the Licensed
Patents in compliance with applicable Law and mark all products made and sold
under the Licensed Patents, or their containers, in accordance with any
applicable patent marking Laws.
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Section 7. Use of Know-How.
7.1. By GenTek Group. (a) To the extent that the production, use, sale
or other distribution of GenTek Products prior to the Spinoff requires the use
or exploitation of any Know-How included as part of the Industrial Chemical
Intellectual Property, each of GCG and GCIP hereby covenants that it will not,
and will cause each other member of the GCG Group not to, assert any claims or
rights, bring any suit, or institute any other action against any member of the
GenTek Group in connection with the use or exploitation of such Know-How by
members of the GenTek Group after the Spinoff, but only to the extent such use
or exploitation is in compliance with applicable Law and is limited to the
production, use, sale or distribution of GenTek Products.
(b) In consideration of GCG's and GCIP's covenant in Section 7.1(a),
GenTek and GCC shall together pay a one-time fee of $10,000 to GCG within 30
days of the date of this Agreement.
7.2. By GCG Group. (a) To the extent that the production, use, sale or
other distribution of Industrial Chemicals Products prior to the Spinoff
requires the use or exploitation of any Know-How of any member of the GenTek
Group, each of GenTek and GCC hereby covenants that it will not, and will cause
each other member of the GenTek Group not to, assert any claims or rights, bring
any suit, or institute any other action against any member of the GCG Group in
connection with the use or exploitation of such Know-How by members of the GCG
Group after the Spinoff, but only to the extent such use or exploitation is in
compliance with applicable Law and is limited to the production, use, sale or
distribution of Industrial Chemicals Products.
(b) In consideration of GenTek's and GCC's covenant in Section 7.2(a),
GCG and GCIP shall together pay a one-time fee of $10,000 to GenTek within 30
days of the date of this Agreement.
Section 8. Transfer of Industrial Chemicals Intellectual Property. (a)
GCC hereby sells, transfers, assigns and grants, to GCIP all of its right, title
and interest in, to and under the Industrial Chemicals Intellectual Property
that is owned, used or held for use (including by license) by GCC. From time to
time at the reasonable request of GCG or GCIP, GenTek shall cause each member of
the GenTek Group to transfer, assign and grant, for no consideration, all of its
right, title and interest in, to and under the Industrial Chemicals Intellectual
Property owned, used or held for use (including by license) by such member of
the GenTek Group to any member of the GCG Group designated by GCG or GCIP.
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(b) GenTek and GCC shall execute and deliver such instruments, and take
such actions, as members of the GCG Group may reasonably request in order to
more effectively transfer to members of the GCG Group the Industrial Chemicals
Intellectual Property being transferred by this Section 8.
Section 9. Limitations on Licenses and Transfers. Notwithstanding
anything in this Agreement to the contrary, this Agreement shall not constitute
an agreement to license, assign or otherwise transfer any intellectual property
or other asset, in whole or in part, or any rights thereunder, if the agreement
or attempt to license, assign or otherwise transfer, without the consent of a
third party, would in any way adversely affect the rights of any member of the
GenTek Group or GCG Group (whichever the transferor, assignor or licensor may
be) with respect to such intellectual property or other asset. If an attempted
license, assign or other transfer would be ineffective or would adversely affect
the rights of any party hereto, the parties hereto will cooperate with each
other to effect any arrangement designed reasonably to provide for the
transferee, assignee or licensee thereof the benefits of any such intellectual
property or other asset.
Section 10. Termination of Licenses. (a) The licenses granted in
Sections 2 and 3 of this Agreement may be terminated (i) at any time by the
mutual written agreement of the parties hereto, or (ii) by either party (x) for
a material breach by the licensee thereunder which has been unremedied for
thirty days after written notice has been given to such breaching party, or (y)
upon the insolvency of the licensee thereunder.
(b) Upon termination of the licenses granted in Section 2 and/or
Section 3 of this Agreement, all rights in the Licensed Marks and/or Licensed
Patents granted thereunder shall automatically revert to the licensor thereof,
and the licensee shall have no further rights in, and shall immediately cease
all use of, the Licensed Patents and/or Licensed Marks, as applicable. Any
termination of any provision of this Agreement for any reason whatsoever shall
not affect the obligations of the parties under Section 11, which shall survive
such termination.
Section 11. Indemnification. (a) GCG and GCIP shall, jointly and
severally, indemnify, defend and hold harmless the GenTek Indemnitees from and
against any and all Losses of the GenTek Indemnitees arising out of, by reason
of or otherwise in connection with the use by members of the GCG Group of any
Licensed Mark, any Licensed Patent, any Know-How referred to in Section 7.2 or
any Industrial Chemicals Intellectual Property, at any time prior to or after
the Spinoff Date.
(b) GenTek and GCC shall, jointly and severally, indemnify and hold
harmless the GCG Indemnitees from and against any and all Losses of the GCG
Indemnitees arising out of, by reason of or otherwise in connection with the use
by members of the GenTek
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Group of any Know-How referred to in Section 7.1 at any time prior to or after
the Spinoff Date.
(c) All claims for indemnification under this Section 11 shall be in
addition to indemnification rights of the parties pursuant to, and shall be made
in accordance with, Article VII of the Separation Agreement.
Section 12. Further Assurances. Each of the parties shall use all
reasonable efforts to (i) execute and deliver such instruments and documents as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement, and (ii) take or cause to be taken
all actions, and do or cause to be done all other things, necessary or desirable
to carry out the intent and accomplish the purposes of this Agreement.
Section 13. Notices. All notices, consents, requests, instructions,
approvals and other communications provided for in, or in connection with, this
Agreement shall be in writing and shall be deemed validly given upon personal
delivery or one day after being sent by overnight courier service or by telecopy
(so long as for notices or other communications sent by telecopy, the
transmitting telecopy machine records electronic confirmation of the due
transmission of the notice), at the following address or telecopy number, or at
such other address or telecopy number as a party may designate to the other
parties:
If to GenTek or GCC, to:
90 East Halsey Road
Parsippany, NJ 07054
Telecopy: [973- ]
Attention: General Counsel
with a copy to:
Liberty Lane
Hampton, New Hampshire 03842
Telecopy: [603- ]
Attention: Corporate Secretary
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If to GCG or GCIP, to:
90 East Halsey Road
Parsippany, NJ 07054
Telecopy: [973- ]
Attention: General Counsel
with a copy to:
Liberty Lane
Hampton, New Hampshire 03842
Telecopy: [603- ]
Attention: Corporate Secretary
Section 14. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the United States with respect to
trademark and patent issues, and in all other respects the State of New York,
without regard to the conflicts of laws provisions thereof.
Section 15. Choice of Forum. Each of the parties hereby irrevocably
submits to the exclusive jurisdiction of the courts of the State of New York and
the Federal courts of the United States of America located in the State, City,
and County of New York solely in respect of the interpretation and enforcement
of the provisions of this Agreement and of the documents referred to in this
Agreement, and in respect of the transactions contemplated hereby and thereby,
and hereby waives, and agrees not to assert, as a defense in any action, suit,
or proceeding for the interpretation or enforcement hereof or of any such
document, that it is not subject thereto or that such action, suit, or
proceeding may not be brought or is not maintainable in said courts or that the
venue thereof may not be appropriate or that this Agreement or any such document
may not be enforced in or by such courts, and the parties hereto irrevocably
agree that all claims with respect to such action or proceeding shall be heard
and determined in such a court. Each of the parties hereby consents to and
grants any such court jurisdiction over the person of such parties and over the
subject matter of any such dispute and agrees that mailing of process or other
papers in connection with any such action or proceeding in the manner provided
in Section 13 or in such other manner as may be permitted by law, shall be valid
and sufficient service thereof.
Section 16. Amendments; Waivers, etc. (a) Neither this Agreement nor
any term hereof may be amended, waived, discharged or terminated other than by
an instrument in writing, signed by the party against which enforcement of such
amendment, discharge, waiver or termination is sought.
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(b) No failure or delay by any party in exercising any right, power or
privilege under this Agreement shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies provided herein shall be cumulative and not exclusive of any rights or
remedies provided by law.
