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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(MARK ONE)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____________ TO _____________
COMMISSION FILE NUMBER 1-13404
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THE GENERAL CHEMICAL GROUP INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 02-0423437
(STATE OF OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
LIBERTY LANE 03842
HAMPTON, NEW HAMPSHIRE (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (603) 929-2606
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, par value $.01 per share New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ___X___ No _______
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and is not contained in the
definitive information statement incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. _______
The aggregate value of the voting stock held by non-affiliates of the
registrant as of March 20, 1997, was approximately $478,643,062.
The number of outstanding shares of the Registrant's Common Stock as of
March 20, 1997 was 8,001,001 shares of Common Stock, $.01 par value per share.
The number of outstanding shares of the Registrant's Class B Common Stock
as of March 20, 1997 was 14,261,467 shares of Class B Common Stock, $.01 par
value per share.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's Proxy Statement for the Annual Meeting of
Stockholders to be held on May 13, 1997 are incorporated by reference into Part
III.
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PART I
ITEM 1. BUSINESS
GENERAL
The General Chemical Group Inc. (the 'Company'), which has a history dating
back to 1899, is a diversified manufacturing company predominantly engaged in
the production of inorganic chemicals, with manufacturing facilities located in
the United States and Canada. Through its Chemical Segment, the Company is a
leading producer of soda ash in North America, and a major North American
supplier of calcium chloride, sodium and ammonia salts, sulfites, nitrites,
aluminum-based chemical products, printing plates and refinery and chemical
regeneration services to a broad range of industrial and municipal customers.
Through its Manufacturing Segment, the Company manufactures precision and highly
engineered stamped and machined metal products, principally automotive engine
parts.
The Company was organized in 1988 as a Delaware corporation. The Company's
principal operating subsidiaries were transferred in 1986 by AlliedSignal to a
predecessor of the Company, at which time new operating management was
installed. On May 15, 1996, the Company and a principal stockholder (the
'Selling Stockholder') completed an initial public offering (the 'Offering') of
7,925,375 shares of Common Stock at $17.50 per share. Of the shares offered,
2,500,000 were issued and sold by the Company. The net proceeds to the Company
from the Offering, after deducting underwriters' discount and related fees and
expenses, were $40,600,000.
For certain information concerning the Company's revenue, operating profit
and identifiable assets attributable to each of the Company's segments,
geographic areas and the amount of export revenues in the aggregate to which
such revenues were made, see Note 12 of Notes to the Consolidated Financial
Statements.
CHEMICAL SEGMENT
INDUSTRIAL CHEMICALS
Soda ash and calcium chloride comprise the Company's industrial chemical
product lines. The Company is the second largest producer of soda ash in the
U.S. and Canada and is the only producer of both synthetic and natural soda ash
in North America. General Chemical (Soda Ash) Partners ('GCSAP'), the Company's
51 percent-owned partnership, produces natural soda ash by refining mined trona
deposits at its plant in Green River, Wyoming. The Green River basin, where all
but one of the U.S. producers of natural soda ash are located, contains the
largest known economically recoverable trona deposits in the world. Soda ash is
also produced by the Company's Canadian subsidiary, General Chemical Canada Ltd.
('GC Canada') at its plant in Amherstburg, Ontario, by using the synthetic
process. This production process, which is energy and labor intensive, is
considerably more costly than refining natural soda ash. The Amherstburg plant
remains profitable due to its operating efficiency, successful marketing of
calcium chloride, a co-product, and favorable freight rates to major Canadian
soda ash markets. GC Canada is the largest producer of calcium chloride in
Canada.
Soda Ash. The major use of soda ash is in the production of glass bottles
and other glass containers. Soda ash is also used in the manufacture of windows,
mirrors, fiberglass, television tubes, lighting ware, tableware, glassware and
laboratory ware. The chemical industry uses soda ash in the production of sodium
bicarbonate, sodium phosphates, sodium silicates and chrome chemicals. The
detergent industry often uses soda ash as the prime alkali to make phosphates
and silicates for dry detergent applications. Soda ash is also used, to a lesser
extent, by the water treatment industry to control pH levels and by the pulp and
paper industries in the pulping of wood fiber.
Due to the low-cost position of the U.S. natural soda ash producers, the
export market has grown significantly and now accounts for over one-third of
U.S. production. The Company, along with the other five U.S. producers of
natural soda ash, exports soda ash through the American Natural Soda Ash
Corporation ('ANSAC'), an export organization organized in 1984 under the
Webb-Pomerrene Act. ANSAC ships to all parts of the world except Canada and
Western Europe. Each individual member's
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allocation of ANSAC volume is based on the member's total nameplate capacity,
with any member's expansion phased in over a multi-year period for allocation
purposes.
Calcium Chloride. Calcium chloride is used predominantly for dust control
and roadbed stabilization on unpaved roads in the summer, and for melting ice on
highways in the winter. Although the summer road market is the dominant end use
in the Canadian market, the winter deicing market and industrial applications
are the major end use markets in the U.S. Industrial applications include
asphalt recycling, water treatment and concrete and drilling mud additives.
DERIVATIVE PRODUCTS AND SERVICES
The Company's derivative products and services product lines include a wide
variety of products such as sulfuric acid, sodium and ammonia salts, sulfites,
aluminum-based chemical products and nitrites that are derived principally from
the production of soda ash and the regeneration of sulfuric acid. These products
are categorized into five major product lines with end markets including
refinery and chemical sulfuric acid regeneration, water treatment, photo
chemicals, pulp and paper, chemical processing, semiconductor devices and
printing.
Refinery and chemical regeneration services. Refineries use sulfuric acid
as an alkylation process catalyst in the production of high-quality, high-octane
and low-vapor-pressure gasoline. The alkylation process contaminates and dilutes
the sulfuric acid catalyst, generating an 85 percent to 90 percent spent
sulfuric acid stream, which is then removed from the refineries via pipeline or
tank truck. The Company thermally decomposes the spent acid to regenerate fresh
sulfuric acid, which is then recycled back to the refinery. A similar service is
provided to the chemical industry for the manufacture of ion exchange resins,
silicone polymers, liquid detergents and surfactants.
Water Treatment. The Company, through its broad geographic network of 28
strategically located plants, is the largest North American producer of aluminum
sulfate ('alum'). Municipalities, which use alum as a flocculant and coagulant
in the treatment of water and waste water, are the predominant customers. Other
products sold to the water treatment market include sodium and ammonia salt and
sulfite products, which are used in dechlorination and to inhibit the corrosion
of steel lines and equipment.
Photo Chemicals. Sodium and ammonia sulfites and bisulfites have major
applications as fixing and developing solutions for conventional film and x-ray
processes. The Company has leading market share positions in these products.
Pulp and Paper. The pulp and paper industry utilizes alum and enhanced
coagulants to impart water resistance ('sizing') to paper and to treat the
substantial quantities of water required in the papermaking process. Paper mills
also use sulfuric acid in the sulfur dioxide pulp bleaching process, in pH
adjustments and in water treatment. Other products used to a lesser extent by
the pulp and paper industry include sodium sulfites, which are used for
digesting fibers in the thermo-mechanical pulping process, reducing bleaching
agents such as chlorine and hydrogen peroxide, and as a raw material for other
bleaching agents.
Chemical Processing. The chemical processing market utilizes a number of
the Company's products. Sodium nitrite is primarily used as a reactant in the
manufacture of various organics (i.e. dyes and pigments and rubber processing
chemicals), in applications as a heat transfer salt in high temperature chemical
reactions and as a cooling tower corrosion inhibitor. Potassium fluoride and
fluoborate derivatives are low-volume, higher priced chemicals used in brazing
fluxes, agricultural chemicals, surfactants and analytical reagants. Sulfuric
acid is used in the manufacture of titanium pigments, fertilizer, synthetic
fibers, steel, alum, paper and many other products.
Semiconductor Devices. The Company supplies high-purity semiconductor
acids, caustics and etchants to customers throughout North America, Western
Europe and the Pacific Rim. These customers manufacture silicon wafers and
convert the wafers to integrated circuits. Fluoborate derivatives are also sold
to this market for use in electroplating.
Printing. The Company, through its indirect wholly-owned subsidiary
Printing Developments, Inc. ('PDI'), manufactures lithographic plates
predominantly for large lithographers that emphasize high-
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quality production in the newspaper insert, commercial, publication and metal
decorating markets. PDI utilizes a unique bimetal plate system that provides
higher resolution, better color reproduction and greater durability than the
polymer system used by most other industry participants. Other products sold to
this market include pressroom chemicals and automatic plate processors.
MANUFACTURING SEGMENT
The Company manufactures automotive engine parts and fluid handling
equipment for original equipment manufacturers and the automotive services
market through its subsidiaries Toledo Technologies, Inc. ('Toledo
Technologies') and Balcrank Products, Inc. ('Balcrank'). Toledo Technologies
manufactures rocker arms, roller rocker arms, roller followers and other stamped
and machined metal products for the automotive industry. Its three primary
customers are Chrysler, Ford and General Motors. Balcrank principally
manufactures fluid handling equipment such as air driven pumps, hose reels,
control handles and accessories, for the automotive services market.
PATENTS, TRADEMARKS AND LICENSES
The Company has certain patents, trademarks and licenses, none of which are
material to the business.
COMPETITION
The Company competes on a variety of factors such as price, freight costs,
service, the availability of up-to-date technology, the ability to meet specific
customer requests rapidly and the quality of the final products. Competitors
include independent chemical manufacturers, integrated companies that supply
their own internal requirements for the Company's products and manufacturers of
automotive engine parts and fluid handling equipment. Products are sold in
highly competitive markets.
CUSTOMERS; SEASONALITY; BACKLOGS
The Company does not have any single customer, or a small number of
customers, the loss of any one or more of which would have a material adverse
effect on the Company. Sales of calcium chloride are concentrated in late spring
and summer. Sales of soda ash to the glass container industry are somewhat
seasonal because sales of beverage containers are stronger in the summer. Due to
the nature of the Company's business, there are no significant backlogs.
ENVIRONMENTAL MATTERS
Regulation. The Company's various inorganic chemical manufacturing
operations, which have been conducted at a number of facilities for many years,
are subject to numerous laws and regulations relating to the protection of human
health and the environment in the U.S. and Canada. The Company believes that it
is in substantial compliance with such laws and regulations. However, as a
result of its operations, the Company is involved from time to time in
administrative and judicial proceedings and inquiries relating to environmental
matters. Based on information available at this time with respect to potential
liability involving these proceedings and inquiries, the Company believes that
any such liability will not have a material adverse effect on its financial
position or results of operations. However, modifications of existing laws and
regulations or the adoption of new laws and regulations in the future,
particularly with respect to environmental and safety standards, or discovery of
any additional or unknown environmental contamination, if any, could require
capital expenditures which might be material or otherwise impact the Company's
operations. See 'Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Environmental Matters.'
Accruals/Insurance. The Company's accruals for environmental liabilities
are recorded based on current interpretation of environmental laws and
regulations when it is probable that a liability has been incurred and the
amount of such liability can be reasonably estimated. Accruals for environmental
matters were $16.6 million and $16.3 million at December 31, 1995 and 1996,
respectively. The Company maintains a comprehensive insurance program, including
customary comprehensive general liability
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insurance for bodily injury and property damage caused by various activities and
occurrences and significant excess coverage to insure against catastrophic
occurrences. However, it does not maintain any insurance other than as described
above for potential liabilities related specifically to remediation of existing
or future environmental contamination, if any. See 'Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Environmental
Matters.'
The Company has an established program to ensure that its facilities comply
with environmental laws and regulations. Expenditures made pursuant to this
program approximated $12.0 million in 1996 (of which approximately $3.9 million
represented capital expenditures and approximately $8.1 million related to
ongoing operations and the management and remediation of hazardous substances).
Expenditures for 1995 approximated $11.4 million (of which approximately $3.5
million represented capital expenditures and approximately $7.9 million related
to ongoing operations and the management and remediation of hazardous
substances). The Company expects similar expenditures in 1997 to be in the range
of $12.0 million to $14.0 million; however, should environmental laws and
regulations affecting the Company's operations become more stringent, the
Company's costs for environmental compliance could increase above such range.
Additionally, the Comprehensive Environmental Response Compensation and
Liability Act of 1980 ('CERCLA'), as amended, and similar state Superfund
statutes have been construed as imposing joint and several liability on present
and former owners and operators of contaminated sites and transporters and
generators of hazardous substances for remediation of contaminated properties
regardless of fault. The Company has received written notice from the
Environmental Protection Agency (the 'EPA') that it has been identified as a
potentially responsible party ('PRP') under CERCLA at three Superfund sites.
With respect to two of these sites, the Company does not believe that its
liability, if any, arising therefrom will be material to its results of
operations or financial condition. With respect to the third site, known as the
Avtex site, which is located in Front Royal, Virginia, the Company has provided
for the estimated costs of certain activities requested by the EPA at the site
in its accrual for environmental liabilities. In addition, Congress continues to
consider the reauthorization of and modifications to CERCLA. Because Congress
has not yet acted with respect to CERCLA, the Company does not have sufficient
information to ascertain the impact any change might have on the Company's
potential liabilities, if any.
Pending Proceedings. At any time, the Company potentially may be involved
in proceedings with various regulatory authorities which could require the
Company to pay fines and penalties relating to violations of environmental laws
and regulations at its sites, or to remediate contamination at some of these
sites, to comply with applicable standards or other requirements, or to incur
capital expenditures to add or change certain pollution control equipment or
processes at its sites. Again, although the amount of any liability that could
arise with respect to these matters cannot be accurately predicted, it is the
opinion of management that the ultimate resolution of these matters will have no
material adverse effect on the Company's operations or financial condition. The
following information addresses those matters of which the Company is presently
aware.
On January 30, 1996 the Ontario Ministry of Natural Resources (the
'Ministry') issued an order to the Company to cease solution mining activities
in certain sections of the Amherstburg plant's brine well fields until the
Company completed a review of, among other things, the stability and
interconnectivity of certain of the brine caverns and submitted certain required
records and data. Under the order, as modified by the Ministry in February 1996,
the Company's production was impacted during the first quarter of 1996.
Subsequent to that time, studies were performed and information generated by a
consultant to the Company which demonstrated the stability of the brine wells in
a manner satisfactory to the Ministry, which, during the third quarter of 1996,
granted permission to the Company to recommence solution mining in the majority
of the brine wells covered by the original order. Additionally, in the third and
fourth quarters of 1996, the Ministry granted new licenses to the Company to
drill and commence development of brine wells on the additional brine field
properties acquired as part of the Company's raw material sourcing program. In
this regard, four new brine wells have been established as part of the initial
development phase of additional brine sources for the plant. Although the
Company's production is no longer impacted by a shortage of brine, the Company
continues to work
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with consultants experienced in solution mining to expand and upgrade its
solution mining activity relating to the Amherstburg facility.
By letter dated March 22, 1990 from the EPA, the Company received a Notice
of Potential Liability pursuant to Section 107(a) of CERCLA with respect to a
site located in Front Royal, Virginia (the 'Avtex Site'), owned at the time by
Avtex Fibers, Inc., which has since filed for bankruptcy. A sulfuric acid plant
adjacent to the main Avtex Site was previously owned and operated by the Company
(the 'acid plant'). The letter requested that the Company perform certain
activities at the acid plant including providing site security, preventing
discharges, removing certain specific residue and sludges from two storage
vessels and the transfer line to the main Avtex facility and determining the
extent of contamination at the site, if any. In April 1991, the Company
submitted a draft work plan with respect to the acid plant including each of the
activities requested by the EPA discussed above. The Company has provided for
the estimated costs of $1.6 million for these activities in its accrual for
environmental liabilities. The EPA has not yet responded to this work plan, nor
has it requested that an initial investigation and feasibility study for the
acid plant be performed. As a result, the extent of remediation required, if
any, is unknown. The Company believes that the acid plant is separate and
divisible from the main Avtex Site and, as a result, is not subject to any
liability for costs related thereto. The Company will continue to vigorously
assert this position with the EPA. There has been very limited contact by the
EPA with the Company since 1993, as it appears that the EPA is focused on
remediation activities at the main Avtex site.
EMPLOYEES/LABOR RELATIONS
As of December 31, 1996, the Company had 2,256 employees, 852 of whom were
full-time salaried employees, 1,248 were full-time hourly employees covered
under 25 different union contracts and 156 were hourly employees working in
nonunion facilities.
The Company's 25 union contracts have durations which vary from two to four
years. Since 1986, the Company has been involved in 119 labor negotiations, only
five of which have resulted in work disruptions. During these disruptions,
management has operated the plants and supplied customers without interruption
until the labor disruptions were settled and new contracts were agreed upon. In
this respect, several contacts, including the contracts covering employees at
the Company's North Claymont, Delaware, and Richmond, California, facilities,
will be up for renewal during 1997.
EXECUTIVE OFFICERS AND KEY EMPLOYEES
Set forth below is information with respect to each of the Company's
executive officers and/or key employees.
* Executive Officers of the Company's General Chemical Corporation
('General Chemical') subsidiary.
Richard R. Russell, 53, President, Chief Executive Officer and Director of
the Company, has held such positions since 1994. Mr. Russell is also the
President and Chief Executive Officer and a Director of General Chemical,
positions he has held since 1986.
Ralph M. Passino, 45, Vice President and Chief Financial Officer of the
Company has held such positions since 1994. Mr. Passino is also Chief Financial
Officer and Vice President of Administration of General Chemical, positions he
has held since 1986, and a Director of General Chemical, a position he has held
since 1994.
* DeLyle Bloomquist, 38, Vice President and General Manager-Industrial
Chemicals of General Chemical since 1996. Between 1995 and 1996, Mr. Bloomquist
had been the Director of the Company's Corporate Distribution Department.
Between 1993 and 1995, Mr. Bloomquist served as Controller-Industrial Chemicals.
Between 1991 and 1993, Mr. Bloomquist had been the Manager of Services at the
Company's Green River Soda Ash operations.
* Bodo B. Klink, 59, Vice President Business Development and Services of
General Chemical since 1996. Mr. Klink was Vice President of Marketing between
1993 and 1996. Mr. Klink had been General Manager-Water Treatment Chemicals from
1991 to 1993.
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* James N. Tanis, 52, Vice President and General Manager-Derivative
Products and Services of General Chemical. Mr. Tanis has held this position
since 1987.
* Edward J. Waite, III, 49, Vice President, General Counsel and Secretary
of General Chemical. Mr. Waite has held this position since 1989.
* James A. Wilkinson, 55, Vice President of Manufacturing of General
Chemical. Mr. Wilkinson has held this position since 1986.
ITEM 2. PROPERTIES
In conducting its operations, the Company uses properties having offices,
storage facilities or manufacturing facilities at 87 locations throughout the
United States, Canada and the Philippines. Thirty-five of these properties are
leased while the remainder are owned by the Company. The leased properties are
occupied under rental agreements having terms ranging up to six years and under
month-to-month tenancies. The Company's headquarters is located in Hampton, New
Hampshire.
The locations and uses of certain major properties of the Company are as
follows:
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United States....................... * Pittsburg, California Manufacturing Facility
* Richmond, California Manufacturing Facility
* North Claymont, Delaware Manufacturing Facility,
Offices and Warehouse
* East St. Louis, Illinois Manufacturing Facility
** Hampton, New Hampshire Offices
** Parsippany, New Jersey Offices
Solvay, New York Manufacturing Facility
Weaverville, North Carolina Manufacturing Facility,
Offices and Warehouse
Perrysburg, Ohio Manufacturing Facility
and Offices
Toledo, Ohio Manufacturing Facility
* Marcus Hook, Pennsylvania Manufacturing Facility,
Offices and Warehouse
* Anacortes, Washington Manufacturing Facility
Racine, Wisconsin Manufacturing Facility
and Offices
Green River, Wyoming Trona Mine and Manufacturing
Facility
Canada.............................. Amherstburg, Ontario Manufacturing Facility
and Undeveloped Lots
** Mississauga, Ontario Offices
Valleyfield, Quebec Manufacturing Facility
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* Each of the indicated has been mortgaged as security by General Chemical for
the U.S. Revolving Credit Facility and Bank Term Loan.
** Leased.
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The Company's Green River plant has a nameplate capacity of approximately
2.4 million tons of soda ash per year. The plant is owned by GCSAP, a
partnership of which General Chemical is the managing partner and in which
General Chemical has a 51 percent equity interest, The Andover Group, Inc.,
which is a wholly owned subsidiary of ACI International Limited, has a 25
percent equity interest and TOSOH Wyoming, Inc., which is a wholly owned
subsidiary of TOSOH America, Inc., has a 24 percent equity interest. Each
partner is prohibited from transferring its interest in GCSAP or withdrawing
from GCSAP without the prior written consent of the other partners.
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In addition to such restrictions on the transfer of interests in GCSAP,
there are certain restrictions and obligations with respect to the transfer of
either General Chemical's interest in GCSAP or the voting securities of General
Chemical. For further information, see Note 6 of Notes to the Consolidated
Financial Statements.
Reserves. The Company mines trona ore under leases with the United States
government, the State of Wyoming, and the Union Pacific Resources Corporation.
The Company's trona reserves and mines are located in the Green River, Wyoming,
area.
The Company's estimated proven reserves within bed No. 17, which the
Company is currently mining, consist of approximately 92.5 million tons of
extractable ore. At the 1996 operating rate of 2.2 million tons of soda ash per
year (4.1 million tons of trona ore), there is approximately a 23-year supply.
For the three years ended December 31, 1996, annual production of trona ore
averaged approximately 4.0 million tons. In addition, the Company's 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 Company's synthetic soda ash plant in Amherstburg, Ontario, Canada,
the Company uses salt and limestone as its raw materials. Based on current
production levels the Company has approximately 30 years of salt reserves.
Limestone reserves owned by the Company total approximately 15 years, with an
option on an additional six years of reserves. However, the Company is not
currently utilizing its limestone reserves and is instead purchasing all of its
limestone requirements under a long-term contract with a major limestone
producer due to the economic benefit of using purchased limestone.
ITEM 3. LEGAL PROCEEDINGS
Richmond Works July 26, 1993 Incident. On July 26, 1993, a pressure relief
device on a railroad tank car containing oleum that was being unloaded at the
Company's Richmond, California, facility ruptured during the unloading process,
causing the release of a significant amount of sulfur trioxide. Approximately
150 lawsuits seeking substantial amounts of damages were filed against the
Company on behalf of in excess of 60,000 claimants in municipal and superior
courts of California (Contra Costa and San Francisco counties) and in federal
court (United States District Court for the Northern District of California).
All state court cases were coordinated before a coordination trial judge (In Re
GCC Richmond Work Cases, JCCP No. 2906) and the federal court cases were stayed
until completion of the state court cases.
After several months of negotiation under the supervision of a settlement
master, the Company and a court-approved plaintiffs' management committee
executed a comprehensive settlement agreement which resolved the claims of
approximately 95 percent of the claimants who filed lawsuits arising out of the
July 26th incident, including the federal court cases. After a final settlement
approval hearing on October 27, 1995, the coordination trial judge approved the
settlement on November 22, 1995.
Pursuant to the terms of the settlement agreement, the Company, with funds
to be provided by its insurers pursuant to the terms of the insurance policies
described below, has agreed to make available a maximum of $180 million to
implement the settlement. Various 'funds' and 'pools' are established by the
settlement agreement to compensate claimants in different subclasses who meet
certain requirements. Of this amount, $24 million has been allocated for
punitive damages, notwithstanding the Company's strong belief that punitive
damages are not warranted. The settlement also makes available $23 million of
this $180 million for the payment of legal fees and litigation costs to class
counsel and the plaintiffs' management committee.
The settlement agreement provides, among other things, that while claimants
may 'opt out' of the compensatory damages portion of the settlement and pursue
their own cases separate and apart from the class settlement mechanism, they
have no right to opt out of the punitive damages portion of the settlement.
Consequently, under the terms of the settlement, no party may seek punitive
damages from the Company outside of those provided by the settlement.
Approximately 2,800 claimants, which constitutes less than 5 percent of the
total number of claimants, have elected to so opt out. Except with
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respect to compensatory damage claims by claimants electing to opt-out, the
settlement fully releases from all claims arising out of the July 26, 1993
incident the Company and all of its related entities, shareholders, directors,
officers and employees, and all other entities who have been or could have been
sued as a result of the July 26th incident, including all those who have sought
or could seek indemnity from the Company.
Notices of appeal of all or portions of the settlement approved by the
court have been filed by five law firms representing approximately 2,750 of the
opt-outs, with 2,700 of these claimants represented by the same law firm.
