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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
August 31, 1998
TRANS-RESOURCES, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 33-11634 36-2729497
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
9 West 57th Street, New York, New York 10019
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(212) 888-3044
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Item 5. Other Events
As previously disclosed by Trans-Resources, Inc. (the "Company"), on
October 24, 1995 several suits were filed in both the State Court in Bogalusa,
Louisiana and in the United States District Court for the Eastern District of
Louisiana, each purporting to be class actions arising out of an October 23,
1995 chemical release from a tank car at a Bogalusa, Louisiana plant of a
customer of the Company's indirect subsidiary, Vicksburg Chemical Company
("Vicksburg"). The tank car contained nitrogen tetroxide which had been produced
and sold by Vicksburg. Subsequently, approximately 146 suits were filed in the
State Court for the 22nd Judicial District, Washington Parish, Louisiana. The
cases have been consolidated in such State Court (the "Louisiana Court") and the
consolidated suit certified as a class action (the "Louisiana Class Action").
The class is estimated to contain more than 8,000 claimants (the "Class").
Vicksburg, the Company and Vicksburg's parent corporation, Cedar Chemical
Corporation ("Cedar"), are included among the defendants in the Class Action. In
addition, two later suits, one on behalf of the City of Bogalusa, have been
filed in the same court naming, among the defendants, Vicksburg, Cedar and the
Company. Also, 10 separate suits naming an aggregate of approximately 4,000
plaintiffs (the "Mississippi Plaintiffs") are pending in the Circuit Court of
Hinds County, Mississippi naming, among the defendants, Vicksburg, Cedar and the
Company. Among other defendants included in the consolidated Louisiana Class
Action and in the Mississippi suits are Gaylord Chemical Company and its parent
corporation, Gaylord Container Corporation; Union Tank Car Company; Illinois
Central Railroad Company; and Kansas City Southern Railway Company. The
plaintiffs in these suits seek unspecified damages arising out of the alleged
exposure to toxic fumes and the City of Bogalusa seeks reimbursement of expenses
allegedly resulting from the chemical release. The suits were tendered to the
Company's liability insurance carriers for defense and indemnification. Certain
of the carriers denied coverage. Vicksburg and Cedar have commenced an action in
the Louisiana Court against their insurance carriers (whose insurance policies
also included the Company as an additional named insured) seeking a declaratory
judgement that Cedar and Vicksburg are entitled to defense costs and
indemnification with respect to these claims.
On August 20 and 21, 1998, conditional agreements to settle the claims
in the consolidated Louisiana Class Action and in the Mississippi suits were
entered into on behalf of the Company, Vicksburg, Cedar and other affiliates of
the Company named as defendants (collectively "TRI") and on behalf of the
plaintiffs.
If the numerous conditions to the settlement are satisfied, TRI's
funding obligation under the settlement would be an aggregate of $32 million,
the initial $10 million of which was deposited in an escrow account on August
31, 1998 governed by a Temporary Escrow Agreement (the "Temporary Escrow
Agreement"). In addition, two settling insurance carriers (the "Settling
Insurers") are to contribute an aggregate of $25 million and TRI will assign to
the plaintiffs its rights under another $27 million of insurance coverage. TRI
is also to contribute a sum equal to the amount by which the policy of one of
the Settling Insurers is depleted by payments of TRI's defense costs.
The Company will record a charge in the third quarter of approximately
$32 million in connection with the conditional settlement.
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The conditional settlement includes: (i) a Louisiana Conditional
Agreement to Settle (the "LCAS") among the Class, TRI and the Settling Insurers,
which sets forth the parameters of the overall settlement; (ii) a Mississippi
Conditional Agreement to Settle (the "MCAS") among TRI, the Mississippi
Plaintiffs, who (through their counsel) have advised that they will opt out of
the Louisiana Class Action, and the Settling Insurers, which sets forth the
settlement with the Mississippi Plaintiffs; and (iii) a Preliminary Settlement
Agreement (the "PSA") among the Class, the Settling Insurers and TRI, setting
forth the settlement with the Class. In addition to the Temporary Escrow
Agreement, a Preliminary Escrow Agreement ("PEA") and an Escrow and Trust
Agreement (which, together with the PSA, governs the Qualified Settlement Fund
described below) are to be executed to govern the money held in escrow until the
settlement is finalized or terminated.
