________________________________________________________________________________
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
GENTEK INC. DELAWARE 3714 02-0505547
General Chemical Corporation Delaware 3714 22-2689817
Toledo Technologies Inc. Delaware 3714 38-2197045
Printing Developments Inc. Delaware 3555 22-2689839
Balcrank Products Inc. Delaware 3586 38-2897194
HMC Patents Holding Company Inc. Delaware 5169 02-0416899
Waterside Urban Renewal Corporation New Jersey 6552 22-2366872
Reheis Inc. Delaware 2819 22-2640008
Defiance, Inc. Delaware 3714 34-1526359
Binderline Draftline, Inc. Michigan 8711 38-1810522
Defiance Precision Products, Inc. Ohio 3451 34-1414422
Hy-Form Products, Inc. Michigan 3714 38-2184722
Defiance Testing and Engineering Services, Inc. Michigan 8711 38-2252141
Noma Corporation Delaware 5063 06-0879221
PCT Mexico Corporation Delaware 5063 25-1559158
Noma O.P. Inc. Delaware 5063 51-0365495
Electronic Interconnect Systems Inc. Massachusetts 5063 04-2828810
Defiance Kinematics Inc. Delaware 8711 22-3665196
HN Investment Holdings Inc. Delaware 6799 22-3645354
PPI Holdings, Inc. California 2819 77-0520612
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS (STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
CHARTER) OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
------------------------
LIBERTY LANE
HAMPTON, NEW HAMPSHIRE 03842
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
TODD M. DUCHENE
GENTEK INC.
LIBERTY LANE
HAMPTON, NEW HAMPSHIRE 03842
(603) 929-2606
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPY TO:
GEORGE E.B. MAGUIRE
DEBEVOISE & PLIMPTON
875 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 909-6000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities of an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to
Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration number of the earlier effective registration
statement for the same offering. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
PROPOSED
MAXIMUM OFFERING PROPOSED
TITLE OF EACH CLASS AMOUNT TO BE PRICE PER MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED SECURITY(1) OFFERING PRICE(1) REGISTRATION FEE
11% Senior Subordinated Notes due
2009................................. $200,000,000 100% $200,000,000 $55,600
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) under the Securities Act of 1933, as amended.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
________________________________________________________________________________
________________________________________________________________________________
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES OR ACCEPT ANY OFFER TO BUY THESE SECURITIES UNTIL WE
DELIVER THIS PROSPECTUS TO YOU IN FINAL FORM. WE ARE NOT USING THIS PROSPECTUS
TO OFFER TO SELL THESE SECURITIES OR TO SOLICIT OFFERS TO BUY THESE SECURITIES
IN ANY STATE OR OTHER PLACE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED NOVEMBER 17, 1999
PROSPECTUS Strictly Confidential
GENTEK INC. [LOGO]
OFFER TO EXCHANGE
$200,000,000 11% SENIOR SUBORDINATED NOTES DUE 2009
FOR REGISTERED
$200,000,000 11% SENIOR SUBORDINATED NOTES DUE 2009
THE NEW NOTES:
We issued our 11% Senior Subordinated Notes due 2009 on August 9, 1999. The
terms of the new notes we will issue in the exchange offer are identical to the
terms of the old notes except that the new notes:
are registered under the Securities Act of 1933 and therefore will not
contain restrictions on transfer; and
will not contain provisions relating to additional interest.
YOU SHOULD CAREFULLY REVIEW THE RISK FACTORS BEGINNING ON PAGE 10 OF THIS
PROSPECTUS.
THE EXCHANGE OFFER:
Our offer to exchange old notes for new notes will be open until
5:00 p.m., New York City time, on [ ], 1999, unless we
extend the offer.
You should also carefully review the procedures for tendering the old
notes beginning on page 20 of this prospectus.
If you fail to tender your old notes, you will continue to hold
unregistered securities and your ability to transfer them could be
adversely affected.
The exchange offer is subject to customary conditions.
No public market currently exists for the notes.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE NOTES OR DETERMINED THAT THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this prospectus is [ ], 1999.
TABLE OF CONTENTS
PAGE
----
Prospectus Summary..................... 1
Risk Factors........................... 10
The Exchange Offer..................... 18
Use of Proceeds........................ 26
Capitalization......................... 26
Unaudited Pro Forma Financial
Statements........................... 27
Selected Financial Data................ 30
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 32
Business............................... 39
Management............................. 52
Beneficial Ownership of Common Stock... 62
Affiliate Relationships and
Transactions......................... 64
Our Arrangements with General Chemical
Group Relating to the Spinoff........ 66
Description of Credit Facility......... 71
Description of Notes................... 73
Material United States Federal Income
Tax Considerations................... 118
Plan of Distribution................... 122
Legal Matters.......................... 122
Experts................................ 122
Financial Statements of Noma and
Krone................................ 123
Where You Can Find More Information.... 123
Index to Consolidated Financial
Statements........................... F-1
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IMPORTANT INFORMATION ABOUT THIS PROSPECTUS
THIS PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND FINANCIAL
INFORMATION ABOUT US THAT IS NOT INCLUDED OR DELIVERED WITH THIS PROSPECTUS,
INCLUDING EXHIBITS TO THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A
PART. WE WILL PROVIDE THESE EXHIBITS WITHOUT CHARGE TO HOLDERS OF THE OLD NOTES,
UPON REQUEST TO GENTEK. REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO THE
SECRETARY, GENTEK INC., LIBERTY LANE, HAMPTON, NEW HAMPSHIRE, 03842 (TELEPHONE
NUMBER 603-929-2606). YOU SHOULD REQUEST ANY SUCH INFORMATION AT LEAST FIVE DAYS
IN ADVANCE OF THE DATE ON WHICH YOU EXPECT TO MAKE YOUR DECISION WITH RESPECT TO
THIS OFFER. IN ANY EVENT, YOU MUST REQUEST SUCH INFORMATION PRIOR TO [ ],
1999.
WE ARE NOT MAKING THE EXCHANGE OFFER, NOR WILL WE ACCEPT SURRENDERS FOR
EXCHANGE FROM ANY HOLDER OF OLD NOTES, IN ANY JURISDICTION IN WHICH THE EXCHANGE
OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES
OR 'BLUE SKY' LAWS OF SUCH JURISDICTION.
i
[THIS PAGE INTENTIONALLY LEFT BLANK]
PROSPECTUS SUMMARY
This summary highlights selected information from this prospectus, but
does not contain all the details of the Notes and information about us,
including information that may be important to you. Therefore, we urge you to
read this entire document carefully.
SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
We completed on August 9, 1999 the private offering of $200,000,000
aggregate principal amount of 11% Senior Subordinated Notes due 2009. We are now
offering to exchange those notes for new registered notes.
The exchange offer........................ In this exchange offer you are entitled to exchange old
notes for new registered 11% Senior Subordinated Notes due
2009.
Resale of new notes....................... We believe most investors can resell the new notes issued in
this exchange offer without compliance with the registration
and prospectus delivery provisions of the Securities Act.
However, you may need to comply with these requirements of
the Securities Act when you resell your new notes if you:
acquire new notes outside the ordinary course of business;
plan to participate in a distribution of the new notes; or
are an affiliate of GenTek.
To find out whether any special exceptions may apply to you
and restrict your resale of new notes, you should read the
discussion under the heading 'The Exchange Offer -- Resales
of New Notes Issued in the Exchange Offer.'
Registration rights agreement............. We entered into an exchange and registration rights
agreement with the initial purchasers of the old notes which
requires us to use our best efforts to make this exchange
offer.
Consequence of failure to exchange old
notes................................... You will continue to hold old notes which will remain
subject to their existing transfer restrictions if:
you do not tender your old notes; or
you tender your old notes and they are not accepted for
exchange.
We will have no obligation to register the old notes after
we consummate the exchange offer. See 'The Exchange
Offer -- Our Obligations under the Registration Rights
Agreement.'
Expiration date........................... The exchange offer will expire at 5:00 p.m., New York City
time, on [ ], 1999, unless we extend it.
Interest on the new notes................. Interest on the new notes will accrue at a rate of 11% per
annum from the most recent date to which interest has been
paid or provided for on the old notes or, if no interest has
been paid on the old notes, from August 9, 1999, the date we
issued the old notes. No additional interest will be paid on
old notes tendered and accepted for exchange.
Liquidated damages........................ If we do not comply with our obligations to consummate this
exchange offer by 210 days after the original offering of
the old notes, we may be required to pay liquidated damages
to holders
1
of old notes until we consummate the exchange offer. We will
have no obligation to pay liquidated damages to holders of
old notes who are not able to make the representations or
provide the information described on page 19. See 'The
Exchange Offer -- Our Obligations Under the Registration
Rights Agreement' for more information on when we may have
to pay liquidated damages.
Conditions to the exchange offer.......... We can terminate or amend the exchange offer if at any time
prior to 5:00 p.m., New York City time, on the expiration
date, we determine that the exchange offer violates any
applicable law or governmental order. In addition, we will
not accept for exchange any old notes or issue any new notes
if any stop order is threatened or in effect on the
qualification of the indenture under the Trust Indenture Act
of 1939 or on the registration statement of which this
prospectus is a part. We are required to use reasonable
efforts to obtain the withdrawal of any stop order.
Procedures for tendering old
notes................................... If you wish to accept the exchange offer and tender your old
notes, you must:
deliver a signed letter of transmittal to the exchange
agent; and
surrender the old notes by:
sending in certificates of old notes to the exchange agent;
or
confirming a book-entry transfer to the exchange agent's
account at The Depository Trust Company.
Different procedures may apply for book-entry transfers. For
more information, see 'The Exchange Offer.'
Guaranteed delivery procedures............ If you wish to tender your old notes, but cannot properly do
so prior to the expiration date, eligible institutions such
as registered brokers, trust companies or banks may tender
old notes according to the guaranteed delivery procedures by
delivering to the exchange agent a letter of transmittal and
a guarantee of physical delivery or book-entry transfer of
the old notes within three New York Stock Exchange trading
days. See 'The Exchange Offer -- Guaranteed Delivery
Procedures.'
Withdrawal rights......................... You may withdraw your tender of old notes at any time prior
to 5:00 p.m., New York City time, on the expiration date.
For the withdrawal of a tender of old notes, the exchange
agent must receive a written or facsimile transmission
notice of withdrawal at its address set forth herein under
'The Exchange Offer -- Exchange Agent' prior to 5:00 p.m.
New York City time, on the expiration date.
Acceptance of old notes and
delivery of new notes................... We will accept for exchange any and all old notes that are
validly tendered in the exchange offer prior to 5:00 p.m.,
New York City time, on the expiration date. We will deliver
the new notes issued in the exchange offer as soon as
practicable following the expiration date. See 'The Exchange
Offer -- Acceptance of Old Notes for Exchange; Delivery of
New Notes.'
2
Material U.S. Federal income
tax considerations...................... We believe that the exchange of old notes for new notes will
not constitute a taxable exchange for U.S. federal income
tax purposes. See 'Material United States Federal Income Tax
Considerations.'
Exchange agent............................ U.S. Bank Trust National Association is serving as the
exchange agent.
Use of proceeds........................... We will not receive any proceeds from the exchange offer.
See 'Use of Proceeds' for a description of the use of
proceeds from the issuance of the old notes.
THE EXCHANGE NOTES
The terms of the new notes are identical in all material respects to the
terms of the old notes except that the new notes:
are registered under the Securities Act, and therefore will not contain
restrictions on transfer; and
will not contain provisions relating to additional interest.
Maturity.................................. August 1, 2009.
Interest Payment Dates.................... February 1 and August 1 of each year, commencing
February 1, 2000.
Sinking Fund.............................. None.
Optional Redemption....................... We may redeem the notes, in whole or in part, on or after
August 1, 2004, at the redemption prices described in
'Description of the Notes -- Optional Redemption,' plus
accrued and unpaid interest, if any, to the date of
redemption. In addition, any time prior to August 1, 2002,
we may redeem up to 35% of the notes at 111.0% of the
principal amount, plus accrued and unpaid interest, with the
net proceeds of our equity issuances; provided at least 65%
of the original aggregate principal amount of the notes
remains outstanding immediately after such redemption.
Change of Control......................... Upon a change of control, we will be required to make an
offer to repurchase each holder's notes at a price equal to
101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of repurchase. The
definition of 'change of control' appears under 'Description
of the Notes.'
Ranking................................... The notes are unsecured senior subordinated obligations and
rank:
subordinate to all of our senior indebtedness;
equally with all of our other unsecured senior subordinated
indebtedness;
senior to all of our subordinated indebtedness; and
effectively junior to all liabilities of our subsidiaries.
As of September 30, 1999, we had outstanding approximately
$755.4 million of indebtedness of which $555.4 million was
senior indebtedness (excluding undrawn commitments under our
Credit Facility) both structurally and contractually senior
to the notes. All
3
of the remaining $200 million of indebtedness consisted of
the old notes. 'See Description of the Notes -- Ranking' and
'Description of Credit Facility.'
Guarantees................................ The notes are guaranteed on an unsecured senior subordinated
basis by certain of our existing and future domestic
restricted subsidiaries. The notes are not guaranteed by our
foreign subsidiaries or our subsidiaries that are not
guarantors of our Credit Facility. At September 30, 1999
those of our subsidiaries that have not guaranteed the notes
had total indebtedness (excluding indebtedness owed to the
Company) of $231 million.
Restrictive Covenants..................... The terms of the notes include restrictions on our ability
to:
incur additional indebtedness;
make restricted payments;
enter into transactions with affiliates;
create liens;
cause dividends and other payments by subsidiaries; and
effect consolidations, mergers and the sale of assets.
These limitations are subject to a number of important
exceptions. See 'Description of the Notes -- Covenants.'
ABOUT OUR COMPANY
We are a manufacturer of telecommunications equipment, industrial
components and performance chemicals sold into numerous markets for a wide
variety of end uses. We operate through three business segments: manufacturing,
performance products and telecommunications equipment. Our manufacturing segment
serves the automotive, appliance and electronic, and industrial markets. Our
performance products segment serves customers in many industries, including the
pharmaceutical and personal care, environmental services, technology and
chemical processing markets. Our telecommunications equipment segment serves the
public network and premises (or non-public) network markets. In many of our
markets, we are an industry leader. Our products are frequently highly
engineered and are important components of, or provide critical attributes to,
our customers' end-products or operations. We operate over 80 manufacturing and
production facilities located in the U.S., Canada, Australia, China, Germany,
Great Britain, India, Indonesia, Ireland and Mexico. Our common stock is traded
on the New York Stock Exchange under the symbol 'GK.'
MANUFACTURING. The manufacturing segment accounted for 44% of our pro
forma sales for the nine months ended September 30, 1999. The manufacturing
segment provides a broad range of engineered components and services to three
principal markets:
Automotive: precision-engineered components for valve-train systems;
computer-aided and mechanical vehicle testing services; custom-designed
wire and cable assemblies for a variety of automotive electronic
applications; tooling and prototype design and engineering services;
and fluid-handling equipment for automotive service applications.
Appliance and Electronic: custom-designed power cord systems and wire
and cable assemblies for a broad range of appliances and electronic
products, such as refrigerators, freezers, dishwashers, washing
machines, ovens, ranges, vacuum cleaners, electronic office equipment,
medical equipment, ATM machines and gaming machines.
4
Industrial: power cord systems and cable and wire assemblies for power
tools, motors, pumps and other industrial products; and wire and cable
for industrial markets, the commercial and residential construction
industries and a wide variety of end market uses by original equipment
manufacturers ('OEMs').
Our customers in this segment include Bombardier, Bosch,
DaimlerChrysler, Delphi, Eaton, Ford, Frigidaire, General Electric, General
Motors, ITT, Johnson Controls, Lear, Whirlpool, and Xerox.
PERFORMANCE PRODUCTS. The performance products segment accounted for 28%
of our pro forma sales for the nine months ended September 30, 1999. The
performance products segment provides a broad range of value-added products and
services to four principal markets:
Pharmaceutical and Personal Care: aluminum-zirconium compounds used as
the active ingredients in antiperspirants; aluminum-magnesium compounds
used as the active ingredients in over-the-counter antacids; potassium
chloride used in electrolyte replacement and intravenous solutions; and
other food and pharmaceutical intermediates.
Environmental Services: water treatment products and services; sulfuric
acid regeneration and sulfur recovery services for pollution abatement
and production of cleaner burning gasoline blending components; and
Al+Clear'r', our specialty agrochemical for improvement of poultry
house sanitation and productivity and the reduction of pollution from
agricultural phosphorous runoff.
Technology: computer-to-plate ('CTP') technology and bimetal
lithographic printing plates for high quality printing applications and
ultra-high-purity electronic chemicals for semiconductor chip and disk
drive production.
Chemical Processing: a broad range of sulfur, sodium and fluorine-based
chemical intermediates used in the production of a wide variety of
products such as paper, gasoline, fertilizers, tires, paints, dyes and
carpeting.
Our customers in this segment include AlliedSignal, BASF,
Colgate-Palmolive, Chevron, Georgia Pacific, Hewlett-Packard, IBM, International
Paper, Micron Technologies, National Semiconductor, PPG Industries, Procter &
Gamble, Sunoco, Unilever, Westvaco, World Color Press and numerous cities and
municipalities.
TELECOMMUNICATIONS EQUIPMENT. Our telecommunications equipment segment
consists of Krone AG, a leading global supplier of telecommunications connector
technology, which we acquired on August 20, 1999. The telecommunications
equipment segment accounted for 28% of our pro forma sales for the nine months
ended September 30, 1999. The telecommunications equipment segment provides
connection and distribution technology to two principal markets:
Public networks: connection and distribution technology and solutions
for fixed telecommunication access networks and related customer
services for both public network providers and telecommunications
systems manufacturers and suppliers.
Premises networks: connection and distribution technology and
solutions for private voice and data networks within private
building complexes.
Our customers in this segment include Alcatel, Anixter, Bell Atlantic, British
Telekom, Deutsche Telekom, Isolectra, Siemens and Wadsworth Electronics.
5
RECENT TRANSACTIONS
RECENT ACQUISITIONS. We have completed five acquisitions this year.
In September 1999, we acquired the business of Pacific Pac
International, Inc. Pacific Pac is a provider of ultrahigh purity
solvents to the electronics industry.
In August 1999, we acquired Krone AG, a German company, for total
consideration of approximately $222 million (including approximately
$63 million of assumed debt). Krone is a leading global supplier of
connector technology for telecommunications and data networks. The
Krone acquisition expanded our offerings of products and services into
our new telecommunications equipment segment.
In July 1999, we acquired the Structural Kinematics business of EG&G,
Inc., a leading provider of testing and engineering services to the
automotive, truck and agricultural equipment industries.
In April 1999, we acquired Noma Industries Limited, a Canadian company,
for total consideration of approximately $240 million. Noma is a
leading North American producer of insulated wire and wire-related
products. The Noma acquisition expanded our product offerings to the
automotive industry and provided access to Noma's blue-chip customer
base in the growing appliance and electronic market.
In February 1999, we acquired Defiance, Inc. for total consideration of
approximately $70 million. Defiance is a manufacturer of specialty
antifriction bearings and a provider of vehicle testing services,
tooling design and preproduction dies and components primarily for the
automotive industry. The Defiance acquisition increased the range of
products and services provided by the manufacturing segment and allows
for a more complete product offering of valve-train-related engine
components to the automotive industry.
We identified the opportunity to acquire Krone through Prestolite Wire
Corporation, Krone's marketing partner. Prestolite, a leading North American
manufacturer of copper and fiber optic wire and cable products for
telecommunications, automotive and industrial markets with annual sales of
approximately $250 million, is controlled by Mr. Paul Montrone, our controlling
shareholder and the Chairman of our Board.
Based on our knowledge of Prestolite, we believe that a combination of
Prestolite's telecommunications businesses with Krone may create additional
value for our company. The integration of Krone's and Prestolite's
telecommunications and data businesses would allow us to provide customers
around the globe with total connectivity and wiring solutions that maximize
bandwidth and network speed. This combination would position us as a global
provider of integrated wire and connector solutions for data and
telecommunications markets. We intend to discuss and pursue with Prestolite a
possible transaction to combine certain of our businesses through the formation
of one or more joint ventures or partnerships, acquisitions or other similar
arrangements.
THE SPINOFF. Our manufacturing and performance products segments were
formerly part of the businesses of The General Chemical Group Inc., our former
parent company. General Chemical Group separated us from its soda ash and
calcium chloride business through a spinoff by distributing our common stock to
General Chemical Group's shareholders. The spinoff was completed on April 30,
1999. Since the spinoff, we have been a separate, stand-alone company. We
believe that the spinoff has enabled us to focus our attention and resources on
our core businesses and more effectively pursue our business strategy.
In connection with the spinoff, we entered into a $550 million credit
facility, which includes a $300 million revolving credit facility and $250
million aggregate term loan facilities. See 'Description of Credit Facility.' On
the spinoff date, we borrowed $500 million under the credit facility, of which
6
approximately $487 million was used to repay a portion of General Chemical
Group's third party indebtedness, including borrowings to finance our
acquisitions of Noma and Defiance earlier this year.
STATE AND DATE OF INCORPORATION AND ADDRESS
We were incorporated in Delaware on January 27, 1999. Our principal
executive offices are at Liberty Lane, Hampton, New Hampshire 03842. Our
telephone number is 603-929-2606.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. All statements
other than statements of historical facts included in this prospectus, including
certain statements under 'Summary,' 'Management's Discussion and Analysis of
Financial Condition and Results of Operations' and 'Business,' may constitute
forward-looking statements. We have based these forward-looking statements on
our current expectations and projections about future events. Although we
believe that our assumptions made in connection with the forward-looking
statements are reasonable, we cannot assure you that our assumptions and
expectations will prove to have been correct. Important factors that could cause
our actual results to differ from our expectations are disclosed in this
prospectus, including factors disclosed under 'Risk Factors.' These
forward-looking statements are subject to various risks, uncertainties and
assumptions about us, including, among other things:
our outstanding indebtedness and our leverage, and the restrictions
imposed by our indebtedness;
the cyclical nature of certain of our businesses, and domestic and
international economic conditions;
the high degree of competition in certain of our businesses, and the
potential for new competitors to enter into those businesses;
the integration of recent and future acquired businesses with our
existing operations in a timely and efficient manner;
the extent to which we undertake new acquisitions or enter into
strategic joint ventures or partnerships;
future modifications to existing laws and regulations affecting the
environment, health and safety;
discovery of unknown contingent liabilities, including environmental
contamination at our facilities;
Year 2000 concerns;
fluctuations in interest rates and in foreign currency exchange rates;
increases in the cost of raw materials and other inputs used to make
our products; and
certain potential adverse tax consequences of a change of control.
We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this prospectus might not occur.
7
SUMMARY HISTORICAL FINANCIAL DATA
The summary historical financial data set forth below for each of the
three years ended December 31, 1998 are derived from, and should be read in
conjunction with, our audited Consolidated Financial Statements and notes
included in this prospectus. The summary financial data for the nine months
ended September 30, 1999 and 1998 are derived from our unaudited Consolidated
Financial Statements and notes included in this prospectus and, in the opinion
of our management, include all adjustments considered necessary for a fair
presentation of our financial position and results of operations for the periods
covered thereby.
We were spun off from The General Chemical Group Inc., and our
manufacturing and performance products segments were separated from its
industrial chemicals business, on April 30, 1999. Because we did not operate as
a separate, stand-alone entity prior to the spinoff, we might have recorded
different results had we operated independently of the industrial chemicals
business of General Chemical Group. See 'Management's Discussion and Analysis of
the Financial Condition and Results of Operation.' For a description of the
basis of presentation of the historical financial data, see note 1 to the
Consolidated Financial Statements.
The spinoff has been treated as a reverse spinoff for financial
statement purposes because we hold the greater proportion of the assets and
operations that were held by General Chemical Group prior to the spinoff.
Therefore, the spinoff is reflected, for financial statement presentation, as if
we had formed a new company consisting of the industrial chemicals business and
distributed the stock of that company as a dividend to our stockholders, with
our assets, operations and businesses remaining with us after the spinoff.
Accordingly, our financial statements reflect the financial position and results
of operations of our businesses as continuing operations and the financial
position and results of operations of the industrial chemicals business as
discontinued operations.
8
SUMMARY FINANCIAL DATA
NINE MONTHS ENDED
SEPTEMBER 30,
YEAR ENDED DECEMBER 31, (UNAUDITED)
------------------------------ -------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT RATIOS)
STATEMENT OF OPERATIONS DATA:
Net revenues...................................... $330,120 $368,516 $443,919 $331,453 $609,324
Gross profit...................................... 100,883 116,604 117,293(1) 96,518 155,386
Operating profit.................................. 48,723(2) 67,526 51,721(3) 56,171 75,383(4)
Interest expense.................................. 10,747 8,855 14,624 10,626 25,378
Income from continuing operations before income
taxes and extraordinary item.................... 39,200 59,535 37,313 45,814 51,657
Income from continuing operations before
extraordinary item.............................. 20,775 33,274 41,069(5) 26,973 27,767
Income from discontinued operations............... 25,833 23,041 10,299 9,339 1,006
Net income.......................................... $ 46,608 $ 56,315 $ 47,707(6) 32,651(6) 23,834(7)
OTHER FINANCIAL DATA:
Capital expenditures.............................. $ 19,231 $ 26,203 $ 33,737 $ 22,185 $ 22,258
Depreciation and amortization..................... 14,099 16,296 23,065 $ 17,539 $ 31,156
Ratio of earnings to fixed charges(8)............. 4.2x 6.7x 3.3x 4.8x 2.9x
AS OF SEPTEMBER 30, 1999
------------------------
(UNAUDITED)
-----------
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 34,549
Total assets.............................................. 1,195,484
Long-term debt (including current portion)................ 755,440
Total equity.............................................. 12,485
- ------------
(1) Includes a one time charge of $12.1 million ($7.3 million after tax)
primarily due to an asset impairment writedown for two of our manufacturing
facilities.
(2) Includes a one-time charge of $6.8 million ($4.1 million after tax)
primarily related to awards made under a restricted unit plan, reflecting
the portion earned under prior equity programs.
(3) Includes incremental accruals of $9.8 million ($5.9 million after tax)
principally related to litigation and environmental spending.
(4) Includes a one-time charge of $6.2 million primarily related to the spinoff.
(5) Includes a nonrecurring gain of $19.5 million related to an income tax
settlement.
(6) Includes an extraordinary loss of $3.7 million, related to the early
retirement of certain indebtedness.
(7) Includes an extraordinary loss of $4.9 million, related to the early
retirement of certain indebtedness.
(8) For purposes of computing ratio of earnings to fixed charges, earnings
consist of income from continuing operations before income taxes and
extraordinary items plus fixed charges. Fixed charges consist of interest
expense, including the amortization of deferred financing costs and that
portion of rental expense management believes to be representative of
interest.
9
RISK FACTORS
In addition to the other information in this prospectus, you should
carefully consider the following factors in evaluating us and making an
investment decision.
IF YOU DO NOT PROPERLY TENDER YOUR OLD NOTES, YOU WILL CONTINUE TO HOLD
UNREGISTERED OLD NOTES; THE OLD NOTES ARE SUBJECT TO TRANSFER RESTRICTIONS, AND
YOUR ABILITY TO TRANSFER OLD NOTES WILL BE ADVERSELY AFFECTED.