Section 17. Assignment. (a) This Agreement shall not be assignable or
otherwise transferable by a party without the prior consent of the other
parties, and any attempt to so assign or otherwise transfer this Agreement
without such consent shall be void and of no effect; provided that any party
hereto may assign all or any portion of its rights under this Agreement to (i)
any other member of its Group, (ii) any lender to such party or any member of
its Group as security for obligations to such lender in respect of the financing
arrangements entered into by members of such party's Group in connection with
the Spinoff, and any refinancings, extensions, refundings or renewals thereof,
and (iii) to any purchaser or transferee of all or substantially all of the
assets of such party that executes, and delivers to the other parties hereto, a
written assumption of the obligations of such party under this Agreement;
provided, further, that no assignment hereunder shall affect the Liabilities of
any such assignor under this Agreement.
(b) This Agreement shall be binding upon the respective successors and
assigns of the parties hereto.
Section 18. Third Party Beneficiaries. Nothing in this Agreement shall
be construed as giving any Person, other than the parties hereto and their
successors and permitted assigns, any right, remedy or claim under or in respect
of this Agreement or any provision hereof.
Section 19. Severability. If any provision of this Agreement is held to
be invalid or unenforceable for any reason, it shall be adjusted rather than
voided, if possible, in order to achieve the intent of the parties hereto to the
maximum extent possible. In any event, the invalidity or unenforceability of any
provision of this Agreement in any jurisdiction shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of this Agreement, including that provision, in any
other jurisdiction.
Section 20. Section Headings. The article and section headings of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
Section 21. Integration. This Agreement, including the Schedules
hereto, and the other documents delivered pursuant hereto constitute the full
and entire understanding
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and agreement of the parties and supersede any and all prior agreements,
arrangements and understandings relating to the subject matters hereof and
thereof.
Section 22. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original and all of
which shall together constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
THE GENERAL CHEMICAL GROUP INC.
By
______________________________________
Name:
Title:
GENERAL CHEMICAL INDUSTRIAL
PRODUCTS INC.
By
______________________________________
Name:
Title:
GENTEK INC.
By
______________________________________
Name:
Title:
GENERAL CHEMICAL CORPORATION
By
______________________________________
Name:
Title:
15
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<PAGE>
Exhibit 10.08
MANAGEMENT AGREEMENT
--------------------
MANAGEMENT AGREEMENT, dated as of _______________, 1999, between
LATONA ASSOCIATES INC., a Delaware corporation ("Manager"), and GENTEK INC., a
Delaware corporation (the "Company").
RECITALS
--------
A. The Company has been formed by The General Chemical Group Inc.,
("GCG"), a Delaware corporation, in connection with the separation of GCG's
performance products and manufacturing businesses through a spinoff by
distributing, on a pro rata basis, all of the shares of the Company to the
stockholders of GCG. Following such distribution, the Company will be a separate
public company, owning and operating GCG's performance products and
manufacturing businesses.
B. The Manager has provided various management and other services to
GCG. Now, the Company desires to engage Manager to provide certain management
services with respect to the business of the Company and its subsidiaries and to
provide other services and advice more fully set forth herein, and Manager is
willing to undertake these responsibilities, all upon the terms and conditions
set forth herein.
NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties to this Agreement hereby agree as follows:
1. Services of Manager. Subject to the terms and conditions of this
Agreement, Manager will provide the following services (collectively, the
"Services") to the Company:
(a) provide strategic management, business and financial
advisory services to the Company and its subsidiaries with respect to,
among other matters, the manufacturing and performance products businesses
conducted by the Company, including strategic guidance and advice with
respect to tax, employee benefits insurance and risk management matters;
and
(b) provide such other corporate services of such nature and
scope as the Company and Manager may reasonably agree upon from time to
time.
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<PAGE>
In addition to the services of its own staff, Manager shall select
and, with the consent of the Company, engage on behalf of the Company the
services of other professionals and consultants in connection with the provision
of the services set forth above, including management consultants, bankers,
investment bankers, underwriters, accountants, actuaries, insurance brokers, tax
advisors, appraisers, risk management consultants and employee benefits
consultants and attorneys.
Manager may also obtain, on its own behalf, the services of
individuals and entities in connection with its provision of the Services, and
such third-party services shall be deemed to be provided by the Manager for
purposes of this Agreement.
The Service shall relate to the business currently conducted by the
Company and its subsidiaries, including, without limitation, General Chemical
Corporation, Toledo Technologies Inc., Balcrank Products Inc., Reheis Inc.,
Defiance, Inc. and Noma Industries Limited.
2. Limitations on Manager's Authority. Manager will not be authorized
to manage the affairs of, act in the name of, direct the actions of employees of
or in any way bind the Company or any of its subsidiaries (unless otherwise
authorized in writing by the Company to do so). The management, policies and
operations of the Company and its subsidiaries will be the responsibility of the
directors and officers of the Company and its subsidiaries acting pursuant to
and in accordance with the relevant corporate charter and by-laws, and all
decisions relating to corporate matters will be made by the directors and
officers of the Company and its subsidiaries acting pursuant to and in
accordance with the relevant corporate charter and by-laws.
3. Independent Contractor Status. Manager will render and perform the
services under this Agreement as an independent contractor in accordance with
its own standards, subject to its compliance with the provisions of this
Agreement and with all applicable laws, ordinances and regulations.
4. Availability of Employees. Manager will make available to the
Company the services of such of its employees and consultants as are necessary,
in the reasonable judgment of the Manager, for the performance from time to time
of the Services, provided that the inability of the Manager to make available to
the Company a specific employee or consultant of the Manager for any reason,
including without limitation the death or disability of such employee or
consultant, the termination of an employment or consulting agreement with any
such person or the assignment of such employee or consultant to other duties,
shall not constitute a default hereunder.
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5. Limited Liability of Manager. (a) Neither Manager nor any
director, officer, stockholder, employee or agent of Manager makes any express
or implied representation, warranty, or guarantee to the Company, to any of its
subsidiaries, to any of its stockholders or to any third party relating to the
services to be performed by Manager pursuant to this Agreement or the quality or
results of such services.
(b) Manager shall not be liable to the Company, to any of its
subsidiaries, to any of its stockholders or to any third party for any expense,
claim, loss or damage, including, without limitations indirect, special,
consequential or exemplary damages suffered other than by reason of Manager's
intentional failure to perform the services to be performed by Manager pursuant
to this Agreement, or by reason of action taken by Manager which was in bad
faith and in a manner not reasonably believed by Manager to be in the best
interests of the Company.
(c) Manager shall not be liable to the Company, to any of its
subsidiaries, to any of its stockholders or to any third party for the
consequences of any failure to perform or delay in performing any of its
obligations under this Agreement if that failure shall be caused by events or
circumstances beyond its control including, without limitation, by strikes or
labor disputes; provided that Manager shall reasonably provide prompt notice to
the Company or its subsidiaries of such inability and the reasons therefor.
6. Indemnification. The Company will indemnify Manager and each
director, officer, stockholder, employee and agent of Manager against any
losses, claims, damages or liabilities (including legal or other expenses
reasonably incurred in investigating or defending against any such losses,
claims, damages or liabilities), joint or several ("Liabilities"), to which any
of such persons may become subject by reason of such person's being a director,
officer, stockholder, employee or agent of Manager (but only to the extent that
such Liabilities arise out of or relate to and with respect to Services);
provided that the party to be indemnified acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
The Company may pay expenses (including attorneys' fees) incurred by
Manager and any director, officer, stockholder, employee and agent of Manager in
defending any civil, criminal, administrative or investigative action, suit or
proceedings, in advance of the final disposition of such action, suit or
proceeding, upon receipt of an undertaking by or on behalf of a party which may
be entitled to indemnification to repay such amount if it shall be ultimately
determined that he is not entitled to be indemnified by the Company as
authorized in this Agreement.
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7. Fee for Services; Expenses. Commencing on the effective date and
throughout the term hereof, the Company will pay to Manager a fixed fee for its
services under Section 1(a) hereof, payable quarterly, of $_____________ per
quarter (the "Management Fee"). Such Management Fee will be due and payable
quarterly in advance by the Company on the first business day of each calendar
quarter during the period in which Services are being provided. The Management
Fee shall be increased each year on the anniversary date of this Agreement by
the rate of increase in the Consumer Price Index for such year over the Consumer
Price Index for the prior year. For purposes of this Agreement, the "Consumer
Price Index" means the Consumer Price Index for the Boston Standard Metropolitan
Statistical Area (All Items for Urban Wage Earners and Clerical Workers),
seasonally adjusted, as published by the United States Department of Labor,
Bureau of Labor Statistics, or a mutually agreeable index if such index is no
longer published or the method of computation thereof is substantially modified.
