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REGISTRATION NO. 333-81469
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 3
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
GENERAL CHEMICAL
INDUSTRIAL PRODUCTS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 2812 22-3649282
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
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LIBERTY LANE
HAMPTON, NEW HAMPSHIRE 03842
(603) 929-2606
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
STEWART FISHER
GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC.
LIBERTY LANE
HAMPTON, NEW HAMPSHIRE 03842
(603) 929-2606
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPY TO:
GEORGE E.B. MAGUIRE
DEBEVOISE & PLIMPTON
875 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 909-6000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities of an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(b)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1993 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED SEPTEMBER 30, 1999
PROSPECTUS
[LOGO] GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC.
OFFER TO EXCHANGE
$100,000,000 10 5/8% SENIOR SUBORDINATED NOTES DUE 2009
FOR REGISTERED
$100,000,000 10 5/8% SENIOR SUBORDINATED NOTES DUE 2009
THE NEW NOTES:
We issued our 10 5/8% Senior Subordinated Notes due 2009 on April 30, 1999.
The terms of the new notes we will issue in the exchange offer are identical to
the terms of the old notes except that the new notes:
are registered under the Securities Act of 1933 and therefore will not
contain restrictions on transfer; and
will not contain provisions relating to additional interest.
YOU SHOULD CAREFULLY REVIEW THE RISK FACTORS BEGINNING ON PAGE 10 OF THIS
PROSPECTUS.
THE EXCHANGE OFFER:
Our offer to exchange old notes for new notes will be open until 5:00 p.m.,
New York City time, on November 9, 1999, unless we extend the offer.
You should also carefully review the procedures for tendering the old notes
beginning on page 19 of this prospectus.
If you fail to tender your old notes, you will continue to hold unregistered
securities and your ability to transfer them could be adversely affected.
The exchange offer is subject to customary conditions.
No public market currently exists for the notes.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE NOTES OR DETERMINED THAT THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this prospectus is October 6, 1999.
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TABLE OF CONTENTS
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Prospectus Summary......................... 1
Risk Factors............................... 10
The Exchange Offer......................... 17
Use of Proceeds............................ 24
Capitalization............................. 24
Selected Financial Data.................... 25
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 26
Industries................................. 32
Business................................... 36
Management................................. 44
Beneficial Ownership of Capital Stock...... 52
Affiliate Relationships and Transactions... 55
Our Arrangements with GenTek Relating to
the Spinoff.............................. 57
Description of Credit Facility............. 62
Description of Notes....................... 64
Material United States Federal Income Tax
Considerations........................... 106
Plan of Distribution....................... 110
Legal Matters.............................. 110
Experts.................................... 110
Where You Can Find More Information........ 110
Index to Financial Statements.............. F-1
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IMPORTANT INFORMATION ABOUT THIS PROSPECTUS
THIS PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND FINANCIAL
INFORMATION ABOUT US THAT IS NOT INCLUDED OR DELIVERED WITH THIS PROSPECTUS,
INCLUDING EXHIBITS TO THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A
PART. WE WILL PROVIDE THESE EXHIBITS WITHOUT CHARGE TO HOLDERS OF THE OLD NOTES,
UPON REQUEST TO GENERAL CHEMICAL. REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO
THE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, GENERAL CHEMICAL INDUSTRIAL
PRODUCTS INC., LIBERTY LANE, HAMPTON, NEW HAMPSHIRE, 03842 (TELEPHONE NUMBER
603-929-2606). YOU SHOULD REQUEST ANY SUCH INFORMATION AT LEAST FIVE DAYS IN
ADVANCE OF THE DATE ON WHICH YOU EXPECT TO MAKE YOUR DECISION WITH RESPECT TO
THIS OFFER. IN ANY EVENT, YOU MUST REQUEST SUCH INFORMATION PRIOR TO
NOVEMBER 5, 1999.
WE ARE NOT MAKING THE EXCHANGE OFFER, NOR WILL WE ACCEPT SURRENDERS FOR
EXCHANGE FROM ANY HOLDER OF OLD NOTES, IN ANY JURISDICTION IN WHICH THE EXCHANGE
OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES
OR 'BLUE SKY' LAWS OF SUCH JURISDICTION.
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PROSPECTUS SUMMARY
This summary highlights selected information from this prospectus, but
does not contain all the details of the notes and information about us,
including information that may be important to you. Therefore, we urge you to
read this entire document carefully. When used in this document, data in tons
are measured in short tons (2,000 pounds).
SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
We completed on April 30, 1999 the private offering of $100,000,000
aggregate principal amount of 10 5/8% Senior Subordinated Notes due 2009. We are
now offering to exchange those notes for new registered notes.
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The exchange offer........................ In this exchange offer you are entitled to exchange old
notes for new registered 10 5/8% Senior Subordinated Notes
due 2009.
Resale of new notes....................... We believe most investors can resell the new notes issued in
this exchange offer without compliance with the registration
and prospectus delivery provisions of the Securities Act.
However, you may need to comply with these requirements of
the Securities Act when you resell your new notes if you:
acquire new notes outside the ordinary course of business;
plan to participate in a distribution of the new notes; or
are an affiliate of General Chemical.
To find out whether any special exceptions may apply to you
and restrict your resale of new notes, you should read the
discussion under the heading 'The Exchange Offer -- Resales
of New Notes Issued in the Exchange Offer.'
Registration rights agreement............. We entered into an exchange and registration rights
agreement with the initial purchasers of the old notes which
requires us to use our best efforts to make the exchange
offer.
Consequence of failure to exchange old
notes................................... You will continue to hold old notes which will remain
subject to their existing transfer restrictions if:
you do not tender your old notes; or
you tender your old notes and they are not accepted for
exchange.
We will have no obligation to register the old notes after
we consummate the exchange offer. See 'The Exchange
Offer -- Our Obligations under the Registration Rights
Agreement.'
Expiration date........................... The exchange offer will expire at 5:00 p.m., New York City
time, on November 9, 1999, unless we extend it.
Interest on the new notes................. Interest on the new notes will accrue at a rate of 10 5/8%
per annum from the most recent date to which interest has
been paid or provided for on the old notes or, if no
interest has been paid on the old notes, from April 30,
1999, the date we issued the old notes. No additional
interest will be paid on old notes tendered and accepted for
exchange.
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Liquidated damages........................ If we do not comply with our obligations to consummate this
exchange offer by 210 days after the original offering of
the old notes, we will be required to pay liquidated damages
to holders of old notes until we consummate the exchange
offer. We will have no obligation to pay liquidated damages
to holders of old notes who are not able to make the
representations or provide the information described in the
first paragraph on page 18. See 'The Exchange Offer -- Our
Obligations Under the Registration Rights Agreement' for
more information on when we will have to pay liquidated
damages.
Conditions to the exchange offer.......... We can terminate or amend the exchange offer if at any time
prior to 5:00 p.m., New York City time, on the expiration
date, we determine that the exchange offer violates any
applicable law or governmental order. In addition, we will
not accept for exchange any old notes or issue any new notes
if any stop order is threatened or in effect on the
qualification of the indenture under the Trust Indenture Act
of 1939 or on the registration statement of which this
prospectus is a part. We are required to use reasonable
efforts to obtain the withdrawal of any stop order.
Procedures for tendering old
notes................................... If you wish to accept the exchange offer and tender your old
notes, you must:
deliver a signed letter of transmittal to the exchange
agent; and
surrender the old notes by:
sending in certificates of old notes to the exchange agent;
or
confirming a book-entry transfer to the exchange agent's
account at The Depository Trust Company.
Different procedures may apply for book-entry transfers. For
more information, see 'The Exchange Offer.'
Guaranteed delivery procedures............ If you wish to tender your old notes, but cannot properly do
so prior to the expiration date, eligible institutions such
as registered brokers, trust companies or banks may tender
old notes according to the guaranteed delivery procedures by
delivering to the exchange agent a letter of transmittal and
a guarantee of physical delivery or book-entry transfer of
the old notes within three New York Stock Exchange trading
days. See 'The Exchange Offer -- Guaranteed Delivery
Procedures.'
Withdrawal rights......................... You may withdraw your tender of old notes at any time prior
to 5:00 p.m., New York City time, on the expiration date.
For the withdrawal of a tender of old notes, the exchange
agent must receive a written or facsimile transmission
notice of withdrawal at its address set forth herein under
'The Exchange Offer -- Exchange Agent' prior to 5:00 p.m.
New York City time, on the expiration date.
Acceptance of old notes and delivery of
new notes............................... We will accept for exchange any and all old notes that are
validly tendered in the exchange offer prior to 5:00 p.m.,
New York City time, on the expiration date. We will deliver
the new notes issued in the exchange offer as soon as
practicable following the
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expiration date. See 'The Exchange Offer -- Acceptance of
Old Notes for Exchange; Delivery of New Notes.'
Material U.S. Federal income tax
considerations.......................... We believe that the exchange of old notes for new notes will
not constitute a taxable exchange for U.S. federal income
tax purposes. See 'Material United States Federal Income Tax
Considerations.'
Exchange agent............................ U.S. Bank Trust National Association is serving as the
exchange agent.
Use of proceeds........................... We will not receive any proceeds from the exchange offer.
See 'Use of Proceeds' for a description of the use of
proceeds from the issuance of the old notes.
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THE EXCHANGE NOTES
The terms of the new notes are identical in all material respects to the
terms of the old notes except that the new notes:
are registered under the Securities Act, and therefore will not contain
restrictions on transfer; and
will not contain provisions relating to additional interest.
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Maturity.................................. May 1, 2009.
Interest Payment Dates.................... May 1 and November 1 of each year, commencing November 1,
1999.
Optional Redemption....................... We may redeem the notes, in whole or in part, on or after
May 1, 2004, at the redemption prices described in
'Description of the Notes -- Optional Redemption,' plus
accrued and unpaid interest, if any, to the date of
redemption. In addition, any time prior to May 1, 2002, we
may redeem up to 35% of the notes at 110.625% of the
principal amount, plus accrued and unpaid interest, with the
net proceeds of equity issuances by us or our parent
company, The General Chemical Group Inc.; provided at least
65% of the original aggregate principal amount of the notes
remains outstanding immediately after such redemption.
Change of Control......................... Upon a change of control, we will be required to make an
offer to repurchase each holder's notes at a price equal to
101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of repurchase. The
definition of 'change of control' appears under 'Description
of the Notes.'
Ranking................................... The notes are unsecured senior subordinated obligations and
rank:
subordinate to all of our senior indebtedness;
equally with all of our senior subordinated indebtedness;
senior to all of our subordinated indebtedness;
effectively subordinate to all liabilities of our
subsidiaries; and
effectively subordinate to all of our secured indebtedness.
In addition, our claims as a partner against the assets of
General Chemical (Soda Ash) Partners will be limited to our
51% interest in that partnership.
As of June 30, 1999, we had outstanding approximately $150
million of indebtedness. Of this amount, $50 million was
incurred by our Canadian subsidiary and is both structurally
and contractually senior to the notes. The remaining $100
million of indebtedness consisted of the old notes. See
'Description of the Notes -- Ranking' and 'Description of
Credit Facility.'
Covenants................................. The terms of the notes include restrictions on our ability
to:
incur additional indebtedness;
issue or sell indebtedness and preferred stock of our
subsidiaries;
make restricted payments;
enter into transactions with affiliates;
create liens;
cause dividends and other payments by subsidiaries; and
effect consolidations, mergers and the sale of assets.
These limitations are subject to a number of important
exceptions. See 'Description of the Notes -- Covenants.'
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ABOUT GENERAL CHEMICAL
We are 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. We have 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. We are 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. Our 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.
For the fiscal year ended December 31, 1998, we had net revenues of $261.5
million compared to net revenues of $289.7 million and $298.9 million,
respectively, for the fiscal years ended December 31, 1997 and 1996. The decline
in net revenues is primarily due to lower pricing for soda ash and calcium
chloride.
We produce natural soda ash from trona ore, the raw material precursor
of soda ash, at our Green River, Wyoming facility, where we have 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 producers. We believe that our lower costs
give us a significant advantage, even after shipping costs, over synthetic
producers in most regions of the world. We operate our Green River facility
through General Chemical (Soda Ash) Partners, a partnership in which we own a
51% equity interest and are the managing partner. The other partners are
subsidiaries of Owens-Illinois, Inc. and TOSOH Corporation. Owens-Illinois is
one of the world's largest consumers of soda ash. TOSOH Corporation is a major
chemical company and a distributor of soda ash in the Japanese market.
We produce synthetic soda ash and calcium chloride, as a co-product, at
our 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 our major Canadian and eastern U.S. markets, control of
raw materials and successful marketing of the calcium chloride co-product make
our Amherstburg facility among the most efficient synthetic soda ash plants in
the world.
ABOUT OUR INDUSTRY
SODA ASH. World demand for soda ash in 1998 was approximately 35 million
tons. U.S. production of natural soda ash in 1998 was an estimated 11.1 million
tons with the remaining global demand being met predominantly by synthetic soda
ash producers. Growth in demand for soda ash is primarily driven by growth in
gross domestic product in global markets, with developing regions historically
growing at a faster rate than developed regions. Natural soda ash production
requires significantly less energy, labor and raw materials than synthetic soda
ash production. This cost differential allows U.S. producers, even after
shipping costs, to competitively export significant volumes of soda ash around
the world. In 1998, U.S. producers exported 36% of their production, primarily
to Latin America and Asia.
During 1998, world demand and pricing for soda ash were negatively
impacted by economic turmoil in Asia and Latin America. In addition, recent
capacity additions by U.S. producers increased available supply. We believe that
market conditions will improve due to a combination of:
(1) growth in demand as per capita soda ash consumption increases in developing
economies and growth in demand continues in developed economies; and
(2) reduction in supply resulting from continued closures of higher-cost
international synthetic soda ash facilities, announced postponements of
previously planned capacity expansions in the United States and industry
consolidation.
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CALCIUM CHLORIDE. We estimate that North American demand for calcium
chloride was 1.2 million tons in 1998. The major end use markets for calcium
chloride are seasonal and weather dependent. During the summer, liquid calcium
chloride is used on unpaved roads for dust control and roadbed stabilization.
During the winter, calcium chloride is used in flake and liquid form on roads
for melting ice. Other applications include retail ice control, concrete
additive, water treatment and oil field uses.
THE SPINOFF
On April 30, 1999, our parent company, The General Chemical Group Inc.,
separated its manufacturing and performance products business from its soda ash
and calcium chloride business through a spinoff. Group accomplished the spinoff
by transferring the manufacturing and performance products business to its
subsidiary GenTek Inc., and distributing the common stock of GenTek to Group
shareholders. We believe that the spinoff will enable us to focus our attention
and resources on our core industrial chemicals business and enhance our access
to the capital markets.
As a result of the spinoff, Group and GenTek are two separate,
stand-alone companies: GenTek operates the manufacturing and performance
chemicals businesses and Group, through our company, operates the soda ash and
calcium chloride business. Group's Common Stock continues to be listed on the
New York Stock Exchange under the symbol 'GCG.'
In connection with the spinoff, we entered into new financing facilities
as of April 30, 1999, which consist of the offering of the old notes and our new
$85 million credit facility. We used the proceeds of these financings as
follows:
(1) the initial borrowing by our Canadian subsidiary of approximately $50
million under the credit facility to repay existing indebtedness allocable
to our business; and
(2) the offering of the old notes and the distribution to Group of
approximately $80 million of the proceeds of the offering to repay existing
third party indebtedness allocable to our business and to pay our share of
the one-time charges directly attributable to the spinoff.
In connection with the spinoff, Group entered into agreements with
GenTek to govern our relationship after the spinoff. These agreements provide
for each party to make certain services, records and personnel available to the
other and for separation between Group and GenTek of certain assets, liabilities
and responsibilities. For more information, see 'Our Arrangements with GenTek
Relating to the Spinoff.'
STATE AND DATE OF INCORPORATION AND ADDRESS
We were incorporated in Delaware on February 12, 1999 and are a wholly
owned subsidiary of Group. Our principal executive offices are at Liberty Lane,
Hampton, New Hampshire, 03842, telephone 603-929-2606.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. All statements
other than statements of historical facts included in this Prospectus, including
statements under 'Prospectus Summary,' 'Management's Discussion and Analysis of
Financial Condition and Results of Operations,' 'Industries' and 'Business,' may
constitute forward-looking statements. We have based these forward-looking
statements on our current expectations and projections about future events.
Although we believe that our assumptions made in connection with the
forward-looking statements are reasonable, we cannot assure you that our
assumptions and expectations will prove to have been correct. Important factors
that could cause our actual results to differ from our expectations are
disclosed in this prospectus, including factors
6
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disclosed under 'Risk Factors.' These forward-looking statements are subject to
various risks, uncertainties and assumptions about us, including, among other
things:
fluctuation of world soda ash prices due to changes in supply and
demand;
international economic conditions and U.S. dollar exchange rates;
reduced soda ash demand from increased use of recycled glass or glass
substitutes;
a substantial portion of our operations is conducted through a joint
venture which is 51% owned by us;
increases in the cost of energy, transportation or labor;
environmental contamination at our facilities;
future modifications to existing environmental, safety and human health
regulations;
Year 2000 concerns;
our ability to operate as an independent business as a result of the
spinoff described under 'Prospectus Summary -- The Spinoff'; and
potential adverse tax consequences of a change of control as a result
of the spinoff.
We undertake 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 prospectus might not occur.
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SUMMARY FINANCIAL DATA
The summary financial data set forth below for each of the three years
ended December 31, 1998 are derived from, and should be read in conjunction
with, our audited Consolidated Financial Statements and notes included in this
prospectus. The summary financial data for the six months ended June 30, 1998
and June 30, 1999 are derived from our unaudited Consolidated Financial
Statements and notes included in this prospectus. The statement of operations
data for the years ended December 31, 1994 and 1995 are derived from our
unaudited financial statements not included in this prospectus, which have been
prepared on a consistent basis with our audited financial statements and, in the
opinion of management, include all adjustments necessary for a fair presentation
of our financial position and results of operations for the periods covered
thereby.
Because we did not actually operate as a separate stand-alone business
through April 30, 1999, we may have recorded different results had we been
operated independently of GenTek's business. Therefore, the financial
information presented below is not necessarily indicative of the results of
operations or financial position that would have resulted if we had been a
separate, stand-alone business during the periods shown or of our future
performance as a separate, stand-alone business. See 'Management's Discussion
and Analysis of Financial Condition and Results of Operations.'
For a description of the basis of presentation of the historical
financial data, see Note 1 to the Consolidated Financial Statements.
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SIX MONTHS
ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------ -------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
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STATEMENT OF OPERATIONS DATA:
Net revenues.............................. $254,139 $265,333 $298,945 $289,700 $261,469 $133,384 $130,637
Gross profit.............................. 75,159 78,794 100,143 84,931 59,131 30,480 25,411
Operating profit.......................... 60,960 62,296 77,924(1) 68,281 41,049(2) 22,410 15,154(3)
Minority interest......................... 16,957 19,458 31,635 24,253 16,666 8,127 5,507
Income before interest expense and income
taxes................................... 43,442 44,224 46,963 44,587 24,342 14,283 10,377
Interest expense (4)...................... 12,193 13,777 13,001 12,747 11,747 5,869 6,102
Income before income taxes................ 31,249 30,447 33,962 31,840 12,595 8,414 4,275
Income tax provision...................... 11,480 9,490 9,682 9,576 3,171 2,475 1,001
Net income................................ $ 19,769 $ 20,957 $ 24,280 $ 22,264 $ 9,424 $ 5,939 $ 3,274
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AS OF JUNE 30, 1999
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(IN THOUSANDS)
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BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments....... $ 26,563
Adjusted working capital (5)............................ 38,613
Total assets............................................ 291,404
Long-term debt (including current portion).............. 150,098
Equity (deficit)........................................ (39,687)
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SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
----------------------------------------------- ---------------
1994 1995 1996 1997 1998 1998 1999
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(IN THOUSANDS, EXCEPT RATIOS)
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OTHER FINANCIAL DATA:
Capital expenditures.................................... $ 6,965 $ 9,251 $34,934 $30,468 $18,498 $8,617 $9,346
Depreciation and amortization........................... 13,865 14,157 15,646 16,798 16,999 8,624 8,570
Ratio of earnings to fixed charges (6).................. 4.1x 3.9x 4.9x 4.3x 2.8x 3.0x 2.2x
ADJUSTED FINANCIAL DATA:
Adjusted capital expenditures (7)....................... $ 5,154 $ 6,509 $21,393 $21,790 $14,214 $6,473 $6,262
Adjusted depreciation and amortization (7).............. 9,681 9,572 10,809 11,187 11,095 4,497 4,546
PRO FORMA FINANCIAL DATA (8):
Cash interest expense (9)...................................................................... $14,673 $7,338 $7,338
Income tax provision........................................................................... 2,434 2,043 712
Net income..................................................................................... 7,235 4,902 2,327
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(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.
(2) Includes incremental accruals of $2.3 million ($1.4 million after tax)
principally related to cost of sales ($.9 million) for the reclamation of
brine wells and selling, general and administrative expenses ($1.4 million)
primarily due to product delivery litigation.
(3) Includes a one-time charge of $1.9 million ($1.2 million after tax) related
to the spinoff.
(4) Includes allocated interest expense from Group attributable to us.
(5) 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).
(6) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income before minority interest and income taxes and
extraordinary items plus fixed charges. Fixed charges consist of interest
expense, including the amortization of deferred financing costs, and that
portion of rental expense that management believes to be representative of
interest. Pro forma for the refinancing transactions, the ratio of earnings
to fixed charges for 1998 and the six months ended June 30, 1999 would be
2.3x and 1.8x, respectively.
(7) Capital expenditures and depreciation and amortization have been adjusted
to exclude the 49% of General Chemical (Soda Ash) Partners capital
expenditures and depreciation and amortization, respectively, attributable
to General Chemical (Soda Ash) Partners minority partners.
(8) Pro forma after giving effect, from January 1, 1998, to the spinoff-related
financings. These pro forma calculations are based upon our estimates and
are therefore subject to uncertainty. See 'Disclosure Regarding
Forward-Looking Statements.'
(9) Pro forma cash interest expense has been calculated using a weighted
average interest rate of 9.78%. A fluctuation in the assumed borrowing rate
of 0.125% would change cash interest expense by $62,500.
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RISK FACTORS
In addition to the other information in this prospectus, you should
carefully consider the following factors in evaluating us and making an
investment decision.
IF YOU DO NOT PROPERLY TENDER YOUR OLD NOTES, YOU WILL CONTINUE TO HOLD
UNREGISTERED OLD NOTES; THE OLD NOTES ARE SUBJECT TO TRANSFER RESTRICTIONS, AND
YOUR ABILITY TO TRANSFER OLD NOTES WILL BE ADVERSELY AFFECTED.
As old notes are tendered and accepted in the exchange offer, the
trading market for the remaining untendered or tendered but not accepted old
notes will be adversely affected. We anticipate that most holders of the old
notes will elect to exchange the old notes for new notes due to the absence of
restrictions on the resale of new notes under the Securities Act. Therefore, we
anticipate that the liquidity of the market for any old notes remaining after
the consummation of the exchange offer will be substantially limited.
We will only issue new notes in exchange for old notes that you timely
and properly tender. Therefore, you should allow sufficient time to ensure
timely delivery of the old notes and you should carefully follow the
instructions on how to tender your old notes. Neither we nor the exchange agent
are required to tell you of any defects or irregularities with respect to your
tender of the old notes. If you do not tender your old notes for new notes in
the exchange offer, the old notes you hold will continue to be subject to the
existing transfer restrictions. In general, you may not offer or sell the old
notes unless registered under the Securities Act, or exempt from registration
under the Securities Act and applicable state securities laws. If you do not
tender your old notes or they are not accepted for exchange, you will have no
further rights under the registration rights agreement. See 'The Exchange
Offer -- Our Obligations under the Registration Rights Agreement.' We do not
anticipate that we will register old notes under the Securities Act.
DOWNWARD FLUCTUATIONS IN SODA ASH PRICES ADVERSELY AFFECT OUR REVENUES AND
PROFITABILITY.
Our principal product is soda ash, and the market price of soda ash
affects the profitability of our operations more than any other factor. If the
market price for soda ash falls significantly, we will experience a decrease in
profits or, potentially, a loss. In 1997 and 1998, due in part to unfavorable
soda ash prices, we experienced decreases in profits compared to the prior year
levels. We estimate that 1999 soda ash prices for U.S. producers will be
approximately $69 per ton, or approximately $6 per ton below the 1998 level.
Numerous factors which we cannot predict or control cause soda ash
prices to fluctuate, including changes in global industry supply and market
demand for soda ash and prices and/or availability of substitutes for
end-products using soda ash. If these factors adversely affect soda ash prices,
they could have a material adverse effect on our results of operations and
financial condition. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations' and 'Industries -- Soda Ash Pricing and
Capacity Utilization.'
OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION AND
PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE NOTES.
We will continue to have substantial indebtedness after completion of
the exchange offer and we may be able to increase our indebtedness in the
future. Our level of indebtedness could have important consequences to holders
of the notes. For example, it could:
make it more difficult to satisfy our obligations with respect to these
notes because a substantial portion of our cash flow from operations
must be dedicated to the payment of interest on our indebtedness;
make us more vulnerable to economic downturns;
potentially limit our ability to withstand competitive pressures;
impair our ability to obtain additional financing in the future for
working capital, capital expenditures, acquisitions or general
corporate purposes; and
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make us more susceptible to the above risks because borrowings under
the credit facility will bear interest at fluctuating rates.
If we are unable to generate sufficient cash flow from operations in the
future, we may be unable to repay or refinance all or a portion of our then
existing debt or to obtain additional financing. There can be no assurance that
any such refinancing would be possible or that any additional financing could be
obtained on terms that are acceptable to us.
The following are important statistics about us, presented after giving
effect to the spinoff-related financings:
as of December 31, 1998, we would have had total long-term debt of $150
million, representing 161% of our total capitalization;
for fiscal year 1998, our pro forma ratio of earnings to fixed charges
would have been 2.3 to 1.0; and
we would have had the ability to borrow an additional $35 million under
our credit facility.
In addition, we could, in the future enter into transactions including
acquistion or alliances or refinancings, recapitalizations or highly leveraged
transactions that would not be a change of control under the indenture requiring
to offer to repurchase the notes but that could increase the amount of
indebtedness outstanding at such time or otherwise affect our capital structure,
credit rating or the noteholders. The definition of 'change of control' appears
in the 'Description of Notes' section.
OUR INDENTURE FOR THE NOTES AND OUR CREDIT FACILITY IMPOSE SIGNIFICANT OPERATING
AND FINANCIAL RESTRICTIONS, WHICH MAY PREVENT US FROM CAPITALIZING ON BUSINESS
OPPORTUNITIES.
Our indenture for the notes and our credit facility impose significant
operating and financial restrictions on us. These restrictions affect, and in
certain cases limit, among other things, our ability to:
incur additional indebtedness and liens;
make capital expenditures;
make investments and sell assets;
enter into transactions with affiliates; or
consolidate, merge or sell all or substantially all of our assets.
There can be no assurance that these covenants will not adversely affect
our ability to finance our future operations or capital needs or to engage in
other business activities that may be in the interest of noteholders. See
'Description of Notes' and 'Description of Credit Facility.'
INCREASED USE OF GLASS SUBSTITUTES AND RECYCLED GLASS MAY AFFECT DEMAND FOR SODA
ASH, WHICH COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.
Competition from increased use of glass substitutes or recycled glass in
the container industry could have a material adverse effect on our results of
operations and financial condition. Container glass production is one of the
principal end markets for soda ash. Competition from increased use of glass
substitutes, such as plastic, and recycled glass in the container industry has
had a negative effect on demand for soda ash. Demand for soda ash in the
container industry has declined from 2.3 million tons in 1987 to 1.8 million
tons in 1998. Management believes that the use of plastic containers will
continue to negatively impact the growth in domestic demand for soda ash.
THE WORLD SODA ASH INDUSTRY IS HIGHLY COMPETITIVE, WITH SOME COMPETITORS HAVING
GREATER MARKET SHARE OR RESOURCES THAN WE DO. WE MAY NOT HAVE SUFFICIENT
RESOURCES TO MAINTAIN OUR COMPETITIVE POSITION.
There can be no assurance that we will have sufficient resources or
otherwise be able to maintain our current competitive position or that
competitors will not seek to reduce prices to compete, the occurrence of any of
which could have a materially adverse effect on our results of operations and
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financial condition. We face competition from a number of international and
North American soda ash producers, some of which have greater market share and
greater financial, production and other resources than we do. For example, of
our four principal competitors, two have greater global soda ash capacity and
market share than us and two have operations with a larger revenue base than us
with significant product lines other than soda ash. In addition, competition in
the soda ash industry is based primarily on price, which results in pressure on
our operating margins. See 'Business -- Competition.'
THE NOTES ARE CONTRACTUALLY SUBORDINATED IN RIGHT OF PAYMENT TO OUR SENIOR DEBT.
The notes are subordinated in right of payment to all our senior debt,
including the principal of and interest on the credit facility. In the event of
our insolvency, liquidation, reorganization, dissolution or other winding-up or
upon a default in payment with respect to, or the acceleration of, any senior
debt, the holders of senior debt must be paid in full before the holders of the
notes may be paid. If we incur any additional senior subordinated debt, the
holders of such debt would be entitled to share ratably with the holders of the
notes in any proceeds distributed in connection with any insolvency,
liquidation, reorganization, dissolution or other winding-up. This right may
have the effect of reducing the amount of proceeds paid to holders of the notes.
In addition, no payments may be made with respect to the principal of or
premium, if any, or interest on the notes if a payment default exists with
respect to our senior debt and, under certain circumstances, no payments may be
made with respect to the principal of, or interest on the notes for a certain
period if a non-payment default exists with respect to senior debt. In addition,
the indenture permits us to incur additional debt, including senior debt, if
certain conditions are met. See 'Description of Notes -- Subordination.'
THE NOTES ARE EFFECTIVELY SUBORDINATED IN RIGHT OF PAYMENT TO OUR SECURED DEBT.
IF ANY SECURED LENDERS SHOULD ATTEMPT TO FORECLOSE ON THEIR COLLATERAL, THE
VALUE OF THE NOTES COULD BE MATERIALLY ADVERSELY AFFECTED.
In the event of a default on secured indebtedness, the lenders under our
credit facility will have a prior secured claim on our assets. The notes are not
secured by any of our assets and therefore are effectively subordinated to all
of our existing and future secured debt. The credit facility is secured by the
capital stock of certain of our subsidiaries, including our 51% ownership
interest in General Chemical (Soda Ash) Partners, and certain of our assets
other than those held by General Chemical (Soda Ash) Partners. In addition, the
indenture and the credit facility permit us to incur additional secured debt, if
certain conditions are met. See 'Description of Credit Facility.'
THE NOTES ARE EFFECTIVELY SUBORDINATED TO THE LIABILITIES OF OUR SUBSIDIARIES.
THE LIABILITIES OF OUR SUBSIDIARIES INCLUDE UP TO $60 MILLION OF BANK DEBT.
The notes are effectively subordinated to the liabilities of our
subsidiaries, which include up to $60 million available in U.S. dollars or the
Canadian dollar equivalent for borrowing by General Chemical Canada under the
credit facility. We conduct substantially all of our operations through various
direct and indirect subsidiaries, including General Chemical (Soda Ash) Partners
and General Chemical Canada Ltd. We are dependent on our ability to receive cash
from our subsidiaries to meet our debt service and other obligations, including
obligations under the notes and the credit facility. Our subsidiaries are
separate and distinct legal entities and have no obligation, contingent or
otherwise, to pay any amounts due under the notes. In addition, our claims
against General Chemical (Soda Ash) Partners are limited to our 51% equity
interest. Our rights, and the rights of our creditors, including holders of the
notes, to participate in the distribution of the assets of any subsidiary upon
that subsidiary's liquidation or reorganization will be subject to the prior
claims of that subsidiary's creditors, including trade creditors.
FEDERAL AND STATE FRAUDULENT TRANSFER STATUTES ALLOW COURTS, UNDER SPECIFIC
CIRCUMSTANCES, TO VOID OR SUBORDINATE INDEBTEDNESS SUCH AS THE NOTES IN FAVOR OF
OTHER CREDITORS OF OUR BUSINESS.
If a court applied fraudulent transfer laws to void or subordinate the
notes, holders of notes would not be repaid or would be paid on a subordinated
basis after other creditors. Federal and state
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governments have enacted various fraudulent transfer laws for the protection of
creditors and a court may utilize these laws to void or subordinate our
indebtedness, including the notes, in favor of other existing or future
creditors of our business. A court, in a lawsuit on behalf of any of our
creditors or a representative of our creditors, could find that, at the time we
issued the notes, we:
(1) intended to hinder, delay or defraud any existing or future creditor or
contemplated insolvency with a design to prefer one or more creditors to
the exclusion in whole or in part of others; or
(2) did not receive fair consideration or reasonably equivalent value for
issuing such notes and we:
(A) were insolvent;
(B) were rendered insolvent by reason of such issuance;
(C) were engaged or about to engage in a business or transaction for
which our remaining assets constituted unreasonably small capital to
carry on our business; or
(D) intended to incur, or believed that we would incur, debts beyond our
ability to pay such debts as they matured.
In such a case, a court could void our obligations under the notes.
Alternatively, claims of the holders of such notes could be subordinated to
claims of our other creditors.
A SUBSTANTIAL PORTION OF OUR OPERATIONS ARE CONDUCTED THROUGH A JOINT VENTURE,
WHICH IS 51% OWNED BY US. JOINT VENTURES ARE ACCOMPANIED BY INHERENT RISKS.
A substantial portion of our revenue is generated from General Chemical
(Soda Ash) Partners, in which we own a 51% equity interest. We have been the
managing partner of General Chemical (Soda Ash) Partners since its formation in
1986. As managing partner, we have had and will continue to have overall
responsibility for management of General Chemical (Soda Ash) Partners, including
all operational, marketing and financial matters. However, certain significant
actions of the partnership must be approved by a majority or, in certain
instances, all of the partners.
The General Chemical (Soda Ash) Partners partnership agreement in
certain cases prohibits the partners from transferring their respective equity
interests or withdrawing from the partnership without the consent of the other
partners. In addition, if the parent company of any General Chemical (Soda Ash)
Partners partner proposes to transfer ownership of its General Chemical (Soda
Ash) Partners partner subsidiary, the non-transferring parent companies may
either:
(1) acquire the transferred General Chemical (Soda Ash) Partners partner, or
its partnership interest, pursuant to a right of first refusal; or
(2) require the transferring parent company, or the proposed purchaser, to
acquire the partnership interest held by their own General Chemical (Soda
Ash) Partners partner subsidiaries.
If one or both of Owens-Illinois Inc. or TOSOH Corporation were to seek to
transfer its General Chemical (Soda Ash) Partners partner subsidiary and we did
not or could not exercise our right of first refusal, a new partner or partners
could be admitted to the partnership. Any such new partner may have business or
financial objectives for General Chemical (Soda Ash) Partners that are different
from ours. See 'Business -- General Chemical (Soda Ash) Partners.'
A PORTION OF OUR REVENUES IS DERIVED FROM INTERNATIONAL SOURCES. INTERNATIONAL
REVENUES ARE SUBJECT TO RISKS NOT PRESENT IN SALES WITHIN U.S. MARKETS, SUCH AS
INTERNATIONAL ECONOMIC AND POLITICAL INSTABILITY AND GOVERNMENTAL EMBARGOES OR
FOREIGN TRADE RESTRICTIONS SUCH AS ANTIDUMPING DUTIES.
We derived approximately $61 million, or 23%, of our revenues in 1998
from sales outside the United States and Canada. As a result, the occurrence of
or increase in any adverse international economic conditions could have a
material adverse effect on our results of operations or financial condition. We,
along with the five other U.S. producers of natural soda ash, are a member of
American Natural Soda Ash Company, a soda ash export cooperative. Through this
cooperative, the six U.S. producers export soda ash to all parts of the world
except Canada and European Union member countries, where each of the members
exports soda ash directly. Sales outside of the United States,
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particularly sales to emerging markets, are subject to other various risks which
are not present in sales within U.S. markets, including currency fluctuations,
political and economic instability, and uncertainty and governmental embargoes
or foreign trade restrictions such as antidumping duties. For example, several
countries have from time to time considered limiting or prohibiting sales of
products through export cooperatives such as American Natural Soda Ash Company.
See 'Industries -- Soda Ash.'
OUR OPERATIONS ARE SUBJECT TO ENVIRONMENTAL LAWS AND REGULATIONS, WHOSE
REQUIREMENTS COULD ADVERSELY AFFECT OUR OPERATIONS AND PROFITABILITY.
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 environmental
contamination, could require expenditures which might be material to our results
of operations or financial condition.
Numerous laws and regulations relating to the protection of human health
and the environment in the U.S. and Canada govern our mining and production
operations, which have been conducted at our Green River, Wyoming and
Amherstburg, Ontario facilities for many years. Additionally, courts have
construed the Comprehensive Environmental Response Compensation and Liability
Act of 1980 and similar state statutes 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. See 'Management's
Discussion and Analysis -- Environmental Matters.'
OUR STRATEGY INVOLVES PURSUING SELECTIVE ACQUISITIONS AND ALLIANCES, AND WE MAY
NOT BE ABLE TO COMPLETE ANY TRANSACTIONS OR THE TRANSACTIONS MAY ADVERSELY
AFFECT OUR OPERATING RESULTS OR RESULT IN INCREASED DEBT, COSTS AND CONTINGENT
LIABILITIES.
Future acquisitions or alliances by us could result in the incurrence of
additional debt, costs and contingent liabilities, all of which could materially
adversely affect our results of operations or financial condition. As part of
our strategy, we will selectively pursue acquisitions and alliances. Our ability
to complete acquisitions or alliances is dependent upon, and may be limited by,
the availability of suitable candidates and capital, and the restrictions
contained in our debt instruments. In addition, acquisitions and alliances
involve risks that could adversely affect our operating results, including the
management time that may be diverted from operations in order to pursue and
complete such transactions and difficulties in integrating and managing the
additional operations and personnel of acquired companies. There can be no
assurance that we will be able to obtain the capital necessary to consummate
acquisitions or alliances on satisfactory terms, if at all.
WE RELY HEAVILY ON THIRD PARTY TRANSPORTATION. INTERRUPTIONS OR INCREASED COSTS
IN SUCH TRANSPORTATION COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.
If we are unable to ship finished product or transport raw materials
because railroads or trucking companies we use in our business fail to operate,
or if there were material changes in the cost of railroads or trucking services,
we will not be able to arrange efficient alternative and timely means to ship
our goods, which would result in a material adverse effect on our financial
condition and results of operations. We rely heavily on railroads and trucking
companies to ship finished product to our customers as well as to transport raw
materials to our manufacturing facilities. Rail and trucking operations are
subject to various hazards, including extreme weather conditions, work
stoppages, operating hazards and the Year 2000 issue.
WE RELY ON UNIONIZED EMPLOYEES AND WILL NEED TO RENEGOTIATE LABOR CONTRACTS IN
1999. THIS NEGOTIATION PROCESS COULD DISRUPT OUR BUSINESS OR HAVE AN ADVERSE
EFFECT ON OUR RESULTS OF OPERATIONS.
There can be no assurance that we will be able to negotiate new labor
agreements on satisfactory terms or that the negotiation process will not
involve material disruptions to our business. As
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of August 31, 1999, three different unions represented 737 of our 1,044
employees. These three union contracts will be up for renewal during 1999. See
'Business -- Employees; Labor Relations.'
PRIOR TO THE SPINOFF WE NEVER OPERATED AS A SEPARATE, STAND-ALONE COMPANY. OUR
RESULTS MAY NOT BE COMPARABLE TO THOSE BEFORE THE SPINOFF.
You cannot be sure that, as a separate, stand-alone company, our
operating results will be comparable to those before the spinoff. Prior to the
spinoff we never operated as a separate, stand-alone entity and have
historically shared with the GenTek business various financial, administrative
and managerial expertise. As a result of the spinoff, for a transitional period,
GenTek is providing us with services, records and personnel, as described in
'Our Arrangements With GenTek Relating to the Spinoff.' As a result of the
spinoff, we maintain our own lines of credit and banking relationships and are
responsible for our own financial reporting and control functions.
WE ARE CONTROLLED BY OUR PRINCIPAL STOCKHOLDER WHOSE INTERESTS MAY NOT BE
ALIGNED WITH THE HOLDERS OF THE NOTES.
We are a wholly owned subsidiary of The General Chemical Group Inc. Paul
M. Montrone, Chairman of the Board of Directors of Group, beneficially owns or
controls 80.6% of the voting power of the outstanding shares of Group.
Therefore, Mr. Montrone alone has sufficient voting power to elect the entire
Board of Directors of Group 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 Group or of our company.