As old notes are tendered and accepted in the exchange offer, the
trading market for the remaining untendered or tendered but not accepted old
notes will be adversely affected. We anticipate that most holders of the old
notes will elect to exchange the old notes for new notes due to the absence of
restrictions on the resale of new notes under the Securities Act. Therefore, we
anticipate that the liquidity of the market for any old notes remaining after
the consummation of the exchange offer may be substantially limited.
We will only issue new notes in exchange for old notes that you timely
and properly tender. Therefore, you should allow sufficient time to ensure
timely delivery of the old notes and you should carefully follow the
instructions on how to tender your old notes. Neither we nor the exchange agent
are required to tell you of any defects or irregularities with respect to your
tender of the old notes. If you do not tender your old notes for new notes in
the exchange offer, the old notes you hold will continue to be subject to the
existing transfer restrictions. In general, you may not offer or sell the old
notes unless registered under the Securities Act, or exempt from registration
under the Securities Act and applicable state securities laws. If you do not
tender your old notes or they are not accepted for exchange, you will have no
further rights under the registration rights agreement. See 'The Exchange
Offer -- Our Obligations under the Registration Rights Agreement.' We do not
anticipate that we will register old notes under the Securities Act.
OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION AND
PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE NOTES.
We will continue to have substantial indebtedness after the completion
of the exchange offer and we may be able to increase our indebtedness in the
future. Our level of indebtedness could have important consequences to holders
of the notes. For example, it could:
make it more difficult to satisfy our obligations with respect to these
notes because a substantial portion of our cash flow from operations
must be dedicated to the payment of interest on our indebtedness;
make us more vulnerable to economic downturns;
potentially limit our ability to withstand competitive pressures;
impair our ability to obtain additional financing in the future for
working capital, capital expenditures, acquisitions or general
corporate purposes; and
make us more susceptible to the above risks because borrowings under
the Credit Facility will bear interest at fluctuating rates.
If we are unable to generate sufficient cash flow from operations in the
future, we may be unable to repay or refinance all or a portion of our then
existing debt or to obtain additional financing. There can be no assurance that
any such refinancing would be possible or that any additional financing could be
obtained on terms that are acceptable to us.
The following are important statistics about us, presented after giving
effect to all the transactions we have completed this year (see 'Recent
Transactions' in the 'Summary' section).
at September 30, 1999, we had total long-term debt of $755.4 million,
representing 98.4% of our total capitalization;
10
for the nine-month period ended September 30, 1999, our pro forma ratio
of earnings to fixed charges would have been 1.9 to 1.0; and
we have the ability to borrow an additional $85.0 million under our
Credit Facility (excluding approximately $13 million for letters of
credit issued under the Credit Facility).
In addition, we could in the future enter into transactions, including
acquisitions or alliances or refinancings, recapitalizations or highly leveraged
transactions that would not be a change of control under the indenture requiring
us to offer to repurchase the notes, but that could increase the amount of
indebtedness outstanding at such time or otherwise affect our capital structure,
credit rating or the holders of the notes. The definition of 'change of control'
appears in the 'Description of Notes' section.
OUR INDENTURE FOR THE NOTES AND OUR CREDIT FACILITY IMPOSE SIGNIFICANT OPERATING
AND FINANCIAL RESTRICTIONS, WHICH MAY PREVENT US FROM CAPITALIZING ON BUSINESS
OPPORTUNITIES.
Our indenture for the notes and our credit facility impose significant
operating and financial restrictions on us. These restrictions affect, and in
certain cases limit, among other things, our ability to:
incur additional indebtedness and liens;
make capital expenditures;
make investments and acquisitions and sell assets; or
consolidate, merge or sell all or substantially all of our assets.
There can be no assurance that these restrictions will not adversely
affect our ability to finance our future operations or capital needs or to
engage in other business activities that may be in the interest of noteholders.
See 'Description of Notes' and 'Description of Credit Facility.'
In addition, future debt instruments, particularly at our foreign
subsidiaries and joint ventures, may restrict their ability to distribute or
otherwise make available to us funds which we might require in order to service
our obligations, including those under the notes.
THE NOTES ARE CONTRACTUALLY SUBORDINATED IN RIGHT OF PAYMENT TO OUR SENIOR DEBT.
The notes and the guarantees of the notes by our subsidiaries will be
subordinated in right of payment to all of our senior debt, including the
principal of and interest on our credit facility and the senior debt of those
subsidiaries that guarantee the notes. At September 30, 1999 we had a total of
$555.4 million of senior debt outstanding and the ability to borrow an
additional $85.0 million of senior debt under our credit facility. In the event
of our insolvency, liquidation, reorganization, dissolution or other winding-up
or upon a default in payment with respect to, or the acceleration of, any senior
debt, the holders of our senior debt must be paid in full before the holders of
the notes may be paid. If we incur any additional senior subordinated debt, the
holders of that debt would be entitled to share ratably with the holders of the
notes in any proceeds distributed in connection with any insolvency,
liquidation, reorganization, dissolution or other winding-up. This right may
have the effect of reducing the amount of proceeds paid to holders of the notes.
In addition, no payments may be made with respect to the principal of or
premium, if any, or interest on the notes if a payment default exists with
respect to our senior debt and, under certain circumstances, no payments may be
made with respect to the principal of, or interest on the notes for a certain
period if a non-payment default exists with respect to senior debt. In addition,
the Indenture permits us to incur additional debt, including senior debt, if
certain conditions are met. See 'Description of Notes -- Subordination.'
11
THE NOTES ARE EFFECTIVELY SUBORDINATED IN RIGHT OF PAYMENT TO OUR SECURED DEBT.
IF ANY SECURED LENDERS SHOULD ATTEMPT TO FORECLOSE ON THEIR COLLATERAL, THE
VALUE OF THE NOTES COULD BE MATERIALLY ADVERSELY AFFECTED.
The notes and the guarantees of the notes by certain of our subsidiaries
will not be secured by any of our assets or any of the assets of those
subsidiaries that guarantee the notes, and therefore will be effectively
subordinated to all of our existing and future secured debt and all of the
existing and future secured debt of those subsidiaries that guarantee the notes.
Our credit facility is secured by guarantees from those subsidiaries that
guarantee the notes, as well as guarantees by, and a pledge of the capital stock
of, certain of our other subsidiaries. In addition, our Indenture and our credit
agreement permit us to incur additional secured debt, if certain conditions are
met. In the event of a default on secured indebtedness (whether as a result of
the failure to comply with a payment or other covenant, a cross-default, or
otherwise), the lenders under our credit facility will have a prior secured
claim on such assets. If any secured lenders should attempt to foreclose on
their collateral, the value of the notes could be materially adversely affected.
THE NOTES ARE EFFECTIVELY SUBORDINATED TO THE INDEBTEDNESS OF OUR SUBSIDIARIES
THAT ARE NOT SUBSIDIARY GUARANTORS. AT SEPTEMBER 30, 1999, THE INDEBTEDNESS OF
OUR NON-GUARANTOR SUBSIDIARIES INCLUDED APPROXIMATELY $231 MILLION OF
OBLIGATIONS THAT COULD BE REQUIRED TO BE PAID BEFORE ANY OF THEIR ASSETS COULD
BE MADE AVAILABLE TO NOTEHOLDERS.
Some but not all of our subsidiaries guarantee the notes. In the event
of a bankruptcy, liquidation or reorganization of any of the subsidiaries that
do not guarantee the notes, holders of their indebtedness and their trade
creditors will generally be entitled to payment of their claims from the assets
of those subsidiaries before any assets are made available for distribution to
us or those subsidiaries that guarantee the notes. As of the date of this
prospectus, all of our wholly-owned domestic subsidiaries are guarantors of the
notes (except for subsidiaries that are held through foreign subsidiaries or
whose only assets are the capital stock of foreign subsidiaries).
THE INDUSTRIES IN WHICH WE OPERATE ARE HIGHLY COMPETITIVE. THIS COMPETITION MAY
PREVENT US FROM RAISING PRICES AT THE SAME PACE AS OUR COSTS INCREASE.
In each of our business segments, we operate in competitive markets. Our
manufacturing segment competes with numerous international and North American
companies, including various captive operations of OEMs and Tier 1 suppliers to
automotive manufacturers. Approximately 38% of pro forma 1998 sales were to the
automotive market. Competition in the manufacturing segment's markets is based
on a number of factors, including design and engineering capabilities, quality,
price and the ability to meet customer delivery requirements.
Most of the markets in which our performance products segment does
business are highly competitive. The major competitors of our performance
products segment are typically segregated by end market and include
international, regional and, in some cases, small independent producers.
Competition in the performance products segment's markets is based on a number
of factors, including price, freight economics, product quality and technical
support. Due to the level of competition faced by our performance products
segment, raising prices has been difficult over the past several years and will
likely continue to be so in the near future.
Our telecommunications equipment segment also operates in highly
competitive markets, with many of our competitors being large, international and
technologically sophisticated companies. Competition in our telecommunications
equipment segment is based on a number of factors, including technological
advancements, product line breadth, price, technical support and service, and
product quality. The ability to achieve and maintain successful performance
in this segment is also dependent on our ability to develop products which
meet the ever-changing requirements of data and voice communications technology.
12
WE WILL CONTINUE TO PURSUE NEW ACQUISITIONS AND JOINT VENTURES, AND ANY OF THESE
TRANSACTIONS COULD ADVERSELY AFFECT OUR OPERATING RESULTS OR RESULT IN INCREASED
COSTS OR OTHER PROBLEMS.
We intend to continue to pursue new acquisitions and joint ventures, a
pursuit which will consume substantial time and resources. Identifying
appropriate acquisition candidates and negotiating and consummating acquisitions
can be a lengthy and costly process. In addition, we have acquired five
businesses this year (including Noma, Defiance and Krone); as with all
acquisitions, we face challenges in implementing our operating strategy at these
businesses and improving their results to our targeted objectives. The
successful implementation of our operating strategy at these and future
acquisitions and joint ventures may require substantial attention from our
management team, which could divert management attention from our existing
businesses. The businesses we acquire, or the joint ventures we enter into, may
not generate the cash flow and earnings, or yield the other benefits, we
anticipate at the time of their acquisition or formation. Furthermore, we may
also encounter substantial unanticipated costs or other problems associated with
the acquired businesses. The risks inherent in our strategy could have an
adverse impact on our results of operation or financial condition.
WE HAVE LIMITED EXPERIENCE IN THE TELECOMMUNICATIONS INDUSTRY AND IN THE
GEOGRAPHIC MARKETS SERVICED BY KRONE, WHICH WE RECENTLY ACQUIRED. IF WE
ENCOUNTER UNEXPECTED COSTS OR OTHER PROBLEMS, THIS ACQUISITION COULD ADVERSELY
AFFECT OUR RESULTS OF OPERATIONS.
We consummated our acquisition of Krone on August 20, 1999. The
acquisition of Krone presents us with significant challenges. Among other
things, the acquisition of Krone reflects a major commitment to the
telecommunications industry and geographic markets outside North America where
we have had relatively little experience. Therefore, there can be no assurance
that difficulties in integrating the operations of Krone will not arise or that
the strategic and commercial benefits expected from the acquisition of Krone
will be realized. Also, while we conducted acquisition-related due diligence
prior to consummating the agreement to acquire Krone, we are continuing our
review of its operations and are assessing the costs to be incurred in
integrating its operations. We may encounter substantial unanticipated
liabilities at Krone and substantial unanticipated costs or problems in
integrating its operations. If we encounter such costs, liabilities or problems,
the acquisition of Krone could have an adverse effect on our results of
operations or financial condition.
OUR OPERATIONS ARE SUBJECT TO ENVIRONMENTAL LAWS AND REGULATIONS, WHOSE
REQUIREMENTS COULD ADVERSELY AFFECT OUR OPERATIONS AND PROFITABILITY.
Our various manufacturing operations, which have been conducted at a
number of facilities for many years, are subject to numerous laws and
regulations relating to the protection of human health and the environment in
the U.S., Canada, Australia, China, Germany, Great Britain, India, Indonesia,
Ireland and Mexico. Due to the nature of our operations, we are also involved
from time to time in administrative and judicial proceedings and inquiries
relating to environmental matters. Modifications or changes in enforcement of
existing laws and regulations, the adoption of new laws and regulations in the
future, particularly with respect to environmental and safety standards, or
unfavorable outcomes to any present or future proceedings or inquiries could
require expenditures which might be material to our results of operations or
financial condition.
Additionally, the Comprehensive Environmental Response Compensation and
Liability Act of 1980 and similar state statutes have been construed as imposing
joint and several liability, under certain circumstances, on present and former
owners and operators of contaminated sites and transporters and generators of
hazardous substances for remediation of contaminated properties regardless of
fault. Our facilities have been operated for many years by us or their prior
owners and operators, and adverse environmental conditions may exist of which we
are not aware. The discovery of additional or unknown environmental
contamination at any of our current or former facilities could have a material
adverse effect on our results of operations or financial condition. In addition,
we have received written notice from the United States Environmental Protection
Agency that we have been identified as a potentially responsible party under the
Comprehensive Environmental Response Compensation and Liability Act of 1980 at
three
13
third-party sites. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Environmental Matters' and
'Business -- Environmental Matters.'
OUR REVENUES ARE DEPENDENT ON THE CONTINUED OPERATION OF OUR MANUFACTURING
FACILITIES, AND BREAKDOWNS OR OTHER PROBLEMS IN THEIR OPERATION COULD ADVERSELY
AFFECT OUR RESULTS OF OPERATIONS. THE PRODUCTION OF CHEMICALS IS ASSOCIATED WITH
A VARIETY OF HAZARDS WHICH COULD CREATE SIGNIFICANT LIABILITIES OR CAUSE OUR
FACILITIES TO SUSPEND THEIR OPERATIONS.
Our revenues are dependent on the continued operation of our various
manufacturing facilities. In particular, the operation of chemical manufacturing
plants involves many risks, including the breakdown, failure or substandard
performance of equipment, natural disasters, the need to comply with directives
of government agencies and dependence on the ability of railroads and other
shippers to transport raw materials and finished products in a timely manner.
The occurrence of material operational problems, including but not limited to
these events, at one or more of our facilities could have a material adverse
effect on our results of operations or financial condition.
In particular, our operations are also subject to various hazards
incident to the production of chemicals, including the use, handling,
processing, storage and transportation of certain hazardous materials. These
hazards, which include the risk of explosions, fires and chemical spills or
releases, can cause personal injury and loss of life, severe damage to and
destruction of property and equipment, environmental damage, suspension of
operations and potentially subject us to lawsuits relating to personal injury
and property damages. Any such event or circumstance could have a material
adverse effect on our results of operations or financial condition.
WE RELY ON UNIONIZED EMPLOYEES AND WILL NEED TO RENEGOTIATE LABOR CONTRACTS IN
THE FUTURE. THESE NEGOTIATIONS COULD DISRUPT OUR BUSINESS OR HAVE AN ADVERSE
EFFECT ON OUR RESULTS OF OPERATIONS.
We have been involved in work stoppages, strikes or other labor
disruptions. Since 1986, we have been involved in numerous labor negotiations,
only three of which have resulted in work disruptions. We will be involved in
other labor negotiations from time to time. There can be no assurance that these
negotiation processes will not involve material disruptions to our businesses.
WE ARE CONTROLLED BY OUR PRINCIPAL STOCKHOLDER, WHOSE INTERESTS MAY NOT BE
ALIGNED WITH THE HOLDERS OF THE NOTES.
Paul M. Montrone, Chairman of our Board of Directors, beneficially owns
or controls 80.6% of the voting power of our outstanding shares. Therefore, Mr.
Montrone alone has sufficient voting power to elect our entire Board of
Directors and, in general, to determine the outcome of any corporate
transactions or other matters submitted to our stockholders for approval,
including mergers and sales of assets, and to prevent, or cause, a change of
control of our company.
WE MAY NOT BE ABLE TO FINANCE THE CHANGE OF CONTROL OFFER REQUIRED BY THE
INDENTURE.
Upon the occurrence of a change of control, we will be required to make
an offer to purchase the Notes at a price in cash equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest thereon, if any, to
the date of repurchase. Certain events involving a change of control may result
in an event of default under our credit facility and our other indebtedness that
may be incurred in the future. An event of default under our credit facility or
other future indebtedness could result in an acceleration of such indebtedness,
in which case the subordination provisions of the notes would require payment in
full (or provision for payment) of all senior debt before we can repurchase or
make other payments in respect of the notes. See 'Description of
Notes -- Repurchase at the Option of Holders -- Change of Control,' 'Description
of Notes -- Subordination' and 'Description of Credit Facility.' There can be no
assurance that we would have sufficient resources to repurchase the notes or pay
our obligations if the indebtedness under the credit facility or other future
senior debt were accelerated upon the
14
occurrence of a change of control. There can be no assurance that we will be
able to obtain the consent of the lenders under the credit facility to enable us
to repurchase the Notes.
The indenture defines a change of control to include, among other
things, a disposition of all or substantially all of our assets. There is no
definitive legal standard to determine what constitutes substantially all the
assets of an enterprise. As a result the holders of the notes may not be easily
able to establish that a change of control based on a sale of substantially all
of our assets has occurred.
IF THE INTERNAL REVENUE SERVICE DETERMINES THAT THE SPINOFF WILL RESULT IN A
GAIN UNDER THE INTERNAL REVENUE CODE, THE IMPACT OF SUCH ADVERSE TAX CONSEQUENCE
MAY HAVE A MATERIALLY ADVERSE AFFECT ON OUR BUSINESSES.
As a result of the possible adverse tax consequences described below, we
may be restricted in our ability to effect certain acquisitions, stock issuances
and other transactions that would result in a change of control of our company.
If the Internal Revenue Service were to determine that the spinoff was part of a
plan or a series of related transactions under which one or more persons
acquire, directly or indirectly, a 50% or greater interest, by vote or value, in
either General Chemical Group or our company, General Chemical Group and,
possibly, our company would recognize gain under section 355(e) of the Internal
Revenue Code of 1986. The amount of such gain would be substantial and could
result in significant liabilities to General Chemical Group and/or our company,
which could have a material adverse effect on our businesses. Under a tax
sharing agreement, we and General Chemical Group will each be responsible for,
and will indemnify one another for, 50% of any taxes resulting from the
application of section 355(e) of the Code, except that, if such taxes are
attributable to our act or an act of General Chemical Group (or any of our
respective subsidiaries), such party will be responsible for, and will indemnify
the other for 100% of such taxes.
IF WE, OR THIRD PARTIES WE RELY ON, FAIL TO BE YEAR 2000 COMPLIANT, OUR BUSINESS
COULD EXPERIENCE MATERIALLY ADVERSE INTERRUPTIONS, SLOWDOWNS OR INCREASED COSTS.
In the event that our information and non-information technology
hardware, software, facilities and equipment or other material systems are not
Year 2000 compliant, we may experience reductions or interruptions in operations
which could have a material adverse effect on our results of operations. A Year
2000 problem can occur where date-sensitive software uses two digit year date
fields, sorting the Year 2000 ('00') before the Year 1999 ('99'). The Year 2000
problem can arise in hardware, software, or other equipment or process that uses
embedded software or other technology. The failure of such systems to properly
recognize dates after December 31, 1999 could result in data corruption and
processing errors.
In addition, we can make no warranty or guarantee as to the future Year
2000 compliance status of material parties we rely on. The process of evaluating
compliance of material third parties is continually ongoing. Our evaluation of
such third parties to date has covered all of our critical vendors, suppliers
and service providers, including the railroad and trucking companies we use to
ship our goods. We have not completed a similar evaluation for Krone, which we
acquired recently. We are likely to experience interruptions, slowdowns or
increased costs in our business if our suppliers fail to be Year 2000 compliant.
We have developed contingency plans to address foreseeable Year 2000
scenarios we have identified with respect to our business. There can be no
assurance, however, that we will be able to successfully carry out our
contingency plans, that our contingency plans will adequately address the worst
case Year 2000 scenarios we have identified or that these contingency plans will
address every Year 2000 problem resulting from the failure of our suppliers to
be Year 2000 compliant. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Year 2000.'
15
FEDERAL AND STATE FRAUDULENT TRANSFER STATUTES ALLOW COURTS, UNDER SPECIFIC
CIRCUMSTANCES, TO VOID OR SUBORDINATE INDEBTEDNESS SUCH AS THE NOTES IN FAVOR OF
OTHER CREDITORS OF OUR BUSINESS.
Federal and state laws allow courts, under specific circumstances, to
void debts and require creditors to return payments received from debtors.
Under the federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, a court could void the guarantees of the notes by
certain of our subsidiaries, or could subordinate claims in respect of those
guarantees to all of our other debts or the debts of any of those subsidiaries
that guarantee the notes if, among other things, that court found that any of
those subsidiaries, at the time we issued the notes and it gave its guarantee:
(1) intended to hinder, delay or defraud current or future creditors; or
(2) received less than reasonably equivalent value or fair consideration for
incurring such indebtedness and such subsidiary:
(A) was insolvent or was rendered insolvent by its guarantee of the
notes;
(B) was engaged or about to engage in a business or transaction for which
its assets remaining constituted unreasonably small capital to carry
on its business; or
(C) intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they matured.
If a court found that these conditions were met, it could, in addition,
void any payment by that subsidiary under the notes or its guarantee and require
the recipients of those payments to return them to that subsidiary or to a fund
for the benefit of creditors of that subsidiary.
While the various state and federal laws that might be applied by the
courts do not use identical tests, in general a subsidiary would be considered
insolvent if:
the sum of its debts, including contingent liabilities, were greater
than the fair saleable value of all of its assets; or
the present fair saleable value of its assets were less than the amount
that it would need to pay its probable liability on existing debts,
including contingent liabilities, as they become absolute and mature.
There can be no assurance as to what standard a court would apply in
making such determinations or that a court would conclude that our subsidiaries
were solvent at the time of the offering.
To the extent these guarantees were voided as a fraudulent conveyance or
held unenforceable for any other reason, holders of notes would cease to have
any claim in respect of the these subsidiaries and would be creditors solely of
GenTek. In such event, the claims of holders of notes against these subsidiaries
would be subject to the prior payment of all liabilities and preferred stock
claims of these subsidiaries. There can be no assurance that, after providing
for all prior claims and preferred stock interests, if any, there would be
sufficient assets to satisfy the claims of holders of notes relating to any
voided portions of the guarantees of the notes by these subsidiaries.
THERE CURRENTLY IS NO PUBLIC TRADING MARKET FOR THE NEW NOTES. NO ASSURANCE CAN
BE GIVEN AS TO THE DEVELOPMENT OF LIQUIDITY OF ANY TRADING MARKET FOR THE NEW
NOTES OR THAT ANY MARKET FOR THE NEW NOTES WILL NOT BE SUBJECT TO DISRUPTIONS.
No assurance can be given as to the development or liquidity of any
trading market for the new notes. Likewise, no assurance can be given regarding
the ability of holders of new notes to sell their new notes or the prices at
which such holders may be able to sell their new notes. The new notes are a new
issue of securities for which there is currently no active trading market. If
the new notes are traded
16
after their initial issuance, they may trade at a discount from their initial
offering price, depending upon prevailing interest rates, the market for similar
securities, our financial condition and other factors beyond our control,
including general economic conditions. We do not intend to apply for a listing
or quotation of the new notes.
Historically, the market for noninvestment grade debt has been subject
to disruptions that have caused substantial volatility in the prices of such
securities. There can be no assurance that the market for the new notes will not
be subject to similar disruptions. Any such disruptions may have an adverse
effect on holders of the new notes.
17
THE EXCHANGE OFFER
The following contains a summary of the material provisions of the
registration rights agreement. It does not contain all of the information that
an investor may wish to consider before participating in the exchange offer.
Reference is made to the provisions of the registration rights agreement, which
has been filed as an exhibit to the registration statement.
OUR OBLIGATIONS UNDER THE REGISTRATION RIGHTS AGREEMENT
In connection with the issuance of the old notes, the initial purchasers
of the old notes and their respective assignees became entitled to the benefits
of the registration rights agreement.
Under the registration rights agreement, GenTek has agreed:
(1) to use its best efforts to cause to be filed with the Commission, on or
prior to 100 days after the date of the original offering, the registration
statement of which this prospectus is a part with respect to a registered
offer to exchange the old notes for the new notes; and
(2) to use its reasonable best efforts to cause the registration statement to
be declared effective under the Securities Act within 180 days after the
original offering of the old notes.
GenTek will keep the exchange offer open for at least 20 days from the
date notice of the exchange offer is mailed to holders of the old notes. The
exchange offer being made hereby, if consummated within 210 days after the
original offering, will satisfy those requirements under the registration rights
agreement.
GenTek will file with the Commission a shelf registration statement to
cover resales of old notes if:
(1) any holder of old notes who validly tenders the old notes in the exchange
offer does not receive new notes within 210 days after the original
offering;
(2) changes in applicable securities laws or interpretations do not permit any
holder to participate in the exchange offer, other than due to the holder's
inability to make the representations set forth in 'Representations Holders
Will Make When They Tender' below; or
(3) any holder of notes that participates in the exchange offer does not
receive freely transferable new notes.
To participate in the shelf registration, holders must satisfy conditions
relating to the provision of information in connection with the shelf
registration statement.
LIQUIDATED DAMAGES
GenTek will pay liquidated damages in an amount equal to $0.192 per week
per $1,000 principal amount of the old notes if:
(1) GenTek does not consummate the exchange offer within 210 days after the
original offering;
(2) if required, a shelf registration is not declared effective within 180 days
after the initial issuance of the old notes (or, in the case of a shelf
registration required to be filed in response to a change in law or the
applicable interpretations of the Commission staff, 45 days after any
publication of any change in law or intrepretations); or
(3) if required, the shelf registration ceases to be effective at any time that
GenTek is obligated to maintain its effectiveness without being succeeded
within 45 days by an additional effective registration statement.
18
GenTek's obligations to pay liquidated damages will cease when the
exchange offer is consummated or the shelf registration statement is declared
effective or again becomes effective, as the case may be.
The following holders will not be qualified to receive liquidated
damages:
(1) holders of notes who fail to comply with the obligation to make the
representations listed below in 'Representations Holders Will Make
When They Tender'; and
(2) holde[rs of notes who fail to provide information required to be
included in a shelf registration statement.
RESALES OF NEW NOTES ISSUED IN THE EXCHANGE OFFER
Based on interpretations by the staff of the Commission as set forth in
no-action letters issued to third parties (including Exxon Capital Holdings
Corporation (available May 13, 1988), Morgan Stanley & Co. Incorporated
(available June 5, 1991), K-III Communications Corporation (available May 14,
1993) and Shearman & Sterling (available July 2, 1993)), GenTek believes that
the new notes issued pursuant to the exchange offer may be offered for resale,
resold and otherwise transferred by any holder thereof (other than any such
holder that is a broker-dealer or an 'affiliate' of GenTek within the meaning of
Rule 405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that:
such new notes are acquired in the ordinary course of business;
at the time of the commencement of the exchange offer such holder has
no arrangement or understanding with any person to participate in a
distribution of such new notes; and
such holder is not engaged in, and does not intend to engage in, a
distribution of such new notes.
GenTek has not sought, and does not intend to seek, a no-action letter from the
Commission with respect to the effects of the exchange offer, and there can be
no assurance that the staff would make a similar determination with respect to
the new notes as it has in such no-action letters.