In addition to the Management Fee referred to above, the Company will
pay or reimburse Manager for all out-of-pocket costs and expenses incurred in
fulfilling its obligations as they relate to the Company under this Agreement,
including any expenses of third parties engaged by Manager; provided that
Manager will not be entitled to reimbursement for compensation of its officers,
directors, employees, consultants or stockholders who provide services under
this Agreement.
In addition to the Management Fee, the Company will pay the Manager
fees and expenses in connection with all acquisitions, divestitures, joint
ventures, business combinations, investment and other transactions entered into
by the Company other than in the ordinary course of its business, in an amount
and on terms that are customarily received by nationally recognized investment
banking firms in similar transactions, as determined by the independent members
of the Company's Board of Directors.
8. Other Relationships. Nothing contained in this Agreement will, or
will be deemed to, prohibit, restrict or limit in any manner any business or
investment activities of Manager or the directors, officers, employees or
affiliates of Manager.
9. Assignment. This Agreement and all the provisions of it will be
binding on and inure to the benefit of the parties to this Agreement and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests and obligations under this Agreement may be assigned by
either party without the prior written consent of the other party to this
Agreement, which consent shall not be unreasonably withheld; provided however
that this Agreement may be assigned without the prior consent of the Company to
any person or entity that is an affiliate (as defined in the Securities Exchange
Act of 1934) of Paul M. Montrone. Nothing in this Agreement, whether expressed
or implied, may be construed to give any person other than the parties
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to this Agreement any legal or equitable right, remedy or claim under or in
respect of this Agreement.
10. Term; Effect of Termination. (a) This Agreement will be effective
on the date first written above and will continue for a term ending on December
31, 2004 (the "Term").
(b) This Agreement may be terminated, at any time prior to the end of
the Term of this Agreement, as follows: (i) by mutual written consent of the
parties; (ii) by the Company, pursuant to written notice by the Company to
Manager, if Paul M. Montrone ceases to hold, directly or indirectly, shares of
the Company's capital stock constituting at least 20 percent of the aggregate
voting power of the Company's capital stock; or (iii) by the Company or the
Manager, if the non-terminating party ceases, or threatens to cease, to carry on
its business, or commits a material breach of this Agreement, and such breach is
not remedied within thirty (30) days after written notice of such breach.
(c) At the end of the Term of this Agreement, or in the event the
parties agree to an earlier termination of this Agreement (in each case the
"Termination Date"), each party will perform its obligations under this
Agreement accrued to the Termination Date, and the Company (i) will assume, pay
and honor all obligations to third parties engaged by Manager in connection with
its Services hereunder and (ii) will promptly pay Manager all accrued fees and
expenses and honor all indemnification obligations arising hereunder. On
termination, Manager will return to the Company any corporate records of the
Company and its subsidiaries.
11. Alternate Dispute Resolution/Arbitration.
(a) Dispute Resolution. Any claim, dispute, difference or controversy
between the parties hereto arising out of, or relative to, this Agreement which
cannot be settled by reference to other terms of this Agreement or by mutual
understanding between the parties shall be submitted to alternative dispute
resolution as described in this Section 11.
(b) Pre-Arbitration Referral to Representatives.
(i) The dispute, claim or controversy arising out of or in relation
to this Agreement or the interpretation or breach thereof shall be resolved in
accordance with this Section 11, being subjected first to the procedure in this
subsection (b) then, if still unresolved, to binding arbitration in accordance
with subsection (c) below. Any party may cause a proceeding to be commenced by
giving written notice to the other party that it desires to do so (the date of
such notice is hereinafter referred to as the "Notice Date"). Each party shall
thereupon prepare a written statement (the "Statement") briefly describing
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such party's position on the matter in dispute. For purposes hereof, the Company
designates its President and Chief Executive Officer and Manager designates Paul
M. Montrone (collectively, the "Representatives") as the individuals who shall
represent such parties. The Statement shall be prepared within fifteen (15) days
of the Notice Date and given to all parties.
(ii) The Representatives shall, during the fifteen (15) day period
commencing on the fifteenth day after the Notice Date, meet and negotiate in
good faith in an attempt to resolve the matter in dispute. If such attempt
proves unsuccessful in the judgment of any party, such party may cause all
parties involved to pursue the procedure set forth below by delivering written
notice to them of such party's desire to do so within five (5) days after the
end of such negotiation period.
(c) Arbitration. Any dispute arising out of or relating to this
Agreement or the breach, termination or validity hereof which are not resolved
by the foregoing procedure shall be finally settled by arbitration conducted
expeditiously in accordance with the Center for Public Resources Rules for
Nonadministered Arbitration of Business Disputes (the "CPR Rules"). The Center
for Public Resources shall appoint a neutral advisor from its National CPR
Panel. The arbitration shall be governed by the United States Arbitration Act, 9
U.S.C. 'SS''SS' 1-16, and judgment upon the award rendered by the arbitrators
may be entered by any court having jurisdiction thereof. The place of
arbitration shall be Boston, Massachusetts.
Such proceedings shall be administered by the neutral advisor in
accordance with the CPR Rules as he/she deems appropriate; however, such
proceedings shall be guided by the following agreed upon procedures:
(i) mandatory exchange of all relevant documents, to be accomplished
within forty-five (45) days of the initiation of the procedure;
(ii) no other discovery;
(iii) hearings before the neutral advisor which shall consist of a
summary presentation by each side of not more than three hours, such
hearings to take place on one or two days at a maximum; and
(iv) decision to be tendered not more than ten (10) days following
such hearings.
Notwithstanding anything to the contrary contained herein, the
provisions of subsection (c) shall not apply with regard to any equitable
remedies to which any party may be entitled hereunder.
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The parties hereto (i) hereby irrevocably submit to the jurisdiction
of the United States District Court for the District of New Hampshire, for the
purpose of enforcing the award or decision in any such proceeding and (ii)
hereby waive, and agree not to assert, by way of motion, as a defense, or
otherwise, in any such suit, action or proceeding, any claim that it is not
subject personally to the jurisdiction of the above-named courts, that its
property is exempt or immune from attachment or execution, that the suit, action
or proceeding is brought in an inconvenient forum, that the venue of the suit,
action or proceeding is improper or that this Agreement or the subject matter
hereof may not be enforced in or by such court, and (iii) hereby waive and agree
not to seek any review by any court of any other jurisdiction which may be
called upon to grant an enforcement of the judgment of any such court. The
parties hereto hereby consent to service of process by registered mail at the
address to which notices are to be given. Each of the Company and Manager agrees
that its submission to jurisdiction and its consent to service of process by
mail is made for the express benefit of the other parties hereto. Final judgment
against the Company or Manager in any such action, suit or proceeding may be
enforced in other jurisdictions by suit, action or proceeding on the judgment,
or in any other manner provided by or pursuant to the laws of such other
jurisdiction; provided, however, that any party may at its option bring suit, or
institute other judicial proceedings, in any state or federal court of the
United States or of any country or place where the other parties or their
assets, may be found.
The losing party shall bear all of the expenses incurred by both
parties in connection with any arbitration, including legal and other expenses,
unless the neutral advisor determines that it is appropriate for the parties to
share all or any part of the expenses incurred in connection with the
arbitration and the legal and other expenses, provided that any costs incurred
by a party to enforce an award of the neutral advisor pursuant to the foregoing
terms of this subsection (c) shall be borne by the party resisting enforcement.
12. Notices. All notices, requests, demands and other communications
provided for by this Agreement must be in writing and will be deemed to have
been given at the time when hand delivered or mailed in any general or branch
United States post office enclosed in a registered or certified post-paid
envelope, addressed to the following addresses of the parties to this Agreement
or to such changed address as such party may have given the other party notice
as provided in this Agreement:
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The Company:
GenTek Inc.
Liberty Lane
Hampton, New Hampshire 03842
Attention: President
Manager:
Latona Associates Inc.
Liberty Lane
Hampton, New Hampshire 03842
Attention: President
13. Miscellaneous. (a) This Agreement, or any term or provision of
it, may only be amended, modified or waived by an instrument in writing signed
by the party against whom such amendment, modification or waiver is sought to be
enforced.
(b) The provisions of this Agreement will be construed in accordance
with and governed by the laws of the State of Delaware.