WE MAY NOT BE ABLE TO FINANCE THE CHANGE OF CONTROL OFFER REQUIRED BY THE
INDENTURE.
Upon the occurrence of a change of control, we will be required to make
an offer to purchase the notes at a price in cash equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest thereon, if any, to
the date of repurchase. Events involving a change of control may result in an
event of default under the credit facility and our other indebtedness that may
be incurred in the future. An event of default under the credit facility or
other future indebtedness could result in an acceleration of such indebtedness,
in which case the subordination provisions of the notes would require payment in
full or provision for payment of all senior debt before we can repurchase or
make other payments in respect of the notes. See 'Description of Notes -- Offer
to Purchase upon Change of Control,' 'Description of Notes -- Subordination' and
'Description of Credit Facility.' There can be no assurance that we would have
sufficient resources to repurchase the notes or pay our obligations if the
indebtedness under the credit facility or other future senior debt were
accelerated upon the occurrence of a change of control. There can be no
assurance that we will be able to obtain the consent of the lenders under the
credit facility to enable us to repurchase the notes.
The indenture defines a change of control to include, among other
things, a disposition of all or substantially all of our assets. There is no
definitive legal standard to determine what constitutes substantially all the
assets of an enterprise. As a result the holders of the notes may not be easily
able to establish that a change of control based on a sale of substantially all
of our assets has occurred.
IF THE INTERNAL REVENUE SERVICE DETERMINES THAT THE SPINOFF WILL RESULT IN A
GAIN UNDER THE INTERNAL REVENUE CODE, THE IMPACT OF SUCH ADVERSE TAX CONSEQUENCE
MAY HAVE A MATERIALLY ADVERSE AFFECT ON OUR BUSINESS.
As a result of the possible adverse tax consequences described below,
Group may be restricted in its ability to effect certain acquisitions, stock
issuances and other transactions that would result in a change of control of
Group. If the Internal Revenue Service were to determine that the spinoff is
part of a plan or a series of related transactions under which one or more
persons acquire, directly or indirectly, a 50% or greater interest, by vote or
value, in either The General Chemical Group Inc. or GenTek, Group and, possibly,
GenTek would recognize a gain under section 355(e) of the Internal Revenue Code
of 1986. The amount of such gain would be substantial and could result in
significant
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liabilities to Group, even if there were no change of control of Group, which
could have a material adverse effect on our business. Under the tax sharing
agreement, Group and GenTek will each be responsible, 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 Group or
GenTek (or any of their respective subsidiaries), such party will be
responsible, and will indemnify the other, for 100% of such taxes. See 'Our
Arrangements with GenTek Relating to the Spinoff -- Tax Sharing Agreement.'
IF WE, OR THIRD PARTIES WE RELY ON, FAIL TO BE YEAR 2000 COMPLIANT, OUR BUSINESS
COULD EXPERIENCE MATERIALLY ADVERSE INTERRUPTIONS, SLOWDOWNS OR INCREASED COSTS.
In the event that material systems of our business are not Year 2000
compliant, we may experience reductions or interruptions in operations which
could have a material adverse effect on our results of operations. 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 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.
In addition, we can make no warranty or guarantee as to the future
Year 2000 compliance status of material parties we rely on. The process of
evaluating compliance of material third parties is continually ongoing. Our
evaluation of such third parties to date has covered all of our critical
vendors, suppliers and service providers, including the railroad and trucking
companies we use to ship our goods.
We are likely to experience interruptions, slowdowns or increased costs
in our business if our suppliers fail to be Year 2000 compliant. We have
developed preliminary contingency plans to address three worst case Year 2000
scenarios we have identified with respect to our business. There can be no
assurance, however, that we will be able to successfully carry out our
contingency plans, that our contingency plans will adequately address the worst
case Year 2000 scenarios we have identified or that these contingency plans will
address every Year 2000 problem resulting from the failure of our suppliers to
be Year 2000 compliant. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Year 2000.'
THERE WILL BE NO PUBLIC TRADING MARKET FOR THE NEW NOTES. NO ASSURANCE CAN BE
GIVEN AS TO THE DEVELOPMENT OR LIQUIDITY OF ANY TRADING MARKET FOR THE NEW NOTES
OR THAT ANY MARKET FOR THE NEW NOTES WILL NOT BE SUBJECT TO DISRUPTIONS.
No assurance can be given as to the development or liquidity of any
trading market for the new notes. Likewise, no assurance can be given regarding
the ability of holders of the new notes to sell their new notes or the prices at
which such holders may be able to sell their new notes. The new notes are a new
issue of securities for which there is currently no active trading market. If
the new notes are traded after their initial issuance, they may trade at a
discount from their initial offering price, depending upon prevailing interest
rates, the market for similar securities, our financial condition and other
factors beyond our control, including general economic conditions. We do not
intend to apply for a listing or quotation of the new notes.
Historically, the market for noninvestment grade debt has been subject
to disruptions that have caused substantial volatility in the prices of such
securities. There can be no assurance that the market for the new notes will not
be subject to similar disruptions. Any such disruptions may have an adverse
effect on holders of the new notes.
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THE EXCHANGE OFFER
The following contains a summary of the material provisions of the
registration rights agreement. It does not contain all of the information that
an investor may wish to consider before participating in the exchange offer.
Reference is made to the provisions of the registration rights agreement, which
has been filed as an exhibit to the registration statement.
OUR OBLIGATIONS UNDER THE REGISTRATION RIGHTS AGREEMENT
In connection with the issuance of the old notes, the initial purchasers
of the old notes and their respective assignees became entitled to the benefits
of the registration rights agreement.
Under the registration rights agreement, General Chemical has agreed:
(1) to use its best efforts to cause to be filed with the Commission, on or
prior to 60 days after the date of the original offering, the registration
statement of which this prospectus is a part with respect to a registered
offer to exchange the old notes for the new notes; and
(2) to use its reasonable best efforts to cause the registration statement to
be declared effective under the Securities Act within 180 days after the
original offering of the old notes.
General Chemical will keep the exchange offer open for at least 30 days
from the date notice of the exchange offer is mailed to holders of the old
notes. The exchange offer being made hereby, if consummated within 210 days
after the original offering, will satisfy those requirements under the
registration rights agreement.
General Chemical will file with the Commission a shelf registration
statement to cover resales of old notes if:
(1) any holder of old notes who validly tenders the old notes in the exchange
offer does not receive new notes within 210 days after the original
offering;
(2) changes in applicable securities laws or interpretations do not permit any
holder to participate in the exchange offer, other than due to the holder's
inability to make the representations set forth in 'Representations Holders
Will Make When They Tender' below; or
(3) any holder of notes that participates in the exchange offer does not
receive freely transferable new notes.
To participate in the shelf registration, holders must satisfy conditions
relating to the provision of information in connection with the shelf
registration statement.
LIQUIDATED DAMAGES
General Chemical will pay liquidated damages in an amount equal to
$0.192 per week per $1,000 principal amount of the old notes if:
(1) General Chemical does not consummate the exchange offer within 210 days
after the original offering;
(2) if required, a shelf registration is not declared effective within 180 days
after the initial issuance of the old notes (or, in the case of a shelf
registration required to be filed in response to a change in law or the
applicable interpretations of the Commission staff, 45 days after any
publication of any change in law or interpretations); or
(3) if required, the shelf registration ceases to be effective at any time that
General Chemical is obligated to maintain its effectiveness without being
succeeded within 30 days by an additional effective registration statement.
General Chemical's obligations to pay liquidated damages will cease when the
exchange offer is consummated or the shelf registration statement is declared
effective or again becomes effective, as the case may be.
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The following holders will not be qualified to receive liquidated
damages:
(1) holders of notes who fail to comply with the obligation to make the
representations listed below in 'Representations Holders Will Make When
They Tender'; and
(2) holders of notes who fail to provide information required to be included in
a shelf registration statement.
RESALES OF NEW NOTES ISSUED IN THE EXCHANGE OFFER
Based on interpretations by the staff of the Commission as set forth in
no-action letters issued to third parties (including Exxon Capital Holdings
Corporation (available May 13, 1988), Morgan Stanley & Co. Incorporated
(available June 5, 1991), K-III Communications Corporation (available May 14,
1993) and Shearman & Sterling (available July 2, 1993)), General Chemical
believes that the new notes issued pursuant to the exchange offer may be offered
for resale, resold and otherwise transferred by any holder thereof (other than
any such holder that is a broker-dealer or an 'affiliate' of General Chemical
within the meaning of Rule 405 under the Securities Act) without compliance with
the registration and prospectus delivery provisions of the Securities Act,
provided that:
such new notes are acquired in the ordinary course of business;
at the time of the commencement of the exchange offer such holder has
no arrangement or understanding with any person to participate in a
distribution of such new notes; and
such holder is not engaged in, and does not intend to engage in, a
distribution of such new notes.
General Chemical has not sought, and does not intend to seek, a no-action letter
from the Commission with respect to the effects of the exchange offer, and there
can be no assurance that the staff would make a similar determination with
respect to the new notes as it has in such no-action letters.
REPRESENTATIONS HOLDERS WILL MAKE WHEN THEY TENDER
By tendering old notes in exchange for new notes and executing the
letter of transmittal, each holder will represent to General Chemical that:
any new notes to be received by it will be acquired in the ordinary
course of business;
it has no arrangements or understandings with any person to participate
in the distribution of the old notes or new notes within the meaning of
the Securities Act; and
it is not an 'affiliate,' as defined in Rule 405 under the Securities
Act, of General Chemical.
Each broker-dealer that receives new notes for its own account in
exchange for old notes, where such old notes were acquired by such broker-dealer
as a result of market-making or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such new notes.
See 'Plan of Distribution.' Each holder, whether or not it is a broker-dealer,
shall also represent that it is not acting on behalf of any person that could
not truthfully make any of the foregoing representations contained in this
paragraph. Any holder of old notes who is unable to make the foregoing
representations and any broker-dealer who acquired the old notes directly from
General Chemical may not rely on the applicable interpretations of the staff of
the Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act, including being named as selling security
holders, in order to resell the notes.
PERIOD OF EXCHANGE OFFER
The expiration date is November 9, 1999, unless General Chemical, in its
sole discretion, extends the exchange offer.
To extend the expiration date, General Chemical will notify the exchange
agent of any extension by oral or written notice and will notify the holders of
the old notes by means of a press release or other public announcement prior to
9:00 A.M., New York City time, on the next business day
18
<PAGE>
after the previously scheduled expiration date. Such announcement may state that
General Chemical is extending the exchange offer for a specified period of time.
General Chemical may:
(1) delay acceptance of any old notes, extend the exchange offer or terminate
the exchange offer and not permit acceptance of old notes not previously
accepted if any of the conditions set forth herein under ' -- Conditions'
shall have occurred prior to the expiration date, by giving oral or written
notice of such delay, extension or termination to the exchange agent, or
(2) amend the terms of the exchange offer in any manner deemed by it to be
advantageous to the holders of the old notes. General Chemical will provide
notice of any delay in acceptance, extension, termination or amendment of
the exchange offer to the exchange agent.
If General Chemical materially amends the exchange offer, General
Chemical will promptly disclose such amendment in a manner reasonably calculated
to inform the holders of the old notes of such amendment and in compliance with
applicable securities laws.
Without limiting the manner in which General Chemical may choose to make
public announcement of any delay, extension, amendment or termination of the
exchange offer, General Chemical shall have no obligations to publish,
advertise, or otherwise communicate any such public announcement, other than by
making a timely release to an appropriate news agency.
INTEREST ON THE NEW NOTES
If an old note is surrendered for exchange on or after a record date for
an interest payment date that will occur on or after the date of such exchange
and as to which interest will be paid, interest on the new note received in
exchange therefor will accrue from the date of such interest payment date.
Interest on the new notes is payable on May 1 and November 1 of each year,
commencing November 1, 1999. No additional interest will be paid on old notes
tendered and accepted for exchange.
PROCEDURES FOR TENDERING
To tender in the exchange offer, a holder must complete, sign and date
the applicable letter of transmittal, or a facsimile thereof, have the
signatures thereon guaranteed if required by the letter of transmittal, and mail
or otherwise deliver such letter of transmittal or such facsimile, together with
any other required documents, to the exchange agent prior to 5:00 p.m., New York
City time, on the expiration date. A holder may tender old notes only in
integral multiples of $1,000 in exchange for an equal principal amount of new
notes. In addition, either:
certificates of such old notes must be received by the exchange agent
along with the applicable letter of transmittal; or
a timely confirmation of a book-entry transfer of such old notes, if
such procedure is available, into the exchange agent's account at The
Depository Trust Company under the procedure for book-entry transfer
described below, must be received by the exchange agent prior to the
expiration date with the applicable letter of transmittal; or
the holder must comply with the guaranteed delivery procedures
described below.
The method of delivery of old notes, letter of transmittal and all other
required documents is at the election and risk of the holders. If such delivery
is by mail, it is recommended that registered mail, properly insured, with
return receipt requested, be used. In all cases, sufficient time should be
allowed to assure timely delivery. No old notes, letters of transmittal or other
required documents should be sent to General Chemical. Delivery of all old
notes, if applicable, letters of transmittal and other documents must be made to
the exchange agent at its address set forth below. Holders may also request
their respective brokers, dealers, commercial banks, trust companies or nominees
to effect such tender for such holders.
The tender by a holder of old notes will constitute an agreement between
such holder and General Chemical in accordance with the terms and subject to the
conditions set forth herein and in the letter of transmittal. Any beneficial
owner whose old notes are registered in the name of a broker, dealer,
19
<PAGE>
commercial bank, trust company or other nominee and who wishes to tender should
contact such registered holder promptly and instruct such registered holder to
tender on his behalf.
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by any member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an 'eligible guarantor' institution within the meaning of
Rule 17Ad-15 under the Exchange Act unless the old notes tendered are tendered:
(1) by a registered holder of old notes who has not completed the box entitled
'Special Issuance Instructions' or 'Special Delivery Instructions' on the
applicable letter of transmittal; or
(2) for the account of an eligible guarantor institution.
If the letter of transmittal is signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such person should so indicate
when signing, and unless waived by General Chemical, evidence satisfactory to
General Chemical of their authority to so act must be submitted with the letter
of transmittal.
All questions as to the validity, form, eligibility, time of receipt and
withdrawal of the tendered old notes will be determined by General Chemical in
its sole discretion, which determination will be final and binding. General
Chemical reserves the absolute right to reject any and all old notes not
properly tendered or any old notes which, if accepted, would, in the opinion of
counsel for General Chemical, be unlawful. General Chemical also reserves the
absolute right to waive any irregularities or conditions of tender as to
particular old notes. General Chemical's interpretation of the terms and
conditions of the exchange offer, including the instructions in the letters of
transmittal, will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of old notes must be cured
within such time as General Chemical shall determine. Neither General Chemical,
the exchange agent nor any other person shall be under any duty to give
notification of defects or irregularities with respect to tenders of old notes,
nor shall any of them incur any liability for failure to give such notification.
Tenders of old notes will not be deemed to have been made until such
irregularities have been cured or waived.
In addition, General Chemical reserves the right in its sole discretion,
subject to the provisions of the indenture:
to purchase or make offers for any old notes that remain outstanding
subsequent to the expiration date or, as set forth under
' -- Conditions;'
to terminate the exchange offer;
to redeem old notes as a whole or in part at any time and from time to
time, as set forth under 'Description of the Notes -- Optional
Redemption;' and
to the extent permitted under applicable law, to purchase old notes in
the open market, in privately negotiated transactions or otherwise.
The terms of any such purchases or offers could differ from the terms of the
exchange offer.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the exchange
offer, all old notes validly tendered and not withdrawn prior to 5:00 pm, New
York City time, on the expiration date will be accepted promptly after the
expiration date, and the new notes will be issued promptly after acceptance of
the old notes. See ' -- Conditions.' For purposes of the exchange offer, old
notes shall be deemed to have been accepted as validly tendered for exchange
when, as and if General Chemical has given oral or written notice thereof to the
exchange agent. For each old note accepted for exchange, the holder of such old
note will receive a new note having a principal amount equal to that of the
surrendered old note. In all cases, issuance of new notes for old notes that are
accepted for exchange in the exchange offer will be made only after timely
receipt by the exchange agent of the required documents.
If any tendered old notes are not accepted for any reason, such
unaccepted or such nonexchanged old notes will be returned without expense to
the tendering holder (if in certificated form)
20
<PAGE>
or credited to an account maintained with The Depositary Trust Company as
promptly as practicable after nonacceptance, withdrawal of tender or the
expiration or termination of the exchange offer, as the case may be.
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account with
respect to the old notes at The Depositary Trust Company for purposes of the
exchange offer within two business days after the date of this prospectus. The
exchange agent and The Depositary Trust Company have confirmed that any
financial institution that is a participant in The Depositary Trust Company may
utilize The Depositary Trust Company Automated Tender Offer Program procedures
to tender old notes.
Any participant in The Depositary Trust Company may make book-entry
delivery of old notes by causing The Depositary Trust Company to transfer such
old notes into the exchange agent's account in accordance with The Depositary
Trust Company's Automated Tender Offer Program procedures for transfer. However,
the exchange for the old notes so tendered will only be made after a book-entry
confirmation of such book-entry transfer of old notes into the exchange agent's
account, and timely receipt by the exchange agent of an agent's message and any
other documents required by the letter of transmittal. The term 'agent's
message' means a message, transmitted by The Depositary Trust Company and
received by the exchange agent and forming part of a book-entry confirmation,
which states that The Depositary Trust Company has received an express
acknowledgment from a participant tendering old notes that are the subject of
such book-entry confirmation that such participant has received and agrees to be
bound by the terms of the letter of transmittal, and that General Chemical may
enforce such agreement against such participant.
GUARANTEED DELIVERY PROCEDURES
If the procedures for book-entry transfer cannot be completed on a
timely basis, a tender may be effected if:
the tender is made through an eligible institution;
prior to the expiration date, the exchange agent receives by facsimile
transmission, mail or hand delivery from such eligible institution a
properly completed and duly executed letter of transmittal and notice
of guaranteed delivery, substantially in the form provided by General
Chemical, which:
(1) sets forth the name and address of the holder of old notes and
the amount of old notes tendered;
(2) states that the tender is being made thereby; and
(3) guarantees that within three New York Stock Exchange trading days
after the date of execution of the notice of guaranteed delivery,
the certificates for all physically tendered old notes, in proper
form for transfer, or a book-entry confirmation, as the case may
be, and any other documents required by the letter of transmittal
will be deposited by the eligible institution with the exchange
agent; and
the certificates for all physically tendered old notes, in proper form
for transfer, or a book-entry confirmation, as the case may be, and all
other documents required by the letter of transmittal are received by
the exchange agent within three New York Stock Exchange trading days
after the date of execution of the notice of guaranteed delivery.
WITHDRAWAL OF TENDERS
Tenders of old notes may be withdrawn at any time prior to 5:00 p.m.,
New York City time, on the expiration date.
21
<PAGE>
For a withdrawal to be effective, a written notice of withdrawal must be
received by the exchange agent prior to 5:00 p.m., New York City time on the
expiration date at one of the addresses set forth below under ' -- Exchange
Agent.' Any such notice of withdrawal must:
specify the name of the person having tendered the old notes to be
withdrawn;
identify the old notes to be withdrawn, including the principal amount
of such old notes;
in the case of old notes tendered by book-entry transfer, specify the
number of the account at The Depositary Trust Company from which the
old notes were tendered and specify the name and number of the account
at The Depositary Trust Company to be credited with the withdrawn old
notes and otherwise comply with the procedures of such facility;
contain a statement that such holder is withdrawing its election to
have such old notes exchanged;
be signed by the holder in the same manner as the original signature on
the letter of transmittal by which such old notes were tendered,
including any required signature guarantees, or be accompanied by
documents of transfer to have the trustee with respect to the old notes
register the transfer of such old notes in the name of the person
withdrawing the tender; and
specify the name in which such old notes are registered, if different
from the person who tendered such old notes.
All questions as to the validity, form, eligibility and time of receipt of such
notice will be determined by General Chemical, whose determination shall be
final and binding on all parties. Any old notes so withdrawn will be deemed not
to have been validly tendered for exchange for purposes of the exchange offer.
Properly withdrawn old notes may be retendered by following one of the
procedures described under ' -- Procedures for Tendering' and ' -- Book-Entry
Transfer' above at any time on or prior to 5:00 p.m., New York City time, on the
expiration date.
CONDITIONS
The exchange offer is not conditioned upon any minimum principal amount
of old notes being tendered for exchange. Notwithstanding any other provision of
the exchange offer, General Chemical shall not be required to accept for
exchange, or to issue new notes in exchange for, any old notes and may terminate
or amend the exchange offer if at any time prior to 5:00 p.m., New York City
time, on the expiration date, General Chemical determines that the exchange
offer violates applicable law, any applicable interpretation of the staff of the
Commission or any order of any governmental agency or court of competent
jurisdiction.
In addition, General Chemical will not accept for exchange any old notes
tendered, and no new notes will be issued in exchange for any such old notes, if
at such time any stop order shall be threatened or in effect with respect to the
registration statement of which this prospectus constitutes a part or the
qualification of the indenture under the Trust Indenture Act of 1939. General
Chemical is required to use every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the registration statement at the
earliest possible moment.
EXCHANGE AGENT
U.S. Bank Trust National Association, exchange agent has been appointed
as exchange agent for the exchange offer. Questions and requests for assistance
and requests for additional copies of this prospectus or of the letters of
transmittal should be directed to the exchange agent addressed as follows:
<TABLE>
<S> <C>
BY MAIL, HAND DELIVERY OR FOR INFORMATION CALL:
OVERNIGHT COURIER: (800) 934-6802
U.S. Bank Trust National Association
180 East 5th Street FACSIMILE TRANSMISSION NUMBER:
St. Paul, Minnesota 55101 (651) 244-1537
ATTENTION: Specialized Finance
</TABLE>
22
<PAGE>
FEES AND EXPENSES
The expenses of soliciting tenders in the exchange offer will be borne
by General Chemical. The principal solicitation for tenders in the exchange
offer is being made by mail; however, additional solicitations may be made by
telegraph, telephone, telecopy or in person by officers and regular employees of
General Chemical.
General Chemical will not make any payments to brokers, dealers or other
persons soliciting acceptances of the exchange offer. General Chemical, however,
will pay the exchange agent reasonable and customary fees for its services and
will reimburse the exchange agent for its reasonable out-of-pocket expenses in
connection with the exchange offer. General Chemical may also pay brokerage
houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of the prospectus
and related documents to the beneficial owners of the old notes, and in handling
or forwarding tenders for exchange.
The expenses to be incurred by General Chemical in connection with the
exchange offer will be paid by General Chemical, including fees and expenses of
the exchange agent and trustee and accounting, legal, printing and related fees
and expenses.
General Chemical will pay all transfer taxes, if any, applicable to the
exchange of old notes in the exchange offer. If, however, new notes or old notes
for principal amounts not tendered or accepted for exchange are to be registered
or issued in the name of any person other than the registered holder of the old
notes tendered, or if tendered old notes are registered in the name of any
person other than the person signing the letter of transmittal, or if a transfer
tax is imposed for any reason other than the exchange of old notes in the
exchange offer, then the amount of any such transfer taxes imposed on the
registered holder or any other persons will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the letter of transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of old notes who do not exchange their old notes for new notes
in the exchange offer will continue to be subject to the restrictions on
transfer of such old notes as set forth in the legend on the old notes as a
consequence of the issuance of the old notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the old notes may not be
offered or sold, unless registered under the Securities Act, except in an
exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. General Chemical does not currently anticipate
that it will register the old notes under the Securities Act. To the extent that
old notes are tendered and accepted in the exchange offer, the trading market
for untendered and tendered but unaccepted old notes will be adversely affected.
23
<PAGE>
USE OF PROCEEDS
THERE WILL BE NO PROCEEDS TO US FROM THE ISSUANCE OF NEW NOTES IN THE EXCHANGE
OFFER.
The net proceeds from the original offering were approximately $96
million. We used approximately $80 million of the net proceeds to fund a
distribution to our parent, Group, prior to the spinoff and the balance for
general corporate purposes. Group used the distribution to repay a portion of
its existing third-party indebtedness allocable to our business and to pay our
share of the one-time expenses directly attributable to the spinoff. None of the
proceeds of the original offering was distributed to our parent's shareholders.
As a result of the refinancing transactions, our outstanding
indebtedness consists of the notes and $50 million outstanding under our $85
million credit facility.
CAPITALIZATION
The following table sets forth, as of June 30, 1999, our capitalization.
This table should be read in conjunction with 'Use of Proceeds' and the
Consolidated Financial Statements and the notes included in this Prospectus.
<TABLE>
<CAPTION>
ACTUAL AT
JUNE 30, 1999
-------------
(IN THOUSANDS)
<S> <C>
Cash, cash equivalents and short-term investments........... $ 26,563
--------
--------
Credit facility(1).......................................... $ 50,098
Notes offered hereby........................................ 100,000
--------
Total debt.................................................. 150,098
Equity (deficit)............................................ (39,687)
--------
Total capitalization........................................ $110,411
--------
--------
</TABLE>
- ------------
(1) The credit facility provides for up to $85 million of borrowings, of which
up to $60 million in U.S. dollars or the Canadian dollar equivalent may be
borrowed by our Canadian subsidiary. As of June 30, 1999, the credit
facility would have had $35 million of unused borrowing availability.
24
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data set forth below for each of the three years
ended December 31, 1998 are derived from, and should be read in conjunction
with, the audited Consolidated Financial Statements and notes for our company
included in this prospectus. The selected financial data for the six months
ended June 30, 1998 and 1999 are derived from the unaudited consolidated
financial statements of our company included in this prospectus. The selected
financial data for the years ended December 31, 1994 and 1995 are derived from
unaudited consolidated financial statements of our company not included in this
prospectus, which have been prepared on a consistent basis with the audited
financial statements of the business and, in the opinion of management, include
all adjustments necessary for a fair presentation of the financial position and
results of operations of the business for the periods covered. Our Consolidated
Financial Statements for the three years ended December 31, 1998 have been
audited by Deloitte & Touche LLP, independent auditors.
Because we did not actually operate as a separate stand-alone business
through April 30, 1999, we may have recorded different results had we been
operated independently of GenTek's business. Therefore, the financial
information presented below is not necessarily indicative of the results of
operations or financial position that would have resulted if we had been a
separate, stand-alone business during the periods shown, or of our future
performance as a separate, stand-alone business. Per share data for net income
have not been presented because we were operated through Group for the periods
presented.
For a description of the basis of presentation of the historical
financial data of our company, see Note 1 to the Consolidated Financial
Statements.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------- -------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues................................. $254,139 $265,333 $298,945 $289,700 $261,469 $133,384 $130,637
Gross profit................................. 75,159 78,794 100,143 84,931 59,131 30,480 25,411
Operating profit............................. 60,960 62,296 77,924(1) 68,281 41,049(2) 22,410 15,154(3)
Minority interest............................ 16,957 19,458 31,635 24,253 16,666 8,127 5,507
Income before interest and income taxes...... 43,442 44,224 46,963 44,587 24,342 14,283 10,377
Interest expense(4).......................... 12,193 13,777 13,001 12,747 11,747 5,869 6,102
Income before income taxes................... 31,249 30,447 33,962 31,840 12,595 8,414 4,275
Income tax provision......................... 11,480 9,490 9,682 9,576 3,171 2,475 1,001
Net income................................... $ 19,769 $ 20,957 $ 24,280 $ 22,264 $ 9,424 $ 5,939 $ 3,274
OTHER DATA:
Ratio of earnings to fixed charges(5)........ 4.1x 3.9x 4.9x 4.3x 2.8x 3.0x 2.2x
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
---------------------------------------------------- JUNE 30,
1994 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments...... $ 558 $ 928 $ 1,609 $ 1,352 $ 1,127 $ 26,563
Adjusted working capital(6)............................ 23,791 27,970 27,628 44,519 38,728 38,613
Total assets........................................... 207,647 212,493 241,086 262,175 248,714 291,404
Equity (deficit)....................................... 53,768 53,354 62,795 85,505 75,292 (39,687)
</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.
(2) Includes incremental accruals of $2.3 million ($1.4 million after tax)
principally related to cost of sales ($.9 million) for the reclamation of
brine wells and selling, general and administrative expenses ($1.4 million)
primarily due to product delivery litigation.
(3) Includes a one-time charge of $1.9 million ($1.2 million after tax) related
to the spinoff.
(4) Includes allocated interest expense from the Group.
(5) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income before minority interest and income taxes and
extraordinary items plus fixed charges. Fixed charges consist of interest
expense, including the amortization of deferred financing costs, and that
portion of rental expense that management believes to be representative of
interest. Pro forma for the refinancing transactions, the ratio of earnings
to fixed charges for 1998 and the six months ended June 30, 1999 would be
2.3x and 1.8x, respectively.
(6) 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).
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
We are a leading global producer of soda ash and North American producer
of calcium chloride. We produce natural soda ash at our facility in Green River,
Wyoming, and synthetic soda ash and calcium chloride at our facility in
Amherstburg, Ontario.
Our principal product is soda ash, and the profitability of our
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, we
experienced decreases in profits compared to prior year levels. We estimate 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 'Industries -- Soda
Ash -- Pricing and Capacity Utilization.'
We produce natural soda ash by refining mined trona deposits at our
plant in Green River, Wyoming. The Green River basin contains the largest known,
economically recoverable trona deposits in the world. Our Green River facility,
including the plants and leases for mining trona ore, is owned and operated
through General Chemical (Soda Ash) Partners, a partnership in which we own a
51% partnership interest and of which we are the managing partner. See
'Business -- General Chemical (Soda Ash) Partners.'
The discussion and analysis of our financial condition and results of
operations in this section relate to periods during which The General Chemical
Group Inc. operated both our and GenTek's businesses. Prior to April 30, 1999,
we did not operate as a separate, stand-alone business and historically shared
with GenTek's business various financial, administrative and managerial
expertise relevant to operating as an independent public company. After the
spinoff, as a separate, stand-alone business, our results and profits may not be
comparable to those before the spinoff.
The Consolidated Financial Statements include an allocation of certain
assets, liabilities and expenses from Group. In the opinion of management,
expenses have been allocated to our company on a reasonable and consistent basis
using management's estimate of services provided to us by Group. However, such
allocations are not necessarily indicative of the level of expenses which might
have been incurred had we 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 our
company, see Note 1 to such Consolidated Financial Statements.
26
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth our unaudited statement of operations
data for the three years ended December 31, 1996, 1997 and 1998, the six months
ended June 30, 1998 and 1999 and the corresponding percentage of our net
revenues for the relevant period presented.
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------------------- ---------------------------
1996 1997 1998 1998 1999
------------- ------------ ------------- ------------ ------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues........... $298.9 100% $289.7 100% $261.5 100% $133.4 100% $130.6 100%
Gross profit........... 100.1 33 84.9 29 59.1 23 30.5 23 25.4 19
Selling, general and
administrative
expense.............. 22.2(1) 7 16.7 6 18.1 7 8.1 6 10.3(3) 8
Operating profit....... 77.9 26 68.3 23 41.0(2) 16 22.4 17 15.1 12
Minority interest...... 31.6 11 24.3 8 16.7 6 8.1 6 5.5 4
Interest expense....... 13.0 4 12.7 4 11.7 4 5.9 4 6.1 5
Net income............. 24.3 8 22.3 8 9.4 4 5.9 4 3.3 3
Depreciation and
amortization......... 15.6 5 16.8 6 17.0 7 8.6 6 8.6 7
</TABLE>
- ------------
Note: Amounts may not total due to rounding
(1) Includes a one-time charge of $5.7 million ($3.5 million after tax) due
primarily to awards made under a restricted unit plan, which replaced
certain prior equity programs.
(2) Includes incremental accruals of $2.3 million ($1.4 million after tax)
principally related to cost of sales ($.9 million) for the reclamation of
brine wells and selling, general and administrative expenses ($1.4 million)
primarily due to product delivery litigation.
(3) Includes a one-time charge of $1.9 million ($1.2 million after tax) related
to the spinoff.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1998
Net revenues for the six month period ended June 30, 1999 were $130.6
million, versus $133.4 million for the comparable period in 1998. This decrease
is due to lower soda ash prices ($6.9 million) partially offset by higher
volumes ($4.1 million).
Gross profit for the six month period ended June 30, 1999 decreased $5.1
million to $25.4 million from $30.5 million for the comparable prior year
period. Gross profit as a percentage of sales was 19% for the six months ended
June 30, 1999 versus 23% for the six month period ended June 30, 1998 primarily
due to the above-mentioned lower soda ash prices.
Selling, general and administrative expense as a percentage of net
revenues was 6% and 8% for the six months ended June 30, 1998 and 1999,
respectively. This increase was principally due to a $1.9 million one-time
charge related to legal, audit, actuarial and other spinoff related charges.
Minority interest for the six month period ended June 30, 1999 was $5.5
million compared with $8.1 million for the six month period ended June 30, 1998,
reflecting lower earnings due to weaker soda ash pricing of General Chemical
(Soda Ash) Partners.
Interest expense for the six month period ended June 30, 1999 was $6.1
million, which was $.2 million higher than the comparable prior year level due
to the issuance of the old notes and borrowings under the credit facility.
Interest income for the six month period ended June 30, 1999 was $.6 million,
which was $.3 million higher than the comparable prior year level as a result of
the net proceeds from the issuance of the old notes.
27
<PAGE>
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 ($21.0
million), as well as lower pricing ($7.2 million).
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, unfavorable pricing and an incremental
accrual of $.9 million for the reclamation of brine wells.
Selling, general and administrative expense as a percentage of net
revenues increased to 7% in 1998 from 6% in 1997 primarily due to an incremental
accrual of $1.4 million primarily due to product delivery litigation.
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.
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 ($18.7
million), partially offset by higher volume ($9.5 million).
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 The General Chemical Group Inc. which
replaced certain prior equity programs.
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 $26.6 million at June 30, 1999 compared
with $1.1 million at December 31, 1998. During the first six months of 1999, we
generated cash flow from operating activities of $7.7 million and received
proceeds from debt of $145.4 million, used cash of $9.3 million for capital
expenditures and transferred $118.3 million to Group. Cash and cash equivalents
were $1.1 million at December 31, 1998 compared with $1.4 million at
December 31, 1997. During 1998, we 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 Group.
We had working capital of $65.2 million at June 30, 1999 as compared
with $39.9 million at December 31, 1998. The increase in working capital
principally reflects higher cash balances due to the proceeds from debt
partially offset by the transfer to Group for repayment of pre-spinoff debt. We
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.
28
<PAGE>
Prior to the spinoff, our primary sources of liquidity were cash
generated from operations and borrowings under Group's credit facility.
Following the spinoff, our liquidity needs arise primarily from our working
capital requirements, capital expenditures and interest and principal payment
obligations. We believe that our existing capital resources, cash flow generated
from future operations and drawings under the credit facility will enable us to
maintain our planned operating, capital expenditure and debt service
requirements for the foreseeable future.
Our ability to satisfy our capital requirements will be dependent upon
our future financial performance, which in turn will be subject to general
economic conditions and to financial, business and other factors, including
factors beyond our control.
On April 30, 1999, we completed the original offering. We used
approximately $80 million of the net proceeds to fund a distribution to The
General Chemical Group Inc. prior to the spinoff and the balance for general
corporate purposes. In addition, concurrently with the original offering and the
spinoff, we entered into an $85 million credit facility, of which up to $60
million will be available for borrowing by our Canadian subsidiary in U.S.
dollars or the Canadian dollar equivalent. The net proceeds of our initial
borrowings under the credit facility were used to repay existing third-party
indebtedness. Upon completion of the spinoff-related financings, we had
approximately $35 million available for future borrowings under the credit
facility and $15 million of cash on hand. As of June 30, 1999, we had $35
million available for future borrowings under the credit facility and $27
million of cash on hand.
We have significant leverage. Our outstanding indebtedness consists of
the old notes and $50 million outstanding under our credit facility. Our
leverage and debt service requirements resulting from the old notes and credit
facility make us more vulnerable to economic downturns, may adversely affect our
ability to obtain additional financing in the future and may place us at a
competitive disadvantage because we may be more highly leveraged than certain of
our competitors. As previously noted, the indenture and the credit facility
impose operating and financial restrictions on us. These covenants could
adversely affect our ability to finance our future operations, potential
acquisitions or capital needs or to engage in business activities that may be in
the interest of noteholders. Based on our results of operations for the six
months ended June 30, 1999, we could incur up to $65 million additional
indebtedness (of which $35 million relates to borrowings under the credit
facility) in compliance with the covenants in our credit facility and the
indenture. See 'Risk Factors -- Our Substantial Indebtedness Could Adversely
Affect Our Financial Condition and Prevent Us From Fulfilling Our Obligations
Under the Notes.'
YEAR 2000
Following the spinoff, GenTek provides us with management information
systems and related functions, including personnel, hardware and software,
through December 31, 2001 on a service contract basis. During this period, as
provided in the transition support agreement, GenTek will provide us services
related to the remediation of the Year 2000 problem for our business. 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, including non-information technology
equipment and systems. The failure of such systems to properly recognize dates
after December 31, 1999 could result in data corruption and processing errors.
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 'Our Arrangements with GenTek
relating to the Spinoff -- Transition Support Agreement.' We intend to work with
GenTek on the separation of management information systems functions of GenTek
and us after resolution of Year 2000 problems. We anticipate that we will
recruit our own staff for this work during 2001 and that by approximately
December 2001 a separation of our and GenTek's functions will be completed.
We completed an assessment of our business' Year 2000 compliance status
in early 1997. This assessment found that the majority of our systems were Year
2000 compliant. The assessment revealed
29
<PAGE>
some minor problems with the maintenance management and order processing systems
and several process control systems. Immediately thereafter, we began a
remediation program to correct these material systems. We did not entirely
replace any systems necessary to the operation of our facilities.
We completed the majority of our remediation efforts in 1998 and
completed the remaining work by mid-1999. The following schedule describes our
progress by phase and the final completion date with respect to our material
systems.
<TABLE>
<CAPTION>
INVENTORY/ COMPLETION
TYPE OF SYSTEM ASSESSMENT REMEDIATION TESTING IMPLEMENTATION DATE
- -------------- ---------- ----------- ------- -------------- ----
<S> <C> <C> <C> <C> <C>
Business Application.................. Complete Complete Complete Complete 1/99
Manufacturing Systems................. Complete Complete Complete Complete 8/99
Technical Infrastructure.............. Complete Complete Complete Complete 6/99
</TABLE>
As of June 30, 1999, a total of approximately $.9 million had been spent
in connection with the Year 2000 program for our business and GenTek's business.
Approximately $.1 million of additional funds has been spent as of August 31,
1999 to replace or reprogram our systems of our business. We believe that as of
August 31, 1999 all material systems were Year 2000 compliant and, therefore, we
expect no additional expenditures relating to the material systems of our
business. We have used and will continue to use funds from operations to bring
our systems into Year 2000 compliance. In the event that material systems of our
business do not prove to be Year 2000 compliant, we may experience reductions or
interruptions in operations which could have a material adverse effect on our
results of operations.
We have also evaluated critical vendors, suppliers and service providers
for Year 2000 compliance, including the railroad and trucking companies we use
to ship our products. This evaluation included sending out letters with
questionnaires to all key suppliers together with follow-up telephone calls and
additional correspondence to complete the evaluation. Based upon the information
we obtained from those suppliers, we do not anticipate that the failure of any
of our key suppliers will have a material impact to our business operations.
However, the process of evaluating the Year 2000 compliance of material third
parties is continually ongoing and, therefore, we can make no guaranty or
warranty as to such third parties' future compliance status or its potential
effect on us.
We have developed preliminary contingency plans to deal with three worst
case Year 2000 scenarios:
(1) We cannot obtain sufficient critical raw materials over an extended period
of time;
(2) Intermittent power outages occur at our faciliities; and/or
(3) Railcars become difficult to obtain due to congestion in the railcar
system.
Our preliminary contingency plan consists of the following:
First, to insure that our facilities will have sufficient raw materials,
we expect to build up critical supplies as we approach year-end. This has been a
regular practice at both our facilities due to the harsh winter climate. We also
believe there exists a sufficient number of suppliers of raw materials for our
business so that we could find alternate sources if any supplier is unable to
deliver raw materials due to Year 2000 problems. Second, we believe that as both
our facilities have capacity to generate electrical power, they may be able to
sustain operations through short-term power outages. Lastly, we expect to build
inventories of railcars at our rail sidings and arrange to use truck carriers to
deliver products although any such arrangements are likely only to address
short-term congestion in the railcar system.
There can be no assurance, however, that we will be able to successfully
carry out our contingency plans, that our contingency plans will adequately
address the above worst case Year 2000 scenarios, or that these contingency
plans will address every Year 2000 problem resulting from the failure of our
suppliers to be Year 2000 compliant. As a result, we are likely to experience
interruptions, slowdowns or increased costs in our business if our suppliers
fail to be Year 2000 compliant.