Virtually all of these claimants have not specified the amount of their claims
in court documents, although the Company believes that their alleged injuries
are no different in nature or extent than those alleged by the settling
claimants. On May 8, 1996, the California Court of Appeals dismissed each of the
appeals that had been filed challenging the trial court's approval of the class
action settlement. The Court of Appeals dismissed the appeal relating to the
trial court's rulings on plaintiffs' attorneys' fees on the ground that the
appealing attorneys lacked standing to appeal. The Court of Appeals also
dismissed each of the other grounds for appeal, ruling that the trial court's
orders and rulings approving the settlement were not presently appealable, if at
all, by the appealing claimants since they had all elected to opt out of the
settlement. The appealing attorneys and some of the appealing claimants filed a
petition for review with the California Supreme Court which, on August 15, 1996,
elected not to review the Court of Appeals' decision.
The settlement includes various terms and conditions designed to protect
the Company in the event that the settlement as approved by the court is
overturned or modified on appeal. If such an overturn or modification occurs,
the Company has the right to terminate the settlement and make no further
settlement payments, and any then unexpended portions of the settlement proceeds
(including, without limitation, the $24 million punitive damage fund) would be
available to address any expenses and liabilities that might arise from any such
an overturn or modification. In addition, in the event that the settlement as
approved by the court is overturned or modified on appeal, the release document
signed by settling claimants contains language which fully releases the Company
from any further claims, either for compensatory or punitive damages, arising
out of the July 26, 1993 incident. The Company has presently obtained releases
from over 94 percent of the settling claimants and believes that it will have
obtained the majority of releases from the remaining settling claimants prior to
any such appeal being ruled on by an appellate court.
It is possible that one or more of the opt-out claimants, once their
opt-out cases are finally litigated through trial, may attempt to refile all or
a portion of the appeals that were dismissed by the California Court of Appeals.
While there can be no assurances regarding how an appellate court might rule in
the event of a refiling of an appeal of the settlement, the Company believes
that the settlement will be upheld on appeal. In the event of a reversal or
modification of the settlement on appeal, with respect to lawsuits by any then
remaining claimants (opt-outs and settling claimants who have not signed
releases) the Company believes that, whether or not it elects to terminate the
settlement in the event it is overturned or modified on appeal, it will have
adequate resources from its available insurance coverage to vigorously defend
these lawsuits through their ultimate conclusion, whether by trial or
settlement. However, in the event the settlement is overturned or modified on
appeal, there can be no assurance that the Company's ultimate liability
resulting from the July 26, 1993 incident would not exceed the available
insurance coverage by an amount which could be material to its financial
condition or results of operations, nor is the Company able to estimate or
predict a range of what such ultimate liability might be, if any.
The Company has insurance coverage relating to this incident which totals
$200 million. The first two layers of coverage total $25 million with a sublimit
of $12 million applicable to the July 26, 1993 incident, and the Company also
has excess insurance policies of $175 million over the first two layers. The
Company reached an agreement with the carrier for the first two layers whereby
the carrier paid the Company $16 million in settlement of all claims the Company
had against that carrier. In the third quarter of 1994, the Company recorded a
$9 million charge to earnings for costs which the Company incurred related to
this matter. The Company's excess insurance policies, which are written by two
Bermuda-based insurers, provide coverage for compensatory as well as punitive
damages. Both insurers have executed agreements with the Company confirming
their respective commitments to fund the
8
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<PAGE>
settlement as required by their insurance policies with the Company and as
described in the settlement agreement. In addition, these same insurers
currently continue to provide substantially the same insurance coverage to the
Company.
Milwaukee Litigation. In March 1993, an outbreak of cryptosporidia occurred
in the public water supply of the City of Milwaukee. As a result of that
incident, several lawsuits have been filed with the Milwaukee County Circuit
Court against one or more of the City of Milwaukee, its Department of Public
Works, Sara Lee Corporation, E.D. Wesley Co., Peck Foods Corporation, certain
hotels, numerous insurance companies, several municipalities and the Company.
The complaints generally allege, among other things, that the outbreak was
caused when certain defendants other than the Company illegally disposed of
waste into the water supply, and that the City of Milwaukee failed to properly
operate its water treatment plant in a manner that would have prevented the
outbreak. The principal allegations against the Company are that a water
treatment chemical sold to the City of Milwaukee by the Company should have
removed the bacteria and failed to do so and that the Company consulted with the
City concerning the water purification.
One of the suits (Markwiese, et al v. Peck Foods Corporation, et al filed
in 1993) had been certified, prior to the service of a complaint against the
Company, as a class action in favor of all persons who sustained damage as a
result of the wrongful acts of the various defendants. Subsequently, the Company
and the City of Milwaukee challenged, among other things, the class
certification, and the Wisconsin Court of Appeals remanded this matter to the
trial court for a determination of how certain issues impact whether class
certification was appropriate. It is expected that these issues will be argued
later in 1997 before a new trial judge.
In addition to the Markwiese action, several other lawsuits have since been
filed by the same lead attorneys in the Circuit Court of Milwaukee County
against the same basic group of defendants, including two multi-party actions,
Quandt et al v. Northbrook Property and Casualty Insurance Co. filed in 1994 and
Winiarski et al v. Peck Foods et al filed in 1996, on behalf of a total of 98
plaintiffs. The unspecified damages sought by these various complaints is
alleged to be 'far in excess of $1.0 million dollars' for personal injury,
economic loss, emotional distress, pain and suffering, medical expenses and
punitive damages.
The Company has denied all material allegations of the complaints and will
continue to defend these lawsuits vigorously. The Company further believes that
its available insurance provides adequate coverage in the event of an adverse
result in this matter, and that this matter will not have a material adverse
effect on its financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No items were submitted to a vote of security holders of the Company,
through the solicitation of proxies or otherwise, during the fourth quarter of
fiscal 1996.
9
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The Company's Common Stock is traded on the New York Stock Exchange under
the symbol 'GCG.' The high and low recorded sales prices of the Company's Common
Stock during fiscal year 1996 are set forth in the table below.
<TABLE>
<CAPTION>
1996
----------------
HIGH LOW
------ ------
<S> <C> <C>
2nd Quarter.......................................................................... $20.75 $17.50
3rd Quarter.......................................................................... 20.63 16.75
4th Quarter.......................................................................... 23.63 18.50
</TABLE>
As of March 20, 1997, there were 72 stockholders of record of the Company's
Common Stock and 3 stockholders of record of the Company's Class B Common Stock.
DIVIDENDS
The Company has declared quarterly cash dividends of $.05 on each share of
Common Stock and Class B Common Stock for each quarter since May 1996 with the
second quarter cash dividend being prorated from the IPO date to $.025. The
Company expects to continue its policy of paying regular quarterly cash
dividends of $.05. Although management believes that such a dividend is
appropriate, the declaration of dividends is dependent upon the Company's
earnings, financial position and other relevant business conditions. The current
dividend policy will be reviewed by the Company's Board of Directors from time
to time. No dividend will be payable unless permitted by applicable law,
declared by the Board of Directors and adequate funds are available therefor.
During 1996, cash dividends of $.075 per share were paid. For further
information, see the information contained under the caption 'Management's
Discussion and Analysis of Financial Conditions and Results of
Operations -- Liquidity and Capital Resources.'
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ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial data of the Company has been
derived from and should be read in conjunction with the Company's Consolidated
Financial Statements. The Company's Consolidated Financial Statements for the
three years ended December 31, 1996 have been audited by Deloitte & Touche LLP,
the Company's independent auditors, and are included elsewhere in this report:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1992 1993 1994 1995 1996
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net revenues............................................. $ 544,704 $ 518,718 $ 525,912 $ 550,871 $ 623,659
Cost of sales............................................ 378,205 363,268 361,637 387,255 422,633
Gross profit............................................. 166,499 155,450 164,275 163,616 201,026
Selling, general and administrative expense.............. 57,927 58,330 57,034 56,619 71,810(8)
Richmond incident costs.................................. -- -- 9,000 -- --
Operating profit......................................... 108,572 97,120 98,241 106,997 129,216(8)
Minority interest........................................ 24,314 17,733 16,957 19,458 31,635
Interest income.......................................... 4,131 3,019 2,487 2,937 2,433
Foreign currency transaction (gains) losses.............. 3,585 1,719 4,004 (1,382) (169)
Other (income) expense................................... 504 (651) 63 735 704
Income before interest, income taxes, extraordinary item
and cumulative effect of accounting change............. 84,300 81,338 79,704 91,123 99,479(8)
Interest expense......................................... 42,047 37,917 33,006 26,704 23,748
Income before income taxes, extraordinary item and
cumulative effect of accounting change................. 42,253 43,421 46,698 64,419 75,731(8)
Income tax provision..................................... 18,442 16,185 18,393 43,326(1) 29,123
Income before extraordinary item and cumulative effect of
accounting change...................................... 23,811 27,236 28,305 21,093(1) 46,608(8)
Net income (loss)(2)..................................... $ (17,617)(3) $ 25,151 $ 20,102 $ 21,093(1) $ 46,608(8)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
PER SHARE:(4)
Income before extraordinary item and cumulative effect of
accounting change...................................... $ 1.21 $ 1.38 $ 1.43 $ 1.07(1) $ 2.13(8)
Net income (loss)........................................ (.89)(3) 1.27 1.02 1.07(1) 2.13(8)
Dividends................................................ 2.84 .49 .70 1.00 .13
Weighted average number of shares outstanding............ 19,736,842 19,736,842 19,736,842 19,736,842 21,921,133
OTHER DATA:
Capital expenditures..................................... $ 18,141 $ 20,221 $ 28,503 $ 34,093 $ 54,165
Depreciation and amortization(5)......................... 27,916 25,826 25,062 27,095 28,619
BALANCE SHEET DATA (AT END OF PERIOD):
Cash, cash equivalents and short-term investments........ $ 56,199 $ 43,818 $ 28,701 $ 19,025 $ 51,700
Adjusted working capital(6).............................. 10,675 (6,252) 4,471 12,484 23,847
Total assets............................................. 446,861 425,944 433,627 431,325 485,137
Long-term debt(7)........................................ 366,322 306,200 304,750 291,495 234,609
Total equity (deficit)................................... (237,968) (223,051) (216,831) (215,336) (119,753)
</TABLE>
- ------------
(1) The Company recorded a nonrecurring charge to income tax expense of $17.1
million ($.87 per share) for all years prior to 1995 related to Internal
Revenue Service (the 'IRS') examinations. See Note 3 of Notes to the
Consolidated Financial Statements.
(2) During 1993 and 1994 the Company recorded extraordinary losses of $2.1
million and $8.2 million, respectively, related to the early retirement of
certain outstanding indebtedness.
(3) The Company implemented Statement of Financial Accounting Standards No. 106,
Employers' Accounting for Postretirement Benefits Other than Pensions, on
the immediate recognition basis effective January 1, 1992, which resulted in
an after-tax charge of $41.4 million.
(4) Adjusted for all periods presented to reflect a 202,994.4539 per share stock
dividend effected as of October 17, 1994.
(5) Consolidated depreciation and amortization excluding amortization of
deferred financing costs.
(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).
(7) Includes the current portion of long-term debt.
(8) Includes a one-time charge of $12.5 million ($7.6 million after tax or $.34
per share) due primarily to awards made under the Restricted Unit Plan,
reflecting the portion earned under prior equity programs.
11
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<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The General Chemical Group Inc., which has a history dating back to 1899,
is a diversified manufacturing company predominantly engaged in the production
of inorganic chemicals, with manufacturing facilities located in the United
States and Canada. Through its Chemical Segment, the Company is a leading
producer of soda ash in North America, and a major North American supplier of
calcium chloride, sodium and ammonia salts, sulfites, nitrites, aluminum-based
chemical products, printing plates and refinery and chemical regeneration
services to a broad range of industrial and municipal customers. Through its
Manufacturing Segment, the Company manufactures precision and highly engineered
stamped and machined metal products, principally automotive engine parts.
Sales in 1996 rose to a record $623.7 million from $550.9 million in 1995,
a gain of 13 percent, net income increased to $46.6 million, or $2.13 per share,
from $21.1 million, or $1.07 per share, in the prior year. Excluding the effects
of a one-time charge of $7.6 million, or $0.34 per share, primarily related to
the initial public offering in 1996 and a one-time charge of $17.1 million, or
$0.87 per share, relating to taxes in 1995, earnings per share in 1996 improved
27 percent to a record $2.47 compared with $1.94 in 1995.
The higher sales recorded in 1996 were attributable to gains in both
segments. Within the Chemical Segment, the industrial chemical product lines
were led by strong pricing gains in soda ash. The Company's natural soda ash
facility in Green River, Wyoming and the synthetic soda ash facility in
Amherstburg, Ontario, were essentially sold out for the second consecutive year.
During 1997, additional soda ash capacity from the recent expansion at the
Company's Green River, Wyoming, facility, will allow the Company to continue to
take advantage of the growth in exports. Although pricing is expected to be down
in 1997 due to expansions by several producers that took place last year,
industry operating rates are expected to remain high.
The second component of the Chemical Segment, the derivative products and
services product lines, also posted a strong performance in 1996 due to volume
gains in all product lines. The performance was bolstered by the expansion of
the Company's two West Coast sulfuric acid regeneration plants and good growth
in products that serve the water treatment and semiconductor markets.
Rapid growth was achieved during 1996 in the Manufacturing Segment due to
the Company's successful launch of higher-value-added automotive engine
components as well as new business from the Big Three auto manufacturers.
The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements and the respective notes thereto included in
Item 8. This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Actual results could differ
materially from those projected in such statements as a result of the following
risk factors: risks and uncertainties in connection with business conditions in
the markets the Company serves and in the general economy, and the impact of
competitive products and pricing, in particular, the price of soda ash.
12
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<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain income statement data for each of
the three years in the period ended December 31, 1996 (dollars in millions).
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------
1994 1995 1996
-------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues.................................................... $525.9 100% $550.9 100% $623.7 100%
Cost of sales................................................... 361.6 69 387.3 70 422.6 68
------ ---- ------ ---- ------ ---
Gross profit.................................................... 164.3 31 163.6 30 201.1 32
Selling, general and administrative expense..................... 57.0 11 56.6 10 71.8(2) 12
Richmond incident costs......................................... 9.0 2 -- -- -- --
------ ---- ------ ---- ------ ---
Operating profit................................................ 98.3 19 107.0 19 129.2 20
Interest expense................................................ 33.0 6 26.7 5 23.7 4
Interest income................................................. 2.5 -- 2.9 1 2.4 --
Foreign currency transaction (gains)/losses..................... 4.0 1 (1.4) -- (.2) --
Other expense, net.............................................. .1 -- .7 -- .8 --
Minority interest............................................... 17.0 3 19.5 4 31.6 5
------ ---- ------ ---- ------ ---
Income before income taxes and extraordinary item............... 46.7 9 64.4 12 75.7 12
Income tax provision............................................ 18.4 4 43.3(1) 8 29.1 5
------ ---- ------ ---- ------ ---
Income before extraordinary item................................ 28.3 5 21.1 4 46.6 7
Extraordinary item -- loss from extinguishment of debt (net of
tax).......................................................... 8.2 1 -- -- -- --
------ ---- ------ ---- ------ ---
Net income...................................................... $ 20.1 4% $ 21.1 4% $ 46.6 7%
------ ---- ------ ---- ------ ---
------ ---- ------ ---- ------ ---
</TABLE>
- ------------
Note: May not add due to rounding.
(1) Includes nonrecurring charge to income tax expense of $17.1 million for all
years prior to 1995 related to IRS examinations. See Note 3 of Notes to the
Consolidated Financial Statements.
(2) Includes a one-time charge of $12.5 million ($7.6 million after-tax or $.34
per share) due primarily to awards made under the Restricted Unit Plan,
reflecting the portion earned under prior equity programs.
1996 COMPARED WITH 1995
Net revenues were $623.7 million for 1996 compared with $550.9 million for
1995, or an increase of 13 percent. Higher Chemical Segment sales were the
result of favorable soda ash pricing and improved volume across all product
lines. Higher Manufacturing Segment sales were the result of volume and product
mix improvements toward higher-value automotive engine parts.
Gross profit increased 23 percent to $201.1 million for 1996 compared with
$163.6 million for 1995. Gross profit as a percentage of sales increased to 32
percent for 1996 versus 30 percent for 1995. Favorable soda ash pricing and
higher volume, offset in part by higher manufacturing expenses, account for the
above-mentioned increase.
Selling, general and administrative expense as a percentage of net revenues
increased from 10 percent to 12 percent for 1996. This increase is due to the
recording of a one-time charge of $12.5 million related primarily to a new
Restricted Unit Plan created by the Company which replaced certain prior equity
programs.
The $3.0 million decrease in interest expense for 1996 compared with 1995
was primarily due to lower outstanding debt balances.
Interest income for 1996 was $2.4 million, which approximated prior-year
levels.
The foreign currency transaction gain for 1996 was $0.2 million compared
with a $1.4 million gain in 1995, principally due to the impact of exchange rate
fluctuations on a $52 million U.S.-denominated loan of the Company's Canadian
subsidiary. The impact of these foreign currency transaction gains on this loan
was noncash.
Other expense for 1996 of $0.8 million was essentially at the prior-year
level.
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Minority interest for 1996 was $31.6 million compared with $19.5 million
for 1995, reflecting higher earnings due to favorable soda ash pricing of GCSAP.
Net income for 1996 was $46.6 million versus $21.1 million for 1995,
reflecting the foregoing, and the nonrecurring charge to income tax expense
recorded in 1995.
1995 COMPARED WITH 1994
Net revenues were $550.9 million for 1995 compared with $525.9 million for
1994. This increase in net revenues of 5 percent was primarily the result of
higher soda ash sales in the Chemical Segment, reflecting favorable pricing and
higher volumes, and higher Manufacturing Segment sales as the result of volume
and product mix improvements toward higher-value automotive engine parts,
reflecting market share gains at the Big Three automotive manufacturers. Lower
calcium chloride volumes partially offset these increases.
Gross profit decreased slightly to $163.6 million from 1995 compared with
$164.3 million for 1994. Gross profit as a percentage of sales decreased to 30
percent for 1995 versus 31 percent for 1994. Higher manufacturing expenses and a
change in sales mix, partially offset by favorable soda ash pricing, accounted
for this decrease.
Selling, general and administrative expense was 10 percent of net revenues
in 1995 versus 11 percent in 1994 due to the higher sales level and lower
spending.
The $6.3 million decrease in interest expense for 1995 compared with 1994
was primarily due to the early retirement of General Chemical Corporation's
Senior Secured 14% Second Priority Notes in November 1994.
Interest income for 1995 was $2.9 million compared with $2.5 million for
1994. The increase was primarily due to a full year of interest income on notes
receivable in 1995 versus eight months for 1994.
The foreign currency transaction gain for 1995 was $1.4 million compared
with a $4.0 million loss in 1994, principally due to the impact of exchange rate
fluctuations on a $52 million U.S.-denominated loan of the Company's Canadian
subsidiary. The impact of these foreign currency transaction (gains) losses on
this loan was noncash.
Other expense for 1995 included losses on disposal of assets of $1.0
million. Other expense for 1994 included a pension-curtailment gain of $1.2
million, partially offset by losses on disposal of assets of $1.0 million.
Minority interest for 1995 was $19.5 million compared with $17.0 million
for 1994, reflecting higher earnings of GCSAP.
Net income for 1995 was $21.1 million versus $20.1 million for 1994, due to
the foregoing, a nonrecurring charge to income tax expense in 1995 of $17.1
million and an extraordinary item of $8.2 million in 1994 related to the early
extinguishment of debt.
ACCOUNTING PRONOUNCEMENTS
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, 'Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of ' ('FAS 121'),
which the Company adopted in 1996. This statement requires the Company to review
and adjust the carrying amount of long-lived assets and certain intangibles for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The adoption of FAS 121 did
not have a material effect on the Company's results of operations or financial
condition.
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, 'Accounting for Stock-Based
Compensation' ('FAS 123'), which the Company adopted in 1996. This statement
allows the Company to retain the current method of accounting for employee
stock-based compensation arrangements with certain additional disclosures. The
new standard did not have a material effect on the Company's financial
statements. See Note 10 of the Notes to the Consolidated Financial Statements
for additional information.
14
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $51.7 million at December 31, 1996 compared
with $19.0 million at December 31, 1995. During 1996 the Company generated cash
flow from operating activities of $90.8 million, received proceeds from the
initial public offering of $40.6 million, received $14.0 million from the
repayment of related-party loans, made capital expenditures of $54.2 million and
made net repayments of $56.9 million of long-term debt.
The Company had working capital of $58.2 million at December 31, 1996
compared with $9.6 million at December 31, 1995. The increase in working capital
reflects higher accounts receivable and cash balances, coupled with lower
accrued liabilities.
General Chemical has a revolving credit facility which expires on March 31,
1999 and allows for borrowings up to $130 million, including letters of credit
of up to $30 million.
GC Canada has a revolving credit facility of $15 million (Canadian)
(approximately $11 million U.S.), which expires on June 22, 1998 and is subject
to one-year extensions at GC Canada's request and at the lender's discretion.
This revolving credit facility is secured by the receivables and inventory of GC
Canada and bears interest at a rate equal to a spread over a reference rate
chosen by GC Canada from various options.
While certain of the Company's subsidiaries' debt facilities are
outstanding, the Company's subsidiaries must meet specific financial tests on an
ongoing basis, which are customary for these types of facilities. Except as
provided by applicable corporate law, there are no restrictions on the Company's
ability to pay dividends from retained earnings. However, the payment of cash
dividends by the Company's subsidiaries to the Company are subject to certain
restrictions under the terms of various agreements covering the Company's
subsidiaries' long-term debt. Toledo, PDI and Balcrank are not permitted under
each subsidiary's respective debt agreements to pay cash dividends. Assuming
certain financial covenants are met, General Chemical is permitted to pay cash
dividends of up to 50 percent of the net income (subject to certain adjustments)
of General Chemical for the applicable period. Consequently, the Company's
ability to pay cash dividends on Common Stock may effectively be limited by such
agreements. At December 31, 1996, approximately $51 million was available for
dividend payments in accordance with these covenants.
The Company anticipates that the capital spending level for 1997 will
approximate the prior-year level. Management believes that the Company's cash
flow will be sufficient to cover its future interest expense, capital
expenditures, debt maturities and working capital requirements.
Richmond Works July 26, 1993 Incident. On July 26, 1993, a pressure relief
device on a railroad tank car containing oleum that was being unloaded at the
Company's Richmond, California, facility ruptured during the unloading process,
causing the release of a significant amount of sulfur trioxide. Approximately
150 lawsuits seeking substantial amounts of damages were filed against the
Company on behalf of in excess of 60,000 claimants in municipal and superior
courts of California (Contra Costa and San Francisco counties) and in federal
court (United States District Court for the Northern District of California).
All state court cases were coordinated before a coordination trial judge (In Re
GCC Richmond Works Cases, JCCP No. 2906) and the federal court cases were stayed
until completion of the state court cases.
After several months of negotiation under the supervision of a settlement
master, the Company and a court-approved plaintiffs' management committee
executed a comprehensive settlement agreement which resolved the claims of
approximately 95 percent of the claimants who filed lawsuits arising out of the
July 26th incident, including the federal court cases. After a final settlement
approval hearing on October 27, 1995, the coordination trial judge approved the
settlement on November 22, 1995. Pursuant to the terms of the settlement
agreement, the Company, with funds to be provided by its insurers pursuant to
the terms of the insurance policies described below, has agreed to make
available a maximum of $180 million to implement the settlement. In addition,
the settlement agreement provides, among other things, that while claimants may
'opt out' of the compensatory damages portion of the settlement and pursue their
own cases separate and apart from the class settlement mechanism, they have no
right to opt out of the punitive damages portion of the settlement.
Consequently, under the
15
<PAGE>
<PAGE>
terms of the settlement, no party may seek punitive damages from the Company
outside of those provided by the settlement.
Notices of appeal of all or portions of the settlement approved by the
court have been filed by five law firms representing approximately 2,750 of the
opt-outs, with 2,700 of these claimants represented by the same law firm.
Virtually all of these claimants have not specified the amount of their claims
in court documents, although the Company believes that their alleged injuries
are no different in nature or extent than those alleged by the settling
claimants. On May 8, 1996, the California Court of Appeals dismissed each of the
appeals that had been filed challenging the trial court's approval of the class
action settlement. The Court of Appeals dismissed the appeal relating to the
trial court's rulings on plaintiffs' attorneys' fees on the ground that the
appealing attorneys lacked standing to appeal. The Court of Appeals also
dismissed each of the other grounds for appeal, ruling that the trial court's
orders and rulings approving the settlement were not presently appealable, if at
all, by the appealing claimants since they had all elected to opt out of the
settlement. The appealing attorneys and some of the appealing claimants filed a
petition for review with the California Supreme Court which, on August 15, 1996,
elected not to review the Court of Appeals' decision.