(c) This Agreement may be executed in counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
one and the same instrument.
(d) This Agreement is complete, reflects the entire agreement of the
parties with respect to its subject matter, and supersedes all previous written
or oral negotiations, commitments or writings.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first above written.
LATONA ASSOCIATES INC.
By:_____________________________________
Name:
Title:
GENTEK INC.
By:_____________________________________
Name:
Title:
<PAGE>
<PAGE>
Exhibit 10.09
LETTERHEAD OF GENTEK INC.
April __, 1999
Mr. Paul M. Montrone
Liberty Lane
Hampton, New Hampshire 03842
Registration Rights Agreement
-----------------------------
Reference is made to the Registration Rights Agreement, dated as of
April __, 1999 (the "Agreement") between The General Chemical Group Inc. ("GCG")
and Paul M. Montrone. Capitalized terms used in this letter without definition
have the meanings given to them in the Agreement.
GenTek Inc. hereby acknowledges and agrees that (i) all shares of
Common Stock and Class B Common Stock of GenTek distributed by GCG to the
Stockholder and its Permitted Transferees in connection with the Spinoff
constitute Registrable Securities, (ii) GenTek is bound by and subject to the
terms and conditions of this Agreement with respect to such Registrable
Securities to the same extent as the Company and (iii) GenTek will comply with
all the provisions of the Agreement as if such provisions contained "GenTek" in
each instance where the word "Company" appears.
Sincerely,
GENTEK INC.
By: _________________________
Name:
Title:
Receipt Acknowledged:
Paul M. Montrone
- --------------------
<PAGE>
<PAGE>
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT, dated as of April __, 1999, between
The General Chemical Group Inc., a Delaware corporation (the "Company"), and
Paul M. Montrone, residing in the State of New Hampshire (the "Stockholder").
RECITALS
--------
A. The Stockholder holds or controls, directly and through family
trusts (the "Family Trusts") of which he is the settlor and a co-trustee or of
which he is the settlor and his spouse is the sole trustee with investment and
voting discretion, a total of 53,000 shares of Common Stock, par value $.01 per
share (the "GCG Common Stock"), of the Company and 9,758,421 shares of Class B
Common Stock, par value $.01 per share (the "GCG Class B Stock"), of the
Company.
B. The Company proposes to separate its manufacturing and performance
products businesses through a spinoff (the "Spinoff") of its wholly-owned
subsidiary, GenTek Inc., a Delaware corporation ("GenTek"), through a
distribution of the stock of GenTek to the stockholders of the Company on a
share-for-share basis. The Company has obtained a private letter ruling from the
Internal Revenue Service (the "IRS") to the effect that this distribution of the
stock of GenTek generally will be tax-free to the Company and its stockholders
for U.S. federal income tax purposes.
C. In order to facilitate the treatment of the Spinoff as a tax-free
transaction and the compliance with the requirements of the Internal Revenue
Code and the IRS pertaining to the IRS ruling, the Company desires that the
Stockholder and the Family Trusts convert a total of 5,800,000 GCG Class B Stock
into GCG Common Stock, which would result in a reduction of the voting power of
the shares of the Company held by the Stockholder and the Family Trusts.
D. In order to induce the Stockholder and the Family Trusts to
convert the GCG Class B Stock into GCG Common Stock, the Company desires to
grant the Stockholder and its Permitted Transferees (as defined in the
certificate of incorporation of the Company), including the Family Trusts,
certain registration rights regarding their stock, all upon the terms and
conditions set forth herein.
E. Capitalized terms used in this Agreement have the meanings given
to them in Section 3.
<PAGE>
<PAGE>
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
Section 1. Registration under the Securities Act.
Section 1.1. Required Registrations. (a) Request. Upon the terms and
subject to the conditions of this Agreement, at any time during the period
beginning on the date hereof and ending on April 1, 2004 (the "Registration
Period"), upon the written request of a majority in interest of the Holders (the
"Requesting Holders") requesting that the Company effect registration under the
Securities Act of all or a specified number of Registrable Securities (which
request shall also specify the intended method or methods of disposition
thereof), the Company shall use its best efforts to effect the registration
under the Securities Act of the Registrable Securities that the Company has been
so requested to register by the Requesting Holders, for disposition according to
the intended method or methods of disposition specified by the Requesting
Holders (including a shelf registration) to the extent required or deemed
appropriate by the Requesting Holders to permit the disposition (according to
the intended method or methods thereof specified by the Requesting Holders) of
the Registrable Securities to be registered; provided that the Company shall not
be required to effect any registration pursuant to this Section 1.1 after three
registrations requested by the Requesting Holders pursuant to this Section 1.1
have been effected; provided, further, that the Company shall not be required to
effect a registration pursuant to this Section 1.1 prior to 90 days following
the date that a registration pursuant to this Section 1.1, or a registration in
which the Holders were entitled to participate pursuant to Section 1.2, has been
effected. If the Requesting Holders request registration of their Registrable
Securities on a delayed or continuing basis under Rule 415 under the Securities
Act (or any successor or similar rule), the Company shall keep such registration
continuously effective for at least 36 months (or such shorter period specified
by the Requesting Holders) following the date on which such registration
statement is declared effective or until all such Registrable Securities
registered thereunder are sold, whichever is shorter.
(b) Withdrawal. The Requesting Holders shall have the right to
request withdrawal of any registration statement filed pursuant to this Section
1.1 (and the Company shall so withdraw such registration statement) prior to the
effectiveness of such registration statement.
(c) Effective Registration Statement. A registration requested
pursuant to this Section 1.1 shall not be deemed to be effected (i) if a
registration statement with respect thereto does not become effective under the
Securities Act (including because of a withdrawal of such registration statement
by the Requesting Holders prior to the effectiveness thereof pursuant to Section
1.1(b)), (ii) if, after it has become effective, such
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registration is interfered with for any reason by any stop order, injunction or
other order or requirement of the Commission or any other Governmental
Authority, and the result of such interference prevents the Requesting Holders
from disposing any of the Registrable Securities proposed to be sold according
to the intended methods of disposition or the Company exercises its rights under
Section 1.4 and delays the proposed distribution of any Registrable Securities
for more than 90 days and the Requesting Holders determine not to sell
Registrable Securities pursuant to such registration as a result of such delay,
(iii) if the conditions to closing specified in the purchase agreement or
underwriting agreement entered into in connection with any underwritten offering
are not satisfied or waived with the consent of the Requesting Holders holding
more than one-half of the Registrable Securities that were to have been sold
thereunder, other than as a result of any breach by any Requesting Holder or any
underwriter of its obligations thereunder or hereunder, or (iv) if, because of
inclusion in such registration of securities held by the Company or a Person or
Persons other than the Requesting Holders (including pursuant to Section
1.1(g)), more than half of the Registrable Securities requested by the
Requesting Holders for such registration are not registered.
(d) Registration Statement Form. Registration statements filed under
this Section 1.1 shall be on such form of the Commission as shall be selected by
the Company and approved by the Requesting Holders (which approval shall not be
unreasonably withheld), and as shall permit the disposition of the subject
Registrable Securities according to the intended method or methods of
disposition specified by the Requesting Holders. The Company agrees to include
in any such registration statement additional information or material reasonably
requested by the Requesting Holders.
(e) Expenses. The Company shall pay all Registration Expenses in
connection with any registration requested pursuant to this Section 1.1.
(f) Selection of Underwriters. If a registration pursuant to this
Section 1.1 involves an underwritten offering, the managing or lead underwriter
or underwriters shall be selected by the Requesting Holders with the approval of
the Company, which approval shall not be unreasonably withheld.
(g) Priority in Requested Registrations. If a registration pursuant
to this Section 1.1 involves an underwritten offering, and the managing or lead
underwriter or underwriters advise the Requesting Holders in writing (a copy of
which shall be provided to the Company by the Requesting Holders) that, in its
or their opinion, the number of securities requested to be included in such
registration by the Requesting Holders, the Company and any other Person exceeds
the number that can be sold in such offering within a price range reasonably
acceptable to the Requesting Holders, the Company shall include in such
registration the number of securities that the Requesting Holders are so
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advised can be sold in such offering, at the option of the Company, either: (i)
(x) first, the Registrable Securities proposed to be included by the Requesting
Holders, (y) second, the securities requested to be included in such
registration by the Company, (z) third, the securities of any other Person or
Persons proposed to be included in such registration; or (ii) (x) first, the
Registrable Securities proposed to be included by the Requesting Holders and the
securities requested to be included in such registration by the Company, each
pro rata in accordance with the number of Registrable Securities proposed to be
included by the Requesting Holders and the number of securities so proposed to
be included by the Company, respectively, and (y) second, the securities of any
other Person or Persons proposed to be included in such registration. If the
Company selects the option set forth in clause (ii) of the preceding sentence,
the Company shall pay the fees and expenses of counsel to the Requesting Holders
(in addition to Registration Expenses) if, due to the Company's participation on
a pro rata basis with the Requesting Holders, more than one-half of the
Registrable Securities requested by the Requesting Holders for such registration
are not registered.