30
<PAGE>
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
We do not expect to enter into financial instruments for trading
purposes. We anticipate periodically entering into interest rate swap agreements
to effectively convert all or a portion of our floating-rate debt to fixed-rate
debt in order to reduce our 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. We also anticipate periodically entering into currency
agreements to partially reduce our exposure to movements in currency exchange
rates. Swap and currency agreements will only be entered into with strong
creditworthy parties.
ENVIRONMENTAL MATTERS
Our 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. We believe that we are in substantial compliance with
such laws and regulations. However, due to the nature of our operations, we are
involved, from time to time in administrative and judicial proceedings and
inquiries relating to environmental matters which we do not believe will have a
material adverse effect. See 'Business -- Environmental Matters.'
We have an established program to ensure that our facilities comply with
environmental laws and regulations. Expenditures made under 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 of environmental matters. 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 of environmental matters. Should environmental laws and
regulations affecting our operations become more stringent, our 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. We are required to adopt FAS 133 for
fiscal years beginning after June 15, 1999. Management does not expect that the
adoption of FAS 133 will have a material effect on our results of operations or
financial condition.
31
<PAGE>
INDUSTRIES
Set forth below is information about the soda ash and calcium chloride
industries in which we operate:
SODA ASH INDUSTRY
Global consumption of soda ash during 1998 was approximately 35 million
tons with U.S. producers estimated to have produced approximately 11.1 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 more energy, labor and raw materials 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. As a result, the U.S. producers of natural soda
ash successfully compete in most regions with local sources of synthetically
produced soda ash.
We, along with the other five U.S. producers of natural soda ash, are a
member of American Natural Soda Ash Company, a soda ash export cooperative
organized in 1984 under an exemption from U.S. antitrust laws provided under the
Webb-Pommerene Act. Through this cooperative, all six U.S. producers export soda
ash to all parts of the world except Canada and European Union member countries.
The primary export markets served by this cooperative are Asia and Latin
America, and to a lesser extent the Middle East, Africa and Eastern Europe. Each
individual member's allocation of this cooperative's 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. American Natural Soda Ash Company is
the exclusive distributor of the soda ash of its members; however, members can
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 American Natural Soda Ash Company on grounds that
they are anti-competitive, though we are not aware of any pending or threatened
activity in this regard that would be material to our 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
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 European Union
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.
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<PAGE>
SODA ASH -- CONSUMPTION
Soda ash is consumed primarily in the production of glass, sodium-based
chemicals, powdered detergents 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. Approximately one-half of global soda ash industry demand is
attributable to the production of glass, including:
flat glass for commercial, residential and automobile windows and
mirrors;
beverage container glass;
food and other container glass; and
other glass such as 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 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. Geological Survey, there was no increase in the domestic
rate of glass recycling from 1997 to 1998, 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
33
<PAGE>
alkali used to make phosphates and silicates for dry detergent applications.
'Light' soda ash is preferred by some detergent 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 our control, 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:
growth in the end-use markets for soda ash;
export growth; and
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. We expect the average
soda ash price per ton for U.S. producers to be approximately $69 in 1999.
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)
- ---- ------------------ --------------
<S> <C> <C>
1988..................................... $67 96%
1989..................................... 77 97
1990..................................... 83 97
1991..................................... 84 91
1992..................................... 81 90
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
34
<PAGE>
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 Inc. 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
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.
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<PAGE>
BUSINESS
OVERVIEW
We are 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. We have 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. We are 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. Our 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.
COMPETITIVE STRENGTHS
We believe our principal competitive strengths are:
LOW-COST, HIGH-QUALITY PRODUCTION BASE
We have one of the lowest production costs in the global soda ash
industry primarily due to our location in the Green River Basin in
Wyoming and our consistent improvement in production efficiency. Since
taking control of the Green River facility in 1986, we have
approximately doubled annual productivity per employee. In the past two
years, through process improvements, we have increased our 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 production of flat glass. As a
result of our market focus, product quality and prudent incremental
increases in capacity, our plants have operated at over 90% of
effective capacity in each of the past 5 years.
STRATEGIC, ECONOMIC PARTNERS
We are partners with major soda ash purchasers who realize economic
benefits from purchasing from us instead of from our competitors.
Owens-Illinois, a 25% partner in General Chemical (Soda Ash)
Partners, is one of the largest consumers of soda ash in the
world.
TOSOH Corporation, a 24% partner in General Chemical (Soda Ash)
Partners, is a distributor of soda ash in the Japanese market.
Church & Dwight and General Chemical (Soda Ash) Partners jointly
own trona mineral leases under which General Chemical (Soda Ash)
Partners mines trona for the production of soda ash sold to
Church & Dwight. We sell soda ash to Church & Dwight Co., Inc.
for use in baking soda, detergents and personal care products.
Church & Dwight is a leading producer of sodium bicarbonate,
commonly known as baking soda, sold under its Arm & Hammer'r'
brand.
In 1998, we sold approximately 500,000 tons of soda ash directly to
Owens-Illinois and Church & Dwight, plus additional amounts to
Owens-Illinois and TOSOH Corporation through an export cooperative of
U.S. soda ash producers, as described below.
U.S. SODA ASH PRODUCER EXPORT COOPERATIVE
We are a member of the American Natural Soda Ash Company, the export
cooperative of U.S. soda ash producers. Membership in this cooperative
further enhances the U.S. producers' low-cost position by leveraging
the cooperative's global sales and marketing operations and creating
distribution economies of scale. Since the creation of the cooperative
36
<PAGE>
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
We are led by an experienced and incentivized executive and operating
management team with an average of over 15 years of industry experience.
Our management team has strengthened relationships with major customers,
improved the efficiency of our operations, accessed new markets and
developed new products.
For a discussion of our competitive weaknesses, see 'Risk Factors.'
BUSINESS STRATEGY
We strive to enhance our market position and improve our profitability
by continued efforts to:
CAPITALIZE ON LOW-COST, HIGH-QUALITY POSITION
We intend to capitalize on our position as one of the world's
low-cost, high-quality producers of soda ash to increase our market
share across global markets. We believe that our low-cost global
position, product quality and consistency, improved production
capabilities from our recent investment program, and the marketing and
distribution efficiencies associated with our membership in the American
Natural Soda Ash Company will enable us to increase our sales volumes
into export markets. We also believe that we are well positioned to
increase our 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 General Chemical (Soda Ash) Partners. We estimate 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 the partnership. We expect that, in light of the
economic benefits of being a partner of General Chemical (Soda Ash)
Partners, Owens-Illinois will consider increased purchases from the
partnership in the future. We have already experienced increased sales
volume to Owens-Illinois in the first half of 1999.
CONTINUE TO EXPAND PRODUCT APPLICATIONS AND SALES REGIONS
In the past two years, we have modified our Green River facility to
produce food grade soda ash and customized products for customers who
need low chloride, low calcium or specific particle size soda ash. In
addition, we have developed patented technology (our Hydrator'r'
technology) to liquify bulk soda ash at customer locations directly from
the railcar or truck, providing significant efficiencies for our
customers.
We have 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, we have recently
successfully sold calcium chloride products in Latin America and the
Middle East, markets that we believe will offer us substantial growth
opportunities in the future. We expect to build off of these recent
successes and further expand our calcium chloride product applications
and sales regions.
PURSUE SELECTIVE ACQUISITIONS, ALLIANCES AND CONSOLIDATION
OPPORTUNITIES
We believe that selective acquisitions, alliances and consolidation
opportunities are available to strengthen and complement our soda ash
and calcium chloride businesses. We believe that these opportunities can
increase our profitability and enhance our leadership position by adding
economies of scale and cost synergies, broadening our revenue base, and
leveraging our management expertise, production base and sales and
marketing organizations.
37
<PAGE>
SALES AND MARKETING
SODA ASH. Our 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 of our company from the top level
management to the plant level.
Our technical staff works with customers to ensure product quality and
to troubleshoot customer manufacturing issues. In addition, our 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. We
operate a rail fleet of approximately 2,500 rail cars to service our customers.
Virtually all of these rail cars are leased.
In the soda ash market, we maintain a diverse client base that includes
numerous Fortune 500 companies. We sell to a range of companies in the glass
manufacturing, chemicals and detergents markets, including Albright & Wilson
Americas Ltd., Ball-Foster Glass Container Co., L.L.C., 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, our top 10 soda ash customers accounted for approximately 36%
of revenues and had purchased from us for an average of 30 years.
Traditionally, large soda ash customers have made their soda ash
purchases under 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 our 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 our results of operations and financial condition, although there can
be no assurance that no such impact will occur in the future.
CALCIUM CHLORIDE. We sell calcium chloride to a broad range of
industrial and municipal customers, principally through our 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 our long standing reputation for service, our strategic location, the
size and extent of our storage and distribution facilities, our dedicated sales
force and our network of specialty distributors will allow us to enhance our
position in the highway and road maintenance market.
PROPERTIES
Our headquarters are located in Hampton, New Hampshire. The locations
and uses of our 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
Brooks, Ontario Calcium Chloride Brine Fields
Mississauga, Ontario(1) Offices
</TABLE>
- ------------
(1) Leased.
38
<PAGE>
MANUFACTURING AND DISTRIBUTION
We produce soda ash at two facilities: General Chemical (Soda Ash)
Partner's plant in Green River, Wyoming, which produces natural soda ash; and
our 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 we have 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, a quality certification program for all types of
industries run 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 for suppliers to the automotive industry.
Currently, our soda ash production capacity is 3.3 million tons, with
500,000 tons of capacity at our Amherstburg facility. In 1999, we received an
operating permit for nameplate capacity of 2.8 million tons at the Green River
facility. We mine 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, we solution mine our own salt
and purchase limestone from a major limestone producer.
At the Green River facility, we produce dense natural soda ash by
converting trona to soda ash. In the production process, trona is 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 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
heated to result in soda ash. The soda ash is cooled, dried and then taken to
storage. Using this process, we are 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 our
operating efficiency, the successful marketing of the co-product calcium
chloride and our proximity to major Canadian and eastern U.S. soda ash markets.
Our calcium chloride operations have twelve terminals in the United
States and Canada. Our 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
We mine trona ore under leases with the U.S. government, the State of
Wyoming and the Union Pacific Resources Corporation. 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.
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<PAGE>
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, storing and loading.
Our estimated proven reserves within bed No. 17, which we are currently
mining, consist of approximately 85 million tons of extractable ore. At the 1998
operating rate of 4.2 million tons of trona ore or 2.3 million tons of soda ash
per year, 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 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.
At the synthetic soda ash plant in Amherstburg, Ontario, Canada, we use
salt and limestone as our primary raw materials. Based on current production
levels, we have approximately 28 years of salt reserves. Owned limestone
reserves total approximately 15 years, with an option on an additional six years
of reserves. However, we are not currently utilizing our limestone reserves and
are instead purchasing all of our limestone requirements from a third party
under a long-term contract.
GENERAL CHEMICAL (SODA ASH) PARTNERS
Since 1986, the Green River plant has been owned by General Chemical
(Soda Ash) Partners, a partnership of which we are the managing partner. We own
a 51% equity interest and ACI International Limited and TOSOH Corporation,
through wholly owned subsidiaries, respectively own 25% and 24% of the
partnership's equity interests. ACI International Limited, a major world
producer of container glass and a customer of the partnership, 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 Corporation 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 Corporation closed its
synthetic soda ash facility and began purchasing soda ash through American
Natural Soda Ash Company.
We have been the managing partner of General Chemical (Soda Ash)
Partners since 1986 when it was formed. As managing partner, we have had and
will continue to have overall responsibility for management of the partnership,
including with respect to all operational, sales, marketing and financial
matters. However, certain significant actions of the partnership must be
approved by a majority or, in certain instances, all of the partners. 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 General Chemical to make quarterly
cash distributions to each of the three partners. The partnership agreement also
prohibits the partners from transferring their equity interests or withdrawing
from the partnership without the consent of the other partners. The obligations
of each 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. If the parent company of any partner
proposes to transfer ownership of its partner subsidiary, the non-transferring
parent companies may either:
(1) acquire the transferred partner, or its partnership interest, pursuant to a
right of first refusal; or
(2) require the transferring parent company, or the proposed purchaser, to
acquire the partnership interest held by their own partner subsidiaries.
40
<PAGE>
PARTNERSHIP WITH CHURCH & DWIGHT
General Chemical (Soda Ash) Partners and Church & Dwight are partners in
a partnership that owns trona reserves. Church & Dwight is a leading producer of
sodium bicarbonate, commonly known as baking soda, sold under the Arm &
Hammer'r' brand. The trona is mined and processed by General Chemical (Soda Ash)
Partners under a tolling agreement and all of the soda ash produced is purchased
by Church & Dwight under a sales contract. We have entered into similar
partnerships with other customers in the past and may do so in the future.
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. FMC Corporation's recent acquisition
of Tg Soda Ash, Inc. increased FMC Corporation's combined total capacity to more
than 4.8 million tons.
Given the global nature of the soda ash industry and major soda ash
consumers, we compete 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.
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 Industrial
Products Inc................. Green River, WY 2,800 Owens-Illinois (25%)(2), TOSOH (24%)
Amherstburg, Ont. 500
------
3,300
FMC Corporation................ Green River, WY 4,850 Sumitomo (10%), Nippon Sheet Glass (10%)
Oriental Chemical Co.(3)....... Green River, WY 2,200 Union Pacific Resources Corp. (49%)
Solvay Minerals, Inc........... Green River, WY 2,300 Asahi Glass (20%)
IMC Global Inc.(4)............. Searles Lake, CA 1,500
------
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 Expansions' above.
(footnotes continued on next page)
41
<PAGE>
(footnotes continued from previous page)
(4) Currently held by IMC Global Inc. through its wholly-owned subsidiary, North
American Chemical Company. In April 1999, IMC Global Inc. announced that it
was abandoning the proposed sale of North American Chemical Company, which
operates a soda ash plant in California, and certain international synthetic
soda ash businesses, to Mincorp LLC, a holding company owned by Citigroup
Venture Capital, but that it was still pursuing alternative disposition
strategies.
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 1999, FMC Corporation, the largest Wyoming producer of
soda ash, purchased another Wyoming producer, Tg Soda Ash, Inc. In April 1999,
IMC Global Inc. announced that it was abandoning the proposed sale of North
American Chemical Company, which operates a soda ash plant in California, and
certain international synthetic soda ash businesses, to Mincorp LLC, a holding
company owned by Citigroup Venture Capital, but that it was still pursuing
alternative disposition strategies. 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. We are the largest producer of calcium chloride in
Canada and the second largest producer of calcium chloride in North America with
450,000 tons of capacity. Major competitors are The Dow Chemical Company, TETRA
Technologies, Inc., Ambar, Inc. and various local producers in Canada. In the
United States, we are the third largest distributor of calcium chloride behind
Dow Chemical Company and TETRA Technologies. It is estimated that Dow Chemical
has 700,000 tons of capacity. The next largest U.S. producer is TETRA
Technologies, which operates four plants with estimated total capacity of
350,000 tons. In addition, Ambar, 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.
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 our business, there are no significant backlogs.
ENVIRONMENTAL MATTERS
Our 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, the Comprehensive
Environmental Response Compensation and Liability Act of 1980 and similar state
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.
We have established a program to ensure that our facilities comply with
environmental laws and regulations. See 'Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Environmental Matters'.
After the spinoff, Group, as the former parent of GenTek and GenTek's
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 Group with
respect to
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<PAGE>
all such liabilities and to bear all of Group's expenses for defending any
claims relating to these matters, our results of operations or financial
condition could be materially adversely affected in the event GenTek is unable
or unwilling to perform its indemnification obligations. See 'Our Arrangements
With GenTek Relating to the Spinoff.'
EMPLOYEES/LABOR RELATIONS
As of August 31, 1999, we had 1,044 employees, 306 of whom were
full-time salaried employees, 725 were full-time hourly employees and 13 were
hourly employees working in nonunion facilities.
Three union contracts, covering 736 employees at the Green River,
Wyoming and Amherstburg, Ontario facilities, have durations of three years and
will be up for renewal during 1999.
LEGAL PROCEEDINGS
We are 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 our results of operation or financial condition.
43
<PAGE>
MANAGEMENT
MANAGEMENT
The following sets forth information about the directors and executive
officers of The General Chemical Group Inc. and General Chemical.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH GROUP POSITION WITH GENERAL CHEMICAL
---- --- ------------------- ------------------------------
<S> <C> <C> <C>
Paul M. Montrone........... 58 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 Vice President and Chief Director, President and Chief
Operating Officer Executive Officer
Stewart A. Fisher.......... 38 Vice President and Chief Director, Vice President and Chief
Financial Officer Financial Officer
Douglas P. Strobel......... 37 Controller Controller
Philip E. Beekman.......... 67 Director --
Gerald J. Lewis............ 65 Director --
Joseph Volpe............... 58 Director --
</TABLE>
Paul Montrone has served as the Chairman of the Board of Group since
1995, and a Director of Group since 1988. He was President of Group from 1987 to
1994. Mr. Montrone is also Chairman of the Board of GenTek. Mr. Montrone is the
Chairman of the Board and Chief Executive Officer of Fisher Scientific
International Inc., a distributor of laboratory and scientific products, and a
Director of Waste Management, Inc. and the New York Metropolitan Opera.
Paul Meister has served as the Vice Chairman of the Board of Group since
1998, and a Director of Group since 1994. Mr. Meister is Vice Chairman of the
Board of GenTek. Mr. Meister has been Vice Chairman of the Board and Executive
Vice President and Chief Financial Officer of Fisher Scientific International
since March 1998; since prior to 1994, he has been Chief Financial Officer of
Fisher Scientific International, and from prior to 1994 to March 1998, he was
Senior Vice President of Fisher Scientific International. Mr. Meister is also a
Director of Minerals Technologies Inc. and M&F Worldwide Corp.
John Kehoe is the President and Chief Executive Officer and a Director
of Group. Since June 1999, Mr. Kehoe has served as the Chairman of Wheelabrator
Technologies Inc., a provider of waste management services that is part of Waste
Management. Mr. Kehoe was the President and Chief Executive Officer of
Wheelabrator Technologies from January 1993 to June 1999.
DeLyle Bloomquist is Vice President and Chief Operating Officer of Group
and a Director and the President and Chief Executive Officer of General
Chemical. Mr. Bloomquist was from 1996 until the spinoff the Vice President and
General Manager, Industrial Chemicals of General Chemical Corporation.
Mr. Bloomquist was the Director of General Chemical Corporation's Corporate
Distribution Department between 1995 and 1996. Between 1993 and 1995, he served
as Controller, Industrial Chemicals of General Chemical Corporation.
Stewart Fisher is Vice President and Chief Financial Officer of Group
and a Director and Vice President and Chief Financial Officer of General
Chemical. Mr. Fisher served from 1998 until the spinoff as the Treasurer of
Group and since 1994 as Treasurer of General Chemical Corporation, a subsidiary
of Group. He served as Assistant Treasurer of Group from 1996 to 1998.
Douglas Strobel is the Controller of Group and General Chemical. He was
Group Controller, Industrial Chemicals for Group from 1996 until the spinoff.
Mr. Strobel served as Business Controller, Sulfur Products for General Chemical
Corporation from prior to 1994 until 1996.
Philip Beekman has served as a Director of Group since 1996.
Mr. Beekman has been President of Owl Hollow Enterprises, an investment and
consulting company, since prior to 1994, and was Chairman of the Board and Chief
Executive Officer of Hook-SupeRx, Inc., a retailer, from prior to
44
<PAGE>
1994 to 1994. Mr. Beekman is also a Director of Sunbeam Corporation, a consumer
products provider, Linens 'n Things Inc. and Kendle International Inc.
Gerald Lewis has served as a Director of Group since 1996. 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 has been a Director of Group since the spinoff. He is a
member of the Audit Committee, the Compensation Committee and the Nominating
Committee of the Board of Group. He has been the General Manager of the New York
Metropolitan Opera since 1990.
COMMITTEES OF THE BOARD OF GROUP
The Board of Directors of Group has three standing committees: an Audit
Committee; a Compensation Committee; and a Nominating Committee.
The Audit Committee consists 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 Group'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 Group's
year-end operating results;
considering the adequacy of the internal accounting and control
procedures of Group;
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 consists of Messrs. Beekman, Meister and
Volpe, with Mr. Beekman serving as Chairman. It is responsible for:
reviewing and recommending compensation arrangements for Directors and
officers;
approving such arrangements for other senior level employees;
administering certain benefit and compensation plans of Group and its
subsidiaries including our company;
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' who are also 'non-employee directors' has exclusive authority to
approve any awards of stock or options to directors of Group other than
non-employee directors or other individuals who are 'officers' of General
Chemical 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.
An 'outside director' means an individual who:
45
<PAGE>
(1) is not an employee of the General Chemical;
(2) does not receive compensation from General Chemical for prior services as
an employee;
(3) has never been an officer of General Chemical; and
(4) only receives remuneration as a director from General Chemical and not in
any other capacity.
The term 'non-employee director' means an individual who:
(1) only receives remuneration as a director from General Chemical and not in
any other capacity;
(2) is not currently an officer of General Chemical; and
(3) has no interest in any transactions or business relationships with General
Chemical.
The Nominating Committee consists 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.
COMPENSATION OF DIRECTORS
The directors of General Chemical do not receive any compensation for
services performed as a director or for meeting attendance. The non-employee
directors of Group are entitled to receive cash compensation and compensation
under the plans described below.
CASH COMPENSATION. Non-employee directors of Group receive compensation
of $40,000 per year, with no additional fees for attendance at the Group's Board
of Directors or committee meetings. Under the deferred compensation plan for
non-employee directors, a non-employee director of Group may elect to have all
or any portion of the director's compensation deferred to a later date.
RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS. Under the retirement plan
for non-employee directors, any director who retires from Group's Board of
Directors with at least five years of service as a non-employee director will be
eligible for an annual retirement benefit for the remainder of the director's
lifetime. The annual retirement benefit is equal to 50 percent of the director
fee in effect at the date of the director's retirement for a director who
retires with five years of eligible service and is increased by 10 percent of
the director fee in effect at the date of the director's retirement for each
additional year of service, up to 100 percent of such fee for 10 or more years
of service as a non-employee director or for directors who retire after age 70.
Retirement benefits may be suspended or terminated.
RESTRICTED UNIT PLAN FOR NON-EMPLOYEE DIRECTORS. Under the restricted
unit plan for non-employee directors, each non-employee director of Group who
becomes a director will, upon becoming a director, receive a one-time grant of
5,000 restricted units evidencing a right to receive shares of Common Stock,
subject to restrictions. Twenty-five percent of the restricted units and the
related dividend equivalents will vest for each year of service as a
non-employee director of Group. There is accelerated 100% vesting upon the death
or disability of a sitting director. Vested restricted units and the related
dividend equivalents will not be payable until the director ceases to be a
member of Group's Board of Directors. At that time the director will receive one
share of Common Stock for each vested restricted unit.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
General Chemical has no compensation committee or other Board committee
performing an equivalent function. The Compensation Committee of Group
determines the compensation of executive officers of Group and General Chemical.
None of the members of the Compensation Committee of Group is or was an officer
or employee of Group or General Chemical. Mr. Meister, a member of the
Compensation Committee, is a Managing Director of Latona Associates, a
management company which performs a range of advisory services for Group and
General Chemical. See the description of 'Agreements with Latona Associates'
under 'Affiliate Relationships and Transactions.'
46
<PAGE>
EXECUTIVE COMPENSATION
In general, compensation for executive officers and other key employees
Group consists 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 1996 Stock Option
and Incentive Plan (as described below).
PERFORMANCE PLAN
Group has adopted a performance plan for the purpose of providing
incentives to certain key employees of Group and its subsidiaries, including
General Chemical, to earn annual cash bonuses and other periodic cash awards.
Eligible employees are selected by the Compensation Committee, and awards are
based solely on the attainment of preestablished goals.
AWARDS. The general parameters of the performance plan allow for a
maximum annual bonus payment that can be earned per individual of no more than
the lesser of $2,000,000 and 200 percent of the individual's base salary. These
parameters represent the upper limits of the performance based incentive program
and do not necessarily indicate the actual award that will be made since awards
will be based solely on attainment of the stated performance objectives.
PERFORMANCE CRITERIA. For awards other than annual bonuses, the
Compensation Committee will allocate a portion of each award to each year in a
performance period it shall establish. The performance objectives for an annual
bonus or performance period may be based upon either company-wide or operating
unit performance in any of the following performance objective areas: earnings
per share, revenues, operating cash flow, operating earnings, working capital to
sales ratio or return on capital. The earned award related to an allocated
portion of an award for a year in a performance period shall be subject to a
three year vesting schedule except that vesting shall also occur upon an
individual's death, disability (as defined in the plan) or termination with the
consent of the Compensation Committee or upon a change of control of General
Chemical or termination of the performance plan.
ADMINISTRATION. The Compensation Committee cannot increase the amounts
payable under the performance plan, but retains discretionary authority to
reduce the amount of compensation that would otherwise be payable to the
executive officers listed in the 'Summary Compensation Table' below even if the
target level of performance is attained. The Performance Plan may be amended or
terminated at any time at the sole discretion of the Compensation Committee.
1996 STOCK OPTION AND INCENTIVE PLAN
Group adopted the 1996 stock option and incentive plan to provide for
the grant of awards covering a maximum of 2,200,000 shares of Common Stock. The
1996 stock plan authorizes
(1) the grant of incentive and non-qualified stock options;
(2) the grant of shares of Common Stock with or without conditions and
restrictions;
(3) the grant of performance share awards entitling the recipient to receive
shares of Common Stock upon the achievement of performance goals; and
(4) stock appreciation rights accompanying options or granted separately. An
award under the 1996 stock plan, other than an award of restricted shares
of Common Stock, may provide for the crediting to the account of, or the
current payment to, the holder thereof of dividend equivalents. For a
description of the options granted by Group to its directors and the named
executives, see 'Summary Compensation Table' and 'Beneficial Ownership.'
All such options will vest 30 percent, 30 percent and 40 percent on the
first, second and third anniversaries, respectively, of the grant date.
PLAN ADMINISTRATION; ELIGIBILITY. The 1996 stock plan is administered by
the Compensation Committee of Group. All members of the Compensation Committee
must be 'disinterested persons' as that term is defined under the rules
promulgated by the Commission.
47
<PAGE>
The Compensation Committee has full power to select, from among the
employees eligible for awards, the individuals to whom awards will be granted,
to make any combination of awards to participants, and to determine the specific
terms of each award, subject to the provisions of the 1996 stock plan. Persons
eligible to participate in the 1996 stock plan will be those officers, directors
and employees of General Chemical and its subsidiaries and other key persons who
are responsible for or contribute to the management, growth or profitability of
General Chemical and its subsidiaries, as selected from time to time by the
Compensation Committee.
CHANGE OF CONTROL PROVISIONS. Under the 1996 stock plan, upon the
occurrence of a change of control event, outstanding options and stock
appreciation rights become immediately exercisable in full, and outstanding
restricted share and performance share awards vest in full. A change of control
event is defined in the 1996 stock plan and includes:
(1) any person or group, with certain exceptions, acquiring the beneficial
ownership of securities representing more than 35 percent of the voting
power of the Group's then outstanding voting securities having the right to
elect directors;
(2) a change in the composition of a majority of the Board of Directors of the
Group unless the selection or nomination of each of the new members was
approved by a majority of incumbent members of the Board of Directors of
the Group; or
(3) approval by the Group's stockholders of a consolidation, a merger in which
the Group does not survive, or the sale of all or substantially all of the
Group's assets. Such provisions of the 1996 stock plan may have an
anti-takeover effect.
RESTRICTED UNIT PLAN
Group has a restricted unit plan authorizing the issuance of 850,000
units to participants of the plan. The number of authorized units is adjusted
for stock splits, stock dividends or other similar events. Each unit represents
one share of Common Stock, which will be issued to the participant upon vesting
unless the participant elects to defer receipt thereof. The restricted unit plan
was established generally to facilitate the issuance of units to approximately
70 key employees in satisfaction and replacement of the rights earned beginning
in 1989 under the prior equity programs.
All units issued under the restricted unit plan will be issued at no
cost to the recipient. All awards are subject to a five-year vesting schedule
such that 10 percent of the award vests six months after the date of grant and
an additional 10 percent vests on each of the first and second anniversaries
thereof, 20 percent on the third anniversary, and 25 percent on each of the
fourth and fifth anniversaries. The Compensation Committee may at any time waive
such restrictions or accelerate the date or dates on which such restrictions
lapse. The restricted unit plan provides that in the event of a 'Change of
Control' (as defined in the restricted unit plan) of Group, all units will
automatically vest.
PENSION PLANS
In connection with the spinoff, Group or General Chemical will establish
a pension plan to mirror the General Chemical Corporation salaried employees'
pension plan and General Chemical Corporation will transfer to the new pension
plan the assets and associated liabilities of the salaried employees' pension
plan associated with employees who are employees of General Chemical and its
U.S. subsidiaries after the spinoff.
The General Chemical Corporation salaried employees' pension plan is a
defined benefit plan that generally benefits eligible, salaried employees. A
participating employee's annual retirement benefit is determined by the
employee's credited service under the salaried employees' pension plan and
average annual earnings during the five consecutive years of the final ten years
of service credited under the salaried employees' pension plan for which such
employee's earnings were highest. Annual earnings include principally salary,
overtime and short-term incentive compensation. The salaried employees' pension
plan provides that a participating employee's right to receive benefits under
the salaried
48
<PAGE>
employees' pension plan becomes fully vested after five years of service. Under
the salaried employees' pension plan, benefits are adjusted by a portion of the
social security benefits received by participants.
In addition to the salaried employees' pension plan, the executive
officers listed in the 'Summary Compensation Table' below participate in an
unfunded nonqualified excess benefit plan which pays benefits which would
otherwise accrue in accordance with the provisions of the salaried employees'
pension plan, but which are not payable under the salaried employees' pension
plan by reason of certain benefit limitations imposed by the Code.
The table below indicates the estimated maximum annual retirement
benefit a hypothetical participant would be entitled to receive under the
salaried employees' pension plan and the excess benefit plan. The amounts shown
are without regard to benefit limitations imposed by the Code, before any
deduction for social security benefits if the retirement occurred December 31,
1995, at the age of 65, after the indicated number of years of credited service
and if average annual earnings equaled the amounts indicated. Compensation
qualifying as annual earnings under the salaried employees' pension plan
approximates the amounts set forth as salary and bonus of the executive officers
listed in the 'Summary Compensation Table.' The number of years of credited
service under the salaried employees' pension plan for Messrs. Russell, Passino,
Tanis, Bloomquist and Klink is approximately 22, 19, 11, 10 and 24,
respectively.
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
AVERAGE ANNUAL ----------------------------------------------------
EARNINGS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
-------- -------- -------- -------- -------- --------
<S> <C> <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>
OTHER PROGRAMS
General Chemical maintains a program under which certain key officers of
General Chemical will be entitled to reimbursement of certain medical expenses
that are excluded or subject to limitations in coverage under General Chemical's
and its subsidiaries' basic employee group medical plans. The maximum amount
which may be reimbursed under such program is $5,000 per year for each covered
officer.
General Chemical and its subsidiaries maintain a deferred compensation
programs to which participants may defer all or any portion of their annual
salary and/or incentive compensation and elect to receive payment of such
deferred amounts in future years based on certain deferral options. Amounts
deferred will be credited on the books of General Chemical or such subsidiary
and interest will accrue on such amounts based on the average quoted rate for
ten-year U.S. Treasury Notes.
General Chemical also maintains qualified defined contribution
retirement plan under which eligible participants may, subject to certain
statutory limits, elect to contribute up to 18 percent of their compensation.
General Chemical makes an additional contribution under one plan equal to 50
percent of each participant's own contributions up to a maximum General Chemical
contribution of 4 percent of the participant's compensation. The executive
officers listed in the 'Summary Compensation Table' below also participate in an
unfunded, nonqualified excess defined contribution retirement plan which pays
benefits which would otherwise accrue in accordance with the provisions of the
defined contribution retirement plans but which are not payable by reason of
certain benefit limitations imposed by the Code. Participants generally become
vested in these additional contributions over five years.
49
<PAGE>
SUMMARY COMPENSATION TABLE
We are a wholly owned subsidiary of the Group and constitute
substantially all of the assets of Group. The following table summarizes
compensation awarded or paid by Group and its subsidiaries during the periods
indicated below to the Chief Executive Officer and the four most highly
compensated other executive officers of Group at year-end 1998. In connection
with the spinoff, Mssrs. Russell, Passino, Tanis and Klink became employees of
GenTek or its subsidiaries and are no longer employed by Group or its
subsidiaries. For a description of the current executive officers of Group and
General Chemical see 'Management.'
All stock compensation in prior years has been in the form of Common
Stock, or options to purchase Common Stock, of Group. The positions indicated in
the table are such persons' positions with Group prior to the spinoff.
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------------- ----------------------
ALL OTHER
NAME AND FISCAL SALARY BONUS OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) (#) ($)
------------------ ------ ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C>
Richard R. Russell ................................... 1998 400,000 75,000 -- 26,000
President and Chief Executive Officer 1997 400,000 375,000 -- 46,000
1996 400,000 425,000 400,000 49,000
Ralph M. Passino ..................................... 1998 250,000 50,000 -- 16,000
Vice President and General Manager, Manufacturing 1997 250,000 225,000 -- 28,000
Group 1996 250,000 265,000 65,000 30,000
James N. Tanis ....................................... 1998 250,000 50,000 -- 16,000
Vice President and General Manager, Performance 1997 250,000 225,000 -- 28,000
Products 1996 250,000 225,000 65,000 28,000
DeLyle W. Bloomquist ................................. 1998 200,000 50,000 -- 13,000
Vice President and General Manager, Industrial 1997 180,000 150,000 10,000 20,000
Chemicals 1996 140,000 125,000 30,000 10,000
Bodo B. Klink ........................................ 1998 205,000 35,000 -- 13,000
Vice President, Business Development and Services 1997 205,000 120,000 5,000 20,000
1996 195,000 150,000 20,000 20,000
</TABLE>
OPTION GRANTS
The following table sets forth information concerning individual grants
of stock options through year-end 1998 by Group to the executive officers listed
in the 'Summary Compensation Table' above through year-end 1998 for the purchase
of Group Common Stock. Group did not grant any stock options during 1998 to
these individuals. For a discussion of the treatment of Group stock option plans
in connection with the spinoff with respect to the executive officers of GenTek,
see 'Group Stock Option and Restricted Unit Conversion' below.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------------------------------
VALUE OF UNEXERCISED
IN-THE-MONEY
OPTIONS AT
SHARES DECEMBER 31, 1998($)
ACQUIRED ON VALUE ---------------------------
NAME EXERCISE REALIZED($) 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
DeLyle Bloomquist............... -- -- 9,000 31,000 0 0
Bodo B. Klink................... -- -- 12,000 13,000 0 0
</TABLE>
50
<PAGE>
GROUP STOCK OPTION AND RESTRICTED UNIT CONVERSION
Under the employee benefits agreement effective on the spinoff date,
holders of outstanding options to purchase Group Common Stock and holders of
restricted stock units will have their interests adjusted as described below.
STOCK OPTIONS. Employees of GenTek who hold Group stock options received
options to purchase under the equivalent GenTek plan the same number of shares
of GenTek as entitled by their Group options. The exercise price of their
existing 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 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 Group will similarly retain their options to acquire shares of Common Stock
of 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 Group, following the spinoff date, represents a similar award with
respect to a share of each of GenTek and Group.
51
<PAGE>
BENEFICIAL OWNERSHIP OF CAPITAL STOCK
Our common stock is 100% held by New Hampshire Oak whose common stock in
turn is 100% held by The General Chemical Group Inc. The table below sets forth,
based on public filings as of the spinoff date and information provided to us by
shareholders of Group, the beneficial ownership of shares of Common Stock of
Group by:
(1) each person who beneficially owns more than 5% of such shares;
(2) each of the directors of General Chemical and Group;
(3) each of the executive officers listed in the 'Summary Compensation Table'
above; and
(4) all of the persons listed under 'Management' as a group.
Our issued and outstanding capital stock consists 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. The shares of Common Stock are
registered under the Exchange Act and are listed on the New York Stock Exchange.
There are significant restrictions on transfers of 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 liquidation
distributions.
On the spinoff date a total of 20,731,613 shares were issued and
outstanding, consisting of 16,773,192 shares of Common Stock and 3,958,421
shares of Class B Common Stock.
The ownership percentages of our Common Stock shown above have been
calculated assuming the conversion of all outstanding shares of Class B Common
Stock into Common Stock. For the purpose of identifying persons who beneficially
own more than 5% of the shares of Common Stock, we have assumed that no
outstanding shares of Class B Common Stock have been converted.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP OF
GROUP
---------------------------
COMMON PERCENT OF
NAME OF BENEFICIAL OWNER STOCK CLASS
------------------------ ---------- ----------
<S> <C> <C>
DIRECTORS AND OFFICERS
Paul M. Montrone(1)(2)(3)(4).............................. 9,811,421 47.3%
Paul M. Meister(5)........................................ 2,061,251 9.9%
John M. Kehoe, Jr......................................... -- --
DeLyle W. Bloomquist(6)................................... 37,268 *
Stewart A. Fisher(7)...................................... 15,001 *
Philip B. Beekman(8)...................................... 30,000 *
Gerald J. Lewis(9)........................................ 25,000 *
Joseph Volpe.............................................. -- --
Richard R. Russell(10).................................... 76,972 *
Ralph M. Passino(11)...................................... 76,986 *
James N. Tanis(12)........................................ 69,986 *
James A. Wilkinson(13).................................... 46,693 *
Bodo W. Klink(14)......................................... 39,157 *
All directors and executive officers as a group
(9 persons)(15)......................................... 11,985,467 48.8%
5% SHAREHOLDERS
Paul M. Montrone(1)(2)(3)(4).............................. 9,811,421 47.3%
1996 and February 1998 GRATs(2)(4)........................ 3,552,502 17.1
Thomson Horstmann & Bryant, Inc.(16)...................... 889,250 4.3(17)
</TABLE>
- ------------
* Less than 1%.
(footnotes continued on next page)
52
<PAGE>
(footnotes continued from previous page)
(1) Includes 894,812 shares of Class B Common Stock and 1,331,107 shares of
Common Stock held directly by Mr. Montrone. Also includes the shares of
Class B Common Stock owned by the 1996 GRAT, the February 1998 GRAT and the
December 1998 GRAT and the 1999 GRAT (see notes 2, 3 and 4 below). 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 family trusts. 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.'
(2) A grantor retained annuity trust formed in 1996 owns 829,140 shares of
Class B Common Stock and 1,214,881 shares of Common Stock. A grantor
retained annuity trust formed in February 1998 owns 611,903 shares of Class
B Common Stock and 896,578 shares of Common Stock. Mr. Paul 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, and Paul
M. Meister, are the co-trustees of the 1996 GRAT and Mrs. Montrone is the
sole trustee with investment and voting discretion of the February 1998
GRAT. By virtue of her position as co-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.
(3) Two grantor retained annuity trusts, one formed in December 1998 and
another formed in March 1999, of which Mr. and Ms. Montrone are
co-trustees, each own 811,283 shares of Class B Common Stock and 1,188,717
Shares of 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 the
beneficial owner of all shares held by the December 1998 GRAT and the 1999
GRAT.
(4) 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.
(5) Includes 10,000 shares of Common Stock held directly by Mr. Meister; and
7,500 restricted units granted under Group's restricted unit plan. Also
includes 829,140 shares of Class B Common Stock and 1,214,881 shares of
Common Stock held by the 1996 GRAT, of which Mr. Meister is a co-trustee.
(6) Includes 500 shares of Common Stock held directly by Mr. Bloomquist; 21,768
restricted units granted under Group's restricted unit plan; and options to
purchase 15,000 shares of Common Stock.
(7) Includes 4,870 Shares of Common Stock held directly by Mr. Fisher; 4,131
restricted units granted under Group's restricted unit plan and vested on
May 15, 1999; and options to purchase 6,000 shares of Common Stock.
(8) Includes 5,000 shares of Common Stock held directly by Mr. Beekman; 5,000
restricted units granted under Group's restricted unit plan for
non-employee directors; and options to purchase 20,000 shares of Common
Stock.
(9) Includes 5,000 restricted units granted under Group's restricted unit plan
for non-employee directors; and options to purchase 20,000 shares of Common
Stock.
(10) 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 under 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 vested on May 15, 1999.
Mr. Russell disclaims any beneficial ownership of the 1,000 shares of
Common Stock held by his daughter. In connection with the spinoff,
Mr. Russell became an employee of GenTek or its subsidiaries and is no
longer employed by Group or its subsidiaries.