It is possible that one or more of the opt-out claimants, once their
opt-out cases are finally litigated through trial, may attempt to refile all or
a portion of the appeals that were dismissed by the California Court of Appeals.
While there can be no assurances regarding how an appellate court might rule in
the event of a refiling of an appeal of the settlement, the Company believes
that the settlement will be upheld on appeal. In the event of a reversal or
modification of the settlement on appeal, with respect to lawsuits by any then
remaining claimants (opt-outs and settling claimants who have not signed
releases), the Company believes that, whether or not it elects to terminate the
settlement in the event it is overturned or modified on appeal, it will have
adequate resources from its available insurance coverage to vigorously defend
these lawsuits through their ultimate conclusion, whether by trial or
settlement. However, in the event the settlement is overturned or modified on
appeal, there can be no assurance that the Company's ultimate liability
resulting from the July 26, 1993 incident would not exceed the available
insurance coverage by an amount which could be material to its financial
condition or results of operations, nor is the Company able to estimate or
predict a range of what such ultimate liability might be, if any.
The Company has insurance coverage relating to this incident which totals
$200 million. The first two layers of coverage total $25 million with a sublimit
of $12 million applicable to the July 26, 1993 incident, and the Company also
has excess insurance policies of $175 million over the first two layers. The
Company reached an agreement with the carrier for the first two layers whereby
the carrier paid the Company $16 million in settlement of all claims the Company
had against that carrier. In the third quarter of 1994, the Company recorded a
$9 million charge to earnings for costs which the Company incurred related to
this matter. The Company's excess insurance policies, which are written by two
Bermuda-based insurers, provide coverage for compensatory as well as punitive
damages. Both insurers have executed agreements with the Company confirming
their respective commitments to fund the settlement as required by their
insurance policies with the Company and as described in the settlement
agreement. In addition, these same insurers currently continue to provide
substantially the same insurance coverage to the Company.
ENVIRONMENTAL MATTERS
The Company has an established program to ensure that its facilities comply
with environmental laws and regulations. Expenditures made pursuant to this
program approximated $12.0 million in 1996 (of which approximately $3.9 million
represented capital expenditures and approximately $8.1 million related to
ongoing operations and the management and remediation of hazardous substances).
Expenditures for 1995 approximated $11.4 million (of which approximately $3.5
million represented capital expenditures and approximately $7.9 million related
to ongoing operations and the management and remediation of hazardous
substances). The Company expects similar expenditures in 1997 to be in the range
of $12.0 million to $14.0 million; however, should environmental laws and
regulations affecting the Company's operations become more stringent, the
Company's costs for environmental compliance could increase above such range.
16
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<PAGE>
Additionally, CERCLA, as amended, and similar state Superfund statutes have
been construed as imposing joint and several liability on present and former
owners and operators of contaminated sites and transporters and generators of
hazardous substances for remediation of contaminated properties regardless of
fault. The Company has received written notice from the EPA that it has been
identified under CERCLA as a PRP at three Superfund sites. With respect to two
of these sites, the Company does not believe that its liability, if any, arising
therefrom will be material to its results of operations or financial condition.
With respect to the third site, known as the Avtex site, which is located in
Front Royal, Virginia, the Company has provided for the estimated costs of
certain activities requested by the EPA at the site in its accrual for
environmental liabilities. See 'Business -- Environmental Matters -- Pending
Proceedings.' In addition, Congress continues to consider the reauthorization of
and modifications to CERCLA. Because Congress has not yet acted with respect to
CERCLA, the Company does not have sufficient information to ascertain the impact
any change might have on the Company's potential liabilities, if any.
INFLATION
Inflation has had a minimal effect on the results of the Company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See 'Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K.'
17
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
THE GENERAL CHEMICAL GROUP INC.:
We have audited the accompanying consolidated balance sheets of The General
Chemical Group Inc. and subsidiaries as of December 31, 1995 and 1996, and the
related consolidated statements of operations, changes in equity (deficit) and
cash flows for each of the three years in the period ended December 31, 1996.
Our audits also included the financial statement schedule in the Index at Item
14. These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statements and the financial statement schedule based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of The General Chemical Group Inc.
and subsidiaries at December 31, 1995 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
Also, in our opinion, such financial statement schedule, when considered in
relation to the basis financial statements taken as whole, presents fairly in
all material respects the information set forth herein.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
February 14, 1997
18
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1994 1995 1996
-------- -------- --------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C> <C>
Net revenues................................................................. $525,912 $550,871 $623,659
Cost of sales................................................................ 361,637 387,255 422,633
Selling, general and administrative expense.................................. 57,034 56,619 71,810
Richmond incident costs...................................................... 9,000 -- --
-------- -------- --------
Operating profit............................................................. 98,241 106,997 129,216
Interest expense............................................................. 33,006 26,704 23,748
Interest income.............................................................. 2,487 2,937 2,433
Foreign currency transaction (gains) losses.................................. 4,004 (1,382) (169)
Other expense, net........................................................... 63 735 704
-------- -------- --------
Income before minority interest, income taxes and extraordinary item......... 63,655 83,877 107,366
Minority interest............................................................ 16,957 19,458 31,635
-------- -------- --------
Income before income taxes and extraordinary item............................ 46,698 64,419 75,731
Income tax provision......................................................... 18,393 43,326 29,123
-------- -------- --------
Income before extraordinary item............................................. 28,305 21,093 46,608
Extraordinary item -- loss from extinguishment of debt (net of tax).......... (8,203) -- --
-------- -------- --------
Net income......................................................... $ 20,102 $ 21,093 $ 46,608
-------- -------- --------
-------- -------- --------
Income (loss) per common share:
Income before extraordinary item........................................ $ 1.43 $ 1.07 $ 2.13
Extraordinary item...................................................... (.41) -- --
-------- -------- --------
Net income......................................................... $ 1.02 $ 1.07 $ 2.13
-------- -------- --------
-------- -------- --------
</TABLE>
See the accompanying notes to the consolidated financial statements.
19
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1996
--------- ---------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................ $ 19,025 $ 51,700
Receivables, net................................................................. 93,231 102,478
Inventories...................................................................... 41,970 41,429
Deferred income taxes............................................................ 14,041 11,264
Other current assets............................................................. 1,485 2,153
--------- ---------
Total current assets........................................................ 169,752 209,024
Property, plant and equipment, net.................................................... 215,557 239,819
Other assets.......................................................................... 46,016 36,294
--------- ---------
Total assets................................................................ $ 431,325 $ 485,137
--------- ---------
--------- ---------
LIABILITIES AND EQUITY (DEFICIT)
Current liabilities:
Accounts payable................................................................. $ 50,987 $ 53,772
Accrued liabilities.............................................................. 83,018 74,205
Income taxes payable............................................................. 4,238 5,500
Current portion of long-term debt................................................ 21,892 17,392
--------- ---------
Total current liabilities................................................... 160,135 150,869
Long-term debt........................................................................ 269,603 217,217
Other liabilities..................................................................... 188,645 198,232
--------- ---------
Total liabilities........................................................... 618,383 566,318
--------- ---------
Minority interest..................................................................... 28,278 38,572
--------- ---------
Equity (deficit):
Preferred Stock, $.01 par value; authorized 10,000,000 shares; none issued or
outstanding..................................................................... -- --
Common Stock, $.01 par value; authorized 50,000,000 and 100,000,000 shares;
issued 19,736,842 and 8,009,601 shares at December 31, 1995 and December 31,
1996, respectively.............................................................. 197 80
Class B Common Stock, $.01 par value; authorized 40,000,000 shares; issued and
outstanding: 14,261,467 shares at December 31, 1996............................. -- 143
Capital deficit.................................................................. (237,140) (185,215)
Foreign currency translation adjustments......................................... (1,362) (1,435)
Retained earnings................................................................ 22,969 66,797
Treasury stock, at cost: 6,325 shares at December 31, 1996....................... -- (123)
--------- ---------
Total equity (deficit)...................................................... (215,336) (119,753)
--------- ---------
Total liabilities and equity (deficit)...................................... $ 431,325 $ 485,137
--------- ---------
--------- ---------
</TABLE>
See the accompanying notes to the consolidated financial statements.
20
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1994 1995 1996
--------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.............................................................. $ 20,102 $ 21,093 $ 46,608
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization...................................... 26,700 28,258 29,745
Loss on extinguishment of debt..................................... 13,570 -- --
Net loss on disposition of long-term assets........................ 1,023 950 1,170
Unrealized exchange (gain) loss.................................... 3,101 (1,586) 31
Restricted unit plan costs......................................... -- -- 11,319
(Increase) in receivables.......................................... (13,894) (2,631) (12,126)
(Increase) decrease in inventories................................. 755 (5,406) 525
Increase in accounts payable....................................... 3,922 315 2,814
Increase (decrease) in accrued liabilities......................... (2,371) 4,379 (9,970)
Increase (decrease) in income taxes payable........................ (5,599) (2,866) 1,279
Increase in other liabilities and assets, net...................... 7,297 13,279 9,125
Increase (decrease) in minority interest........................... (2,179) 686 10,294
--------- -------- --------
Net cash provided by operating activities........................ 52,427 56,471 90,814
--------- -------- --------
Cash flows from investing activities:
Capital expenditures.................................................... (28,503) (34,093) (54,165)
Proceeds from sales or disposals of long-term assets.................... 183 577 73
(Loans to) payments from related parties................................ (14,000) -- 14,000
Cash acquired in excess of purchase price of acquisition................ 2,426 -- --
--------- -------- --------
Net cash used for investing activities........................... (39,894) (33,516) (40,092)
--------- -------- --------
Cash flows from financing activities:
Net proceeds from initial public offering............................... -- -- 40,600
Proceeds from long-term debt............................................ 243,964 6,200 20,000
Repayment of long-term debt............................................. (257,214) (19,455) (76,886)
Payments to acquire treasury stock...................................... -- -- (123)
Dividends............................................................... (13,800) (19,650) (1,668)
--------- -------- --------
Net cash used for financing activities........................... (27,050) (32,905) (18,077)
--------- -------- --------
Effect of exchange rate changes on cash...................................... (600) 274 30
--------- -------- --------
Increase (decrease) in cash and cash equivalents............................. (15,117) (9,676) 32,675
Cash and cash equivalents at beginning of period............................. 43,818 28,701 19,025
--------- -------- --------
Cash and cash equivalents at end of period................................... $ 28,701 $ 19,025 $ 51,700
--------- -------- --------
--------- -------- --------
Supplemental information:
Cash paid for income taxes.............................................. $ 23,347 $ 23,827 $ 23,051
--------- -------- --------
--------- -------- --------
Cash paid for interest.................................................. $ 31,307 $ 25,543 $ 22,809
--------- -------- --------
--------- -------- --------
</TABLE>
See the accompanying notes to the consolidated financial statements.
21
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
FOREIGN
CLASS B CURRENCY
COMMON COMMON TREASURY CAPITAL TRANSLATION RETAINED
STOCK STOCK STOCK DEFICIT ADJUSTMENTS EARNINGS TOTAL
------ ------ -------- --------- ----------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993............... $-- $-- $-- $(237,140) $(1,332) $ 15,421 $(223,051)
Net income............................ 20,102 20,102
Dividends (Per Share $.70)............ (13,800) (13,800)
Stock split in the form of dividend... 197 (197) --
Foreign currency translation.......... (82) (82)
------ ------ -------- --------- ----------- -------- ---------
Balance at December 31, 1994............... 197 -- -- (237,140) (1,414) 21,526 (216,831)
Net income............................ 21,093 21,093
Dividends (Per Share $1.00)........... (19,650) (19,650)
Foreign currency translation.......... 52 52
------ ------ -------- --------- ----------- -------- ---------
Balance at December 31, 1995............... 197 -- -- (237,140) (1,362) 22,969 (215,336)
Net income............................ 46,608 46,608
Dividends (Per Share $.125)........... (2,780) (2,780)
Proceeds from initial public
offering............................ 25 40,575 40,600
Conversion of Common Stock to Class B
Common Stock........................ (197) 197 --
Conversion of Class B Common Stock to
Common Stock........................ 54 (54) --
Restricted Unit Plan grants,
cancellations, tax benefits and
other............................... 1 11,350 11,351
Purchase of Treasury stock............ (123) (123)
Foreign currency translation.......... (73) (73)
------ ------ -------- --------- ----------- -------- ---------
Balance at December 31, 1996............... $ 80 $143 $ (123) $(185,215) $(1,435) $ 66,797 $(119,753)
------ ------ -------- --------- ----------- -------- ---------
------ ------ -------- --------- ----------- -------- ---------
</TABLE>
See the accompanying notes to the consolidated financial statements.
22
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The General Chemical Group Inc. (the 'Company'), formerly known as NHO,
Inc., is a Delaware corporation formed in 1988. In January 1989, The Company
acquired New Hampshire Oak, Inc. ('New Hampshire Oak'). Through March 31, 1994,
the Company operated primarily through two wholly owned subsidiaries, General
Chemical Corporation ('GCC') and Exeter Oak Inc. ('Exeter'). On April 1, 1994,
Exeter contributed certain assets and liabilities to its subsidiaries: Toledo
Technologies, Inc. ('Toledo'), Balcrank Products, Inc. ('Balcrank'), and
Printing Developments, Inc. ('PDI'). Exeter was then merged into its parent
company, New Hampshire Oak.
The Company is a diversified manufacturing company predominantly engaged in
the production of inorganic chemicals, with manufacturing facilities located in
the United States and Canada. Through its Chemical Segment, the Company is a
leading producer of soda ash in North America, and a major North American
supplier of calcium chloride, sodium and ammonia salts, sulfites, nitrites,
aluminum-based chemical products, printing plates and refinery and chemical
regeneration services to a broad range of industrial and municipal customers.
The Chemical Segment accounted for approximately 86 percent of the Company's
consolidated 1996 net revenues. Through its Manufacturing Segment, the Company
manufactures precision and highly engineered stamped and machined metal
products, principally automotive engine parts as well as fluid-handling
equipment, manual controls and trailer hitches for the automotive market, which
combined accounted for approximately 14 percent of the Company's consolidated
1996 net revenues.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
The consolidated financial statements include the accounts of the Company
and of all majority-owned subsidiaries and General Chemical (Soda Ash) Partners
('GCSAP'), of which the Company indirectly owns 51 percent. Minority interests
relate solely to partnerships, primarily GCSAP, in which the Company has a
controlling interest. Intercompany balances and transactions are eliminated in
consolidation.
Inventories are valued at the lower of cost or market, using primarily the
last-in, first-out ('LIFO') method for 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. Mines and machinery and
equipment of GCSAP are depreciated using the units-of-production method. All
other plant and equipment are depreciated principally using the straight-line
method, using estimated lives which range from 3 to 35 years.
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.
Accruals for environmental liabilities are recorded based on current
interpretations of environmental laws and regulations when it is probable that a
liability has been incurred and the amount of such a liability can be reasonably
estimated. Liabilities for environmental matters were $16,628 and $16,319 at
December 31, 1995 and 1996, respectively. These amounts do not include estimated
third-party recoveries nor have they been discounted.
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 for over the estimated remaining life of the reserves
currently under lease.
23
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
The Company does not hold or issue financial instruments for trading
purposes. Amounts to be paid or received under interest swap agreements are
recognized as increases or reductions in interest expense in the periods in
which they accrue.
The financial statements of the foreign subsidiaries of the Company have
been translated into U.S. dollars in accordance with Statement of Financial
Accounting Standards No. 52.
All highly liquid instruments purchased with a maturity of three months or
less are considered to be cash equivalents.
The capital deficit at December 31, 1993 of $237,140 arose as a result of
dividends and distributions exceeding accumulated earnings and capital
contributions.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 121, 'Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of' ('FAS 121'), which the
Company adopted in 1996. The Company evaluates the carrying value of its
long-lived assets whenever there is a significant change in the use of an asset
and adjusts the carrying value, if necessary, to reflect the amount recoverable
through future operations. The adoption of FAS 121 had no effect on the
Company's results of operations or financial condition.
The computation of primary earnings per common and common equivalent share
is based on the weighted average number of common shares outstanding during the
period and assumes the exercise of all stock options and restricted units, using
the treasury stock method. Fully diluted earnings per common and common
equivalent share do not differ materially from primary earnings per common and
common equivalent share and are therefore not presented.
Certain prior-period amounts have been reclassified to conform with the
current presentation.
NOTE 2 -- INITIAL PUBLIC OFFERING
On October 17, 1994, the Board of Directors approved an amendment to the
Company's Certificate of Incorporation to effect a 202,994.4539 per share stock
dividend. On May 13, 1996 the stockholders authorized 40,000,000 shares of Class
B Common Stock, $.01 par value, which has ten votes per share, is subject to
significant restrictions on transfer and is convertible at any time into Common
Stock on a share-for-share basis. The Company also increased the amount of
authorized Common Stock to 100,000,000 shares. Upon the filing of the Company's
Amended and Restated Certificate of Incorporation with the Secretary of State of
Delaware on such date, all of the then outstanding 19,736,842 shares of Common
Stock held by the Company's existing stockholders were automatically converted
into a like number of shares of the newly created Class B Common Stock. The
Common Stock and Class B Common Stock are substantially identical, except for
the disparity in voting power, restriction on transfer and conversion
provisions.
On May 15, 1996, the Company and a principal stockholder (the 'Selling
Stockholder') completed an initial public offering (the 'Offering') of 7,925,375
shares of Common Stock at $17.50 per share. Of the shares offered, 2,500,000
were issued and sold by the Company. The net proceeds to the Company from the
Offering, after deducting underwriter's discount and related fees and expenses,
were $40,600.
Contemporaneous with the Offering, the Selling Stockholder converted
5,425,375 shares of Class B Common Stock to 5,425,375 shares of Common Stock,
which were then sold in the Offering. The Company did not receive any of the
proceeds from the sale of such shares by the Selling Stockholder.
24
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 3 -- INCOME TAXES
Income before income taxes and extraordinary item is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
United States................................................ $32,748 $40,644 $57,282
Foreign...................................................... 13,950 23,775 18,449
------- ------- -------
Total................................................... $46,698 $64,419 $75,731
------- ------- -------
------- ------- -------
</TABLE>
The components of the income tax provision are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
United States:
Current................................................. $14,377 $28,515 $18,524
Deferred................................................ (2,988) 3,544 38
Foreign:
Current................................................. 7,497 8,867 7,296
Deferred................................................ (2,765) (601) (791)
State:
Current................................................. 2,914 2,127 4,201
Deferred................................................ (642) 874 (145)
------- ------- -------
Total.............................................. $18,393 $43,326 $29,123
------- ------- -------
------- ------- -------
</TABLE>
A summary of the components of deferred tax assets and liabilities is as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1996
------- -------
<S> <C> <C>
Postretirement benefits................................................. $30,530 $31,151
Nondeductible accruals.................................................. 40,204 41,060
Foreign operations...................................................... 10,384 --
Other................................................................... 1,342 1,001
------- -------
Deferred tax assets................................................ 82,460 73,212
------- -------
Foreign operations...................................................... -- 867
Property, plant and equipment........................................... 30,753 31,832
Pensions................................................................ 7,448 7,437
Inventory............................................................... 3,143 2,951
Other................................................................... 1,897 1,260
------- -------
Deferred tax liabilities........................................... 43,241 44,347
------- -------
Valuation allowance..................................................... 17,516 6,265
------- -------
Net deferred tax asset........................................ $21,703 $22,600
------- -------
------- -------
</TABLE>
The Company has deferred tax assets related to foreign tax credits of
$17,516 and $6,265 at December 31, 1995 and 1996, respectively, against which a
full valuation allowance has been recorded. A valuation allowance of $2,133 and
$1,641 was provided during 1994 and 1995, respectively. During 1996, the Company
reversed $11,251 of previously recorded valuation allowances primarily related
to foreign tax credits that expired.
25
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP 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,
------------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
U.S. federal statutory rate............................................ 35.0% 35.0% 35.0%
State income taxes, net of federal benefit............................. 3.2 3.0 3.5
Tax effect of foreign operations....................................... 2.9 6.7 5.1
Provision for disputed items........................................... -- 26.5 --
Depletion.............................................................. (2.8) (4.6) (5.3)
Other.................................................................. 1.1 0.6 0.2
---- ---- ----
Total........................................................ 39.4% 67.2% 38.5%
---- ---- ----
---- ---- ----
</TABLE>
The Internal Revenue Service (the 'IRS') examinations of the Company's
federal income tax returns resulted in the issuance of a deficiency notice
during 1995. The Company has filed an administrative appeal with the IRS
contesting the items denoted in the deficiency notice. Notwithstanding such
appeal, in 1995 the Company recorded a provision for disputed items of $17,100
for all years prior to 1995 in connection with the deficiency notice. Management
believes the amounts provided at December 31, 1996 are adequate.
NOTE 4 -- PENSION PLANS
The Company maintains several defined benefit pension plans covering
substantially all employees. A participating employee's annual postretirement
pension benefit is determined by the employee's credited service and, in most
plans, final average annual earnings with the Company. Vesting requirements are
five years in the U.S. and two years in Canada. The Company's funding policy is
to annually contribute the statutorily required minimum amount as actuarially
determined.
The net periodic pension cost for U.S. pension plans included the following
components:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
------- -------- --------
<S> <C> <C> <C>
Service cost (benefits earned during the year)..................... $ 4,238 $ 3,826 $ 4,748
Interest cost on projected benefit obligation...................... 10,944 12,377 13,125
Actual return on assets............................................ (276) (24,938) (24,655)
Net amortization and deferral...................................... (9,030) 14,775 13,335
------- -------- --------
Net periodic pension cost..................................... $ 5,876 $ 6,040 $ 6,553
------- -------- --------
------- -------- --------
</TABLE>
26
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
The net periodic pension cost for Canadian pension plans included the
following components:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Service cost (benefits earned during the year).................. $ 1,245 $ 1,140 $ 1,494
Interest cost on projected benefit obligation................... 3,664 3,527 3,727
Actual return on assets......................................... (1,209) (6,614) (4,662)
Net amortization and deferral................................... (3,399) 2,457 559
------- ------- -------
Net periodic pension cost.................................. $ 301 $ 510 $ 1,118
------- ------- -------
------- ------- -------
</TABLE>
The funded status and (accrued) prepaid pension cost for all plans are as
follows:
<TABLE>
<CAPTION>
UNITED STATES CANADA
DECEMBER 31, DECEMBER 31,
---------------------- --------------------
1995 1996 1995 1996
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested......................................... $(145,840) $(144,887) $(38,348) $(40,421)
Nonvested...................................... (9,847) (13,235) (194) (205)
--------- --------- -------- --------
Accumulated benefit obligation...................... $(155,687) $(158,122) $(38,542) $(40,626)
--------- --------- -------- --------
--------- --------- -------- --------
Plan assets at fair value........................... $ 145,531 $ 166,661 $ 53,799 $ 60,224
Projected benefit obligation........................ (179,743) (187,760) (48,178) (50,783)
--------- --------- -------- --------
Projected benefit obligation (in excess of) less
than plan assets.................................. (34,212) (21,099) 5,621 9,441
Unrecognized prior service cost..................... 7,738 6,896 1,034 942
Unrecognized net (gain) loss........................ 3,839 (8,712) 12,690 8,761
--------- --------- -------- --------
(Accrued) prepaid pension cost...................... $ (22,635) $ (22,915) $ 19,345 $ 19,144
--------- --------- -------- --------
--------- --------- -------- --------
</TABLE>
The Canadian prepaid pension cost is included in other assets on the
balance sheet.
The assumptions used in accounting for the plans in 1994, 1995 and 1996
were
<TABLE>
<CAPTION>
UNITED STATES
----------------------------------------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Estimated discount rate.......................................... 8 1/2% 7 1/2% 7 1/2%
Estimated long-term rate of return on assets..................... 9% 9% 9%
Average rate of increase in employee compensation................ 5% 5% 5%
<CAPTION>
CANADA
------------------------------------
1994 1995 1996
------- ---------- ----------
<S> <C> <C> <C>
Estimated discount rate.......................................... 9% 8% 8%
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>
On January 1, 1994, GCSAP initiated a pension plan covering hourly
employees at GCSAP's manufacturing facility. These employees ceased to be active
participants under the GCC hourly pension plan, resulting in a $1,200
curtailment gain.
The dates used to measure plan assets and liabilities were October 31, 1995
and 1996 for all plans. Plan assets are invested primarily in stocks, bonds,
short-term securities and cash equivalents.