(h) Inconsistent Rights. The Company shall not grant to any Person
any registration or other rights inconsistent with the provisions of this
Section 1.1.
Section 1.2. "Piggy-Back" Registration Rights. (a) Right to
Participate. If the Company at any time proposes to register any of its
securities under the Securities Act (other than by a registration on Form S-4 or
S-8 or any successor or similar forms or filed in connection with an exchange
offer or any offering of securities solely to the Company's existing
stockholders, and other than pursuant to Section 1.1), whether or not for sale
for its own account, the Company shall give prompt written notice to each Holder
of its intention to do so and of the rights of the Holders under this Section
1.2. Upon the terms and subject to the conditions of this Agreement, during the
Registration Period, upon the written request of any Holder (the "Participating
Holder") made within 30 days after the delivery of any such notice by the
Company (which request shall specify the Registrable Securities intended to be
disposed of by any Participating Holder and the intended method or methods of
such disposition), the Company shall use its best efforts to effect the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by such Participating Holders, to the
extent required or deemed appropriate by such Participating Holders to permit
the disposition (in accordance with the intended methods thereof specified by
the Participating Holders), of the Registrable Securities so to be registered.
If, at any time after giving written notice of its intention to register any
such securities and prior to the effective date of the registration statement
filed in connection with such registration, the Company determines for any
reason not to register or to delay registration of such securities, the Company
may, at its election, give written notice of such determination to each
Participating Holder and, thereupon, (i) in the case of a determination not to
register, the Company need not register
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any Registrable Securities in connection with such registration (but shall, in
such case, pay the reasonable fees and expenses of counsel to the Participating
Holders in addition to the Registration Expenses), without prejudice, however,
to the rights of the Participating Holders to request that such registration be
effected as a registration under Section 1.1, and (ii) in the case of a
determination to delay registering, the Company may delay registering any
Registrable Securities for the same period as the delay in registering such
other securities. No registration effected under this Section 1.2 shall relieve
the Company of its obligation to effect any registration upon request under
Section 1.1.
(b) Priority in Piggy-Back Registration Rights. If a registration
pursuant to this Section 1.2 involves an underwritten offering and the managing
or lead underwriter or underwriters advises the Company in writing (a copy of
which shall be provided by the Company to each Participating Holder) that, in
its or their opinion, the number of securities requested and otherwise proposed
to be included in such registration exceeds the number that can be sold in such
offering within a price range reasonably acceptable to the Company, the Company
shall include in such registration, up to the number of securities that the
Company is so advised can be sold in such offering, (i) if the registration is a
primary registration on behalf of the Company, (x) first, the securities
proposed to be included by the Company, and (y) second, the Registrable
Securities requested to be included in such registration by the Participating
Holders and the securities of other Persons requested to be included in such
registration, each pro rata in accordance with the number of Registrable
Securities so requested to be included and the number of securities proposed to
be included by such other Persons, respectively, and (ii) if the registration is
a secondary registration on behalf of a Person or Persons other than a Holder,
the securities proposed to be registered by such other Person or Persons and the
Registrable Securities requested to be included in such registration by the
Participating Holders, each pro rata in accordance with the number of securities
proposed to be registered by such Person or Persons and the number of
Registrable Securities so requested to be included, respectively.
(c) Inconsistent Rights. The Company shall not grant to any holder of
its securities any registration rights inconsistent with the provisions of this
Section 1.2.
(d) Expenses. The Company shall pay all Registration Expenses in
connection with any registration requested pursuant to this Section 1.2.
(e) Selection of Underwriters. If an incidental registration pursuant
to this Section 1.2 involves an underwritten offering, the managing or lead
underwriter or underwriters shall be selected by the Company with the approval
of the Requesting Holders, which approval shall not be unreasonably withheld.
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Section 1.3. Registration Procedures. If and whenever the Company is
required to use its best efforts to effect the registration of any Registrable
Securities as provided in Sections 1.1 and 1.2, the Company shall as
expeditiously as possible:
(a) prepare and as soon thereafter as possible file with the
Commission the requisite registration statement to effect such
registration and thereafter use its best efforts to cause such
registration statement to become effective, provided that before filing
such registration statement or any amendments thereto, the Company shall
furnish to the counsel to the Selling Stockholders copies of all such
documents proposed to be filed, which documents will be subject to the
review of such counsel;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement continuously effective for a period of either (i) not less than
120 days (subject to extension pursuant to the last paragraph of this
Section 1.3) or, if such registration statement relates to an underwritten
offering, such longer period as in the opinion of counsel for the
underwriters a prospectus is required by law to be delivered in connection
with sales of securities by an underwriter or dealer; or (ii) such shorter
period as is required for the disposition of all of the securities covered
by such registration statement in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such
registration statement (but in any event not before the expiration of any
longer period of effectiveness required under the Securities Act), and to
comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement until
such time as all of such securities have been disposed of in accordance
with the intended methods of disposition by the seller or sellers thereof
set forth in such registration statement;
(c) furnish to each seller of securities covered by such registration
statement such number of conformed copies of such registration statement
and of each such amendment and supplement thereto (in each case including
all exhibits), such number of copies of the prospectus contained in such
registration statement (including each preliminary prospectus and any
summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the Securities
Act, and such other documents in order to facilitate the disposition of
such securities owned by such seller in accordance with such seller's
intended method of disposition, as such seller may reasonably request, but
only during such time as the Company shall be required under the
provisions hereof to cause such registration statement to remain current;
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(d) use its best efforts to register or qualify securities covered by
such registration statement under such other securities or blue sky laws
of such jurisdictions in the United States as each seller thereof shall
reasonably request, to keep such registration or qualification in effect
for so long as such registration statement remains in effect, and to take
any other action which may be reasonably necessary to enable such seller
to consummate the disposition in such jurisdictions in the United States
of the securities owned by such seller, provided that the Company shall
not for any such purpose be required to (i) qualify generally to do
business as a foreign corporation in any jurisdiction where it would not
otherwise be required to qualify but for the requirements of this
subsection (d), (ii) consent to general service of process in any such
jurisdiction, (iii) subject itself to taxation in any such jurisdiction or
(iv) conform its capitalization or the composition of its assets at the
time to the securities or blue sky laws of such jurisdiction;
(e) use its best efforts to cause all securities covered by such
registration statement to be registered with or approved by such other
Governmental Authorities as may be necessary by virtue of the business and
operations of the Company to enable the sellers to consummate the
disposition thereof;
(f) furnish to each Selling Stockholder a signed counterpart,
addressed to such Selling Stockholder (and the underwriters, if any), of
(i) an opinion of counsel for the Company, dated the effective
date of such registration statement (and, if such registration
includes an underwritten public offering, dated the date of the
closing under the underwriting agreement), in form and substance
reasonably satisfactory to such Selling Stockholder, and
(ii) a "comfort" letter, dated the effective date of such
registration statement (and, if such registration includes an
underwritten public offering, dated the date of the closing under the
underwriting agreement), in form and substance reasonably
satisfactory to such Selling Stockholder, signed by the independent
public accountants who have certified the Company's financial
statements included in such registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' letters delivered to the underwriters in
underwritten public offerings of securities;
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(g) furnish to each such Selling Stockholder at least five business
days prior to the filing thereof a copy of any amendment or supplement to
such registration statement or prospectus (other than any amendment or
supplement in the form of a filing which the Company is required to make
pursuant to the Exchange Act) and not file any such amendment or
supplement to which any such Selling Stockholder shall have reasonably
objected on the grounds that, in the opinion of counsel to such Selling
Stockholder, such amendment or supplement does not comply in all material
respects with the requirements of the Securities Act;
(h) notify each Selling Stockholder, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act,
upon discovery that, or upon the discovery of the happening of any event
as a result of which, the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of
the circumstances under which they were made, and at the request of any
such Selling Stockholder promptly prepare and furnish to such Selling
Stockholder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they
were made;
(i) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering a period of at least twelve months beginning after the effective
date of such registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act;
(j) cooperate in the conduct of such due diligence relating to the
Company as the Selling Stockholders and the managing or lead underwriter
or underwriters (including their counsel and other authorized
representatives) may reasonably request and is customary for such
offering, including by making available for inspection the Company's
financial and other records and pertinent corporate and other documents as
shall be reasonably necessary or appropriate to enable such persons to
conduct their due diligence and by causing the Company's officers and
personnel to supply information and respond to all inquiries reasonably
requested by such persons in connection with their due diligence.