(11) Consists of 9,000 shares of Common Stock held by Mr. Passino's wife and
children, an aggregate of 27,986 restricted units granted under 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 vested 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 on May 15, 1999. Mr. Passino disclaims any
beneficial ownership of the 9,000 shares of Common Stock held by his wife
and children. In connection with the spinoff, Mr. Passino became an
employee of GenTek or its subsidiaries and is no longer employed by Group
or its subsidiaries.
(12) Includes 2,000 shares of Common Stock held by Mr. Tanis directly, an
aggregate of 27,986 restricted units granted under 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 vested 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 on May 15, 1999. In connection with the spinoff,
Mr. Tanis became an employee of GenTek or its subsidiaries and is no longer
employed by Group or its subsidiaries.
(13) 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 8,000 shares on May 15, 1999. In connection with the spinoff,
Mr. Wilkinson became an employee of GenTek or its subsidiaries and is no
longer employed by Group or its subsidiaries.
(14) Includes 500 shares of Common Stock held by Mr. Klink directly, an
aggregate of 18,657 restricted units granted under the 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 vested on
May 15, 1999. Also includes options to purchase 20,000 shares of Common
Stock,
(footnotes continued on next page)
53
<PAGE>
(footnotes continued from previous page)
which options vested 6,000 shares on each of May 15, 1997 and May 15, 1998,
and 8,000 shares on May 15, 1999. In connection with the spinoff,
Mr. Klink became an employee of GenTek or its subsidiaries and is no longer
employed by Group or its subsidiaries.
(15) Of such shares, 9,811,421 are beneficially owned by Mr. Montrone (see notes
(1), (2), (3) and (4)).
(16) The information presented herein is based solely upon a Schedule 13G filing
made with the Commission by Thomson Horstmann Bryant, Inc. on January 28,
1999. According to such filing, Thomson Horstmann Bryant has 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 889,250 of the above
shares. The address of Thomson Horstmann Bryant is Park 80 West, Plaza Two,
Saddle Brook, New Jersey 07663.
(17) The percentage ownership of Common Stock has been calculated assuming the
conversion of all outstanding shares of Class B Common Stock into Common
Stock. Prior to such conversion, the percentage ownership of Common Stock
for Thomson Horstmann Bryant would be 5.3%.
54
<PAGE>
AFFILIATE RELATIONSHIPS AND TRANSACTIONS
OUR ARRANGEMENTS WITH GENTEK RELATING TO THE SPINOFF
In connection with the spinoff, Group and GenTek entered into agreements
to facilitate the separation of Gentek's manufacturing and performance products
business from our business. For a description of these agreements see 'Our
Arrangements with GenTek Relating to the Spinoff' below.
AGREEMENTS WITH LATONA ASSOCIATES
Latona Associates Inc. is a management company that, since 1995, has
provided Group with strategic management, business and financial advisory
services, including strategic guidance and advice related to financings,
security offerings, recapitalizations, restructurings and acquisitions and tax
and employee benefit matters. In 1998, Group paid Latona Associates $5.8 million
of fees for such services, of which approximately $1.1 million was attributable
to our business. Latona Associates has also provided Group, for an additional
fee, advisory services with respect to acquisitions, business combinations and
other strategic transactions. Paul M. Montrone, the controlling stockholder and
Chairman of the Board of Group, also controls Latona Associates. In addition,
Paul M. Meister, a director of Group, is a Managing Director of Latona
Associates.
In connection with the spinoff, Latona Associates agreed to continue to
provide its services separately to us and to GenTek and to split its current fee
between us and GenTek. As a result, Group will pay Latona Associates an annual
fee of $1.5 million, 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 Group requests Latona Associates to
provide advisory services in connection with any acquisition, business
combination or other strategic transaction, Group will pay Latona Associates
additional fees, comparable to those received by investment banking firms for
such services (subject to the approval of a majority of Group's independent
directors).
Group's new agreement with Latona Associates relating to our business is
substantially similar to Group's prior agreement with Latona Associates and
extends through 2004. The agreement may be terminated by Group or Latona
Associates 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 notice of such breach. Group may terminate the agreement if
Mr. Montrone ceases to hold, directly or indirectly, shares representing at
least 20% of the aggregate voting power of Group's capital stock.
While there can be no assurance that the amount of fees to be paid by
Group to Latona Associates will not exceed the amount that Group would have to
pay to obtain from unaffiliated third parties the services to be provided by
Latona Associates, Group believes that the employees of Latona Associates have
extensive knowledge concerning its business which would be impractical for a
third paty to obtain. As a result, Group has not compared the fee payable to
Latona Associates with fees that might be charged by third parties for similiar
services.
Proposals regarding amendments to, waivers of, extensions of or other
changes in the terms of the agreement with Latona Associates, 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 New York Stock Exchange and prevailing corporate practices.
STOCKHOLDER AGREEMENTS
Mr. Montrone, who holds, or controls through the Montrone family trusts,
all of the Class B Common Stock and approximately 47.3% of the outstanding
shares of stock of Group assuming conversion of all outstanding Class B Common
Stock into Common Stock. Mr. Montrone may from time to time acquire shares of
Common Stock or warrants, options or rights to acquire shares of Common Stock in
the open market or in private transactions. Group has agreed not to interfere
with any such acquisitions. See 'Beneficial Ownership of Capital Stock.'
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In order to facilitate obtaining the private letter ruling of the
Internal Revenue Service concerning the tax-free nature of the spinoff,
Mr. Montrone and the Montrone family trusts converted 5,800,000 of their shares
of Class B Common Stock into Common Stock of Group. As a result of such
conversion, the voting power of the shares held or controlled by Mr. Montrone
and the Montrone family trusts decreased from 89.9% to 80.6%. We believe that,
without such conversion, the spinoff could have adverse tax consequences to
Group.
Under a registration rights agreement with Group, Mr. Montrone and the
Montrone family trusts may request, at any time until April 1, 2004, the
registration of their shares of Common Stock of Group for sale under the
Securities Act. Group will be required to accept up to three requests for
registration and, in addition, to include the shares of Mr. Montrone and the
Montrone family trusts in a proposed registration of shares of Group Common
Stock under the Securities Act in connection with the sale of shares of Common
Stock of Group or any other stockholder of Group. Group will be responsible to
pay the expenses of the registration of shares of Mr. Montrone and the Montrone
family trusts, other than brokerage and underwriting commissions and taxes
relating to the sale of the shares. See 'Summary -- The Spinoff' and 'Beneficial
Ownership of Capital Stock.'
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OUR ARRANGEMENTS WITH GENTEK
RELATING TO THE SPINOFF
In connection with the spinoff, Group and GenTek entered into the
agreements described in this section to facilitate the separation of GenTek's
manufacturing and performance products business from our business and an orderly
transition in establishing Group, and GenTek each as separate, stand-alone
companies. The agreements summarized below have been filed as exhibits to the
registration statement of which this prospectus forms a part. The following
summarizes the material terms of such agreements.
Currently, Group and GenTek have two common directors: Messrs. Montrone
and Meister. Because Messrs. Montrone and Meister serve as directors of both
Group and GenTek, they may have conflicts of interest in connection with the
agreements summarized below. The Boards of Directors of Group and GenTek will
deal with proposals regarding amendments to, waivers of, extensions for other
changes in the terms of the agreements summarized below on a case by case basis,
taking into account the requirements of the New York Stock Exchange and
prevailing corporate practice, including the disclosure of the terms of the
potential transaction and the interests of Messrs. Montrone and Meister or the
approval of the transaction by the disinterested directors of Group.
There can be no assurance that the terms of the agreements summarized
below are at least as favorable to Group as terms it would have negotiated with
unaffiliated third parties. Given the pre-spinoff relationship of GenTek and
Group, the desire of GenTek and Group to continue aspects of their pre-spinoff
operations for a transitional period and the extensive knowledge of GenTek's
personnel concerning Group and General Chemical, it was impracticable or
undesirable for Group to seek to enter into similar arrangements with
unaffiliated third parties. As a result, Group has not compared the terms of
these agreements with the terms it would have negotiated with unaffiliated third
parties.
SEPARATION AGREEMENT
The separation agreement provided for, among other things, the split up
at and after the spinoff between GenTek and us of assets and liabilities held by
Group before the spinoff. Under the separation agreement:
GROUP'S ASSETS: Group owns through its subsidiary New Hampshire Oak 100%
of our capital stock, and, we, in turn, own the following assets:
51% interest in General Chemical (Soda Ash) Partners, and all rights of
the managing partner of such partnership;
the capital stock of General Chemical Canada Ltd. and certain other
subsidiaries of Group engaged in our business; and
all other assets of Group and its subsidiaries used principally in our
business.
GENTEK'S ASSETS: The following became exclusively the assets of GenTek
at or prior to the spinoff:
the capital stock of General Chemical Corporation;
the capital stock of certain subsidiaries of Group that are currently
engaged in the GenTek business including Defiance, Inc. and Noma
Industries Limited, both acquired in 1999 by Group; and
any other assets of Group and its subsidiaries that are not used
principally in our business.
GROUP'S LIABILITIES: All liabilities of Group prior to the spinoff,
other than GenTek's liabilities described below, remained exclusively the
liabilities of Group and its subsidiaries after the spinoff, including all
liabilities:
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incurred in the conduct or operation of our business or the ownership
or use of Group's assets;
set forth on the balance sheet of our business;
of Group under the separation agreement or any other agreements with
GenTek relating to the spinoff;
arising under or in connection with the Form 10, except for liabilities
with respect to statements in the Form 10 regarding GenTek or GenTek's
business; and
of Group, New Hampshire Oak, the subsidiaries engaged in our business
and General Chemical Corporation that do not relate to GenTek's
business, including liabilities relating to, or arising out of the sale
of, any business formerly owned or operated by any of them. While we
are not aware of any material liabilities of this nature, there can be
no assurance that claims arising from previously unknown liabilities of
this nature may hereafter be asserted or that, if asserted, such claims
will not have a material adverse effect on our results of operations
and financial condition.
GENTEK'S LIABILITIES: The separation agreement further provided that, as
of the spinoff, all liabilities of GenTek's business are exclusively the
liabilities of GenTek and its subsidiaries, including all liabilities:
incurred in the conduct or operation of GenTek's business or the
ownership or use of GenTek's assets, whether arising before, at or
after the Spinoff;
of GenTek's subsidiaries, whether or not incurred in the conduct or
operation of the GenTek's business or the ownership of the GenTek's
assets;
of GenTek arising under the separation agreement or any other
agreements with Group relating to the spinoff;
undertaken by Group in connection with acquisitions relating to
GenTek's business, including the recent acquisitions of Noma and
Defiance; and
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 GenTek's business.
INDEMNIFICATION.
After the spinoff, GenTek and Group will indemnify each other and their
respective directors, officers, employees and agents from any losses, including
reasonable attorney's fees, incurred by any respective indemnitee due to the
failure of the indemnifying party to satisfy its obligations under the
separation agreement.
If the indemnity is insufficient to hold harmless an indemnified party
for any indemnifiable losses, each indemnifying party will pay its fair share of
the losses. In addition, Group will use its best efforts to maintain directors'
and officers' liability insurance coverage at least equal to Group's pre-spinoff
directors' and officers' liability insurance coverage for a period of six years
for directors and officers of Group who will become directors and officers of
GenTek as of the spinoff date for their acts as directors and officers of Group
for periods prior to the spinoff date.
NON-COMPETITION AND NON-SOLICITATION. Each of Group and GenTek have
agreed that, subject to certain exceptions, neither will compete with the other
prior to the fifth anniversary of the spinoff. Group and GenTek 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.
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EMPLOYEE BENEFITS AGREEMENT
In connection with the spinoff, Group and GenTek entered into an
employee benefits agreement that separated the assets and liabilities under
Group's employee benefit plans and other employment-related liabilities between
Group and GenTek. As a general matter, Group and GenTek each agreed:
(1) to continue to employ their respective employees; and
(2) to assume the liabilities existing at the time of the spinoff for their
respective employees and former employees.
The employee benefits agreement also provides 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 and Group will establish or maintain pension plans, health and
welfare plans, a savings (401(k)) plan, and executive compensation plans to
mirror the plans that Group or its subsidiaries currently sponsor for their
employees. The employee benefits agreement provides for the separation of the
amounts necessary to fund the projected benefit obligations under the Group
pension plans of GenTek's current and former employees, on the one hand, and
Group's current and former employees, on the other hand, determined on an
equitable basis in accordance with the actuarial assumptions used by the
applicable 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 has established a long-term incentive plan under which stock
options, stock appreciation rights, and other equity-related incentive awards,
as well as cash performance awards, may be granted. Outstanding Group
equity-related awards held by current or former employees of GenTek will receive
similar awards with respect to GenTek stock, based on formulas that preserve the
inherent value of such awards at the time of the spinoff except that restricted
units will be split between GenTek and Group. Replacement awards generally will
have the same other terms and conditions as the original awards.
TRANSITION SUPPORT AGREEMENT
Under a transition support agreement, for a period of up to twelve
months following the spinoff, GenTek has agreed to provide Group with tax,
legal, accounting, treasury, purchasing services, human resources, insurance
management and claims administration, and certain other administrative services,
and Group agreed to provide GenTek with certain services as they may agree upon.
In addition, following the spinoff, GenTek has agreed to provide us with
management information services and related functions, including personnel,
hardware and software, on a service contract basis. This arrangement will remain
in effect through approximately December 31, 2001. GenTek provides us with the
general administrative and management information 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 'Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Year 2000' and
'Risk Factors.'
Upon not less than 60 days prior written notice, either GenTek or Group
may direct the other to discontinue any services provided under the transition
support agreement, except with respect to management information services 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 also
provides 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 wilful
misconduct.
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SUBLEASE AGREEMENT
As of the spinoff, we use a portion of the office space located in
Parsippany, New Jersey under a sublease agreement between General Chemical
Corporation, a subsidiary of GenTek after the spinoff, and us. The sublease
payments 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 also provides for customary maintenance
and ancillary services.
TAX SHARING AGREEMENT
Prior to the spinoff, Group and GenTek entered into a tax sharing
agreement which provides, among other things, that:
(1) except for taxes described in clauses (2) and (3) below, GenTek generally
will be responsible for all taxes of any affiliated consolidated, combined
or unitary tax group that includes GenTek or any of its subsidiaries, for
all periods ending on or before the spinoff date;
(2) Group and GenTek generally will each be responsible for 50% of any taxes
attributable to the spinoff, including any taxes resulting from the
application of section 355(e) of the Code to the spinoff, except that each
of GenTek and Group will be responsible for 100% of such taxes that are
attributable to an act of such company or any of its subsidiaries;
(3) GenTek will pay Group its share of current taxes of any affiliated
consolidated, combined or unitary tax group that includes GenTek or any of
its subsidiaries, for all periods ending on or before the spinoff date; and
(4) all separate company taxes will be borne by the company responsible for
such taxes under local law.
The tax sharing agreement also establishes, as between GenTek and Group,
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 is not binding on the Internal
Revenue Service or any other taxing authority and will not affect the several
liability of GenTek and Group and their respective subsidiaries to the Internal
Revenue Service for federal income taxes of the Group consolidated group
relating to periods beginning prior to the spinoff date.
The tax sharing agreement also restricts the ability of GenTek and Group
to take certain actions which could adversely affect the tax-free nature of the
spinoff, including as a result of the recognition of gain under section 355(e)
of the Code. In particular, the tax sharing agreement provides that in the event
Paul Montrone and the Montrone family trusts no longer control 50% or more of
the voting power of GenTek or Group, both GenTek and Group generally will be
prohibited from entering into any transaction or series of transactions, during
the two years following the spinoff, under which one or more persons would
acquire control of 50% or more of the voting power or value of GenTek or Group.
The tax sharing agreement provides that each of GenTek and Group may enjoin the
other company from engaging in any such restricted action.
INTELLECTUAL PROPERTY AGREEMENT
Under an intellectual property agreement entered into by GenTek and
Group, after the spinoff, Group has the rights to and interest in the
copyrights, trademarks, trade secrets and other intellectual property of Group
used prior to the spinoff primarily in the Group's soda ash and calcium chloride
business, and GenTek has the rights to and interest in all other intellectual
property of Group. As of the spinoff, each of GenTek and Group licensed 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, subject to customary limitations.
General Chemical Corporation, a wholly-owned subsidiary of GenTek after
the spinoff, entered into a license with Group regarding the General Chemical
name and logo. General Chemical Corporation,
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which owns the General Chemical name and logo, granted to Group, for a one-time
up-front fee, a perpetual license to use the name and logo in connection with
the soda ash and calcium chloride activities and operations of Group, including
as the trading name of Group and General Chemical and with respect to our role
as the managing partner of General Chemical (Soda Ash) Partners.
PURCHASES OF SODA ASH AND CALCIUM CHLORIDE
GenTek is an end user of soda ash. After the spinoff, GenTek expects to
continue to purchase soda ash from us 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 its purchase of soda ash
from us prior to the spinoff. Calcium chloride will also be purchased for resale
to GenTek distributors and customers who purchase multiple GenTek products.
Prior to the spinoff, General Chemical Corporation, which is a
subsidiary of GenTek after the spinoff, was party to contracts with end users
and distributors of soda ash and calcium chloride. In connection with the
pre-spinoff reorganization, General Chemical Corporation was obliged to use
reasonable efforts to assign all of its soda ash and calcium chloride sales
contracts to us, except for contracts with distributors that covered products of
GenTek's business. Any contracts that were not assigned to us prior to the
spinoff remained with General Chemical Corporation. We will provide soda ash and
calcium chloride to GenTek and General Chemical 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, we will enter
into new contracts with them directly. For the year ended December 31, 1998 and
the six months ended June 30, 1999, sales to General Chemical Corporation
amounted to $5.3 million and $5.1 million, respectively.
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DESCRIPTION OF CREDIT FACILITY
GENERAL. Concurrently with the original offering and the spinoff,
General Chemical entered into the credit facility with a group of lenders and
The Chase Manhattan Bank, as administrative agent, to refinance third party
indebtedness and for working capital and other general corporate purposes. The
commitments under the credit facility are $85 million of which up to $60 million
of the credit facility is available in United States dollars or in the Canadian
dollar equivalent to General Chemical Canada Ltd., a subsidiary of General
Chemical. Upon consummation of the refinancing transactions, $50 million is
outstanding under the credit facility and $35 million is available for future
borrowings. Amounts borrowed under the credit facility may be used for general
corporate purposes including working capital, capital expenditures, acquisitions
and other payments. In addition, a portion of the credit facility is available
for the issuance of letters of credit. All indebtedness under the credit
facility of General Chemical is guaranteed, on a joint and several basis, by all
of the direct and indirect domestic subsidiaries of General Chemical other than
General Chemical (Soda Ash) Partners. All indebtedness under the credit facility
of General Chemical Canada is guaranteed by General Chemical and the subsidiary
guarantors. Indebtedness under the credit facility is senior to the notes.
SECURITY. The credit facility is secured by 100% of the owned capital
stock of the direct and indirect domestic subsidiaries of General Chemical, 65%
of certain owned foreign subsidiaries of General Chemical and substantially all
of the other assets of General Chemical and the subsidiary guarantors. In
addition, the portion of the credit facility available to General Chemical
Canada is secured by 100% of the owned capital stock of all subsidiaries of
General Chemical Canada and substantially all of the assets of General Chemical
Canada and its subsidiaries.
MATURITY; PREPAYMENT. The credit facility matures five years after the
closing date of the credit facility. The credit facility is subject to mandatory
prepayments out of proceeds received from the sale or disposition of assets,
sale or issuance of equity and indebtedness and insurance recoveries of General
Chemical and its subsidiaries. There are some important exceptions to our
prepayment obligations.
INTEREST RATES. The interest rate applicable to borrowings under the
credit facility is based, at the option of General Chemical, on ABR or
Eurodollar Rate for General Chemical or U.S. Base Rate, Canadian Dollar Prime
Rate, Banker's Acceptance or Eurodollar Rate for the General Chemical Canada as
defined in the credit facility, in each case plus a specified margin or stamping
fee, in the case of a Banker's Acceptance, based on General Chemical's ratio of
funded debt to pro forma EBITDA calculated on a rolling four quarter basis. Such
margin or stamping fee will range between 1.00% and 2.00% in the case of ABR,
U.S. Base Rate and Canadian Prime Rate loans and 2.25% and 3.25% in the case of
Eurodollar loans or Banker's Acceptances.
REPRESENTATIONS AND WARRANTIES. The credit facility contains
representations and warranties customarily found in loan agreements for similar
financings.
COVENANTS; EVENTS OF DEFAULT. The credit facility contains numerous
restrictive financial and other covenants, including without limitation:
(1) restrictions on indebtedness, liens and guarantees;
(2) restrictions on mergers, consolidations, liquidations and dissolutions,
sales of assets, investments, modifications of subordinated and other debt
instruments, amendments to the documents executed in connection with the
spinoff, transactions with affiliates, negative pledge clauses and clauses
restricting subsidiary distributions, leases, changes in passive holding
company status of the parent companies of General Chemical and lines of
business;
(3) restrictions on capital expenditures, prepayment on the notes and other
junior indebtedness, dividend payments, and redemptions or other payments
on the capital stock; and
(4) financial tests, including a maximum senior leverage ratio, a maximum
leverage ratio and a minimum interest coverage ratio. The credit facility
provides for customary events of defaults, including an event of default
upon the occurrence of a change of control of General Chemical.
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The credit facility requires General Chemical to comply with the
following financial ratios:
<TABLE>
<CAPTION>
PERIOD SENIOR LEVERAGE RATIO LEVERAGE RATIO INTEREST COVERAGE RATIO
------ --------------------- -------------- -----------------------
<S> <C> <C> <C>
July 1, 1999 through December 31, 1999...... 2.50:1.00 5.40:1.00 1.60:1.00
January 1, 2000 through
December 31, 2000......................... 2.25:1.00 5.25:1.00 1.75:1.00
January 1, 2001 through
December 31, 2001......................... 2.00:1.00 5.00:1.00 2.00:1.00
January 1, 2002 and after................... 2.00:1.00 5.00:1.00 2.25:1.00
</TABLE>
The credit facility has specific tailored definitions of senior leverage
ratio, leverage ratio and interest coverage ratio. We urge you to read the
credit agreement in order to understand these definitions and the financial
ratios. General Chemical believes that it is currently in compliance with the
covenants in the credit facility.
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DESCRIPTION OF NOTES
General Chemical issued the old notes under an indenture, dated as of
April 30, 1999, between General Chemical and U.S. Bank Trust National
Association, as trustee. The new notes will also be issued under the indenture.
The terms of the new notes are identical in all material respects to the terms
of the old notes except that the new notes are registered under the Securities
Act and therefore will not contain restrictions on transfer or provisions
relating to additional interest.
The following is a summary of the material provisions of the indenture.
It does not contain all of the information that may be important to an investor
in the notes. It is subject to, and is qualified in its entirety by reference
to, the Trust Indenture Act of 1939, and to all of the provisions of the
indenture. General Chemical has filed the indenture as an exhibit to the
registration statement of which this prospectus is a part. The definitions of
most capitalized terms used in the following summary are set forth below under
'Certain Definitions.' References in this 'Description of the Notes' section to
'General Chemical' mean only General Chemical Industrial Products Inc. and not
any of its subsidiaries.
SERVICE CHARGES AND TAXES ON TRANSFER OR EXCHANGE
Under the indenture, General Chemical will not impose any service charge
for any registration of transfer or exchange of the notes. However, General
Chemical may require a holder of notes to pay any tax or other governmental
charge that may be imposed in connection with such transfer or exchange.
RANKING
The notes:
rank junior to, and are subordinated in right of payment to, all
existing and future Senior Indebtedness of General Chemical;
pari passu in right of payment with all senior subordinated
Indebtedness of General Chemical; and
senior in right of payment to all Subordinated Indebtedness of General
Chemical.
At December 31, 1998, on a pro forma basis after giving effect to the
refinancing transactions, General Chemical would have had $50 million of Senior
Indebtedness outstanding and the ability to borrow an additional $35 million of
Senior Indebtedness under the Credit Facility. All debt incurred under the $85
million Credit Facility will be Senior Indebtedness of General Chemical and a
portion of such debt (up to the Canadian dollar equivalent of $60 million) may
be incurred by General Chemical Canada, a wholly owned subsidiary of General
Chemical. See ' -- Subordination' below and the risk factors relating to
contractual and structural subordination and General Chemical's dependence upon
subsidiaries (including joint ventures) under 'Risk Factors.'
MATURITY, INTEREST AND PRINCIPAL OF THE NOTES
The notes will be limited to $100.0 million aggregate principal amount
and will mature on May 1, 2009. Interest on the notes will accrue at a rate of
10 5/8% per annum. Interest is payable semi-annually in arrears on each May 1
and November 1, commencing November 1, 1999. General Chemical will make each
interest payment to the holders of record of notes at the close of business on
April 15 and October 15, respectively, immediately preceding such interest
payment date. Cash interest will accrue from the most recent interest payment
date to which interest has been paid or, if no interest has been paid, from
April 30, 1999. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
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OPTIONAL REDEMPTION
General Chemical may opt to redeem the notes, in whole or in part, at
any time on or after May 1, 2004, at the redemption prices set forth below,
which are expressed as percentages of the principal amount, plus accrued and
unpaid interest thereon, if any, to the redemption date (subject to the right of
holders of record on the relevant record date to receive interest due on the
relevant interest payment date), if redeemed during the twelve-month period
beginning on May 1 of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2004...................................................... 105.313%
2005...................................................... 103.542%
2006...................................................... 101.771%
2007 and thereafter....................................... 100.000%
</TABLE>
In addition, at any time and from time to time on or prior to May 1,
2002, General Chemical may redeem up to 35% of the originally issued aggregate
principal amount of the notes with the net cash proceeds of one or more Equity
Issuances, at a redemption price in cash equal to 110.625% of the principal
amount thereof, plus accrued and unpaid interest thereon, if any, to the date of
redemption (subject to the right of holders of record on the relevant record
date to receive interest due on the relevant interest payment date); provided,
however, that at least 65% of the originally issued aggregate principal amount
of the notes must remain outstanding immediately after giving effect to each
such redemption, excluding any notes held by General Chemical or any of its
Affiliates. Notice of any such redemption must be given within 90 days after the
date of the closing of the relevant Equity Issuance.
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the notes are to be redeemed at any
time pursuant to an optional redemption, selection of such notes for redemption
will be made by the trustee in compliance with the requirements of the principal
national securities exchange, if any, on which the notes are listed or, if the
notes are not then listed on a national securities exchange, on a pro rata
basis, by lot or by such method as the trustee shall deem fair and appropriate.
No notes of a principal amount of $1,000 or less shall be redeemed in part. If a
partial redemption is made with the net cash proceeds of an Equity Issuance,
selection of the notes or portions thereof for redemption shall be made by the
trustee only on a pro rata basis or on as nearly a pro rata basis as is
practicable, subject to the procedures of The Depository Trust Company, unless
such method is otherwise prohibited.
Notice of redemption shall be mailed by first-class mail at least 30 but
not more than 60 days before the redemption date to each holder of notes to be
redeemed at its registered address. If any note is to be redeemed in part only,
the notice of redemption that relates to such note shall state the portion of
the principal amount thereof to be redeemed. A new note in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the holder
thereof upon cancellation of the original note. On and after the redemption
date, interest will cease to accrue on notes or portions thereof called for
redemption as long as General Chemical has deposited with the paying agent for
the notes funds in satisfaction of the applicable redemption price pursuant to
the indenture.
SUBORDINATION
The payment of the principal of, premium, if any, and interest on and
other Obligations relating to the notes is subordinated in right of payment, as
provided in the indenture, to the prior payment in full in cash of all Senior
Indebtedness.
Upon any payment or distribution of assets or securities of General
Chemical of any kind or character, whether in cash, property or securities
(excluding any payment in, or distribution of, Permitted Junior Securities and
excluding any payment from the trust described under 'Satisfaction and Discharge
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of Indenture; Defeasance' (a 'Defeasance Trust Payment')), upon any dissolution
or winding-up or total liquidation or reorganization of General Chemical,
whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or
other proceedings, all Senior Indebtedness shall first be paid in full in cash
before the holders or the trustee on behalf of the holders shall be entitled to
receive any payment by or on behalf of General Chemical of the principal of,
premium, if any, or interest on, or other Obligations with respect to, the
notes, or any payment by or on behalf of General Chemical to acquire any of the
notes or related Obligations for cash, property or securities, or any
distribution by or on behalf of General Chemical with respect to the notes of
any cash, property or securities (excluding any payment in, or distribution of,
Permitted Junior Securities and excluding any Defeasance Trust Payment).
Before any payment may be made by, or on behalf of, General Chemical of
the principal of, premium, if any, or interest on, or other Obligations with
respect to, the notes upon any such dissolution or winding-up or total
liquidation or reorganization or in bankruptcy, insolvency, receivership or
other proceedings, any payment in, or distribution of, assets or securities of
General Chemical of any kind or character, whether in cash, property or
securities (excluding any payment or distribution of Permitted Junior Securities
and excluding any Defeasance Trust Payment), to which the holders or the trustee
on their behalf would be entitled, but for the subordination provisions of the
Indenture, shall be made by General Chemical or by any receiver, trustee in
bankruptcy, liquidation trustee, agent or other Person making such payment or
distribution, directly to the holders of the Senior Indebtedness (pro rata to
such holders on the basis of the respective amounts of Senior Indebtedness held
by such holders) or their representatives or to the trustee or trustees or agent
or agents under any agreement or indenture pursuant to which any of such Senior
Indebtedness may have been issued, as their respective interests may appear, to
the extent necessary to pay all such Senior Indebtedness in full in cash after
giving effect to any prior or concurrent payment, distribution or provision
therefor to or for the holders of such Senior Indebtedness.
No direct or indirect payment (excluding any payment in, or distribution
of, Permitted Junior Securities and excluding any Defeasance Trust Payment) by
or on behalf of General Chemical of principal of, premium, if any, or interest
on, or other Obligations with respect to, the notes, whether pursuant to the
terms of the notes, upon acceleration, pursuant to an Offer to Purchase,
redemption, defeasance, other purchase or otherwise, will be made if, at the
time of such payment, there exists a default in the payment of all or any
portion of the Obligations on any Designated Senior Indebtedness, whether at
maturity, on account of mandatory prepayment, acceleration or otherwise, and
such default shall not have been cured or waived or the benefits of this
sentence waived by or on behalf of the holders of such Designated Senior
Indebtedness.
In addition, during the continuance of any event of default (other than
a payment default described in the preceding sentence) with respect to any
Designated Senior Indebtedness pursuant to which the maturity thereof may be
immediately accelerated, and upon receipt by the trustee of written notice (a
'Payment Blockage Notice') from the holder or holders of such Designated Senior
Indebtedness or the trustee or agent acting on behalf of the holders of such
Designated Senior Indebtedness, then, unless and until such event of default has
been cured or waived or has ceased to exist or such Designated Senior
Indebtedness has been discharged or repaid in full in cash or the benefits of
these provisions have been waived by the holders of such Designated Senior
Indebtedness, no direct or indirect payment (excluding any payment in, or
distribution of, Permitted Junior Securities and excluding any Defeasance Trust
Payment) will be made by or on behalf of General Chemical of principal of,
premium, if any, or interest on, or other Obligations with respect to, the
notes, to such holders, during a period (a 'Payment Blockage Period') commencing
on the date of receipt of such notice by the trustee and ending 179 days
thereafter.
Notwithstanding anything in the subordination provisions of the
indenture or the notes to the contrary:
in no event will a Payment Blockage Period extend beyond 179 days from
the date the Payment Blockage Notice in respect thereof was given;
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there shall be a period of at least 181 consecutive days in each
360-day period when no Payment Blockage Period is in effect; and
not more than one Payment Blockage Period may be commenced with respect
to the notes during any period of 365 consecutive days.
No event of default that existed or was continuing on the date of
commencement of any Payment Blockage Period with respect to the Designated
Senior Indebtedness initiating such Payment Blockage Period (to the extent the
holder of Designated Senior Indebtedness, or trustee or agent, giving notice
commencing such Payment Blockage Period had knowledge of such existing or
continuing event of default) may be, or be made, the basis for the commencement
of any other Payment Blockage Period by the holder or holders of such Designated
Senior Indebtedness or the trustee or agent acting on behalf of such Designated
Senior Indebtedness, whether or not within a period of 365 consecutive days,
unless such event of default has been cured or waived for a period of not less
than 90 consecutive days. If, notwithstanding the foregoing, General Chemical
(or any other Person on behalf of General Chemical) makes any payment or
distribution to the Trustee or to holders prohibited by the subordination
provisions of the indenture, then such payment or distribution will be required
to be paid over to or for the benefit of holders of Designated Senior
Indebtedness.
The failure to make any payment or distribution for or on account of the
notes by reason of the provisions of the indenture described under this
'Subordination' heading will not be construed as preventing the occurrence of
any Event of Default in respect of the notes. See 'Events of Default' below.
By reason of the subordination provisions described above, in the event
of insolvency of General Chemical, funds which would otherwise be payable to
holders of notes will be paid to the holders of Senior Indebtedness to the
extent necessary to pay the Senior Indebtedness in full in cash, and General
Chemical may be unable to meet fully its obligations with respect to the notes.
At the time of the issuance of the old notes, $50 million of borrowings
under the Credit Facility were the only outstanding Senior Indebtedness. Subject
to the restrictions set forth in the Indenture, in the future General Chemical
may issue additional Senior Indebtedness to refinance existing Indebtedness or
for other corporate purposes.
OFFER TO PURCHASE UPON CHANGE OF CONTROL
Following the occurrence of a Change of Control General Chemical shall
notify the holders of such occurrence in the manner prescribed by the indenture
and shall, within 30 days after the Change of Control Date, make an Offer to
Purchase all notes then outstanding, and shall purchase all notes validly
tendered, at a purchase price in cash equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest thereon, if any, to the
Purchase Date (subject to the right of holders of record on the relevant record
date to receive interest due on the relevant interest payment date). General
Chemical's obligations to make and consummate an Offer to Purchase following the
occurrence of a Change of Control may be satisfied if another Person makes and
consummates such Offer to Purchase in the manner and at the times prescribed
herein.
If a Change of Control occurs which also constitutes an event of default
under the Credit Facility or any other Indebtedness, the lenders under the
Credit Facility or such other Indebtedness would be entitled to exercise the
remedies available to them as lenders under applicable law and pursuant to the
terms of the Credit Facility or such Indebtedness. Any claims of such lenders
holding secured indebtedness of General Chemical or Senior Indebtedness will be
prior to any claim of the holders, as more fully discussed elsewhere in this
prospectus.
If an Offer to Purchase is made, there can be no assurance that General
Chemical will have available funds sufficient to pay for all of the notes that
might be tendered by holders seeking to accept the Offer to Purchase. If General
Chemical fails to repurchase all of the notes tendered for purchase, such
failure will constitute an Event of Default under the indenture. See 'Events of
Default' below.
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If General Chemical makes an Offer to Purchase, General Chemical will
comply with all applicable tender offer laws and regulations, including Section
14(e) and Rule 14e-1 under the Exchange Act, and any other applicable Federal or
state securities laws and regulations and any applicable requirements of any
securities exchange on which the notes are listed, and any violation of the
provisions of the indenture relating to such Offer to Purchase occurring as a
result of such compliance shall not be deemed an Event of Default or an event
that, with the passing of time or giving of notice, or both, would constitute an
Event of Default.
Except as described above with respect to a Change of Control, the
indenture does not contain provisions that permit the holders of notes to
require that General Chemical repurchase or redeem the notes in the event of a
takeover, recapitalization or similar transaction.
COVENANTS
The indenture contains the following covenants:
LIMITATION ON INCURRENCE OF INDEBTEDNESS AND PREFERRED EQUITY INTERESTS.
(1) General Chemical will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, Incur any Indebtedness and (2) General
Chemical will not permit any Restricted Subsidiary to issue any Preferred Equity
Interests; provided, however, that General Chemical and/or any Restricted
Subsidiary (other than GCSAP and its Subsidiaries) may Incur Indebtedness (other
than Preferred Equity Interests of a Restricted Subsidiary) if, at the time of
and immediately after giving pro forma effect to such Incurrence of Indebtedness
and the application of the proceeds therefrom, General Chemical's Consolidated
Coverage Ratio would be greater than or equal to 2.0 to 1.0.
The provisions of the first paragraph of this covenant will not apply to
the Incurrence of any Permitted Indebtedness.
For purposes of determining compliance with this covenant,
(A) in the event that an item of Indebtedness meets the criteria of more than
one of the categories of Permitted Indebtedness described in clauses (1)
through (8) of the definition thereof or is entitled to be Incurred
pursuant to the first paragraph of this covenant, General Chemical shall,
in its sole discretion, classify such item of Indebtedness in any manner
that complies with this covenant at the time of Incurrence or issuance or
at the time of any subsequent Incurrence or issuance; and
(B) to avoid duplication, with respect to any item of Indebtedness, any other
obligation of the obligor on such Indebtedness (or of any other Person that
could have Incurred such Indebtedness under this covenant) arising under
any guaranty, Lien or letter of credit, bankers' acceptance or other
similar instrument or obligation supporting such Indebtedness shall be
disregarded to the extent that such guaranty, Lien or letter of credit,
bankers' acceptance or other similar instrument or obligation secures the
principal amount of such Indebtedness and the Incurrence of such
Indebtedness has otherwise been included in determining compliance with
this covenant.
LIMITATION ON RESTRICTED PAYMENTS.
General Chemical will not, and will not cause or permit any Restricted
Subsidiary to, directly or indirectly,
(1) declare or pay any dividend or any other distribution in respect of any
Equity Interests of General Chemical or any Restricted Subsidiary or make
any payment or distribution to the direct or indirect holders (in their
capacities as such) of Equity Interests of General Chemical or any
Restricted Subsidiary (other than:
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(a) any dividends, distributions and payments made to General Chemical or
any Restricted Subsidiary;
(b) dividends or distributions payable to any Person solely in Qualified
Equity Interests of General Chemical or in options, warrants or other
rights to purchase Qualified Equity Interests of General Chemical;
and
(c) the payment of any dividend or distribution on a pro rata basis to
all holders of Equity Interests in a Restricted Subsidiary);
(2) purchase, redeem or otherwise acquire or retire for value any Equity
Interests (other than any Equity Interests owned by General Chemical or any
Restricted Subsidiary) of:
(a) General Chemical; or
(b) any Restricted Subsidiary to the extent such Equity Interests of the
Restricted Subsidiary are owned by an Affiliate of General Chemical
(other than a Restricted Subsidiary).
(3) purchase, redeem, defease or retire for value, or make any principal
payment on, prior to any scheduled maturity, scheduled repayment or
scheduled sinking fund payment, any Subordinated Indebtedness (other than:
(a) any Subordinated Indebtedness held by General Chemical or any
Restricted Subsidiary; and
(b) any purchase, redemption, defeasance or other acquisition or
retirement for value in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case due
within one year of the date of such acquisition or retirement); or
(4) make any Investment (other than a Permitted Investment) in any Person;
(any such payment or any other action described in (1), (2), (3) or (4) each, a
'Restricted Payment'), unless:
(A) no Default shall have occurred and be continuing at the time of or
immediately after giving effect to such Restricted Payment;
(B) immediately after giving effect to such Restricted Payment, General
Chemical would be able to Incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under the Consolidated Coverage Ratio of the
first paragraph of the 'Limitation on Incurrence of Indebtedness and
Preferred Equity Interests' covenant; and
(C) immediately after giving effect to such Restricted Payment, the aggregate
amount of all Restricted Payments declared or made on or after the Issue
Date does not exceed an amount equal to the sum of:
(1) 50% of cumulative Consolidated Net Income determined for the period
(taken as one accounting period) from April 1, 1999 and ending on the
last day of the most recent fiscal quarter immediately preceding the
date of such Restricted Payment for which consolidated financial
statements of General Chemical are available (or, if such cumulative
Consolidated Net Income shall be a loss, minus 100% of such loss);
plus
(2) the aggregate net cash proceeds received by General Chemical either:
(a) as capital contributions to General Chemical after the Issue
Date; or
(b) from the issue and sale (other than to a Subsidiary of the
Company) of Qualified Equity Interests of General Chemical
after the Issue Date (excluding the net cash proceeds:
(a) from any issuance or sale of Qualified Equity Interests
or capital contribution if such net cash proceeds are to
be made the subject of an optional redemption prior to
May 1, 2002; or
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(b) from any issuance or sale of Equity Interests or capital
contribution financed, directly or indirectly, using
funds borrowed from General Chemical or any Subsidiary of
the Company until and to the extent such borrowing is
repaid); plus
(3) the principal amount (or accreted amount (determined in accordance
with GAAP), if less) of any Indebtedness of General Chemical or any
Restricted Subsidiary Incurred after the Issue Date which has been
converted into or exchanged for Qualified Equity Interests of General
Chemical; plus
(4) in the case of the disposition or repayment of any Investment
constituting a Restricted Payment made after the Issue Date, an
amount (to the extent not included in the computation of Consolidated
Net Income) equal to the lesser of:
(a) the return of capital with respect to such Investment; and
(b) the amount of such Investment which was treated as a Restricted
Payment,
in either case, less the cost of the disposition of such Investment
and net of taxes to the extent such costs and taxes exceed the
amount, if any, by which the proceeds of such disposition or
repayment exceed the lesser of the amounts referred to in the
preceding such clauses (a) and (b) of this clause (4); plus
(5) so long as the Designation thereof was treated as a Restricted
Payment made after the Issue Date, with respect to any Unrestricted
Subsidiary as to which a Revocation has occurred in accordance with
the 'Designation of Unrestricted Subsidiaries' covenant below, the
lesser of:
(a) the Fair Market Value of the Investment of General Chemical or
any Restricted Subsidiary in such Subsidiary as of the date of
such Revocation; or
(b) the Designation Amount with respect to such Designation; plus
(6) to the extent not included in the computation of Consolidated Net
Income, the amount of cash dividends or cash distributions (other
than to permit General Chemical or a Restricted Subsidiary to pay
taxes) received from any Unrestricted Subsidiary since the Issue
Date; minus
(7) the greater of:
(a) $0; and
(b) the Designation Amount (measured as of the date of Designation)
with respect to any Subsidiary of General Chemical which has
been Designated as an Unrestricted Subsidiary after the Issue
Date in accordance with the 'Designation of Unrestricted
Subsidiaries' covenant below; plus
(8) $5.0 million.