NOTE 5 -- POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company maintains several plans providing postretirement benefits
covering substantially all hourly and the majority of salaried employees. The
Company funds these benefits on a pay-as-you-go basis. The long-term portion of
accrued postretirement benefit cost of $83,470 and $85,442 at December 31, 1995
and 1996, respectively, is included in other liabilities on the balance sheet.
27
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
The net periodic postretirement benefit cost included the following
components:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Service cost (benefits earned during the year).......................... $ 1,609 $ 1,576 $ 1,765
Interest cost on projected postretirement benefit obligation............ 4,327 4,862 4,451
Net amortization and deferral........................................... (2,005) (2,052) (2,361)
------- ------- -------
Net periodic postretirement benefit cost........................... $ 3,931 $ 4,386 $ 3,855
------- ------- -------
------- ------- -------
</TABLE>
The funded status and accrued postretirement benefit obligation are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
-------- --------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees................................................................... $(39,506) $(39,797)
Fully eligible plan participants........................................... (10,978) (12,095)
Other active plan participants............................................. (15,367) (17,001)
-------- --------
Accumulated postretirement benefit obligation................................... (65,851) (68,893)
Plan assets at fair value....................................................... -- --
-------- --------
Accumulated postretirement benefit obligation in excess of plan assets.......... (65,851) (68,893)
Unrecognized net reduction in prior service costs............................... (14,343) (12,708)
Unrecognized net gain........................................................... (5,666) (6,293)
-------- --------
Accrued postretirement benefit obligation....................................... $(85,860) $(87,894)
-------- --------
-------- --------
</TABLE>
The assumptions used in accounting for the plans in 1995 were a 12 percent
health care cost trend rate (decreasing to 7 1/2 percent in the year 2000 and
beyond) and a 7 1/2 percent discount rate for the U.S. plans and an 11 percent
health care cost trend rate (decreasing to 7 percent in the year 2000 and
beyond), an 8 percent discount rate and a 5 1/4 percent salary scale for the
Canadian plans.
The assumptions used in accounting for the plans in 1996 were an 11 percent
health care cost trend rate (decreasing to 7 1/2 percent in the year 2000 and
beyond) and a 7 1/2 percent discount rate for the U.S. plans and an 11 percent
health care cost trend rate (decreasing to 7 percent in the year 2000 and
beyond), an 8 percent discount rate and a 5 1/4 percent salary scale for the
Canadian plans. A one percent increase in the health care trend rate would
increase the accumulated postretirement benefit obligation by $6,566 at year end
1996 and the net periodic cost by $606 for the year.
NOTE 6 -- 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, 1996 are as
follows:
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31,
- ------------
<S> <C>
1997.................................................................. $12,522
1998.................................................................. 6,019
1999.................................................................. 3,935
2000.................................................................. 1,547
2001.................................................................. 459
-------
$24,482
-------
-------
</TABLE>
28
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
Rental expense for the years ended December 31, 1994, 1995 and 1996 was
$13,254, $13,531, and $15,414, respectively.
Parent Guaranty and Transfer Agreement. A restated parent guaranty and
transfer agreement between New Hampshire Oak, ACI International Limited and
TOSOH America, Inc. provides that in the event that either New Hampshire Oak,
ACI International Limited or TOSOH America, Inc. (such entities being referred
to as a 'transferring parent' or 'nontransferring parent' as the context
requires) proposes to sell or otherwise transfer or cause to be sold or
transferred the voting securities of GCC, the Andover Group, Inc. or TOSOH
Wyoming, Inc., (the respective subsidiaries constituting the partners of GCSAP)
as the case may be, the nontransferring parents will have the following options:
(1) to purchase the transferring parent's subsidiary's interest in GCSAP at fair
market value; (2) to require the transferring parent to purchase the
nontransferring parents' subsidiaries' interest in GCSAP at fair market value;
(3) to buy the voting securities to be sold by the transferring parent on the
same terms and conditions and at the same price as the transferring parent
proposes to sell or otherwise transfer or cause to be sold or transferred such
voting securities; or (4) to cause the proposed transferee to purchase the
nontransferring parents' subsidiaries' interest in GCSAP for a price reflecting
the price to be paid by the proposed transferee for such voting securities. In
the event that New Hampshire Oak ceases to own at least 51 percent of GCC while
GCC is a partner, GCC shall pay to The Andover Group, Inc. $2,833.
Richmond Works July 26, 1993 Incident. On July 26, 1993 a pressure relief
device on a railroad tank car containing oleum that was being unloaded at the
Company's Richmond, California, facility ruptured during the unloading process,
causing the release of a significant amount of sulfur trioxide. Approximately
150 lawsuits seeking substantial amounts of damages were filed against the
Company on behalf of in excess of 60,000 claimants in municipal and superior
courts of California (Contra Costa and San Francisco Counties) and in federal
court (United States District Court for the Northern District of California).
All state court cases were coordinated before a coordination trial judge (In Re
GCC Richmond Works Cases, JCCP No. 2906) and the federal court cases were stayed
until completion of the state court cases.
After several months of negotiation under the supervision of a settlement
master, the Company and a court-approved plaintiffs' management committee
executed a comprehensive settlement agreement which resolved the claims of
approximately 95 percent of the claimants who filed lawsuits arising out the
July 26th incident, including the federal court cases. After a final settlement
approval hearing on October 27, 1995, the coordination trial judge approved the
settlement on November 22, 1995. Pursuant to the terms of the settlement
agreement, the Company, with funds to be provided by its insurers pursuant to
the terms of its insurance policies, has agreed to make available a maximum of
$180,000 to implement the settlement. In addition, the settlement agreement
provides, among other things, that while claimants may 'opt out' of the
compensatory damages portion of the settlement and pursue their own cases
separate and apart from the class settlement mechanism, they have no right to
opt out of the punitive damages portion of the settlement. Consequently, under
the terms of the settlement, no party may seek punitive damages from the Company
outside of those provided by the settlement.
Notices of appeal of all or portions of the settlement approved by the
court were filed by five law firms representing approximately 2,750 claimants,
with approximately 2,700 of these claimants represented by the same law firm.
Virtually all of these claimants have not specified the amount of their claims
in court documents, although the Company believes that their alleged injuries
are no different in nature or extent than those alleged by the settling
claimants. On May 8, 1996, the California Court of Appeals dismissed each of the
appeals that had been filed challenging the trial court's approval of the class
action settlement. The Court of Appeals dismissed the appeal relating to the
trial court's rulings on plaintiffs' attorney's fees on the ground that the
appealing attorneys lacked standing to appeal. The Court of Appeals also
dismissed each of the other pending appeals, ruling that the trial court's
orders
29
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
and rulings approving the settlement were not presently appealable, if at all,
by the appealing claimants since they had all elected to opt out of the
settlement. The appealing attorneys and some of the appealing claimants then
filed a petition for review with the California Supreme Court which on August
15, 1996 elected not to review the Court of Appeals' decision.
It is possible that one or more of the appealing claimants, once their
opt-out cases are finally litigated through trial, may attempt to refile all or
a portion of the appeals that were dismissed by the Court of Appeals. While
there can be no assurances regarding how an appellate court might rule in the
event of such a refiling, the Company believes that the settlement will be
upheld on appeal. If the settlement is upheld on appeal, the Company believes
that any further liability in excess of the amounts made available under the
settlement agreement will not exceed the available insurance coverage, if at
all, by an amount that could be material to its financial condition or results
of operations. In the event of a reversal or modification of the settlement on
appeal, with respect to lawsuits by any then remaining claimants (opt-outs and
settling claimants who have not signed releases) the Company believes that,
whether or not it elects to terminate the settlement in the event it is reversed
or modified on appeal, it will have adequate resources from its available
insurance coverage to vigorously defend these lawsuits through their ultimate
conclusion, whether by trial or settlement. However, in the event the settlement
is overturned or modified on appeal, there can be no assurance that the
Company's ultimate liability resulting from the July 26, 1993 incident would not
exceed the available insurance coverage by an amount which could be material to
its financial condition or results of operations, nor is the Company able to
estimate or predict a range of what such ultimate liability might be, if any.
The Company has insurance coverage relating to this incident which totals
$200,000. The first two layers of coverage total $25,000 with a sublimit of
$12,000 applicable to the July 26, 1993 incident, and the Company also has
excess insurance policies of $175,000 over the first two layers. The Company
reached an agreement with the carrier for the first two layers whereby the
carrier paid the Company $16,000 in settlement of all claims the Company had
against that carrier. In the third quarter of 1994, the Company recorded a
$9,000 charge to earnings for costs which the Company incurred related to this
matter. The Company's excess insurance policies, which are written by two
Bermuda-based insurers, provide coverage for compensatory as well as punitive
damages. Both insurers have executed agreements with the Company confirming
their respective commitments to fund the settlement as required by their
insurance policies with the Company and as described in the settlement
agreement. In addition, these same insurers currently continue to provide
substantially the same insurance coverage to the Company.
Environmental Matters. Accruals for environmental liabilities are recorded
based on current interpretations of applicable environmental laws and
regulations when it is probable that a liability has been incurred and the
amount of such liability can be reasonably estimated. Estimates are established
based upon information available to management to date, the nature and extent of
the environmental liability, the Company's experience with similar activities
undertaken, estimates obtained from outside consultants and the legal and
regulatory framework in the jurisdiction in which the liability arose. The
potential costs related to environmental matters and their estimated impact on
future operations are difficult to predict due to the uncertainties regarding
the extent of any required remediation, the complexity and interpretation of
applicable laws and regulations, possible modification of existing laws and
regulations or the adoption of new laws or regulations in the future, and the
numerous alternative remediation methods and their related varying costs. The
material components of the Company's environmental accruals include potential
costs, as applicable, for investigation, monitoring, remediation and ongoing
maintenance activities at any affected site. Accrued liabilities for
environmental matters were $16,628 and $16,319 at December 31, 1995 and 1996,
respectively. These amounts do not include estimated third-party recoveries nor
have they been discounted.
By letter dated March 22, 1990 from the Environmental Protection Agency
(the 'EPA'), the Company received a Notice of Potential Liability pursuant to
Section 107(a) of the Comprehensive
30
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
Environmental Response, Compensation and Liability Act of 1980 ('CERCLA'), as
amended, with respect to a site located in Front Royal, Virginia, owned at the
time by Avtex Fibers, Inc. (the 'Avtex Site'), which has since filed for
bankruptcy. A sulfuric acid plant adjacent to the main Avtex Site was previously
owned and operated by the Company (the 'acid plant'). The letter requested that
the Company perform certain activities at the acid plant including providing the
security, preventing discharges, removing certain specific residue and sludges
from two storage vessels and the transfer line to the main Avtex facility and
determining the extent of contamination at the site, if any. In April 1991, the
Company submitted a draft work plan with respect to the acid plant including
each of the activities requested by the EPA discussed above. The Company has
provided for the estimated costs of $1,600 for these activities in its accrual
for environmental liabilities. The EPA has not yet responded to this work plan,
nor has it requested that an initial investigation and feasibility study for the
acid plant be performed. As a result, the extent of remediation required, if
any, is unknown. The Company believes that the acid plant is separate and
divisible from the main Avtex Site and, as a result, is not subject to any
liability for costs related thereto. The Company will continue to vigorously
assert this position with the EPA. There has been very limited contact by the
EPA with the Company over the past three years, as it appears that the EPA is
focused on remediation activities at the main Avtex Site.
In addition to the matters discussed above, the Company is involved in
other claims, litigation, administrative proceedings and investigations and
remediation relative to environmental matters. Although the amount of any
ultimate liability which could arise with respect to these matters cannot be
accurately predicted, it is the opinion of management, based upon currently
available information and the accruals established, that any such liability will
have no material adverse effect on the Company's financial condition.
NOTE 7 -- RELATED PARTY TRANSACTIONS
MANAGEMENT AGREEMENT
Upon its formation, the Company entered into a management agreement with a
company (the 'Management Company') owned by the then shareholders of the Company
under which the Company received corporate supervisory and administrative
services and strategic guidance for a quarterly fee. The quarterly fee was
$1,475 in 1994. The Company also paid a special fee of $250 in 1994 to the
Management Company for services rendered in connection with restructuring,
financing and tax research. The management agreement was terminated on December
29, 1994. On December 30, 1994 the Company purchased all of the outstanding
common stock of the Management Company for $50, which approximated the net book
value of the Management Company on the purchase date. On January 1, 1995, the
Company entered into a new management agreement with Latona Associates (which is
controlled by a stockholder of the Company) under which the Company receives
corporate supervisory and administrative services and strategic guidance for a
quarterly fee of $1,375 and $1,400 in 1995 and 1996, respectively. In addition,
in connection with any acquisition or business combination with respect to which
Latona Associates advises the Company, the Company has agreed to pay Latona
Associates additional fees comparable with fees received by investment banking
firms for such services. This agreement expires on December 31, 2004.
NOTES RECEIVABLE
On April 25, 1994, Toledo and PDI advanced $5,000 and $9,000, respectively,
to a stockholder of the Company and a former stockholder of the Company in the
form of unsecured promissory notes which had a 7.25 percent annual interest rate
at December 31, 1995. The noncurrent portion of the notes at December 31, 1995
was $11,200 and is included in other assets on the balance sheet. During 1996
the promissory notes were prepaid in full.
31
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 8 -- ADDITIONAL FINANCIAL INFORMATION
The following are summaries of selected balance sheet items:
RECEIVABLES
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1995 1996
------- --------
<S> <C> <C>
Trade.................................................................. $92,281 $104,108
Other.................................................................. 6,624 3,737
Allowance for doubtful accounts........................................ (5,674) (5,367)
------- --------
$93,231 $102,478
------- --------
------- --------
</TABLE>
INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1996
------- -------
<S> <C> <C>
Raw materials........................................................... $10,447 $11,022
Work in process......................................................... 4,602 4,900
Finished products....................................................... 19,061 17,403
Supplies and containers................................................. 7,860 8,104
------- -------
$41,970 $41,429
------- -------
------- -------
</TABLE>
Inventories valued at LIFO amounted to $21,485 and $20,153 at December 31,
1995 and 1996, respectively, which were below estimated replacement cost by
$3,437 and $3,088, respectively. The impact of LIFO liquidations in 1994, 1995
and 1996 was not significant.
PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1996
--------- ---------
<S> <C> <C>
Land and improvements.............................................. $ 23,223 $ 27,299
Machinery and equipment............................................ 274,930 315,544
Buildings and leasehold improvements............................... 41,660 42,968
Construction in progress........................................... 13,541 17,597
Mines and quarries................................................. 12,964 13,539
--------- ---------
366,318 416,947
Less accumulated depreciation and amortization..................... (150,761) (177,128)
--------- ---------
$ 215,557 $ 239,819
--------- ---------
--------- ---------
</TABLE>
ACCRUED LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1996
------- -------
<S> <C> <C>
Wages, salaries and benefits............................................ $23,359 $22,235
Richmond incident....................................................... 10,823 --
Interest................................................................ 6,146 5,752
Taxes, other than income taxes.......................................... 10,652 13,060
Other................................................................... 32,038 33,158
------- -------
$83,018 $74,205
------- -------
------- -------
</TABLE>
32
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 9 -- LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
MATURITIES 1995 1996
---------- -------- --------
<S> <C> <C> <C>
GCC Debt:
Bank Term Loan -- floating rate.............................. 1996-2001 $100,000 $ 82,609
Senior Subordinated Notes -- 9.25%........................... 2003 100,000 100,000
Canada Senior Notes -- 9.09%................................. 1999 52,000 52,000
U.S. Revolving Credit Facility -- floating rate.............. 1999 21,000 --
Toledo Debt:
Toledo Bank Term Loan -- floating rate....................... 1996-1998 8,250 --
Toledo Revolving Credit Facility -- floating rate............ 1998 3,300 --
PDI Debt:
PDI Bank Term Loan -- floating rate.......................... 1996-1998 6,945 --
-------- --------
Total Debt................................................... 291,495 234,609
-------- --------
Less: Current Portion........................................ (21,892) (17,392)
-------- --------
Net Long-Term Debt........................................... $269,603 $217,217
-------- --------
-------- --------
</TABLE>
Aggregate maturities of long-term debt for each of the years in the five
year period ending December 31, 2001 are $17,392, $17,392, $69,392, $17,392 and
$13,041, respectively.
The U.S. Revolving Credit Facility allows General Chemical to borrow up to
$130,000, including letters of credit of up to $30,000, through March 31, 1999.
The unused letter of credit balance was $21,066 and $21,033 at December 31, 1995
and 1996, respectively. This facility bears interest at a rate equal to a spread
over a reference rate chosen by the Company from various options. The rate in
effect at December 31, 1995 was 6.8 percent. At December 31, 1996 there were no
outstanding borrowings under this facility.
General Chemical Canada Limited has a $15,000 (Canadian Dollar) Revolving
Credit Facility maturing June 22, 1998, subject to one-year extensions at the
lender's discretion. This facility bears interest at a rate equal to a spread
over a reference rate chosen by General Chemical Canada Limited from various
options. At December 31, 1995 and 1996, there were no outstanding borrowings
under this facility.
Commitment fees paid for the abovementioned facilities were $354, $350 and
$414 for 1994, 1995 and 1996, respectively.
The Bank Term Loan bears interest at a rate equal to a spread over a
reference rate chosen by GCC from various options. The rate in effect at
December 31, 1995 and 1996, including effects of interest rate swap hedge
agreements (see Note 11), was 7.4 percent each year.
The U.S. Revolving Credit Facility and the Bank Term Loan are secured by
(1) substantially all of the assets of GCC, (2) 65 percent of the capital stock
of General Chemical Canada Holding Inc., (3) GCC's 51 percent general
partnership interest in GCSAP, and (4) all of the stock of the other direct and
indirect subsidiaries of GCC.
During 1994, GCC recorded an extraordinary loss of $8,203 (net of a tax
benefit of $5,367) related to the retirement of certain indebtedness.
The Toledo and PDI term loans bear interest at a rate equal to a spread
over a reference rate chosen by the respective companies from various options.
The rate in effect for the Toledo term loan was 8.2 percent at December 31,
1995. The rate in effect for the PDI term loan was 7.7 percent at December 31,
1995. During 1996, both term loans were prepaid in full.
33
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
Toledo has a $5,000 (reduced from $7,500 on February 13, 1996) revolving
credit facility, including letters of credit up to $2,000, available through
December 31, 1998. The unused letter of credit balance was $1,724 at each of
December 31, 1995 and 1996. The revolving credit facility bears interest at a
rate equal to a spread over a reference rate chosen by Toledo from various
options. The rate in effect was 8.3 percent at December 31, 1995. There were no
borrowings at December 31, 1996. Commitment fees paid were $8 and $14 for 1995
and 1996, respectively.
PDI has a $3,000 revolving credit facility, including letters of credit of
up to $1,500, available through December 31, 1998. No amounts were outstanding
under the revolving credit facility at each of December 31, 1995 and 1996. The
unused letter of credit balance was $1,209 at each of December 31, 1995 and
1996. The revolving credit facility bears interest at a rate equal to a spread
over a reference rate chosen by PDI from various options. Commitment fees paid
were $10 and $15 for 1995 and 1996, respectively.
The Toledo and PDI term loans and revolving credit facilities are secured
by all inventory, equipment, fixtures, receivables and trademarks of the
respective companies and by pledges of their respective capital stock.
Balcrank has a $1,000 revolving loan facility which expires April 30, 1997.
No amounts were outstanding under this facility at December 31, 1995 and 1996.
At December 31, 1995 and 1996, Balcrank had unused letters of credit of $145
under the $500 letter of credit portion of this facility. Balcrank's credit
facility is secured by substantially all the assets of Balcrank. Borrowings
under the credit agreement bear interest at a rate equal to a spread over a
reference rate chosen by Balcrank from various options. Commitment fees paid
were $2 and $3 for 1995 and 1996, respectively.
While certain of the Company's subsidiaries' debt facilities are
outstanding, the Company's subsidiaries must meet specific financial tests on an
ongoing basis, which are customary for these types of facilities. Except as
provided by applicable corporate law, there are no restrictions on the Company's
ability to pay dividends from retained earnings. However, the payment of cash
dividends by the Company's subsidiaries to the Company are subject to certain
restrictions under the terms of various agreements covering the Company's
subsidiaries' long-term debt. Toledo, PDI and Balcrank are not permitted under
each subsidiary's respective debt agreements to pay cash dividends. Assuming
certain financial covenants are met, General Chemical is permitted to pay cash
dividends of up to 50 percent of the net income (subject to certain adjustments)
of General Chemical for the applicable period. Consequently, the Company's
ability to pay cash dividends on Common Stock may effectively be limited by such
agreements. At December 31, 1996, approximately $51,000 was available for
dividend payments in accordance with these covenants.
NOTE 10 -- STOCK OPTION PLAN AND RESTRICTED UNIT PLAN
During 1996, the Company adopted the 1996 Stock Option and Incentive Plan
which provides for the issuance of up to 2,200,000 shares of Common Stock under
the plan. The plan authorizes the granting of incentive and nonqualified stock
options, stock appreciation rights, restricted and unrestricted stock and
performance share awards to executives, directors and other key persons. Any
incentive stock options granted under the plan must have an exercise price at
least equal to the market value of the shares on the day the option is granted
and a maximum term of 10 years.
During the second quarter of 1996, the Company granted options to purchase
1,080,000 shares of Common Stock at the initial public offering price of $17.50
per share which vest and are exercisable on dates ranging from May 1997 through
May 2006. During the fourth quarter of 1996, the Company granted options to
purchase 201,000 shares of Common Stock at $18.50 per share which vest and
become exercisable on dates ranging from November 1997 through November 1999.
34
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AVERAGE OPTION
SHARES PRICE PER SHARE
---------- ---------------
<S> <C> <C>
Options Outstanding at December 31, 1995........................ -- $--
Options Granted............................................ 1,281,000 17.66
Options Exercised.......................................... -- --
Options Forfeited.......................................... 10,000 17.50
----------
Options Outstanding at December 31,1996......................... 1,271,000 $ 17.66
---------- -------
---------- -------
</TABLE>
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123 'Accounting for Stock-Based Compensation'
('FAS 123'). Had compensation cost for this plan been determined under FAS 123,
the Company's net income would have been reduced to $45,623 with income per
common share of $2.08. For purposes of this calculation, the fair value of each
option grant was estimated on the grant date using the Black-Scholes
option-pricing model with the following assumptions used: dividend yield of 1.0
percent; expected volatility of 27 percent; weighted average risk free interest
rate of 6.42 percent; and, weighted average expected lives of 7 years. All
options granted to date under the stock option plan have an exercise price equal
to the market price of the Company's stock on the grant date.
The Company adopted a Restricted Unit Plan that authorized the issuance of
850,000 units, with each unit representing one share of Common Stock to be
issued to the participant upon the occurrence of certain conditions ('vesting')
unless the participant elects to defer receipt thereof. All awards are subject
to a five year vesting schedule under which a portion of each participant's
award vests annually over a five year period. Dividend equivalents on
outstanding units accrue to the benefit of the participants and are paid at the
time dividends are paid to Common Stock shareholders. These units were awarded
during the second quarter of 1996 in replacement of the rights earned by
participants beginning in 1989 under the Phantom Equity Plan and certain other
prior equity programs of the Company which were then terminated. The Company
recorded a charge to income of $10,530 with a contra credit to capital deficit,
representing the amounts earned under the prior equity programs.
NOTE 11 -- FINANCIAL INSTRUMENTS
INTEREST RATE SWAP AGREEMENTS
The Company periodically enters into interest rate swap agreements to
effectively convert all or a portion of its floating-rate debt to fixed-rate
debt in order to reduce the Company's risk to movements in interest rates. Such
agreements involve the exchange of fixed and floating interest rate payments
over the life of the agreement without the exchange of the underlying principal
amounts. Accordingly, the impact of fluctuations in interest rates on these
interest rate swap agreements is fully offset by the opposite impact on the
related debt. Swap agreements are only entered into with strong creditworthy
counterparties. The swap agreements in effect were as follows:
<TABLE>
<CAPTION>
INTEREST RATE
NOTIONAL --------------------
DECEMBER 31, AMOUNT MATURITIES RECEIVE(1) PAY(2)
- ----------- -------- ---------- ---------- ------
<S> <C> <C> <C> <C>
1995............................................ $ 75,000 1998-1999 5.9% 6.8%
1996............................................ $ 75,000 1998-1999 5.5% 6.8%
</TABLE>
- ------------
(1) Three-month LIBOR.
(2) Represents the weighted average rate.
35
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
In addition to the swap agreements described above, the Company has entered
into a forward swap agreement, which will begin in 1998 and mature in 2002,
which has a notional amount of $30,000 and a fixed payment rate of 6.6 percent.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1996
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Long-term debt......................................... $291,495 $295,495 $234,609 $238,967
Unrealized loss on interest rate swap agreements....... $ -- $ (3,600) $ -- $ (1,200)
</TABLE>
The fair values of cash and cash equivalents, receivables and payables
approximate their carrying values due to the short-term nature of the
instruments.