REPRESENTATIONS HOLDERS WILL MAKE WHEN THEY TENDER
By tendering old notes in exchange for new notes and executing the
letter of transmittal, each holder will represent to GenTek that:
any new notes to be received by it will be acquired in the ordinary
course of business;
it has no arrangements or understandings with any person to participate
in the distribution of the old notes or new notes within the meaning of
the Securities Act; and
it is not an 'affiliate,' as defined in Rule 405 under the Securities
Act, of GenTek.
Each broker-dealer that receives new notes for its own account in
exchange for old notes, where such old notes were acquired by such broker-dealer
as a result of market-making or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such new notes.
See 'Plan of Distribution.' Each holder, whether or not it is a broker-dealer,
shall also represent that it is not acting on behalf of any person that could
not truthfully make any of the foregoing representations contained in this
paragraph. Any holder of old notes who is unable to make the foregoing
representations and any broker-dealer who acquired the old notes directly from
GenTek may not rely on the applicable interpretations of the staff of the
Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act, including being named as selling security
holders, in order to resell the notes.
19
PERIOD OF EXCHANGE OFFER
The expiration date is [ ], 1999, unless GenTek, in its sole
discretion, extends the exchange offer.
To extend the expiration date, GenTek will notify the exchange agent of
any extension by oral or written notice and will notify the holders of the old
notes by means of a press release or other public announcement prior to 9:00
A.M., New York City time, on the next business day after the previously
scheduled expiration date. Such announcement may state that GenTek is extending
the exchange offer for a specified period of time.
GenTek may:
(1) delay acceptance of any old notes, extend the exchange offer or terminate
the exchange offer and not permit acceptance of old notes not previously
accepted if any of the conditions set forth herein under ' -- Conditions'
shall have occurred prior to the expiration date, by giving oral or written
notice of such delay, extension or termination to the exchange agent, or
(2) amend the terms of the exchange offer in any manner deemed by it to be
advantageous to the holders of the old notes. GenTek will provide notice of
any delay in acceptance, extension, termination or amendment of the
exchange offer to the exchange agent.
If GenTek materially amends the exchange offer, GenTek will promptly
disclose such amendment in a manner reasonably calculated to inform the holders
of the old notes of such amendment and in compliance with applicable securities
laws.
Without limiting the manner in which GenTek may choose to make public
announcement of any delay, extension, amendment or termination of the exchange
offer, GenTek shall have no obligations to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
to an appropriate news agency.
INTEREST ON THE NEW NOTES
If an old note is surrendered for exchange on or after a record date for
an interest payment date that will occur on or after the date of such exchange
and as to which interest will be paid, interest on the new note received in
exchange therefor will accrue from the date of such interest payment date.
Interest on the new notes is payable on February 1 and August 1 of each year,
commencing February 1, 2000. No additional interest will be paid on old notes
tendered and accepted for exchange.
PROCEDURES FOR TENDERING
To tender in the exchange offer, a holder must complete, sign and date
the applicable letter of transmittal, or a facsimile thereof, have the
signatures thereon guaranteed if required by the letter of transmittal, and mail
or otherwise deliver such letter of transmittal or such facsimile, together with
any other required documents, to the exchange agent prior to 5:00 p.m., New York
City time, on the expiration date. A holder may tender old notes only in
integral multiples of $1,000 in exchange for an equal principal amount of new
notes. In addition, either:
certificates of such old notes must be received by the exchange agent
along with the applicable letter of transmittal; or
a timely confirmation of a book-entry transfer of such old notes, if
such procedure is available, into the exchange agent's account at The
Depository Trust Company under the procedure for book-entry transfer
described below, must be received by the exchange agent prior to the
expiration date with the applicable letter of transmittal; or
the holder must comply with the guaranteed delivery procedures
described below.
20
The method of delivery of old notes, letter of transmittal and all other
required documents is at the election and risk of the holders. If such delivery
is by mail, it is recommended that registered mail, properly insured, with
return receipt requested, be used. In all cases, sufficient time should be
allowed to assure timely delivery. No old notes, letters of transmittal or other
required documents should be sent to GenTek. Delivery of all old notes, if
applicable, letters of transmittal and other documents must be made to the
exchange agent at its address set forth below. Holders may also request their
respective brokers, dealers, commercial banks, trust companies or nominees to
effect such tender for such holders.
The tender by a holder of old notes will constitute an agreement between
such holder and GenTek in accordance with the terms and subject to the
conditions set forth herein and in the letter of transmittal. Any beneficial
owner whose old notes are registered in the name of a broker, dealer, commercial
bank, trust company or other nominee and who wishes to tender should contact
such registered holder promptly and instruct such registered holder to tender on
his behalf.
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by any member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an 'eligible guarantor' institution within the meaning of
Rule 17Ad-15 under the Exchange Act unless the old notes tendered are tendered:
(1) by a registered holder of old notes who has not completed the box entitled
'Special Issuance Instructions' or 'Special Delivery Instructions' on the
applicable letter of transmittal; or
(2) for the account of an eligible guarantor institution.
If the letter of transmittal is signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such person should so indicate
when signing, and unless waived by GenTek, evidence satisfactory to GenTek of
their authority to so act must be submitted with the letter of transmittal.
All questions as to the validity, form, eligibility, time of receipt and
withdrawal of the tendered old notes will be determined by GenTek in its sole
discretion, which determination will be final and binding. GenTek reserves the
absolute right to reject any and all old notes not properly tendered or any old
notes which, if accepted, would, in the opinion of counsel for GenTek, be
unlawful. GenTek also reserves the absolute right to waive any irregularities or
conditions of tender as to particular old notes. GenTek's interpretation of the
terms and conditions of the exchange offer, including the instructions in the
letters of transmittal, will be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of old notes must be
cured within such time as GenTek shall determine. Neither GenTek, the exchange
agent nor any other person shall be under any duty to give notification of
defects or irregularities with respect to tenders of old notes, nor shall any of
them incur any liability for failure to give such notification. Tenders of old
notes will not be deemed to have been made until such irregularities have been
cured or waived. Any old notes received by the exchange agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned without cost to such holder by the exchange
agent, unless otherwise provided in the letter of transmittal, as soon as
practicable following the expiration date.
In addition, GenTek reserves the right in its sole discretion, subject
to the provisions of the indenture:
to purchase or make offers for any old notes that remain outstanding
subsequent to the expiration date or, as set forth under
' -- Conditions;'
to terminate the exchange offer;
to redeem old notes as a whole or in part at any time and from time to
time, as set forth under 'Description of the Notes -- Optional
Redemption;' and
21
to the extent permitted under applicable law, to purchase old notes in
the open market, in privately negotiated transactions or otherwise.
The terms of any such purchases or offers could differ from the terms of the
exchange offer.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the exchange
offer, all old notes validly tendered and not withdrawn prior to 5:00 pm, New
York City time, on the expiration date will be accepted promptly after the
expiration date, and the new notes will be issued promptly after acceptance of
the old notes. See ' -- Conditions.' For purposes of the exchange offer, old
notes shall be deemed to have been accepted as validly tendered for exchange
when, as and if GenTek has given oral or written notice thereof to the exchange
agent. For each old note accepted for exchange, the holder of such old note will
receive a new note having a principal amount equal to that of the surrendered
old note. In all cases, issuance of new notes for old notes that are accepted
for exchange in the exchange offer will be made only after timely receipt by the
exchange agent of the required documents.
If any tendered old notes are not accepted for any reason, such
unaccepted or such nonexchanged old notes will be returned without expense to
the tendering holder (if in certificated form) or credited to an account
maintained with The Depositary Trust Company as promptly as practicable after
nonacceptance or withdrawal of tender or the expiration or termination of the
exchange offer, as the case may be.
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account with
respect to the old notes at The Depositary Trust Company for purposes of the
exchange offer within two business days after the date of this prospectus. The
exchange agent and The Depositary Trust Company have confirmed that any
financial institution that is a participant in The Depositary Trust Company may
utilize The Depositary Trust Company Automated Tender Offer Program procedures
to tender old notes.
Any participant in The Depositary Trust Company may make book-entry
delivery of old notes by causing The Depositary Trust Company to transfer such
old notes into the exchange agent's account in accordance with The Depositary
Trust Company's Automated Tender Offer Program procedures for transfer. However,
the exchange for the old notes so tendered will only be made after a book-entry
confirmation of such book-entry transfer of old notes into the exchange agent's
account, and timely receipt by the exchange agent of an agent's message and any
other documents required by the letter of transmittal. The term 'agent's
message' means a message, transmitted by The Depositary Trust Company and
received by the exchange agent and forming part of a book-entry confirmation,
which states that The Depositary Trust Company has received an express
acknowledgment from a participant tendering old notes that are the subject of
such book-entry confirmation that such participant has received and agrees to be
bound by the terms of the letter of transmittal, and that GenTek may enforce
such agreement against such participant.
GUARANTEED DELIVERY PROCEDURES
If the procedures for book-entry transfer cannot be completed on a
timely basis, a tender may be effected if:
the tender is made through an eligible institution;
prior to the expiration date, the exchange agent receives by facsimile
transmission, mail or hand delivery from such eligible institution a
properly completed and duly executed letter of transmittal and notice
of guaranteed delivery, substantially in the form provided by GenTek,
which:
22
(1) sets forth the name and address of the holder of old notes and
the amount of old notes tendered;
(2) states that the tender is being made thereby; and
(3) guarantees that within three New York Stock Exchange trading days
after the date of execution of the notice of guaranteed delivery,
the certificates for all physically tendered old notes, in proper
form for transfer, or a book-entry confirmation, as the case may
be, and any other documents required by the letter of transmittal
will be deposited by the eligible institution with the exchange
agent; and
the certificates for all physically tendered old notes, in proper form
for transfer, or a book-entry confirmation, as the case may be, and all
other documents required by the letter of transmittal are received by
the exchange agent within three New York Stock Exchange trading days
after the date of execution of the notice of guaranteed delivery.
WITHDRAWAL OF TENDERS
Tenders of old notes may be withdrawn at any time prior to 5:00 p.m.,
New York City time, on the expiration date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the exchange agent prior to 5:00 p.m., New York City time on the
expiration date at one of the addresses set forth below under ' -- Exchange
Agent.' Any such notice of withdrawal must:
specify the name of the person having tendered the old notes to be
withdrawn;
identify the old notes to be withdrawn, including the principal amount
of such old notes;
in the case of old notes tendered by book-entry transfer, specify the
number of the account at The Depositary Trust Company from which the
old notes were tendered and specify the name and number of the account
at The Depositary Trust Company to be credited with the withdrawn old
notes and otherwise comply with the procedures of such facility;
contain a statement that such holder is withdrawing its election to
have such old notes exchanged;
be signed by the holder in the same manner as the original signature on
the letter of transmittal by which such old notes were tendered,
including any required signature guarantees, or be accompanied by
documents of transfer to have the trustee with respect to the old notes
register the transfer of such old notes in the name of the person
withdrawing the tender; and
specify the name in which such old notes are registered, if different
from the person who tendered such old notes.
All questions as to the validity, form, eligibility and time of receipt of such
notice will be determined by GenTek, whose determination shall be final and
binding on all parties. Any old notes so withdrawn will be deemed not to have
been validly tendered for exchange for purposes of the exchange offer. Properly
withdrawn old notes may be retendered by following one of the procedures
described under ' -- Procedures for Tendering' and ' -- Book-Entry Transfer'
above at any time on or prior to 5:00 p.m., New York City time, on the
expiration date.
CONDITIONS
The exchange offer is not conditioned upon any minimum principal amount
of old notes being tendered for exchange. Notwithstanding any other provision of
the exchange offer, GenTek shall not be required to accept for exchange, or to
issue new notes in exchange for, any old notes and may terminate
23
or amend the exchange offer if at any time prior to 5:00 p.m., New York City
time, on the expiration date, GenTek determines that the exchange offer violates
applicable law, any applicable interpretation of the staff of the Commission or
any order of any governmental agency or court of competent jurisdiction.
In addition, GenTek will not accept for exchange any old notes tendered,
and no new notes will be issued in exchange for any such old notes, if at such
time any stop order shall be threatened or in effect with respect to the
registration statement of which this prospectus constitutes a part or the
qualification of the indenture under the Trust Indenture Act of 1939. GenTek is
required to use every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of the registration statement at the earliest
possible moment.
EXCHANGE AGENT
U.S. Bank Trust National Association has been appointed as exchange
agent for the exchange offer. Questions and requests for assistance and requests
for additional copies of this prospectus or of the letters of transmittal should
be directed to the exchange agent addressed as follows:
BY MAIL, HAND DELIVERY OR FOR INFORMATION CALL:
OVERNIGHT COURIER: (800) 934-6802
U.S. Bank Trust National Association
180 East 5th Street
St. Paul, Minnesota 55101 FACSIMILE TRANSMISSION NUMBER
ATTENTION: Specialized Finance (612) 244-1537
FEES AND EXPENSES
The expenses of soliciting tenders in the exchange offer will be borne
by GenTek. The principal solicitation for tenders in the exchange offer is being
made by mail; however, additional solicitations may be made by telegraph,
telephone, telecopy or in person by officers and regular employees of GenTek.
GenTek will not make any payments to brokers, dealers or other persons
soliciting acceptances of the exchange offer. GenTek, however, will pay the
exchange agent reasonable and customary fees for its services and will reimburse
the exchange agent for its reasonable out-of-pocket expenses in connection with
the exchange offer. GenTek may also pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them
in forwarding copies of the prospectus and related documents to the beneficial
owners of the old notes, and in handling or forwarding tenders for exchange.
The expenses to be incurred by GenTek in connection with the exchange
offer will be paid by GenTek, including fees and expenses of the exchange agent
and trustee and accounting, legal, printing and related fees and expenses.
GenTek will pay all transfer taxes, if any, applicable to the exchange
of old notes in the exchange offer. If, however, new notes or old notes for
principal amounts not tendered or accepted for exchange are to be registered or
issued in the name of any person other than the registered holder of the old
notes tendered, or if tendered old notes are registered in the name of any
person other than the person signing the letter of transmittal, or if a transfer
tax is imposed for any reason other than the exchange of old notes in the
exchange offer, then the amount of any such transfer taxes imposed on the
registered holder or any other persons will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the letter of transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
24
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of old notes who do not exchange their old notes for new notes
in the exchange offer will continue to be subject to the restrictions on
transfer of such old notes as set forth in the legend on the old notes as a
consequence of the issuance of the old notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the old notes may not be
offered or sold, unless registered under the Securities Act, except in an
exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. GenTek does not currently anticipate that it
will register the old notes under the Securities Act. To the extent that old
notes are tendered and accepted in the exchange offer, the trading market for
untendered and tendered but unaccepted old notes will be adversely affected.
25
USE OF PROCEEDS
THERE WILL BE NO PROCEEDS TO US FROM THE ISSUANCE OF NEW NOTES IN THE EXCHANGE
OFFER.
The net proceeds from the original offering were approximately $193
million. We used these proceeds to repay a portion of our outstanding
indebtedness under our credit facility. We paid the cash portion of the purchase
price for our acquisition of Krone by reborrowing under the revolving portion
of our credit facility. As of September 30, 1999, we had $465 million in
borrowings outstanding under our credit facility and the ability to borrow an
additional $85 million under our credit facility (excluding approximately $13
million for letters of credit issued under the credit facility). At
September 30, 1999, our total outstanding indebtedness was $755.4 million
(including $200 million under the notes).
CAPITALIZATION
The following table sets forth our capitalization as of September 30,
1999. This table should be read in conjunction with the Consolidated Financial
Statements and the notes thereto included in this prospectus.
ACTUAL AT
SEPTEMBER 30, 1999
------------------
(IN THOUSANDS)
Cash and cash equivalents................................... $ 34,459
--------
--------
Long-term debt, including current portion:
Bank Borrowings:
Revolving credit facility......................... 215,000(1)
Term loans........................................ 249,625
Notes.................................................. 200,000
Other debt............................................. 90,815
--------
Total debt................................... 755,440
Stockholders' equity........................................ 12,485
--------
Total capitalization......................... $767,925
--------
--------
- ------------
(1) The Credit Facility provides for borrowings of up to $300 million under a
revolving credit facility (excluding approximately $13 million for letters
of credit issued under the Credit Facility). See 'Description of Credit
Facility.'
26
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited statements of operations have been derived from
our historical financial statements included in this prospectus. These
statements should be read in conjunction with 'Management's Discussion and
Analysis of Financial Condition and Results of Operations' and the Consolidated
Financial Statements included in this prospectus.
The pro forma statements of operations for the year ended December 31,
1998 and the nine months ended September 30, 1999 have been prepared on the
basis that the transactions we have completed this year (the acquisitions of
Defiance, Noma and Krone, the spinoff and the related financing transactions,
and the issuance of the notes) had occurred as of the first day of the period
presented. See also 'Summary -- Recent Transactions' and 'Use of Proceeds.'
The pro forma adjustments, as described in the notes to the statements
of operations, are based on currently available information and certain
adjustments that management believes are reasonable. This pro forma financial
information is presented for informational purposes only and does not
necessarily represent what our financial position or results of operations would
have been if these transactions had in fact occurred on such date, or as of the
beginning of such periods, and is not necessarily indicative of our financial
position or results of operations for any future date or period.
27
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
----------------------------------------------------------
GENTEK ACQUIRED PRO FORMA
HISTORICAL COMPANIES(A) ADJUSTMENTS(B) PRO FORMA
---------- ------------ -------------- -------------
(IN THOUSANDS)
Net revenues.............................................. $443,919 $691,716 $ -- $1,135,635
Cost of sales............................................. 326,626 494,491 9,287 (c) 830,404
Selling, general and administrative expense............... 65,572 135,496 2,000 (d) 203,068
Provision for restructuring............................... -- 12,144 -- 12,144
-------- -------- --------- ----------
Operating profit.......................................... 51,721 49,585 (11,287) 90,019
Interest expense.......................................... 14,624 8,274 42,246 (e) 65,144
Interest income........................................... 1,165 -- -- 1,165
Other (income) expense, net............................... 949 (53) -- 896
-------- -------- --------- ----------
Income from continuing operations before income taxes and
extraordinary item...................................... 37,313 41,364 (53,533) 25,144
Income tax provision...................................... (3,756) 18,756 (16,499) (1,499)
Minority interest in income............................... -- 90 -- 90
-------- -------- --------- ----------
Income from continuing operations before extraordinary
item.................................................... $ 41,069 $ 22,518 $ (37,034) $ 26,553
-------- -------- --------- ----------
-------- -------- --------- ----------
- ------------
(a) Includes the results of Noma, Defiance and Krone for 1998. Noma's statement
of operations data have been converted from C$ into US$ at the rate of
C$1.50 = US$1.00 representing the 1998 average monthly C$/US$ exchange
rate. Krone's statement of operations data have been converted from DM to
US$ at the rate of DM1.7591 = US$1.00 representing the 1998 average DM/US$
exchange rate for 1998.
(b) Adjustments for the acquisitions of Defiance, Noma and Krone, the spinoff
and related financing transactions, and the issuance of the notes.
(c) To record incremental goodwill amortization.
(d) To record estimated incremental general and administrative expenses
expected to be incurred as a result of GenTek operating as a stand-alone
entity.
(e) To record an increase in interest expense from the amounts included in the
historical financial statements to reflect the incurrence of additional
debt to finance the acquisitions and to reflect the amortization of
deferred financing costs associated with new borrowings.
28
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
----------------------------------------------------------
GENTEK ACQUIRED PRO FORMA
HISTORICAL COMPANIES(a) ADJUSTMENTS(b) PRO FORMA
---------- ------------ -------------- -------------
(IN THOUSANDS)
Net revenues.............................................. $609,324 $287,593 $-- $896,917
Cost of sales............................................. 453,938 188,122 3,781 (c) 645,841
Selling, general and administrative expense............... 80,003 76,125 650 (d) 156,778
-------- -------- -------- --------
Operating profit.......................................... 75,383 23,346 (4,431) 94,298
Interest expense.......................................... 25,378 5,548 17,932 (e) 48,858
Interest income........................................... 739 148 -- 887
Other (income) expense, net............................... (913) (37) -- (950)
-------- -------- -------- --------
Income from continuing operations before income taxes and
extraordinary item...................................... 51,657 17,983 (22,363) 47,277
Income tax provision...................................... 23,890 3,229 (6,599) 20,520
Minority interest in income............................... -- 366 -- 366
-------- -------- -------- --------
Income from continuing operations before extraordinary
item.................................................... $ 27,767 $ 14,388 $(15,764) $ 26,391
-------- -------- -------- --------
-------- -------- -------- --------
- ------------
(a) Includes the results of Noma, Defiance and Krone for the periods prior to
their acquisition. Noma's statement of operations data have been converted
from C$ into US$ at the rate of C$1.51 = US$1.00 representing the average
monthly C$/US$ exchange rate for the three month period ended March 31,
1999. Krone's statement of operations data have been converted from DM to
US$ at the rate of DM1.8154 = US$1.00, representing the average daily
DM/US$ exchange rate for the eight month period ended August 31, 1999.
(b) Adjustments for the acquisitions of Defiance, Noma and Krone, the spinoff
and related financing transactions, and the issuance of the notes.
(c) To record incremental goodwill amortization.
(d) To record estimated incremental general and administrative expenses
expected to be incurred as a result of GenTek operating as a stand-alone
entity.
(e) To record an increase in interest expense from the amounts included in the
historical financial statements to reflect the incurrence of additional
debt to finance the acquisitions and to reflect the amortization of
deferred financing costs associated with new borrowings.
29
SELECTED FINANCIAL DATA
The following selected financial data have been derived from and should
be read in conjunction with our Consolidated Financial Statements and notes for
our company included in this prospectus and 'Management's Discussion and
Analysis of Financial Condition and Results of Operations'.
The statement of operations data set forth below for the nine months
ended September 30, 1998 and 1999 and the balance sheet data as of
September 30, 1999 are derived from the unaudited Consolidated Financial
Statements and notes included in this prospectus and, in the opinion of our
management, include all adjustments (consisting of only normal recurring
adjustments) considered necessary for a fair presentation. The statement of
operations data set forth below for each of the years in the three-year period
ended December 31, 1998 and the balance sheet data at December 31, 1997 and 1998
are derived from the audited Consolidated Financial Statements and notes
included in this prospectus. The statement of operations data for the years
ended December 31, 1994 and 1995 and the balance sheet data at December 31,
1994, 1995 and 1996 are derived from financial statements of the Company not
included in this prospectus. The Consolidated Financial Statements as of
December 31, 1997 and 1998 and for the three years ended December 31, 1998 have
been audited by Deloitte & Touche LLP, independent auditors.
Because we did not operate as a separate, stand-alone entity through
April 30, 1999 (the date of the spinoff), we might have recorded different
results had we operated independently of the industrial chemicals business.
Therefore, the financial information presented below is not necessarily
indicative of the results of operations or financial position that would have
resulted if we had been a separate, stand-alone entity during the periods shown,
or of our future performance as a separate, stand-alone entity. For a
description of the basis of presentation of the historical financial data, see
note 1 to such Consolidated Financial Statements.
The spinoff has been treated as a reverse spinoff for financial
statement purposes because we hold the greater proportion of the assets and
operations that were held by General Chemical Group prior to the spinoff.
Therefore, the spinoff is reflected, for financial statement presentation, as if
we had formed a new company consisting of the industrial chemicals business and
distributed the stock of that company as a dividend to our stockholders, with
our assets, operations and businesses remaining with us after the spinoff.
Accordingly, our financial statements reflect the financial position and results
of operations of our businesses as continuing operations and the financial
position and results of operations of the industrial chemicals business as
discontinued operations.
30
SELECTED FINANCIAL DATA
NINE MONTHS ENDED
SEPTEMBER 30,
YEARS ENDED DECEMBER 31, (UNAUDITED)
---------------------------------------------------- ---------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- -------- ----------
(DOLLARS IN THOUSANDS, EXCEPT RATIOS)
STATEMENT OF OPERATIONS DATA:
Net revenues...................... $275,767 $290,185 $330,120 $368,516 $443,919 $331,453 $ 609,324
Gross profit...................... 89,116 84,822 100,883 116,604 117,293(1) 96,518 155,386
Operating profit.................. 34,997(2) 43,564 48,723(3) 67,526 51,721(4) 56,171 75,383(5)
Interest expense.................. 20,813 12,927 10,747 8,855 14,624 10,626 25,378
Income from continuing operations
before income taxes and
extraordinary item.............. 13,165 32,835 39,200 59,535 37,313 45,814 51,657
Income (loss) from continuing
operations before extraordinary
items........................... 7,155 (551)(6) 20,775 33,274 41,069(7) 26,973 27,767
Income from discontinued
operations...................... 21,150 21,644 25,833 23,041 10,299 9,339 1,006
Income before extraordinary
item............................ 28,305 21,093 46,608 56,315 51,368 36,312 28,773
Net income (8).................... $ 20,102 $ 21,093 $ 46,608 $ 56,315 $ 47,707 $ 32,651 $ 23,834
OTHER DATA:
Capital expenditures.............. $ 21,538 $ 24,842 $ 19,231 $ 26,203 $ 33,737 $ 22,185 $ 22,258
Depreciation and amortization..... 13,011 13,125 14,099 16,296 23,065 17,539 31,156
Ratio of earnings to fixed
charges (9)..................... 1.6x 3.3x 4.2x 6.7x 3.3x 4.8x 2.9x
AS OF
AS OF DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------- -------------
1994 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------- -------------
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and cash equivalents............ $ 28,143 $ 18,097 $ 50,091 $ 20,401 $ 61,310 $ 34,459
Total assets......................... 252,037 259,773 274,298 389,818 536,818 1,195,484
Long-term debt (including current
portion)........................... 304,750 291,495 234,609 258,004 357,531 755,440
Total equity (deficit)............... (216,831) (215,336) (119,753) (94,239) (54,696) 12,485
- ------------
(1) Includes a one-time charge of $12.1 million ($7.3 million after tax)
primarily due to an asset impairment writedown for two of our manufacturing
facilities.
(2) Includes a one-time charge of $9.0 million ($5.4 million after tax) due to
litigation related to an incident at one of our manufacturing facilities.
(3) Includes a one-time charge of $6.8 million ($4.1 million after tax)
primarily related to awards made under a restricted unit plan, which
replaced certain prior equity programs.
(4) Includes incremental accruals of $9.8 million ($5.9 million after tax)
principally related to litigation and environmental spending.
(5) Includes a one-time charge of $6.2 million primarily related to the spinoff.
(6) Includes a nonrecurring charge to income tax expense of $17.1 million.
(7) Includes a nonrecurring gain of $19.5 million related to an income tax
settlement.
(8) For 1994, 1998, the nine months ended September 30, 1998 and the nine months
ended September 30, 1999, includes extraordinary losses of $8.2 million,
$3.7 million, $3.7 million and $4.9 million, respectively, related to the
early retirement of certain indebtedness.
(9) For purposes of computing ratio of earnings to fixed charges, earnings
consist of income from continuing operations before income taxes and
extraordinary items plus fixed charges. Fixed charges consist of interest
expense, including the amortization of deferred financing costs and that
portion of rental expense management believes to be representative of
interest.