For purposes of the preceding clause (C), the value of the aggregate net
proceeds received by General Chemical upon the issuance of Capital Stock either
upon the conversion of convertible Indebtedness or in exchange for outstanding
Indebtedness or upon the exercise of options, warrants or rights will be the net
proceeds received upon the issuance of such Indebtedness, options warrants or
rights plus the incremental amount received by General Chemical upon the
conversion, exchange or exercise thereof. For purposes of this covenant, the
amount of any Restricted Payment, if other than cash, shall be the Fair Market
Value of the asset(s) proposed to be transferred by General Chemical or such
Restricted Subsidiary, as the case may be, pursuant to such Restricted Payment.
The foregoing provisions will not prevent:
(1) the payment of any dividend or distribution on, or redemption of, Equity
Interests within 60 days after the date of declaration of such dividend or
distribution or the giving of formal notice of such
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redemption, if at the date of such declaration or giving of such formal
notice such payment or redemption would comply with the provisions of the
indenture;
(2) the purchase, redemption, retirement or other acquisition of any Equity
Interests in exchange for, or out of the net cash proceeds of the
substantially concurrent issue and sale (other than to a Subsidiary of
General Chemical) of, Qualified Equity Interests of General Chemical or a
substantially concurrent capital contribution to General Chemical;
provided, that any such net cash proceeds and the value of any Qualified
Equity Interests issued in exchange for such retired Equity Interests are
excluded from clause (C)(2) of the preceding paragraph;
(3) the purchase, redemption, retirement, defeasance or other acquisition of
Subordinated Indebtedness, or any other payment thereon, made in exchange
for, or out of the net cash proceeds of:
(a) a substantially concurrent issue and sale (other than to a Subsidiary
of General Chemical) of, Qualified Equity Interests of General
Chemical or a substantially concurrent capital contribution to
General Chemical; provided, that any such net cash proceeds and the
value of any Qualified Equity Interests issued in exchange for
Subordinated Indebtedness are excluded from clauses (C)(2) and (C)(3)
of the preceding paragraph; or
(b) a substantially concurrent issue and sale of other Subordinated
Indebtedness having no stated maturity for the payment of principal
thereof prior to the 91st day following the final stated maturity of
the Notes;
(4) the distribution to be made to NHO for distribution to GCG out of the net
proceeds from the issuance of the Notes (as described under 'Use of
Proceeds');
(5) Permitted Equity Incentive Payments;
(6) payments in connection with Permitted Partnership Transactions;
(7) distributions, loans or advances to NHO for distribution to GCG to fund
payments, or payments made on behalf of GCG, pursuant to the terms of the
Separation Agreements, as the same may be amended, modified or replaced in
accordance with the indenture;
(8) for any tax period in which General Chemical is included in any
consolidated, combined, affiliated or unitary group of GCG or NHO or, in
the case of payments described in clause (1) of the definition of Related
Taxes, for any tax period to which the Tax Sharing Agreement applies,
payments to GCG or NHO in an amount equal to the amount of Related Taxes
for such period, less the aggregate amount of such Related Taxes paid or to
be paid directly by General Chemical or its Subsidiaries for such period
and less any refunds of such Related Taxes (in respect of such period or
any prior period (or portion thereof) beginning after the Issue Date) that
were received by GCG or NHO and were not repaid to General Chemical;
(9) the making of distributions, loans or advances to NHO for distribution to
GCG to permit GCG to:
(A) pay its costs (including all professional fees and expenses) incurred
to comply with its reporting obligations under federal or state laws,
including any reports filed with respect to the Securities Act,
Exchange Act or the respective rules and regulations promulgated
thereunder,
(B) make payments in respect of its directors and officers insurance
coverage and as customary compensation to the independent directors
of GCG,
(C) make payments in respect of indemnification obligations under GCG's
charter or by-laws or pursuant to written agreements owing to:
(1) directors and officers of GCG; or
(2) to employees or other Persons to the extent, in the case of
this sub-clause (2), such payments relate to services performed
by any such Person for General Chemical and its Subsidiaries,
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(D) pay all reasonable fees and expenses payable by it and relating to
the industrial chemicals business in connection with the spinoff,
(E) pay amounts due pursuant to the Management Agreement in an amount not
to exceed $1.5 million per year (subject to increase as provided for
therein on the Issue Date) and other fees payable under the
Management Agreement to the extent approved by disinterested
directors of GCG or General Chemical in accordance with the
'Transactions with Affiliates' covenant,
(F) pay its other operational expenses (other than federal, state, local
or foreign taxes) incurred in the ordinary course of business to the
extent such expenses relate to acting as a holding company for
General Chemical and its Subsidiaries or to the operation of General
Chemical and its Subsidiaries;
(10) any Investment constituting a Restricted Payment in any Person that is made
out of the net cash proceeds received by General Chemical either as:
(a) a substantially concurrent capital contribution; or
(b) a substantially concurrent issue and sale (other than to a Subsidiary
of General Chemical) of Qualified Equity Interests of General
Chemical, provided that such net cash proceeds are excluded from
clause (C)(2) of the preceding paragraph; and
(11) any purchase, redemption, repurchase, defeasance or other acquisition or
retirement of Subordinated Indebtedness to the extent required by the
agreement governing such Subordinated Indebtedness, following the
occurrence of a Change of Control (or other similar event described therein
as a 'change of control'), but only if General Chemical shall have complied
with the covenant described under ' -- Change of Control' and, if required,
purchased all notes tendered pursuant to the offer to repurchase all the
notes required thereby, prior to purchasing or repaying such Subordinated
Indebtedness;
provided, however, that in the case of each of clauses (2), (3), (5), (10) and
(11), no Default shall have occurred and be continuing or would arise therefrom.
In determining the amount of Restricted Payments permissible under this
covenant, amounts expended pursuant to clauses (1), (5), (9) (other than
subclause (D) thereof) and (11) of the immediately preceding paragraph shall be
included as Restricted Payments and amounts expended pursuant to any other
clauses shall be excluded; provided, however that amounts expended pursuant to
clause (9) shall only be included as Restricted Payments to the extent of 50% of
such amounts, on an after tax basis, that have not been deducted in arriving at
Consolidated Net Income. The amount of any non-cash Restricted Payment shall be
deemed to be equal to the Fair Market Value thereof at the date of the making of
such Restricted Payment. For purposes of determining compliance with this
covenant, in the event that a Restricted Payment meets the criteria of more than
one of the exceptions described in clauses (1) through (11) above or is entitled
to be made pursuant to the first paragraph of this covenant, the Company may, in
its sole discretion, classify such Restricted Payment in any manner that
complies with this covenant at the time of such Restricted Payment.
LIMITATION ON LIENS.
General Chemical will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, assume, incur, create or suffer to exist any Liens
of any kind against or upon any of their respective properties or assets,
whether owned on the Issue Date or thereafter acquired, or any proceeds
therefrom, to secure any Indebtedness (an 'Initial Lien') unless
contemporaneously therewith effective provision is made, in the case of General
Chemical, to secure the notes and all other amounts due under the indenture,
equally and ratably with such Indebtedness (or, in the event that such
Indebtedness is subordinated in right of payment to the notes, prior to such
Indebtedness) with a Lien on the same properties and assets securing such
Indebtedness for so long as such Indebtedness is secured by such Lien, except
for:
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(1) Liens securing any Senior Indebtedness or any guaranty of Senior
Indebtedness by any Restricted Subsidiary; and
(2) Permitted Liens.
Any Lien created in favor of the notes pursuant hereto will be automatically and
unconditionally released and discharged upon:
(1) the unconditional release and discharge of the Initial Lien to which it
relates; or
(2) any sale, exchange or transfer to any Person that is not an Affiliate of
General Chemical or any Restricted Subsidiary of the property or assets
secured by such Initial Lien, or of all of the Equity Interests held by
General Chemical and the Restricted Subsidiaries in, or all or
substantially all of the assets of, the Restricted Subsidiary whose
property or assets were the subject of such Lien, provided that, in the
case of this clause (2), the provisions of the covenant 'Disposition of
Proceeds of Asset Sales' are complied with in connection with such sale,
exchange or transfer.
DISPOSITION OF PROCEEDS OF ASSET SALES.
General Chemical will not, and will not cause or permit any Restricted
Subsidiary to, directly or indirectly, make any Asset Sale, unless:
(1) General Chemical or such Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the
Fair Market Value of the assets sold or otherwise disposed of; and
(2) at least 75% of such consideration consists of cash or Cash Equivalents;
provided that the principal amount (or accreted value) of any:
(A) Indebtedness (other than any Subordinated Indebtedness or Pari Passu
Debt) of General Chemical or any Restricted Subsidiary that is
actually assumed by the transferee in such Asset Sale and from which
General Chemical and the Restricted Subsidiaries are fully and
unconditionally released shall be deemed to be cash for purposes of
determining the percentage of cash consideration received by General
Chemical or the Restricted Subsidiaries; and
(B) notes or other similar obligations received by General Chemical or
the Restricted Subsidiaries from such transferee that are immediately
converted, sold or exchanged (or are converted, sold or exchanged
within 30 days of the related Asset Sale) by General Chemical or the
Restricted Subsidiaries into cash
shall be deemed to be cash in an amount equal to the net cash proceeds realized
upon such conversion, sale or exchange for purposes of determining the
percentage of cash consideration received by General Chemical or the Restricted
Subsidiaries.
With respect to any Asset Sale, General Chemical or such Restricted
Subsidiary, as the case may be, may:
(1) apply the Net Cash Proceeds of such Asset Sale within 365 days of receipt
thereof to repay Senior Indebtedness;
(2) apply the Net Cash Proceeds of such Asset Sale to acquire, construct or
improve properties and capital assets to be used in a Related Business or
to acquire Equity Interests in any Person which thereby becomes a
Restricted Subsidiary whose assets consist primarily of properties and
capital assets used in a Related Business; or
(3) apply the Net Cash Proceeds of any Asset Sale within 365 days of receipt
thereof to repay Pari Passu Debt not exceeding the Pari Passu Debt Pro Rata
Share. Notwithstanding the foregoing, in the event a Restricted Subsidiary
that is not a Wholly-Owned Restricted Subsidiary dividends or
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distributes to all of its stockholders on a pro rata basis any Net Cash
Proceeds to General Chemical or another Restricted Subsidiary, General
Chemical or such Restricted Subsidiary need only apply its share of such
Net Cash Proceeds in accordance with the preceding clause (1), (2) or (3).
To the extent all or part of the Net Cash Proceeds of any Asset Sale are
not applied within 365 days of such Asset Sale as described in clause (1), (2)
or (3) or the proviso of the first paragraph of this covenant (such Net Cash
Proceeds, the 'Unutilized Net Cash Proceeds'), General Chemical shall, within 20
days after such 365th day, make an Offer to Purchase all outstanding notes up to
a maximum principal amount (expressed as a multiple of $1,000) of notes equal to
such Unutilized Net Cash Proceeds, at a purchase price in cash equal to 100% of
the principal amount thereof, plus accrued and unpaid interest thereon, if any,
to the Purchase Date; provided, however, that the Offer to Purchase may be
deferred until there are aggregate Unutilized Net Cash Proceeds equal to or in
excess of $10.0 million, at which time the entire amount of such Unutilized Net
Cash Proceeds, and not just the amount in excess of $10.0 million, shall be
applied as required pursuant to this paragraph.
With respect to any Offer to Purchase effected pursuant to this
covenant, among the notes, to the extent the aggregate principal amount of notes
tendered pursuant to such Offer to Purchase exceeds the Unutilized Net Cash
Proceeds to be applied to the repurchase thereof, such notes shall be purchased
pro rata based on the aggregate principal amount of such notes tendered by each
holder. To the extent the Unutilized Net Cash Proceeds exceed the aggregate
amount of notes tendered by the holders pursuant to such Offer to Purchase,
General Chemical may retain and utilize any portion of the Unutilized Net Cash
Proceeds not applied to repurchase the notes for any purpose consistent with the
other terms of the indenture.
In the event that General Chemical makes an Offer to Purchase the Notes,
General Chemical shall comply with any applicable securities laws and
regulations, including any applicable requirements of Section 14(e) of, and Rule
14e-1 under, the Exchange Act, and any violation of the provisions of the
Indenture relating to such Offer to Purchase occurring as a result of such
compliance shall not be deemed an Event of Default or an event that with the
passing of time or giving of notice, or both, would constitute an Event of
Default.
Each holder shall be entitled to tender all or any portion of the notes
owned by such holder pursuant to the Offer to Purchase, subject to the
requirement that any portion of a note tendered must be tendered in an integral
multiple of $1,000 principal amount and subject to any proration among tendering
holders as described above.
TRANSACTIONS WITH AFFILIATES.
General Chemical will not, and will not cause or permit any Restricted
Subsidiary to, directly or indirectly, conduct any business or enter into any
transaction (or series of related transactions) with or for the benefit of any
of the respective Affiliates of GCG or General Chemical (each an 'Affiliate
Transaction'), unless:
(1) such Affiliate Transaction is on terms, taken as a whole, which are no
less favorable to General Chemical or such Restricted Subsidiary, as the
case may be, than would be available at the time in a comparable
transaction with an unaffiliated third party;
(2) if such Affiliate Transaction or series of related Affiliate Transactions
(other than any such Affiliate Transactions between General Chemical or a
Restricted Subsidiary in the ordinary course of business) involves
aggregate payments or other consideration having a Fair Market Value in
excess of $5.0 million, such Affiliate Transaction is in writing and a
majority of the members of the Board of Directors of General Chemical or
GCG that are disinterested with respect to such Affiliate Transaction
shall have approved such Affiliate Transaction and determined that such
Affiliate Transaction complies with the foregoing provisions; and
(3) if such Affiliate Transaction or series of related Affiliate Transactions
involves aggregate payments or other consideration having a Fair Market
Value in excess of $10.0 million, General Chemical
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shall have obtained a written opinion from an Independent Financial
Advisor (which is delivered to the trustee) stating that the terms of such
Affiliate Transaction are fair, from a financial point of view, to General
Chemical or the Restricted Subsidiary involved in such Affiliate
Transaction, as the case may be.
Notwithstanding the foregoing, the restrictions set forth in this
covenant shall not apply to:
(1) any employment or separation agreement, collective bargaining agreement,
benefit plan, program or arrangement, related trust agreement or any other
similar arrangement for or with any employee, officer or director entered
into by General Chemical or any Restricted Subsidiary in the ordinary
course of business, whether before or after the Issue Date;
(2) loans or other advances in an aggregate principal amount not to exceed
$1.0 million at any one time outstanding;
(3) transactions between or among General Chemical and/or the Restricted
Subsidiaries; provided that no Person that is an Affiliate of GCG or
General Chemical other than a Restricted Subsidiary directly or indirectly
has a beneficial Equity Interest in such Restricted Subsidiary;
(4) the payment of reasonable director compensation and expenses to Persons
who are not otherwise Affiliates of General Chemical;
(5) sales of soda ash, calcium chloride and other products to GenTek and its
Subsidiaries pursuant to existing agreements or in the ordinary course of
business on terms in aggregate no less favorable than would be available
in a comparable transaction at the time with an unaffiliated third party;
(6) payments made pursuant to the Refinancing Transactions or the Separation
Agreements or the Tax Sharing Agreement as such agreements are in effect
on the Issue Date;
(7) payments not to exceed $1.5 million per year (subject to increase as
provided for in the Management Agreement as in effect on the Issue Date)
pursuant to the Management Agreement as in effect on the Issue Date and
other payments of fees for services rendered from an Affiliate which have
been approved by a majority of the disinterested directors of GCG or
General Chemical;
(8) payments of indemnification or contribution made to any directors,
officers, employees or agents of General Chemical or any Restricted
Subsidiary as determined in good faith by the Board of Directors of
General Chemical or such Restricted Subsidiary;
(9) any dividend or distribution permitted pursuant to the covenant described
under ' -- Covenants -- Limitation on Restricted Payments';
(10) the payment of compensation, performance of indemnification or
contribution obligations, or any issuance, grant or award of stock,
options, other equity-related interests or other securities, to employees,
officers or directors in the ordinary course of business;
(11) any transaction in the ordinary course of business between General
Chemical and any Restricted Subsidiary and any Affiliate that is a joint
venture or similar entity (including a Supply Partnership and Mineral
Agreement) in which General Chemical and/or a Restricted Subsidiary has an
Investment and which is primarily engaged in a Related Business, provided
that no Person that is an Affiliate of GCG or General Chemical (other than
a Restricted Subsidiary) directly or indirectly has a beneficial interest
in any Equity Interests in such joint venture or similar entity; and
(12) Permitted Partnership Transactions.
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LIMITATION ON SENIOR SUBORDINATED INDEBTEDNESS.
General Chemical will not, directly or indirectly, Incur any
Indebtedness that by its terms would expressly rank senior in right of payment
to the notes and expressly rank subordinate in right of payment to any other
Indebtedness of General Chemical.
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES.
General Chemical will not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause to exist or
become effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(A) pay dividends or make any other distributions to General Chemical or any
other Restricted Subsidiary on its Equity Interests or with respect to any
other interest or participation in, or measured by, its profits, or pay any
Indebtedness owed to General Chemical or any other Restricted Subsidiary;
(B) make loans or advances to, or guaranty any Indebtedness or other
obligations of, General Chemical or any other Restricted Subsidiary; or
(C) transfer any of its properties or assets to General Chemical or any other
Restricted Subsidiary, except for such encumbrances or restrictions
existing under or by reason of:
(1) the Credit Facility as in effect on the Issue Date and any
amendments, restatements, renewals, replacements or refinancings
thereof; provided, however, that any such amendment, restatement,
renewal, replacement or refinancing is not materially more
restrictive in the aggregate with respect to such encumbrances or
restrictions than those contained in the Credit Facility on the Issue
Date, as determined by the Board of Directors of General Chemical;
(2) applicable law;
(3) any instrument governing Indebtedness or Equity Interests of an
Acquired Person acquired by General Chemical or any Restricted
Subsidiary as in effect at the time of such acquisition (except to
the extent any such Indebtedness or Equity Interests were Incurred by
such Acquired Person in connection with, as a result of or in
contemplation of such acquisition); provided, however, that such
encumbrances and restrictions are not applicable to any Restricted
Subsidiary, or the properties or assets of any Restricted Subsidiary,
other than the Acquired Person;
(4) (A) non-assignment provisions that restrict in a customary manner
the subletting, assignment or transfer of any property or asset
that is subject to a lease, license or similar contract, or the
assignment or transfer of any lease, license or other contract;
(B) customary provisions restricting dispositions of real property
interests set forth in any easement or similar agreements of
General Chemical or any Restricted Subsidiary; or
(C) restrictions on cash or other deposits or net worth imposed by
customers under agreements entered into in the ordinary course
of business;
(5) Purchase Money Indebtedness or Capital Lease Obligations permitted
under the covenants described under ' -- Limitation on Incurrence of
Indebtedness and Preferred Equity Interests' and ' -- Limitation on
Liens' that only imposes encumbrances and restrictions on the
property so acquired;
(6) any agreement for the sale or disposition of the Equity Interests or
assets of any Restricted Subsidiary; provided, however, that such
encumbrances and restrictions described in this clause (6) are only
applicable to such Restricted Subsidiary or assets, as applicable,
and any
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such sale or disposition is made in compliance with the covenant
'Disposition of Proceeds of Asset Sales' above to the extent
applicable thereto;
(7) Permitted Refinancing Indebtedness permitted under clause (4) of the
second paragraph of 'Limitation on Incurrence of Indebtedness and
Preferred Equity Interests' above; provided, however, that such
encumbrances and restrictions contained in the agreements governing
such Indebtedness are not materially more restrictive in the
aggregate than those contained in the agreements governing the
Indebtedness being refinanced immediately prior to such refinancing,
as determined by the Board of Directors of General Chemical;
(8) the indenture or contained in any other indenture governing debt
securities that are not materially more restrictive than those
contained in the indenture, as determined by the Board of Directors
of General Chemical; or
(9) customary restrictions contained in Indebtedness of a Restricted
Subsidiary which is permitted to be Incurred under the indenture.
OWNERSHIP OF GCSAP.
General Chemical will at all times maintain direct or indirect record
and beneficial ownership of not less than 51% of the Equity Interests and will
at all times remain as the Managing General Partner of GCSAP with rights and
duties under the GCSAP Partnership Agreement that are not materially adverse in
any respect from those in effect on the Issue Date from the perspective of
holders. For so long as this covenant is complied with, GCSAP will be deemed a
Subsidiary of General Chemical for all purposes of the indenture.
LIMITATION ON LINES OF BUSINESS.
General Chemical will not, and will not cause or permit any Restricted
Subsidiary, directly or indirectly, to, engage in any business other than a
Related Business.
DESIGNATION OF UNRESTRICTED SUBSIDIARIES.
General Chemical may make a Designation only if:
(1) no Default shall have occurred and be continuing at the time of or after
giving effect to such Designation;
(2) at the time of and after giving effect to such Designation, General
Chemical could Incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) under the Consolidated Coverage Ratio of the first paragraph
of 'Limitation on Incurrence of Indebtedness and Preferred Equity
Interests' above; and
(3) General Chemical would be permitted to make an Investment (other than a
Permitted Investment) at the time of Designation (assuming the
effectiveness of such Designation) pursuant to the first paragraph of
'Limitation on Restricted Payments' above in an amount equal to the
Designation Amount.
Neither General Chemical nor any Restricted Subsidiary shall at any
time:
(A) provide credit support for, subject any of its property or assets (other
than the Equity Interests of any Unrestricted Subsidiary) to the
satisfaction of, or guaranty, any Indebtedness of any Unrestricted
Subsidiary (including any undertaking, agreement or instrument evidencing
such Indebtedness);
(B) be directly or indirectly liable for any Indebtedness of any Unrestricted
Subsidiary; or
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(C) be directly or indirectly liable for any Indebtedness which provides that
the holder thereof may (upon notice, lapse of time or both) declare a
default thereon or cause the payment thereof to be accelerated or payable
prior to its final scheduled maturity upon the occurrence of a default with
respect to any Indebtedness of any Unrestricted Subsidiary,
except for any nonrecourse guaranty given solely to support the pledge by
General Chemical or any Restricted Subsidiary of the capital stock of any
Unrestricted Subsidiary. All Subsidiaries of Unrestricted Subsidiaries shall be
automatically deemed to be Unrestricted Subsidiaries.
General Chemical may make a Revocation if:
(1) no Default shall have occurred and be continuing at the time of and after
giving effect to such Revocation;
(2) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding
immediately following such Revocation would, if Incurred at such time, have
been permitted to be Incurred for all purposes of the indenture; and
(3) any transaction (or series of related transactions) between such Subsidiary
and any of its Affiliates that occurred while such Subsidiary was an
Unrestricted Subsidiary would be permitted by 'Transactions with
Affiliates' below as if such transaction (or series of related
transactions) had occurred at the time of such Revocation.
All Designations and Revocations must be evidenced by resolutions of the
Board of Directors of General Chemical, delivered to the trustee certifying
compliance with the foregoing provisions.
PROVISION OF FINANCIAL INFORMATION.
Whether or not General Chemical is subject to Section 13(a) or 15(d) of
the Exchange Act, or any successor provision thereto, General Chemical shall
file with the Commission if permitted by Commission practice and applicable law
and regulations, so long as any Notes remain outstanding, the annual reports,
quarterly reports and other documents which General Chemical would have been
required to file with the Commission pursuant to such Section 13(a) or
15(d) (each, an 'Exchange Act Report') or any successor provision thereto if
General Chemical were so subject, such documents to be filed with the Commission
on or prior to the respective dates (the 'Required Filing Dates') by which
General Chemical would have been required so to file such documents if General
Chemical were so subject. General Chemical shall also in any event:
(A) within 15 days of each Required Filing Date (whether or not permitted or
required to be filed with the Commission):
(1) transmit (or cause to be transmitted) by mail to all holders, as
their names and addresses appear in the note register, without cost
to such holders; and
(2) file with the trustee, copies of the annual reports, quarterly
reports and other documents (without exhibits) which General Chemical
is required to file with the Commission pursuant to the preceding
sentence, or, if such filing is not so permitted (or, prior to the
consummation of the Exchange Offer, when General Chemical is not
subject to Section 13(d) or 15(d) of the Exchange Act), information
and data of a similar nature; and
(B) if, notwithstanding the preceding sentence, filing such documents by
General Chemical with the Commission is not permitted by Commission
practice or applicable law or regulations, promptly upon written request
supply copies of such documents to any holder.
In addition, for so long as any notes remain outstanding, until the
completion of the exchange offer or the effectiveness of a shelf registration
statement, as the case may be, General Chemical will furnish to the holders and
to securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act, and, to any
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beneficial holder of notes, if not obtainable from the Commission, information
of the type that would be filed with the Commission pursuant to the foregoing
provisions, upon the request of any such holder.
MERGER AND CONSOLIDATION
General Chemical shall not consolidate with or merge with or into
(whether or not General Chemical is the Surviving Person) any other Person and
General Chemical shall not and shall not cause or permit any Restricted
Subsidiary to, sell, convey, assign, transfer, lease or otherwise dispose of all
or substantially all of General Chemical's and the Restricted Subsidiaries'
properties and assets (determined on a consolidated basis for General Chemical
and the Restricted Subsidiaries) to any Person in a single transaction or series
of related transactions, unless:
(1) either:
(a) General Chemical shall be the Surviving Person; or
(b) the Surviving Person (if other than General Chemical) shall be a
corporation organized and validly existing under the laws of the
United States of America or any State thereof or the District of
Columbia, and shall, in any such case, expressly assume by a
supplemental indenture, the due and punctual payment of the principal
of, premium, if any, and interest on all the notes and the
performance and observance of every covenant of the indenture and the
registration rights agreement to be performed or observed on the part
of General Chemical;
(2) immediately thereafter, no Default shall have occurred and be continuing;
(3) immediately after giving effect to any such transaction including the
Incurrence by General Chemical or any Restricted Subsidiary, directly or
indirectly, of additional Indebtedness (and treating any Indebtedness not
previously an obligation of General Chemical or any Restricted Subsidiary
in connection with or as a result of such transaction as having been
Incurred at the time of such transaction), the Surviving Person could
Incur, on a pro forma basis after giving effect to such transaction as if
it had occurred at the beginning of the four quarter period immediately
preceding such transaction for which consolidated financial statements of
General Chemical are available, at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) under the Consolidated Coverage Ratio
of the first paragraph of the covenant described under 'Limitation on
Incurrence of Indebtedness and Preferred Equity Interests' above; and
(4) General Chemical will have delivered to the trustee an officers'
certificate and a written opinion from legal counsel (including an employee
of or counsel to General Chemical or the trustee) who is reasonably
acceptable to the trustee, each stating that such consolidation, merger or
transfer and such supplemental indenture (if any) comply with the
indenture.
Notwithstanding the foregoing clause (3) of the immediately preceding
paragraph, any Restricted Subsidiary may consolidate with, merge into or
transfer all or part of its properties and assets to General Chemical.
For purposes of the foregoing, the transfer (by lease, assignment, sale
or otherwise, in a single transaction or series of transactions) of all or
substantially all the properties and assets of one or more Restricted
Subsidiaries the Equity Interests of which constitute all or substantially all
the properties and assets of General Chemical shall be deemed to be the transfer
of all or substantially all the properties and assets of General Chemical.
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the immediately preceding paragraphs in
which General Chemical is not the Surviving Person and the Surviving Person is
to assume all the Obligations of General Chemical under the notes, the indenture
and the registration rights agreement pursuant to a supplemental indenture, such
Surviving Person shall succeed to, and be substituted for, and may exercise
every right and power of, General
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Chemical and General Chemical shall be discharged from its Obligations under the
indenture and the notes.
EVENTS OF DEFAULT
The occurrence of any of the following will be defined as an 'Event of
Default' under the indenture:
(a) failure to pay principal of (or premium, if any, on) any note when due
(whether or not prohibited by the provisions of the indenture described
under 'Subordination' above);
(b) failure to pay any interest on any note when due, continued for 30 days or
more (whether or not prohibited by the provisions of the indenture
described under 'Subordination' above);
(c) default in the payment of principal of or interest on any note required to
be purchased pursuant to any Offer to Purchase required by the Indenture
when due and payable or failure to pay on the Purchase Date the Purchase
Price for any note validly tendered pursuant to any Offer to Purchase
(whether or not prohibited by the provisions of the indenture described
under 'Subordination' above);
(d) failure to perform or comply with any of the provisions described under
' -- Covenants -- Ownership of GCSAP' and 'Merger and Consolidation' above;
(e) failure to perform any other covenant or agreement of General Chemical
under the indenture or in the notes continued for 45 days or more after
written notice to General Chemical by the trustee or holders of at least
25% in aggregate principal amount of the outstanding notes;
(f) default or defaults under the terms of one or more instruments evidencing
or securing Indebtedness of General Chemical or any of the Restricted
Subsidiaries having an outstanding principal amount of $5.0 million or more
individually or in the aggregate that have resulted in the acceleration of
the payment of such Indebtedness or failure by General Chemical or any of
the Restricted Subsidiaries to pay principal when due at the stated
maturity of any such Indebtedness;
(g) the rendering of a final judgment or judgments (not subject to appeal)
against General Chemical or any of the Restricted Subsidiaries in an amount
of $5.0 million or more (net of any amounts covered by reputable and
creditworthy insurance companies) which remain undischarged or unstayed for
a period of 60 days after the date on which the right to appeal has
expired; or
(h) certain events of bankruptcy, insolvency or reorganization affecting
General Chemical or any of the Restricted Subsidiaries. Subject to the
provisions of the indenture relating to the duties of the trustee, in case
an Event of Default shall occur and be continuing, the trustee will be
under no obligation to exercise any of its rights or powers under the
indenture at the request or direction of any of the holders, unless such
holders shall have offered to the trustee reasonable indemnity. Subject to
such provisions for the indemnification of the trustee, the holders of a
majority in aggregate principal amount of the outstanding notes will have
the right to direct the time, method and place of conducting any proceeding
for any remedy available to the trustee, or exercising any trust or power
conferred on such trustee.
If an Event of Default with respect to the notes (other than an Event of
Default with respect to General Chemical described in clause (h) of the
preceding paragraph) occurs and is continuing, the trustee or the holders of at
least 25% in aggregate principal amount of the outstanding notes, by notice in
writing to General Chemical, may declare the unpaid principal of (and premium,
if any) and accrued interest to the date of acceleration on all the outstanding
notes to be due and payable immediately and, upon any such declaration, such
principal amount (and premium, if any) and accrued interest, notwithstanding
anything contained in the indenture or the notes to the contrary will become
immediately due and payable; provided, however, that so long as the Credit
Facility shall be in full force and effect, if an Event of Default shall have
occurred and be continuing (other than an Event of Default with respect to
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General Chemical described in clause (h) of the preceding paragraph), the notes
shall not become due and payable until the earlier to occur of:
(a) five Business Days following delivery of written notice of such
acceleration of the notes to the agent under the Credit Facility;
and
(b) the acceleration of any Indebtedness under the Credit Facility. If an Event
or Default specified in clause (h) of the preceding paragraph with respect
to General Chemical occurs under the indenture, the notes will become
immediately due and payable without any declaration or other act on the
part of the trustee or any holder.
Notwithstanding the foregoing, in the event of a declaration of
acceleration in respect of the notes because an Event of Default specified in
clause (f) above shall have occurred and be continuing, such declaration of
acceleration shall be automatically annulled if the Indebtedness that is the
subject of such Event of Default has been discharged or paid or such Event of
Default shall have been cured or waived by the holders of such Indebtedness and
written notice of such discharge, cure or waiver, as the case may be, shall have
been given to the trustee by General Chemical or by the requisite holders of
such Indebtedness or a trustee, fiduciary or agent for such holders, within 60
days after such declaration of acceleration in respect of the notes and:
(a) no Person shall have commenced judicial proceedings to foreclose upon
assets of General Chemical or any of the Restricted Subsidiaries or shall
have exercised any right under applicable law or applicable security
documents to take ownership of any of such assets in lieu of foreclosure;
and
(b) no other Event of Default with respect to the notes shall have occurred
which has not been cured or waived during such 60-day period.
Any such declaration with respect to the notes may be rescinded by the
holders of a majority in aggregate principal amount of the outstanding notes
upon the conditions provided in the indenture. For information as to waiver of
defaults, see 'Modification and Waiver' below. The indenture provides that the
trustee shall, within 30 days after the occurrence of any Default with respect
to the notes outstanding, give the holders thereof notice of all uncured
Defaults thereunder known to it. Except in the case of a Default in the payment
of principal of, or premium (if any) or interest on, any note, the trustee may
withhold notice if and so long as a committee of its trust officers in good
faith determines that withholding notice is in the interests of the holders.
No holder will have any right to institute any proceeding with respect
to the indenture or for any remedy thereunder, unless:
(1) such holder shall have previously given to the trustee written notice of a
continuing Event of Default thereunder,
(2) the holders of at least 25% of the aggregate principal amount of the
outstanding notes shall have made written request, and offered reasonable
indemnity, to the trustee to institute such proceeding as the trustee, and
(3) the trustee shall have not have received from the holders of a majority in
aggregate principal amount of such outstanding notes a direction
inconsistent with such request and shall have failed to institute such
proceeding within 60 days.
However, such limitations do not apply to a suit instituted by a holder for
enforcement of payment of the principal of and premium, if any, or interest on
such note on or after the respective due dates expressed in such note.
General Chemical will be required to furnish to the trustee annually a
statement as to the performance by it of certain of its obligations under the
indenture and as to any default in such performance.
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NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, INCORPORATOR AND
STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of General
Chemical or any of its Affiliates, as such, shall have any liability for any
obligations of General Chemical or any of its Affiliates under the notes or the
indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each holder of notes by accepting a note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the notes.
SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE
General Chemical may terminate its substantive obligations in respect of
the notes (subject to the subordination provisions) by delivering all
outstanding notes to the trustee for cancellation and paying all sums payable by
it on account of principal of, premium, if any, and interest on all notes or
otherwise. In addition to the foregoing, General Chemical may, provided that no
Default has occurred and is continuing or would arise therefrom (or, with
respect to a Default with respect to General Chemical specified in clause (h) of
'Events of Default' above, occurs at any time on or prior to the 91st calendar
day after the date of such deposit (it being understood that this condition
shall not be deemed satisfied until after such 91st day)) under the indenture
and provided that no default under any Senior Indebtedness would result
therefrom, terminate its substantive obligations in respect of the notes (except
for its obligations to pay the principal of (and premium, if any, on) and the
interest on the notes) by:
(1) depositing with the trustee, under the terms of an irrevocable trust
agreement, money or United States Government Obligations sufficient
(without reinvestment) to pay all remaining Indebtedness on such notes to
redemption or maturity, as the case may be;
(2) delivering to the trustee either an opinion of counsel or a ruling directed
to the trustee from the Internal Revenue Service to the effect that the
holders will not recognize income, gain or loss for Federal income tax
purposes as a result of such deposit and termination of obligations;
(3) delivering to the trustee an opinion of counsel to the effect that General
Chemical's exercise of its option under this paragraph will not result in
any of General Chemical, the trustee or the trust created by General
Chemical's deposit of funds pursuant to this provision becoming or being
deemed to be an 'investment company' under the Investment Company Act of
1940; and
(4) complying with certain other requirements set forth in the indenture.
In addition, General Chemical may, provided that no Default has occurred
and is continuing or would arise therefrom (or, with respect to a Default with
respect to General Chemical specified in clause (h) of 'Events of Default'
above, occurs at any time on or prior to the 91st calendar day after the date of
such deposit (it being understood that this condition shall not be deemed
satisfied until after such 91st day)) under the indenture and provided that no
default under any Senior Indebtedness would result therefrom, terminate all of
its substantive obligations in respect of the notes (including its obligations
to pay the principal of (and premium, if any, on) and interest on the notes) by:
(1) depositing with the trustee, under the terms of an irrevocable trust
agreement, money or United States Government Obligations sufficient
(without reinvestment) to pay all remaining Indebtedness on the notes to
redemption or maturity, as the case may be;
(2) delivering to the trustee either a ruling directed to the trustee from the
Internal Revenue Service to the effect that the holders will not recognize
income, gain or loss for Federal income tax purposes as a result of such
deposit and termination of obligations or an opinion of counsel addressed
to the trustee based upon such a ruling or based on a change in the
applicable Federal tax law since the date of the indenture, to such effect;
(3) delivering to the trustee an opinion of counsel to the effect that General
Chemical's exercise of its option under this paragraph will not result in
any of General Chemical, the trustee or the trust
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created by General Chemical's deposit of funds pursuant to this provision
becoming or being deemed to be an 'investment company' under the Investment
Act; and
(4) complying with certain other requirements set forth in the indenture.
General Chemical may make an irrevocable deposit pursuant to this
provision only if at such time it is not prohibited from doing so under the
subordination provisions of the indenture or certain covenants in the Senior
Indebtedness and General Chemical has delivered to the trustee and any paying
agent an officers' certificate to that effect.
An opinion of counsel delivered pursuant to this provision must be a
written opinion from legal counsel who is reasonably acceptable to the trustee.
The counsel may be an employee of or counsel to General Chemical or the trustee.
GOVERNING LAW
The indenture and the notes will be governed by the laws of the State of
New York without regard to principles of conflicts of laws.
MODIFICATION AND WAIVER
Modifications and amendments of the indenture may be made by General
Chemical and the trustee with the consent of the holders of a majority in
aggregate principal amount of the outstanding notes (including consents obtained
in connection with a tender offer or exchange offer for the notes); provided,
however, that no such modification or amendment to the indenture may, without
the consent of the holder of each note affected thereby,
(a) change the maturity of the principal of or any installment of interest on
any such note or alter the optional redemption or repurchase provisions of
any such note or the indenture in a manner adverse to the holders of the
notes;
(b) reduce the principal amount of (or the premium) of any such note;
(c) reduce the rate of or extend the time for payment of interest on any such
note;
(d) change the place or currency of payment of principal of (or premium) or
interest on any such note;
(e) modify any provisions of the indenture relating to the waiver of past
defaults (other than to add sections of the indenture or the notes subject
thereto) or the right of the holders of notes to institute suit for the
enforcement of any payment on or with respect to any such note or the
modification and amendment provisions of the indenture and the notes (other
than to add sections of the indenture or the notes which may not be
amended, supplemented or waived without the consent of each holder therein
affected);
(f) reduce the percentage of the principal amount of outstanding notes
necessary for amendment to or waiver of compliance with any provision of
the indenture or the notes or for waiver of any Default in respect
thereof;
(g) waive a default in the payment of principal of, interest on, or redemption
payment with respect to, the notes (except a rescission of acceleration of
the notes by the holders as provided in the indenture and a waiver of the
payment default that resulted from such acceleration);
(h) modify the ranking or priority of any note or modify the definition of
Senior Indebtedness or amend or modify the subordination provisions of the
indenture, in any case in any manner adverse to the holders; or
(i) modify the provisions of any covenant (or the related definitions) in the
indenture requiring General Chemical to make an Offer to Purchase
following an event or circumstance which may give rise to
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the requirement to make an Offer to Purchase in a manner materially
adverse to the holders affected thereby otherwise than in accordance with
the indenture.