The fair value of the Company's long-term debt was based on quoted market
prices for publicly traded notes and discounted cash flow analyses on its
nontraded debt. The fair value of the Company's interest rate swap agreements is
the estimated amount the Company would have to pay or receive to terminate the
swap agreements based upon quoted market prices as provided by financial
institutions which are counterparties to the swap agreements.
NOTE 12 -- GEOGRAPHIC AND INDUSTRY SEGMENT INFORMATION
Geographic area information is summarized as follows:
<TABLE>
<CAPTION>
UNITED STATES(1) FOREIGN(2) ELIMINATIONS(3) TOTAL
---------------- ---------- --------------- --------
<S> <C> <C> <C> <C>
Net revenues:
1994.................................... $446,289 $ 118,920 $ (39,297) $525,912
1995.................................... 467,347 122,659 (39,135) 550,871
1996.................................... 544,029 128,345 (48,715) 623,659
Operating profit:
1994.................................... $ 72,746 $ 25,495 $ -- $ 98,241
1995.................................... 80,390 26,607 -- 106,997
1996.................................... 106,548 22,668 -- 129,216
Identifiable assets at December 31:
1994.................................... $338,729 $ 94,898 $ -- $433,627
1995.................................... 331,237 100,088 -- 431,325
1996.................................... 384,352 100,785 -- 485,137
</TABLE>
-----------------
(1) Includes export sales amounting to $47,726, $59,320 and $71,413 for the
years ended December 31, 1994, 1995 and 1996, respectively.
(2) Principally of General Chemical Canada Holding Inc., a wholly owned
subsidiary of GCC.
(3) Sales between geographic areas are recorded at prices comparable to market
prices charged to third party customers and are eliminated in consolidation.
36
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
(DOLLARS IN THOUSANDS)
Industry segment information is summarized as follows:
<TABLE>
<CAPTION>
CHEMICALS MANUFACTURING CORPORATE TOTAL
--------- ------------- --------- --------
<S> <C> <C> <C> <C>
Net revenues:
1994........................................... $ 464,452 $61,460 $ -- $525,912
1995........................................... 480,926 69,945 -- 550,871
1996........................................... 534,434 89,225 -- 623,659
Operating profit:
1994........................................... $ 98,950 $ 4,737 $(5,446) $ 98,241
1995........................................... 105,186 4,337 (2,526) 106,997
1996........................................... 123,695 12,472 (6,951) 129,216
Identifiable assets at December 31:
1994........................................... $ 378,958 $45,112 $ 9,557 $433,627
1995........................................... 377,014 49,833 4,478 431,325
1996........................................... 424,864 55,151 5,122 485,137
Capital expenditures:
1994........................................... $ 20,873 $ 7,630 $ -- $ 28,503
1995........................................... 29,099 4,994 -- 34,093
1996........................................... 52,546 1,619 -- 54,165
Depreciation and amortization:
1994........................................... $ 25,074 $ 1,479 $ 147 $ 26,700
1995........................................... 26,188 2,020 50 28,258
1996........................................... 26,978 2,767 -- 29,745
</TABLE>
NOTE 13 -- UNAUDITED QUARTERLY INFORMATION
<TABLE>
<CAPTION>
1995
----------------------------------------------------------
FIRST SECOND THIRD FOURTH YEAR
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net revenues..................................... $128,661 $143,062 $142,457 $136,691 $550,871
Gross profit..................................... 35,811 44,819 45,187 37,799 163,616
Net income (loss)................................ 7,890 12,764 12,626 (12,187)(1) 21,093
Net income (loss) per common share............... .40 .65 .64 (.62) 1.07
</TABLE>
<TABLE>
<CAPTION>
1996
----------------------------------------------------------
FIRST SECOND THIRD FOURTH YEAR
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net revenues..................................... $144,571 $160,130 $161,967 $156,991 $623,659
Gross profit..................................... 41,511 53,067 51,730 54,718 201,026
Net income....................................... 9,316 7,042(2) 14,634 15,616 46,608
Net income per common share...................... .47 .33 .63 .67 2.13
</TABLE>
Note: Earnings per share calculations are based on the weighted average number
of shares outstanding during each of the quarters. The sum of the four
quarters may not equal the full year computation due to rounding.
- ------------
(1) The Company recorded a nonrecurring charge to income tax expense of $17.1
million for all years prior to 1995 in the fourth quarter of 1995 related to
IRS examinations. See Note 3 of the Notes to the Consolidated Financial
Statements.
(2) In the second quarter of 1996, the Company recorded a one-time pre tax
charge of $12.5 million ($7.6 million after-tax or $.35 per share) due
primarily to awards made under the Restricted Unit Plan, reflecting the
portion earned under prior equity programs.
37
<PAGE>
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors. For information relating to the Company's Directors, see the
information contained under the caption 'Election of Directors-Board of Director
Nominees' in the Company's definitive 1997 Proxy Statement (the 'Proxy
Statement'), which information is hereby incorporated by reference.
Executive Officers. For information relating to the Company's executive
officers, see the information contained under the caption 'Executive Officers
and Key Employees' in Part I of this report.
Compliance with Section 16(a) of the Exchange Act. For information relating
to the Company's compliance with Section 16(a) of the Exchange Act, see the
information contained under the caption 'Section 16(a) Beneficial Ownership
Reporting Compliance' in the Company's Proxy Statement, which information is
hereby incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION
Executive Compensation. For information relating to the compensation of the
Company's executives, see the information contained under the caption
'Compensation of Executive Offices and Key Employees' and 'Election of
Directors -- Compensation of Directors' in the Company's Proxy Statement, which
information is hereby incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners. For information relating
to the beneficial ownership of more than five percent of the Company's Common
stock and Class B Common Stock, see the information contained under the caption
'Principal Stockholders' in the Company's Proxy Statement, which information is
hereby incorporated by reference.
Security Ownership of Management. For information relating to the
beneficial ownership of the Company's Common Stock and Class B Common Stock by
Management, see the information contained under the caption 'Management
Stockholders' in the Company's Proxy Statement, which information is hereby
incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain Relationships and Related Transactions. For information relating to
certain relationships and related transactions of the Company, see the
information contained under the caption 'Certain Relationships and Transactions'
in the Company's Proxy Statement, which information is hereby incorporated by
reference.
38
<PAGE>
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.]
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
-- -----------
<C> <S>
3.1 -- Amended and Restated Certificate of Incorporation of the Company
**3.2 -- Amended and Restated By-Laws of the Company
**4.1 -- Specimen Certificate for shares of Common Stock, $.01 par value, of the Company
**10.1 -- Agreement dated as of March 15, 1996 between Paul M. Montrone and the Company
**10.2 -- Amended and Restated Management Agreement effective as of January 1, 1995 between the Company and
Latona Associates, Inc.
`D'10.4 -- Restated Environmental Matters Agreement among Allied-Signal, Henley, The Wheelabrator Group Inc., New
Hampshire Oak, Inc., and Fisher Scientific Group Inc., dated as of February 26, 1986, as amended and
restated as of July 28, 1989
`D'10.5 -- Second Amended and Restated Partnership Agreement of GCSAP dated June 30, 1992, among General Chemical,
The Andover Group, Inc., and TOSOH Wyoming, Inc.
`D'10.6 -- Amended and Restated Parent Guaranty and Transfer Agreement dated June 30, 1992, among New Hampshire
Oak, Inc., ACI International Limited and TOSOH America, Inc.
**10.7 -- The General Chemical Group Inc. Deferred Compensation Plan for Non-Employee Directors
**10.8 -- The General Chemical Group Inc. Retirement Plan for Non-Employee Directors
**10.9 -- The General Chemical Group Inc. Restricted Unit Plan for Non-Employee Directors
**10.10 -- The General Chemical Group Inc. 1996 Stock Option and Incentive Plan
**10.11 -- The General Chemical Group Inc. Performance Plan
**10.12 -- The General Chemical Group Inc. Restricted Unit Plan
`D'`D'10.13 -- First Amendment to General Chemical Corporation Equity Program, effective as of October 1, 1993.
**10.14 -- General Chemical Group Dividend Award Program, as amended December 15, 1995, effective as of October 1,
1993
**10.15 -- General Chemical Corporation Supplemental Savings and Retirement Plan
`D'10.16 -- Indenture dated as of August 15, 1993 between General Chemical and Continental Bank, National
Association, as trustee, with respect to the Senior Subordinated Notes
**10.17 -- Credit Agreement dated as of April 22, 1994 between Toledo Technologies and Wells Fargo Bank ('Wells')
as agent, with respect to revolving and term loan facilities ('Toledo Agreement')
**10.18 -- First Amendment to Toledo Agreement dated as of August 15, 1995
**10.19 -- Credit Agreement dated as of April 22, 1994 between PDI and Wells as agent, with respect to revolving
and term loan facilities ('PDI Agreement')
**10.20 -- First Amendment to PDI Agreement dated as of March 27, 1995
**10.21 -- Credit Agreement dated as of April 22, 1994 between Balcrank and Wells, as agent, with respect to a
revolving credit facility ('Balcrank Agreement')
**10.22 -- Note Agreement dated as of April 1, 1992, among GC Canada and certain noteholders, with respect to the
9.09% Senior Notes due 1999 in aggregate principal amount of $52 million
`D'10.23 -- Credit Agreement dated as of June 22, 1992, between GC Canada and The Toronto-Dominion Bank, with
respect to a $15 million revolving credit facility (the 'Canada Revolver')
**10.24 -- First Amendment to Canada Revolver
**10.25 -- Amended and Restated Credit Agreement dated as of September 15, 1993 among General Chemical and
Chemical Bank, as Administrative Agent and NationsBank of North Carolina, as Co-Agent, with respect to
a $130 million revolving credit facility (the 'US Revolver')
**10.26 -- First Amendment to the US Revolver dated as of December 11, 1995
**10.27 -- Term Loan Agreement dated as of August 4, 1994 among General Chemical and Chemical Bank, as
Administrative Agent, and NationsBank of North Carolina, as Co-Agent, with respect to a $100 million
term loan
**10.28 -- Settlement Agreement relating to July 26, 1993 Richmond incident litigation
10.29 -- Stockholder Agreement among the Company, the GRAT, Paul M. Montrone and Sandra G. Montrone, dated as of
April 15, 1996
</TABLE>
39
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
-- -----------
<C> <S>
10.30 -- Stockholder Agreement between the Company and Stonor, dated as of May 15, 1996
11 -- Statement regarding computation of per share earnings
**21 -- Subsidiaries of the Company
23.1 -- Consent of Deloitte & Touche LLP, Independent Accountants
27 -- Financial Data Schedule
</TABLE>
- ------------
** Incorporated by reference to the relevant exhibit to the Company's
Registration Statement filed with the Securities and Exchange Commission
(the 'SEC') on May 3, 1996, File No. 33-83766.
`D' 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.
`D'`D' Incorporated by reference to the relevant exhibit to General Chemical
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993 filed with the SEC.
FINANCIAL STATEMENTS
See Item 8, beginning on page 18.
FINANCIAL STATEMENT SCHEDULES
See Index to Financial Statement Schedule on page 43.
REPORTS ON FORM 8-K
No report on Form 8-K has been filed by the Company during the last quarter
of the period covered by this report.
40
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Parsippany, State
of New Jersey on the 15th day of March 1997.
THE GENERAL CHEMICAL GROUP INC.
By: /s/ RALPH M. PASSINO
...........................................
RALPH M. PASSINO
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
March 15, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/s/ PAUL M. MONTRONE Chairman of the Board and Director March 15, 1997
.........................................
(PAUL M. MONTRONE)
/s/ RICHARD R. RUSSELL President, Chief Executive Officer March 15, 1997
......................................... (Principal Executive Officer) and Director
(RICHARD R. RUSSELL)
/s/ RALPH M. PASSINO Vice President and Chief Financial Officer March 15, 1997
......................................... (Principal Financial and
(RALPH M. PASSINO) Accounting Officer)
/s/ PHILIP E. BEEKMAN Director March 15, 1997
.........................................
(PHILIP E. BEEKMAN)
/s/ GERALD J. LEWIS Director March 15, 1997
.........................................
(GERALD J. LEWIS)
/s/ PAUL M. MEISTER Director March 15, 1997
.........................................
(PAUL M. MEISTER)
/s/ SCOTT M. SPERLING Director March 15, 1997
.........................................
(SCOTT M. SPERLING)
/s/ IRA STEPANIAN Director March 15, 1997
.........................................
(IRA STEPANIAN)
</TABLE>
41
STATEMENT OF DIFFERENCES
The dagger symbol shall be expressed as ................................... `D'
<PAGE>
<PAGE>
THE GENERAL CHEMICAL GROUP INC.
INDEX TO FINANCIAL STATEMENT SCHEDULES
Schedule II -- Valuation and Qualifying Accounts..............................44
Schedules required by Article 12 of Regulation S-X, other than those listed
above, are omitted because of the absence of the conditions under which they are
required or because the required information is included in the consolidated
financial statements or notes thereto.
42
<PAGE>
<PAGE>
SCHEDULE II
THE GENERAL CHEMICAL GROUP INC.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
TRANSLATION
BALANCE AT ADDITIONS DEDUCTIONS ADJUSTMENT BALANCE AT
BEGINNING CHARGED TO FROM DURING END OF
OF PERIOD INCOME RESERVES PERIOD PERIOD
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1994
Allowance for doubtful accounts................. $5,918 $383 $ (296) $(45) $5,960
Year ended December 31, 1995
Allowance for doubtful accounts................. $5,960 $298 $ (564) $(20) $5,674
Year ended December 31, 1996
Allowance for doubtful accounts................. $5,674 $174 $ (481) $-- $5,367
</TABLE>
43
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
--- ----------- -----
<C> <S> <C>
3.1 -- Amended and Restated Certificate of Incorporation of the Company................................
**3.2 -- Amended and Restated By-Laws of the Company.....................................................
**4.1 -- Specimen Certificate for shares of Common Stock, $.01 par value, of the Company.................
**10.1 -- Agreement dated as of March 15, 1996 between Paul M. Montrone and the Company...................
**10.2 -- Amended and Restated Management Agreement effective as of January 1, 1995 between the Company
and Latona Associates, Inc......................................................................
`D'10.4 -- Restated Environmental Matters Agreement among Allied-Signal, Henley, The Wheelabrator Group
Inc., New Hampshire Oak, Inc., and Fisher Scientific Group Inc., dated as of February 26, 1986,
as amended and restated as of July 28, 1989.....................................................
`D'10.5 -- Second Amended and Restated Partnership Agreement of GCSAP dated June 30, 1992, among General
Chemical, The Andover Group, Inc., and TOSOH Wyoming, Inc.......................................
`D'10.6 -- Amended and Restated Parent Guaranty and Transfer Agreement dated June 30, 1992, among New
Hampshire Oak, Inc., ACI International Limited and TOSOH America, Inc...........................
**10.7 -- The General Chemical Group Inc. Deferred Compensation Plan for Non-Employee Directors...........
**10.8 -- The General Chemical Group Inc. Retirement Plan for Non-Employee Directors......................
**10.9 -- The General Chemical Group Inc. Restricted Unit Plan for Non-Employee Directors.................
**10.10 -- The General Chemical Group Inc. 1996 Stock Option and Incentive Plan............................
**10.11 -- The General Chemical Group Inc. Performance Plan................................................
**10.12 -- The General Chemical Group Inc. Restricted Unit Plan............................................
`D'`D'10.13 -- First Amendment to General Chemical Corporation Equity Program, effective as of October 1,
1993............................................................................................
**10.14 -- General Chemical Group Dividend Award Program, as amended December 15, 1995, effective as of
October 1, 1993.................................................................................
**10.15 -- General Chemical Corporation Supplemental Savings and Retirement Plan...........................
`D'10.16 -- Indenture dated as of August 15, 1993 between General Chemical and Continental Bank, National
Association, as trustee, with respect to the Senior Subordinated Notes..........................
**10.17 -- Credit Agreement dated as of April 22, 1994 between Toledo Technologies and Wells Fargo Bank
('Wells') as agent, with respect to revolving and term loan facilities ('Toledo Agreement').....
**10.18 -- First Amendment to Toledo Agreement dated as of August 15, 1995.................................
**10.19 -- Credit Agreement dated as of April 22, 1994 between PDI and Wells as agent, with respect to
revolving and term loan facilities ('PDI Agreement')............................................
**10.20 -- First Amendment to PDI Agreement dated as of March 27, 1995.....................................
**10.21 -- Credit Agreement dated as of April 22, 1994 between Balcrank and Wells, as agent, with respect
to a revolving credit facility ('Balcrank Agreement')...........................................
**10.22 -- Note Agreement dated as of April 1, 1992, among GC Canada and certain noteholders, with respect
to the 9.09% Senior Notes due 1999 in aggregate principal amount of $52 million.................
`D'10.23 -- Credit Agreement dated as of June 22, 1992, between GC Canada and The Toronto-Dominion Bank,
with respect to a $15 million revolving credit facility (the 'Canada Revolver').................
**10.24 -- First Amendment to Canada Revolver..............................................................
**10.25 -- Amended and Restated Credit Agreement dated as of September 15, 1993 among General Chemical and
Chemical Bank, as Administrative Agent and NationsBank of North Carolina, as Co-Agent, with
respect to a $130 million revolving credit facility (the 'US Revolver').........................
**10.26 -- First Amendment to the US Revolver dated as of December 11, 1995................................
**10.27 -- Term Loan Agreement dated as of August 4, 1994 among General Chemical and Chemical Bank, as
Administrative Agent, and NationsBank of North Carolina, as Co-Agent, with respect to a $100
million term loan...............................................................................
**10.28 -- Settlement Agreement relating to July 26, 1993 Richmond incident litigation.....................
</TABLE>
44
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
--- ----------- -----
<C> <S> <C>
10.29 -- Stockholder Agreement among the Company, the GRAT, Paul M. Montrone and Sandra Montrone, dated
April 15, 1996..................................................................................
10.30 -- Stockholder Agreement between the Company and Stonor, dated May 15, 1996........................
11 -- Statement regarding computation of per share earnings...........................................
**21 -- Subsidiaries of the Company.....................................................................
23.1 -- Consent of Deloitte & Touche LLP, Independent Accountants.......................................
27 -- Financial Data Schedule.........................................................................
</TABLE>
- ------------
** Incorporated by reference to the relevant exhibit to the Company's
Registration Statement filed with the Securities and Exchange Commission
(the 'SEC') on May 3, 1996, File No. 33-83766.
`D' 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.
`D'`D' Incorporated by reference to the relevant exhibit to General Chemical
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993 filed with the Securities and Exchange Commission.
45
<PAGE>
<PAGE>
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF THE GENERAL CHEMICAL GROUP INC.
The GENERAL CHEMICAL GROUP INC., a corporation organized and existing under
the laws of the State of Delaware (the 'Corporation'), hereby certifies as
follows:
1. The name of the Corporation is The General Chemical Group Inc. The
date of the filing of its original Certificate of Incorporation with the
Secretary of State of the State of Delaware was June 24, 1988. The name
under which the Corporation filed its original Certificate of Incorporation
was Dingman Holding Co., Inc.
2. This Amended and Restated Certificate of Incorporation amends,
restates and integrates the provisions of the Certificate of Incorporation
of the Corporation filed with the Secretary of State of Delaware on June
24, 1988 as heretofore amended or restated (the 'Certificate of
Incorporation'), and was duly adopted by unanimous written consent of the
stockholders of the Corporation, all in accordance with the applicable
provisions of Sections 228, 242 and 245 of the General Corporation Law of
the State of Delaware ('DGCL').
3. The text of the Certificate of Incorporation is hereby amended and
restated in its entirety to provide as herein set forth in full.
ARTICLE I
NAME
The name of the Corporation is The General Chemical Group Inc.
ARTICLE II
REGISTERED OFFICE
The address of the registered office of the Corporation in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is The Corporation Trust
Company.
ARTICLE III
PURPOSES
The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the DGCL.
ARTICLE IV
CAPITAL STOCK
SECTION 1. Number of Shares.
The total number of shares of capital stock which the Corporation shall
have the authority to issue is One Hundred Fifty Million (150,000,000) shares,
of which (a) One Hundred Million (100,000,000) shares shall be common stock, par
value $.01 per share (the 'Common Stock'), (b) Forty Million (40,000,000) shares
shall be Class B common stock, par value $.01 per share, (the 'Class B Stock')
and (c) Ten Million (10,000,000) shares shall be preferred stock, par value $.01
per share (the 'Undesignated Preferred Stock'). As set forth in this Article IV,
the Board of Directors or any authorized committee thereof is authorized from
time to time to establish and designate one or more series of Undesignated
Preferred Stock, to fly and determine the variations in the relative rights and
preferences as between the different series of Undesignated Preferred Stock in
the manner hereinafter set forth in this Article IV, and to fix or alter the
number of shares comprising any such series and the designation thereof to the
extent permitted by law.
The number of authorized shares of the class of Undesignated Preferred
Stock may be increased or decreased (but not below the number of shares
outstanding) by the affirmative vote of the holders of a majority of the Common
Stock and the Class B Stock, voting together as a single class, without a vote
<PAGE>
<PAGE>
of the holders of the Undesignated Preferred Stock, pursuant to the resolution
or resolutions establishing the class of Undesignated Preferred Stock or this
Amended and Restated Certificate of Incorporation, as it may be amended from
time to time.
SECTION 2. General.
The designations, powers, preferences and rights of, and the
qualifications, limitations and restrictions upon, each class or series of stock
shall be determined in accordance with, or as set forth below in, Sections 3 and
4 of this Article IV.
SECTION 3. Common Stock and Class B Common Stock
(a) Authorization of Two Classes.
As of the date and time this Amended and Restated Certificate of
Incorporation shall become effective under the laws of the State of Delaware
(the 'Effective Time'), there shall be two classes of common stock, par value
$.01 per share. The first class shall be denominated Common Stock and shall
consist of One Hundred Million (100,000,000) shares. The second class shall be
denominated Class B Common Stock ('Class B Stock') and shall consist of Forty
Million (40,000,000) shares.
At the Effective Time, all issued and outstanding shares of Common Stock
shall automatically, without further act or deed on the part of the Corporation,
the holder of such share or any other person, be converted into shares of Class
B Stock on a share-for-share basis, and certificates representing such shares of
Common Stock shall thereupon and thereafter be deemed to represent a like number
of shares of Class B Stock. Upon presentation to the Corporation of certificates
representing such shares of Common Stock, the Corporation shall issue and
deliver to the holder of such shares certificates for the number of shares of
Class B Stock issuable upon such conversion.
(b) Powers, Preferences and Rights.
Except as otherwise required by law, the powers, preferences and rights of
the Common Stock and the Class B Stock shall be as set forth herein. Except as
otherwise required by law or as set forth herein, the powers, preferences and
rights of the Common Stock and the Class B Stock shall be identical.
(c) Voting Rights.
Each share of Common Stock shall entitle the holder thereof to one (1) vote
and each share of Class B Stock shall entitle the holder thereof to ten (10)
votes. Except as set forth herein, all actions submitted to a vote of
stockholders shall be voted on by the holders of Common Stock and Class B Stock
(as well as the holders of any series of Undesignated Preferred Stock, if any,
entitled to vote thereon) voting together as a single class.
The holders of Common Stock and Class B Stock shall each be entitled to
vote separately as a single class with respect to matters which require class
votes under the General Corporation Law of the State of Delaware, with holders
of Class B Stock voting on matters affecting Class B Stock and holders of Common
Stock voting on matters affecting Common Stock.
Except as otherwise provided by law or pursuant to this Article IV or by
vote or votes of the Board of Directors providing for the issue of any series of
Undesignated Preferred Stock, the holders of the Common Stock and the Class B
Stock shall have sole voting power for all purposes, each holder of the Common
Stock and Class B Stock being entitled to vote as provided in this Section 3(c).
Neither the holders of shares of Common Stock nor the holders of shares of
Class B Common Stock shall have cumulative voting rights.
The Corporation may, as a condition to counting the votes cast by any
holder of shares of Class B Stock at any annual or special meeting of
stockholders, in the case of any written consent of stockholders in lieu of a
meeting, or for any other purpose, require the furnishing of such affidavits or
other proof as it may reasonably request to establish that the shares of Class B
Stock held by such holder have not, by virtue of the provisions of Section 3(h),
been converted into shares of Common Stock.
2
<PAGE>
<PAGE>
(d) Dividends.