The $10 million deposited in a Temporary Escrow Account on August 31,
1998, plus any earned interest (less a fixed amount which is to be paid to a
small group of the Mississippi Plaintiffs who have dismissed their claims
against TRI; the "Fixed Mississippi Settlement Amount") will be returned to TRI
if the MCAS, the LCAS and the PEA are not signed by all of the parties thereto
(including the escrow agents and the Settling Insurers) by October 1, 1998 or if
any of these agreements have been terminated by that date. After the MCAS, the
LCAS and the PEA have been signed, the $10 million (plus earned interest) in the
Temporary Escrow Account will be transferred to a preliminary escrow account,
which is governed by the LCAS, the MCAS and the PEA (the "Preliminary Escrow
Account"). TRI is also required to make a deposit into the Preliminary Escrow
Account of $18 million by the earlier of (i) March 31, 1999 and (ii) 30 days
after the Louisiana appeals court has affirmed the trial court's certification
of the Class (the "Certification Judgement"). By April 1, 1999 (or, if earlier,
35 days after the Certification Judgment), the Settling Insurers are to deposit
in the Preliminary Escrow Account an aggregate of $25 million (less any amount
by which those proceeds have been depleted by payment of TRI's defense costs).
After: (a) (i) plaintiffs' counsel has obtained settlements and
releases from all plaintiffs who are not in the Class because they have opted
out or fall outside of the definition of the Class ("Independent Claims
Plaintiffs") or (ii) TRI has agreed to go forward with the settlement without
such settlements and releases from the Independent Claims Plaintiffs; and (b)
the Louisiana Court gives its preliminary approval of the settlement respecting
the Class as set forth in the PSA, TRI will deposit in the Preliminary Escrow
Account a sum equal to the amount by which the insurance policy of one of the
Settling Insurers has been depleted by payments of TRI's defense costs.
Thereafter, the funds in the Preliminary Escrow Account (including earned
interest), less (x) the sums needed to settle the claims of all Independent
Claims Plaintiffs who settle, and (y) the sums to be set aside for the
Independent Claims Contingency Escrow (described below) and the Other Claims
Contingency Escrow (described below), will be transferred to the Qualified
Settlement Fund.
The Qualified Settlement Fund is to be used to fund the settlement with
the Class. If the transfer to the Qualified Settlement Fund occurs, TRI will be
further required to deposit $4 million in the Qualified Settlement Fund by
January 2, 2003 (but with interest on the $4 million at the three month LIBOR
rate to be payable by TRI beginning January 2, 2001). After all of the
conditions (described below) of the LCAS, MCAS and PSA have been met, TRI will
be deemed to have assigned to the Class all rights in the insurance policies of
the four non-settling insurance companies except for the "duty to defend"
obligation of one of them.
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TRI can terminate the settlement and TRI and the Settling Insurers can
recover the escrowed amounts plus earned interest (less the Fixed Mississippi
Settlement Amount) if any of the following conditions, among others, do not
occur: (a) by October 9, 1998 the Louisiana Court enters an order enjoining and
staying all claims and cross claims against TRI and Arie Genger (who, with his
family members, indirectly owns all of the outstanding capital stock of the
Company and is the Company's Chairman of the Board and Chief Executive Officer;
"Genger") in the Louisiana Class Action; (b) the Certification Judgment is
entered and becomes final; (c) all Class members and all settling Independent
Claims Plaintiffs reduce judgments against non-settling defendants to the extent
necessary to eliminate all cross claims and claims for contribution or indemnity
against TRI and/or Genger; (d) all claims of the Class are finally settled
pursuant to the terms of the settlement agreements; (e) either (i) plaintiffs'
counsel has obtained settlements and releases from all of the Independent Claims
Plaintiffs within 15 months after the deadline to opt out of the Louisiana Class
Action (the "Independent Claims Deadline") or (ii) if that does not happen, TRI
has agreed to go forward with the settlement without settlements and releases
from all of the Independent Claims Plaintiffs; (f) the sum that TRI demands be
placed in the Independent Claims Contingency Escrow to cover the claims of the
Independent Claims Plaintiffs not settled by the Independent Claims Deadline is
agreed to by plaintiffs' counsel and placed in such escrow; (g) the sum that TRI
demands be placed in the Other Claims Contingency Escrow to cover certain claims
that may not otherwise be covered by the settlement, is agreed to by plaintiffs'
counsel and placed in such escrow; (h) within 20 business days after all of the
above has taken place, the PSA is submitted to the Louisiana Court for its
preliminary approval; and (i) after the fairness hearing, the Louisiana Court
enters an order finally approving the PSA and the settlement with the Class
embodied therein and such order becomes final. If TRI elects to go forward with
the settlement without the releases from all of the Independent Claims
Plaintiffs and the Independent Claims Contingency Escrow is insufficient to
satisfy the remaining claims of the Independent Claims Plaintiffs and pay for
TRI's defense thereof, TRI is responsible for the shortfall. If the settlement
terminates, the plaintiffs can resume the litigations against TRI.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
September 9, 1998 TRANS-RESOURCES, INC.
By: /s/ Lester W. Youner
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Lester W. Youner
Vice President, Treasurer and
Chief Financial Officer
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