The holders of a majority in aggregate principal amount of the
outstanding notes, on behalf of all holders, may waive compliance by General
Chemical with certain restrictive provisions of the indenture. Subject to
certain rights of the trustee, as provided in the indenture, the holders of a
majority in aggregate principal amount of the notes, on behalf of all holders,
may waive any past default under the indenture (including any such waiver
obtained in connection with a tender offer or exchange offer for the notes),
except a default in the payment of principal, premium or interest (other than a
payment default resulting from an acceleration of the notes rescinded as
provided in the indenture) or a default arising from failure to purchase any
notes tendered pursuant to an Offer to Purchase, or a default in respect of a
provision that under the indenture cannot be modified or amended without the
consent of each affected holder.
THE TRUSTEE
Except during the continuance of a Default, the trustee will perform
only such duties as are specifically set forth in the indenture. During the
existence of a Default, the trustee will exercise such rights and powers vested
in it under the Indenture and use the same degree of care and skill in its
exercise as a prudent person would exercise under the circumstances in the
conduct of such person's own affairs.
The indenture and provisions of the Trust Indenture Act contain
limitations on the rights of the trustee, should it become a creditor of General
Chemical or any other obligor upon the notes, to obtain payment of claims in
certain cases or to realize on certain property received by it in respect of any
such claim as security or otherwise. The trustee is permitted to engage in other
transactions with General Chemical or an Affiliate of General Chemical. However,
if the trustee acquires any conflicting interest, as defined in the indenture or
in the Trust Indenture Act, it must eliminate such conflict or resign.
CERTAIN DEFINITIONS
Set forth below are defined terms used in the indenture. Please refer to
the indenture for a full definition of all such terms, as well as other terms
used in this summary for which no definition is provided.
'ACQUIRED INDEBTEDNESS' means Indebtedness of a Person
(1) assumed in connection with an Acquisition from such Person or
(2) existing at the time such Person becomes a Restricted Subsidiary or is
merged or consolidated with or into General Chemical or any Restricted
Subsidiary;
provided that such Indebtedness was not Incurred by such Person in connection
with or in contemplation of such Acquisition, merger or consolidation or such
Person becoming a Restricted Subsidiary.
'ACQUIRED PERSON' means, with respect to any specified Person, any other
Person which merges with or into or becomes a Subsidiary of such specified
Person.
'ACQUISITION' means
(1) any capital contribution (by means of transfers of cash or other property
to others or payments for property or services for the account or use of
others, or otherwise) by General Chemical or any Restricted Subsidiary to
any other Person, or any acquisition or purchase of Equity Interests of any
other Person by General Chemical or any Restricted Subsidiary, in either
case pursuant to which such Person shall become a Restricted Subsidiary or
shall be consolidated with or merged into General Chemical or any
Restricted Subsidiary or
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(2) any acquisition by General Chemical or any Restricted Subsidiary of the
assets of any Person which constitute substantially all of an operating
unit or line of business of such Person or which is otherwise outside of
the ordinary course of business.
'ADDITIONAL INTEREST' means the liquidated damages payable upon a
registration default under the Registration Rights Agreement.
'AFFILIATE' of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, 'control'
(including, with correlative meanings, the terms 'controlling,' 'controlled by'
and 'under common control with'), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided, however,
that
(1) beneficial ownership of 10.0% or more of the then outstanding Equity
Interests of a Person shall be deemed to be control for purposes of
compliance with the covenant described under 'Covenants -- Transactions
with Affiliates'; and
(2) no individual, other than a director of General Chemical or GCG or an
officer of General Chemical with a policy-making function, shall be deemed
an Affiliate of General Chemical or any of its Subsidiaries, solely by
reason of such individual's employment, position or responsibilities by or
with respect to General Chemical or any of its Subsidiaries;
provided, further, no Person holding Equity Interests in GCSAP or in any Person
in which GCSAP holds any Equity Interest will be considered to be an Affiliate
of General Chemical solely by reason of directly or indirectly owning such
Equity Interests for so long as GCSAP shall be a Restricted Subsidiary.
'ALCAD PARTNERSHIP' means the partnership between Church & Dwight Co.,
Inc. and GCSAP pursuant to the Partnership Agreement dated December 29, 1981, as
the same has been and may after the Issue Date be amended, restated or
supplemented from time to time.
'ASSET SALE' means any direct or indirect sale, conveyance, transfer,
lease (that has the effect of a disposition) or other disposition (including,
without limitation, any merger, consolidation or sale-leaseback transaction) to
any Person other than General Chemical or a Restricted Subsidiary, in one
transaction or a series of related transactions, of:
(1) any Equity Interest of any Restricted Subsidiary;
(2) any material license, franchise or other authorization of General Chemical
or any Restricted Subsidiary;
(3) any assets of General Chemical or any Restricted Subsidiary which
constitute substantially all of an operating unit or line of business of
General Chemical or any Restricted Subsidiary; or
(4) any other property or asset of General Chemical or any Restricted
Subsidiary outside of the ordinary course of business (including the
receipt of proceeds paid on account of the loss of or damage to any
property or asset and awards of compensation for any asset taken by
condemnation, eminent domain or similar proceedings). For the purposes of
this definition, the term 'Asset Sale' shall not include:
(a) any transaction consummated in compliance with 'Merger and
Consolidation' above and the creation of any Lien not prohibited by
the covenant described under ' -- Covenants -- Limitation on Liens'
above; provided, however, that any transaction consummated in
compliance with 'Merger and Consolidation' above involving a sale,
conveyance, assignment, transfer, lease or other disposal of less
than all of the properties or assets of General Chemical shall be
deemed to be an Asset Sale with respect to the properties or assets
of General Chemical and the Restricted Subsidiaries that are not so
sold, conveyed, assigned, transferred, leased or otherwise disposed
of in such transaction;
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(b) sales of property or equipment that has become worn out, obsolete or
damaged or otherwise unsuitable for use in connection with the
business of General Chemical or any Restricted Subsidiary;
(c) any transaction consummated in compliance with the covenant
described under ' -- Covenants -- Limitation on Restricted Payments'
above;
(d) any disposition or series of related dispositions for aggregate
consideration not to exceed $1,000,000;
(e) sales of accounts receivable for cash for financing purposes;
(f) any sale, conveyance, transfer or other disposition of leases,
licenses or other interests in mineral rights in exchange for other
leases, licenses or interests in mineral rights to be used by
General Chemical and the Restricted Subsidiaries and having an
equivalent Fair Market Value (taking into account the value to
General Chemical or any Restricted Subsidiary of the location and
quality of the new mineral rights relative to the existing mineral
rights); and
(g) any sale, conveyance, transfer, lease or other disposition
constituting a Permitted Investment in a Supply Joint Venture.
'CAPITAL LEASE OBLIGATION' means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be so required to be capitalized on the balance sheet in
accordance with GAAP.
'CASH EQUIVALENTS' means:
(1) U.S. dollars and any other currency that is convertible into U.S. dollars
without legal restrictions and which is utilized by General Chemical or any
of the Restricted Subsidiaries in the ordinary course of its business;
(2) securities issued or directly and fully guaranteed or insured by the U.S.
government or any agency or instrumentality thereof having maturities of
not more than 365 days from the date of acquisition;
(3) certificates of deposit and time deposits with maturities of 365 days or
less from the date of acquisition, bankers' acceptances with maturities not
exceeding 365 days and overnight bank deposits, in each case with any
commercial bank having capital and surplus in excess of $500.0 million (or
the foreign currency equivalent thereof);
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3) above
entered into with any financial institution meeting the qualifications
specified in clause (3) above; and
(5) commercial paper rated P-1, A-1 or the equivalent thereof by Moody's
Investors Service, Inc. or Standard & Poor's Corporation, respectively, and
in each case maturing within 365 days after the date of acquisition.
'CHANGE OF CONTROL' means the occurrence of any of the following:
(1) any 'person' (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than one or more Permitted Holders in the aggregate,
is or becomes the 'beneficial owner' (as defined in Rules 13d-3 and 13d-5
under the Exchange Act), directly or indirectly, of a majority of the total
voting power of the Voting Equity Interests of General Chemical (including
any successor thereto under the Indenture);
(2) the sale, lease, transfer, conveyance or other disposition (other than by
way of merger or consolidation involving General Chemical, in one or a
series of related transactions, of all or substantially all of the assets
of General Chemical and its Subsidiaries taken as a whole to any 'person'
(as such term is used in Section 13(d)(3) of the Exchange Act) other than
one or more Permitted Holders;
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(3) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of General
Chemical (together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of General
Chemical was approved by a vote of 66 2/3% of the directors of General
Chemical then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved or approved by a vote of Permitted Holders who beneficially own,
directly or indirectly, a majority in the aggregate of the total voting
power of the Voting Equity Interests of General Chemical cease for any
reason to constitute a majority of the Board of Directors of General
Chemical then in office; or
(4) the adoption of a plan relating to the liquidation or dissolution of
General Chemical.
'CHANGE OF CONTROL DATE' means the date of an occurrence of a Change of
Control.
'CONSOLIDATED COVERAGE RATIO' as of any date of determination means the
ratio of (A) the aggregate amount of Consolidated EBITDA for the Four Quarter
Period to (B) Consolidated Interest Expense for such Four Quarter Period;
provided, however, that:
(1) if General Chemical or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such Four Quarter Period that remains
outstanding on such date of determination or if the transaction giving rise
to the need to calculate the Consolidated Coverage Ratio is an Incurrence
of Indebtedness, Consolidated EBITDA and Consolidated Interest Expense for
such Four Quarter Period shall be calculated after giving effect on a pro
forma basis to such Indebtedness as if such Indebtedness had been Incurred
on the first day of such Four Quarter Period (except that in making such
computation, the amount of Indebtedness under any revolving credit facility
outstanding on the date of such calculation shall be computed based on (A)
the average daily balance of such Indebtedness during such Four Quarter
Period or such shorter period for which such facility was outstanding or
(B) if such facility was created after the end of such Four Quarter Period,
the average daily balance of such Indebtedness during the period from the
date of creation of such facility to the date of such calculation) and the
discharge of any other Indebtedness repaid, repurchased or otherwise
discharged with the proceeds of such new Indebtedness as if such discharge
had occurred on the first day of such Four Quarter Period;
(2) if since the beginning of such Four Quarter Period General Chemical or any
Restricted Subsidiary shall have made any Asset Sale, the Consolidated
EBITDA for such Four Quarter Period shall be reduced by an amount equal to
the Consolidated EBITDA (if positive) directly attributable to the assets
that are the subject of such Asset Sale for such Four Quarter Period or
increased by an amount equal to the Consolidated EBITDA (if negative)
directly attributable thereto for such Four Quarter Period and Consolidated
Interest Expense for such Four Quarter Period shall be reduced by an amount
equal to the Consolidated Interest Expense directly attributable to any
Indebtedness of General Chemical or any Restricted Subsidiary repaid,
repurchased or otherwise discharged with respect to General Chemical and
its continuing Restricted Subsidiaries in connection with such Asset Sale
for such Four Quarter Period (or, if the Equity Interests of any Restricted
Subsidiary are sold, the Consolidated Interest Expense for such Four
Quarter Period directly attributable to the Indebtedness of such Restricted
Subsidiary to the extent General Chemical and its continuing Restricted
Subsidiaries are no longer liable for such Indebtedness after such sale);
(3) if since the beginning of such Four Quarter Period General Chemical or any
Restricted Subsidiary (by merger or otherwise) shall have made an
Acquisition of assets, including any Acquisition occurring in connection
with a transaction causing a calculation to be made hereunder, Consolidated
EBITDA and Consolidated Interest Expense for such Four Quarter Period shall
be calculated after giving pro forma effect thereto (including the
Incurrence of any Indebtedness) as if such Acquisition occurred on the
first day of such Four Quarter Period; and
(4) if since the beginning of such Four Quarter Period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into
General Chemical or any Restricted Subsidiary since the beginning of such
Four Quarter Period) shall have made any Asset Sale or any Acquisition
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that would have required an adjustment pursuant to clause (2) or (3) above
if made by General Chemical or a Restricted Subsidiary during such Four
Quarter Period, Consolidated EBITDA and Consolidated Interest Expense for
such Four Quarter Period shall be calculated after giving pro forma effect
thereto as if such Asset Sale or Acquisition occurred on, with respect to
any Acquisition, the first day of such Four Quarter Period and, with
respect to any Asset Sale, the day prior to the first day of such Four
Quarter Period. For purposes of this definition, whenever pro forma effect
is to be given to an Acquisition, the amount of income or earnings and any
cost savings relating thereto and the amount of Consolidated Interest
Expense associated with any Indebtedness Incurred in connection therewith,
the pro forma calculations shall be determined in accordance with
Regulation S-X under the Securities Act. If any Indebtedness bears a
floating rate of interest and is being given pro forma effect, the interest
expense on such Indebtedness shall be calculated as if the rate in effect
on the date of determination had been the applicable rate for the entire
period (taking into account any agreement under which Hedging Obligations
relating to interest are outstanding applicable to such Indebtedness. In
giving effect to any Indebtedness to be Incurred, if such Indebtedness
bears, at the option of General Chemical or a Restricted Subsidiary, a rate
of interest based on a prime or similar rate, a eurocurrency interbank
offered rate or other fixed or floating rate, the interest expense on such
Indebtedness shall be calculated by applying such optional rate as General
Chemical may designate. Interest on a Capital Lease Obligation shall be
deemed to accrue at an interest rate determined in good faith by a
responsible financial or accounting officer of General Chemical to be the
rate of interest implicit in such Capital Lease Obligation in accordance
with GAAP.
'CONSOLIDATED EBITDA' means, for any period, the Consolidated Net Income
for such period, minus (A) any non-cash item increasing Consolidated Net Income
during such period (other than any non-cash item arising from the reversal of an
accrual or reserve previously established in respect of a non-cash item), plus
(B) the following to the extent deducted in calculating such Consolidated Net
Income:
(1) Consolidated Income Tax Expense for such period;
(2) Consolidated Interest Expense for such period;
(3) depreciation expense for such period;
(4) amortization expense for such period (other than in respect of amortization
or writeoff of debt issuance costs to the extent not constituting
Consolidated Interest Expense); and
(5) all other non-cash items reducing Consolidated Net Income for such period
(other than any non-cash item requiring an accrual or a reserve for cash
disbursements in any future period); provided that, in determining
Consolidated EBITDA, there shall only be included that portion of the items
referred to in clause (A) or (B) related to, or arising in connection with,
any Person all of whose Equity Interests are not beneficially owned
directly or indirectly by General Chemical (a 'Specified Person') that is
proportionate to the amount of the net income (loss) of the Specified
Person included in Consolidated Net Income for such period.
'CONSOLIDATED INCOME TAX EXPENSE' means, with respect to General
Chemical for any period, the provision for federal, state, local and foreign
income taxes payable by General Chemical and the Restricted Subsidiaries for
such period as determined on a consolidated basis in accordance with GAAP.
'CONSOLIDATED INTEREST EXPENSE' means, with respect to General Chemical
for any period, without duplication, the sum of:
(1) the interest expense of General Chemical and the Restricted Subsidiaries
for such period as determined on a consolidated basis in accordance with
GAAP (excluding, except to the extent provided in clause (b) or (d) below,
amortization or writeoff of debt issuance costs), including, without
limitation:
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(a) any amortization of debt discount;
(b) the net cost under Hedging Obligations relating to interest
(including any amortization of discounts);
(c) the interest portion of any deferred payment obligation;
(d) all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing; and
(e) all capitalized interest and all accrued interest; and
(2) to the extent Incurred by General Chemical and the Restricted Subsidiaries
in such period but not included in such interest expense, without
duplication:
(x) the interest component of Capital Lease Obligations paid, accrued
and/or scheduled to be paid or accrued by General Chemical and the
Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP; and
(y) dividends and distributions paid, accrued and/or scheduled to be paid
or accrued in respect of Disqualified Equity Interests of General
Chemical or Preferred Equity Interests of any Restricted Subsidiary
(other than, in each case, (1) any such dividends or distributions in
Qualified Equity Interests of General Chemical or (2) any such
dividends or distributions paid or payable to General Chemical or a
Restricted Subsidiary) during such period as determined on a
consolidated basis in accordance with GAAP. In determining
Consolidated Interest Expense, there shall only be included that
portion of the items referred to in clause (1) or (2) related to, or
arising in connection with, any Specified Person that is
proportionate to the amount of the net income (loss) of the Specified
Person included in Consolidated Net Income for such period.
'CONSOLIDATED NET INCOME' means, for any period, the consolidated net
income (loss) of General Chemical and the Restricted Subsidiaries determined on
a consolidated basis in accordance with GAAP; provided, however, that there
shall be excluded from such Consolidated Net Income:
(1) any net income (loss) of any Person that is not a Restricted Subsidiary,
except that (A) subject to the limitations contained in clause (4) below,
General Chemical's equity in the net income of any such Person for such
period shall be included in such Consolidated Net Income up to the
aggregate amount of cash actually distributed by such Person during such
period to General Chemical or a Restricted Subsidiary as a dividend or
other distribution (subject, in the case of a dividend or other
distribution to a Restricted Subsidiary, to the limitations contained in
clause (3) below) and (B) General Chemical's equity in a net loss of any
such Person (other than an Unrestricted Subsidiary) for such period shall
be included in determining such Consolidated Net Income;
(2) for purposes of the covenant described under ' -- Covenants -- Limitation
on Restricted Payments,' any net income (loss) of any Person acquired by
General Chemical or a Restricted Subsidiary in a 'pooling of interests'
transaction for any period prior to the date of such acquisition;
(3) any net income (loss) of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions or loans or advances by
such Restricted Subsidiary, directly or indirectly, to General Chemical
except that (A) subject to the limitations contained in (4) below, General
Chemical's equity in the net income of any such Restricted Subsidiary for
such period shall be included in such Consolidated Net Income up to the
aggregate amount of cash that could have been distributed by such
Restricted Subsidiary during such period to General Chemical or a
Restricted Subsidiary as a dividend (subject, in the case of a dividend
that could have been made to another Restricted Subsidiary, to the
limitation contained in this clause (1)) and (B) General Chemical's equity
in a net loss of any such Restricted Subsidiary for such period shall be
included in determining such Consolidated Net Income;
(4) any gain or loss realized upon the sale or other disposition of any asset
of General Chemical or the Restricted Subsidiaries (including pursuant to
any sale/leaseback transaction) that is not sold or
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otherwise disposed of in the ordinary course of business and any gain or
loss realized upon the sale or other disposition of any Equity Interests of
any Person;
(5) the cumulative effect of a change in accounting principles;
(6) any item classified as an extraordinary, unusual or nonrecurring gain, loss
or charge, including, but not limited to, any such item related to, or
arising in connection with the spinoff or to any Asset Sale or Acquisition
by General Chemical or any Restricted Subsidiary after the Issue Date (in
each case on an after-tax basis);
(7) all deferred financing costs written off and premiums paid in connection
with any early extinguishment of Indebtedness; and
(8) any non-cash compensation charge arising from any grant of stock, stock
options or other equity-based awards.
'CONSOLIDATED TANGIBLE ASSETS' means, as of any date of determination,
the total assets, less goodwill and other intangibles shown on the balance sheet
of General Chemical and the Restricted Subsidiaries as of the most recent date
for which such a balance sheet is available, determined on a consolidated basis
in accordance with GAAP.
'CONSOLIDATION' means the consolidation of the accounts of each of the
Restricted Subsidiaries with those of General Chemical in accordance with GAAP
consistently applied; provided, however, that 'consolidation' will not include
consolidation of the accounts of any Unrestricted Subsidiary, but the interest
of General Chemical or any Restricted Subsidiary in an Unrestricted Subsidiary
will be accounted for as an investment. The term 'consolidated' has a
correlative meaning.
'CREDIT FACILITY' means the Credit Agreement, dated as of April 30, 1999
among General Chemical, General Chemical Canada Ltd., the lenders named therein
and The Chase Manhattan Bank, as Administrative Agent, including any deferrals,
renewals, extensions, replacements, refinancings or refundings thereof, or
amendments, modifications or supplements thereto and any agreement providing
therefor (including any restatements thereof and any increases in the amount of
commitments thereunder), whether by or with the same or any other lender,
creditor, group of lenders or group of creditors, and including related notes,
guaranty and note agreements, collateral security documents and other
instruments and agreements executed in connection therewith.
'DEFAULT' means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
'DESIGNATED SENIOR INDEBTEDNESS' means (a) any Indebtedness outstanding
under the Credit Facility and (b) any other Senior Indebtedness which, at the
time of determination, has an aggregate principal amount outstanding, together
with any commitments to lend additional amounts, of at least $15.0 million, if
the instrument governing such Senior Indebtedness expressly states that such
Indebtedness is 'Designated Senior Indebtedness' for purposes of the indenture
and an officers' certificate of General Chemical setting forth such designation
by General Chemical has been filed with the trustee.
'DESIGNATION' means a designation by General Chemical after the Issue
Date of any Subsidiary of General Chemical (other than GCSAP and its
Subsidiaries or any Subsidiary which owns Equity Interests in GCSAP or any of
its Subsidiaries) as an 'Unrestricted Subsidiary' under the indenture.
'DESIGNATION AMOUNT' means an amount equal to the Fair Market Value of
the Investment of General Chemical and the Restricted Subsidiaries in such
Subsidiary on such date.
'DISPOSITION' means, with respect to any Person, any merger,
consolidation or other business combination involving such Person (whether or
not such Person is the Surviving Person) or the sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of such
Person's assets.
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'DISQUALIFIED EQUITY INTEREST' means any Equity Interest to the extent
that, by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable at the option of the holder thereof), or upon
the happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable, at the option of the holder
thereof, in whole or in part, or exchangeable into Indebtedness on or prior to
the maturity date of the notes; provided, however, any Equity Interests that
would not constitute Disqualified Equity Interests but for provisions thereof
giving holders thereof the right to require such Person to repurchase or redeem
such Capital Stock upon the occurrence of a 'change of control' occurring prior
to the final stated maturity of the notes shall not constitute Disqualified
Equity Interests if the 'change of control' provisions applicable to such
Capital Stock are not more favorable to the holders of such Capital Stock than
the similar provisions of the covenants described under 'Change of Control.'
'EQUITY INTEREST' in any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited, and
membership interests in such Person, including any Preferred Equity Interests.
'EQUITY ISSUANCE' means any public or private issuance of Equity
Interests of GCG or General Chemical (including by General Chemical to NHO or
GCG); provided that, in the case of an Equity Issuance by GCG, the proceeds
thereof in an amount not less than the amount of funds to be used to optionally
redeem notes must be contributed as common equity to General Chemical.
'ESOP' means an employee stock ownership plan for the benefit of the
employees of General Chemical or its Subsidiaries.
'EXISTING INDEBTEDNESS' means any Indebtedness of General Chemical and
the Restricted Subsidiaries in existence on the Issue Date until such amounts
are repaid.
'EXPIRATION DATE' means the expiration date of the Offer to Purchase.
'FAIR MARKET VALUE' means, with respect to any asset, the price (after
taking into account any liabilities relating to such assets) which could be
negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing and able buyer, neither of which is under any
compulsion to complete the transaction; provided, however, that the Fair Market
Value of any such asset or assets shall be determined conclusively by the Board
of Directors of General Chemical acting in good faith, and shall be evidenced by
resolutions of the Board of Directors of General Chemical delivered to the
trustee.
'FOUR QUARTER PERIOD' means the four quarter period of the most recent
four consecutive fiscal quarters ending prior to the date of the relevant
determination for which consolidated financial statements of General Chemical
are available.
'GAAP' means generally accepted accounting principles in the United
States of America as in effect on the Issue Date (for purposes of the
definitions of the terms 'Consolidated Coverage Ratio,' 'Consolidated EBITDA,'
'Consolidated Interest Expense,' 'Consolidated Tangible Assets' and
'Consolidated Net Income' and all defined terms in the indenture to the extent
used in or relating to any of the foregoing definitions, and all ratios and
computations based on any of the foregoing definitions) and as in effect from
time to time (for all other purposes of the indenture), including those set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations based on GAAP contained in
the indenture shall be computed in conformity with GAAP as consistently applied.
In calculating any of 'Consolidated Net Income,' 'Consolidated Coverage Ratio,'
'Consolidated Interest Expense' and 'Consolidated Tangible Assets' and all
defined terms used in or relating to the foregoing for periods that include
periods prior to the Issue Date, information found in or derived from combined
financial statements of the industrial chemicals business prepared on a basis
consistent with those included in this prospectus shall be utilized.
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'GCG' means The General Chemical Group Inc. and any successor thereto
for so long as it directly or indirectly owns a majority of the Equity Interests
and Voting Equity Interests of General Chemical.
'GCSAP' means General Chemical (Soda Ash) Partners and any successor
thereto.
'GUARANTY' means, as applied to any obligation,
(1) a guaranty (other than by endorsement of negotiable instruments for
collection in the ordinary course of business), direct or indirect, in any
manner, of any part or all of such obligation; and
(2) an agreement, direct or indirect, contingent or otherwise, the practical
effect of which is to assure in any way the payment or performance (or
payment of damages in the event of non-performance) of all or any part of
such obligation, including, without limiting the foregoing, the payment of
amounts drawn down by letters of credit. A guaranty shall include, without
limitation, any agreement to maintain or preserve any other Person's
financial condition or to cause any other Person to achieve certain levels
of operating results.
'HEDGING OBLIGATIONS' means, with respect to any Person, the Obligations
of such Person under
(1) interest rate swap agreements, interest rate cap agreements and interest
rate collar agreements,
(2) other agreements or arrangements relating to fluctuations in interest rates
and
(3) foreign currency, commodity or energy hedge, exchange or similar agreements
(agreements referred to in this definition being referred to herein as
'Hedging Agreements').
'INCUR' means, with respect to any Indebtedness or other obligation of
any Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guaranty or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and 'Incurrence,' 'Incurred' and 'Incurring' shall have meanings
correlative to the foregoing); provided, however, that a change in generally
accepted accounting principles that results in an obligation of such Person that
exists at such time becoming Indebtedness shall not be deemed an Incurrence of
such Indebtedness and that neither the accrual of interest nor the accretion of
original issue discount shall be deemed an Incurrence of Indebtedness (although
the amount of such accrual or accretion at any date at which an outstanding
amount of Indebtedness is to be calculated shall be included in the calculation
of such outstanding principal amount). Indebtedness of any Acquired Person or
any of its Subsidiaries existing at the time such Acquired Person becomes a
Restricted Subsidiary (or is merged into or consolidated with General Chemical
or any Restricted Subsidiary), whether or not such Indebtedness was Incurred in
connection with, as a result of, or in contemplation of, such Acquired Person
becoming a Restricted Subsidiary (or being merged into or consolidated with
General Chemical or any Restricted Subsidiary), shall be deemed Incurred at the
time any such Acquired Person becomes a Restricted Subsidiary or merges into or
consolidates with General Chemical or any Restricted Subsidiary.
'INDEBTEDNESS' means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and whether
or not contingent,
(1) every obligation of such Person for money borrowed;
(2) every obligation of such Person evidenced by bonds, debentures, notes or
other similar instruments, including obligations incurred in connection
with the acquisition of property, assets or businesses;
(3) every reimbursement obligation of such Person with respect to letters of
credit, bankers' acceptances or similar facilities issued for the account
of such Person;
(4) every obligation of such Person issued or assumed as the deferred purchase
price of property or services and every conditional sale obligation (but
excluding (a) trade accounts payable incurred in
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the ordinary course of business and payable in accordance with industry
practices or (b) other accrued liabilities arising in the ordinary course
of business which are not overdue or which are being contested in good
faith);
(5) every Capital Lease Obligation of such Person;
(6) every net obligation under Hedging Obligations of such Person; and
(7) every obligation of the type referred to in clauses (1) through (6) of
another Person and all dividends of another Person the payment of which, in
either case, such Person has guaranteed or is responsible or liable for,
directly or indirectly, as obligor, guarantor or otherwise. Indebtedness:
(a) shall never be calculated taking into account any cash and Cash
Equivalents held by such Person;
(b) shall not include obligations of any Person (a) arising from
reclamation obligations, or any bonding thereof, to the extent such
reclamation obligations are due after the final Stated Maturity of
the notes, (b) arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently
drawn against insufficient funds in the ordinary course of business,
provided that such obligations are extinguished within two Business
Days of their Incurrence, (c) resulting from the endorsement of
negotiable instruments for collection in the ordinary course of
business and consistent with past business practices and (d) under
stand-by letters of credit to the extent collateralized by cash or
Cash Equivalents;
(c) which provides that an amount less than the principal amount thereof
shall be due upon any declaration of acceleration thereof shall be
deemed to be Incurred or outstanding in an amount equal to the
accreted value thereof at the date of determination;
(d) shall include the liquidation preference and any mandatory redemption
payment obligations in respect of any Disqualified Equity Interests
of General Chemical or any Restricted Subsidiary; and
(e) shall not include obligations under performance bonds, performance
guaranties, surety bonds and appeal bonds, letters of credit or
similar obligations, incurred in the ordinary course of business.
For purposes of determining compliance with any U.S. dollar-denominated
restriction on the Incurrence of Indebtedness denominated in a foreign currency,
the U.S. dollar-equivalent principal amount of such Indebtedness Incurred
pursuant thereto shall be calculated based on the relevant currency exchange
rate in effect on the date that such Indebtedness was Incurred if such
Indebtedness is Incurred to refinance other Indebtedness denominated in a
foreign currency, and such refinancing would cause the applicable U.S.
dollar-denominated restriction to be exceeded if calculated at the relevant
currency exchange rate in effect on the date of such refinancing, such U.S.
dollar-denominated restriction shall be deemed not to have been exceeded so long
as the principal amount of such refinancing Indebtedness does not exceed the
principal amount of such Indebtedness being refinanced. The principal amount of
any Indebtedness Incurred to refinance other Indebtedness, if Incurred in a
different currency from the Indebtedness being refinanced, shall be calculated
based on the currency exchange rate applicable to the currencies in which such
respective Indebtedness is denominated that is in effect on the date of such
refinancing.
'INDEPENDENT FINANCIAL ADVISOR' means a nationally recognized
accounting, appraisal, investment banking firm or consultant that is, in the
judgment of General Chemical's Board of Directors, qualified to perform the task
for which it has been engaged:
(1) which does not, and whose directors, officers and employees or Affiliates
do not, have a direct or indirect financial interest in General Chemical;
and
(2) which, in the judgment of the Board of Directors of General Chemical, is
otherwise independent and qualified to perform the task for which it is to
be engaged.
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'INTEREST' means, with respect to the notes, the sum of any cash
interest and any Additional Interest on the notes.
'INVESTMENT' means, with respect to any Person, any direct or indirect
loan, advance, guaranty or other extension of credit (other than trade
receivables created on customary terms in the ordinary course of business) or
capital contribution to (by means of transfers of cash or other property or
assets to others or payments for property or services for the account or use of
others, or otherwise), or purchase or acquisition of capital stock, bonds,
notes, debentures or other securities or evidences of Indebtedness issued by,
any other Person. Unless the context otherwise requires, the amount of any
Investment shall be the original cost of such Investment, plus the cost of all
additions thereto, and minus the amount of any portion of such Investment repaid
to such Person in cash as a repayment of principal or a return of capital, as
the case may be, but without any other adjustments for increases or decreases in
value, or write-ups, write-downs or write-offs with respect to such Investment.
In determining the amount of any Investment constituting a guaranty, the maximum
potential amount of such guaranty shall be considered the amount of the
Investment and, in determining the amount of any Investment involving a transfer
of any property or asset other than cash, such property shall be valued at its
Fair Market Value at the time of such transfer. A guaranty of performance by
General Chemical or any Restricted Subsidiary in the delivery of the product or
material requirements of a customer or third party in the ordinary course of
business shall not constitute an Investment.
'ISSUE DATE' means the original issue date of the notes.
'LIEN' means any lien, mortgage, charge, security interest,
hypothecation, assignment for security or encumbrance of any kind (including any
conditional sale or capital lease or other title retention agreement, any lease
in the nature thereof, and any agreement to give any security interest).
'MANAGEMENT AGREEMENT' means the management agreement as in effect on
the Issue Date between GCG and Latona Associates Inc. (and its permitted
successors and assigns thereunder), as it may be amended, modified or replaced
after the Issue Date with the approval of a majority of the disinterested
directors of GCG or General Chemical.
'MATURITY DATE' means May 1, 2009.
'MINERAL AGREEMENT' means an agreement between General Chemical or a
Restricted Subsidiary of General Chemical and a customer of General Chemical or
such Restricted Subsidiary (that is not an Affiliate of General Chemical) for
the purpose of mining minerals pursuant to which General Chemical or such
Restricted Subsidiary contributes minerals leases to such Person (that is not a
Affiliate of General Chemical), or agrees to mine minerals for such Person, in
the ordinary course of General Chemical or such Restricted Subsidiary's
business.
'NET CASH PROCEEDS' means the aggregate proceeds in the form of cash or
Cash Equivalents received by General Chemical or any Restricted Subsidiary in
respect of any Asset Sale, including all cash or Cash Equivalents received upon
any sale, liquidation or other exchange of proceeds of Asset Sales received in a
form other than cash or Cash Equivalents, net of:
(1) the direct costs relating to such Asset Sale (including, without
limitation, legal, accounting and investment banking fees, and sales
commissions) and any relocation expenses incurred as a result thereof;
(2) taxes paid or payable as a result thereof (after taking into account any
available tax credits or deductions and any tax sharing arrangements);
(3) amounts required to be applied to the repayment of Indebtedness secured by
a Lien on the asset or assets that were the subject of such Asset Sale;
(4) amounts deemed, in good faith, appropriate by the Board of Directors of
General Chemical to be provided as a reserve, in accordance with GAAP,
against any liabilities associated with such assets which are the subject
of such Asset Sale (provided that the amount of any such reserves shall be
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deemed to constitute Net Cash Proceeds at the time such reserves shall have
been released or are not otherwise required to be retained as a reserve);
and
(5) with respect to Asset Sales by Restricted Subsidiaries, the portion of such
cash payments attributable to Persons holding a minority interest in such
Restricted Subsidiary.
'NHO' means New Hampshire Oak, Inc., a Delaware corporation, or any
successor thereto for so long as it directly or indirectly beneficially owns a
majority of the Voting Equity Interests and Equity Interests in General
Chemical.
'OBLIGATIONS' means any principal, interest (including, with respect to
Designated Senior Indebtedness only, Post-Petition Interest), penalties, fees,
indemnifications, reimbursement obligations, damages and other liabilities
payable under the documentation governing any Indebtedness.
'OFFER TO PURCHASE' means a written offer sent by or on behalf of
General Chemical by first-class mail, postage prepaid, to each holder at his
address appearing in the register for the notes on the date of the written offer
offering to purchase up to the principal amount of notes specified in such
written offer at the purchase price specified in such written offer (as
determined pursuant to the indenture). Unless otherwise required by applicable
law, the written offer shall specify the Expiration Date, which shall be not
less than 20 Business Days nor more than 60 days after the date of such written
offer, and the Purchase Date for purchase of notes to occur no later than five
Business Days after the Expiration Date. General Chemical shall notify the
trustee at least 15 Business Days (or such shorter period as is acceptable to
the trustee) prior to the mailing of the written offer of General Chemical's
obligation to make an Offer to Purchase, and the written offer shall be mailed
by General Chemical or, at General Chemical's request, by the trustee in the
name and at the expense of General Chemical. The written offer shall contain all
the information required by applicable law to be included therein. The written
offer shall also contain information concerning the business of General Chemical
and its Subsidiaries which General Chemical in good faith believes will enable
such holders to make an informed decision with respect to the Offer to Purchase
(which at a minimum will include:
(1) the most recent annual and quarterly financial statements and 'Management's
Discussion and Analysis of Financial Condition and Results of Operations'
contained in the documents required to be filed with the Trustee pursuant
to the indenture (which requirements may be satisfied by delivery of such
documents together with the written offer);
(2) a description of material developments in General Chemical's business
subsequent to the date of the latest of such financial statements referred
to in clause (1) (including a description of the events requiring General
Chemical to make the Offer to Purchase);
(3) if applicable, appropriate pro forma financial information concerning the
Offer to Purchase and the events requiring General Chemical to make the
Offer to Purchase; and
(4) any other information required by applicable law to be included therein).
The written offer shall contain all instructions and materials necessary
to enable such Holders to tender notes pursuant to the Offer to Purchase. The
written offer shall also state:
(1) the Section of the indenture pursuant to which the Offer to Purchase is
being made;
(2) the Expiration Date and the Purchase Date;
(3) the Purchase Amount;
(4) the Purchase Price;
(5) that the holder may tender all or any portion of the notes registered in
the name of such holder and that any portion of a note tendered must be
tendered in an integral multiple of $1,000 principal amount;
(6) the place or places where notes are to be surrendered for tender pursuant
to the Offer to Purchase;
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(7) that interest on any note not tendered or tendered but not purchased by
General Chemical pursuant to the Offer to Purchase will continue to accrue;
(8) that on the Purchase Date the Purchase Price will become due and payable
upon each note being accepted for payment pursuant to the Offer to Purchase
and that interest thereon shall cease to accrue on and after the Purchase
Date;
(9) that each holder electing to tender all or any portion of a note pursuant
to the Offer to Purchase will be required to surrender such note at the
place or places specified in the written offer prior to the close of
business on the Expiration Date (such note being, if General Chemical or
the trustee so requires, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to General Chemical and the
trustee duly executed by, the holder thereof or his attorney duly
authorized in writing);
(10) that holders will be entitled to withdraw all or any portion of notes
tendered if General Chemical (or its Paying Agent) receives, not later than
the close of business on the fifth Business Day next preceding the
Expiration Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the holder, the principal amount of the note the
holder tendered, the certificate number of the note the holder tendered and
a statement that such holder is withdrawing all or a portion of his tender;
(11) that (a) if notes in an aggregate principal amount less than or equal to
the Purchase Amount are duly tendered and not withdrawn pursuant to the
Offer to Purchase, General Chemical shall purchase all such notes and
(b) if notes in an aggregate principal amount in excess of the Purchase
Amount are tendered and not withdrawn pursuant to the Offer to Purchase,
General Chemical shall purchase notes having an aggregate principal amount
equal to the Purchase Amount on a pro rata basis (with such adjustments as
may be deemed appropriate so that only notes in denominations of $1,000
principal amount or integral multiples thereof shall be purchased); and
(12) that in the case of any holder whose note is purchased only in part,
General Chemical shall execute and the trustee shall authenticate and
deliver to the holder of such note without service charge, a new note or
notes, of any authorized denomination as requested by such holder, in an
aggregate principal amount equal to and in exchange for the unpurchased
portion of the note so tendered.
An Offer to Purchase shall be governed by and effected in accordance
with the provisions above pertaining to any written offer.
'PARI PASSU DEBT' means Indebtedness of General Chemical that neither
constitutes Senior Indebtedness nor Subordinated Indebtedness.
'PARI PASSU DEBT PRO RATA SHARE' means the amount of the applicable Net
Cash Proceeds obtained by multiplying the amount of such Net Cash Proceeds by a
fraction,
(1) the numerator of which is the aggregate accreted value and/or principal
amount, as the case may be, of all Pari Passu Debt outstanding at the time
of the applicable Asset Sale with respect to which General Chemical is
required to use Net Cash Proceeds to repay or make an offer to purchase or
repay and
(2) the denominator of which is the sum of (a) the aggregate principal amount
of all Notes outstanding at the time of the applicable Asset Sale and
(b) the aggregate principal amount or the aggregate accreted value, as the
case may be, of all Pari Passu Debt outstanding at the time of the
applicable Offer to Purchase with respect to which General Chemical is
required to use the applicable Net Cash Proceeds to offer to repay or make
an offer to purchase or repay.
'PERMITTED DESIGNEE' with respect to any Permitted Holder means
(1) a spouse or child (in the case of an individual) of such Permitted Holder,
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(2) any trust principally for the benefit of such Permitted Holder or a spouse
or child of such Permitted Holder,
(3) in the event of death or incompetence of a Permitted Holder, such Permitted
Holder's estate, heirs, executor, administrator, committee or other court
appointed representative,
(4) any foundation or not-for-profit organization established by a Permitted
Holder, or
(5) any Person so long as one or more Permitted Holders in the aggregate owns a
majority of the voting power of the Voting Stock of such person.
'PERMITTED EQUITY INCENTIVE PAYMENTS' means
(1) distributions, loans or advances made to NHO for distribution to GCG to the
extent used to fund the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of GCG held by any member of
General Chemical's or any of its Subsidiaries' management pursuant to any
management equity subscription agreement or stock option agreement in
effect as of the date of the Indenture and as the same may be amended,
modified or replaced in accordance with the covenant described under
' -- Covenants -- Transactions with Affiliates';
(2) payments of any amounts to an ESOP or other stock plan for employees of
General Chemical or any of its Subsidiaries; and
(3) payments to members of management of General Chemical and its Subsidiaries
pursuant to equity incentive plans of GCG to the extent such payments are
reflected as expenses in the calculation of Consolidated Net Income;
provided that the aggregate amount of payments made under the preceding
clauses (1), (2) and (3) shall not exceed the sum of $3.0 million in any
calendar year plus the Net Cash Proceeds received by General Chemical since
the Issue Date from, or as a capital contribution from, the issuance or
sale to employees of General Chemical and its Subsidiaries of Qualified
Equity Interests, to the extent such Net Cash Proceeds are not and have not
been included in any calculation under clause (C)(2) of the first paragraph
(a) or under any clause (other than clause (5)) of the second paragraph of
the covenant described under ' -- Covenants -- Limitation on Restricted
Payments.'