31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
We are a manufacturer of telecommunications equipment, industrial
components and performance chemicals sold into numerous markets for a wide
variety of end uses. We operate through three primary business segments,
manufacturing, performance products and telecommunications equipment. Our
manufacturing segment serves the automotive, appliance and electronic, and
industrial markets. Our performance products segment serves customers in many
industries including the pharmaceutical and personal care, environmental
services, technology and chemical processing markets. Our telecommunications
equipment segment serves public network and premises (or non-public) network
markets.
The percentage of our revenues generated by our three segments has
changed significantly this year. Our manufacturing segment has expanded
significantly this year, primarily due to the acquisitions of Noma in April 1999
and Defiance in February 1999. In addition, our telecommunications equipment
segment consists of Krone, which we acquired on August 20, 1999. Set forth below
are revenues for our three business segments on a consolidated basis:
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------ -------------------
1996 1997 1998 1998 1999
---- ---- ---- ---- ----
(IN MILLIONS)
REVENUES:
Performance Products.................................. $240.9 $260.3 $315.8 $238.3 $254.6
Manufacturing......................................... 89.2 108.2 128.1 93.2 315.1
Telecommunications Equipment.......................... -- -- -- -- 39.6
------ ------ ------ ------ ------
Total............................................ $330.1 $368.5 $443.9 $331.5 $609.3
------ ------ ------ ------ ------
------ ------ ------ ------ ------
RECENT ACQUISITIONS
We have grown through acquisitions, and we will continue to pursue
acquisition and investment opportunities that will create value and enhance cash
flow and earnings. Generally, the businesses we have acquired have had lower
margins than our existing operations. One of our goals for the acquired
businesses is to increase earnings by implementing cost reduction programs and
achieving operating efficiencies. However, until we can achieve these
improvements, our segment operating margins may be negatively impacted.
Since 1997, we have made the following strategic acquisitions:
In September 1999, we acquired the business of Pacific Pac
International, Inc., a provider of ultrahigh purity solvents to the
electronics industry.
In August 1999, we acquired Krone, a leading global supplier of
connector technology for telecommunications and data networks, from
Jenoptik AG for total consideration of approximately $222 million
(including $63 million of assumed debt). Krone had pro forma sales of
DM 580.6 million (approximately $330.0 million) in the year ended
December 31, 1998.
In July 1999, we acquired the Structural Kinematics business of EG&G,
Inc., a leading provider of testing and engineering services to the
automotive, truck and agricultural equipment industries.
In April 1999, we acquired Noma for total consideration of
approximately $240 million. Noma is a leading North American producer
of insulated wire and wire-related products for the
32
automotive, appliance and electronic and industrial markets. Noma had
sales of approximately $269 million for the year ended December 31,
1998.
In February 1999, we acquired Defiance for total consideration of
approximately $70 million. Defiance is a leading North American
manufacturer of specialty antifriction bearings for the transportation
industry and a provider of vehicle testing services, tooling design and
preproduction dies and components primarily for the automotive
industry. Defiance had sales of approximately $93 million for the
twelve months ended December 31,1998.
In April 1998, we acquired Reheis Inc., a worldwide leader in the
manufacture of the active chemical ingredients in antiperspirants and
over-the-counter antacids.
In February 1998, we acquired Sandco Automotive Ltd., a Canadian
manufacturer of stamped automobile engine components, principally
rocker arms and roller followers.
In July 1997, we acquired Peridot Holdings Inc., a leading manufacturer
and supplier of sulfuric acid and water treatment chemicals for the
pharmaceutical, water treatment, pulp and paper, electronics and
industrial markets.
We have financed our acquisitions to date through existing cash, bank
borrowings and the issuance of the notes.
33
RESULTS OF OPERATIONS
The following table sets forth our statement of operations data for the
three years ended December 31, 1998 and for the nine months ended September 30,
1998 and 1999, and the percentage of our net revenues for the relevant period
presented.
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------ ------------------------------
1996 1997 1998 1998 1999
------------ ------------ ------------ ------------ ---------------
(DOLLARS IN MILLIONS)
Net revenues...................... $330.1 100% $368.5 100% $443.9 100% $331.4 100% $609.3 100%
Cost of sales..................... 229.2 69 251.9 68 326.6(1) 74 234.9 71 453.9 75
------ --- ------ --- ------ --- ------ --- ------ ---
Gross profit...................... 100.9 31 116.6 32 117.3 26 96.5 29 155.4 25
Selling, general and
administrative expense.......... 52.2(2) 16 49.1 13 65.6(3) 14 40.3 12 80.0(4) 13
------ --- ------ --- ------ --- ------ --- ------ ---
Operating profit.................. 48.7 15 67.5 19 51.7 12 56.2 17 75.4 12
Interest expense.................. 10.7 3 8.9 2 14.6 3 10.6 3 25.4 4
Interest income................... 1.4 -- 1.5 -- 1.2 -- 0.7 -- 0.7 --
Other (income) expense, net....... 0.2 -- 0.7 -- 0.9 -- 0.5 -- (1.0) --
------ --- ------ --- ------ --- ------ --- ------ ---
Income from continuing operations
before income taxes and
extraordinary item.............. 39.2 12 59.5 16 37.3 9 45.8 14 51.7 8
Income tax provision.............. 18.4 6 26.2 7 (3.7)(5) -- 18.8 6 23.9 4
------ --- ------ --- ------ --- ------ --- ------ ---
Income from continuing operations
before extraordinary item....... 20.8 6 33.3 9 41.1 9 27.0 8 27.8 5
Income from discontinued
operations...................... 25.8 8 23.0 6 10.3 2 9.3 3 1.0 --
------ --- ------ --- ------ --- ------ --- ------ ---
Income before extraordinary
operations...................... 46.6 14 56.3 15 51.4 11 36.3 11 28.8 5
Extraordinary item-loss from
extinguishment of debt (net of
tax)............................ -- -- -- -- 3.7 -- 3.7 1 4.9 1
------ --- ------ --- ------ --- ------ --- ------ ---
Net income........................ $ 46.6 14% $ 56.3 15% $ 47.7 11% $ 32.6 10% 23.8 4%
------ --- ------ --- ------ --- ------ --- ------ ---
------ --- ------ --- ------ --- ------ --- ------ ---
- ------------
Note: Amounts may not total due to rounding.
(1) Includes a one-time charge of $12.1 million ($7.3 million after tax)
primarily due to an asset impairment writedown for two of our manufacturing
facilities.
(2) Includes a one-time charge of $6.8 million ($4.1 million after-tax) due
primarily to awards made under a restricted unit plan, which replaced
certain prior equity programs.
(3) Includes incremental accruals of $9.8 million ($5.9 million after tax)
principally related to litigation and environmental spending.
(4) Includes a one-time charge of $6.2 million, primarily related to the
spinoff.
(5) Includes a nonrecurring gain of $19.5 million related to an income tax
settlement.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1998
Net revenues for the three and nine month periods ended September 30,
1999 increased 134% and 84% to $263.8 million and $609.3 million, respectively,
from $112.6 million and $331.5 million, for the comparable periods in 1998.
These increases were primarily due to the acquisitions made in 1999.
Gross profit for the three and nine month periods ended September 30,
1999 increased $36.2 million and $58.9 million, respectively, over the
comparable periods in 1998. These increases were principally related to the
acquisitions made in 1999 in the manufacturing segment. Gross profit as a
percentage of net revenues for the first nine months of 1999 was 26% compared to
29% for the prior year. This decrease is principally due to lower margins in the
acquired businesses and pricing pressures in certain of our performance products
markets.
34
Selling, general and administrative expense increased $20.2 million and
$39.7 million for the three and nine month periods ended September 30, 1999 as
compared to the 1998 year levels, principally due to the acquisitions made in
1999 and a $6.2 million one-time charge recorded in the second quarter of 1999
primarily related to the spinoff. Selling, general and administrative expense as
a percentage of net revenues for the first nine months of 1999 was 13% as
compared to 12% for the comparable period in 1998, principally due to the
abovementioned one-time charge of $6.2 million.
Interest expense was $13.1 million and $25.4 million for the three and
nine month periods ended September 30, 1999 as compared with $4.1 million and
$10.6 million for the comparable periods of 1998 principally due to higher
outstanding debt balances following the 1998 and 1999 acquisitions.
1998 COMPARED WITH 1997
Net revenues were $443.9 million for 1998 compared with $368.5 million
for 1997. This increase was due to higher sales in both the manufacturing and
the performance products segments. The increase in sales of the manufacturing
segment reflects higher unit volumes. The increase in sales of the performance
products segment was due to the acquisitions of Reheis and Peridot.
Gross profit of $117.3 million was $0.7 million above the prior year's
level. This increase was principally due to increases in sales resulting from
acquired businesses in the performance products segment and higher volumes in
the manufacturing segment, partially offset by a one-time charge of $12.1
million recorded in 1998, principally related to an asset impairment writedown
for two of our manufacturing facilities. Excluding the effect of one-time
charges, gross profit as a percentage of sales was 29% for 1998 versus 32% for
1997, primarily due to the lower margins of the acquired businesses.
Selling, general and administrative expense as a percentage of net
revenues was 14% in 1998 versus 13% for 1997. This increase was principally due
to incremental accruals of $9.8 million in 1998 principally related to
litigation and environmental spending.
Interest expense increased by $5.7 million in 1998 from 1997 due to
higher outstanding debt balances as a result of acquisitions.
Income from the industrial chemicals business, recorded as discontinued
operations, was $10.3 million for 1998 versus $23.0 million for 1997. This
decrease was due to weaker pricing and lower export soda ash volumes to Asia.
Net income was $47.7 million for 1998 versus $56.3 million for 1997.
This decrease was due to the foregoing reasons and a $3.7 million extraordinary
item related to the early extinguishment of debt, substantially offset by a
nonrecurring gain of $19.5 million related to an income tax settlement.
1997 COMPARED WITH 1996
Net revenues were $368.5 million for 1997 compared with $330.1 million
for 1996, representing an increase of 12%. Approximately half of this increase
was due to higher sales of the performance products segment as the result of the
acquisition of Peridot on July 1, 1997. The other half of the increase was due
to higher Manufacturing segment sales as a result of increased volumes and
product mix improvements toward higher-value-added automotive engine components.
Gross profit of $116.6 million for 1997 was $15.7 million, or 16%,
higher than the prior year level, principally due to the above-mentioned higher
sales levels. Gross profit as a percentage of sales was 32%, essentially at the
prior year level.
Selling, general and administrative expense as a percentage of net
revenues decreased from 16% in 1996 to 13% in 1997. This decrease was
principally due to the recording of a one-time charge in 1996 of $6.8 million
related primarily to a new General Chemical Group restricted unit plan which
replaced certain prior equity programs.
35
The $1.8 million decrease in interest expense for 1997 compared with
1996 was primarily due to lower outstanding debt balances during the first six
months of 1997.
Income from the industrial chemicals business, recorded as discontinued
operations, was $23.0 million for 1997 versus $25.8 million for 1996. This
decrease was principally due to lower pricing for soda ash and calcium chloride.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $34.5 million at September 30, 1999
compared with $61.3 million at year-end 1998. During the first nine months of
1999, we generated cash flow from continuing operations of $47.0 million, had
net proceeds from debt of $846.8 million and cash flow from discontinued
operations of $122.7 million. Our cash flow was used to fund acquisitions of
$445.0 million to repay debt of $573.4 million and make capital expenditures of
$22.3 million.
We had working capital of $122.2 million at September 30, 1999 as
compared with $17.3 million at December 31, 1998. This increase in working
capital principally reflects the working capital of the newly acquired companies
partially offset by lower cash balances.
The increases in property, plant and equipment, goodwill and long-term
debt reflect the assets and debt related to the various acquisitions completed
during 1999.
In connection with the spinoff, we entered into a $550 million credit
facility with a syndicate of banks and other financial institutions, consisting
of a $300 million revolving credit facility and $250 million aggregate term loan
facilities. Our initial borrowing incurred at the time of the spinoff was $500
million (consisting of $250 million of term loans and $250 million of loans
under our revolving credit facility), of which we used approximately $487
million to repay a portion of General Chemical Group's third party indebtedness,
including borrowings to finance the acquisitions of Noma and Defiance. The
agreement for our credit facility contains restrictive covenants which impose
operating and financial restrictions on us, including the requirement that we
maintain maximum leverage and minimum interest coverage ratios. See 'Description
of Credit Facility.'
On August 9, 1999, we completed the original offering and received
proceeds of $193.0 million from the offering. We used these proceeds to repay a
portion of our outstanding indebtedness under our credit facility. We paid the
cash portion of the purchase price for our acquisition of Krone by reborrowing
under the revolving portion of our credit facility.
As of September 30, 1999, we had $465 million in borrowings
outstanding under our credit facility and the ability to borrow an additional
$85 million under our credit facility (excluding approximately $13 million for
letters of credit issued under the credit facility). At September 30, 1999, our
total outstanding indebtedness was $755.4 million (including $200 million under
the notes).
We paid the cash consideration for Krone, Noma, Defiance, Structural
Kinematics and Pacific Pac through cash on hand and borrowings under our and
General Chemical Group's credit facilities.
Management believes that our cash flows will be sufficient to cover our
future interest expense, capital expenditures and working capital requirements.
We will use proceeds of borrowings under the revolving portion of our credit
facility to finance future acquisitions and investments. In the event we
identify additional acquisition candidates, however, our current sources of
liquidity may not be adequate. Accordingly, we may issue equity securities or
incur additional debt, subject to market conditions. We may also use our stock
as acquisition currency.
YEAR 2000 ISSUE
A Year 2000 problem can occur where date-sensitive software uses two
digit year date fields, sorting the Year 2000 ('00') before Year 1999 ('99').
The Year 2000 problem can arise in hardware, software, or any other equipment or
process that uses embedded software or other technology. The
36
failure of such systems to properly recognize dates after December 31, 1999
could result in data corruption and processing errors.
We have implemented a program to assess, mitigate and remediate the
potential impact of the Year 2000 problem. We completed our assessment of our
Year 2000 compliance status in early 1997 and began work on our remediation
program immediately thereafter. Our remediation program has been structured to
address our information and non-information technology hardware, software,
facilities and equipment systems. We have spent approximately $1.8 million to
replace or reprogram existing systems for the Year 2000 compliance program. All
material systems were Year 2000 compliant by March 31, 1999 and substantially
all systems will be Year 2000 compliant by December 31, 1999. In the event that
our material systems are not Year 2000 compliant, we may experience reductions
or interruptions in operations which could have a material adverse effect on our
results of operations.
In addition, we have implemented a program to determine the Year 2000
compliance status of our material vendors, suppliers, service providers and
customers, including the railroad and trucking companies used to ship our
products or to transport raw materials to our manufacturing facilities. We have
not completed such an evaluation for Krone, which we acquired recently. Based on
currently available information, we do not anticipate any material impact to us
based on the failure of such third parties to be Year 2000 compliant. However,
the process of evaluating the Year 2000 compliance status of material third
parties is continually ongoing and, therefore, no guaranty or warranty can be
made as to such third parties' future compliance status or its potential effect
on us. We believe there exists a sufficient number of suppliers of raw materials
for us so that if any supplier is unable to deliver raw materials due to Year
2000 problems, alternate sources will be available and that any supply
interruption will not be material to us. There can be no assurances, however,
that we would be able to obtain all of our supply requirements from such
alternate sources in a timely manner or on terms comparable with those of our
current suppliers. If the railroad or trucking companies that ship our products
or raw materials fail to be Year 2000 compliant, we may not be able to arrange
alternative and timely means to ship our goods or raw materials, which could
lead to interruptions or slowdowns in our business. Possible worst case
scenarios include interruptions in the manufacturing process, the inability to
ship orders and invoice and collect amounts due to us. We are preparing for the
possible use of alternative suppliers and means of transportation, possible
adjustment of raw materials and product inventory levels and contingencies with
respect to potential energy source interruptions, all in an effort to minimize
the effects, if any, of Year 2000 related interruptions or slowdowns caused by
suppliers and transporters.
Before proceeding with the recent acquisitions of Structural Kinematics,
Krone and Pacific Pac and as part of our acquisition-related due diligence, we
reviewed Year 2000-related concerns for each and received assurances from their
respective managements that their businesses are, or prior to year-end 1999 will
be, materially Year 2000 compliant. As part of our pre-acquisition due
diligence, we reviewed various information, including assessments and reports
prepared by its outside consultants, the periodic internal reports prepared by
MIS personnel for senior management and other information relating to these
businesses and their respective Year 2000 procedures. We have completed our own
assessment for the systems of Structural Kinematics, Krone and Pacific Pac, and
we expect that their material systems will be Year 2000 compliant by
December 31, 1999. In the event that the material systems for Krone are not
Year 2000 compliant, we may may experience reductions or interruptions in our
operations which could have a material adverse effect on our results of
operations or financial condition.
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
Our cash flows and earnings are subject to fluctuations resulting from
changes in interest rates and changes in foreign currency exchange rates and we
selectively use financial instruments to manage these risks. Our objective in
managing our exposure to changes in foreign currency exchange rates and interest
rates is to reduce volatility on earnings and cash flow associated with such
changes. We have not entered, and do not intend to enter, into financial
instruments for speculation or trading purposes. Additional information
regarding our financial instruments is contained in Note 14 to the Consolidated
Financial Statements.
37
We measure the market risk related to our holding of financial
instruments based on changes in interest rates and foreign currency rates using
a sensitivity analysis. The sensitivity analysis measures the potential loss in
fair values, cash flows and earnings based on a hypothetical 10% change in
interest and currency exchange rates. We used current market rates on our debt
and derivative portfolio to perform the sensitivity analysis. Such analysis
indicates that a hypothetical 10% change in interest rates or foreign currency
exchange rates would not have a material impact on our fair values, cash flows
or earnings.
ENVIRONMENTAL MATTERS
Our various manufacturing operations, which have been conducted at a
number of facilities for many years, are subject to numerous laws and
regulations relating to the protection of human health and the environment in
the U.S., Canada, Australia, China, Germany, Great Britain, India, Indonesia,
Ireland and Mexico. We believe that we are in substantial compliance with such
laws and regulations. However, as a result of our operations, we are 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,
we believe that any such liability would not have a material adverse effect on
our financial position or results of operations. However, modifications or
changes in enforcement of existing laws and regulations or the adoption of new
laws and regulations in the future, particularly with respect to environmental
and safety standards could require expenditures which might be material to our
financial position or results of operations. See also 'Business -- Environmental
Matters.'
Our accruals for environmental liabilities are recorded based on current
interpretation of environmental laws and regulations when it is probable that a
liability has been incurred and the amount of such liability can be reasonably
estimated. At December 31, 1998 and September 30, 1999, accruals for
environmental matters were $25.0 million and $26.6 million, respectively. We
maintain a comprehensive insurance program, including customary comprehensive
general liability insurance for bodily injury and property damage caused by
various activities and occurrences and significant excess coverage to insure
against catastrophic occurrences. However, we do not maintain any insurance
other than as described above for potential liabilities related specifically to
remediation of existing environmental contamination or future environmental
contamination, if any.
We have an established program to ensure that our facilities comply with
environmental laws and regulations. Expenditures for 1998 approximated $11.7
million (of which approximately $1.0 million represented capital expenditures
and approximately $10.7 million related to ongoing operations and the management
and remediation of potential environmental contamination from prior operations).
Expenditures for 1997 approximated $7.1 million (of which approximately $1.6
million represented capital expenditures and approximately $5.5 million related
to ongoing operations and the management and remediation of potential
environmental contamination from prior operations) Management expects similar
expenditures in 1999 to be in the range of $9.0 million to $11.0 million,
including the facilities of Noma, Defiance and Krone. In addition, if
environmental laws and regulations affecting our operations become more
stringent, our costs for environmental compliance may increase above such range.
See 'Risk Factors -- We Are Subject to Environmental Laws and Regulations' and
'Business -- Environmental Matters.'
OTHER MATTERS
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 'Accounting for Derivative Instruments
and Hedging Activities' ('FAS 133'). FAS 133 requires that all derivative
instruments be measured at fair value and recognized in the balance sheet as
either assets or liabilities. We are required to adopt FAS 133 for our fiscal
year beginning after June 15, 2000. We do not expect that the adoption of FAS
133 will have a material effect on our results of operations or financial
condition.
38
BUSINESS
GENERAL
We are a manufacturer of telecommunications equipment, industrial
components and performance chemicals sold into numerous markets for a wide
variety of end uses. We operate through three primary business segments,
manufacturing, performance products and telecommunications equipment. Our
manufacturing segment serves the automotive, appliance and electronic, and
industrial markets. Our performance products segment serves customers in many
industries including the pharmaceutical and personal care, environmental
services, technology and chemical processing markets. Our telecommunications
equipment segment serves the public network and premises (or non-public) network
markets. Our products are frequently highly engineered and are important
components of, or provide critical attributes to, our customers' end products or
operations. We operate over 80 manufacturing and production facilities located
in the U.S., Canada, Australia, China, Germany, Great Britain, India, Indonesia,
Ireland and Mexico.
BUSINESS STRATEGY
Our goal is to build on our leading market positions by continuing to
improve our existing operations and to pursue value-enhancing acquisitions.
For our current operations, we intend to:
utilize our leadership positions to capitalize on the favorable growth
trends in selected end-markets;
improve our operating efficiency through productivity gains and other
cost reduction initiatives. For example, we believe that our recent
acquisitions of Noma, Defiance and Krone provide us with significant
cost saving opportunities;
grow our customer base by expanding into new geographic markets and
developing new products and end-markets, as well as new applications
for our existing products; and
leverage our strong customer relationships and recently expanded
product offerings through increased cross-selling to existing
customers.
In addition, we have grown through acquisitions and we will continue to
pursue acquisitions and investment opportunities that will create value and
enhance cash flow. We target acquisition and investment opportunities that
provide us:
Cost saving opportunities;
Enhanced positioning in existing markets;
Entry into new end-use and geographic markets; and
Turnaround opportunities for under-performing businesses.
COMPETITIVE STRENGTHS
WE HAVE SIGNIFICANT MARKET POSITIONS IN OUR BUSINESSES. We have leading
market shares in our primary markets. For example, we believe that we have
leading positions in North America in each of the following products and
services:
Stamped valve-train components for the automotive industry;
Wire and cable assemblies for manufacturers of major appliances;
Sulfuric acid regeneration services;
39
Aluminum-based chemicals used in water treatment services and pulp and
paper production;
Active ingredients for antiperspirants; and
Active ingredients for over-the-counter antacids.
Our Krone subsidiary is a leading worldwide supplier of connection and
distribution technology for voice and data networks.
WE PROVIDE SPECIALIZED PRODUCTS AND SERVICES REQUIRING OPERATIONAL AND
TECHNICAL INTEGRATION WITH OUR CUSTOMERS. Our products and services are
frequently highly engineered and important components of, or provide critical
attributes to, our customers' end-products or operations. We generally work
closely with our customers in the design, engineering and production of these
products and we often provide ongoing technical service and support. As a
result, we enjoy strong customer relationships which allow us to achieve
attractive operating margins and maintain or enhance our market shares.
WE ARE HIGHLY DIVERSIFIED. We have highly diversified sources of revenue
and cash flow. We provide a wide range of products for a broad customer base
serving numerous end-uses and end-markets. For example, in 1998, no single
customer accounted for more than 10% of our pro forma sales. We believe that
this diversification provides us with a broad base from which to expand customer
relationships and increase revenues.
WE HAVE AN EXPERIENCED MANAGEMENT TEAM. Our management team has
significant experience managing and operating a variety of industrial
businesses. With an average of over 20 years of industry experience, we have
significant experience in improving productivity, reducing costs, and enhancing
customer relationships in competitive markets. In addition, our management team
has been successful in identifying, completing and integrating acquisitions,
which have enhanced our revenues and cash flow and expanded our customer base
and product offerings.
PRODUCTS AND SERVICES
MANUFACTURING
Our manufacturing segment provides a broad range of engineered
components and services to three principal markets: automotive, appliance and
electronic, and industrial. Our products for these markets are described below:
Automotive. For the automotive market, we provide:
precision-engineered components for valve-train systems, including
stamped and machined rocker and roller-rocker arms, cam follower
rollers, cam follower roller axles, antifriction bearings and other
hardened/machined components;
electronic wire and cable assemblies, such as wire harnesses, ignition
cables, molded parts, electro-mechanical assemblies, engine block
heaters, battery blankets and various electrical switches, used in the
manufacture of automobiles and personal recreation vehicles such as
snowmobiles and jet-skis;
computer-aided and mechanical vehicle testing services for the
automotive industry;
pre-production dies and tooling, and prototype design and production
which are used by our customers for prototype and short production runs
of automotive components or systems;
fluid transport and handling equipment for automotive service
applications.
Our precision-engineered stamped and machined engine components for
valve-train systems improve engine efficiency by reducing engine friction and
component mass. These components are used both in traditional overhead valve and
in the increasingly popular single and double overhead cam (OHC)
40
engines which power cars, light trucks and sport utility vehicles (such as Ford
Expedition and F-150, Lincoln Navigator and DaimlerChrysler Minivan). The
increased use of these OHC engines has resulted in significant volume growth
through market share gains, as vehicle manufacturers are able to obtain better
fuel economy and higher horsepower using OHC engines. We believe that this OHC
trend will continue. Additionally, we have participated in the automakers'
conversion of traditional overhead valve engines to reduced-friction valve-train
components (using bearings) to obtain some of the efficiency of OHC engines. Our
products compare favorably with other technologies by providing comparable
performance characteristics at a lower delivered cost. This reduced cost is a
function of lower raw material cost as well as lower machining cost. In
addition, these products have received increased acceptance as automakers strive
to reduce vehicle weight and improve performance at a reasonable cost.
Our wire and cable assembly products include a variety of automotive
electronic components for use in OEM production and the aftermarket. As a
leading Tier-2 supplier of products such as wire harnesses, ignition cables,
engine block heaters, battery blankets and various electrical and electro-
mechanical switches and assemblies, we provide our customers with a range of
technical services, including product design using Computer-Aided Design (CAD)
systems. As OEMs and Tier-1 suppliers strive to reduce costs and outsource
engineering, design, prototyping and testing services, our strong technical
capabilities position us as a strategic supplier to the automotive industry. In
addition, our vertical integration in wire and cable manufacture gives us a
competitive advantage over those of our competitors who purchase all of their
wire and cable requirements.
Through our computer-aided and mechanical vehicle testing offerings, we
provide computer-aided design, engineering and simulation services for
automotive structural and mechanical systems to OEMs and Tier 1 suppliers. We
provide a wide range of testing services for automotive components and systems
from single sub-systems, such as chassis, suspensions, seats and seating
assemblies, to entire vehicles. Our engineering and simulation services provide
customers with finite element modeling, kinematics, crash and variation
simulation analyses, experimental dynamics and vehicle development programs, and
allow our customers to test their automotive products for durability, stress,
noise, vibration and environmental considerations.
Our primary customers in the automotive industry include
DaimlerChrysler, Ford, General Motors, Honda, Nissan, Toyota, Volkswagen and
Volvo. Other customers include OEMs and Tier-1 suppliers such as Bombardier,
Bosch, Delphi, ITT, John Deere, Johnson Controls and Lear. Our fluid transport
and handling equipment is used in the automotive service industry by customers
such as Sunoco-Kendall and Jiffy Lube and in automotive service bays in tire
stores and auto dealerships.