(k) use its best efforts to provide customary assistance to the
underwriters in their selling efforts and presentations to prospective
investors, including by making
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available the Company's officers and personnel for presentations to and
meetings with prospective investors; and
(l) use its reasonable efforts to cause all such Registrable
Securities covered by such registration statement to be listed on a
national securities exchange (if such Registrable Securities are not
already so listed), and on each other securities exchange on which similar
securities issued by the Company are then listed, if the listing of such
Registrable Securities is then permitted under the rules of such exchange.
The Company may require each Selling Stockholder to furnish the
Company in writing for inclusion in the registration statement such information
regarding such Selling Stockholder and the distribution of such Registrable
Securities being sold as the Company may from time to time reasonably request.
Each Selling Stockholder agrees that upon receipt of any notice from
the Company of the happening of any event of the kind described in Section
1.3(h), such Selling Stockholder shall forthwith discontinue such Selling
Stockholder's disposition of Registrable Securities pursuant to the registration
statement relating to such Registrable Securities until such Selling
Stockholder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 1.3(h) and, if so directed by the Company, such Selling
Stockholder shall use its reasonable efforts to deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Selling Stockholder's possession, of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice. If the Company shall
give any such notice, the applicable time period mentioned in Section 1.3(b)
during which a registration statement is to remain effective shall be extended
by the number of days during the period from and including the date of the
giving of such notice pursuant to Section 1.3(h), to and including the date when
each Selling Stockholder shall have received the copies of the supplemented or
amended prospectus contemplated by Section 1.3(h).
Section 1.4. Delay of Filing or Sales. (a) The Company shall have the
right, upon giving notice to the Selling Stockholders of the exercise of such
right, to delay filing a registration statement or to require such Selling
Stockholders not to sell any Registrable Securities pursuant to a registration
statement for a period of 180 days from the date on which such notice is given,
or such shorter period of time as may be specified in such notice or in a
subsequent notice delivered by the Company to such effect prior to or during the
effectiveness of the registration statement, if (i) the Company is engaged in
negotiations with respect to, or has taken a substantial step to commence, or
there otherwise is pending, any merger, acquisition, other form of business
combination, divestiture, tender offer, financing or other similar transaction,
or there is an event or state of facts relating to the Company, in each case
which is material to the Company (any of
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the foregoing, a "Material Activity"), (ii) such Material Activity would, in the
opinion of counsel for the Company, require disclosure so as to permit the
Registrable Securities to be sold in compliance with law, and (iii) such
disclosure would, in the reasonable judgment of the Company, be adverse to its
interests; provided that the Company shall have no right to delay the filing of
a registration statement or the selling of Registrable Securities if at any time
during the 180 days preceding the date on which such notice was given the
Company had delayed either the filing of a registration statement that included
Registrable Securities or the selling of Registrable Securities.
(b) The Company shall have no obligation to include in any notice
contemplated by Section 1.4(a) any reference to or description of the facts
based upon which the Company is delivering such notice. The Company shall pay
all Registration Expenses and all reasonable fees and expenses of counsel for
the Selling Stockholders with respect to any registration of Registrable
Securities or sales thereof that has been delayed for more than 30 days pursuant
to this Section 1.4.
Section 1.5. Underwritten Offerings. (a) Required Underwritten
Offerings. If requested by the underwriters of any underwritten offering of
Registrable Securities pursuant to a registration requested under Section 1.1,
the Company shall enter into an underwriting agreement with such underwriters
for such offering. Such agreement shall be reasonably satisfactory in substance
and form to each Selling Stockholder, the Company and the underwriters and shall
contain representations, warranties, indemnities and agreements as are
customarily provided or entered into by an issuer in underwriting agreements of
this type, including indemnities for the benefit of the underwriters to the
effect and to the extent provided to the Selling Stockholders in Section 1.6.
The Selling Stockholders shall be parties to such underwriting agreement and
may, at their option, require that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such Selling Stockholders.
(b) Piggy-Back Underwritten Offerings. If the Company at any time
proposes to register any of its securities under the Securities Act as
contemplated by Section 1.2 and such securities are to be distributed by or
through one or more underwriters, the Company shall, if requested by the Selling
Stockholders pursuant to Section 1.2 and subject to the provisions of Section
1.2(b), use its best efforts to arrange for such underwriters to include those
Registrable Securities designated by the Selling Stockholders among the
securities to be distributed by such underwriters. The Selling Stockholders
shall be parties to the underwriting agreement between the Company and such
underwriters and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such Selling Stockholders and that any or all of the
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conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
Selling Stockholders. No underwriting agreement (or other agreement in
connection with such offering) shall require any Selling Stockholder to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
Selling Stockholder, such Selling Stockholder's Registrable Securities and such
Selling Stockholder's intended method of distribution and any other
representation required by law.
(c) Holdback Agreements. (i) Each Holder agrees by becoming a holder
of Registrable Securities not to effect any public sale or distribution of any
equity securities of the Company, or any securities convertible into or
exchangeable or exercisable for such securities, including a sale pursuant to
Rule 144 under the Securities Act (or any similar provision then in force),
during the ten days before and the 90 days after any underwritten registration
pursuant to Section 1.1 or 1.2 has become effective, except as part of such
underwritten registration.
(ii) The Company agrees: (x) not to effect any public sale or
distribution of its equity securities or securities convertible into or
exchangeable or exercisable for any of such securities during the ten days
before and the 90 days after any underwritten registration pursuant to Section
1.1 or 1.2 has become effective, except as part of such underwritten
registration and except pursuant to (A) registrations on Form S-4 or S-8, or any
successor or similar forms thereto; (B) sales upon exercise or exchange, by the
holder thereof, of options, warrants or convertible securities; and (C) any
other agreement to issue equity securities or securities convertible into or
exchangeable or exercisable for any of such securities in effect on the date the
Selling Stockholders deliver to the Company the request to register, or include
in a registration, Registrable Securities under Sections 1.1 or 1.2, as the case
may be; and (y) to use all reasonable efforts to cause holder of its equity
securities or any securities convertible into or exchangeable or exercisable for
any of such securities, whether outstanding on the date of this Agreement or
issued at any time after the date of this Agreement (other than any such
securities acquired in a public offering, including any public sales pursuant to
Rule 144), to agree not to effect any such public sale or distribution of such
securities during such period, except as part of any such registration if
permitted.
Section 1.6. Indemnification. (a) Indemnification by the Company. In
the event of any registration of any securities of the Company under the
Securities Act pursuant to Section 1.1 or 1.2, the Company shall, and hereby
does, indemnify and hold harmless each Selling Stockholder, its directors,
officers, employees, agents and advisors, and each other Person, if any, who
controls such Selling Stockholder within the meaning of the Securities Act,
against any losses, claims, damages or liabilities, joint or several, to which
each such
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Person may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of any material
fact contained in any registration statement under which such securities
were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein or used in
connection with the offering of securities covered thereby, or any
amendment or supplement thereto,
(ii) any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, or
(iii) any violation or alleged violation by the Company, or any of
its directors, officers, employees, agents or advisors, of any law or
regulation with respect to such registration or offer or sale of
Registrable Securities,
and the Company will reimburse such Person for any reasonable legal or any other
expenses incurred by it in connection with investigating or defending any such
loss, claim, liability, action or proceeding; provided that the Company shall
not be liable in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
or is based upon an untrue statement or alleged untrue statement, or omission or
alleged omission, made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement, in
reliance upon and in conformity with written information prepared and furnished
to the Company by any Selling Stockholder specifically for use in the
preparation thereof; provided, further, that the Company shall not be liable to
any Selling Stockholder who participates as an underwriter in any such
registration or any other Person who controls such underwriter within the
meaning of the Securities Act, in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of such Person's failure to send or give a copy of the final
prospectus, as the same may be then supplemented or amended, to the Person
asserting an untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of the securities
to such Person if such statement or omission was timely corrected in such final
prospectus. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of any such Person and shall survive the
transfer of such securities by such Person. The Company shall not be obligated
to pay the fees and expenses of more than one counsel or firm of counsel for all
parties indemnified in respect of a claim for each jurisdiction in which such
counsel is required unless a conflict of interest exists between such
indemnified party and any other indemnified party in respect of such claim.