(i) If and when a dividend on the Common Stock or the Class B Stock is
declared by the Board of Directors, whether payable in cash, in property or in
shares of stock of the Corporation, an equivalent dividend shall also be
declared on the Class B Stock or the Common Stock, as the case may be. If
dividends are declared that are payable in shares of Common Stock or Class B
Stock, such dividends shall be payable at the same rate on both classes of
stock, provided that the dividends payable in shares of Common Stock shall be
payable only to holders of Common Stock and the dividends payable in shares of
Class B Stock shall be payable only to holders of Class B Stock.
(ii) Subject to provisions of law and the rights of holders of the
Undesignated Preferred Stock, the holders of the Common Stock and the Class B
Stock shall be entitled to receive dividends at such time and in such amounts,
subject to Section 3(d)(i), as may be determined by the Board of Directors and
declared out of any funds lawfully available therefor, and shares of
Undesignated Preferred Stock shall not be entitled to share therein except as
otherwise expressly provided in the vote or votes of the Board of Directors
providing for the issue of such Undesignated Preferred Stock.
(e) Stock Splits and Other Transactions.
Shares of Common Stock or Class B Stock may not be split up, subdivided,
combined or reclassified, unless at the same time the shares of such other class
are proportionately so split up, subdivided, combined or reclassified in a
manner which maintains the same proportionate equity ownership between the
holders of Common Stock and Class B Stock as comprised on the record date for
any such transaction.
(f) Liquidation, Dissolution or Winding Up.
In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, after payments of or provision
for payment of the debts and other liabilities of the Corporation and the
preferential amounts to which the holders of any stock ranking prior to the
Common Stock and the Class B Stock in the distribution of assets shall be
entitled upon such liquidation, dissolution or winding up, the holders of the
Common Stock and the Class B Stock shall be entitled to receive an equal amount
with respect to each share owned.
(g) Conversion of Class B Stock.
(i) The holder of each share of Class B Stock shall have the right at any
time, and from time to time, at such holder's option, to convert such shares
into one fully paid and nonassessable share of Common Stock on and subject to
the terms and conditions set forth in this Section 3(g).
(ii) In order to exercise the conversion rights set forth in Section
3(g)(i), the holder of any shares of Class B Stock to be converted shall present
and surrender the certificate or certificates representing such shares during
normal business hours at the principal executive offices of the Corporation or,
if an agent for the registration of the transfer of shares of Common Stock is
then duly appointed and acting (the 'Transfer Agent'), then at the office of the
Transfer Agent, accompanied by a written notice of the election by the record
holder thereof to convert, and (if so required by the Corporation or the
Transfer Agent) by instruments of transfer, in form reasonably satisfactory to
the Corporation or the Transfer Agent. A conversion shall be deemed to have
occurred at the close of business on the date when the Corporation or the
Transfer Agent, as the case may be, has received the prescribed written notice,
the required certificate or certificates and any such instruments of transfer
(the 'Conversion Date'). Such notice shall also state the name or names (with
address) in which the certificate or certificates for shares of Common Stock
issuable on such conversion shall be registered. The person or persons in whose
name or names any certificate or certificates for shares of Common Stock shall
be issuable on such conversion shall be, for the purpose of receiving dividends
and for all other corporate purposes whatsoever, deemed to have become the
holder or holders of record of the shares of Common Stock represented thereby on
the Conversion Date.
(iii) As promptly as practicable after the presentation and surrender for
conversion, as herein provided, of any certificate of shares of Class B Stock,
the Corporation shall issue and deliver at such office or agency, to or upon the
written order of the holder thereof, certificates for the number of shares of
Common Stock issuable upon such conversion. In case any certificate for shares
of Class B Stock
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shall be surrendered for conversion of only a part of the shares represented
thereby, the Corporation shall deliver at such office or agency, to or upon the
written order of the holder thereof, a certificate or certificates for the
number of shares of Class B Stock represented by such surrendered certificate
which are not being converted. The issuance of certificates for shares of Common
Stock issuable upon the conversion of shares of Class B Stock by the registered
holder thereof shall be made without charge to the converting holder for any tax
imposed on the Corporation in respect of the issue thereof. The Corporation
shall not, however, be required to pay any tax which may be payable with respect
to any transfer involved in the issue and delivery of any certificate in a name
other than that of the registered holder of the shares being converted, and the
Corporation shall not be required to issue or deliver any such certificate
unless and until the person requesting the issue thereof shall have paid to the
Corporation the amount of such tax or has established to the satisfaction of the
Corporation that such tax has been paid.
(iv) Upon any conversion of shares of Class B Stock into shares of Common
Stock pursuant hereto, no adjustment with respect to dividends shall be made;
only those dividends that are payable on the shares so converted as have been
declared but not yet paid to holders of record of shares of Class B Stock with
respect to a record date prior to the conversion date shall be payable with
respect to the shares of Class B Stock so converted; and only those dividends
shall be payable on shares of Common Stock issued upon such conversion as have
been declared and are payable to holders of record of shares of Common Stock
with respect to a record date on or after such conversion date.
(v) In case of any consolidation or merger of the Corporation as a result
of which stockholders of the Corporation shall be entitled to receive cash,
stock, other securities or other property with respect to or in exchange for
stock of the Corporation, each holder of Common Stock and Class B Stock shall be
entitled to receive an equal amount of consideration for each share of Common
Stock or Class B Stock surrendered in such merger.
(vi) Shares of the Class B Stock converted into shares of Common Stock
shall be retired and shall resume the status of authorized but unissued shares
of Class B Stock.
(vii) The Corporation covenants that it will at all times reserve and keep
available, solely for the purpose of issuance upon conversion of the outstanding
shares of Class B Stock, such number of shares of Common Stock as shall be
issuable upon the conversion of all such outstanding shares of Class B Stock.
(h) Limitations on Transfer of Class B Stock.
(i) No record or beneficial owner of shares of Class B Stock may transfer,
and the Corporation shall not register the transfer of, shares of Class B Stock,
whether by sale, assignment, gift, bequest, appointment or otherwise, except to
a 'Permitted Transferee' as provided herein.
A. In the case of a holder of record of the Class B Stock (the 'Class B
Holder') who is a natural person and the beneficial owner of the shares of Class
B Stock to be transferred, Permitted Transferees shall mean:
1. The spouse of such Class B Holder, any lineal descendant of a
grandparent of such Class B Holder or of a grandparent of such spouse, or
any spouse of such lineal descendant (herein collectively referred to as
'Class B Holder's Family Members');
2. The trustee or trustees of a trust (including a voting trust)
solely (except for remote contingent interests) for the benefit of such
Class B Holder and/or one or more of such Class B Holder's Family Members;
provided, however, that if at any time such trust ceases to meet the
requirements of this Section 3(h)(i)A.2, all shares of Class B Stock then
held by such trustee or trustees shall, upon receipt by such trustee or
trustees of a notice from the Corporation that it has obtained actual
knowledge that the trust no longer meets the requirements of this Section
3(h)(i)A.2, be automatically converted into Common Stock on a
share-for-share basis, and stock certificates formerly representing such
shares of Class B Stock shall thereupon and thereafter be deemed to
represent a like number of shares of Common Stock;
3. A corporation, of which all of the record and beneficial owners of
outstanding capital stock are, or a partnership in which all of the
partners are, and all of the partnership interests are owned
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by, the Class B Holder and/or one or more of the Permitted Transferees of
such Class B Holder as determined under this Section 3(h); provided,
however, that if by reason of any change in the ownership of such stock or
partners or partnership interests, such corporation or partnership would no
longer qualify as a Permitted Transferee of such Class B Holder, then all
shares of Class B Stock then held by such corporation or partnership shall,
upon receipt by such partnership or corporation of a notice from the
Corporation that it has obtained actual knowledge that such corporation or
partnership no longer qualifies as a Permitted Transferee, be automatically
converted into shares of Common Stock on a share-for-share basis, and stock
certificates formerly representing such shares of Class B Stock shall
thereupon and thereafter be deemed to represent a like number of shares of
Common Stock;
4. The executor, administrator or personal representative of the
estate of a deceased Class B Holder or the trustee of the estate of a
bankrupt or insolvent Class B Holder or the guardian or conservator of a
Class B Holder adjudged disabled or incompetent by a court of competent
jurisdiction, acting in his capacity as such; and
5. Any private foundation created or established by a Class B Holder
or any Permitted Transferee of a Class B Holder.
B. In the case of a Class B Holder holding the shares of Class B Stock as
trustee pursuant to a trust (including a voting trust) other than an irrevocable
trust as described in Section 3(h)(i)C below, Permitted Transferees shall mean:
1. any successor trustee of such trust;
2. the person or persons who established such trust; and
3. a Permitted Transferee of any person who established such trust.
C. In the case of a Class B Holder holding the shares of Class B Stock as
trustee pursuant to a trust which was irrevocable as of the Record Date (a
'Transferor Trust'), Permitted Transferees shall mean:
1. any successor trustee of such Transferee Trust;
2. any person to whom or for whose benefit the principal or income may
be distributed either during or at the end of the term of such Transferor
Trust whether by power of appointment or otherwise; and
3. a Permitted Transferee of any person who established such trust.
D. In the case of a Class B Holder which is a partnership and the
beneficial owner of the shares of Class B Stock proposed to be transferred,
Permitted Transferees shall mean:
1. any partner of such partnership who was also a partner of such
partnership as of the Record Date;
2. any person transferring shares of Class B Stock to such partnership
after the Record Date; provided, however, that such transfer to the
partnership was made in accordance with this Section 3(h), and further
provided that such transferor may not receive shares of Class B Stock in
excess of the shares transferred to such partnership; and
3. any Permitted Transferee of such person referred to in Sections
3(h)(i)D.1 or 3(h)(i)D.2 above, provided that in the case of Section
3(h)(i)D.2, the number of shares which such Permitted Transferee is
entitled to receive pursuant to this Section 3(h)(i)D.3 shall not exceed
the number of shares such person would have been entitled to receive
pursuant to Section 3(h)(i)D.2.
E. In the case of a Class B Holder which is a corporation and the
beneficial owner of the shares proposed to be transferred, Permitted Transferees
shall include only:
1. any stockholder of such corporation as of the Record Date that is
generally entitled to vote in the selection of directors of such
corporation (a 'Voting Stockholder'), provided that such corporation does
not have more than 20 Voting Stockholders of Record as of the Record Date.
2. any stockholder of such corporation on the Record Date who receives
shares of Class B Stock pro rata to such Stockholder's stock ownership in
such corporation through a dividend or through a distribution made upon
liquidation of such corporation;
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3. any person transferring shares of Class B Stock to such corporation
after the Record Date; provided, however, that such transferor may not
receive shares of Class B Stock in excess of the shares transferred by the
transferor to such corporation;
4. any Permitted Transferee of such stockholder or person referred to
in Sections 3(h)(i)E.1, 2 or 3 above, provided that in the case of Section
3(h)(i)E.3 the number of shares which such Permitted Transferee is entitled
to receive pursuant to this Section 3(h)(i)E.4 shall not exceed the number
of shares such person would have been entitled to receive pursuant to
Section 3(h)(i)E.3; and
5. the survivor of a merger or consolidation of such corporation but
only if all of the record and beneficial owners of the outstanding capital
stock of such survivor immediately after the merger or consolidation are
Permitted Transferees of such corporation; provided, however, that if by
reason of any change in the ownership of such stock such surviving
corporation would no longer qualify as a Permitted Transferee, then all
shares of Class B Stock then held by such surviving corporation shall, upon
receipt by such surviving corporation of a notice from the Corporation that
it has obtained actual knowledge that the surviving corporation no longer
qualifies as a Permitted Transferee, be automatically converted into shares
of Common Stock on a share-for-share basis, and stock certificates formerly
representing such shares of Class B Stock shall thereupon and thereafter be
deemed to represent a like number of shares of Common Stock.
F. In the case of a Class B Holder who is the executor or administrator of
the estate of a deceased Class B Holder, guardian or conservator of the estate
of a disabled or incompetent Class B Holder or who is a trustee of the estate of
a bankrupt or insolvent Class B Holder, Permitted Transferees shall include only
a Permitted Transferee of such deceased, disabled, bankrupt or insolvent Class B
Holder.
(ii) Notwithstanding anything to the contrary set forth herein, any Class B
Holder may pledge such holder's shares of Class B Stock to a pledgee pursuant to
a bona fide pledge of shares as collateral security for indebtedness due to the
pledgee, provided that such shares shall be transferred to or registered in the
name of the pledgee and shall remain subject to the provisions of this Section
3(h). In the event of foreclosure or other similar action by the pledgee, such
pledged shares of Class B Stock may only be transferred to the pledgor or a
Permitted Transferee of the pledgor or converted into shares of Common Stock, as
the pledgee may elect or as may be governed by the applicable pledge agreement.
(iii) For purposes of this Section 3(h):
A. the 'Record Date' with respect to shares of Class B Stock is the
date on which such share of Class B Stock is issued;
B. any limitation on the number of shares of Class B Stock permitted
to be transferred imposed by this Section 3(h) shall be adjusted
appropriately for any stock splits, stock dividends or other similar
recapitalizations effected during any time period in question;
C. the term 'spouse' shall refer to any then present or former spouse;
D. the relationship of any person that is derived by or through legal
adoption shall be considered a natural one;
E. each joint owner of shares of Class B Stock shall be considered a
Class B Holder of such shares;
F. a minor for whom shares of Class B Stock are held pursuant to a
Uniform Gifts to Minors Act or similar law shall be considered a Class B
Holder of such shares;
G. unless otherwise specified, the term 'person' means both natural
persons and legal entities; and
H. the term 'private foundation' shall have the meaning set forth in
Section 509(a) of the Internal Revenue Code of 1986, as amended, or any
successor statute.
(iv) Any transfer of shares of Class B Stock not permitted hereunder shall
result in the automatic conversion of the transferee's shares of Class B Stock
into an equal number of shares of Common Stock, effective as of the date on
which certificates representing such shares of Class B Stock are presented for
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transfer on the stock transfer record books of the Corporation; provided,
however, that if the Corporation should determine that such shares were not so
presented for transfer within twenty (20) days after the date of such transfer,
sale, assignment or other disposition, the transfer date shall be the actual
date of such transfer, sale, assignment or other disposition, as determined in
good faith by the Board of Directors or its appointed agent. The Corporation
may, in its discretion from time to time or as a condition to the transfer or
the registration of transfer of shares of Class B Stock to a purported Permitted
Transferee, require the furnishing of such affidavits or other proof as it deems
necessary to establish that a holder of Class B Stock or proposed transferee is
a Permitted Transferee. Unless notification to the contrary is provided at the
time shares of Class B Stock are presented for transfer, the transfer shall be
presumed by the Corporation to be a transfer to a person other than a Permitted
Transferee.
(i) Registration of Class B Stock in Name of Beneficial Owner.
Shares of Class B Stock shall be registered in the name(s) of the
beneficial owner(s) thereof (as hereafter defined) and not in 'street' or
'nominee' names. For the purposes of Sections 3(h) and 3(i), the term
'beneficial owner(s)' of any shares of Class B Stock shall mean the person or
persons who possess the power to vote or dispose, or to direct the voting or
disposition, of such shares and 'beneficially owned' shares shall refer to
shares owned by such a beneficial owner. The Corporation shall note on the
certificates representing the shares of Class B Stock that there are
restrictions on transfer and registration of transfer imposed by Sections 3(h)
and 3(i).
(j) Termination of Class B Stock.
All outstanding shares of Class B Stock shall automatically, without
further act or deed on the part of this Corporation or any other person, be
converted into shares of Common Stock on a share-for-share basis at such time as
the total number of shares of Class B Stock issued and outstanding constitutes
less than 10% of the total of all shares of Common Stock and Class B Stock then
issued and outstanding. In the event of any automatic conversion of Class B
Stock pursuant to this Section 3(j), certificates formerly representing
outstanding shares of Class B Stock will thereafter be deemed to represent a
like number of shares of Common Stock.
SECTION 4. Undesignated Preferred Stock.
Subject to any limitations prescribed by law, the Board of Directors or any
authorized committee thereof is expressly authorized to provide for the issuance
of the shares of Undesignated Preferred Stock in one or more series of such
stock, and by filing a certificate pursuant to applicable law of the State of
Delaware, to establish or change from time to time the number of shares to be
included in each such series, and to fix the designations, powers, preferences
and the relative, participating, optional or other special rights of the shares
of each series and any qualifications, limitations and restrictions thereof. Any
action by the Board of Directors or any authorized committee thereof under this
Section 4 shall require the affirmative vote of a majority of the Directors then
in office or a majority of the members of such committee. The Board of Directors
or any authorized committee thereof shall have the right to determine or fix one
or more of the following with respect to each series of Undesignated Preferred
Stock to the extent permitted by law:
(a) The distinctive serial designation and the number of shares
constituting such series;
(b) The dividend rates or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative and, if so,
from which date or dates, the payment date or dates for dividends, and the
participating and other rights, if any, with respect to dividends;
(c) The voting powers, full or limited, if any, of the shares of such
series;
(d) Whether the shares of such series shall be redeemable and, if so,
the price or prices at which, and the terms and conditions on which, such
shares may be redeemed;
(e) The amount or amounts payable upon the shares of such series and
any preferences applicable thereto in the event of voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
(f) Whether the shares of such series shall be entitled to the benefit
of a sinking or retirement fund to be applied to the purchase or redemption
of such shares, and if so entitled, the amount of
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such fund and the manner of its application, including the price or prices
at which such shares may be redeemed or purchased through the application
of such fund;
(g) Whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or of any other
series of the same or any other class or classes of stock of the
Corporation and, if so convertible or exchangeable, the conversion price or
prices, or the rate or rates of exchange, and the adjustments thereof, if
any, at which such conversion or exchange may be made, and any other terms
and conditions of such conversion or exchange;
(h) The price or other consideration for which the shares of such
series shall be issued;
(i) Whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of Undesignated
Preferred Stock (or series thereof) and whether such shares may be reissued
as shares of the same or any other class or series of stock; and
(j) Such other powers, preferences, rights, qualifications,
limitations and restrictions thereof as the Board of Directors or any
authorized committee thereof may deem advisable.
ARTICLE V
BUSINESS COMBINATION STATUTE
The Corporation hereby expressly elects not to be governed by Section 203
of the DGCL entitled Business Combinations with interested stockholders.
ARTICLE VI
STOCKHOLDER ACTION
No action that is required or permitted to be taken by the stockholders of
the Corporation at any annual or special meeting of stockholders may be effected
by written consent of stockholders in lieu of a meeting of stockholders, unless
the action to be effected by written consent of stockholders and the taking of
such action by such written consent have expressly been approved in advance by
the Board of Directors. Except as otherwise required by law and subject to the
rights of the holders of any series of Undesignated Preferred Stock, special
meetings of the stockholders of the Corporation may be called only by (i) the
Board of Directors pursuant to a resolution approved by the affirmative vote of
a majority of the Directors then in office, (ii) the Chairman of the Board, if
one is elected, or (iii) the President. Only those matters set forth in the
notice of the special meeting may be considered or acted upon at a special
meeting of stockholders of the Corporation, unless otherwise provided by law.
Advance notice of any matters or nominations which stockholders intend to
propose for action at an annual meeting shall be given at the time and in the
manner provided in the By Laws.
ARTICLE VII
DIRECTORS
SECTION 1. General.
The business and affairs of the Corporation shall be managed by or under
the direction of the Board of Directors except as otherwise provided herein or
required by law.
SECTION 2. Election of Directors.
Election of Directors need not be by written ballot unless the By-Laws of
the Corporation shall so provide.
SECTION 3. Number of Directors.
The number of Directors of the Corporation shall be fixed by resolution
duly adopted from time to time by the Board of Directors or by the affirmative
vote of a majority (or such greater proportion as may be required by law) of the
total votes eligible to be cast by holders of voting stock, voting together as a
single class.
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Notwithstanding the foregoing, whenever, pursuant to the provisions of
Article IV of this Amended and Restated Certificate of Incorporation, the
holders of any one or more series of Undesignated Preferred Stock shall have the
right, voting separately as a series or together with holders of other such
series, to elect Directors at an annual or special meeting of stockholders, the
election, term of office, filling of vacancies and other features of such
directorships shall be governed by the terms of this Amended and Restated
Certificate of Incorporation and any certificate of designations applicable
thereto, and such Directors so elected shall not be divided into classes
pursuant to this Section 3.
During any period when the holders of any series of Undesignated Preferred
Stock have the right to elect additional Directors as provided for or fixed
pursuant to the provisions of Article IV hereof, then upon commencement and for
the duration of the period during which such right continues: (i) the then
otherwise total authorized number of Directors of the Corporation shall
automatically be increased by such specified number of Directors, and the
holders of such Undesignated Preferred Stock shall be entitled to elect the
additional Directors so provided for or fixed pursuant to said provisions, and
(ii) each such additional Director shall serve until such Director's successor
shall have been duly elected and qualified, or until such Director's right to
hold such office terminates pursuant to said provisions, whichever occurs
earlier, subject to such Director's earlier death, disqualification, resignation
or removal. Except as otherwise provided by the Board in the resolution or
resolutions establishing such series, whenever the holders of any series of
Undesignated Preferred Stock having such right to elect additional Directors are
divested of such right pursuant to the provisions of such stock, the terms of
office such additional Directors elected by the holders of such stock, or
elected to fill any vacancies resulting from the death, resignation,
disqualification or removal of such additional Directors, shall forthwith
terminate and the total and authorized number of Directors of the Corporation
shall be reduced accordingly.
SECTION 4. Vacancies.
Subject to the rights, if any, of the holders of any series of Undesignated
Preferred Stock to elect Directors and to fill vacancies in the Board of
Directors relating thereto, any and all vacancies in the Board of Directors,
however occurring, including, without limitation, by reason of an increase in
size of the Board of Directors, or the death, resignation, disqualification or
removal of a Director, shall be filled by the affirmative vote of a majority of
the remaining Directors then in office, even if less than a quorum of the Board
of Directors, or by the affirmative vote of a majority of the total votes
eligible to be cast by holders of voting stock, voting together as a single
class. In the event of a vacancy in the Board of Directors, the remaining
Directors, except as otherwise provided by law, may exercise the powers of the
full Board of Directors until the vacancy is filled.
SECTION 5. Removal.
Subject to the rights, if any, of any series of Undesignated Preferred
Stock to elect Directors and to remove any Director whom the holders of any such
stock have the right to elect, any Director (including persons elected by
Directors to fill vacancies in the Board of Directors) may be removed from
office for any reason whatsoever by the affirmative vote of at least a majority
of the total votes which would be eligible to be cast by stockholders in the
election of such Director.
ARTICLE VIII
LIMITATION OF LIABILITY
A Director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability (i) for any breach of the Director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL or (iv) for any
transaction from which the Director derived an improper personal benefit. If the
DGCL is amended after the effective date of this Amended and Restated
Certificate of Incorporation to authorize corporate action further eliminating
or limiting the personal liability of Directors, then the liability of a
Director of the Corporation shall be eliminated or limited to the fullest extent
permitted by the DGCL, as so amended.
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Any repeal or modification of this Article VIII by either of (i) the
stockholders of the Corporation or (ii) an amendment to the DGCL, shall not
adversely affect any right or protection existing at the time of such repeal or
modification with respect to any acts or omissions occurring before such repeal
or modification of a person serving as a Director at the time of such repeal or
modification.
ARTICLE IX
AMENDMENT OF BY-LAWS
SECTION 1. Amendment by Directors
Except as otherwise provided by law, the By-laws of the Corporation may be
amended or repealed by the Board of Directors.
SECTION 2. Amendment by Stockholders
The By-laws of the Corporation may be amended or repealed at any annual
meeting of stockholders, or special meeting of stockholders called for such
purpose, by the affirmative vote of at least two-thirds of the total votes
eligible to be cast on such amendment or repeal by holders of voting stock,
voting together as a single class; provided, however, that if the Board of
Directors recommends that stockholders approve such amendment or repeal at such
meeting of stockholders, such amendment or repeal shall only require the
affirmative vote of a majority of the total votes eligible to be cast on such
amendment or repeal by holders of voting stock, voting together as a single
class.