Automotive manufacturers generally award business to their suppliers by
individual engine line or model, often for multiple-model years. The loss of any
individual engine line or model contract would not be material to us. However,
an economic downturn in the automotive industry as a whole or other events
(e.g., labor disruptions) resulting in significantly reduced operations of any
of Daimler-Chrysler, Ford or General Motors could have a material adverse impact
on the results of our manufacturing segment. None of these customers accounted
for 10% or more of our revenues in 1998.
Appliance and Electronic. We produce custom-designed power cord systems
and wire and cable assemblies for a broad range of appliances and electronic
products including:
household appliances, such as refrigerators, freezers, dishwashers,
washing machines, ovens, ranges, and vacuum cleaners;
electronic office equipment, including copiers and printers; and
various electronic products, such as medical equipment, ATM machines
and gaming machines.
Our specialized wiring expertise and high quality wire and cable
assemblies are generally provided to larger OEM customers. A highly competitive
environment has required our customers to improve their productivity by
outsourcing to lower cost producers. Our manufacturing facilities are
41
strategically located in both Canada and Mexico, permitting us to share with
customers efficiencies gained through our operating scale and lower costs.
A team of experienced engineers, skilled technicians and manufacturing
personnel works closely with our customers, from design and development through
to testing and verification. Our CAD system enables us to supply custom
requirements with faster development times and increased design flexibility.
Our customers in the appliance and electronic markets include Celestica,
Fantom, Friedrich, Frigidaire, NCR, Whirlpool and Xerox.
Industrial. For the industrial market, we manufacture:
custom-designed wire harness and power cord systems for power tools,
motors, pumps and other industrial products; and
wire and cable for industrial markets, the commercial and residential
construction industries and for a wide variety of end market uses by
OEMs.
We produce a broad product line of single- and multi-conductor wire and
cable, wire harnesses and power cord systems. Our wire jacketing expertise
includes the use of polyvinyl chloride (PVC), rubber, thermoplastic elastomer
(TPE) and cross-link compounds. Working closely on design and engineering issues
with our customers, our highly flexible manufacturing environment permits a
close match of productive capacity to any order volume, as well as custom color
matching and construction of specialized formulations. Our Canadian wire and
cable facility located at Stouffville, Ontario, features one of only three
continuous cast oxygen-free copper rod lines in North America. Copper rod
production is coupled with multi-wire drawing technology to produce high quality
copper strand as part of the wire and cable manufacturing process.
Our customers in the industrial market include Alcoa, Bridgeport,
Cincinnati Milicron, Lyall, Makino, Mori Seiki and Woods.
PERFORMANCE PRODUCTS
Our performance products segment provides a broad range of value-added
products and services to four principal markets: pharmaceutical and personal
care, environmental services, technology and chemical processing. Our products
and services for these markets are described below.
Pharmaceutical and Personal Care. We are a leading supplier of the
active chemical ingredients used in the manufacture of over-the-counter ('OTC')
antiperspirants and antacids, and also supply active ingredients used in
prescription pharmaceuticals, nutritional supplements, nutraceuticals,
veterinary health products and personal care products. Our product line
includes:
aluminum and zirconium compounds for use in antiperspirants;
aluminum hydroxide and magnesium hydroxide blends used in OTC antacids
for acid-neutralization;
high-purity aluminum hydroxide for use as veterinary and human vaccine
adjuvants;
potassium chloride used in electrolyte replacement medications and
intravenous solutions;
pharmaceutical-grade aluminum chloride;
sodium nitrite used as a reactant in the production of artificial
sweeteners; and
pharmaceutical-grade sulfuric acid used in the production of vitamin C
tablets.
We maintain leadership positions in many of our pharmaceutical and
personal care products. In antiperspirant actives, for example, we have
introduced more than 25 new products or product categories
42
over the last six years. Recent new product introductions have included
nonresidue-forming antiperspirant actives designed for the growing clear
stick/gel antiperspirant market and a line of antiperspirant active ingredients
designed to appeal to European consumer preferences. Based on the capabilities
of our research and development team and the numerous U.S. and foreign patents
awarded to us, we believe that we are the technical leader in the antiperspirant
actives industry.
Some of our major customers in the pharmaceutical and personal care
market include Bristol-Myers Squibb, Carter-Wallace, Church & Dwight,
Colgate-Palmolive, Hoechst Marion Roussel, Hoffmann-LaRoche, Pfizer, Schering
Plough and Unilever.
Environmental Services. Our water treatment products and services are
designed to address the important environmental issues confronting our
customers. These value-added products and services provide cleaner drinking
water, restore algae-infested lakes, reduce damaging phosphorus runoff from
agricultural operations, and significantly reduce pollution from industrial
waste water. With a network of 34 plants strategically located throughout the
United States and Canada, we are the largest North American producer of aluminum
sulfate, or 'alum,' which is used as a coagulant in potable water and waste
water treatment applications, and a leading supplier of flocculents (a
polymer-based material used for settling and/or separating solids from liquids).
We are also a leading provider of 'closed loop' sulfuric acid regeneration
services, which significantly reduce the waste streams generated by certain
refineries and chemical plants.
Our water treatment products consist primarily of:
aluminum sulfate ('alum'),
polymer-based enhanced coagulants and flocculents, and
sodium and ammonia salts and sulfites.
With the assistance of the company's Technical Center in Syracuse, New
York, we have introduced Al+Clear'r', an agrochemical product for the poultry
market. When applied to the litter in poultry houses, Al+Clear'r' not only
improves sanitation and productivity, but also benefits the environment by
aiding in the control of phosphorous runoff. Phosphorous runoff from
agricultural activities has been linked to contamination in lakes, rivers,
streams and other water bodies.
Our major customers for water treatment products include various water
treatment service providers and distributors such as Hercules/Betz and various
cities and municipalities (including the cities of Detroit, Denver and San
Francisco, and the Province of Ontario).
In the environmental market, we also provide sulfuric acid regeneration
services to the refining and chemical industries, and market pollution abatement
and sulfur recovery services to selected refinery customers. Refineries use
sulfuric acid as a catalyst in the production of alkylate, a gasoline blending
component with favorable performance and environmental properties. The
alkylation process contaminates and dilutes the sulfuric acid, thereby creating
the need to dispose of or regenerate the contaminated acid. We transport the
contaminated acid back to the company's facilities for recycling and redeliver
the fresh, recycled acid back to customers. This 'closed loop' process offers
customers significant savings versus alternative disposal methods and also
benefits the environment by significantly reducing refineries' waste streams.
Similar regeneration services are provided to manufacturers of ion exchange
resins and silicone polymers. We are expanding our pollution abatement services
of treating and removing other waste streams generated by refineries, including
hydrogen sulfide and sulfur dioxide. Some of our major customers for our
sulfuric acid regeneration services include Chevron, Coastal, DuPont, Equilon
(formerly a Shell company), General Electric, Hess, Rohm & Haas, Sunoco, Tesoro
(formerly a Texaco company) and Tosco.
Technology. In the technology market, we provide CTP technology and
bi-metal lithographic printing plates for high-quality commercial printing
applications, as well as ultra-high-purity electronic chemicals for the
semiconductor and disk drive industries.
43
We have recently introduced our Prisma'TM' CTP technology which allows
printers to transfer computer images directly to digitally imageable printing
plates, thereby eliminating intermediate film processing and reducing labor and
material costs. Our proprietary bi-metal plating system provides sharper color
reproduction, greater durability and superior on-press economics relative to the
polymer plates offered by other industry participants. Our major customers for
our products used in printing applications include Treasure Chest, Quebecor
World and Crown Cork & Seal.
Our electronic chemicals include ultra-high-purity acids, caustics and
etchants for use in the manufacture of semiconductor processing chips and
computer disk drives. Within the past two years, we have completed construction
of a new plant that produces ultra-high-purity sulfuric acid with impurities
measured in the parts-per-trillion range. In addition, we are the exclusive
U.S. licensee for the manufacture and sale of Spinetch'TM' etchants, a
proprietary product line developed by Merck KGaA of Germany. Sales of the
Spinetch'TM' etchants are not material for us at this time. Customers for our
electronic chemicals include Hewlett Packard, IBM, Micron Technologies,
National Semiconductor and SEH America.
Chemical Processing. We manufacture a broad range of products that serve
as chemical intermediates in the production of such everyday products as
newspapers, tires, paints, dyes and carpets. We are a leading producer of:
alum and polymer-based enhanced coagulants used in paper manufacturing
to impart water resistance,
sodium and ammonia sulfites used to produce fixing and developing
solutions for conventional film and x-ray processing,
sodium nitrite, of which we are one of only two North American
producers, primarily used as a reactant in the manufacture of dyes,
pigments and rubber processing chemicals,
potassium fluoride and fluoborate derivatives sold into the metal
treatment, agrochemical, surfactant and analytical reagent markets, and
sulfuric acid, which is used in the manufacture of titanium pigments,
fertilizers, synthetic fibers, steel, petroleum and paper, as well as
many other products.
Major customers of our products in this market include 3M, AlliedSignal, Dow
Chemical, DSM, Eastman Chemical, Georgia Pacific, International Paper, Konishi
International, PPG Industries, Olin, Westvaco and W.R. Grace.
TELECOMMUNICATIONS EQUIPMENT
Our telecommunications equipment segment was created through our
acquisition of Krone AG, a leading global supplier of connector technology for
telecommunications and data networks, from Jenoptik AG, a major German
technology group. Our telecommunications equipment segment is principally
operated through Krone and its subsidiaries, as wholly-owned subsidiaries of our
company.
Our telecommunications equipment segment provides connection and
distribution technology to two principal markets:
Public telecommunications networks; and
Premises (non-public) voice and data networks.
Krone has positioned itself as a global supplier, with more than 80% of
its 1998 sales generated outside Germany. Approximately 55% of Krone's sales are
in Europe, 18% in North and South America, and 27% in Asia and Australia. Krone
has subsidiaries in 25 countries, some of which operate as integrated production
and sales companies and others as sales companies only.
The product range of our telecommunications equipment segment includes
all connection and distribution systems, both for telecommunications access
networks and premises data networks using
44
either copper or fiber optics, together with comprehensive design, maintenance
and testing services. The systems solutions offered are based on Krone's
LSA-Plus'TM' rapid connection system which permits wire/cable connection without
solder, screws, and wire stripping of wire/cable lines in all types of
communications networks. The LSA-Plus'TM' system allows easy and rapid
'stapling' of wires into connector plugs, without the need for soldering or
time-consuming screwing or twisting required by many competitors' products. In
addition, this stapling action automatically punctures the wire insulation,
thereby avoiding any need for manual removal of the wire insulation.
LSA-Plus'TM' systems are offered in various product lines and modules
that meet differing customer requirements. For example, Krone offers special
series for interior and exterior installations, special surge protector
components for optimal protection in communication networks, products for flush
mount assembly in small rooms and special modules for heavier gauge conductor
wire.
Krone also provides services related to its technology, including the
design, planning and construction of fixed networks, and the installation and
maintenance of communication systems.
Public Networks. In public networks, our telecommunications equipment
segment manufactures connectors and distributors for fixed telecommunication
access networks, and provides related services to customers. The connectors
are mainly used in the access portion of telecommunication networks to connect
copper or fiber optic wires at the main distribution frame, at the local
exchange, at other cable connector points and, finally, at the premises of
the subscriber. Key customers in this market include public network providers
such as Deutsche Telekom, British Telecom, Bell Atlantic, and telecommunications
systems manufacturers and suppliers such as Siemens and Alcatel.
The state of the public network market varies by region. In highly
developed markets such as Europe and the U.S. where growth in new installations
is relatively flat, revenue is derived primarily from network renovation and
rationalization. In markets such as Eastern Europe, Asia, and Latin America
where telecommunications infrastructure is less developed, there is significant
growth in the installation and expansion of access networks.
Premises Networks. Our main products in premises networks are connection
and distribution components for voice, data and video communication
infrastructure within private and industrial building complexes that use both
copper and fiber optic cabling. The product range of our premises networks
business includes components needed for the connection of wires/cables in the
following areas:
Internal telephone systems: telephone cabling in building complexes,
and the increasing replacement of telephone cabling through structured
cabling; and
Structured cabling: complete solutions for wiring phones, workstations,
PCs and other communication devices throughout a building. Krone
provides connectors for structured cabling for data, voice and video
transmission networks for system solutions and higher capacity rates.
Key customers for our premises network market include distributors and
cable systems integrators who offer complete communications network solutions,
including Anixter, Greybar, Kent and Wadsworth Electronics.
The premises network market is in a state of change, with increasing
demand for private telecommunications networks. Growth in premises networks is
currently driven by increasing networking requirements for building technology,
the need for more efficient connectors and increasing demand as a result of the
growing home use of faxes and Internet.
45
Prior to our acquisition of Krone, Krone spun off its wireless local
loop business, which manufactures and sells radio telephone systems, and we
therefore did not acquire that business.
For further information on segment data, see 'Note 15 -- Geographic and
Industry Segment Information' in the Notes to the Consolidated Financial
Statements.
COMPETITION
In each of our business segments, we operate in competitive markets.
Competition in our manufacturing segment's markets is based upon a number of
factors including design and engineering capabilities, quality, price and the
ability to meet customer delivery requirements. In the automotive market, we
compete with, among others, Eaton, Hitchiner, INA, Ingersoll-Rand, Sumitomo,
Yazaki and captive OEMs. In the appliance and electronic and industrial markets,
we compete with International Wire, General Cable, Alcatel, Belden, EDS Mexico
and Choctaw, among others.
Although our performance products segment generally has significant
market share positions in the product areas in which it competes, most of its
end markets are extremely competitive. Our major competitors are typically
segregated by end markets and include international, regional and, in some
cases, small independent producers. Our ability to compete effectively depends
on our ability to maintain competitive prices and to provide reliable and
responsible service to our customers. We believe that, with certain products
which have relatively higher freight costs, the proximity of our production
facility to the end market user is a key factor in being price competitive. In
general, raising prices has been difficult over the past several years and will
likely continue to be so in the near future.
In the pharmaceuticals and personal care market, our major competitors
include Barcroft, Giulini, Summit and Westwood. Our competitors in our
environmental market include the refineries that perform their own sulfuric acid
regeneration, as well as DuPont, Marsulex, Arch Chemical, PVS and Rhodia, which
also have sulfuric acid regeneration facilities that are generally located near
their major customers. In addition, we compete with Geo Specialty Chemicals,
U.S. Aluminates and other regional players in the water treatment market.
Competitors in the technology market include Kodak-Polychrome and Fuji, which
also provide printing-related products. With regard to electronic chemicals, our
principal competitors are Ashland and Arch Chemical. Competitors in the chemical
processing market include BASF, Calabrian, U.S. Salt, Kerley, Rhodia and Solvay
S.A.
Our telecommunications equipment segment also operates in highly
competitive markets, with many of our competitors being large, international and
technologically sophisticated companies. Competition in our telecommunications
equipment segment is based on a number of factors, including technological
advancements, product line breadth, price, technical support and service, and
product quality. The ability to achieve and maintain successful performance
in this segment is also dependent on our ability to develop products which meet
the ever- changing requirements of data and voice communications technology.
In the public network market, our principal competitor is Lucent Technologies.
Other significant competitors include Siemens, Quante/Pouyet, and Raychem. Our
principal competitors in the premises network market are Lucent Technologies,
AMP and Quante/Pouyet. This market is highly fragmented with many regional
suppliers.
SUPPLIERS; AVAILABILITY OF RESOURCES
We purchase a variety of raw materials for our businesses. Our primary
raw materials in our manufacturing segment are copper and steel. The primary
raw materials used by our telecommunications equipment segment are plastic
and steel. Our performance products segment's competitive cost position and
high-quality products are in part attributable to its control of certain raw
materials that serve as the feedstocks for many of its products. For our
sulfuric acid regeneration business, we have the ability to manufacture sulfur
dioxide and sulfuric acid relatively inexpensively. Sulfur dioxide is a major
raw material in the manufacture of many of our sodium salts and sulfites, and
sulfuric acid is an important raw material in the manufacture of aluminum
sulfate as well as
46
in the manufacture of ultra-high-purity electronic chemicals. Consequently,
major raw material purchases are limited primarily to sulfuric acid where it is
uneconomical for us to supply ourselves due to distribution costs, soda ash (for
the manufacture of sodium salts, sulfites and nitrites), bauxite and hydrate
(for the manufacture of alum), sulfur (for the manufacture of sulfuric acid),
and aluminum (for the manufacture of printing plates).
We purchase our raw materials from a number of suppliers and, in
addition, believe that alternative sources are available to fulfill our needs.
In our opinion, the raw materials we need for our businesses will be available
in sufficient supply on a competitive basis for the foreseeable future.
SALES AND DISTRIBUTION
Our manufacturing segment has approximately 70 sales, marketing and
customer service personnel. Generally, we market our products directly to our
customers, but in certain industrial markets a distribution network is used. Our
technical and engineering staff is an integral part of our manufacturing
segment's sales and distribution effort. Since many of our products are
precision-engineered and custom-designed to customer specifications, our sales
force and engineers work closely with our customers in designing, producing,
testing and improving our products. In designing and developing new products,
our engineering staff often assists in the sales and marketing effort through
joint design and applications-engineering efforts with major customers.
In our performance products segment, we employ over 100 experienced
sales, marketing, distribution and customer service personnel. The sales force
is divided into both a general group and several specialized groups which focus
on specific products, end-users and geographic regions. This targeted approach
provides us with insight into emerging industry trends and creates opportunities
for product development.
Our performance products sales force markets products and services both
directly to end-users and indirectly through independent distributors.
Generally, sulfuric acid regeneration services are sold directly to end-users,
often pursuant to long-term contracts. In addition, we have an extensive network
of independent distributors both in the United States and internationally.
Distributors typically promote a full-line or focused range of products to a
larger market or to a market focused on specific end-users or regions. Our sales
contracts with our end-users and distributors are usually for one to three year
periods.
SEASONALITY; BACKLOGS
The businesses of our manufacturing, performance products and
telecommunications equipment segments are generally not seasonal. Due to the
nature of our businesses, there are no significant backlogs.
ENVIRONMENTAL MATTERS
Our various manufacturing operations, which have been conducted at a
number of facilities for many years, are subject to numerous laws and
regulations relating to the protection of human health and the environment in
the U.S., Canada, Australia, China, Germany, Great Britain, India, Indonesia,
Ireland and Mexico. We believe that we are in substantial compliance with such
laws and regulations. However, as a result of our operations, we are involved
from time to time in administrative and judicial proceedings and inquiries
relating to environmental matters. These include several currently pending
administrative proceedings concerning alleged environmental violations at our
facilities. Based on information available at this time with respect to
potential liability involving these facilities, we believe that any such
liability will not have a material adverse effect on our financial condition 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, could require capital
expenditures which may be material or otherwise adversely impact our operations.
47
The Comprehensive Environmental Response Compensation and Liability Act
of 1980 (which we abbrevate to 'CERCLA' below) and similar state statutes have
been construed as imposing joint and several liability, under certain
circumstances, on present and former owners and operators of contaminated sites
and transporters and generators of hazardous substances regardless of fault. Our
facilities have operated for many years by us or their prior owners and
operators, and adverse environmental conditions may exist of which we are not
aware. The discovery of additional or unknown environmental contamination at any
of our current or former facilities could have a material adverse effect on our
financial condition or results of operation. In addition, we have received
written notice from the Environmental Protection Administration that we have
been identified as a 'potentially responsible party' under CERCLA at three
third-party sites. We do not believe that our liability, if any, for these sites
will be material to our results of operations or financial condition. In
addition, Congress continues to consider the reauthorization of and
modifications to CERCLA. Because Congress has not yet acted with respect to
CERCLA, we do not have sufficient information to ascertain the impact that any
change might have on our potential liabilities, if any.
At any time, we may be involved in proceedings with various regulatory
authorities which could require us to pay various fines and penalties due to
violations of environmental laws and regulations at our sites, remediate
contamination at some of these sites, comply with applicable standards or other
requirements, or incur capital expenditures to modify certain pollution control
equipment or processes at our sites. Again, although the amount of any liability
that could arise with respect to these matters cannot be accurately predicted,
we believe that the ultimate resolution of these matters will have no material
adverse effect on our results of operations or financial condition. See also
' -- Legal Proceedings' below.
Avtex Site at Front Royal, Virginia. On March 22, 1990, the
Environmental Protection Administration issued to us a Notice of Potential
Liability pursuant to Section 107(a) of CERCLA with respect to a site located in
Front Royal, Virginia, owned at the time by Avtex Fibers Front Royal, Inc.,
which has filed for bankruptcy. A sulfuric acid plant adjacent to the main Avtex
site was previously owned and operated by us. On September 30, 1998, the
Environmental Protection Administration issued an administrative order under
Section 106 of CERCLA, which requires General Chemical Group (whose obligations
we assumed in connection with the Spinoff), AlliedSignal, Inc. and Avtex to
undertake certain removal actions at the acid plant. On October 19, 1998, we
delivered to the Environmental Protection Administration written notice of our
intention to comply with that order, subject to numerous defenses. The
requirements of the order include preparation of a study to determine the extent
of any contamination at the acid plant site. We have provided for the estimated
costs of $1.6 million for these activities in our accrual for environmental
liabilities relating to the order. We are working cooperatively with the
Environmental Protection Administration with respect to compliance with the
order and believe that such compliance will not have a material effect on our
results of operations or financial condition. See 'Risk Factors -- We Are
Subject to Environmental Laws and Regulations' and 'Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Environmental
Matters.'
EMPLOYEES/LABOR RELATIONS
At September 30, 1999, we had approximately 9,700 employees, of whom
approximately 2,950 were full-time salaried employees, approximately 1,350
were full-time hourly employees (represented by ten different unions) and
approximately 5,400 were hourly employees working in nonunion facilities.
Approximately 1,300 of our employees are based in Germany. German-based
employees are members of unions and are subject to industry-wide and other
collective bargaining agreements.
Our union contracts have durations which vary from two to four years.
Since 1986, we have been involved in numerous labor negotiations, only three of
which have resulted in work disruptions. During these disruptions, management
operated the plants and supplied customers without interruption until the labor
disruptions were settled and new contracts were agreed upon.
PROPERTIES
We operate over 80 manufacturing and production facilities located in
the United States, Canada, Australia, China, Germany, Great Britain, India,
Indonesia, Ireland and Mexico. Our headquarters are located in Hampton, New
Hampshire.
48
Set forth below are the locations and uses of our major properties:
LOCATION USE
- -------------------------------------------- --------------------------------------------
Manufacturing
Livonia, Michigan(1)........................ Production Facility
Troy, Michigan(1)........................... Production Facility and Offices
Westland, Michigan(1)....................... Production Facility
Upper Sandusky, Ohio(1)..................... Production Facility
Toledo, Ohio................................ Production Facility
Defiance, Ohio.............................. Production Facility
Perrysburg, Ohio(1)......................... Production Facility and Offices
Mineral Wells, Texas........................ Production Facility
Imuris, Mexico.............................. Production Facility
Juarez, Mexico(1)........................... Production Facility
Nogales, Mexico(1).......................... Production Facility
Concord, Ontario............................ Production Facility
Guelph, Ontario(1).......................... Production Facility
Stouffville, Ontario........................ Production Facility
Tillsonburg, Ontario(1)..................... Production Facility
Toronto, Ontario............................ Production Facility
Waterdown, Ontario.......................... Production Facility
Performance Products
Hollister, California....................... Production Facility and Offices
Pittsburg, California....................... Production Facility
Richmond, California........................ Production Facility
North Claymont, Delaware.................... Production Facility, Offices and Warehouse
Augusta, Georgia............................ Production Facility
East St. Louis, Illinois.................... Production Facility
Berkeley Heights, New Jersey................ Production Facility, Offices and Warehouse
Newark, New Jersey.......................... Production Facility
Solvay, New York............................ Production Facility
Marcus Hook, Pennsylvania................... Production Facility, Offices and Warehouse
Midlothian, Texas........................... Production Facility
Anacortes, Washington....................... Production Facility
Racine, Wisconsin........................... Production Facility and Offices
Dublin, Ireland............................. Production Facility, Offices and Warehouse
Thorold, Ontario............................ Production Facility
Valleyfield, Quebec......................... Production Facility
Telecommunications Equipment
Englewood, Colorado......................... Production Facility and Offices
Sydney, Australia........................... Production Facility and Offices
Cheltenham, England......................... Production Facility and Offices
Berlin, Germany(1).......................... Production Facility and Offices
Mexico City, Mexico......................... Production Facility
Shanghai, People's Republic of China........ Production Facility
Bangalore, India............................ Production Facility
Jakarta, Indonesia.......................... Production Facility
Offices
Hampton, New Hampshire(1)................... Headquarters
Parsippany, New Jersey(1)................... Offices
- ------------
(1) Leased.
49
LEGAL PROCEEDINGS
General. We are involved in claims, litigation administrative
proceedings and investigations of various types, including the Milwaukee and
Delaware Valley litigation discussed below and certain environmental proceedings
previously discussed. Although the amount of any liability that could arise with
respect to these actions cannot be accurately predicted, the opinion of
management based upon currently-available information is that any such liability
not covered by insurance will have no material adverse effect on our results of
operations or financial condition.
Milwaukee Litigation. In March 1993, an outbreak of cryptosporidia
occurred in the public water supply of the City of Milwaukee. As a result of
that incident, several lawsuits have been filed with the Milwaukee County
Circuit Court against one or more of the City of Milwaukee, its Department of
Public Works, Sara Lee Corporation, E.D. Wesley Co., Peck Foods Corporation,
certain hotels, numerous insurance companies, several municipalities and General
Chemical Group (whose obligations we assumed). The principal allegations against
us are that a water treatment chemical sold by us to the City of Milwaukee
should have removed certain bacteria contained in the water supply and failed to
do so and that General Chemical Group consulted with the City concerning the
water purification.
One of the suits (Markwiese, et al. v. Peck Foods Corporation, et al.
filed in 1993) had been certified, prior to the service of a complaint against
General Chemical Group (whose obligations we assumed), as a class action in
favor of all persons who sustained damage as a result of the wrongful acts of
the various defendants. An appeal of this class certification was filed by
General Chemical Group and the City of Milwaukee, and in a March 13, 1998
hearing, a new trial judge ruled that this matter shall not proceed as a class
action. If this matter proceeds to trial, it is possible that lawyers for the
plaintiffs could appeal this ruling after conclusion of the trial. In addition
to the Markwiese action, several other lawsuits have since been filed by the
same lead attorneys in the Circuit Court of Milwaukee County against the same
basic group of defendants. In total, we believe the total number of individual
plaintiffs in all suits filed to date is approximately 700. The unspecified
damages sought by these various complaints is alleged to be 'far in excess of
$1.0 million dollars' for personal injury, economic loss, emotional distress,
pain and suffering, medical expenses and punitive damages.
On September 17, 1998, the court preliminarily approved a class action
settlement with Sara Lee, whereby Sara Lee would pay to the plaintiffs $250,000
to cover certain expenses related to the litigation. Final approval of the
settlement was granted by the court on December 17, 1998. The remaining parties
in the litigation, including GenTek, continued in the discovery phase of the
litigation.