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(b) Indemnification by the Selling Stockholders. The Company may
require, as a condition to including any Registrable Securities held by a
Selling Stockholder in any registration statement filed pursuant to Sections 1.1
or 1.2, that the Company receive an undertaking reasonably satisfactory to it
from such Selling Stockholder, to indemnify and hold harmless (in the same
manner and to the same extent as set forth in Section 1.6(a)) the Company, each
director, officer, employee, agent and advisor of the Company and each other
Person, if any, who controls the Company within the meaning of the Securities
Act (other than such Persons who are Selling Stockholders), with respect to any
untrue statement or alleged untrue statement in or omission or alleged omission
from such registration statement, any preliminary prospectus, final prospectus
or summary prospectus contained therein, or any amendment or supplement thereto,
if such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
prepared and furnished to the Company by such Selling Stockholder specifically
for use therein. Such indemnity shall remain in full force and effect,
regardless of any investigation made by or on behalf of the Company or any such
director, officer, employee, agent, advisor or controlling Person and shall
survive the transfer of such securities by such Selling Stockholder. The
indemnity provided by each Selling Stockholder under this Section 1.6(b) shall
be only with respect to its own misstatements and omissions and not with respect
to those of any other seller or prospective seller of securities, and not
jointly and severally, and shall be limited in amount to the net amount of
proceeds received by such Selling Stockholder from the sale of Registrable
Securities pursuant to such registration statement.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subsections of this Section 1.6, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action; provided that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under this Section 1.6, except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice. In case any such action is
brought against an indemnified party, unless a conflict of interest between such
indemnified and indemnifying parties exists in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, if the
indemnifying party is entitled to do so hereunder, the indemnifying party shall
not be liable to such indemnified party for any legal or other expenses
subsequently incurred by the latter in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without the
consent of the indemnified party, consent to entry of
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any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
(d) Contribution. If for any reason the indemnity set forth in the
preceding subsections of this Section 1.6 is unavailable, or is insufficient to
hold harmless an indemnified party, other than by reason of the exceptions
provided therein, then the indemnifying party shall contribute to the amount
paid or payable by the indemnified party as a result of such losses, claims,
damages or liabilities in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and the indemnified
party on the other hand in connection with the offering of securities and the
statements or omissions or alleged statements or omissions which resulted in
such loss, claim, damage, or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party or by
the indemnified party. No party shall be liable for contribution under this
Section 1.6(d) except to the extent and under such circumstances as such party
would have been liable to indemnify under this Section 1.6 if such
indemnification were enforceable under applicable law.
(e) Payments. The indemnification or contribution required by this
Section 1.6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred, subject to refund if the party
receiving such payments is subsequently found not to have been entitled thereto
hereunder.
Section 2. Other Provisions.
Section 2.1. Rule 144. The Company shall file the reports required to
be filed by it under the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder (or, if the Company is not required to file
such reports, shall, upon the request of any holder of Registrable Securities,
make publicly available other information) and shall take such further action as
any Holder may reasonably request, all to the extent required from time to time
to enable such Holder to sell Registrable Securities without registration under
the Securities Act pursuant to (a) Rule 144 under the Securities Act, as such
rule may be amended from time to time, or (b) any similar rule or regulation
hereafter promulgated. Upon the request of any Holder, the Company shall deliver
to such holder a written statement as to whether it has complied with such
requirements.
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Section 2.2. Transfer of Registration Rights and Obligations. This
Agreement and the rights provided herein are for the benefit of all Holders in
addition to the Stockholder, and all such Holders may enforce their rights and
remedies directly against the Company. In the event the Company issues or
distributes, or proposes to issue or distribute, any shares or other securities
of another issuer to any Holder (including common stock and Class B common stock
of GenTek) and such shares or other securities would be Registrable Securities,
the Company shall use its best efforts to cause such issuer (including GenTek)
to deliver to the Holders a written instrument, in form and substance reasonably
satisfactory to the Holders, that such issuer is bound by and subject to all the
terms and conditions of this Agreement to the same extent as the Company and
that the rights and remedies provided herein to the Holders apply in all
respects to the Registrable Securities of such issuer.
Section 3. Definitions. Capitalized terms, as used in this Agreement,
have the following meanings:
Beneficial ownership and owned beneficially have the meanings given
to them in Rule 13d-3 under the Exchange Act.
Commission means the Securities and Exchange Commission.
Company has the meaning given to it in the Introduction.
Exchange Act means The Securities Exchange Act of 1934, and the rules
and regulations promulgated thereunder, all as the same shall be in effect at
the time.
Family Trusts has the meaning given in Recital A.
GenTek has the meaning given in Recital B.
GCG Common Stock and GCG Class B Stock have the meanings given to
them in Recital A.
Governmental Authority means any government, any political
subdivision, any governmental agency, bureau, department, board or commission,
any court or tribunal or any other governmental instrumentality, whether
federal, state or local, domestic or foreign.
Holder means any Person who owns, beneficially or of record, any
Registrable Securities.
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Material Activity has the meaning given to it in Section 1.4.
Participating Holder has the meaning given to it in Section 1.2(a).
Permitted Transferee (i) with respect to securities of the Company,
has the meaning given to it in the Company's certificate of incorporation as in
effect on the date hereof, assuming for this purpose that any reference to
"Class B Stock" in such definition is also a reference to such other securities
of the Company, (ii) with respect to securities of GenTek, has the meaning given
to it in GenTek's certificate of incorporation as in effect upon the
distribution of stock of GenTek to stockholders of the Company, assuming for
this purpose that any reference to "Class B Stock" in such definition is also a
reference to such other securities of the Company, and (iii) with respect to
securities of any other issuer, any Person who would have been a Permitted
Transferee of the Stockholder under the Company's certificate of incorporation.
Person means an individual, corporation, trust, joint venture,
association, partnership or other entity, or any governmental or political
subdivision or an agency or instrumentality thereof.
Registration Expenses means all expenses incident to the Company's
performance of or compliance with Section 1, including, (a) all registration,
filing and NASD fees, (b) all fees and expenses of complying with securities or
blue sky laws, (c) all word processing, duplicating and printing expenses, (d)
messenger and delivery expenses, (e) the fees and disbursements of counsel for
the Company and of its independent public accountants, including the expenses of
any "comfort" letters required by or incident to such performance and
compliance, (f) premiums and other costs of policies of insurance against
liabilities arising out of the public offering of the Registrable Securities
being registered (if the Company elects to obtain any such insurance), (g) any
fees and disbursements of underwriters customarily paid by issuers or sellers of
securities, including counsel for the underwriters but excluding underwriting
discounts and commissions, and (h) reasonable costs and expenses incurred for
presentations to or meetings with prospective investors in connection with the
offer or sale of Registrable Securities in a public offering thereof; provided,
that (x) except as otherwise specifically provided herein, fees and
disbursements of counsel to one or more Selling Stockholders, and (y) transfer
taxes, and underwriting discounts or commissions and brokerage fees for the sale
of Registrable Securities, shall not be included as Registration Expenses and
shall not be paid by the Company.
Registrable Securities means any of the following securities owned,
beneficially and of record, by the Stockholder or any Permitted Transferee: (i)
any shares of GCG Common Stock or GCG Class B Stock owned, beneficially or of
record, by the
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<PAGE>
Stockholder or any Permitted Transferee on the date hereof, and any securities
into which any such GCG Common Stock or GCG Class B Stock is converted or
exchanged (including a conversion of GCG Class B Stock into GCG Common Stock);
(ii) any shares of common stock or Class B common stock, or other securities, of
GenTek distributed as a dividend or other distribution in respect of the
securities in clause (i), and any securities into which any such common stock or
Class B common stock of GenTek is converted or exchanged (including a conversion
of Class B common stock of GenTek into common stock of GenTek); and (iii) any
shares or other securities issued or proposed to be issued with respect to any
of the securities in clause (i) or (ii) by way of a dividend or other
distribution (including a stock dividend or a dividend of securities of another
issuer), stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. It is expressly
stipulated that the foregoing securities shall be Registrable Securities only so
long as they are owned, beneficially and of record, by the Stockholder or
Permitted Transferees.