ARTICLE X
AMENDMENT OF CERTIFICATE OF INCORPORATION
The Corporation reserves the right to amend or repeal this Amended and
Restated Certificate of Incorporation in the manner now or hereafter prescribed
by statute and this Amended and Restated Certificate of Incorporation, and all
rights conferred upon stockholders herein are granted subject to this
reservation. No amendment or repeal of this Amended and Restated Certificate of
Incorporation shall be made unless the same is first approved by the Board of
Directors pursuant to a resolution adopted by the Board of Directors in
accordance with Section 242 of the DGCL, and, except as otherwise provided by
law, thereafter approved by the stockholders. Whenever any vote of the holders
of voting stock is required, and in addition to any other vote of holders of
voting stock that is required by this Amended and Restated Certificate of
Incorporation or by law, the affirmative vote of a majority (or such greater
proportion as may be required by law) of the total votes eligible to be cast by
holders of voting stock with respect to such amendment or repeal, voting
together as a single class, at a duly constituted meeting of stockholders called
expressly for such purpose shall be required to amend or repeal any provision
of, or adopt any provisions of this Amended and Restated Certificate of
Incorporation; provided, however, that the affirmative vote of not less than
eighty percent (80%) of the total votes eligible to be cast by the holders of
voting stock, voting together as a single class, shall be required to amend of
repeal any of the provisions of Article VIII of this Article X of this Amended
and Restated Certificate of Incorporation.
I, Ralph M. Passino, Vice President of the Corporation, for the purpose of
amending and restating the Corporation's Certificate of Incorporation pursuant
to the General Corporation Law of the State of Delaware, do make this
certificate, hereby declaring and certifying that this is my act and deed on
behalf of the Corporation this 13th day of May, 1996.
RALPH M. PASSINO
.....................................
RALPH M. PASSINO, VICE PRESIDENT
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STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT made as of this 15th day of April, 1996, by and among
The General Chemical Group Inc., a Delaware corporation (the 'Company'), Paul M.
Montrone and Sandra G. Montrone, as trustees (the 'Trustees') of the Paul M.
Montrone 1996 Annuity Trust (the 'Trust') created under the Paul M. Montrone
1996 Trust Agreement dated March 1, 1996 (the 'Trust Agreement'), Mr. Paul M.
Montrone residing in Hampton Falls, County of Rockingham and State of New
Hampshire (the 'Grantor') and Sandra G. Montrone residing in Hampton Falls,
County of Rockingham and State of New Hampshire ('Ms. Montrone').
WITNESSETH:
WHEREAS, the Trust holds a voting trust certificate representing 4,934,210
shares of the Class B Common Stock, par value $.01 per share (the 'Class B
Common Stock'), of the Company, which is generally not transferrable but is
convertible at any time at the election of the holder into an identical number
of shares of Common Stock, par value $.01 per share (the 'Common Stock'), of the
Company (such number of shares, as the same is adjusted to reflect any stock
splits, dividends or other recapitalizations, of Class B Common Stock, or Common
Stock following any such conversion, being hereinafter referred to as the 'Trust
Shares');
WHEREAS, the Trust Agreement provides that the Trustees shall pay to the
Grantor or, if he should die prior to the expiration of the Trust Term (as
defined in the Trust Agreement), to Ms. Montrone (if she is then living and
provided the Grantor has not exercised his power of revocation as provided in
subparagraph 1 of Paragraph B of Article III of the Trust Agreement) the
Qualified Annuity Amount (as defined in the Trust Agreement), on each of the
three anniversaries of the date of transfer by the Grantor to the Trust of the
property described in Schedule A to the Trust Agreement, which payments may be
made by distribution in kind of all or a portion of the Trust Shares (any such
Trust Shares so distributed are referred to herein as the 'Annuity Shares');
WHEREAS, the Company has requested the Trust to grant it a right of first
refusal with respect to any sales of the Trust Shares on the terms set forth
herein; and
WHEREAS, the Trust is willing to grant the Company such right of first
refusal only if the Company grants to the Grantor and, following the death of
the Grantor, to Ms. Montrone, and to their respective transferees, certain
registration rights with respect to the Annuity Shares.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
RESTRICTIONS ON SHARES
SECTION 1.01. Right of First Refusal. The Trust and any transferee of the
Trust Shares under Section 1.02 (a 'Proposed Transferor') shall not sell,
assign, transfer, exchange, pledge or otherwise dispose of any Trust Shares,
Annuity Shares or any interest therein (collectively, the 'Subject Shares')
unless the Proposed Transferor shall have received from a third party a bona
fide written offer therefor and shall have first given written notice thereof to
the Company, identifying the proposed transferee, the purchase price, if any,
and the terms of the proposed transaction, and offering said Subject Shares to
the Company for purchase by it at a purchase price equal to the value offered by
such third party, which amount shall be payable in cash or the equivalent under
terms substantially identical to those offered by such third party. Within three
trading days (i.e. days on which shares are traded on the New York Stock
Exchange) after receipt of the notice, the Company may elect to purchase all of
the Subject Shares so offered by delivering written notice of its acceptance
(the 'Acceptance Notice') to the Proposed Transferor within said three day
period. If the Company fails to give the Proposed Transferor the Acceptance
Notice within said three day period, said Subject Shares may be transferred
within 120 days after the expiration of said three day period to the proposed
transferee upon the price and terms specified in the notice and all shares so
transferred shall be free from all restrictions set forth in this
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Article I. Any Subject Shares not so transferred within such 120-day period
shall again become subject to the provisions of this Article I.
SECTION 1.02. Exceptions to Restrictions. The restrictions set forth in
this Article I shall be inapplicable to any transfer of Subject Shares to a
Permitted Transferee (as such term is defined in the Company's Amended and
Restated Certificate of Incorporation as of the date hereof) of the Proposed
Transferor; provided, however, that such Shares in the hands of each such
transferee shall remain subject to this Agreement.
SECTION 1.03. Transfers in Violation of Agreement. If any transfer of
Subject Shares is made or attempted contrary to the provisions of this
Agreement, or if Subject Shares are not offered to the Company as required by
this Agreement, the Company shall have the right to purchase said Subject Shares
from the holder thereof or such holder's transferee at any time before or after
the transfer, as hereinafter provided. In addition to any other legal or
equitable remedies that it may have, the Company may enforce its rights by
actions for specific performance (to the extent permitted by law) and may refuse
to recognize any transferee as one of its stockholders for any purpose,
including without limitation for purposes of dividend and voting rights, until
all applicable provisions of this Agreement have been complied with.
SECTION 1.04. Tenders. All Subject Shares which the Company has elected to
purchase hereunder shall be tendered to the Company, or to one or more
substitute purchasers designated by it, at the principal office of the Company
at a date and time specified by it (within five trading days after the Proposed
Transferor's receipt of the Company's Acceptance Notice) by delivery of
certificates representing such Subject Shares, endorsed in blank and in proper
form for transfer against payment of the purchase price in cash or by certified
or bank checks, or upon such terms as are applicable under Section 1.01.
SECTION 1.05. Legend on Certificates; Stock Splits. etc. Each certificate
representing Subject Shares shall bear on its face the following legend:
'The shares represented by this certificate are subject to
restrictions on transfer, a copy of which will be furnished by the Company
to the holder of this certificate upon written request and without charge.'
SECTION 1.06. Term. The Company's right pursuant to Section 1.01 to
purchase Subject Shares shall terminate on the earliest to occur of (i)
immediately prior to the closing or effective date of any consolidation or
merger of the Company with any other person (other than a consolidation or
merger in which the Company is the continuing corporation where the stockholders
of the Company immediately prior thereto shall, immediately thereafter, hold as
a group the right to cast at least a majority of the votes of all holders of
voting securities of the continuing corporation or entity), any sale or transfer
by the Company of all or substantially all of its assets or any sale or transfer
of all or substantially all of the capital stock of the Company, or (ii) March
1, 2001.
ARTICLE II
REGISTRATION RIGHTS
SECTION 2.01. Required Registrations; 'Piggy-Back' Registration Rights.
(a) If on any three (3) occasions during the period beginning March 1, 1997
and ending March 1, 2001, a majority in interest of the Holders (as hereinafter
defined) shall notify the Company in writing that they intend to offer or cause
to be offered for public sale all or any portion of their Registrable Securities
(as hereinafter defined), the Company will use its best efforts to cause such of
the Registrable Securities as may be requested by the Holders to be registered
under the Securities Act of 1933, as amended (the 'Securities Act') for sale on
a delayed or continuous basis under Rule 415, and to keep such registration
effective for 180 days or until all of such Holders' Registrable Securities
registered thereunder are sold, whichever is shorter. All expenses of such
registrations and offerings, including the underwriting and selling commissions
relating to the Registrable Securities, attributable to any registration
pursuant to this Section 2.01(a) shall be borne by the Holders exercising their
rights hereunder. The Company may postpone the filing of any registration
statement required under this
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Section 2.01(a) for a reasonable period of time, not to exceed 60 days during
any twelve-month period, if the Company has been advised by legal counsel that
such filing would require a special audit or the disclosure of a material
impending transaction or other matter and the Company determines reasonably and
in good faith that such disclosure would have a material adverse effect on the
Company. The Company shall not be required to cause a registration statement
requested pursuant to this Section 2.01(a) to become effective prior to 90 days
following the effective date of a registration statement initiated by the
Company, if the request for registration has been received by the Company
subsequent to the giving of written notice by the Company, made in good faith,
to the Holders to the effect that the Company is commencing to prepare a
company-initiated registration statement (other than a registration effected
solely to implement an employee benefit plan or a transaction to which Rule 145
or any other similar rule of the Securities and Exchange Commission (the
'Commission') under the Securities Act is applicable); provided, however, that
the Company shall use its best efforts to achieve such effectiveness promptly.
Any registration effected pursuant to this Section 2.01(a) and so designated by
the Holders shall be subject to this Section 2.01(a), regardless of the form in
which such registration is effected.
(b) If at any time or times after the date hereof, the Company shall
determine or be required to register any shares of its Common Stock for sale
under the Securities Act (whether in connection with a public offering of
securities by the Company (a 'primary offering'), a public offering of
securities by stockholders of the Company (a 'secondary offering'), or both, but
not in connection with a registration effected solely to implement an employee
benefit plan or a transaction to which Rule 145 or any other similar rule of the
Commission under the Securities Act is applicable), the Company will promptly
give written notice thereof to each of the Holders. In connection with any such
registration, if within 20 days after the receipt of such notice one or more
Holders of Registrable Securities (as hereinafter defined), request the
inclusion of some or all of the Registrable Securities (but not any other
shares) held by them in such registration, the Company will use its best efforts
to effect the registration under the Securities Act of all Registrable
Securities which such Holders request to be registered in a writing delivered to
the Company within 20 days after such Holders' receipt of the notice referred to
above. In the case of the registration of shares of Common Stock by the Company
in connection with an underwritten public offering, (i) the Company shall not be
required to include any Registrable Securities in such underwriting unless the
Holders thereof accept the terms of the underwriting as agreed upon between the
Company and the underwriter or underwriters selected by it, and (ii) if the
underwriter(s) determines that marketing factors require a limitation on the
number of Registrable Securities to be offered, the Company shall not be
required to register Registrable Securities of the Holders in excess of the
amount, if any, of shares of the capital stock which the principal underwriter
of such underwritten offering shall reasonably and in good faith agree to
include in such offering in excess of any amount to be registered for the
Company, and in the event of any such limitation the number of Registrable
Securities of any Holder requesting inclusion in such registration shall be
based upon the relative holdings of Common Stock of all Holders requesting such
registration (and if any Holder would thus be entitled to include more
Registrable Securities than such Holder requested to be registered, the excess
shall be allocated among other requesting Holders pro rata based upon their
relative holdings of Common Stock. All expenses relating to the registration and
offering of Registrable Securities pursuant to this Section 2.01(b) shall be
borne by the Company and the Holders of Registrable Securities registered in
such offering pro rata in the same proportion that the number of shares
registered by the Company and such Holders, as the case may be, bears to the
total number of shares registered, except that the Holders alone shall bear
underwriting and selling commissions attributable to their Registrable
Securities being registered and any transfer taxes on shares being sold by such
Holders.
SECTION 2.02. Form S-3. If the Company becomes eligible to use Form S-3
under the Securities Act or a comparable successor form, the Company shall use
its best efforts to continue to qualify at all times for registration of its
capital stock on Form S-3 or such successor form. In addition to their rights
under Section 2.01 hereof, the Holders shall have the right to request and have
effected registrations of Registrable Securities on Form S-3 or such successor
form for a sale of shares of Registrable Securities having an aggregate sale
price of not less than $500,000 (such requests shall be in writing and shall
state the number of shares of Registrable Securities to be disposed of and the
intended method of disposition of such shares by the Holders). The Company shall
use its best efforts to cause such Registrable
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Securities to be registered under the Securities Act on Form S-3 (or any
successor form). If so requested by the Holders, the Company shall take such
steps as are required to register the Registrable Securities for which the
Holders have requested registration for sale on a delayed or continuous basis
under Rule 415, and to keep such registration continuously effective for a
period of at least 36 months following the date on which such registration
statement is declared effective or until all of such Registrable Securities
registered thereunder are sold, whichever is shorter. All expenses attributable
to a registration requested pursuant to this Section 2.02, including the
underwriting and selling commissions relating to the Registrable Securities,
shall be borne by the Holders exercising their rights hereunder. The Company may
postpone the filing of any registration statement required hereunder for a
reasonable period of time, not to exceed 60 days during any twelve-month period,
if the Company has been advised by legal counsel that such filing would require
a special audit or the disclosure of a material impending transaction or other
matter and the Company determines reasonably and in good faith that such
disclosure would have a material adverse effect on the Company. The Company
shall not be required to cause a registration statement requested pursuant to
this Section 2.02 to become effective prior to 90 days following the effective
date of a registration statement initiated by the Company, if the request for
registration has been received by the Company subsequent to the giving of
written notice by the Company, made in good faith, to the Holders to the effect
that the Company is commencing to prepare a Company-initiated registration
statement (other than a registration effected solely to implement an employee
benefit plan or a transaction to which Rule 145 or any other similar rule of the
Commission under the Securities Act is applicable); provided, however, that the
Company shall use its best efforts to achieve such effectiveness promptly.
SECTION 2.03. Selection of Underwriter. If the Holders so elect, the
offering of Registrable Securities pursuant to a registration statement filed
under this Article II shall be in the form of an underwritten offering. If they
so elect, the Holders participating in such registration statement shall select
one or more nationally recognized firms of investment bankers to act as the
book-running managing underwriter or underwriters in connection with such
offering and shall select any additional investment bankers and managers to be
used in connection with the offering.
SECTION 2.04. Definitions.
(a) Registrable Securities. For the purposes of this Agreement, the term
'Registrable Securities' shall mean (i) any shares of Common Stock into which
any Annuity Shares are convertible and (ii) any shares of Common Stock issued or
issuable with respect to any of such shares by way of a stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization; provided, however, that any of the
foregoing that are sold in a registered sale pursuant to an effective
registration statement under the Securities Act or that may be sold without
restriction pursuant to Rule 144(k) under the Securities Act (as confirmed by an
unqualified opinion of counsel to the Company) shall not be deemed Registrable
Securities.
(b) Holders. For purposes of this Agreement, the term 'Holder' shall mean
any holder of Registrable Securities from time to time, including without
limitation (i) the Grantor, (ii) following the death of the Grantor, Ms.
Montrone, and (iii) any subsequent transferees of the Grantor or Ms. Montrone of
Annuity Shares or Registrable Securities.
SECTION 2.05. Further Obligations of the Company. Whenever under the
preceding Sections of this Article II the Company is required hereunder to
register any Registrable Securities, it agrees that it shall also do the
following:
(a) Use its best efforts (with due regard to the management of the ongoing
business of the Company) to diligently prepare and file with the Commission a
registration statement and such amendments and supplements to said registration
statement on the appropriate form and the prospectus used in connection
therewith as may be necessary to keep said registration statement effective and
to comply with the provisions of the Securities Act with respect to the sale of
securities covered by said registration statement for the lesser of (i) 180 days
(in the case of any registration pursuant to Section 2.01) or 36 months (in the
case of any registration pursuant to Section 2.02) or (ii) the period necessary
to complete the proposed sale of such Registrable Securities;
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(b) Furnish to each selling Holder such copies of each preliminary and
final prospectus and such other documents as such Holder may reasonably request
to facilitate the sale of such Holder's Registrable Securities;
(c) Enter into any reasonable underwriting agreement required by the
proposed underwriter for the selling Holders, if any;
(d) Use its best efforts to register or qualify the securities covered by
said registration statement under the securities or 'blue-sky' laws of such
jurisdictions as any selling Holders may reasonably request, provided that the
Company shall not be required to register or qualify the securities in any
jurisdictions which require it to qualify to do business or subject itself to
general service of process therein;
(e) Immediately notify each selling Holder, at any time when a prospectus
relating to such Holder's Registrable Securities is required to be delivered
under the Securities Act, of the happening of any event as a result of which
such prospectus contains an untrue statement of a material fact or omits any
material fact necessary to make the statements therein not misleading, and, at
the request of any such selling Holder, prepare a supplement or amendment to
such prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus will not contain any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein not misleading;
(f) Cause all such Registrable Securities to be listed on each securities
exchange or quoted in each quotation system on which similar securities issued
by the Company are then listed or quoted;
(g) Otherwise use its best efforts to comply with all applicable rules and
regulations of the Commission and make generally available to its security
holders, in each case as soon as practicable, but not later than 45 days after
the close of the period covered thereby (90 days in case the period covered
corresponds to a fiscal year of the Company), an earnings statement of the
Company which will satisfy the provisions of Section 11(a) of the Securities
Act; and
(h) Obtain and furnish to each selling Holder, immediately prior to the
effectiveness of the registration statement (and, in the case of an underwritten
offering, at the time of delivery of any Registrable Securities sold pursuant
thereto), a cold comfort letter from the Company's independent public
accountants in the same form and covering the same matters as is typically
delivered to underwriters and, in the event that an underwriter or underwriters
have been retained in connection with such registration, such cold comfort
letter to be provided to the selling Holders shall be the same cold comfort
letter delivered to such underwriter or underwriters.
SECTION 2.06. Indemnification; Contribution.
(a) Incident to any registration statement referred to in this Agreement,
and subject to applicable law, the Company will indemnify and hold harmless each
underwriter, each Holder of Registrable Securities (including its respective
directors, officers, employees and agents) so registered, and each person who
controls any of them within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder (the 'Exchange Act'), from and against any
and all losses, claims, damages, expenses and liabilities, joint or several
(including any investigation, legal and other expenses incurred in connection
with, and any amount paid in settlement of, any action, suit or proceeding or
any claim asserted), to which they, or any of them, may become subject under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities arise out of or are based on (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement
(including any related preliminary or definitive prospectus, or any amendment or
supplement to such registration statement or prospectus), (ii) any omission or
alleged omission to state in such document a material fact required to be stated
in it or necessary to make the statements in it not misleading, or (iii) any
violation or alleged violation by the Company of the Securities Act, any state
securities or 'blue sky' laws or any rule or regulation thereunder in connection
with such registration, provided, however, that the Company will not be liable
to the extent that such loss, claim, damage, expense or liability arises from
and is based on (A) an untrue statement or omission or alleged untrue statement
or omission made in reliance on and in conformity with
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information furnished in writing to the Company by such underwriter, Holder or
controlling person expressly for use in such registration statement or (B) any
preliminary prospectus, to the extent that any such loss, claim, damage or
liability results solely from an untrue statement of a material fact contained
in, or the omission of a material fact from, such preliminary prospectus which
untrue statement or omission was corrected in the final prospectus, if the
Company shall sustain the burden of proving that a Holder sold Registrable
Securities to the person alleging such loss, claim, damage or liability without
sending or giving, at or prior to the written confirmation of such sale, a copy
of the final prospectus. With respect to such untrue statement or omission or
alleged untrue statement or omission in the information furnished in writing to
the Company by such Holder expressly for use in such registration statement,
such Holder will indemnify and hold harmless each underwriter, the Company
(including its directors, officers, employees and agents), each other Holder of
Registrable Securities (including its respective directors, officers, employees
and agents) so registered, and each person who controls any of them within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
from and against any and all losses, claims, damages, expenses and liabilities,
joint or several, to which they, or any of them, may become subject under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise to the same extent provided in the
immediately preceding sentence. In no event, however, shall the liability of a
Holder for indemnification under this Section 2.06(a) exceed the lesser of (i)
that proportion of the total of such losses, claims, damages or liabilities
indemnified against equal to the proportion of the total Registrable Securities
sold under such registration statement which is being sold by such Holder or
(ii) the proceeds received by such Holder from its sale of Registrable
Securities under such registration statement.
(b) If the indemnification provided for in Section 2.06(a) above for any
reason is held by a court of competent jurisdiction to be unavailable to an
indemnified party in respect of any losses, claims, damages, expenses or
liabilities referred to therein, then each indemnifying party under this Section
2.06, in lieu of indemnifying such indemnified party thereunder, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, expenses or liabilities in such proportion as
is appropriate to reflect the relative fault of the Company, the selling Holders
and the underwriters in connection with the statements or omissions which
resulted in such losses, claims, damages, expenses or liabilities, as well as
any other relevant equitable considerations. The relative fault of the Company,
the selling Holders and the underwriters shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company, the selling Holders or the underwriters and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company, the Holders, and
the underwriters agree that it would not be just and equitable if contribution
pursuant to this Section 2.06(b) were determined by pro rata or per capita
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding sentences.
In no event, however, shall a Holder be required to contribute any amount under
this Section 2.06(b) in excess of the lesser of (i) that proportion of the total
of such losses, claims, damages or liabilities indemnified against equal to the
proportion of the total Registrable Securities sold under such registration
statement which is being sold by such Holder or (ii) the proceeds received by
such Holder from its sale of Registrable Securities under such registration
statement. No person found guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(c) The indemnification and contribution provided for in this Section 2.06
will remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified parties or any officer, director, employee, agent
or controlling person of the indemnified parties.
SECTION 2.07. Rule 144 Requirements. If the Company becomes subject to the
reporting requirements of either Section 13 or 15(d) of the Exchange Act, the
Company will use its best efforts to file with the Commission such information
as the Commission may require under either of said Sections; and in such event,
the Company shall use its best efforts to take all action as may be required as
a condition to the availability of Rule 144 or Rule 144A under the Securities
Act (or any successor or similar exemptive rules hereafter in effect). The
Company shall furnish to any Holder of Registrable Securities upon request a
written statement executed by the Company as to the steps it has taken to
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comply with the current public information requirement of Rule 144 or Rule 144A
or such successor rules.
SECTION 2.08. Transfer of Registration Rights. The registration rights and
related obligations under this Article II of the Grantor and Ms. Montrone with
respect to any of his or her Registrable Securities may be assigned by either of
them, and upon such transfer the relevant transferee shall be deemed to be
included within the definition of a 'Holder' solely for purposes of this Article
II. The Grantor, Ms. Montrone and any subsequent transferee shall notify the
Company at the time of such transfer.
ARTICLE III
MISCELLANEOUS
SECTION 3.01. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the conflicts of law principles thereof.
SECTION 3.02. Further Assurances. Each of the parties hereto agrees to
execute all such further instruments and documents and to take all such further
action as any other party may reasonably require in order to effectuate the
terms and purposes of this Agreement.
SECTION 3.03. Rights of Third Parties. Nothing expressed or implied in this
Agreement is intended or shall be construed to confer upon or give any person or
entity other than the parties hereto any rights or remedies under or by reason
of this Agreement.
SECTION 3.04. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be taken to be
an original and all such counterparts shall be taken to constitute one and the
same document.
SECTION 3.05. Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any way
impaired thereby, it being intended that all of the rights and privileges of the
Holders shall be enforceable to the fullest extent permitted by law.
SECTION 3.06. Entire Agreement. This Agreement is intended by the parties
as a final expression of their agreement and is intended to be the complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
SECTION 3.07. Attorneys' Fees. In any action or proceeding brought to
enforce any provision of this Agreement or where any provision hereof is validly
asserted as a defense, the successful party shall, to the extent permitted by
applicable law, be entitled to recover reasonable attorneys' fees in addition to
any other available remedy.
SECTION 3.08. Remedies. In the event of a breach or a threatened breach by
any party to this Agreement of its obligations under this Agreement, any party
injured or to be injured by such breach will be entitled to specific performance
of its rights under this Agreement or to injunctive relief, in addition to being
entitled to exercise all rights provided in this Agreement and granted by law.
The parties agree that the provisions of this Agreement shall be specifically
enforceable, it being agreed by the parties that the remedy at law, including
monetary damages, for objection in any action for specific performance or
injunctive relief that a remedy at law would be adequate is waived.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
THE GENERAL CHEMICAL GROUP, INC.
By: /s/ RALPH M. PASSINO
...................................
NAME:
TITLE:
The Paul M. Montrone 1996 Annuity
Trust, established under the Paul M.
Montrone 1996 Trust Agreement dated
March 1, 1996
By: /s/ PAUL M. MONTRONE
...................................
PAUL M. MONTRONE
TRUSTEE
By: /s/ SANDRA G. MONTRONE
...................................