On August 20, 1999, the Company and its insurer, National Fire Union
Insurance Company of Pittsburgh, Pennsylvania ('National Union') entered into a
settlement with plaintiffs to resolve the case. The settlement agreement
provides that National Union shall pay the total amount of $1,500,000, which
shall be allocated to provide approximately $1,150,000 to compensate claimants
and $350,000 for plaintiffs' attorneys' fees and settlement administration
costs. The settlement is structured as a class action settlement pursuant to
which all claims will be barred upon final court approval of the settlement. The
Company reserves the right to terminate the settlement in the event that any
claimants opt out of the settlement, the settlement is appealed or the terms of
the settlement are modified or vacated. The trial court granted preliminary
approval of the settlement on October 19, 1999. The deadline for claimants to
opt out of the settlement is December 6, 2000. Objections to the settlement must
be filed by February 7, 2000. The final approval hearing has been scheduled for
March 2, 2000.
Delaware Valley Litigation. In April 1998, approximately 40 employees
(and their respective spouses) of the Sun Company, Inc. refinery in Marcus Hook,
Pennsylvania, filed lawsuits in the Court of Common Pleas, Delaware County,
Pennsylvania, against General Chemical Group (whose obligations we have
assumed), alleging that sulfur dioxide and sulfur trioxide releases from our
Delaware Valley facility caused various respiratory and pulmonary injuries.
Unspecified damages in excess of $50,000 for each plaintiff are sought. The
litigation has entered the discovery phase. We have denied all material
allegations of the complaints and will continue to defend ourselves vigorously
in this matter. We further believe that our current accruals and available
insurance should provide adequate coverage in the event
50
of an adverse result in this matter and that, based on currently available
information, this matter will not have a material adverse effect on our results
of operations or financial condition.
In addition, on September 24, 1999, the same attorneys that filed the
April, 1998 actions against the Company also filed a purported class action
complaint against the Company, titled Whisnant vs. General Chemical Corporation,
(in the court of Common Pleas, Delaware County, Pennsylvania, on behalf of 550
current and former employees of the Sunoco (formerly Sun Company, Inc.) Marcus
Hook, Pennsylvania refinery located immediately adjacent to the Company's
Delaware Valley facility. The complaint alleges that unspecified releases of
sulfur dioxide and sulfur trioxide over unspecified timeframes caused injuries
to the plaintiffs, and seeks, among other things, to establish a 'trust fund'
for medical monitoring for the plaintiffs. The Company believes this claim is
without merit and will vigorously defend itself in this matter. Management
further believes that the Company's current accruals and available insurance
should provide adequate coverage in the event of an adverse result in this
matter, and that, based on currently available information, this matter will not
have a material adverse effect on the Company's results of operations or
financial condition.
51
MANAGEMENT
MANAGEMENT
The following table sets forth our directors and executive officers.
NAME AGE POSITION
---- --- --------
Paul M. Montrone............................ 58 Director; Chairman of the Board
Paul M. Meister............................. 47 Director; Vice Chairman of the Board
Richard R. Russell.......................... 57 Director; President and Chief Executive Officer
Michael R. Herman........................... 37 Vice President and General Counsel
William C. Keightley........................ 46 Vice President and Chief Financial Officer
Kevin J. O'Connor........................... 48 Controller
John W. Gildea.............................. 55 Director
Bruce Koepfgen.............................. 47 Director
Scott M. Sperling........................... 41 Director
Ira Stepanian............................... 62 Director
Paul Montrone is a Director and the Chairman of our Board. He is the
Chairman of the Board of General Chemical Group, a position he has held since
1995, and a Director of General Chemical Group, a position he has held since
1988. Mr. Montrone was President of General Chemical Group from 1987 to 1994.
Mr. Montrone is the Chairman of the Board and the Chief Executive Officer of
Fisher Scientific International Inc., a distributor of laboratory and scientific
products, and a director of Waste Management, Inc. and the New York Metropolitan
Opera.
Paul Meister is a Director and the Vice Chairman of our Board. He is the
Vice Chairman of the Board of General Chemical Group, a position he has held
since 1998, and a Director of General Chemical Group, a position he has held
since 1994. Mr. Meister has been the Vice Chairman of the Board and the
Executive Vice President and Chief Financial Officer of Fisher Scientific
International since March 1998, since prior to 1994, he has been Chief Financial
Officer of Fisher Scientific International, and from 1994 to March 1998, he was
Senior Vice President of Fisher Scientific International. Mr. Meister is also a
Director of Minerals Technologies Inc. and M&F Worldwide Corp.
Richard Russell is our President and Chief Executive Officer and a
Director. From 1994 until the spinoff date, he served as the President and Chief
Executive Officer and a Director of General Chemical Group. Mr. Russell has also
been the President and Chief Executive Officer of General Chemical Corporation
since 1986.
Michael Herman is a Vice President and our General Counsel. From 1997
until the spinoff date, he served as the Vice President and General Counsel of
General Chemical Corporation. Mr. Herman had served as Deputy General Counsel of
General Chemical Corporation from 1995 until 1997, and as Associate General
Counsel of General Chemical Corporation from 1992 to 1995.
William Keightley is our Vice President, Finance and Chief Financial
Officer. From March 1999 until the spinoff date, he served as the Vice President
and Chief Financial Officer of General Chemical Group. Mr. Keightley served as
Vice President, Finance of Waste Management, Inc. from June 1997 to December
1998 and was Vice President, Finance of Wheelabrator Technologies Inc. from May
1996 to June 1997. From 1992 until May 1996, Mr. Keightley served as Chief
Financial Officer of a subsidiary of Waste Management, Inc.
Kevin O'Connor is our Controller. From March 1996 until the spinoff
date, he served as the Controller of General Chemical Group. Mr. O'Connor served
as Controller of General Chemical Corporation from 1986 to March 1996.
John Gildea is a Director. From 1997 until the spinoff date, he served
as a Director of General Chemical Group. Mr. Gildea has been Managing Director
of Gildea Management Company (investment
52
management firm) since prior to 1994. He is also a Director of American Service
Group, Inc., Barry's Jewelers, Inc. and Konover Property Trust.
Bruce Koepfgen was elected as a Director on September 30, 1999. Mr.
Koepfgen is a private investor who spent 23 years with Salomon Brothers Inc., 15
of which he was a managing director. Most recently, he led Salomon's efforts in
Fixed Income Sales and managed its Chicago office and Midwest Sales Territory,
Salomon's largest regional office. He also was chairman of Salomon Analytics, a
company established to develop sophisticated fixed income analytic tools for
institutional investors.
Scott Sperling is a Director. From 1996 until the spinoff date, he
served as a Director of General Chemical Group. Mr. Sperling is the President of
TH Lee, Putnam Capital and has been a Managing Director of Thomas H. Lee Company
(private equity investment firm) since July 1994. Mr. Sperling is Trustee of
THL Equity Trust III, the General Partner of Equity Advisors III Limited
Partnership, which is the General Partner of THL Equity Fund III and Managing
Director of THL Equity Advisors IV, LLC, the general partner of THL Equity Fund
IV, L.P. Mr. Sperling was Managing Partner of The Aeneas Group Inc., a private
capital affiliate of Harvard Management Company, from prior to 1993 to
September 1994. He is also a Director of Fisher, The Learning Company, Inc.,
Livent, Inc., Safelite Glass Corp., Wyndham International and several private
corporations.
Ira Stepanian is a Director. From 1996 until the Spinoff Date, he served
as a Director of General Chemical Group. He was Chairman and Chief Executive
Officer of Bank of Boston Corporation and its principal subsidiary, The First
National Bank of Boston, from prior to 1994 until 1995.
COMMITTEES OF THE BOARD OF GENTEK
The Board of Directors of GenTek has four standing committees:
(1) an Audit Committee;
(2) a Compensation Committee;
(3) an Executive Committee; and
(4) a Nominating Committee.
The Audit Committee consists of Messrs. Gildea, Sperling and Stepanian,
with Mr. Stepanian serving as Chairman. It is responsible for, among other
things:
recommending the firm to be appointed as independent accountants to
audit GenTek's financial statements and to perform services related to
the audit;
approving in advance the general nature of each professional service
performed by the independent public accountants;
reviewing the scope and results of the audit with the independent
accountants; reviewing with the management and the independent
accountants GenTek's year-end operating results;
considering the adequacy of the internal accounting and control
procedures of GenTek; reviewing the non-audit services to be performed
by the independent accountants, if any;
considering the effect of such performance on the accountants'
independence; directing and supervising, when appropriate, special
investigations into matters within the scope of the independent public
accountants' duties; and
performing such other tasks related to and in furtherance of the
foregoing as it may consider necessary or appropriate or as may be
assigned to it by the Board from time to time.
The Compensation Committee consists of Messrs. Meister and Sperling,
with Mr. Sperling serving as Chairman. It is responsible for, among other
things:
reviewing and recommending compensation arrangements for Directors and
officers;
53
approving such arrangements for other senior level employees;
administering certain benefit and compensation plans of GenTek and its
subsidiaries;
monitoring the activities of an internal committee of members of
management established to carry out policies and guidelines with
respect to such plans; and
performing such other tasks related to and in furtherance of the
foregoing as it may consider necessary or appropriate or as may be
assigned to it by the Board from time to time.
A subcommittee of the Compensation Committee, comprised solely of
'outside directors' (as such term is used in Section 162(m) of the Internal
Revenue Code) who are also 'non-employee directors' (as such term is defined in
Rule 16b-3 of the Securities Exchange Act), has exclusive authority:
(1) to approve any awards of stock or options to directors of GenTek (other
than non-employee directors) or other individuals who are 'officers' of
GenTek for purposes of Section 16 of the Exchange Act under GenTek's
long-term incentive plan (described below); and
(2) to administer elements of the GenTek performance plan (also described
below) covered by Section 162(m) of the Code. The subcommittee will also be
responsible for determining whether the performance goals under the GenTek
Inc. performance plan have been met.
In the remainder of this prospectus, references to the Compensation Committee
shall be deemed to be references to the subcommittee in all cases where Section
162(m) of the Code or Section 16 of the Exchange Act would require that action
be taken by the subcommittee rather than the full Compensation Committee.
An 'outside director' means an individual who:
(1) is not an employee of GenTek;
(2) does not receive compensation from GenTek for prior services as an
employee;
(3) has never been an officer of GenTek; and
(4) only receives remuneration as a director from GenTek and not in any other
capacity.
The term 'non-employee director' means an individual who:
(1) only receives remuneration as a director from GenTek and not in any other
capacity;
(2) is not currently an officer of GenTek; and
(3) has no interest in any transactions or business relationships with GenTek.
The Executive Committee consists of Messrs. Montrone, Russell and
Stepanian, with Mr. Montrone serving as Chairman. The Executive Committee
possesses, and may exercise during the interval between meetings of the Board,
all the powers of the Board. The Committee is responsible for overseeing the
management and direction of all business and affairs of GenTek, in such manner
as the Executive Committee deems in the best interests of GenTek. Meetings maybe
called by the Chief Executive Officer of GenTek or the Chairman of the
Committee.
The Nominating Committee consists of all members of the Board, with Mr.
Montrone serving as Chairman. The Nominating Committee is responsible for
nominating persons for election to the Board. The Nominating Committee will
consider nominees properly recommended by stockholders.
COMPENSATION OF DIRECTORS
The employee directors of GenTek do not receive any compensation for
services performed as a director or for meeting attendance. The non-employee
directors of GenTek are entitled to receive cash compensation and compensation
under the plans described below.
54
CASH COMPENSATION. Our non-employee directors receive compensation of
$40,000 per year, with no additional fees for attendance at the company's Board
or committee meetings. Employee directors are not paid any fees or additional
compensation for service as members of our Board or any of its committees. All
directors are reimbursed for expenses incurred in connection with attending our
Board and committee meetings.
RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS. Under GenTek's retirement
plan for non-employee directors, any non-employee director who retires from our
Board with at least five years of service as a director (other than Messrs.
Montrone and Meister) will be eligible for an annual retirement benefit for the
remainder of his or her lifetime. The annual retirement benefit is equal to 50%
of the director fee in effect at the date of such director's retirement for a
director who retires with five years of eligible service and is increased by 10%
of the director fee in effect at the date of such director's retirement for each
additional year of service, up to 100% of such fee for ten or more years of
service as a director or for directors who retire after age 70. Payment of the
retirement benefits to any director will commence upon the later of the
director's retirement from our Board or the attainment of age 60. We may suspend
or terminate retirement benefits if the retired director refuses to render
consultative services and advice to us or engages in any activity which competes
with our business.
RESTRICTED UNIT PLAN FOR NON-EMPLOYEE DIRECTORS. We adopted, effective
as of the spinoff, a restricted unit plan for non-employee directors, under
which each of our non-employee directors (other than Messrs. Montrone and
Meister), upon becoming a director, will receive a one-time grant of 5,000
restricted units evidencing a right to receive shares of common stock, subject
to certain restrictions. We will maintain a memorandum account for each director
who received the grant of restricted units and credit to such account the amount
of any cash dividends and shares of stock of any subsidiary distributed on the
shares of common stock underlying such director's restricted units from the date
of grant until the payment date described below. No shares of common stock will
be issued at the time restricted units are granted, and we will not be required
to set aside a fund for any such grant or for amounts credited to the memorandum
account. Under the terms of the plan, neither the restricted units nor the
memorandum account may be sold, assigned, pledged or otherwise disposed of
twenty-five percent of the restricted units and the related cash and stock
dividends will vest for each year of service as a director. Vested restricted
units and the related cash and stock dividends will not be payable until the
director ceases to be a member of our Board. At that time, the director will
receive one share of common stock for each vested restricted unit, provided that
a director may elect, prior to the date on which restricted units vest, to have
payment deferred to a later date. Any restricted units and related cash and
stock dividends that have not vested at the time the director ceases to be a
director will be canceled unless service has terminated because of death or
disability, in which event all such restricted units and related cash and stock
dividends will vest immediately. When payment of restricted units is made, non-
employee directors (other than Messrs. Montrone and Meister) will also receive
cash and securities equal to the related cash and stock dividends, together with
interest on the cash based upon the average quoted rate for ten-year U.S.
Treasury Notes. In the event of a stock dividend, stock split, recapitalization,
merger, liquidation or similar event, the Board, in its sole discretion, may
make equitable adjustments in outstanding awards and the number of shares of
common stock reserved for issuance under the plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee determines the compensation of executive
officers of GenTek. None of the members of the Compensation Committee is or was
an officer or employee of GenTek. Mr. Meister, a member of the Compensation
Committee, is a Managing Director of Latona Associates, a management company
which performs a range of advisory services for GenTek. See the description of
'Agreements with Latona Associates' under 'Affiliate Relationships and
Transactions.'
EXECUTIVE COMPENSATION
In general, compensation for our executive officers and other key
employees consists of base salary, annual bonus awards (a portion of which may
be payable in restricted stock) and long-term
55
incentive awards of options or restricted stock that may be made from time to
time under GenTek's long-term incentive plan (described below).
PERFORMANCE PLAN
Prior to the consummation of the spinoff, our Board adopted, and General
Chemical Group, as sole shareholder of GenTek approved, effective upon the
consummation of the spinoff, a performance plan under which executive officers
and key employees of GenTek and its subsidiaries are eligible to receive annual
or other periodic bonuses. The performance plan is administered by the
Compensation Committee of our Board of Directors. Non-employee directors will
not be eligible for awards under the performance plan.
Each year, we will establish target incentive bonuses for participants
in the performance plan. Bonuses will be payable under the performance plan for
a year if we meet the performance objectives for such year selected for a
participant or group of participants by the Compensation Committee. The
performance objectives may be based upon either company-wide or operating unit
performance in the following areas: earnings per share, revenues, operating cash
flow, operating earnings, working capital to sales ratio and return on capital.
In addition, notwithstanding the foregoing, the Compensation Committee
has the right, in its discretion, to pay to any participant an annual bonus
based on individual performance or any other criteria that the Committee deems
appropriate and, in connection with the hiring of any person or otherwise, the
Compensation Committee may provide for a minimum bonus amount in any calendar
year, regardless of whether performance objectives are attained.
The performance plan vests broad powers in the Compensation Committee to
administer and interpret the plan. The Compensation Committee's powers include
authority, within the limitations set forth in the performance plan, to select
the persons to be granted awards, to determine the time when awards will be
granted, to determine and certify whether objectives and conditions for earning
awards have been met, to determine whether payment of an award will be made at
the end of an award period or deferred, and to determine whether an award or
payment of an award should be reduced or eliminated. The performance plan also
generally vests broad powers in the Compensation Committee to amend and
terminate the performance plan.
LONG-TERM INCENTIVE PLAN
Prior to the consummation of the spinoff, our Board of Directors adopted
and General Chemical Group, as sole stockholder of GenTek approved, effective
upon the consummation of the spinoff, a long-term incentive plan. The long-term
incentive plan provides for the grant of any or all of the following types of
awards:
(1) stock options, including incentive stock options;
(2) stock appreciation rights;
(3) restricted stock and restricted units;
(4) incentive stock and incentive units; and
(5) deferred stock units.
The long-term incentive plan also provides for the grant of a split of
General Chemical Group equity-related incentive awards held by all employees in
connection with the Spinoff. See ' -- General Chemical Group Stock Option and
Restricted Unit Conversion' below.
Awards under the long-term incentive plan may be granted to key
employees, including our executive officers and executive officers of our
subsidiaries and affiliates, but may not be granted to any
56
non-employee director. The number of employees participating in the long-term
incentive plan will vary from year to year. Initially, 1,600,000 shares of
common stock have been authorized for issuance under the long-term incentive
plan, which number of shares includes the shares issued as a result of the split
of General Chemical Group equity-related incentive awards, as described under
' -- General Chemical Group Stock Option and Restricted Unit Conversion' below.
If shares subject to an option under the long-term incentive plan cease
to be subject to that option, if shares awarded under the long-term incentive
plan are forfeited or if an award otherwise terminates without a payment being
made to the participant in the form of common stock, those shares will again be
available for future award under the long-term incentive plan. In the event of
certain changes in our capital structure affecting GenTek common stock, the
Compensation Committee may make appropriate adjustments in the number of shares
that may be awarded and in the number of shares covered by options and other
awards then outstanding under the long-term incentive plan, and, where
applicable, the exercise price of outstanding awards under the long-term
incentive plan. The long-term incentive plan will be administered by the
Compensation Committee.
Stock Options
The Compensation Committee may grant options to purchase shares of
GenTek common stock that are either 'qualified,' which includes those awards
that satisfy the requirements of Section 422 of the Internal Revenue Code for
incentive stock options, or 'nonqualified,' which includes those awards that are
not intended to satisfy the requirements of Section 422 of the Internal Revenue
Code. Under the terms of the long-term incentive plan, the exercise price of the
options will, unless the Compensation Committee determines otherwise, not be
less than fair market value of GenTek's common stock at the time of grant. The
exercise price of the option is payable in cash or its equivalent or, as
permitted by the Compensation Committee, by exchanging shares of common stock
owned by the participant, or by a combination of the foregoing.
The options will generally have a term of ten years, unless the
Compensation Committee specifies a shorter term, and, unless the Compensation
Committee otherwise determines, will become exercisable in four equal annual
installments commencing on the first anniversary of the date of grant. If an
option holder ceases employment with us as a result of the holder's
(1) death,
(2) disability,
(3) early retirement with the consent of the Compensation Committee or
(4) normal retirement,
the holder (or his or her beneficiary or legal representative) may exercise any
option, regardless of whether then exercisable, for a period of one year (or
such greater or lesser period as determined by the Compensation Committee at or
after grant), but in no event after the date the option otherwise expires. If an
option holder's employment is terminated for any other reason, all of his or her
options will immediately terminate, regardless of whether then exercisable
(unless determined otherwise by the Compensation Committee). The Compensation
Committee may provide that a participant who delivers shares of common stock to
exercise an option when the market value of the GenTek common stock exceeds the
exercise price of the option will be automatically granted new options for the
number of shares delivered to exercise the option. Such new options will be
subject to the same terms and conditions as the exercised option except that the
exercise price will be the fair market value on the date the new option is
granted and such options will not be exercisable for six months.
57
Stock Appreciation Rights
The long-term incentive plan authorizes the Compensation Committee to
grant stock appreciation rights in tandem with a stock option, in addition to a
stock option, or freestanding and unrelated to a stock option. Stock
appreciation rights entitle the participant to receive the excess of the fair
market value of a stated number of shares of GenTek common stock on the date of
exercise over the base price of the stock appreciation right. The base price may
not be less than 100% of the fair market value of the GenTek common stock on the
date the stock appreciation right is granted. The Committee shall determine when
an stock appreciation right is exercisable, the method of exercise, and whether
settlement of the stock appreciation right is to be made in cash, shares of
common stock or a combination of the foregoing.
Restricted Stock and Restricted Units
The long-term incentive plan authorizes the Compensation Committee to
grant awards in the form of restricted stock and restricted units. For purposes
of the long-term incentive plan, restricted stock is an award of common stock
and a restricted unit is a contractual right to receive GenTek common stock (or
cash based on fair market value of common stock). Such awards will be subject to
such terms and conditions, if any, as the Compensation Committee deems
appropriate. Unless otherwise determined by the Compensation Committee,
participants will be entitled to receive either currently or at a future date,
dividends or other distributions paid with respect to restricted stock and, if
and to the extent determined by the Compensation Committee, either will be
credited with or receive, currently an amount equal to dividends paid with
respect to the corresponding number of shares covered by restricted units.
Restricted stock and restricted units become vested and nonforfeitable and the
restricted period will lapse pro rata on each of the first four anniversaries of
the date of grant unless the Compensation Committee determines otherwise. If a
participant's employment terminates because of death, disability, early
retirement (with the Compensation Committee's consent) or normal retirement,
during the period in which the transfer of shares is restricted, the restricted
stock or restricted units will become vested and nonforfeitable as to that
percentage of the shares based upon the days worked as a percentage of total
days in the restricted period (or such greater percentage as the Compensation
Committee may determine). Unless nonforfeitable on the date of termination or
otherwise determined by the Compensation Committee, a restricted stock or
restricted unit award will be forfeited on termination of employment.
Incentive Stock and Incentive Units
The long-term incentive plan allows for the grant of awards in the form
of incentive stock and incentive units. For purposes of the long-term incentive
plan, incentive stock is an award of common stock and an incentive unit is a
contractual right to receive GenTek common stock (or cash based on fair market
value of GenTek common stock). Such awards will be contingent upon the
attainment, in whole or in part, of certain performance objectives over a period
to be determined by the Compensation Committee. With regard to a particular
performance period, the Compensation Committee will have the discretion, subject
to the long-term incentive plan's terms, to determine the terms and conditions
of such awards, including the performance objectives to be achieved during such
period and the determination of whether and to what degree such objectives have
been attained. Unless otherwise determined by the Compensation Committee,
participants will be entitled to receive, either currently or at a future date,
all dividends and other distributions paid with respect to the incentive stock
and, if and to the extent determined by the Compensation Committee, either to be
credited with or receive currently an amount equal to dividends paid with
respect to the corresponding number of shares covered by the incentive units. If
a participant's employment terminates because of death, disability, early
retirement (with the Compensation Committee's consent) or normal retirement
during the measurement period, an award of incentive stock or incentive units
will become vested and nonforfeitable as to that percentage of the award that
would have been earned based on the attainment of performance objectives for the
days worked as a percentage of total days in the performance period (or such
greater percentage as the Compensation
58
Committee may determine). Unless the Compensation Committee determines
otherwise, any incentive stock or incentive unit award will be forfeited on
termination of employment.
Deferred Stock
An award of deferred stock confers upon a participant the right to
receive shares of common stock at the end of a specified deferral period. On
such date or dates established by the Compensation Committee and subject to such
terms and conditions as determined by the Compensation Committee, a participant
may be permitted to defer receipt of all or a portion of his or her annual
salary and/or annual incentive bonus and receive the equivalent amount in
elective units based on the fair market value of common stock on the date of
grant. To the extent determined by the Compensation Committee, a participant may
also receive supplemental stock units for a percentage of the amount deferred by
the participant. Deferred stock units carry no voting rights until the shares
have been issued. The Compensation Committee will determine whether any cash and
stock dividends attributable to deferred units are to be paid currently or
credited to the participant's account and deemed reinvested in deferred stock
units. Deferred stock units and cash and stock dividends with respect thereto
are fully vested at all times. Unless the Compensation Committee provides
otherwise, supplemental stock units and cash and stock dividends with respect
thereto will become fully vested on the fourth anniversary of the date the
corresponding deferred amount would have been paid and free standing stock units
and cash and stock dividends with respect thereto will become fully vested on
the third anniversary of the corresponding award.
If there is a change in control, all awards that are not then vested
will become vested and any restrictions or limitations will lapse. A change of
control is defined in the long-term incentive plan and includes:
(1) a change in the composition of a majority of the Board of Directors of
GenTek unless the selection or nomination of each of the new members was
approved by a majority of incumbent members of the Board of Directors of
GenTek;
(2) the acquisition by any person or group, with certain exceptions, of the
beneficial ownership of securities representing more than 20 percent of the
voting power of GenTek's then outstanding voting securities having the
right to elect directors;
(3) the consummation, after approval by GenTek's stockholders, of a merger or
other business combination with an entity other than a majority-owned
subsidiary of GenTek, or the sale of all or substantially all of GenTek's
assets; or
(4) the purchase by any person or group, with certain exceptions, of 20% or
more of the outstanding shares of GenTek's common stock pursuant to a
tender or exchange offer.
These provisions of the long-term incentive plan may have an anti-takeover
effect.
Notwithstanding the foregoing, a change in control will not be deemed to
occur in the event we file for bankruptcy, liquidation or reorganization under
the United States Bankruptcy Code.
The Board or the Compensation Committee may amend, suspend or terminate
the long-term incentive plan.
OTHER BENEFIT PLANS AND ARRANGEMENTS
Our salaried employees continue to participate in the General Chemical
Corporation pension plan -- of which we continued to be the sponsor following
the spinoff -- on the same terms and conditions as before the spinoff, as well
as in the other benefit plans and arrangements that we established or continued
to sponsor pursuant to the employee benefits agreement. In addition to the
pension plan, we will continue to be the sponsor of existing employee benefit
plans that cover our employees. In connection with the spinoff, GenTek caused a
transfer of plan assets and liabilities, where applicable, to a
59
corresponding 'mirror' employee benefit plan established by General Chemical
Group for the benefit of employees of the industrial chemicals business who were
participants in the plan sponsored by us immediately prior to the spinoff. For
further information on the employee benefit agreement we entered into in
connection with the spinoff, see the section 'Arrangements Between GenTek and
General Chemical Group Relating to the Spinoff -- Employee Benefits Agreement.'
A participating employee's annual retirement benefit is determined by
the employee's credited service under the salaried employees' pension plan and
average annual earnings during the five years of the final ten years of service
credited under the salaried employees' pension plan for which such employees'
earnings were highest. Annual earnings include principally salary, overtime and
short-term incentive compensation. The salaried employees' pension plan provides
that a participating employee's right to receive benefits under the salaried
employees' pension plan becomes fully vested after five years of service. Under
the salaried employees' pension plan, benefits are adjusted by a portion of the
social security benefits received by participants.
In addition, our key executives participate in an unfunded nonqualified
excess benefit plan which pays benefits which would otherwise accrue in
accordance with the provisions of the salaried employees' pension plan, but
which are not payable under the salaried employees' pension plan by reason of
certain benefit limitations imposed by the Internal Revenue Code.