'PERMITTED HEDGING OBLIGATIONS' means any Hedging Obligations that are
Incurred (a) in the ordinary course of business and (b) for the purpose of
hedging (x) interest rate risk to General Chemical or any Restricted Subsidiary
with respect to any fixed or floating rate Indebtedness of General Chemical or
any Restricted Subsidiary (including all Hedging Obligations Incurred in
connection with the Credit Facility), (y) currency risk to General Chemical or
any Restricted Subsidiary with respect to Indebtedness of General Chemical or a
Restricted Subsidiary or the cost of goods and services used by General Chemical
or a Restricted Subsidiary in the ordinary course of business or (z) the risk to
General Chemical and the Restricted Subsidiaries of fluctuations in the cost of
natural gas, other energy inputs or commodities used in the ordinary course of
business of General Chemical and the Restricted Subsidiaries.
'PERMITTED HOLDER' means Paul M. Meister and Paul M. Montrone and their
respective Permitted Designees.
'PERMITTED INDEBTEDNESS' means:
(1) the Incurrence by General Chemical or any Restricted Subsidiary (other than
GCSAP and its Subsidiaries) of Indebtedness under the Credit Facility;
provided that the aggregate principal amount of Indebtedness (with letters
of credit being deemed to have a principal amount at any time equal to the
aggregate then undrawn and unexpired amount thereof plus the aggregate
amount of drawings thereunder that have not then been reimbursed)
outstanding under the Credit Facility after giving effect to such
Incurrence does not exceed an amount equal to:
(a) $85.0 million; plus
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(b) in the case of a Credit Facility constituting a refinancing (or a
successive refinancing) of the initial Credit Facility of an amount
equal to the amount of reasonable fees, underwriting discounts,
premiums and other costs and expenses incurred in connection with
such refinancing; less
(c) the aggregate principal amount of such Indebtedness repaid from the
net cash proceeds of any Asset Sale to the extent reducing the
commitments of the lenders thereunder.
(2) the Incurrence by General Chemical or any Restricted Subsidiary of
Indebtedness under the Indenture;
(3) the Incurrence by General Chemical or any Restricted Subsidiary of Purchase
Money Indebtedness or Capital Lease Obligations; provided that, after
giving effect to any such Incurrence, the aggregate principal amount (or
accreted value, as applicable) of all outstanding Indebtedness Incurred
under this clause (3), when aggregated with all outstanding Permitted
Refinancing Indebtedness (including any successive refinancings) Incurred
under clause (4) below to refinance Indebtedness Incurred under this clause
(3), does not exceed at any time outstanding the greater of:
(a) $15.0 million; and
(b) 5% of Consolidated Tangible Assets;
(4) the Incurrence by General Chemical or any Restricted Subsidiary of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace, Indebtedness that was
Incurred under the first paragraph hereof or clause (2) or (3) of this
paragraph;
(5) the Incurrence or issuance by General Chemical or any Restricted Subsidiary
of intercompany Indebtedness or Preferred Equity Interests between or among
General Chemical and any of the Restricted Subsidiaries; provided that:
(a) if General Chemical is the obligor on any such Indebtedness, such
Indebtedness is expressly subordinated to the prior payment in full
in cash of all Obligations with respect to the notes; and
(b) (x) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness or Preferred Equity Interests
being held by a Person other than General Chemical or a
Restricted Subsidiary thereof and
(y) any sale or other transfer of any such Indebtedness or
Preferred Equity Interests to a Person that is neither General
Chemical nor a Restricted Subsidiary thereof shall be deemed,
in each case, to constitute an Incurrence of such Indebtedness
or issuance of Preferred Equity Interests by General Chemical
or such Restricted Subsidiary, as the case may be, that was not
permitted by this clause (5);
(6) the Incurrence by General Chemical or any Restricted Subsidiary of
Permitted Hedging Obligations;
(7) the Incurrence by General Chemical or any Restricted Subsidiary of
Indebtedness represented by trade letters of credit, performance or surety
bonds, completion guarantees or similar arrangements, in each case, in the
ordinary course of business; and
(8) the Incurrence by General Chemical or any Restricted Subsidiary (other than
GCSAP and its Subsidiaries) of additional Indebtedness and the issuance by
any Restricted Subsidiary of Preferred Equity Interests in an aggregate
principal amount or liquidation preference or other priority claim (or
accreted value, as applicable) at any time outstanding not to exceed $15.0
million at any one time outstanding.
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'PERMITTED INVESTMENTS' means:
(1) any Investment in General Chemical, any Restricted Subsidiary or a Person
that becomes a Restricted Subsidiary, or is merged with or into or
consolidated with General Chemical or a Restricted Subsidiary (provided
General Chemical or a Restricted Subsidiary is the survivor), as a result
of or in connection with such Investment;
(2) Cash Equivalents;
(3) Investments in prepaid expenses, negotiable instruments held for collection
and lease, utility and workers' compensation, performance and other similar
deposits;
(4) loans and advances to employees made in the ordinary course of business not
to exceed $1.0 million in the aggregate at any one time outstanding;
(5) Permitted Hedging Obligations;
(6) bonds, notes, debentures or other securities received as consideration from
any Asset Sale that is subject to and made in compliance with the covenant
described under ' -- Covenants -- Disposition of Proceeds of Asset Sales',
any sale or other disposition of assets not to exceed $1.0 million
outstanding at any time or the sale of property or equipment that has
become worn out, obsolete or damaged or otherwise unsuitable for use in
connection with the business of General Chemical or any Restricted
Subsidiary;
(7) transactions with officers, directors and employees of General Chemical or
any Restricted Subsidiary entered into in the ordinary course of business
(including compensation or employee benefit arrangements with any such
director or employee);
(8) any Investment to the extent that the consideration therefor consists of
Qualified Equity Interests of General Chemical or Equity Interests of GCG
or NHO;
(9) Investments in Persons primarily engaged in a Related Business in an
aggregate amount at any time outstanding not to exceed the greater of (x)
$10.0 million or (y) 5% of Consolidated Tangible Assets;
(10) securities or other Investments received in settlement of debts created in
the ordinary course of business and owing to General Chemical or any
Restricted Subsidiary, or as a result of foreclosure, perfection or
enforcement of any Lien, or in satisfaction of judgments, including in
connection with any bankruptcy proceeding or other reorganization of
another Person;
(11) any Investment in any Supply Partnership in an aggregate amount at any time
outstanding not to exceed 10% of Consolidated Tangible Assets and
(12) any Investment pursuant to a Mineral Agreement.
'PERMITTED JUNIOR SECURITIES' means any securities of General Chemical
or any other Person provided for by a plan of reorganization or readjustment
succeeding to the assets and liabilities for General Chemical that are (1)
equity securities without special covenants or (2) subordinated in right of
payment to all Senior Indebtedness that may at the time be outstanding, to
substantially the same extent as, or to a greater extent than, the notes are
subordinated as provided in the Indenture, in any event pursuant to a court
order so providing and as to which:
(1) the rate of interest on such securities shall not exceed the effective rate
of interest on the notes on the date of the indenture;
(2) such securities shall not be entitled to the benefits of covenants or
defaults materially more beneficial to the holders of such securities than
those in effect with respect to the notes on the date of the Indenture; and
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(3) such securities shall not provide for amortization (including sinking fund
and mandatory prepayment provisions) commencing prior to the date one year
following the final scheduled maturity date of the Senior Indebtedness (as
modified by the plan of reorganization or readjustment pursuant to which
such securities are issued);
provided that, in each case with respect to clauses (1) and (2) above, (x) if a
new corporation results from any such reorganization or readjustment, such
corporation assumes all Senior Indebtedness that will be outstanding after
giving effect thereto and (y) the rights of the holders of the Senior
Indebtedness are not, without the consent of such holders, altered or impaired,
including, without limitation, such rights being impaired within the meaning of
Section 1124 of Title 11 of the United States Code, or any impairment of the
right to receive interest accruing during the pendency of a bankruptcy or
insolvency proceeding, including proceedings under Title 11 of the United States
Code.
'PERMITTED LIENS' means:
(1) Liens on property of a Person existing at the time such Person is merged
into or consolidated with General Chemical or any Restricted Subsidiary;
provided, however, that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not secure any
property or assets of General Chemical or any Restricted Subsidiary other
than the property or assets subject to the Liens prior to such merger or
consolidation;
(2) Liens imposed by law such as carriers', warehousemen's and mechanics' Liens
and other similar Liens arising in the ordinary course of business which
secure payment of obligations not more than 60 days past due or which are
being contested in good faith and by appropriate proceedings;
(3) Liens existing on the Issue Date;
(4) Liens securing only the notes;
(5) Liens in favor of General Chemical or any Restricted Subsidiary;
(6) Liens for taxes, assessments or governmental charges or claims that are not
yet delinquent or the nonpayment of which in the aggregate would not
reasonably be expected to have a material adverse effect on General
Chemical and the Restricted Subsidiaries or that are being contested in
good faith by appropriate proceedings; provided, however, that any reserve
or other appropriate provision as shall be required in conformity with GAAP
shall have been made therefor;
(7) easements, reservation of rights of way, restrictions and other similar
easements, licenses, restrictions on the use of properties, or minor
imperfections of title that in the aggregate do not in any case materially
detract from the properties subject thereto or interfere with the ordinary
conduct of the business of General Chemical and the Restricted
Subsidiaries;
(8) pledges, deposits or Liens in connection with workers' compensation,
unemployment insurance and other social security and other similar
legislation or other insurance-related obligations (including, without
limitation, pledges or deposits securing liability to insurance carriers
under insurance or self-insurance arrangements);
(9) pledges, deposits or Liens to secure the performance of bids, tenders,
trade, government or other contracts (other than for borrowed money),
obligations for utilities, leases, licenses, statutory obligations,
completion guarantees, surety, judgment, appeal or performance bonds, other
similar bonds, instruments or obligations, and other obligations of a like
nature incurred in the ordinary course of business;
(10) (A) mortgages, liens, security interests, restrictions, encumbrances or
any other matters of record that have been placed by any developer,
landlord or other third party on property over which General Chemical
or any Restricted Subsidiary has easement rights or on any leased
property and subordination or similar agreements relating thereto; and
(B) any condemnation or eminent domain proceedings affecting any real
property;
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(11) Liens arising out of judgments, decrees, orders or awards not constituting
any Event of Default in respect of which General Chemical shall in good
faith be prosecuting an appeal or proceedings for review, which appeal or
proceedings shall not have been finally terminated, or if the period within
which such appeal or proceedings may be initiated shall not have expired;
(12) Liens securing Hedging Obligations Incurred in compliance with the covenant
described under ' -- Covenants -- Limitation on Incurrence of
Indebtedness';
(13) Liens securing Purchase Money Indebtedness; provided, however, that:
(a) such Liens secure Indebtedness in an amount not in excess of the
original purchase price or the original cost of any such assets or
repair, addition or improvement thereto (plus an amount equal to the
reasonable fees and expenses in connection with the incurrence of
such Indebtedness),
(b) such Liens do not extend to any other assets of General Chemical or
the Restricted Subsidiaries (and, in the case of repair, addition or
improvements to any such assets, such Lien extends only to the assets
(and improvements thereto or thereon) repaired, added to or
improved),
(c) the Incurrence of such Indebtedness is permitted by ' -- Covenants
-- Limitation on Incurrence of Indebtedness' above and
(d) such Liens attach within 180 days of such purchase, construction,
installation, repair, addition or improvement;
(14) Liens to secure any refinancings, renewals, extensions, modifications or
replacements (collectively, 'refinancing') (or successive refinancings), in
whole or in part, of any Indebtedness secured by Liens referred to in the
clauses above so long as such Lien does not extend to any other property
(other than improvements thereto);
(15) Liens securing letters of credit entered into in the ordinary course of
business and consistent with past business practice; and
(16) Liens on and pledges of the Equity Interests of any Unrestricted Subsidiary
securing any Indebtedness of such Unrestricted Subsidiary.
'PERMITTED PARTNERSHIP TRANSACTION' means
(1) payments or other transactions made pursuant to the General Chemical (Soda
Ash) Partnership Agreement, as in effect on the date of the indenture or as
amended from time to time in accordance with its terms; provided that any
such amendment does not contain terms that are materially more adverse in
the aggregate to the holders than those in effect on the date of the
indenture; and
(2) transactions between General Chemical and GCSAP which are on terms as
favorable in aggregate to General Chemical than those that would be
obtainable at the time for a comparable transaction in arm's-length
dealings with an unrelated third person so long as no Affiliate (other than
General Chemical or a Restricted Subsidiary) directly or indirectly has a
beneficial Equity Interest in GCSAP.
'PERMITTED REFINANCING INDEBTEDNESS' means any Indebtedness of General
Chemical or any of the Restricted Subsidiaries issued in exchange for, or the
net proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of the Restricted Subsidiaries
(other than intercompany Indebtedness); provided that:
(1) the principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount of (or
accreted value, if applicable), plus accrued interest on, the Indebtedness
so extended, refinanced, renewed, replaced, defeased or refunded (plus the
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amount of reasonable fees, underwriting discount, premiums and all other
costs and expenses incurred in connection therewith);
(2) except in the case of Senior Indebtedness or Indebtedness of a Restricted
Subsidiary, such Permitted Refinancing Indebtedness has a final maturity
date not earlier than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life
to Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced, defeased
or refunded is subordinated in right of payment to the notes, such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the
Notes on terms at least as favorable to the holders as those contained in
the documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded;
(4) GCSAP and its Subsidiaries may only Incur such Indebtedness to extend,
refinance, renew, replace, defease or refund its own Indebtedness; and
(5) Preferred Equity Interest of a Restricted Subsidiary may not be refinanced,
replaced, defeased or refunded with Indebtedness.
'PERSON' means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, limited liability
limited partnership, trust, unincorporated organization or government or any
agency or political subdivision thereof.
'POST-PETITION INTEREST' means, with respect to any Indebtedness of any
Person, all interest accrued or accruing on such Indebtedness after the
commencement of any bankruptcy, insolvency or liquidation proceeding against
such Person in accordance with and at the contract rate (including, without
limitation, any rate applicable upon default) specified in the agreement or
instrument creating, evidencing or governing such Indebtedness, whether or not,
pursuant to applicable law or otherwise, the claim for such interest is allowed
as a claim in such bankruptcy, insolvency or liquidation proceeding.
'PREFERRED EQUITY INTEREST,' in any Person, means an Equity Interest of
any class or classes (however designated) which is preferred as to the payment
of dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over Equity
Interests of any other class in such Person. Preferred Equity Interests of any
Acquired Person or any of its Subsidiaries existing at the time such Acquired
Person becomes a Restricted Subsidiary (or is merged into or consolidated with
General Chemical or any Restricted Subsidiary), shall be deemed issued at such
time.
'PURCHASE AMOUNT' means the aggregate principal amount of the
outstanding notes offered to be purchased by General Chemical pursuant to the
Offer to Purchase (including, if less than 100%, the manner by which such amount
has been determined pursuant to the Section of the Indenture requiring the Offer
to Purchase).
'PURCHASE DATE' means the settlement date for purchases of notes in
connection with an Offer to Purchase.
'PURCHASE MONEY INDEBTEDNESS' means Indebtedness of General Chemical or
any Restricted Subsidiary Incurred for the purpose of financing all or any part
of the acquisition (whether directly or through the acquisition of the Equity
Interests of any Person), leasing, construction or improvement of any property,
plant or equipment used in the business of General Chemical or any Restricted
Subsidiary, provided that the aggregate principal amount of such Indebtedness
does not exceed such purchase price or cost.
'PURCHASE PRICE' means the purchase price to be paid by General Chemical
for each $1,000 aggregate principal amount of notes accepted for payment (as
specified pursuant to the indenture).
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'QUALIFIED EQUITY INTEREST' in any Person means any Equity Interest in
such Person other than any Disqualified Equity Interest.
'RELATED BUSINESS' means:
(1) those businesses in which General Chemical or any of the Restricted
Subsidiaries is engaged on the date of the Indenture, or that are similar
or reasonably related, complementary or incidental thereto or extensions or
developments thereof; and
(2) any business (the 'Other Business') which forms a part of a business (the
'Acquired Business') which is acquired by General Chemical or any of the
Restricted Subsidiaries if (a) the primary intent of General Chemical or
such Restricted Subsidiary was to acquire that portion of the Acquired
Business which meets the requirements of clause (2) of this definition and
(b) General Chemical believed that it would not have been able to acquire
such portion of the Acquired Business if the Other Business was not also
acquired.
'RELATED TAXES' means
(1) General Chemical's share (based on the ratio of the book value of General
Chemical and its subsidiaries to the book value of GCG and its subsidiaries
(including General Chemical and its subsidiaries)) of any state or local
taxes, other than taxes imposed on or measured by income or receipts, that
are imposed on GCG or NHO by virtue of GCG or NHO (as the case may be):
(a) being incorporated in such state or locality;
(b) having capital stock outstanding; or
(c) owning the stock of General Chemical (but excluding any taxes imposed
on or attributable to any dividends received from General Chemical),
(2) any payments in respect of federal, state, local or foreign taxes required
to be made by GCG under the Tax Sharing Agreement (less any refunds of such
taxes that are received by GCG or NHO and not repaid to General Chemical);
and
(3) any federal, state, local or foreign taxes of General Chemical or its
Subsidiaries that are measured by income and for which GCG or NHO is liable
up to an amount not to exceed with respect to such federal taxes, the
amount of any such taxes that General Chemical would have been required to
pay on a consolidated basis if General Chemical had filed a consolidated
return on behalf of an affiliated group (as defined in section 1504 of the
Code) of which it was the common parent, or with respect to such state,
local and foreign taxes, the amount of taxes that General Chemical would
have been required to pay if General Chemical and its eligible Subsidiaries
had filed an affiliated, combined or unitary return with respect to such
state, local or foreign taxes.
'RESTRICTED SUBSIDIARY' means any Subsidiary of General Chemical that
has not been designated by the Board of Directors of General Chemical, by a
resolution of the Board of Directors of General Chemical delivered to the
trustee, as an Unrestricted Subsidiary pursuant to the covenant ' -- Designation
of Unrestricted Subsidiaries' above. Any such designation may be revoked by a
resolution of the Board of Directors of General Chemical delivered to the
trustee, subject to the provisions of such covenant.
'REVOCATION' means a revocation by General Chemical of any Designation
of a Subsidiary as an Unrestricted Subsidiary.
'SENIOR INDEBTEDNESS' means, at any date,
(1) all Obligations of General Chemical under the Credit Facility;
(2) all Hedging Obligations of General Chemical;
(3) all Obligations of General Chemical under stand-by letters of credit; and
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(4) all Obligations under other Indebtedness of General Chemical including
principal, premium, if any, and interest on such Indebtedness, unless the
instrument under which such Indebtedness of General Chemical for money
borrowed is Incurred expressly provides that such Indebtedness for money
borrowed is not senior or superior in right of payment to the notes, and
all renewals, extensions, modifications, amendments or refinancings
thereof. Notwithstanding the foregoing, Senior Indebtedness shall not
include:
(a) to the extent that it may constitute Indebtedness, any Obligation for
federal, state, local, foreign or other taxes;
(b) any Indebtedness of General Chemical to any Subsidiary of General
Chemical, unless and for so long as such Indebtedness has been
pledged to secure Obligations under the Credit Facility or other
Senior Indebtedness;
(c) any Obligation in respect of any trade payable Incurred for the
purchase of goods or materials, or for services obtained, in the
ordinary course of business;
(d) Indebtedness evidenced by the notes;
(e) Indebtedness of General Chemical that is expressly subordinate or
junior in right of payment to any other Indebtedness of General
Chemical;
(f) to the extent that it may constitute Indebtedness, any obligation
owing under leases (other than Capital Lease Obligations), subleases
or licenses or Management Agreements; and
(g) any obligation that by operation of law is subordinate to any general
unsecured obligations of General Chemical.
'SEPARATION AGREEMENTS' means, collectively, the Separation Agreement
dated April 15, 1999 among GenTek, GCG, General Chemical Corporation and General
Chemical, the Employee Benefits Agreement dated April 28, 1999 between GenTek
and GCG, the Transition Support Agreement dated April 28, 1999 between GenTek
and GCG, the Sublease Agreement dated April 28, 1999 between General Chemical
Corporation and General Chemical and the Intellectual Property Agreement dated
April 28, 1999 among GenTek, GCG, General Chemical Corporation and General
Chemical and does not include the Tax Sharing Agreement.
'STATED MATURITY,' when used with respect to any note or any installment
of interest thereon, means the date specified in such note as the fixed date on
which the principal of such note or such installment of interest is due and
payable.
'SUBORDINATED INDEBTEDNESS' means, with respect to General Chemical, any
Indebtedness of General Chemical which is expressly subordinated in right of
payment to the notes.
'SUBSIDIARY' means, with respect to any Person,
(a) any corporation of which the outstanding Voting Equity Interests having at
least a majority of the votes entitled to be cast in the election of
directors shall at the time be owned, directly or indirectly, by such
Person, or
(b) any other Person of which at least a majority of Voting Equity Interests
are at the time, directly or indirectly, owned by such first named Person.
Notwithstanding the foregoing, for so long as General Chemical is
permitted to consolidate the ALCAD Partnership in its consolidated financial
statements and the ALCAD Partnership and related agreements provide for the
distribution of profits to General Chemical and the Restricted Subsidiaries on
terms that are not adverse in any material respect from the perspective of
Holders than those in effect on the Issue Date, General Chemical will be
permitted to treat the ALCAD Partnership as a Subsidiary for all purposes of the
indenture.
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'SUPPLY PARTNERSHIP' means any Person:
(a) in which General Chemical beneficially owns less than a majority of the
Voting Equity Interests; and
(b) which has been organized for the purpose of toll manufacturing, marketing
or selling industrial chemical products, mining minerals and/or supplying
energy, raw materials or transportation services for the benefit of (x)
General Chemical and the Restricted Subsidiaries in the ordinary course and
(y) one or more of its customers or raw material (including energy)
suppliers that is not an Affiliate of General Chemical and (z) if
applicable, other persons similarly situated as General Chemical and the
Restricted Subsidiary with respect to such benefits.
'SURVIVING PERSON' means, with respect to any Person involved in or that
makes any Disposition, the Person formed by or surviving such Disposition or the
Person to which such Disposition is made.
'TAX SHARING AGREEMENT' means the Tax Sharing Agreement dated April 28,
1999 between GenTek and GCG, as the same may be amended, modified or replaced in
accordance with the indenture.
'UNITED STATES GOVERNMENT OBLIGATIONS' means direct non-callable
obligations of the United States of America for the payment of which the full
faith and credit of the United States is pledged.
'UNRESTRICTED SUBSIDIARY' means any Subsidiary of General Chemical
designated as such pursuant to ' -- Covenants -- Designation of Unrestricted
Subsidiaries' above. Any such designation may be revoked by a resolution of the
Board of Directors of General Chemical delivered to the trustee, subject to the
provisions of such covenant.
'UNUTILIZED NET CASH PROCEEDS' has the meaning set forth in the third
paragraph under ' -- Covenants -- Disposition of Proceeds of Asset Sales' above.
'VOTING EQUITY INTERESTS' means Equity Interests in a corporation or
other Person either:
(x) with voting power under ordinary circumstances entitling the holders
thereof to vote for the election of the Board of Directors or other
governing body of such corporation or Person; or
(y) for purposes of the definition of 'Change of Control' only, directly or
indirectly accompanied with other rights to direct the policies,
management or affairs of such Person pursuant to contract or otherwise.
'WEIGHTED AVERAGE LIFE TO MATURITY' means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the sum
of the products obtained by multiplying (1) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment of final maturity, in respect thereof, by (2)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
aggregate principal amount of such Indebtedness.
'WHOLLY OWNED RESTRICTED SUBSIDIARY' means any Restricted Subsidiary all
of the outstanding Equity Interests (other than directors' qualifying shares) of
which are owned, directly or indirectly, by General Chemical.
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of material United States income tax
consequences of the exchange of the old notes for the new notes and the
ownership and disposition of the new notes. This summary applies only to a
beneficial owner of a new note who acquires the new notes in exchange for old
notes that such holder acquired for cash at the original offering from the
initial purchasers and for the original offering price thereof.
This summary is based on provisions of the Internal Revenue Code of
1986, existing and proposed Treasury regulations promulgated thereunder and
administrative and judicial interpretations thereof, all as of the date hereof
and all of which are subject to change, possibly on a retroactive basis.
This summary does not address the tax consequences to subsequent
purchasers of the Notes and is limited to acquirors who hold the notes as
'capital assets' within the meaning of section 1221 of the Code. This summary
does not address all of the tax consequences that may be relevant to particular
acquirors in light of their personal circumstances, or to acquirors who are
subject to special rules (such as banks and other financial institutions, real
estate investment trusts, regulated investment companies, insurance companies,
tax-exempt organizations, dealers in securities, persons who have hedged the
interest rate on the notes, partnerships and other pass-through entities or
persons whose functional currency is not the U.S. dollar). In addition, this
summary does not include any description of the tax laws of any state, local or
non-U.S. government that may be applicable to a particular acquiror.
As used herein, the term 'U.S. Holder' means a beneficial owner of a
note that is, for U.S. federal income tax purposes:
(1) a citizen or individual resident of the United States;
(2) a corporation created or organized in the United States or under the laws
of the United States or of any state of the United States;
(3) an estate whose income is includable in gross income for U.S. federal
income tax purposes regardless of its source; or
(4) a trust if:
(A) a court within the United States is able to exercise primary
supervision over the administration of the trust; and
(B) at least one U.S. person has authority to control all substantial
decisions of the trust.
PROSPECTIVE ACQUIRORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE PARTICULAR U.S. FEDERAL INCOME AND ESTATE TAX CONSEQUENCES TO
THEM OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE NOTES, AS WELL AS THE
TAX CONSEQUENCES UNDER STATE, LOCAL, NON-U.S. AND OTHER TAX LAWS AND THE
POSSIBLE EFFECTS OF CHANGES IN TAX LAWS.
THE EXCHANGE OFFER
The exchange of an old note for a new note of a U.S. Holder pursuant to
the exchange offer will not constitute a taxable exchange of the old notes, and
thus a U.S. Holder will not recognize taxable gain or loss upon receipt of a new
note. As a result, each U.S. Holder will have the same adjusted tax basis and
holding period in the new notes as it had in the old notes immediately before
the exchange.
INCOME TAXATION OF U.S. HOLDERS
PAYMENT OF INTEREST ON THE NOTES. In general, interest paid on a note
will be taxable to a U.S. Holder as ordinary interest income, as received or
accrued, in accordance with such holder's regular method of accounting for
federal income tax purposes.
LIQUIDATED DAMAGES. Since the old notes provide for the payment of
liquidated damages in the circumstances described in 'The Exchange Offer -- Our
Obligations Under the Registration Rights Agreement,' the notes may be subject
to special rules under the Treasury Regulations that are applicable
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to debt instruments that provide for one or more contingent payments. Under the
Treasury Regulations, however, the special rules applicable to contingent
payment debt instruments will not apply if, as of the issue date, the
contingency is either 'remote' or 'incidental.' General Chemical intends to take
the position that, solely for these purposes, at the time of the original
offering, the payment of liquidated damages was a remote or incidental
contingency. General Chemical's determination that such payments were a remote
or incidental contingency for these purposes is binding on a U.S. Holder, unless
such U.S. Holder discloses in the proper manner to the Internal Revenue Service
that it is taking a different position. Prospective investors should consult
their tax advisors as to the tax considerations relating to the payment of
liquidated damages, in particular in connection with the Treasury Regulations
relating to contingent payment interests.
SALE, EXCHANGE OR RETIREMENT OF THE NOTES. Upon the sale, exchange,
redemption, retirement at maturity or other disposition of a note, a U.S. Holder
will generally recognize taxable gain or loss equal to the difference between
the sum of the cash and the fair market value of all other property received on
such disposition (except to the extent such cash or property is attributable to
accrued interest, which will be taxable as ordinary income) and such holder's
adjusted tax basis in the note.
Gain or loss recognized on the disposition of a note generally will be
capital gain or loss, and will be long-term capital gain or loss if, at the time
of such disposition, the holder's holding period for the note is more than one
year.
BACKUP WITHHOLDING AND INFORMATION REPORTING. In general, a U.S. Holder
will be subject to backup withholding at the rate of 31% with respect to
payments of interest, principal and premium, if any, paid on, and the proceeds
of a disposition of, a note, unless the holder:
(1) is an entity that is exempt from withholding (including corporations,
tax-exempt organizations and certain qualified nominees) and, when
required, demonstrates this fact; or
(2) provides General Chemical's with its taxpayer identification number (which
for an individual would be the holder's social security number), certifies
under penalties of perjury that the taxpayer identification number provided
to General Chemical is correct and that the holder has not been notified by
the Internal Revenue Service that it is subject to backup withholding due
to underreporting of interest or dividends, and otherwise complies with
applicable requirements of the backup withholding rules. In addition, such
payments of principal, premium and interest to U.S. holders that are not
exempt entities will generally be subject to information reporting
requirements.
A U.S. Holder who does not provide General Chemical with its correct taxpayer
identification number may be subject to penalties imposed by the Internal
Revenue Service.
General Chemical will report to U.S. holders and the Internal Revenue
Service the amount of any 'reportable payments' (including any interest paid)
and any amounts withheld with respect to the notes during the calendar year.
The amount of any backup withholding from a payment to a U.S. holder
will be allowed as a credit against such holder's federal income tax liability
and may entitle such holder to a refund, provided that the required information
is furnished to the Internal Revenue Service. Treasury Regulations, generally
effective for payments made after December 31, 2000, modify the certification
requirements for backup withholding. It is possible that General Chemical and
other withholding agents may request a new withholding exemption from holders in
order to qualify for continued exemption from backup withholding under these new
withholding regulations.
TAXATION OF NON-U.S. HOLDERS
PAYMENT OF INTEREST ON THE NOTES. In general, payments of interest
received by any holder of a note that is not a U.S. Holder will not be subject
to a U.S. federal income tax (or any withholding thereof, except as described
below under 'Backup Withholding and Information Reporting'), provided that:
(1) under an exemption for portfolio interest,
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(A) the non-U.S. holder does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of
General Chemical that is entitled to vote;
(B) the holder is not a 'controlled foreign corporation' (generally, a
non-U.S. corporation controlled by U.S. shareholders) that is related
to General Chemical actually or constructively through stock
ownership; and
(C) either:
(x) the beneficial owner of the note, under penalties of perjury,
provides General Chemical or its agent with the beneficial
owner's name and address and certifies that it is not a U.S.
person on Internal Revenue Service Form W-8 (or a suitable
substitute or successor form); or
(y) a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary
course of its trade or business holds the note and certifies
to General Chemical or its agent under penalties of perjury
that such a Form W-8 (or suitable substitute or successor
form) has been received by it from the beneficial owner or
qualifying intermediary and furnishes the payor a copy
thereof;
(2) the non-U.S. holder is subject to U.S. federal income tax with respect to
the note on a net basis because payments received with respect to the note
are effectively connected with the conduct of a trade or business within
the United States by the holder (in which case the holder may also be
subject to U.S. 'branch profits tax') and the holder provides General
Chemical with a properly executed Internal Revenue Service Form 4224 or a
successor form; or
(3) the non-U.S. holder is entitled to the benefits of an income tax treaty
under which the interest is exempt from U.S. withholding tax and the holder
or such holder's agent provides a properly executed Internal Revenue
Service Form 1001 or a successor form claiming the exemption.
Payments of interest not exempt from U.S. federal income tax as described above
will be subject to withholding at the rate of 30% (subject to reduction under
the applicable income tax treaty).
The new withholding regulations generally will be effective with respect
to payments made after December 31, 2000. The new withholding regulations
generally will not affect the certification rules described in the preceding
paragraph, but will provide alternative methods for satisfying such
requirements. The new withholding regulations may require that a non-U.S. holder
(including a non-U.S. partnership or a partner thereof) obtain a taxpayer
identification number and make certifications if interest in respect of a note
is not portfolio interest and the non-U.S. holder wishes to claim a reduced rate
of withholding under an income tax treaty. It is possible that General Chemical
and other withholding agents may request a new withholding exemption from
non-U.S. holders in order to qualify for continued exemption from withholding
under the new withholding regulations. Each non-U.S. holder should consult its
own tax advisor regarding the application of the new withholding regulations.
SALE, EXCHANGE OR RETIREMENT OF THE NOTES. A non-U.S. holder generally
will not be subject to U.S. federal income tax (or withholding thereof) in
respect of gain realized on the sale, exchange, redemption, retirement at
maturity or other disposition of notes, unless:
(1) the gain is effectively connected with the conduct of a trade or business
within the United States by the holder; or
(2) the holder is an individual who is present in the United States for a
period or periods aggregating 183 or more days in the taxable year of the
disposition and certain other conditions are met.
With respect to a non-U.S. holder subject to U.S. federal income tax as
described in the preceding paragraph, an exchange of a note for an exchange note
will not be treated as a taxable exchange of the note. The old notes provide for
the payment of liquidated damages in the circumstances described in 'The
Exchange Offer -- Our Obligations Under The Registration Rights Agreement.'
Non-U.S. holders should consult their tax advisors as to the tax considerations
relating to debt instruments that provide for one or more contingent payments,
in particular as to the availability of the exemption for
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portfolio interest, and the ability of holders to claim the benefits of income
tax treaty exemptions from U.S. withholding tax on interest, in respect of such
liquidated damages.
BACKUP WITHHOLDING AND INFORMATION REPORTING. Under current Treasury
Regulations, backup withholding and certain information reporting do not apply
to payments made by General Chemical or a paying agent to non-U.S. holders if
the certification described under 'Payment of Interest on the Notes' is
received, provided that the payor does not have actual knowledge that the holder
is a U.S. person. If any payments of principal and interest are made to the
beneficial owner of a note by or through the non-U.S. office of a non-U.S.
custodian, non-U.S. nominee or other non-U.S. agent of such beneficial owner, or
if the non-U.S. office of a non-U.S. 'broker' (as defined in applicable Treasury
Regulations) pays the proceeds of the sale of a note or a coupon to the seller
thereof, backup withholding and information reporting will not apply.
Information reporting requirements (but not backup withholding) will apply,
however, to a payment by a non-U.S. office of a broker that is a U.S. person,
that derives 50% or more of its gross income for certain periods from the
conduct of a trade or business in the United States, or that is a 'controlled
foreign corporation' (generally, a non-U.S. corporation controlled by U.S.
shareholders) with respect to the United States, unless the broker has
documentary evidence in its records that the holder is a non-U.S. person and
other conditions are met, or the holder otherwise establishes an exemption.
Payment by a U.S. office of a broker is subject to both backup withholding at a
rate of 31% and information reporting unless the holder certifies under
penalties of perjury that it is a non-U.S. person, or otherwise establishes an
exemption. A non-U.S. holder may obtain a refund or a credit against such
holder's U.S. federal income tax liability of any amounts withheld under the
backup withholding rules, provided the required information is furnished to the
Internal Revenue Service.
In addition, interest on a note owned by a non-U.S. holder may be
required to be reported annually on IRS Form 1042S, in which case such form will
be filed with the IRS and furnished to the holder.
The new withholding regulations revise the procedures that withholding
agents and payees must follow to comply with, or to establish an exemption, from
these information reporting and backup withholding provisions for payments after
December 31, 2000. It is possible that General Chemical and other withholding
agents may request a new withholding exemption from non-U.S. holders in order to
qualify for continued exemption from backup withholding under the new
withholding regulations. Each non-U.S. holder should consult its own tax advisor
regarding the application to such holder of the new withholding regulations.
ESTATE TAX. Subject to applicable estate tax treaty provisions, notes
held at the time of death (or theretofore transferred subject to certain
retained rights or powers) by an individual who at the time of death is a
non-U.S. holder will not be included in such holder's gross estate for U.S.
federal estate tax purposes, provided that (a) the individual does not actually
or constructively own 10% or more of the total combined voting power of all
classes of stock of General Chemical entitled to vote and (b) the income on the
notes is not effectively connected with the conduct of a U.S. trade or business
by the individual.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives new notes for its own account pursuant
to the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of such new notes. This prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of new notes received in exchange for old notes where
such old notes were acquired as a result of market-making activities or other
trading activities. General Chemical has agreed that, for a period of 180 days
after the expiration date, it will make this prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale. In addition, until 180 days after the expiration of this exchange offer
on November 9, 1999, all dealers effecting transactions in the new notes may
be required to deliver a prospectus.
General Chemical will not receive any proceeds from any sale of new
notes by broker-dealers. New notes received by broker-dealers for their own
account pursuant to the exchange offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the new notes or a combination of such methods
of resale, at market prices prevailing at the time of resale, at prices related
to such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such new notes. Any broker-dealer that
resells new notes that were received by it for its own account pursuant to the
exchange offer and any broker or dealer that participates in a distribution of
such new notes may be deemed to be an 'underwriter' within the meaning of the
Securities Act and any profit on any such resale of new notes and any commission
or concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The letter of transmittal states that, by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an 'underwriter' within the
meaning of the Securities Act.
For a period of 180 days after the expiration date General Chemical will
promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests such documents
in the letter of transmittal. General Chemical has agreed to pay all expenses
incident to the exchange offer including the expenses of one counsel for the
holders of the old notes other than commissions or concessions of any
broker-dealers and will indemnify the holders of the old notes including any
broker-dealers against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The enforceability of the new notes will be passed on for General
Chemical by Debevoise & Plimpton, New York, New York.
EXPERTS
The consolidated financial statements as of December 31, 1997 and 1998
and for each of the three years in the period ended December 31, 1998 included
in this prospectus and the related financial statement schedule included
elsewhere in the registration statement have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their reports appearing herein and
elsewhere in the registration statement, and have been so included in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-4 to register with the
Commission the new notes to be issued in exchange for the old notes. This
prospectus is part of that registration statement. As allowed by the
Commission's rules, this prospectus does not contain all of the information you
can find in the registration statement or the exhibits to the registration
statement.
Upon effectiveness of the registration statement of which this
prospectus is a part, we will file annual, quarterly and other information with
the Commission. You may read and copy any reports,
110
<PAGE>
statements and other information we file at the Commission's public reference
rooms in Washington, D.C., New York, New York, and Chicago, Illinois. Please
call 1-800-SEC-0330 for further information on the public reference rooms. Our
filings will also be available to the public from commercial document retrieval
services and at the web site maintained by the Commission at http://www.sec.gov.
The indenture for the notes requires us to distribute to the holders of
the notes annual reports containing our financial statements audited by our
independent auditors and quarterly reports containing unaudited condensed
consolidated financial statements for the first three quarters of each fiscal
year.
111
<PAGE>
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
OF GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Operations for the Six Months
Ended June 30, 1998 and 1999.............................. F-2
Consolidated Balance Sheets at December 31, 1998 and June
30, 1999.................................................. F-3
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1998 and 1999.............................. F-4
Consolidated Statements of Changes in Equity for the Six
Months Ended June 30, 1999................................ F-5
Notes to Consolidated Financial Statements.................. F-6
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Report................................ F-9
Consolidated Statements of Operations for the three years
ended December 31, 1998................................... F-10
Consolidated Balance Sheets at December 31, 1997 and 1998... F-11
Consolidated Statements of Cash Flows for the three years
ended December 31, 1998................................... F-12
Consolidated Statements of Changes in Equity for the three
years ended December 31, 1998............................. F-13
Notes to Consolidated Financial Statements.................. F-14
</TABLE>
F-1
<PAGE>
GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
1998 1999
---- ----
(IN THOUSANDS)
<S> <C> <C>
Net revenues................................................ $133,384 $130,637
Cost of sales............................................... 102,904 105,226
Selling, general and administrative expense................. 8,070 10,257
-------- --------
Operating profit....................................... 22,410 15,154
Interest expense............................................ 5,869 6,102
Interest income............................................. 315 581
Foreign currency transaction (gains) losses................. 154 (141)
Other expense, net.......................................... 161 (8)
-------- --------
Income before income taxes and minority interest....... 16,541 9,782
Minority interest........................................... 8,127 5,507
-------- --------
Income before income taxes............................. 8,414 4,275
Income tax provision........................................ 2,475 1,001
-------- --------
Net income............................................. $ 5,939 $ 3,274
-------- --------
-------- --------
</TABLE>
See the accompanying notes to consolidated financial statements.