Registration Period has the meaning given to it in Section 1.1(a).
Requesting Holders has the meaning given to it in Section 1.1(a).
Securities Act means the Securities Act of 1933, and the rules and
regulations promulgated thereunder, all as the same shall be in effect at the
time.
Selling Stockholder means any Requesting Holder or Participating
Holder.
Stockholder has the meaning given to it in the Introduction.
Section 4. Miscellaneous.
Section 4.1. Termination. This Agreement shall terminate, except for
the provisions of Section 1.6 which shall survive any such termination, upon the
termination of the Registration Period; provided that if a Selling Stockholder
has made a request for registration pursuant to Section 1.1 or 1.2 prior to the
termination of the Registration Period and all obligations with respect to such
registration set forth in this Agreement have not been fulfilled or satisfied
(including for the payment of Registration Expenses or pursuant to Section 1.3),
this Agreement shall survive until the satisfaction or fulfillment of all such
obligations with respect thereto.
Section 4.2. Notices. All notices, consents, requests, instructions,
approvals and other communications provided for in, or in connection with, this
Agreement shall be in writing and shall be deemed validly given upon personal
delivery or one day after being sent by overnight courier service or by telecopy
(so long as for notices or other communi-
17
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<PAGE>
cations sent by telecopy, the transmitting telecopy machine records electronic
confirmation of the due transmission of the notice), at the following address or
telecopy number, or at such other address or telecopy number as a party may
designate to the other parties:
If to the Company, to:
The General Chemical Group Inc.
Liberty Lane
Hampton, New Hampshire 03842
Telecopy: [603- ]
Attention: Corporate Secretary
If to the Stockholder or any other Holder, to:
Paul M. Montrone
c/o Latona Associates Inc.
Liberty Lane
Hampton, New Hampshire 03842
Telecopy: [603- ]
Attention: General Counsel
Section 4.3. Choice of Forum. Each of the parties hereby irrevocably
submits to the exclusive jurisdiction of the courts of the State of New York and
the Federal courts of the United States of America located in the State, City,
and County of New York solely in respect of the interpretation and enforcement
of the provisions of this Agreement and of the documents referred to in this
Agreement, and in respect of the transactions contemplated hereby and thereby,
and hereby waives, and agrees not to assert, as a defense in any action, suit,
or proceeding for the interpretation or enforcement hereof or of any such
document, that it is not subject thereto or that such action, suit, or
proceeding may not be brought or is not maintainable in said courts or that the
venue thereof may not be appropriate or that this Agreement or any such document
may not be enforced in or by such courts, and the parties hereto irrevocably
agree that all claims with respect to such action or proceeding shall be heard
and determined in such a court. Each of the parties hereby consents to and
grants any such court jurisdiction over the person of such parties and over the
subject matter of any such dispute and agrees that mailing of process or other
papers in connection with any such action or proceeding in the manner provided
in Section 4.2 in such other manner as may be permitted by law, shall be valid
and sufficient service thereof.
Section 4.4. Amendments; Waivers, etc. (a) Neither this Agreement nor
any term hereof may be amended, waived, discharged or terminated other than by
an
18
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<PAGE>
instrument in writing, signed by the party against which enforcement of such
amendment, discharge, waiver or termination is sought.
(b) No failure or delay by any party in exercising any right, power
or privilege under this Agreement shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies provided herein shall be cumulative and not exclusive of any rights or
remedies provided by law.
Section 4.5. Assignment. Except as otherwise contemplated by Section
2.2, this Agreement shall not be assignable or otherwise transferable by a party
without the prior consent of the other parties, and any attempt to so assign or
otherwise transfer this Agreement without such consent shall be void and of no
effect. This Agreement shall be binding upon the respective successors and
assigns of the parties hereto.
Section 4.6. Third Party Beneficiaries. Except as provided in Section
2.2, nothing in this Agreement shall be construed as giving any Person, other
than the parties hereto and their successors and permitted assigns (including
Holders other than the Stockholder), any right, remedy or claim under or in
respect of this Agreement or any provision hereof.
Section 4.7. Severability. If any provision of this Agreement is held
to be invalid or unenforceable for any reason, it shall be adjusted rather than
voided, if possible, in order to achieve the intent of the parties hereto to the
maximum extent possible. In any event, the invalidity or unenforceability of any
provision of this Agreement in any juris diction shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of this Agreement, including that provision, in any
other jurisdiction.
Section 4.8. Section Headings. The article and section headings of
this Agree ment are for convenience of reference only and are not to be
considered in construing this Agreement.
Section 4.9. Integration. This Agreement, and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement of the parties and supersede any and all prior agreements,
arrangements and understandings relating to the subject matters hereof and
thereof.
Section 4.10. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original and all of
which shall together constitute one and the same instrument.
19
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Section 4.11. Specific Performance. In the event of a breach or a
threatened breach by any party to this Agreement of its obligations under this
Agreement, any party injured or to be injured by such breach will be entitled to
specific performance of its rights under this Agreement or to injunctive relief,
in addition to being entitled to exercise all rights provided in this Agreement
and granted by law. The parties agree that the provisions of this Agreement
shall be specifically enforceable, it being agreed by the parties that the
remedy at law, including monetary damages, for objection in any action for
specific performance or injunctive relief that a remedy at law would be adequate
is waived.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
THE GENERAL CHEMICAL GROUP INC.
By:______________________________
Name:
Title:
Paul M. Montrone
_________________________________
20
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Exhibit 21.01
SUBSIDIARIES OF GENTEK INC.
---------------------------
Subsidiaries of GenTek Inc. after the spinoff of GenTek Inc. from The General
Chemical Group Inc.
General Chemical Corporation (Delaware)
Balcrank Products, Inc. (Delaware)
Defiance, Inc. (Delaware)
Printing Developments Inc. (Delaware)
HMC Patents Holding Co. Inc. (Delaware)
Waterside Urban Development Corp. (New Jersey)
GenTek Canada Holding Inc. (Delaware)
GenTek Canada Holding Ltd. (Canada)
GenTek Canada Performance Chemicals Ltd. (Canada)
Reheis, Inc. (Delaware)
Reheis International, Inc. (Delaware)
Reheis Overseas (Ireland)
Reheis Commercial (Cayman Islands)
Reheis Holdings Inc. (Delaware)
Ilminister Company (Ireland)
Reheis Ireland (Ireland)
Toledo Technologies, Inc. (Delaware)
1279597 Ontario Inc. (Canada)
Sandco Automotive Ltd. (Canada)
Noma Industries Limited (Canada)
Noma (Hong Kong) Limited (Hong Kong)
Fleck Manufacturing, Inc. (Canada)
Sistemas y Connexiones Integrades, S.A. de C.V. (Mexico)
Noma Corporation (Delaware)
Electronic Interconnect Systems Inc. (Massachusetts)
Noma Inc. (Canada)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Form 10-K
for the period ended December 31, 1998 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0001077552
<NAME> GenTek Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 61,310
<SECURITIES> 0
<RECEIVABLES> 64,346
<ALLOWANCES> 3,726
<INVENTORY> 37,619
<CURRENT-ASSETS> 171,869
<PP&E> 350,569
<DEPRECIATION> 154,043
<TOTAL-ASSETS> 536,818
<CURRENT-LIABILITIES> 154,540
<BONDS> 306,729
0
0
<COMMON> 224
<OTHER-SE> (54,920)
<TOTAL-LIABILITY-AND-EQUITY> 536,818
<SALES> 443,919
<TOTAL-REVENUES> 443,919
<CGS> 326,626
<TOTAL-COSTS> 326,626
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 584
<INTEREST-EXPENSE> 14,624
<INCOME-PRETAX> 37,313
<INCOME-TAX> (3,756)
<INCOME-CONTINUING> 41,069
<DISCONTINUED> 10,299
<EXTRAORDINARY> (3,661)
<CHANGES> 0
<NET-INCOME> 47,707
<EPS-PRIMARY> 2.27
<EPS-DILUTED> 2.18
<PAGE>