The table below indicates the estimated maximum annual retirement
benefit a hypothetical participant would be entitled to receive under the
salaried employees' pension plan and the excess benefit plan. The amounts shown
are without regard to benefit limitations imposed by the Internal Revenue Code,
before any deduction for social security benefits if the retirement occurred
December 31, 1998, at the age of 65, after the indicated number of years of
credited service and if average annual earnings equaled the amounts indicated.
Compensation qualifying as annual earnings under the salaried employees' pension
plan approximates the amounts set forth as the salary and bonus of the executive
officers in the 'Summary Compensation Table' included in the next section of
this prospectus. The number of years of credited service under the salaried
employees' pension plan for Messrs. Russell, Passino, Tanis, Wilkinson and Klink
is approximately 22, 19, 11, 14 and 24, respectively.
YEARS OF CREDITED SERVICE
----------------------------------------------------
AVERAGE 15 20 25 30 35
ANNUAL EARNINGS YEARS YEARS YEARS YEARS YEARS
- --------------- ----- ----- ----- ----- -----
$ 200,000 ........................... $ 60,000 $ 80,000 $100,000 $100,000 $105,000
250,000 ........................... 75,000 100,000 125,000 125,000 131,250
300,000 ........................... 90,000 120,000 150,000 150,000 157,500
400,000 ........................... 120,000 160,000 200,000 200,000 210,000
500,000 ........................... 150,000 200,000 250,000 250,000 262,500
600,000 ........................... 180,000 240,000 300,000 300,000 315,000
700,000 ........................... 210,000 280,000 350,000 350,000 367,500
800,000 ........................... 240,000 320,000 400,000 400,000 420,000
900,000 ........................... 270,000 360,000 450,000 450,000 472,500
1,000,000 ........................... 300,000 400,000 500,000 500,000 525,000
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table summarizes compensation awarded or paid by General
Chemical Group and its subsidiaries during the periods indicated below to our
Chief Executive Officer and the four most highly compensated other executive
officers of General Chemical Group at year-end 1998 who, since the Spinoff, have
been employees of our subsidiary, General Chemical Corporation. Except for Mr.
Russell, who is the President and Chief Executive Officer of GenTek, none of
these officers is an executive officer of GenTek. The positions indicated in the
table are the position such persons held with General Chemical Group. See
'Management.' Our senior management currently receives compensation similar to
that received by the senior management of General Chemical Group in the past.
60
All stock compensation in prior years has been in the form of shares of
the common stock, or options to purchase shares of the common stock, of General
Chemical Group.
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
---------------------------- ----------------------
NAME AND FISCAL ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
------------------ ---- ------ ----- ------- ------------
Richard R. Russell ............................ 1998 $400,000 $ 75,000 -- $26,000
President and Chief Executive Officer 1997 400,000 375,000 -- 46,000
1996 400,000 425,000 400,000 49,000
Ralph M. Passino .............................. 1998 250,000 50,000 -- 16,000
Vice President and General Manager, 1997 250,000 225,000 -- 28,000
Manufacturing Group 1996 250,000 265,000 65,000 30,000
James N. Tanis ................................ 1998 250,000 50,000 -- 16,000
Vice President and General Manager, 1997 250,000 225,000 -- 28,000
Performance Products 1996 250,000 225,000 65,000 28,000
James A. Wilkinson ............................ 1998 220,000 40,000 -- 14,000
Vice President, Manufacturing 1997 220,000 110,000 -- 20,000
1996 220,000 100,000 20,000 18,000
Bodo B. Klink ................................. 1998 205,000 35,000 -- 13,000
Vice President, Business Development and 1997 205,000 120,000 5,000 20,000
Services 1996 195,000 150,000 20,000 20,000
OPTION GRANTS
The following table sets forth information concerning individual grants
of stock options by General Chemical Group to the executive officers of the
General Chemical Group named in the previous table through year-end 1998 for the
purchase of General Chemical Group Common Stock. There were no stock options
granted by General Chemical Group to these officers during 1998. For a
discussion of the treatment of General Chemical Group stock option plans in
connection with the spinoff with respect to the executive officers of GenTek,
see ' -- General Chemical Group Stock Option and Restricted Unit Conversion'
below.
INDIVIDUAL GRANTS
-------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS AT 12/31/98 OPTIONS AT 12/31/98
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
Richard R. Russell.............. -- -- -- 400,000 $0 $0
Ralph M. Passino................ -- -- 24,000 41,000 0 0
James N. Tanis.................. -- -- 24,000 41,000 0 0
James A. Wilkinson.............. -- -- 12,000 8,000 0 0
Bodo B. Klink................... -- -- 12,000 13,000 0 0
GENERAL CHEMICAL GROUP STOCK OPTION AND RESTRICTED UNIT CONVERSION
Under the employee benefits agreement, effective on the spinoff date,
holders of outstanding options to purchase General Chemical Group common stock
and holders of restricted stock units had their interests adjusted as described
below.
Stock Options. Our employees who held General Chemical Group stock
options as of the Spinoff Date received options to purchase under the GenTek
Inc., long-term incentive plan the same number of shares of GenTek as entitled
by their GCG stock options. The exercise price of their General Chemical Group
stock options was adjusted, and the exercise price of their GenTek stock options
was established, in a manner that preserved (1) the difference between the
exercise price and value of the shares covered by the General Chemical Group
stock option and (2) the ratio of the exercise price per share to the fair
market value of the share covered by the option. All other terms of such
adjusted options remained unchanged in the spinoff. Individuals who continue to
provide employment, consulting and similar services to both GenTek and General
Chemical Group similarly retained their options to acquire shares of common
stock of General Chemical Group and received additional options to acquire
shares of common stock of GenTek, in each case as adjusted in the manner
described above.
Restricted Units. Each restricted unit, whether held by employees of
GenTek or General Chemical Group, represented a similar award with respect to a
share of each of GenTek and General Chemical Group.
61
BENEFICIAL OWNERSHIP OF COMMON STOCK
The table below sets forth, to the best of our knowledge, certain
information regarding the beneficial ownership of shares of our common stock by:
(1) each person who beneficially owns more than 5% of such shares,
(2) each of our directors,
(3) each of the executive officers named in the tables in the preceding section
of this prospectus and
(4) all directors and executive officers as a group.
Our issued and outstanding capital stock consists of shares of Common
Stock, entitling its holder to one vote for each share, and Class B Common
Stock, entitling its holder to ten votes for each share. Holders of Class B
Common Stock may convert each such share of Class B Stock at any time and from
time to time into one share of Common Stock. The shares of Common Stock are
registered under the Exchange Act and are listed on the New York Stock Exchange.
There are significant restrictions on transfers of Class B Common Stock. Except
for the disparity in voting power, the conversion provisions and the transfer
restrictions, shares of Common Stock and Class B Common Stock are substantially
identical, including their participation in dividends and in liquidation
distributions.
As of October 31, 1999, a total of 20,818,246 shares were issued and
outstanding, consisting of 16,859,825 shares of Common Stock and 3,958,421
shares of Class B Common Stock.
The ownership percentages of our Common Stock shown above have been
calculated assuming the conversion of all outstanding shares of Class B Common
Stock into Common Stock. For the purpose of identifying persons who beneficially
own more than 5% of the shares of Common Stock, we have assumed that no
outstanding shares of Class B Common Stock have been converted.
BENEFICIAL OWNERSHIP OF
GENTEK
---------------------------
COMMON PERCENT OF
NAME OF BENEFICIAL OWNER STOCK CLASS
------------------------ ---------- ----------
DIRECTORS AND OFFICERS
Paul M. Montrone(1)(2)(3)(4).............................. 9,811,421 47.3%
Paul M. Meister(5)........................................ 2,061,251 9.9
John W. Gildea(6)(12)..................................... 595,996 2.9
Richard R. Russell(7)..................................... 76,972 *
Ralph M. Passino(8)....................................... 76,986 *
James N. Tanis(9)......................................... 69,986 *
James A. Wilkinson(10).................................... 46,693 *
Bodo W. Klink(11)......................................... 39,157 *
Scott M. Sperling(12)..................................... 25,000 *
Ira Stepanian(12)......................................... 25,000 *
Bruce Koepfgen(13)........................................ 9,000
All directors and Named Executive Officers as a group
(11 persons)(14)........................................ 10,793,711 52.0
5% SHAREHOLDERS
Paul M. Montrone(1)(2)(3)(4).............................. 9,811,421 47.3
Paul M. Meister(5)........................................ 2,061,251 9.9
1996 and February 1998 GRATs(2)(4)........................ 3,552,502 17.1
J.P. Morgan and Co. Incorporated(15)...................... 1,717,550 8.3
Thomson Horstmann & Bryant, Inc.(16)...................... 889,250 4.3
- ------------
* Less than 1%.
(1) Includes 894,812 shares of Class B Common Stock and 1,331,107 shares of
Common Stock held directly by Mr. Montrone, 30,000 shares of Common Stock
held directly by Sandra A. Montrone, the wife of Mr. Montrone, and 3,000
shares of Common Stock held by family trust. Also includes the shares of
Class B Common Stock and Common Stock owned by the 1996 GRAT, the February
1998 GRAT and the December 1998 GRAT and the 1999 GRAT (see notes 3, 4 and
5 below). By virtue of his position as co-trustee of the December 1998 GRAT
and the 1999 GRAT and his relationship with the trustee of the 1996 GRAT
and the February 1998 GRAT, as well as his status as the settlor and
annuity beneficiary of such GRATs, Mr. Montrone may be deemed beneficial
owner of all the shares held by such GRATs. The address for Mr. Montrone is
c/o GenTek Inc., Liberty Lane, Hampton, New Hampshire 03842. See also
'Certain Relationships and Affiliate Transactions -- Stockholder
Agreements.'
(2) A grantor retained annuity trust formed in 1996 (the '1996 GRAT') owns
829,140 shares of Class B Common Stock and 1,214,881 shares of Common
Stock. A grantor retained annuity trust formed in February 1998 (the
'February 1998 GRAT') owns 611,903 shares of Class B Common Stock and
896,578 shares of Common Stock. Mr. Paul Montrone was the settlor, and is
the annuity beneficiary, of both the 1996 GRAT and the February 1998 GRAT.
Sandra G. Montrone, the wife of
(footnotes continued on next page)
62
(footnotes continued from previous page)
Mr. Montrone, and Mr. Meister are the co-trustees of the 1996 GRAT and Mrs.
Montrone is the sole trustee with investment and voting discretion of the
February 1998 GRAT. By virtue of her position as sole trustee,
Ms. Montrone may be deemed the beneficial owner of all shares held by the
1996 GRAT and the February 1998 GRAT. Wilmington Trust Company is the
administrative trustee of the February 1998 GRAT. The address for the 1996
GRAT and the February 1998 GRAT is c/o Sandra G. Montrone, as trustee,
Liberty Lane, Hampton, New Hampshire 03842.
(3) Two grantor retained annuity trusts, one formed in December 1998 (the
'December 1998 GRAT') and another formed in March 1999 (the '1999 GRAT'
and, together with the 1996 GRAT, February 1998 GRAT and December 1998
GRAT, the 'Montrone Trusts'), of which Mr. and Ms. Montrone are
co-trustees, each own 811,283 shares of Class B Common Stock and 1,188,717
Shares of Common Stock. Wilmington Trust Company is the administrative
trustee of the December 1998 GRAT and the 1999 GRAT. By virtue of their
position as co-trustees, each of Mr. and Ms. Montrone may be deemed the
beneficial owner of all shares held by the December 1998 GRAT and the 1999
GRAT.
(4) Does not include 100,000 shares of Common Stock held by a charitable
foundation, of which Mr. Montrone is a Director and Ms. Montrone is a
Director and officer. By virtue of their positions with the charitable
foundation, Mr. and Ms. Montrone may be deemed to be beneficial owners of
the shares of Common Stock held by the charitable foundation. Mr. and
Ms. Montrone disclaim any beneficial ownership of the 100,000 shares of
Common Stock held by the charitable foundation.
(5) Includes 10,000 shares of Common Stock owned by Mr. Meister directly, an
aggregate of 7,500 restricted units granted pursuant to the General
Chemical Group's Restricted Unit Plan, of which 1,500 restricted units
vested on each of November 15, 1996, May 15, 1997 and May 15, 1998 and
3,000 restricted units vested on May 15, 1999.
Also includes 829,140 shares of Class B Common Stock and 1,214,881 shares
of Common Stock held by the 1996 GRAT, of which Mr. Meister is a
co-trustee.
(6) Includes 75,000 shares of Common Stock held by Mr. Gildea directly, 25,000
shares of Common Stock held by defined benefit plan of Gildea Investment
Company, a Connecticut S Corporation of which Mr. Gildea is an officer
and sole stockholder and information presented herein is based solely upon
a Schedule 13D filing made with the SEC on February 16, 1999 by Mr. John
W. Gildea, a director of GenTek, on behalf of himself and Network Fund III,
Ltd. ('Network'). Network is an investment fund managed by Gildea
Management Company, of which Mr. Gildea is the Chairman of the Board of
Directors, Chief Executive Officer and sole stockholder. According to such
filing, Network possesses sole voting power over 470,996 shares of the
above shares and sole dispositive power over 470,996 of the above shares
while Mr. Gildea possesses sole voting and sole dispositive power over
all of the above shares. The address of Mr. Gildea is 115 East Putnam
Avenue, Greenwich, CT 06830. The address for Network is P.O. Box 219,
Butterfield House, Grand Cayman, Cayman Islands, BWI.
(7) Includes 20,000 shares of Common Stock held by Mr. Russell's wife, 1,000
shares of Common Stock held by Mr. Russell's daughter, an aggregate of
55,972 restricted units granted pursuant to the General Chemical Group's
Restricted Unit Plan, of which 11,194 restricted units vested on each of
November 15, 1996, May 15, 1997 and May 15, 1998 and 22,390 restricted
units vested on May 15, 1999. Mr. Russell disclaims any beneficial
ownership of the 21,000 shares of Common Stock held by his wife and
daughter.
(8) Consists of 9,000 shares of Common Stock held by Mr. Passino's wife and
children, an aggregate of 27,986 restricted units granted pursuant to the
General Chemical Group's Restricted Unit Plan, of which 5,597 restricted
units vested on each of November 15, 1996, May 15, 1997 and May 15, 1998
and 11,195 restricted units vested on May 15, 1999, options to purchase
40,000 shares of Common Stock, which options vested 12,000 shares on each
of May 15, 1997 and May 15, 1998 and 16,000 shares on May 15, 1999.
Mr. Passino disclaims any beneficial ownership of the 9,000 shares of
Common Stock held by his wife and children.
(9) Includes 2,000 shares of Common Stock held by Mr. Tanis directly, an
aggregate of 16,791 restricted units granted pursuant to the General
Chemical Group's Restricted Unit Plan, of which 5,597 restricted units
vested on each of November 15, 1996, May 15, 1997 and May 15, 1998 and
11,195 restricted units will vest on May 15, 1999. Also includes options to
purchase 40,000 shares of Common Stock, which options vested 12,000 shares
on each of May 15, 1997 and May 15, 1998 and 16,000 shares on May 15, 1999.
(10) Includes 13,633 shares of Common Stock held by Mr. Wilkinson directly,
4,353 shares held by Mr. Wilkinson's spouse, 8,707 restricted units vesting
on May 15, 1999 and options to purchase 20,000 shares of Common Stock,
which options vested 6,000 shares on each of May 15, 1997 and May 15, 1998
and 8,000 shares on May 15, 1999.
(11) Includes 500 shares of Common Stock held by Mr. Klink directly, an
aggregate of 18,657 restricted units granted pursuant to the General
Chemical Group's Restricted Unit Plan, of which 3,732 restricted units
vested on each of November 15, 1996, May 15, 1997 and May 15, 1998 and
7,461 restricted units vested on May 15, 1999. Also includes options to
purchase 20,000 shares of Common Stock, which options vested 6,000 shares
on each of May 15, 1997 and May 15, 1998, and 8,000 shares on May 15, 1999.
(12) Includes 5,000 restricted units granted pursuant to General Chemical
Group's Restricted Unit Plan for Non-Employee Directors and options to
purchase 20,000 shares of Common Stock.
(13) Includes 5,000 restricted units granted pursuant to GenTek's Restricted
Unit Plan for Non-Employee Directors.
(14) Of such shares, 9,811,421 are beneficially owned by Mr. Montrone (see
notes 1, 2, 3 and 4 above) and 590,996 are beneficially owned by
Mr. Gildea (see note 5 above). Also includes the 2,061,251 shares
beneficially owned by Mr. Meister, of which 2,044,021 shares are included
in the shares beneficially owned by Mr. Montrone.
(15) The information presented herein is based solely upon a Schedule 13G filing
made with the SEC by J.P. Morgan and Co. Incorporated ('J.P. Morgan') on
October 8, 1999. According to such filing, J.P. Morgan has sole voting
power over 1,359,650 of the above shares, shared voting power over none of
the above shares and sole dispositive power over all of the above shares.
The address of J.P. Morgan is 60 Wall Street, New York, New York 10260. The
percentage ownership of Common Stock by J.P. Morgan has been calculated
assuming the conversion of all outstanding shares of Class B Common Stock
into Common Stock. Prior to such conversion, the percentage ownership of
Common Stock for J.P. Morgan would be 10.2%.
(16) The information presented herein is based solely upon a Schedule 13G filing
made with the SEC by Thomson Horstmann Bryant, Inc. ('Horstmann') on
January 28, 1999. According to such filing, Horstmann as sole voting power
over 572,600 of the above shares, shared voting power over 15,600 of the
above shares and sole dispositive power over all of the above shares. The
address of Horstmann is Park 80 West, Plaza Two, Saddle Brook, New Jersey
07663. The percentage ownership of Common Stock by Horstmann has been
calculated assuming the conversion of all outstanding shares of Class B
Common Stock into Common Stock. Prior to such conversion, the percentage
ownership of Common Stock for Horstmann would be 5.3%.
63
AFFILIATE RELATIONSHIPS AND TRANSACTIONS
OUR ARRANGEMENTS WITH THE GENERAL CHEMICAL GROUP RELATING TO THE SPINOFF
In connection with the spinoff, the General Chemical Group and GenTek
entered into agreements to facilitate the separation of our manufacturing and
performance products businesses from the industrial chemicals business of
General Chemical Group. For a description of these agreements see 'Our
Arrangements with General Chemical Group Relating to the Spinoff' below.
AGREEMENTS WITH LATONA ASSOCIATES
Latona Associates Inc. is a management company that, since 1995, has
provided General Chemical Group with strategic management, business and
financial advisory services, including guidance and advice related to
financings, security offerings, recapitalizations, restructurings, acquisitions
and tax and employee benefit matters. In 1998, General Chemical Group paid
Latona Associates $5.9 million for such services, of which approximately $4.7
million was attributable to our businesses. Through the first three quarters of
1999, we have paid Latona $3.6 million. Paul M. Montrone, the controlling
stockholder and Chairman of our Board, also controls Latona Associates. In
addition, Paul M. Meister, a member of our Board, is a Managing Director of
Latona Associates.
In connection with the spinoff, Latona Associates agreed to provide its
services separately to us and to General Chemical Group and to split its current
fee between us and General Chemical Group. As a result, we will pay Latona
Associates an annual fee of $4.5 million, payable quarterly in advance, adjusted
annually after 1999 for increases in the U.S. Department of Labor, Bureau of
Labor Statistics, Consumer Price Index. In addition, if we request Latona to
provide advisory services in connection with any acquisition, business
combination or other strategic transaction, we will pay Latona Associates
additional fees, comparable to those received by investment banking firms for
such services (subject to the approval of a majority of our independent
directors). In 1999, Latona Associates has advised us with respect to our
acquisitions of Noma, Defiance and Krone and has received total fees of $3.6
million for services rendered in connection with these transactions. In 1998,
Latona received fees of $0.5 million for advisory services provided with respect
to acquisitions, combinations and other strategic transactions.
Our agreement with Latona Associates is substantially similar to General
Chemical Group's existing agreement with Latona and will extend through 2004.
The agreement may be terminated by us or Latona Associates if the other party
ceases, or threatens to cease, to carry on its business, or commits a material
breach of the agreement which is not remedied within 30 days of notice of such
breach. We may terminate the agreement if Mr. Montrone ceases to hold, directly
or indirectly, shares of our capital stock constituting at least 20% of the
aggregate voting power of our capital stock.
While there can be no assurance that the amount of fees to be paid by
GenTek to Latona Associates will not exceed the amount that GenTek would have to
pay to obtain from unaffiliated third parties the services to be provided by
Latona Associates, GenTek believes that the employees of Latona Associates have
extensive knowledge concerning its business which would be impractical for a
third party to obtain. As a result, GenTek has not compared the fee payable to
Latona Associates with fees that might be charged by third parties for similar
services.
Proposals regarding amendments to, waivers of, extensions of or other
changes in the terms of the agreement with Latona Associates, as well as any
transactions perceived to involve potential conflicts of interest, will be dealt
with on a case-by-case basis, taking into account relevant factors including the
requirements of the New York Stock Exchange and prevailing corporate practices.
REGISTRATION RIGHTS AGREEMENT
In order to facilitate obtaining the private letter ruling of the
Internal Revenue Service concerning the tax-free nature of the spinoff,
Mr. Montrone and the Montrone family trusts converted 5,800,000 of their shares
of Class B Common Stock into Common Stock of General Chemical Group. As a result
of such conversion, the voting power of the shares held or controlled by Mr.
Montrone and the Montrone family trusts decreased from 89.9% to 80.6%. We
believe that, without such conversion, the spinoff could have adverse tax
consequences to General Chemical Group.
64
Under a registration rights agreement, Mr. Montrone and the Montrone
family trusts may request, at any time until April 1, 2004, the registration of
their shares of Common Stock (including shares of Common Stock received upon
conversion of any Class B Common Stock) for sale under the Securities Act. We
will be required to accept up to three requests for registration and, in
addition, to include the shares of Mr. Montrone and the Montrone family trusts
in a proposed registration of shares of Common Stock under the Securities Act in
connection with the sale of shares of Common Stock by us or any of our
stockholders. We will be responsible for the expenses of the registration of
shares of Mr. Montrone and the Montrone family trusts, other than brokerage and
underwriting commissions and taxes relating to the sale of the shares.
65
OUR ARRANGEMENTS WITH GENERAL CHEMICAL GROUP
RELATING TO THE SPINOFF
In connection with the spinoff, General Chemical Group and GenTek
entered into the agreements described in this section to facilitate the
separation of our manufacturing and performance products business from the
industrial chemicals business of General Chemical Group and an orderly
transition in establishing GenTek and General Chemical Group each as separate,
stand-alone companies. The agreements summarized below have been filed as
exhibits to the registration statement of which this prospectus forms a part.
The following summarizes the material terms of such agreements.
Currently, GenTek and General Chemical Group have two common directors:
Messrs. Montrone and Meister. Because Messrs. Montrone and Meister serve as
directors of both GenTek and General Chemical Group, they may have conflicts of
interest in connection with the agreements summarized below. The Boards of
Directors of GenTek and General Chemical Group will deal with proposals
regarding amendments to, waivers of, extensions for other changes in the terms
of the agreements summarized below on a case by case basis, taking into account
the requirements of the New York Stock Exchange and prevailing corporate
practice, including the disclosure of the terms of the potential transaction and
the interests of Messrs. Montrone and Meister or the approval of the transaction
by the disinterested directors of GenTek.
There can be no assurance that the terms of the agreements summarized
below are at least as favorable to GenTek as terms it would have negotiated with
unaffiliated third parties. Given the pre-spinoff relationship of GenTek and
General Chemical Group, the desire of GenTek and General Chemical Group to
continue aspects of their pre-spinoff operations for a transitional period and
the extensive knowledge of GenTek's personnel concerning Group and General
Chemical, it was impracticable or undesirable for GenTek to seek to enter into
similar arrangements with unaffiliated third parties. As a result, GenTek has
not compared the terms of these agreements with the terms it would have
negotiated with unaffiliated third parties.
SEPARATION AGREEMENT
The separation agreement provided for, among other things, the split up
at and after the spinoff between GenTek and General Chemical Group of certain
assets and liabilities held by General Chemical Group before the spinoff. Under
the separation agreement:
GENTEK'S ASSETS: The following became assets of GenTek at or prior to
the spinoff:
the capital stock of General Chemical Corporation;
the capital stock of Noma, Reheis, Defiance, Toledo Technologies Inc.,
Balcrank Products Inc., PDI and the other subsidiaries that are engaged
in our businesses; and
any other assets that are not used principally in the industrial
chemicals business.
GENERAL CHEMICAL GROUP'S ASSETS: The following assets were retained by
General Chemical Group at and after the spinoff:
the capital stock of New Hampshire Oak, General Chemical Industrial
Products Inc., General Chemical Canada Ltd. and the other subsidiaries
that are engaged in the industrial chemicals business of General
Chemical Group;
all of General Chemical Corporation's 51% interest in General Chemical
(Soda Ash) Partners, and all rights of the managing partner of such
partnership; and
all other assets used principally in the industrial chemicals business.
GENTEK'S LIABILITIES: As of the Spinoff, all liabilities of GenTek's
businesses became exclusively the liabilities of our company, including all
liabilities:
66
incurred in the conduct or operation of our business or the ownership
or use of our assets, whether arising before, at or after the spinoff;
of our subsidiaries, whether or not incurred in the conduct or
operation of our businesses or the ownership of the our assets;
of GenTek arising under the separation agreement or any other
agreements with General Chemical Group relating to the spinoff;
undertaken by General Chemical Group in connection with its acquisition
of Noma, Defiance, Reheis, Peridot and Sandco Automotive; and
arising under or in connection with the Form 10, but only to the extent
such liabilities relate to statements in, or omissions from, the Form
10 regarding GenTek or our businesses.
GENERAL CHEMICAL GROUP'S LIABILITIES: All liabilities of General
Chemical Group, other than the liabilities of GenTek just described, have been
retained by General Chemical Group, including all liabilities:
incurred in the conduct or operation of its industrial chemicals
business or the ownership or use of Industrial Assets;
set forth on the balance sheet of the industrial chemicals business;
arising under or in connection with the Form 10, except for liabilities
relating to information or statements in, or omissions from, the
Form 10 regarding GenTek or its businesses;
of General Chemical Group arising under the separation agreement or any
other agreements with GenTek relating to the spinoff; and
of General Chemical Group or any of its subsidiaries that do not relate
either to our businesses or the industrial chemicals business,
including liabilities relating to any business formerly owned or
operated by any of them (other than any such business that had been
engaged in our businesses) or arising out of the sale thereof.
INDEMNIFICATION. After the spinoff, GenTek and General Chemical Group
will indemnify each other and their respective directors, officers, employees
and agents from any losses, including reasonable attorney's fees, incurred by
any respective indemnitee due to the failure of the indemnifying party to
satisfy its obligations under the separation agreement.
If the indemnity is insufficient to hold harmless an indemnified party
for any indemnifiable losses, each indemnifying party will pay its fair share of
the losses. In addition, General Chemical Group will use its best efforts to
maintain directors' and officers' liability insurance coverage at least equal to
General Chemical Group's pre-spinoff directors' and officers' liability
insurance coverage for a period of six years for directors and officers of
General Chemical Group who will become directors and officers of GenTek as of
the spinoff date for their acts as directors and officers of General Chemical
Group for periods prior to the spinoff date.
NON-COMPETITION AND NON-SOLICITATION. Each of GenTek and General
Chemical Group have agreed that, subject to certain exceptions, neither will
compete with the other prior to the fifth anniversary of the spinoff. GenTek and
General Chemical Group have also agreed not to hire, or solicit for employment,
any director, officer or supervisory-level employee of the other until the third
anniversary of the spinoff.