F-2
<PAGE>
GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1998 1999
---- ----
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 1,127 $ 26,563
Receivables, net....................................... 58,601 66,115
Inventories............................................ 25,508 21,386
Deferred income taxes.................................. 4,392 5,340
Other current assets................................... 1,659 5,784
-------- --------
Total current assets.............................. 91,287 125,188
Property, plant and equipment, net.......................... 141,808 143,945
Other assets................................................ 15,619 22,271
-------- --------
Total assets...................................... $248,714 $291,404
-------- --------
-------- --------
LIABILITIES AND EQUITY (DEFICIT)
Current liabilities:
Accounts payable....................................... $ 24,298 $ 30,003
Accrued liabilities.................................... 25,146 30,009
Income taxes payable................................... 1,988 --
-------- --------
Total current liabilities......................... 51,432 60,012
Long-term debt.............................................. -- 150,098
Other liabilities........................................... 78,561 80,988
-------- --------
Total liabilities................................. 129,993 291,098
Minority interest........................................... 43,429 39,993
Equity (deficit).......................................
Net investment by The General Chemical Group Inc. ..... 75,292 --
Common Stock, $.01 par value; authorized 1,000 shares;
issued 1,000 shares at June 30, 1999.................. -- --
Capital deficit........................................ -- (43,220)
Accumulated other comprehensive income................. -- 45
Retained earnings...................................... -- 3,488
-------- --------
Total equity (deficit)............................ 75,292 (39,687)
-------- --------
Total liabilities and equity (deficit)............ $248,714 $291,404
-------- --------
-------- --------
</TABLE>
See the accompanying notes to consolidated financial statements.
F-3
<PAGE>
GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
1998 1999
---- ----
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net income............................................. $ 5,939 $ 3,274
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization..................... 8,624 8,570
Net loss on disposition of long-term assets....... 160 --
Decrease (increase) in receivables................ 4,828 (7,514)
(Increase) decrease in inventories................ (1,043) 4,122
Increase (decrease) in accounts payable........... (2,557) 5,705
Increase in accrued liabilities................... 6,285 4,863
(Decrease) in income taxes payable................ (1,697) (1,988)
Increase (decrease) in other liabilities and
assets, net...................................... (369) (5,955)
Increase (decrease) in minority interest.......... 2,210 (3,436)
-------- --------
Net cash provided by operating activities......... 22,380 7,641
-------- --------
Cash flows from investing activities:
Capital expenditures................................... (8,617) (9,346)
-------- --------
Net cash (used for) investing activities.......... (8,617) (9,346)
-------- --------
Cash flows from financing activities:
Net transactions with The General Chemical Group
Inc................................................... (13,819) (118,298)
Proceeds from long-term debt........................... -- 145,439
-------- --------
Net cash provided by (used for) financing
activities....................................... (13,819) 27,141
-------- --------
Increase (decrease) in cash and cash equivalents............ (56) 25,436
Cash and cash equivalents at beginning of period............ 1,352 1,127
-------- --------
Cash and cash equivalents at end of period.................. $ 1,296 $ 26,563
-------- --------
-------- --------
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest.......................................... $ -- $ 310
</TABLE>
See the accompanying notes to consolidated financial statements.
F-4
<PAGE>
GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (DEFICIT)
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NET
INVESTMENT
ACCUMULATED BY THE
OTHER GENERAL
COMMON CAPITAL COMPREHENSIVE RETAINED CHEMICAL
STOCK DEFICIT INCOME (LOSS) EARNINGS GROUP TOTAL
----- ------- ------------- -------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998.... $ $ $ $ $ (54,696) $ (54,696)
Distribution of GenTek,
Inc...................... -- -- -- -- 129,988 129,988
------ -------- -------- -------- --------- ---------
Balance at December 31, 1998
(as adjusted)................. -- -- -- -- 75,292 75,292
Net income (loss) to
distribution date............. -- -- -- -- (214) (214)
Net settlements with The General
Chemical Group Inc............ -- -- -- -- (118,298) (118,298)
Issuance of common stock to
stockholders.................. -- (43,220) -- -- 43,220 --
Net income...................... -- -- -- 3,488 -- 3,488
Comprehensive income............ -- -- 45 -- -- 45
------ -------- -------- -------- --------- ---------
Balance at June 30, 1999........ $ -- $(43,220) $ 45 $ 3,488 $ -- $ (39,687)
------ -------- -------- -------- --------- ---------
------ -------- -------- -------- --------- ---------
</TABLE>
See the accompanying notes to consolidated financial statements.
F-5
<PAGE>
GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(DOLLARS IN THOUSANDS)
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
General Chemical Industrial Products Inc. (the 'Company') is a
wholly-owned subsidiary of The General Chemical Group Inc. ('GCG'). The company
was formed on April 30, 1999 as part of the separation by GCG of its
Manufacturing and Performance Products Segments from its Industrial Chemicals
Segment through a distribution of stock of GenTek Inc. ('GenTek') to
stockholders of GCG (the 'Spinoff'). In connection with the Spinoff, GCG
transferred its Industrial Chemical Segment to a wholly-owned subsidiary,
General Chemical Industrial Products Inc. and transferred its Manufacturing and
Performance Products Segments to a wholly-owned subsidiary, GenTek and
distributed the stock of GenTek to shareholders of GCG. On April 30, 1999, GCG
and GenTek became separate, publicly-traded companies on the New York Stock
Exchange. GCG continues to trade using the GCG symbol. GCG owns and operates the
Company, and GenTek owns and operates the businesses comprising the
Manufacturing and Performance Products Segments.
These unaudited financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. The financial
statements do not include certain information and footnotes required by
generally accepted accounting principles. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) considered
necessary for a fair presentation have been included. Operating results for the
six months ended June 30, 1999 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1999. The Company's
financial statements should be read in conjunction with the financial statements
and the notes thereto for the year ended December 31, 1998 included elsewhere in
this Prospectus.
Certain prior-period amounts have been reclassified to conform with the
current presentation.
NOTE 2 -- COMPREHENSIVE INCOME
Total comprehensive income is comprised of net income and foreign
currency translation gains and losses. Total comprehensive income for the six
months ended June 30, 1998 and 1999 was $5,300 and $3,301, respectively.
NOTE 3 -- ADDITIONAL FINANCIAL INFORMATION
The components of inventories were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1998 1999
---- ----
<S> <C> <C>
Raw materials............................................... $ 3,480 $ 2,204
Work in process............................................. 1,839 2,698
Finished products........................................... 13,297 8,189
Supplies and containers..................................... 6,892 8,295
------- -------
$25,508 $21,386
------- -------
------- -------
</TABLE>
F-6
<PAGE>
GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(DOLLARS IN THOUSANDS)
(UNAUDITED)
NOTE 4 -- LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
MATURITIES 1998 1999
---------- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
$85 Million Revolving Credit
Facility-floating rate....................... 2004 $ -- $ 50,098
Senior Subordinated
Notes -- 10 5/8%............................. 2009 -- 100,000
-------- --------
Total Debt........................................ -- 150,098
Loss: Current Portion........................ -- --
-------- --------
Net Long-Term Debt................................ $ -- $150,098
-------- --------
-------- --------
</TABLE>
On April 30, 1999, in connection with the Spinoff, the Company and its
Canadian subsidiary entered into an $85,000 revolving credit facility ('Credit
Facility') with certain lenders party thereto, The Chase Manhattan Bank, as
Administrative Agent, The Chase Manhattan Bank of Canada, as Canadian
Administrative Agent, The Bank of Nova Scotia, as Syndication Agent, and The
First National Bank of Chicago as Documentation Agent. Of this amount, up to
$60,000 is available for borrowing by the Canadian Subsidiary. In addition, on
April 30, 1999, GCIP issued and sold $100,000 aggregate principal amount of
10 5/8% Senior Subordinated Notes due 2009 of which approximately $80 million
was distributed to GCG.
The Senior Subordinated Notes are unsecured while the $85 million Credit
Facility is secured by 100% of the capital stock of GCIP, 100% of the owned
capital stock of, and guarantees from, the direct and indirect domestic
subsidiaries of the Company, 65% of certain owned foreign subsidiaries of the
Company and substantially all of the other assets of the Company. In addition,
the portion of the Credit Facility available to the Company's Canadian
subsidiary is secured by substantially all of the assets of the Company's
Canadian subsidiary. The Senior Subordinated Notes and the Credit Facility
contain certain covenants with respect to additional indebtedness, and preferred
stock by subsidiaries, restricted payments, transactions with affiliates, liens,
dividends and other payment instructions affecting subsidiaries, consolidations,
mergers, the sale of assets and financial tests.
NOTE 5 -- 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. In connection with the Spinoff, Latona agreed to provide its services
separately to GCG and GenTek. GCG's share of this management fee is $570 and
$738 for the six months ended June 30, 1998 and 1999, respectively.
TRANSITION SUPPORT AGREEMENT
GCG and GenTek have entered into various transition agreements that
provide mechanisms for an orderly transition after the Spinoff. For the period
from April 30, 1999 to June 30, 1999, GenTek charged GCG $618 related to these
transition agreements.
F-7
<PAGE>
GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(DOLLARS IN THOUSANDS)
(UNAUDITED)
OTHER TRANSACTIONS
The Company supplies soda ash to General Chemical Corporation ('GCC'),
an affiliate of the Company. For the six months ended June 30, 1998 and 1999,
sales to GCC amounted to $3,434 and $5,106, respectively.
NOTE 6 -- GEOGRAPHIC INFORMATION
<TABLE>
<CAPTION>
TOTAL REVENUES OPERATING PROFIT
JUNE 30, JUNE 30,
------------------- -----------------
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
United States..................................... $ 99,611 $ 93,312 $16,976 $ 9,391
Foreign........................................... 49,546 51,790 5,746 5,838
Elimination....................................... (15,773) (14,465) (312) (75)
-------- -------- ------- -------
$133,384 $130,637 $22,410 $15,154
-------- -------- ------- -------
-------- -------- ------- -------
</TABLE>
F-8
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE STOCKHOLDER OF
GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC.
We have audited the accompanying consolidated balance sheets of General
Chemical Industrial Products Inc. as of December 31, 1997 and 1998, and the
related consolidated statements of operations, changes in equity and cash flows
for each of the three years in the 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 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 General Chemical Industrial
Products Inc. 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.
Deloitte & Touche LLP
Parsippany, New Jersey
February 11, 1999
(April 30, 1999 as to Note 1)
F-9
<PAGE>
GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC.
CONSOLIDATED 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 consolidated financial statements.
F-10
<PAGE>
GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1997 1998
-------- --------
(IN THOUSANDS)
<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...................................... $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
Net investment by The General Chemical Group Inc............ 85,505 75,292
-------- --------
Total liabilities and equity...................... $262,175 $248,714
-------- --------
-------- --------
</TABLE>
See the accompanying notes to the consolidated financial statements.
F-11
<PAGE>
GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC.
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................................................ $ 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 consolidated financial statements.
F-12
<PAGE>
GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1996 1997 1998
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Net investment by The General Chemical Group Inc. 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)
-------- ------- --------
Net investment by The General Chemical Group Inc. at end of
year...................................................... $ 62,795 $85,505 $ 75,292
-------- ------- --------
-------- ------- --------
</TABLE>
F-13
<PAGE>
GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1 -- BASIS OF PRESENTATION
General Chemical Industrial Products Inc. (the 'Company') 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.
The Company is a wholly-owned subsidiary of The General Chemical Group Inc.
('GCG'). The Company was formed on April 30, 1999 as part of the separation by
GCG of its Manufacturing and Performance Products Segments from its Industrial
Chemicals Segment through a distribution of stock of GenTek Inc. ('GenTek') to
stockholders of GCG (the 'Spinoff'). In connection with the Spinoff, GCG
transferred its Industrial Chemical Segment to a wholly-owned subsidiary,
General Chemical Industrial Products Inc. and transferred its Manufacturing and
Performance Products Segment to a wholly-owned subsidiary, GenTek and
distributed the stock of GenTek to shareholders of GCG. On April 30, 1999, GCG
and GenTek became separate, publicly-traded companies on the New York Stock
Exchange. GCG continues to trade using the GCG symbol. GCG owns and operates the
Company, and GenTek owns and operates the businesses comprising the
Manufacturing and Performance Products Segments. This transaction will result in
a deficit of approximately $40 million.
The transfer of GCG's Industrial Chemical Segment to the Company has been
reflected at the historical book value of the assets and liabilities received
and accounted for in a manner similar to a pooling of interests. Accordingly,
all prior periods presented have been restated to reflect the transfer. The
financial information included herein does not necessarily reflect the
consolidated results of operations, financial position, changes in equity and
cash flows of the Company had the Company been a separate stand-alone entity for
the periods presented. The consolidated 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 Company in a reasonable and consistent basis
using management's estimate of services provided to the Company by GCG. However,
such allocations are not necessarily indicative of the level of expenses which
might have been incurred had the Company been operating as a stand-alone entity
during the periods presented or expected to be incurred after the Spinoff.
The Company 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 Company 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 transfers to or from
GCG are reflected in net investment by The General Chemical Group Inc. Net
interest expense has been allocated assuming that the Company's 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 Company operated as a separate, stand-alone public
entity. Subsequent to the Spinoff, the Company 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 Company's financial results include the costs incurred by GCG pension
and postretirement benefit plans for employees and retirees of the Company.
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
F-14
<PAGE>
GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
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 consolidated financial statements reflect the results of
operations, financial position, changes in net equity and cash flows of the
Company, including General Chemical (Soda Ash) Partners ('GCSAP') of which the
Company owns 51 percent. The consolidated financial statements reflect the
assets and liabilities and the historical results of operations of the
Industrial Chemical Business. All intercompany balances and transactions have
been eliminated.
Taxes on income are computed as if the Company were a stand-alone company.
The provision for income taxes has been determined as if the Company 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.
The Company recognizes revenues upon shipment of product, net of freight
with provisions recorded for estimated returns.
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.
F-15
<PAGE>
GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 3 -- 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 summary of the components of deferred tax assets and liabilities is as
follows:
<TABLE>
<CAPTION>
YEARS ENDED 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 liabilities................................ $ 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.
F-16
<PAGE>
GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
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, GCG entered into a tax sharing agreement
with GenTek. The agreement will require GenTek to indemnify and hold harmless
GCG for consolidated income tax liabilities attributable to periods before the
Spinoff.
NOTE 4 -- PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
The Company participates in GCG's domestic and foreign pension plans. At
the Spinoff, the Company will assume the responsibility for pension benefits for
retirees whose last work assignment was with the Company and for employees of
the Company. Following the Spinoff, the Company will establish separate defined
benefit plans for the employees and retirees of the Company. Assets included in
trusts under qualified pension plans will be divided after the Spinoff between
the trusts for GenTek's qualified pension plans and the Company's 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
Company also participates in GCG's sponsored postretirement benefit plan
substantially covering all hourly and certain salaried employees of GCG. GCG
funds these benefits on a pay-as-you-go basis. At the Spinoff, the Company will
assume the responsibility for postretirement benefits for retirees whose last
work assignment was with the Company and for the employees of the Company. The
disclosures for GCG'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>
F-17
<PAGE>
GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
<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........ $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>
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-18
<PAGE>
GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
<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>
<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 1,643 354 370
Foreign Currency Translation.................. (1,950) (4,412) -- --
Benefits Paid................................. (3,505) (3,240) (354) (370)
-------- -------- -------- --------
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>
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
F-19
<PAGE>
GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
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 Company's share of GCG'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 Company's 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 Company's 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 Company's 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 Company's 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. The actual amount transferred will be measured at the Spinoff
date and may be different from these amounts.
NOTE 5 -- 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>
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 the Company, 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 the Company, 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
F-20
<PAGE>
GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
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 the
Company while the Company is a partner, the Company shall pay to The Andover
Group, Inc. $2,833.
The Company is involved in 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 6 -- 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 Company's share of this management fee is
$388, $361 and $285 per quarter for the years 1996, 1997 and 1998, respectively.
OTHER TRANSACTIONS
The Company supplies soda ash to General Chemical Corporation ('GCC'), an
affiliate of the Company. For the years ended December 31, 1996, 1997 and 1998,
sales to GCC amounted to $5,665, $5,240 and $5,325, respectively.
NOTE 7 -- ADDITIONAL FINANCIAL INFORMATION
The following are summaries of selected balance sheet items:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
RECEIVABLES 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
------- -------
------- -------
<CAPTION>
DECEMBER 31,
---------------------
INVENTORIES 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.
F-21
<PAGE>
GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
PROPERTY, PLANT AND EQUIPMENT 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>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
ACCRUED LIABILITIES 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>
NOTE 8 -- 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 9 -- GEOGRAPHIC INFORMATION
<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)..... $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.
F-22
<PAGE>
[Logo] GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC.
OFFER TO EXCHANGE FOR ALL OUTSTANDING
10 5/8% SENIOR SUBORDINATED NOTES DUE 2009
-----------------------------
PROSPECTUS
-----------------------------
------------------------------------------------
BROKER-DEALER PROSPECTUS
DELIVERY REQUIREMENTS
Until 180 days after the expiration of this exchange offer on
November 9, 1999, all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
Each broker-dealer that receives new notes for its own account in the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of such new notes. The letter of transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an 'underwriter' within the meaning of the Securities Act of
1933. This prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of new notes received
in exchange for old notes where such old notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. We have agreed that, for a period of 180 days after the expiration
date, we will make this prospectus available to any broker-dealer for use in
connection with any such resale.
------------------------------------------------
OCTOBER 6, 1999
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
General Chemical is incorporated under the laws of the State of Delaware.
Section 145 of the Delaware Corporation Law, as amended, and paragraph (5) of
Article Fifth of General Chemical's Amended and Restated Certificate of
Incorporation provide for the indemnification, except in certain circumstances
set forth below, of officers, directors, employees and agents of General
Chemical for certain expenses incurred in connection with any threatened,
pending or completed action, suit, or proceeding, whether civil, criminal,
administrative or investigative, and for the purchase and maintenance of
insurance by General Chemical on behalf of officers, directors, employees and
agents of General Chemical against any liability asserted against, and incurred
by, any such officer, director, employee or agent in such capacity. Set forth
below is the text of Section 145 and the text of paragraph (5) of Article Fifth
of General Chemical's Amended and Restated Certificate of Incorporation.
Section 145 of the Delaware Corporation Law, as amended, provides as
follows:
'145 INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS;
INSURANCE. -- (a) A corporation shall have power to indemnify any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that the person is or
was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by the
person in connection with such action, suit or proceeding if this person
acted in good faith and in a manner the person reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe
the person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which
this person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that the person's conduct was
unlawful.
(b) A corporation shall have power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that the person is or
was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or
settlement of such action or suit if the person acted in good faith and in
a manner the person reasonably believed to be in or not opposed to the best
interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the
extent that the 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 person
is fairly and reasonably entitled to indemnity for such expenses which the
Court of Chancery or such other court shall deem proper.
(c) To the extent that a present or former director or officer of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith.
II-1
<PAGE>
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the present or former director, officer, employee or agent is proper in
the circumstances because the person has met the applicable standard of
conduct set forth in subsections (a) and (b) of this section. Such
determination shall be made, with respect to a person who is a director or
officer at the time of such determination, (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even
though less than a quorum, or (2) by a committee of such directors
designated by majority vote of such directors, even though less than a
quorum, or (3) if there are no such directors, or if such directors so
direct, by independent legal counsel in a written opinion, or (4) by the
stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that such person is not
entitled to be indemnified by the corporation as authorized in this
section. Such expenses (including attorneys' fees) incurred by former
directors and officers or other employees and agents may be so paid upon
such terms and conditions, if any, as the corporation deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any bylaw, 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 such office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against such person and incurred by such person in
any such capacity, or arising out of such person's status as such, whether
or not the corporation would have the power to indemnify such person
against such liability under this section.
(h) For purposes of this section, references to 'the corporation'
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as such
person would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this section, references to 'other enterprises'
shall include employee benefit plans; references to 'fines' shall include
any excise taxes assessed on a person with respect to any employee benefit
plan; and references to 'serving at the request of the corporation' shall
include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee, or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner such person reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner 'not opposed to the best interests of the
corporation' as referred to in this section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.'
II-2
<PAGE>
(k) The Court of Chancery is hereby vested with exclusive jurisdiction
to hear and determine all actions for advancement of expenses or
indemnification brought under this section or under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise. The Court of
Chancery may summarily determine a corporation's obligation to advance
expenses (including attorney's fees).'
Paragraph (5) of Article Fifth of the Amended and Restated Certificate of
Incorporation of General Chemical provides as follows:
'(5) No director of the Corporation shall be liable to the Corporation
or its stockholders for monetary damages for breach of his or her fiduciary
duty as a director, provided that nothing contained in this Article shall
eliminate or limit the liability of a director (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 the law, (iii) under Section 174 of the DGCL or
(iv) for any transaction from which the director derived an improper
personal benefit.'
As permitted by Section 145 of the General Corporation Law of the State of
Delaware, as amended, General Chemical has purchased and maintains insurance
providing for reimbursement to elected directors and officers, subject to
certain exceptions, of amounts they may be legally obligated to pay, including
but not limited to damages, judgments, settlements, costs and attorneys' fees
(but not including fines, penalties or matters not insurable under the law), as
a result of claims and legal actions instituted against them to recover for
their acts while serving as directors or officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
2.1 -- Amendment No. 2 to Form 10 of GenTek Inc. for
registration of Securities of GenTek Inc. Incorporated by
reference to GenTek Inc.'s Registration Statement
Amendment No. 2 on Form 10 (File No. 001-14789) filed with
the Securities and Exchange Commission on April 8, 1999
(the '1999 GenTek Form 10')
2.2 -- Separation Agreement among General Chemical, GenTek Inc.,
The General Chemical Group Inc. and General Chemical
Corporation. Incorporated by reference to the relevant
exhibit to the 1999 GenTek Form 10
*3.1 -- Amended and Restated Certificate of Incorporation of
General Chemical
*3.2 -- Amended and Restated By-Laws of General Chemical
4.1 -- Indenture, dated as of April 30, 1999, between General
Chemical and U.S. Bank Trust National Association, as
Trustee. Incorporated by reference to the relevant exhibit
to General Chemical Group Inc.'s 10-Q for the three months
ended March 31, 1999 filed with the Securities and
Exchange Commission on May 17, 1999 (the 'GCG First
Quarter 1999 10-Q')
*4.2 -- Exchange and Registration Rights Agreement, dated as of
April 30, 1999, among General Chemical, Chase Securities
Inc., BT Alex. Brown Incorporated and ING Baring Fulman
Selz LLC
5.1 -- Opinion of Debevoise & Plimpton
10.1 -- Second Amended and Restated Partnership Agreement of
GCSAP dated June 30, 1992, among the Company (as assignee
of General Chemical Corporation), The Andover Group, Inc.,
and TOSOH Wyoming, Inc. Incorporated by reference to the
relevant exhibit to General Chemical Corporation's
Registration Statement filed with the SEC on August 11,
1993, File No. 33-64824 (the '1993 GCC Registration
Statement')
10.2 -- Amended and Restated Parent Guaranty and Transfer
Agreement dated June 30, 1992, among New Hampshire Oak,
Inc., ACI International Limited and TOSOH America, Inc.
Incorporated by reference to the relevant exhibit to the
1993 GCC Registration Statement
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C>
10.3 -- Amended and Restated Services Agreement, dated June 30,
1992, between General Chemical (as assignee of General
Chemical Corporation) and GCSAP. Incorporated by reference
to the relevant exhibit to the 1993 GCC Registration
Statement
10.4 -- Employee Transfer Agreement, dated June 30, 1992, between
General Chemical (as assignee of General Chemical
Corporation) and GCSAP. Incorporated by reference to the
relevant exhibit to the 1993 GCC Registration Statement
10.5 -- Guaranty dated as of June 30, 1992, from New Hampshire
Oak, Inc., for the benefit of GCSAP. Incorporated by
reference to the relevant exhibit to the 1993 GCC
Registration Statement
10.6 -- Employee Benefits Agreement among The General Chemical
Group Inc., General Chemical and General Chemical
Corporation. Incorporated by reference to the relevant
exhibit to the 1999 GenTek Form 10
10.7 -- Intellectual Property Agreement among General Chemical,
General Chemical Corporation, GenTek Inc. and The General
Chemical Group Inc. Incorporated by reference to the
relevant exhibit to the 1999 GenTek Form 10
10.8 -- Credit Agreement, dated as of April 30, 1999, among
General Chemical and General Chemical Canada Ltd. as
Borrowers, the several Lenders from time to time parties
thereto, The Chase Manhattan Bank, as Administrative
Agent, The Chase Manhattan Bank of Canada, as Canadian
Administrative Agent, The Bank of Nova Scotia, as
Syndication Agent, and The First National Bank of Chicago
as Documentation Agent. Incorporated by reference to the
relevant exhibit to the GCG First Quarter 1999 10-Q
10.9 -- Guarantee and Collateral Agreement, dated as of April 30,
1999, made by General Chemical and certain of its
subsidiaries in favor of the Chase Manhattan Bank, as
Collateral Agent. Incorporated by reference to the
relevant exhibit to the GCG First Quarter 1999 10-Q
10.10 -- Amended and Restated Management Agreement between Latona
Associates Inc. and The General Chemical Group Inc.
Incorporated by reference to the relevant exhibit to The
General Chemical Group Inc.'s 10-Q for the three months
ended June 30, 1999 with the Securities and Exchange
Commission on August 16, 1999 (the 'GCG Second Quarter
10-Q').
10.11 -- Tax Sharing Agreement between The General Chemical Group
Inc. and GenTek Inc. Incorporated by reference to the
relevant exhibit to the 1999 GenTek Form 10.
*10.12 -- Sublease Agreement between General Chemical Industrial
Products Inc. and General Chemical Corporation.
*10.13 -- Transition Support Agreement between The General Chemical
Group Inc. and GenTek Inc.
*12.1 -- Computations of Ratio of Earnings to Fixed Charges
*21.1 -- Subsidiaries of General Chemical
23.1 -- Consent of Deloitte & Touche LLP
23.2 -- Consent of Debevoise & Plimpton (included in item 5.1)
*24.1 -- Powers of Attorney
25.1 -- Statement of Eligibility and Qualification Under the
Trust Indenture Act (Form T-1) of Exchange Agent
*27.1 -- Financial Data Schedule
*99.1 -- Form of Letter of Transmittal used in connection with the
Exchange Offer
*99.2 -- Form of Notice of Guaranteed Delivery used in connection
with the Exchange Offer
</TABLE>
- ------------
* Previously filed.
II-4
<PAGE>
(B) FINANCIAL STATEMENT SCHEDULES.
GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE THREE YEARS ENDED DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS DEDUCTIONS TRANSLATION BALANCE AT
BEGINNING CHARGED TO FROM ADJUSTMENT END OF
OF PERIOD INCOME RESERVES DURING PERIOD PERIOD
--------- ------ -------- ------------- ------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996
Allowance for doubtful accounts..... $2,020 $126 $(201) $ 3 $1,948
Year ended December 31, 1997
Allowance for doubtful accounts..... $1,948 $768 $ (5) $(22) $2,689
Year ended December 31, 1998
Allowance for doubtful accounts..... $2,689 $ 5 $ (5) $(31) $2,658
</TABLE>
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(c) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
(d) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in
II-5
<PAGE>
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value
of securities offered would not exceed that which is registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the 'Calculation of
Registration Fee' table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, General
Chemical Industrial Products Inc. has caused this Registration Statement on Form
S-4 to be signed on its behalf by the undersigned, thereunto duly authorized, on
the 30th day of September, 1999.
GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC.
By /S/ STEWART FISHER
............................................
STEWART FISHER
VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
Pursuant to the requirements of this Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
PRINCIPAL EXECUTIVE OFFICER:
* President and Chief Executive Officer September 30, 1999
......................................
(DELYLE BLOOMQUIST)
PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER:
/S/ STEWART FISHER Vice President and Chief Financial September 30, 1999
...................................... Officer
(STEWART FISHER)
DIRECTORS:
* Director and Chairman of the Board September 30, 1999
......................................
(DELYLE BLOOMQUIST)
/S/ STEWART FISHER Director September 30, 1999
......................................
(STEWART FISHER)
*By: /S/ STEWART FISHER September 30, 1999
...................................
STEWART FISHER
Attorney-in-Fact
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
2.1 -- Amendment No. 2 to Form 10 of GenTek Inc. for
registration of Securities of GenTek Inc. Incorporated by
reference to GenTek Inc.'s Registration Statement
Amendment No. 2 on Form 10 (File No. 001-14789) filed with
the Securities and Exchange Commission on April 8, 1999
(the '1999 GenTek Form 10')
2.2 -- Separation Agreement among General Chemical, GenTek Inc.,
The General Chemical Group Inc. and General Chemical
Corporation. Incorporated by reference to the relevant
exhibit to the 1999 GenTek Form 10
*3.1 -- Amended and Restated Certificate of Incorporation of
General Chemical
*3.2 -- Amended and Restated By-Laws of General Chemical
4.1 -- Indenture, dated as of April 30, 1999, between General
Chemical and U.S. Bank Trust National Association, as
Trustee. Incorporated by reference to the relevant exhibit
to General Chemical Group Inc.'s 10-Q for the three months
ended March 31, 1999 filed with the Securities and
Exchange Commission on May 17, 1999 (the 'GCG First
Quarter 1999 10-Q')
*4.2 -- Exchange and Registration Rights Agreement, dated as of
April 30, 1999, among General Chemical, Chase Securities
Inc., BT Alex. Brown Incorporated and ING Baring Fulman
Selz LLC
5.1 -- Opinion of Debevoise & Plimpton
10.1 -- Second Amended and Restated Partnership Agreement of
GCSAP dated June 30, 1992, among General Chemical (as
assignee of General Chemical Corporation), The Andover
Group, Inc., and TOSOH Wyoming, Inc. Incorporated by
reference to the relevant exhibit to General Chemical
Corporation's Registration Statement filed with the SEC on
August 11, 1993, File No. 33-64824 (the '1993 GCC
Registration Statement')
10.2 -- Amended and Restated Parent Guaranty and Transfer
Agreement dated June 30, 1992, among New Hampshire Oak,
Inc., ACI International Limited and TOSOH America, Inc.
Incorporated by reference to the relevant exhibit to the
1993 GCC Registration Statement
10.3 -- Amended and Restated Services Agreement, dated June 30,
1992, between General Chemical (as assignee of General
Chemical Corporation) and GCSAP. Incorporated by reference
to the relevant exhibit to the 1993 GCC Registration
Statement
10.4 -- Employee Transfer Agreement, dated June 30, 1992, between
General Chemical (as assignee of General Chemical
Corporation) and GCSAP. Incorporated by reference to the
relevant exhibit to the 1993 GCC Registration Statement
10.5 -- Guaranty dated as of June 30, 1992, from New Hampshire
Oak, Inc., for the benefit of GCSAP. Incorporated by
reference to the relevant exhibit to the 1993 GCC
Registration Statement
10.6 -- Employee Benefits Agreement among The General Chemical
Group Inc., General Chemical and General Chemical
Corporation. Incorporated by reference to the relevant
exhibit to the 1999 GenTek Form 10
10.7 -- Intellectual Property Agreement among General Chemical,
General Chemical Corporation, GenTek Inc. and The General
Chemical Group Inc. Incorporated by reference to the
relevant exhibit to the 1999 GenTek Form 10
10.8 -- Credit Agreement, dated as of April 30, 1999, among
General Chemical and General Chemical Canada Ltd. as
Borrowers, the several Lenders from time to time parties
thereto, The Chase Manhattan Bank, as Administrative
Agent, The Chase Manhattan Bank of Canada, as Canadian
Administrative Agent, The Bank of Nova Scotia, as
Syndication Agent, and The First National Bank of Chicago
as Documentation Agent. Incorporated by reference to the
relevant exhibit to the GCG First Quarter 1999 10-Q
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
10.9 -- Guarantee and Collateral Agreement, dated as of April 30,
1999, made by General Chemical and certain of its
subsidiaries in favor of the Chase Manhattan Bank, as
Collateral Agent. Incorporated by reference to the
relevant exhibit to the GCG First Quarter 1999 10-Q
10.10 -- Amended and Restated Management Agreement between Latona
Associates Inc. and The General Chemical Group Inc.
Incorporated by reference to the relevant exhibit to The
General Chemical Group Inc.'s 10-Q for the three months
ended June 30, 1999 with the Securities and Exchange
Commission on August 16, 1999 (the 'GCG Second
Quarter 10-Q')
10.11 -- Tax Sharing Agreement between The General Chemical Group
Inc. and GenTek Inc. Incorporated by reference to the
relevant exhibit to the 1999 GenTek Form 10
*10.12 -- Sublease Agreement between General Chemical Industrial
Products Inc. and General Chemical Corporation
*10.13 -- Transition Support Agreement between GenTek Inc. and
General Chemical Corporation
*12.1 -- Computations of Ratio of Earnings to Fixed Charges
*21.1 -- Subsidiaries of General Chemical
23.1 -- Consent of Deloitte & Touche LLP
23.2 -- Consent of Debevoise & Plimpton (included in Exhibit 5.1)
*24.1 -- Powers of Attorney
25.1 -- Statement of Eligibility and Qualification Under the
Trust Indenture Act (Form T-1) of Exchange Agent
*27.1 -- Financial Data Schedule
*99.1 -- Form of Letter of Transmittal used in connection with the
Exchange Offer
*99.2 -- Form of Notice of Guaranteed Delivery used in connection
with the Exchange Offer
</TABLE>
------------
* Previously filed.
II-9
STATEMENT OF DIFFERENCES
------------------------
The trademark symbol shall be expressed as .............................. 'TM'
The registered trademark symbol shall be expressed as ................... 'r'
<PAGE>
Exhibit 5.1
[Letterhead of Debevoise & Plimpton]
September 30, 1999
General Chemical Industrial Products Inc.
90 East Halsey Road
Parsippany, New Jersey 03841
Registration Statement on Form S-4
Ladies and Gentlemen:
We have acted as special counsel to General Chemical Industrial
Products Inc. (the "Company") in connection with the preparation and filing with
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Act"), of a Registration Statement on Form S-4 (as
amended, the "Registration Statement") relating to the proposed exchange by the
Company of $100,000,000 aggregate principal amount of its 10 5/8% Senior
Subordinated Notes due 2009 (the "New Notes") for $100,000,000 aggregate
principal amount of its currently outstanding 10 5/8% Senior Subordinated Notes
due 2009 (the "Old Notes"). The Old Notes and the New Notes were or, will be,
respectively, issued by the Company pursuant to the Indenture (the "Indenture"),
dated as of April 30, 1999, between the Company and U.S. Bank Trust National
Association, as trustee.
In so acting, we have examined and relied upon the originals, or
copies certified or otherwise identified to our satisfaction, of such records,
documents, certificates and other instruments as in our judgment are necessary
or appropriate to enable us to render the opinion expressed below.
We are of the opinion that, when the Registration Statement has
become effective under the Securities Act and the New Notes have been issued and
exchanged for
<PAGE>
2
the Old Notes in the manner described in the Registration Statement and in
accordance with the Indenture, the New Notes will be validly issued and will
be valid and legally binding obligations of the Company, enforceable against
the Company in accordance with their terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating
to or affecting creditors' rights generally or by general principles of equity
(regardless of whether such enforceability is considered in an action at law
or in equity).
We express no opinion as to the effect of any Federal or state
laws regarding fraudulent transfers or conveyances.
We express no opinion as to the laws of any jurisdiction other
than the Federal laws of the United States, the laws of the State of New York
and the corporate laws of the State of Delaware.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the headings "Legal
Matters" in the Prospectus. In giving such consent, we do not hereby concede
that we are within the category of persons whose consent is required under
Section 7 of the Act or the rules and regulations of the Commission thereunder.
Very truly yours,
/s/ Debevoise & Plimpton
<PAGE>
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
TO THE SHAREHOLDER OF
GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC.
We consent to the use in this Amendment No. 3 to Registration
Statement No. 333-81469 relating to $100,000,000 Senior Subordinated Notes due
2009 of General Chemical Industrial Products Inc. on Form S-4 of our report
dated February 11, 1999 (April 30, 1999 as to Note 1), appearing in the
Prospectus, which is part of this Registration Statement, and to the references
to us under the headings 'Selected Financial Data' and 'Experts' in such
Prospectus.
Our audits of the consolidated financial statements referred to in
our aforementioned report also included the financial statement schedule of
General Chemical Industrial Products Inc., listed in Item 21(b). This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
/s/ Deloitte & Touche LLP
Parsippany, New Jersey
September 30, 1999
<PAGE>
Exhibit 25.1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER
THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility of
a Trustee Pursuant to Section 305(b)(2)_
---------------------------------------------------
U.S. BANK TRUST NATIONAL ASSOCIATION
(Exact name of Trustee as specified in its charter)
<TABLE>
<S> <C> <C>
111 EAST WACKER DRIVE, SUITE 3000
CHICAGO, ILLINOIS 60601 36-4046888
(Address of principal executive offices) (Zip Code) I.R.S. Employer Identification No.
Dennis J. Calabrese
111 East Wacker Drive, Suite 3000
Chicago, Illinois 60601
Telephone (312) 228-9418
(Name, address and telephone number of agent for service)
GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC.
(Exact name of obligor as specified in its charter)
</TABLE>
<TABLE>
<S> <C>
DELAWARE 22-3649282
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
LIBERTY LANE
HAMPTON, NEW HAMPSHIRE 03841
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
DEBT SECURITIES
$100,000,000 10 5/8% Senior Subordinated Notes due 2009
================================================================================
<PAGE>
FORM T-1
ITEM 1. GENERAL INFORMATION. Furnish the following information as to the
Trustee.
a) Name and address of each examining or supervising authority to
which it is subject.
Comptroller of the Currency
Washington, D.C.
b) Whether it is authorized to exercise corporate trust powers.
Yes
ITEM 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the
Trustee, describe each such affiliation.
None
ITEMS 3-15 Not applicable because, to the best of Trustee's knowledge, the
Trustee is not a trustee under any other indenture under which any
other securities or certificates of interest or participation in any
other securities of the obligor are outstanding and there is not, nor
has there been, a default with respect to securities issued under
this indenture.
ITEM 16. LIST OF EXHIBITS: List below all exhibits filed as apart of this
statement of eligibility and qualification.
1. A copy of the Articles of Association of the Trustee now in
effect, incorporated herein by reference to Exhibit 1 of Form T-1,
Registration No. 333-18235.*
2. A copy of the certificate of authority of the Trustee to commence
business, incorporated herein by reference to Exhibit 2 of Form
T-1, Registration No. 333-18235.*
3. A copy of the certificate of authority of the Trustee to exercise
corporate trust powers, incorporated herein by reference to
Exhibit 3 of Form T-1, Registration No. 333-18235.*
4. A copy of the existing bylaws of the Trustee, as now in effect,
incorporated herein by reference to Exhibit 4 of Form T-1,
Registration No. 333-18235.*
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the
Trust Indenture Act of 1939, incorporated herein by reference to
Exhibit 6 of Form T-1, Registration No. 333-18235.*
7. A copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or
examining authority, filed herewith.
8. Not applicable.
9. Not applicable.
2
*See* at top of page 3
<PAGE>
* Exhibits thus designated are incorporated herein by reference to Exhibits
bearing identical numbers in Item 16 of the Form T-1 filed by the Trustee with
the Securities and Exchange Commission with the specific references noted.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the Trustee, U.S. BANK TRUST NATIONAL ASSOCIATION, a national
banking association organized and existing under the laws of the United
States of America, has duly caused this statement of eligibility and
qualification to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Chicago, State of Illinois on the 28th day
of September, 1999.
U.S. BANK TRUST NATIONAL ASSOCIATION
By: /s/ K. WENDY KUMAR
--------------------------------------
Vice President and Assistant Secretary
3
<PAGE>
Exhibit 7
U.S. BANK TRUST NATIONAL ASSOCIATION
STATEMENT OF FINANCIAL CONDITION
AS OF 6/30/99
($000's)
<TABLE>
<CAPTION>
6/30/99
-------------
<S> <C>
ASSETS
Cash and Due From Depository Institutions $ 61,703
Federal Reserve Stock 3,732
Fixed Assets 67
Intangible Assets 42,764
Other Assets 3,046
-------------
TOTAL ASSETS $111,311
LIABILITIES
Other Liabilities 1,899
-------------
TOTAL LIABILITIES $ 1,899
EQUITY
Common and Preferred Stock 1,000
Surplus 106,712
Undivided Profits 1,699
Net unrealized hold in gains on available for sale securities 1
-------------
TOTAL EQUITY CAPITAL 109,412
TOTAL LIABILITIES AND EQUITY CAPITAL $111,311
</TABLE>
- -------------------------------------------------------------------------------
To the best of the undersigned's determination, as of this date the above
financial information is true and correct.
U.S. Bank Trust National Association
By: /s/ K. Wendy Kumar
--------------------------------
Vice President
Date: September 28, 1999
4