SANDRA G. MONTRONE
TRUSTEE
By: /s/ PAUL M. MONTRONE
...................................
PAUL M. MONTRONE
GRANTOR
By: /s/ SANDRA G. MONTRONE
...................................
SANDRA G. MONTRONE
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STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT made as of this 15th day of May, 1996, by and among
The General Chemical Group Inc., a Delaware corporation (the 'Company') and
Stonor Group Limited, a corporation organized under the laws of Liberia
('Stonor').
WITNESSETH:
WHEREAS, Stonor holds a voting trust certificate representing 9,868,421
shares of the Class B Common Stock, par value $.01 per share (the 'Class B
Common Stock'), of the Company, which is generally not transferrable but is
convertible at any time at the election of the holder into an identical number
of shares of Common Stock, par value $.01 per share (the 'Common Stock'), of the
Company (such number of shares, as the same is adjusted to reflect any stock
splits, dividends or other recapitalizations, of Class B Common Stock, or Common
Stock following any such conversion, being hereinafter referred to as the
'Stonor Shares');
WHEREAS, the Company has requested Stonor to grant it a right of first
refusal with respect to any sales of the Stonor Shares on the terms set forth
herein; and
WHEREAS, Stonor is willing to grant the Company such right of first refusal
only if the Company grants Stonor certain registration rights with respect to
the Stonor Shares.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
RESTRICTIONS ON SHARES
SECTION 1.01. Right of First Refusal. Stonor and any transferee of the
Stonor Shares under Section 1.02 (a 'Proposed Transferor') shall not sell,
assign, transfer, exchange, pledge or otherwise dispose of any Stonor Shares or
any interest therein (collectively, the 'Subject Shares') unless the Proposed
Transferor shall have received from a third party a bona fide written offer
therefor and shall have first given written notice thereof to the Company,
identifying the proposed transferee, the purchase price, if any, and the terms
of the proposed transaction, and offering said Subject Shares to the Company for
purchase by it at a purchase price equal to the value offered by such third
party, which amount shall be payable in cash or the equivalent under terms
substantially identical to those offered by such third party. Within three
trading days (i.e. days on which shares are traded on the New York Stock
Exchange) after receipt of the notice, the Company may elect to purchase all of
the Subject Shares so offered by delivering written notice of its acceptance
(the 'Acceptance Notice') to the Proposed Transferor within said three day
period. If the Company fails to give the Proposed Transferor the Acceptance
Notice within said three day period, said Subject Shares may be transferred
within 120 days after the expiration of said three day period to the proposed
transferee upon the price and terms specified in the notice and all shares so
transferred shall be free from all restrictions set forth in this Article I. Any
Subject Shares not so transferred within such 120-day period shall again become
subject to the provisions of this Article I.
SECTION 1.02. Exceptions to Restrictions. The restrictions set forth in
this Article I shall be inapplicable to any transfer of Subject Shares to a
Permitted Transferee (as such term is defined in the Company's Amended and
Restated Certificate of Incorporation as of the date hereof) of the Proposed
Transferor; provided, however, that such Shares in the hands of each such
transferee shall remain subject to this Agreement.
SECTION 1.03. Transfers in Violation of Agreement. If any transfer of
Subject Shares is made or attempted contrary to the provisions of this
Agreement, or if Subject Shares are not offered to the Company as required by
this Agreement, the Company shall have the right to purchase said Subject Shares
from the holder thereof or such holder's transferee at any time before or after
the transfer, as hereinafter provided. In addition to any other legal or
equitable remedies that it may have, the Company may enforce its rights by
actions for specific performance (to the extent permitted by law) and may refuse
to recognize any transferee as one of its stockholders for any purpose,
including without
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limitation for purposes of dividend and voting rights, until all applicable
provisions of this Agreement have been complied with.
SECTION 1.04. Tenders. All Subject Shares which the Company has elected to
purchase hereunder shall be tendered to the Company, or to one or more
substitute purchasers designated by it, at the principal office of the Company
at a date and time specified by it (within five trading days after the Proposed
Transferor's receipt of the Company's Acceptance Notice) by delivery of
certificates representing such Subject Shares, endorsed in blank and in proper
form for transfer against payment of the purchase price in cash or by certified
or bank checks, or upon such terms as are applicable under Section 1.01.
SECTION 1.05. Legend on Certificates; Stock Splits. etc. Each certificate
representing Subject Shares shall bear on its face the following legend:
'The shares represented by this certificate are subject to restrictions
on transfer, a copy of which will be furnished by the Company to the holder of
this certificate upon written request and without charge.'
SECTION 1.06. Term. The Company's right pursuant to Section 1.01 to
purchase Subject Shares shall terminate on the earliest to occur of (i)
immediately prior to the closing or effective date of any consolidation or
merger of the Company with any other person (other than a consolidation or
merger in which the Company is the continuing corporation where the stockholders
of the Company immediately prior thereto shall, immediately thereafter, hold as
a group the right to cast at least a majority of the votes of all holders of
voting securities of the continuing corporation or entity), any sale or transfer
by the Company of all or substantially all of its assets or any sale or transfer
of all or substantially all of the capital stock of the Company, or (ii) March
1, 2001.
ARTICLE II
REGISTRATION RIGHTS
SECTION 2.01. Required Registrations; 'Piggy-Back' Registration Rights.
(a) If on any three (3) occasions during the period beginning March 1, 1997
and ending March 1, 2001, a majority in interest of the Holders (as hereinafter
defined) shall notify the Company in writing that they intend to offer or cause
to be offered for public sale all or any portion of their Registrable Securities
(as hereinafter defined), the Company will use its best efforts to cause such of
the Registrable Securities as may be requested by the Holders to be registered
under the Securities Act of 1933, as amended (the 'Securities Act') for sale on
a delayed or continuous basis under Rule 415, and to keep such registration
effective for 180 days or until all of such Holders' Registrable Securities
registered thereunder are sold, whichever is shorter. All expenses of such
registrations and offerings, including the underwriting and selling commissions
relating to the Registrable Securities, attributable to any registration
pursuant to this Section 2.01(a) shall be borne by the Holders exercising their
rights hereunder. The Company may postpone the filing of any registration
statement required under this Section 2.01(a) for a reasonable period of time,
not to exceed 60 days during any twelve-month period, if the Company has been
advised by legal counsel that such filing would require a special audit or the
disclosure of a material impending transaction or other matter and the Company
determines reasonably and in good faith that such disclosure would have a
material adverse effect on the Company. The Company shall not be required to
cause a registration statement requested pursuant to this Section 2.01(a) to
become effective prior to 90 days following the effective date of a registration
statement initiated by the Company, if the request for registration has been
received by the Company subsequent to the giving of written notice by the
Company, made in good faith, to the Holders to the effect that the Company is
commencing to prepare a company-initiated registration statement (other than a
registration effected solely to implement an employee benefit plan or a
transaction to which Rule 145 or any other similar rule of the Securities and
Exchange Commission (the 'Commission') under the Securities Act is applicable);
provided, however, that the Company shall use its best efforts to achieve such
effectiveness promptly. Any registration effected pursuant to this Section
2.01(a) and so designated by the Holders shall be subject to this Section
2.01(a), regardless of the form in which such registration is effected.
2
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<PAGE>
(b) If at any time or times after the date hereof, the Company shall
determine or be required to register any shares of its Common Stock for sale
under the Securities Act (whether in connection with a public offering of
securities by the Company (a 'primary offering'), a public offering of
securities by stockholders of the Company (a 'secondary offering'), or both, but
not in connection with a registration effected solely to implement an employee
benefit plan or a transaction to which Rule 145 or any other similar rule of the
Commission under the Securities Act is applicable), the Company will promptly
give written notice thereof to each of the Holders. In connection with any such
registration, if within 20 days after the receipt of such notice one or more
Holders of Registrable Securities (as hereinafter defined), request the
inclusion of some or all of the Registrable Securities (but not any other
shares) held by them in such registration, the Company will use its best efforts
to effect the registration under the Securities Act of all Registrable
Securities which such Holders request to be registered in a writing delivered to
the Company within 20 days after such Holders' receipt of the notice referred to
above. In the case of the registration of shares of Common Stock by the Company
in connection with an underwritten public offering, (i) the Company shall not be
required to include any Registrable Securities in such underwriting unless the
Holders thereof accept the terms of the underwriting as agreed upon between the
Company and the underwriter or underwriters selected by it, and (ii) if the
underwriter(s) determines that marketing factors require a limitation on the
number of Registrable Securities to be offered, the Company shall not be
required to register Registrable Securities of the Holders in excess of the
amount, if any, of shares of the capital stock which the principal underwriter
of such underwritten offering shall reasonably and in good faith agree to
include in such offering in excess of any amount to be registered for the
Company, and in the event of any such limitation the number of Registrable
Securities of any Holder requesting inclusion in such registration shall be
based upon the relative holdings of Common Stock of all Holders requesting such
registration (and if any Holder would thus be entitled to include more
Registrable Securities than such Holder requested to be registered, the excess
shall be allocated among other requesting Holders pro rata based upon their
relative holdings of Common Stock). All expenses relating to the registration
and offering of Registrable Securities pursuant to this Section 2.01(b) shall be
borne by the Company and the Holders of Registrable Securities registered in
such offering pro rata in the same proportion that the number of shares
registered by the Company and such Holders, as the case may be, bears to the
total number of shares registered, except that the Holders alone shall bear
underwriting and selling commissions attributable to their Registrable
Securities being registered and any transfer taxes on shares being sold by such
Holders.
SECTION 2.02. Form S-3. If the Company becomes eligible to use Form S-3
under the Securities Act or a comparable successor form, the Company shall use
its best efforts to continue to qualify at all times for registration of its
capital stock on Form S-3 or such successor form. In addition to their rights
under Section 2.01 hereof, the Holders shall have the right to request and have
effected registrations of Registrable Securities on Form S-3 or such successor
form for a sale of shares of Registrable Securities having an aggregate sale
price of not less than $500,000 (such requests shall be in writing and shall
state the number of shares of Registrable Securities to be disposed of and the
intended method of disposition of such shares by the Holders). The Company shall
use its best efforts to cause such Registrable Securities to be registered under
the Securities Act on Form S-3 (or any successor form). If so requested by the
Holders, the Company shall take such steps as are required to register the
Registrable Securities for which the Holders have requested registration for
sale on a delayed or continuous basis under Rule 415, and to keep such
registration continuously effective for a period of at least 36 months following
the date on which such registration statement is declared effective or until all
of such Registrable Securities registered thereunder are sold, whichever is
shorter. All expenses attributable to a registration requested pursuant to this
Section 2.02, including the underwriting and selling commissions relating to the
Registrable Securities, shall be borne by the Holders exercising their rights
hereunder. The Company may postpone the filing of any registration statement
required hereunder for a reasonable period of time, not to exceed 60 days during
any twelve-month period, if the Company has been advised by legal counsel that
such filing would require a special audit or the disclosure of a material
impending transaction or other matter and the Company determines reasonably and
in good faith that such disclosure would have a material adverse effect on the
Company. The Company shall not be required to cause a registration statement
requested pursuant to this Section 2.02 to become effective prior to 90
3
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<PAGE>
days following the effective date of a registration statement initiated by the
Company, if the request for registration has been received by the Company
subsequent to the giving of written notice by the Company, made in good faith,
to the Holders to the effect that the Company is commencing to prepare a
Company-initiated registration statement (other than a registration effected
solely to implement an employee benefit plan or a transaction to which Rule 145
or any other similar rule of the Commission under the Securities Act is
applicable); provided, however, that the Company shall use its best efforts to
achieve such effectiveness promptly.
SECTION 2.03. Selection of Underwriter. If the Holders so elect, the
offering of Registrable Securities pursuant to a registration statement filed
under this Article II shall be in the form of an underwritten offering. If they
so elect, the Holders participating in such registration statement shall select
one or more nationally recognized firms of investment bankers to act as the
book-running managing underwriter or underwriters in connection with such
offering and shall select any additional investment bankers and managers to be
used in connection with the offering.
SECTION 2.04. Definitions.
(a) Registrable Securities. For the purposes of this Agreement, the term
'Registrable Securities' shall mean (i) any shares of Common Stock into which
any Stonor Shares are convertible and (ii) any shares of Common Stock issued or
issuable with respect to any of such shares by way of a stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization; provided, however, that any of the
foregoing that are sold in a registered sale pursuant to an effective
registration statement under the Securities Act or that may be sold without
restriction pursuant to Rule 144(k) under the Securities Act (as confirmed by an
unqualified opinion of counsel to the Company) shall not be deemed Registrable
Securities.
(b) Holders. For purposes of this Agreement, the term 'Holder' shall mean
any holder of Registrable Securities from time to time, including without
limitation (i) Stonor and (ii) any subsequent transferees of Stonor of Stonor
Shares or Registrable Securities.
SECTION 2.05. Further Obligations of the Company. Whenever under the
preceding Sections of this Article II the Company is required hereunder to
register any Registrable Securities, it agrees that it shall also do the
following:
(a) Use its best efforts (with due regard to the management of the
ongoing business of the Company) to diligently prepare and file with the
Commission a registration statement and such amendments and supplements to
said registration statement on the appropriate form and the prospectus used
in connection therewith as may be necessary to keep said registration
statement effective and to comply with the provisions of the Securities Act
with respect to the sale of securities covered by said registration
statement for the lesser of (i) 180 days (in the case of any registration
pursuant to Section 2.01) or 36 months (in the case of any registration
pursuant to Section 2.02) or (ii) the period necessary to complete the
proposed sale of such Registrable Securities;
(b) Furnish to each selling Holder such copies of each preliminary and
final prospectus and such other documents as such Holder may reasonably
request to facilitate the sale of such Holder's Registrable Securities;
(c) Enter into any reasonable underwriting agreement required by the
proposed underwriter for the selling Holders, if any;
(d) Use its best efforts to register or qualify the securities covered
by said registration statement under the securities or 'blue-sky' laws of
such jurisdictions as any selling Holders may reasonably request, provided
that the Company shall not be required to register or qualify the
securities in any jurisdictions which require it to qualify to do business
or subject itself to general service of process therein;
(e) Immediately notify each selling Holder, at any time when a
prospectus relating to such Holder's Registrable Securities is required to
be delivered under the Securities Act, of the happening of any event as a
result of which such prospectus contains an untrue statement of a material
fact or omits any material fact necessary to make the statements therein
not misleading,
4
<PAGE>
<PAGE>
and, at the request of any such selling Holder, prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus will not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading;
(f) Cause all such Registrable Securities to be listed on each
securities exchange or quoted in each quotation system on which similar
securities issued by the Company are then listed or quoted;
(g) Otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission and make generally available to its
security holders, in each case as soon as practicable, but not later than
45 days after the close of the period covered thereby (90 days in case the
period covered corresponds to a fiscal year of the Company), an earnings
statement of the Company which will satisfy the provisions of Section 11(a)
of the Securities Act; and
(h) Obtain and furnish to each selling Holder, immediately prior to
the effectiveness of the registration statement (and, in the case of an
underwritten offering, at the time of delivery of any Registrable
Securities sold pursuant thereto), a cold comfort letter from the Company's
independent public accountants in the same form and covering the same
matters as is typically delivered to underwriters and, in the event that an
underwriter or underwriters have been retained in connection with such
registration, such cold comfort letter to be provided to the selling
Holders shall be the same cold comfort letter delivered to such underwriter
or underwriters.
SECTION 2.06. Indemnification; Contribution.
(a) Incident to any registration statement referred to in this Agreement,
and subject to applicable law, the Company will indemnify and hold harmless each
underwriter, each Holder of Registrable Securities (including its respective
directors, officers, employees and agents) so registered, and each person who
controls any of them within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder (the 'Exchange Act'), from and against any
and all losses, claims, damages, expenses and liabilities, joint or several
(including any investigation, legal and other expenses incurred in connection
with, and any amount paid in settlement of, any action, suit or proceeding or
any claim asserted), to which they, or any of them, may become subject under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities arise out of or are based on (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement
(including any related preliminary or definitive prospectus, or any amendment or
supplement to such registration statement or prospectus), (ii) any omission or
alleged omission to state in such document a material fact required to be stated
in it or necessary to make the statements in it not misleading, or (iii) any
violation or alleged violation by the Company of the Securities Act, any state
securities or 'blue sky' laws or any rule or regulation thereunder in connection
with such registration, provided, however, that the Company will not be liable
to the extent that such loss, claim, damage, expense or liability arises from
and is based on (A) an untrue statement or omission or alleged untrue statement
or omission made in reliance on and in conformity with information furnished in
writing to the Company by such underwriter, Holder or controlling person
expressly for use in such registration statement or (B) any preliminary
prospectus, to the extent that any such loss, claim, damage or liability results
solely from an untrue statement of a material fact contained in, or the omission
of a material fact from, such preliminary prospectus which untrue statement or
omission was corrected in the final prospectus, if the Company shall sustain the
burden of proving that a Holder sold Registrable Securities to the person
alleging such loss, claim, damage or liability without sending or giving, at or
prior to the written confirmation of such sale, a copy of the final prospectus.
With respect to such untrue statement or omission or alleged untrue statement or
omission in the information furnished in writing to the Company by such Holder
expressly for use in such registration statement, such Holder will indemnify and
hold harmless each underwriter, the Company (including its directors, officers,
employees and agents), each other Holder of Registrable Securities (including
its respective directors, officers, employees and agents) so registered, and
each person who controls any of them within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages, expenses and liabilities, joint or several, to which
they, or any of them, may become subject under the Securities Act, the Exchange
Act or other federal or
5
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<PAGE>
state statutory law or regulation, at common law or otherwise to the same extent
provided in the immediately preceding sentence. In no event, however, shall the
liability of a Holder for indemnification under this Section 2.06(a) exceed the
lesser of (i) that proportion of the total of such losses, claims, damages or
liabilities indemnified against equal to the proportion of the total Registrable
Securities sold under such registration statement which is being sold by such
Holder or (ii) the proceeds received by such Holder from its sale of Registrable
Securities under such registration statement.
(b) If the indemnification provided for in Section 2.06(a) above for any
reason is held by a court of competent jurisdiction to be unavailable to an
indemnified party in respect of any losses, claims, damages, expenses or
liabilities referred to therein, then each indemnifying party under this Section
2.06, in lieu of indemnifying such indemnified party thereunder, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, expenses or liabilities in such proportion as
is appropriate to reflect the relative fault of the Company, the selling Holders
and the underwriters in connection with the statements or omissions which
resulted in such losses, claims, damages, expenses or liabilities, as well as
any other relevant equitable considerations. The relative fault of the Company,
the selling Holders and the underwriters shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company, the selling Holders or the underwriters and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company, the Holders, and
the underwriters agree that it would not be just and equitable if contribution
pursuant to this Section 2.06(b) were determined by pro rata or per capita
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding sentences.
In no event, however, shall a Holder be required to contribute any amount under
this Section 2.06(b) in excess of the lesser of (i) that proportion of the total
of such losses, claims, damages or liabilities indemnified against equal to the
proportion of the total Registrable Securities sold under such registration
statement which is being sold by such Holder or (ii) the proceeds received by
such Holder from its sale of Registrable Securities under such registration
statement. No person found guilty of fraudulent misrepresentation (within the
meaning of Section l l(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(c) The indemnification and contribution provided for in this Section 2.06
will remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified parties or any officer, director, employee, agent
or controlling person of the indemnified parties.
SECTION 2.07. Rule 144 Requirements. If the Company becomes subject to the
reporting requirements of either Section 13 or 15(d) of the Exchange Act, the
Company will use its best efforts to file with the Commission such information
as the Commission may require under either of said Sections; and in such event,
the Company shall use its best efforts to take all action as may be required as
a condition to the availability of Rule 144 or Rule 144A under the Securities
Act (or any successor or similar exemptive rules hereafter in effect). The
Company shall furnish to any Holder of Registrable Securities upon request a
written statement executed by the Company as to the steps it has taken to comply
with the current public information requirement of Rule 144 or Rule 144A or such
successor rules.
SECTION 2.08. Transfer of Registration Rights. The registration rights and
related obligations under this Article II of Stonor with respect to any of its
Registrable Securities may be assigned by it, and upon such transfer the
relevant transferee shall be deemed to be included within the definition of a
'Holder' solely for purposes of this Article II. Stonor and any subsequent
transferee shall notify the Company at the time of such transfer.
ARTICLE III
MISCELLANEOUS
SECTION 3.01. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the conflicts of law principles thereof.
6
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<PAGE>
SECTION 3.02. Further Assurances. Each of the parties hereto agrees to
execute all such further instruments and documents and to take all such further
action as any other party may reasonably require in order to effectuate the
terms and purposes of this Agreement.
SECTION 3.03. Rights of Third Parties. Nothing expressed or implied in this
Agreement is intended or shall be construed to confer upon or give any person or
entity other than the parties hereto any rights or remedies under or by reason
of this Agreement.
SECTION 3.04. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be taken to be
an original and all such counterparts shall be taken to constitute one and the
same document.
SECTION 3.05. Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any way
impaired thereby, it being intended that all of the rights and privileges of the
Holders shall be enforceable to the fullest extent permitted by law.
SECTION 3.06. Entire Agreement. This Agreement is intended by the parties
as a final expression of their agreement and is intended to be the complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
SECTION 3.07. Attorneys' Fees. In any action or proceeding brought to
enforce any provision of this Agreement or where any provision hereof is validly
asserted as a defense, the successful party shall, to the extent permitted by
applicable law, be entitled to recover reasonable attorneys' fees in addition to
any other available remedy.
SECTION 3.08. Remedies. In the event of a breach or a threatened breach by
any party to this Agreement of its obligations under this Agreement, any party
injured or to be injured by such breach will be entitled to specific performance
of its rights under this Agreement or to injunctive relief, in addition to being
entitled to exercise all rights provided in this Agreement and granted by law.
The parties agree that the provisions of this Agreement shall be specifically
enforceable, it being agreed by the parties that the remedy at law, including
monetary damages, for objection in any action for specific performance or
injunctive relief that a remedy at law would be adequate is waived.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
THE GENERAL CHEMICAL GROUP, INC.
By: /s/ RALPH M. PASSINO
..................................
Name:
Title:
STONOR GROUP LIMITED
By: /s/ R.J. WILLIS
..................................
Name:
Title:
7
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<PAGE>
EXHIBIT 11
THE GENERAL CHEMICAL GROUP INC.
COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
(UNAUDITED)
Earnings per share were calculated as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Primary
Total income used for primary earnings per share............................ $20,102 $21,093 $46,608
------- ------- -------
------- ------- -------
Weighted average common shares outstanding.................................. 19,737 19,737 21,333
Weighted average common equivalent shares................................... -- -- 588
------- ------- -------
Weighted average common and common equivalent shares........................ 19,737 19,737 21,921
------- ------- -------
------- ------- -------
Primary earnings per common share and common equivalent share............... $ 1.02 $ 1.07 $ 2.13
------- ------- -------
------- ------- -------
Fully Diluted
Total income used for fully diluted earnings per share...................... $20,102 $21,093 $46,608
------- ------- -------
------- ------- -------
Weighted average common shares outstanding.................................. 19,737 19,737 21,333
Weighted average common equivalent shares................................... -- -- 833
------- ------- -------
Weighted average common and common equivalent shares........................ 19,737 19,737 22,166
------- ------- -------
------- ------- -------
Fully diluted earnings per common share and common
equivalent share.......................................................... $1.02 $1.07 $2.10
----- ----- -----
----- ----- -----
</TABLE>
<PAGE>
<PAGE>
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-05765 of The General Chemical Group Inc. on Form S-8 of our report dated
February 14, 1997, appearing in this Annual Report on Form 10-K of The General
Chemical Group Inc. for the year ended December 31, 1996.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
March 27, 1997
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Form 10-K
for the period ended December 31, 1996 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 51,700
<SECURITIES> 0
<RECEIVABLES> 107,845
<ALLOWANCES> 5,367
<INVENTORY> 41,429
<CURRENT-ASSETS> 209,024
<PP&E> 409,915
<DEPRECIATION> 170,096
<TOTAL-ASSETS> 485,137
<CURRENT-LIABILITIES> 150,869
<BONDS> 217,217
0
0
<COMMON> 223
<OTHER-SE> (119,976)
<TOTAL-LIABILITY-AND-EQUITY> 485,137
<SALES> 623,659
<TOTAL-REVENUES> 623,659
<CGS> 422,633
<TOTAL-COSTS> 422,633
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 174
<INTEREST-EXPENSE> 23,748
<INCOME-PRETAX> 75,731
<INCOME-TAX> 29,123
<INCOME-CONTINUING> 46,608
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,608
<EPS-PRIMARY> 2.13
<EPS-DILUTED> 2.10
</TABLE>