EMPLOYEE BENEFITS AGREEMENT
In connection with the spinoff, GenTek and General Chemical Group
entered into an employee benefits agreement that, among other things, separated
the assets and liabilities under General Chemical Group's employee benefit plans
and other employment-related liabilities between us and General Chemical Group.
As a general matter, GenTek and General Chemical Group each agreed
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(1) to continue to employ our respective employees and
(2) to assume the liabilities existing at the time of the spinoff for our
respective employees and former employees.
The employee benefits agreement also provides for the treatment of
certain retirement plans, investment and savings programs, medical and life
insurance benefits, retiree medical and life insurance benefits and stock
awards.
We and General Chemical Group, effective as of the date of the spinoff,
established or have maintained pension plans, health and welfare plans, a
savings (401(k)) plan, and executive compensation plans to mirror the plans that
General Chemical Group or its subsidiaries sponsored for their employees prior
to the spinoff. The employee benefits agreement provides for the separation of
the amounts necessary to fund the projected benefit obligations under the
General Chemical Group pension plans of our current and former employees, on the
one hand, and General Chemical Group's current and former employees, on the
other hand, determined on an equitable basis in accordance with the actuarial
assumptions used by the applicable General Chemical Group pension plan with
respect to its last completed actuarial report. Similar principles will apply
with respect to any employee benefit plan maintained outside of the United
States.
We have established a long-term incentive plan under which stock
options, stock appreciation rights, and other equity-related incentive awards,
as well as cash performance awards, may be granted. Under the employee benefits
agreement, effective as of the spinoff date, the outstanding General Chemical
Group equity-related awards held by our current or former employees also
received similar awards with respect to our stock, adjusted so as to preserve
(a) the difference between the exercise price and the value of shares of General
Chemical Group prior to the spinoff date and (b) the ratio of the exercise price
per share of our common stock and the common stock of General Chemical Group to
the pre-spinoff fair market value of the General Chemical Group shares relating
to the award.
TRANSITION SUPPORT AGREEMENT
Under a transition support agreement, for a period of up to twelve
months following the spinoff, we will provide General Chemical Group with tax,
legal, accounting, treasury, purchasing services, human resources, insurance
management and claims administration, and certain other administrative services,
and General Chemical Group will provide us with certain services as we may agree
upon. In addition, we provide General Chemical Group with management information
services and related functions, including personnel, hardware and software, on a
service contract basis. This arrangement will remain in effect through
approximately December 2001. During this period, we will provide to General
Chemical Group the services related to the mitigation and remediation of the
potential impact of Year 2000 problems of the General Chemical Group.
We provide General Chemical Group with these general administrative and
management information services and functions for a fee that reflects a pro rata
allocation, based on the extent of services and functions provided, of our
overall costs and expenses for such services and functions, plus an appropriate
margin. Upon not less than 60 days prior written notice, either we or General
Chemical Group may direct the other to discontinue any services provided under
the transition support agreement, except with respect to management information
services and related functions. The transition support agreement may be
terminated by either party for a material uncured breach by the other party, the
insolvency of the other party, or the change of control of the other party. The
agreement also provides that generally neither party will be liable to the other
party for any costs, losses, damages or claims related to services provided by
it under the transition support agreement, other than for gross negligence or
willful misconduct.
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SUBLEASE AGREEMENT
General Chemical Group uses a portion of our office space in Parsippany,
New Jersey under a sublease agreement with our subsidiary, General Chemical
Corporation. The sublease payments by General Chemical Group reflect a pro rata
allocation, based upon the square footage of the subleased premises, of General
Chemical Corporation's overall rental and other occupancy costs. The sublease
agreement also provides for customary maintenance and ancillary services.
TAX SHARING AGREEMENT
We and General Chemical Group entered into a tax sharing agreement which
provides, among other things, that
(1) except for taxes described in clauses (2) and (3) below, we will be
responsible for all taxes of any affiliated consolidated, combined or
unitary tax group that includes GenTek or any of its subsidiaries for all
periods ending on or before the spinoff date;
(2) we and General Chemical Group generally will each be responsible for 50% of
any taxes attributable to the spinoff, including any taxes resulting from
the application of section 355(e) of the Code to the spinoff, including any
taxes resulting from the application of section 355(e) of the Code to the
spinofff, except that we and General Chemical Group will be responsible for
100% of such taxes that are attributable to an act of such party or any of
its subsidiaries;
(3) we will pay to General Chemical Group our share of current taxes of any
affiliated consolidated, combined or unitary tax group that includes us or
any of our subsidiaries, for all periods ending on or before the spinoff
date; and
(4) separate company taxes generally will be borne by the company that is
responsible for such taxes under local law.
The tax sharing agreement also establishes, as between us and General
Chemical Group, procedures for the conduct and settlement of certain tax audits
and related proceedings and the determination of the amount of the tax sharing
payments described above. The tax sharing agreement will not be binding on the
Internal Revenue Service or any other taxing authority and will not affect the
several liability of our company and General Chemical Group and our respective
subsidiaries to the Internal Revenue Service for Federal income taxes of the
General Chemical Group consolidated group relating to periods beginning prior to
the spinoff date.
The tax sharing agreement also restricts the ability of our company and
General Chemical Group to take certain actions which could adversely affect the
tax-free nature of the spinoff including as a result of the recognition of gain
under section 355(e) of the Code. In particular, the Tax Sharing Agreement
provides that in the event Paul Montrone and the Montrone family trusts no
longer control 50% of the voting power of our company or General Chemical Group,
both we and General Chemical Group generally will be prohibited from entering
into any transaction or series of transactions, during the two years following
the spinoff, under which one or more persons would control 50% or more of the
voting power or value of our company or General Chemical Group. The tax sharing
agreement provides that each of our company and General Chemical Group may
enjoin the other company from engaging in any such restricted action.
INTELLECTUAL PROPERTY AGREEMENT
Under an intellectual property agreement, General Chemical Group has the
rights to and interest in the copyrights, trademarks, trade secrets and other
intellectual property of General Chemical Group used prior to the spinoff
primarily in the industrial chemicals business, and we have the rights to and
interest in all other intellectual property of General Chemical Group. As of the
spinoff, we and General Chemical Group each licensed to the other party, on a
non-exclusive basis, those items of
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intellectual property that such party owns and the other party needs to use for
the continued operations of its businesses, subject to customary limitations.
We entered into a license with General Chemical Group regarding the
General Chemical name and logo. We own this name and logo and granted to General
Chemical Group, for a one-time up-front fee, a perpetual license to use this
licensed property in connection with the soda ash and calcium chloride
activities and operations of the industrial chemicals business of General
Chemical Group.
PURCHASES OF SODA ASH AND CALCIUM CHLORIDE
We are an end user of soda ash. We purchase our soda ash requirements
from General Chemical Group, both to meet our own supply needs and to resell to
our distributors and customers who purchase multiple GenTek products. These
purchases are on terms similar to those for our purchases of soda ash from the
industrial chemicals business of General Chemical Group prior to the spinoff. We
will also purchase calcium chloride for resale to our distributors and customers
who purchase multiple products of our businesses. These purchases of soda ash
and calcium chloride are not material to our businesses.
We are party to contracts with end users and distributors of soda ash
and calcium chloride. Prior to the spinoff, we assigned certain of our soda ash
and calcium chloride sales contracts to General Chemical Industrial Products
Inc., a subsidiary of General Chemical Group, except for contracts with
distributors that also cover products of our businesses. These other contracts
remain with us. General Chemical Industrial Products Inc. provides us with soda
ash and calcium chloride to enable us to satisfy any such unassigned contracts,
on terms substantially similar to those provided in the unassigned contracts.
Once these contracts with end users and distributors expire, it is anticipated
that, if acceptable to these customers, General Chemical Industrial Products
Inc. will enter into new contracts with them directly. For the year ended
December 31, 1998 and the nine months ended September 30, 1999, sales by General
Chemical Group to us amounted to $5.3 million and $10.0 million, respectively.
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DESCRIPTION OF CREDIT FACILITY
GENERAL. GenTek and Noma have entered into a credit facility with a
group of lenders and The Chase Manhattan Bank, as administrative agent. The
credit facility provides for $300 million of revolving loans to GenTek, $100
million of tranche A term loans to GenTek and $150 million of tranche B term
loans to Noma. On the spinoff date, GenTek borrowed $250 million under the
revolving portion of the credit facility and all $100 million of the A Term
Loans, and Noma borrowed all $150 million of the B Term Loans. Approximately
$486 million of such borrowings was used to repay a portion of General Chemical
Group's third party indebtedness, including borrowings to finance our
acquisition of Noma and Defiance earlier this year prior to the spinoff. We used
the proceeds of the offering of the old notes to repay part of the amounts
outstanding under the revolving portion of the credit facility, and subsequently
borrowed $159 million under the revolving portion of the credit facility to
finance our acquisition of Krone. See 'Use of Proceeds.'
Our term loan borrowings under the credit facility at September 30, 1999
consisted of $100 million of tranche A term loans, $150 million of tranche B
term loans and $215 million of loans under the revolving portion of the credit
facility. As of September 30, 1999, we had the ability to borrow an additional
$85 million under the revolving portion of the credit facility (excluding $13
million for letters of credit), subject to customary borrowing conditions.
Amounts borrowed under the revolving portion of the credit facility may be used
to finance acquisitions and for general corporate purposes including working
capital, capital expenditures and other payments. A portion of the revolving
portion of the credit facility is available for the issuance of letters of
credit.
SECURITY. All indebtedness of GenTek under the credit facility is
guaranteed, on a joint and several basis, by the direct and indirect domestic
subsidiaries of GenTek (with certain exceptions), and all indebtedness of Noma
under the credit facility is guaranteed by GenTek, the domestic subsidiaries of
GenTek and the subsidiaries of Noma. The credit facility is secured by 100% of
the owned capital stock of the direct and indirect domestic subsidiaries of
GenTek, and 65% of certain foreign subsidiaries of GenTek.
MATURITY; PREPAYMENT. Commitments under the revolving portion of the
credit facility terminate on April 30, 2005, at which time all outstanding
borrowings under the revolving portion of the credit facility will mature and be
payable. The tranche A term loans mature and are payable in the following
amounts (in equal quarterly installments): (a) $2.5 million from September 30,
2000 through June 30, 2001, (b) $5.0 million from September 30, 2001 through
June 30, 2002, (c) $12.5 million from September 30, 2002 through June 30, 2003,
(d) $30.0 million from September 30, 2003 through June 30, 2004, and (e) $50.0
million from September 30, 2004 through April 30, 2005. The tranche B term loans
mature and are payable in the following amounts (in equal quarterly
installments): (a) $1.5 million in each 12-month period beginning September 30,
1999 until September 30, 2006, and (b) $139.5 million from September 30, 2006
through April 30, 2007.
The credit facility is subject to mandatory prepayments out of proceeds
received from the sale or disposition of certain assets, sale or issuance of
certain indebtedness and certain insurance recoveries of GenTek. GenTek may
prepay borrowings under the credit facility without any premium or penalty.
INTEREST RATES. Interest is due on amounts outstanding under the credit
facility on March 31, June 30, September 30 and December 31, except that in the
case of Eurodollar loans, GenTek and Noma may elect to pay interest
semi-annually. The interest rate applicable to borrowings under the credit
facility will be based, at the option of GenTek, on ABR or Eurodollar Rate, in
each case plus a specified margin based on the GenTek's ratio of funded debt to
pro forma EBITDA calculated on a rolling four quarter basis. Such margin on the
revolving portion of the credit facility and the tranche A term loans ranges
between 0% and 0.75% in the case of ABR loans, and between 1.00% and 2.00% in
the case of Eurodollar loans. The margin on the tranche B term loans ranges
between 1.00% and 1.50% in the case of ABR loans and between 2.25% and 2.75% in
the case of Eurodollar loans.
REPRESENTATIONS AND WARRANTIES. The credit facility contains
representations and warranties customarily found in loan agreements for similar
financings.
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COVENANTS; EVENTS OF DEFAULT. The credit facility contains numerous
restrictive financial and other covenants, including without limitation:
(1) restrictions on indebtedness, liens and guarantees;
(2) restrictions on certain mergers, consolidations, liquidations and
dissolutions, sales of assets, investments, leases, changes in lines of
business, modifications of subordinated and other debt instruments,
amendments to the documents executed in connection with the spinoff,
transactions with affiliates, and negative pledge clauses and clauses
restricting subsidiary distributions;
(3) restrictions on certain payments (capital expenditures, prepayment on the
notes and other junior indebtedness, dividend payments, and redemptions or
other payments on the capital stock); and
(4) certain financial tests, including a maximum senior leverage ratio, a
maximum leverage ratio and a minimum interest coverage ratio. The credit
facility provides for certain customary events of default, including an
event of default upon the occurrence of a change of control of GenTek.
The credit facility requires GenTek to comply with the following
financial ratios as of the last day of any of its fiscal quarters, beginning
with the quarter ending September 30, 1999:
Senior Leverage Ratio....................................... 3.75:1.00
Leverage Ratio.............................................. 5.00:1.00
Interest Coverage Ratio..................................... 2.50:1.00
The credit facility has specific tailored definitions of senior leverage
ratio, leverage ratio and interest coverage ratio. We urge you to read the
credit agreement in order to understand these definitions and the financial
ratios. GenTek believes that it is currently in compliance with the covenants in
its credit facility.
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DESCRIPTION OF NOTES
GenTek issued the old notes under an indenture, dated as of August 9,
1999, between GenTek and U.S. Bank Trust National Association, as trustee. The
new notes will also be issued under the indenture. The terms of the new notes
are identical in all material respects to the terms of the old notes except that
the new notes are registered under the Securities Act and therefore will not
contain restrictions on transfer or provisions relating to additional interest.
The following is a summary of the material provisions of the indenture.
It does not contain all of the information that may be important to an investor
in the notes. It is subject to, and is qualified in its entirety by reference
to, the Trust Indenture Act of 1939, and to all of the provisions of the
indenture. GenTek has filed the indenture as an exhibit to the registration
statement of which this prospectus is a part. The definitions of most
capitalized terms used in the following summary are set forth below under
'Certain Definitions.' References in this 'Description of the Notes' section to
'GenTek' mean only GenTek Inc. and not any of its subsidiaries.
SERVICE CHARGES AND TAXES ON TRANSFER OR EXCHANGE
Under the indenture, GenTek will not impose any service charge for any
registration of transfer or exchange of the notes. However, GenTek may require a
holder of notes to pay any tax or other governmental charge that may be imposed
in connection with such transfer or exchange.
RANKING
The notes:
rank junior to, and be subordinated in right of payment to, all
existing and future Senior Indebtedness of GenTek;
pari passu in right of payment with all senior subordinated
indebtedness of GenTek; and
senior in right of payment to all Subordinated Indebtedness of GenTek.
The notes will also be effectively subordinated to any secured
Indebtedness of GenTek to the extent of the value of the assets securing such
Indebtedness.
The indebtedness evidenced by the Subsidiary Guarantees:
ranks junior to, and is subordinated in right of payment to, all
existing and future Guarantor Senior Indebtedness of the applicable
Subsidiary Guarantor;
pari passu in right of payment with all senior subordinated
Indebtedness of such Subsidiary Guarantor; and
senior in right of payment to all Subordinated Indebtedness of such
Subsidiary Guarantor.
The Subsidiary Guarantees will also be effectively subordinated to any
secured Indebtedness of the applicable Subsidiary Guarantor to the extent of the
value of the assets securing such Indebtedness.
At September 30, 1999, GenTek had $555.4 million of Senior Indebtedness
outstanding and the ability to borrow an additional $85.0 million of Senior
Indebtedness under the Credit Facility. All debt incurred under the $550.0
million Credit Facility will be Senior Indebtedness of GenTek and will be
guaranteed by the Subsidiary Guarantors on a senior basis.
The operations of GenTek are conducted through its subsidiaries. Unless
the subsidiary is a Subsidiary Guarantor, claims of creditors of such
subsidiaries, including trade creditors, and claims of preferred stockholders
(if any) of such Subsidiaries will have priority with respect to the assets and
earnings of such subsidiaries over the claims of the creditors of GenTek,
including holders of the notes. The notes, therefore, will be effectively
subordinated to creditors, including trade creditors, and preferred
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stockholders (if any) of the Subsidiaries of GenTek that are not Subsidiary
Guarantors. At September 30, 1999, the Non-Guarantor Subsidiaries had total
indebtedness (excluding indebtedness owed to GenTek) of $231 million. See
' -- Subordination' below and the risk factors relating to contractual and
structural subordination and GenTek's dependence upon subsidiaries under 'Risk
Factors' herein.
MATURITY, INTEREST AND PRINCIPAL OF THE NOTES
The notes will be limited to $200 million aggregate principal amount and
will mature on August 1, 2009. Interest on the notes will accrue at a rate of
11% per annum and will be payable semi-annually in arrears on each February 1
and August 1, commencing February 1, 2000, to the holders of record of notes at
the close of business on January 15 and July 15, respectively, immediately
preceding such interest payment date. Cash interest will accrue from the most
recent interest payment date to which interest has been paid or, if no interest
has been paid, from August 9, 1999. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
OPTIONAL REDEMPTION
GenTek may opt to redeem the notes in whole or in part, at any time on
or after August 1, 2004, at the redemption prices (expressed as a percentage of
principal amount) set forth below, plus accrued and unpaid interest thereon, if
any, to the redemption date (subject to the right of holders of record of notes
on the relevant record date to receive interest due on the relevant interest
payment date), if redeemed during the twelve-month period beginning on August 1
of the years indicated below:
REDEMPTION
YEAR PRICE
- ---- -----
2004........................................................ 105.500%
2005........................................................ 103.667%
2006........................................................ 101.833%
2007 and thereafter......................................... 100.000%
In addition, at any time and from time to time on or prior to August 1,
2002, GenTek may redeem up to 35% of the originally issued aggregate principal
amount of the notes with the net cash proceeds of one or more Equity Issuances,
at a redemption price in cash equal to 111.0% of the principal amount thereof,
plus accrued and unpaid interest thereon, if any, to the date of redemption
(subject to the right of holders of record of note on the relevant record date
to receive interest due on the relevant interest payment date); provided,
however, that at least 65% of the originally issued aggregate principal amount
of the notes must remain outstanding immediately after giving effect to each
such redemption (excluding any notes held by GenTek or any of its Affiliates).
Notice of any such redemption must be given within 90 days after the date of the
closing of the relevant Equity Issuance.
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the notes are to be redeemed at any
time pursuant to an optional redemption, selection of such notes for redemption
will be made by the trustee in compliance with the requirements of the principal
national securities exchange, if any, on which the notes are listed or, if the
notes are not then listed on a national securities exchange, on a pro rata
basis, by lot or by such method as the trustee shall deem fair and appropriate;
provided, however, that no notes of a principal amount of $1,000 or less shall
be redeemed in part; provided, further, that if a partial redemption is made
with the net cash proceeds of an Equity Issuance, selection of the notes or
portions thereof for redemption shall be made by the trustee only on a pro rata
basis or on as nearly a pro rata basis as is practicable (subject to the
procedures of The Depository Trust Company), unless such method is otherwise
prohibited.
Notice of redemption shall be mailed by first-class mail at least 30 but
not more than 60 days before the redemption date to each holder of notes to be
redeemed at its registered address. If any note is to be redeemed in part only,
the notice of redemption that relates to such note shall state the portion
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of the principal amount thereof to be redeemed. A new note in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the holder
thereof upon cancellation of the original note. On and after the redemption
date, interest will cease to accrue on notes or portions thereof called for
redemption as long as GenTek has deposited with the paying agent for the notes
funds in satisfaction of the applicable redemption price pursuant to the
indenture.
SUBORDINATION
The payment of the principal of, premium, if any, and interest on and
other Obligations relating to the Notes is subordinated in right of payment, as
provided in the indenture, to the prior payment in full in cash of all Senior
Indebtedness.
Upon any payment or distribution of assets or securities of GenTek of
any kind or character, whether in cash, property or securities (excluding any
payment in, or distribution of, Permitted Junior Securities and excluding any
payment from the trust described under 'Satisfaction and Discharge of Indenture;
Defeasance' if the funding of such trust was permitted (a 'Defeasance Trust
Payment')), upon any dissolution or winding-up or total liquidation or
reorganization of GenTek, whether voluntary or involuntary or in bankruptcy,
insolvency, receivership or other proceedings, all Senior Indebtedness shall
first be paid in full in cash before the holders or the trustee on behalf of the
holders shall be entitled to receive any payment or distribution by or on behalf
of GenTek of the principal of, premium, if any, or interest on, or other
Obligations with respect to, the notes, or any payment or distribution by or on
behalf of the Company to acquire any of the notes or related Obligations for
cash, property or securities, or any payment or distribution by or on behalf of
GenTek with respect to the notes of any cash, property or securities (excluding
any payment in, or distribution of, Permitted Junior Securities and excluding
any Defeasance Trust Payment).
Before any payment or distribution may be made by, or on behalf of,
GenTek of the principal of, premium, if any, or interest on, or other
Obligations with respect to, the notes upon any such dissolution or winding-up
or total liquidation or reorganization or in bankruptcy, insolvency,
receivership or other proceedings, any payment in, or distribution of, assets or
securities of GenTek of any kind or character, whether in cash, property or
securities (excluding any payment or distribution of Permitted Junior Securities
and excluding any Defeasance Trust Payment), to which the holders or the trustee
on their behalf would be entitled, but for the subordination provisions of the
indenture, shall be made by GenTek or by any receiver, trustee in bankruptcy,
liquidation trustee, agent or other Person making such payment or distribution,
directly to the holders of the Senior Indebtedness (pro rata to such holders on
the basis of the respective amounts of Senior Indebtedness held by such holders)
or their representatives or to the trustee or trustees or agent or agents under
any agreement or indenture pursuant to which any of such Senior Indebtedness may
have been issued, as their respective interests may appear, to the extent
necessary to pay all such Senior Indebtedness in full in cash after giving
effect to any prior or concurrent payment, distribution or provision therefor to
or for the holders of such Senior Indebtedness.
No direct or indirect payment or distribution (excluding any payment in,
or distribution of, Permitted Junior Securities and excluding any Defeasance
Trust Payment) by or on behalf of GenTek or any Subsidiary of principal of,
premium, if any, or interest on, or other Obligations with respect to, the
Notes, whether pursuant to the terms of the notes, upon acceleration, pursuant
to an Offer to Purchase, redemption, defeasance, other purchase or otherwise,
will be made if, at the time of such payment or distribution, there exists a
default in the payment of all or any portion of the Obligations on any
Designated Senior Indebtedness, whether at maturity, on account of mandatory
prepayment, acceleration or otherwise, and such default shall not have been
cured or waived or the benefits of this sentence waived by or on behalf of the
holders of such Designated Senior Indebtedness.
In addition, during the continuance of any event of default (other than
a payment default described in the preceding sentence) with respect to any
Designated Senior Indebtedness pursuant to which the maturity thereof may be
immediately accelerated, and upon receipt by the Trustee of written notice (a
'Payment Blockage Notice') from the holder or holders of such Designated Senior
Indebtedness or the trustee or agent acting on behalf of the holders of such
Designated Senior Indebtedness, then,
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unless and until such event of default has been cured or waived or has ceased to
exist or such Designated Senior Indebtedness has been discharged or repaid in
full in cash or the benefits of these provisions have been waived by the holders
of such Designated Senior Indebtedness, no direct or indirect payment or
distribution (excluding any payment in, or distribution of, Permitted Junior
Securities and excluding any Defeasance Trust Payment) will be made by or on
behalf of GenTek of principal of, premium, if any, or interest on, or other
Obligations with respect to, the notes, to such holders, during a period (a
'Payment Blockage Period') commencing on the date of receipt of such notice by
the trustee and ending 179 days thereafter.
Notwithstanding anything in the subordination provisions of the
Indenture or the Notes to the contrary:
in no event will a Payment Blockage Period extend beyond 179 days from
the date the Payment Blockage Notice in respect thereof was given;
there shall be a period of at least 181 consecutive days in each
360-day period when no Payment Blockage Period is in effect; and
not more than one Payment Blockage Period may be commenced with respect
to the notes during any period of 365 consecutive days.
No event of default that existed or was continuing on the date of
commencement of any Payment Blockage Period with respect to the Designated
Senior Indebtedness initiating such Payment Blockage Period (to the extent the
holder of Designated Senior Indebtedness, or trustee or agent, giving notice
commencing such Payment Blockage Period had knowledge of such existing or
continuing event of default) may be, or be made, the basis for the commencement
of any other Payment Blockage Period by the holder or holders of such Designated
Senior Indebtedness or the trustee or agent acting on behalf of such Designated
Senior Indebtedness, whether or not within a period of 365 consecutive days,
unless such event of default has been cured or waived for a period of not less
than 90 consecutive days. If, notwithstanding the foregoing, GenTek (or any
other Person on behalf of GenTek) makes any payment or distribution to the
trustee or to holders prohibited by the subordination provisions of the
indenture, then such payment or distribution will be required to be paid over to
or for the benefit of holders of Designated Senior Indebtedness.
The failure to make any payment or distribution for or on account of the
Notes by reason of the provisions of the Indenture described under this
'Subordination' heading will not be construed as preventing the occurrence of
any Event of Default in respect of the Notes. See 'Events of Default' below.
By reason of the subordination provisions described above, in the event
of insolvency of GenTek, funds which would otherwise be payable to holders of
notes will be paid to the holders of Senior Indebtedness to the extent necessary
to pay the Senior Indebtedness in full in cash, and GenTek may be unable to meet
fully its obligations with respect to the notes.
The indenture will contain substantially similar subordination
provisions relating to each Subsidiary Guarantor's obligations under its
Subsidiary Guarantee.
THE GUARANTEES
Each of the Subsidiary Guarantors will fully and unconditionally
guarantee (each, a 'Subsidiary Guarantee'), on a joint and several basis, all of
GenTek's obligations under the notes and the indenture, including the
obligations to pay principal, premium, if any, and interest with respect to the
notes. The Subsidiary Guarantees will be general unsecured obligations of the
Subsidiary Guarantors. The obligations of each Subsidiary Guarantor under its
Subsidiary Guarantee will be subordinated and junior in right of payment to the
prior payment in full of all existing and future Guarantor Senior Indebtedness
of such Subsidiary Guarantor to substantially the same extent as the notes are
subordinated to all existing and future Senior Indebtedness of GenTek.
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Under the indenture, each of GenTek's Eligible Subsidiaries on the Issue
Date will be a Subsidiary Guarantor. Pursuant to the indenture, after the Issue
Date, GenTek will cause each Eligible Subsidiary formed or acquired thereafter
that borrows under, or is required to become a guarantor of, the Credit Facility
to execute and deliver to the trustee a supplemental indenture pursuant to which
such Eligible Subsidiary will become a Subsidiary Guarantor. In addition, GenTek
may, at its option, cause any of its other Subsidiaries that becomes a guarantor
of the Credit Facility to execute and deliver to the trustee a supplemental
indenture pursuant to which such Subsidiary will become a Subsidiary Guarantor.
Eligible Subsidiaries are all Restricted Subsidiaries, other than:
Foreign Subsidiaries,
Subsidiaries of Foreign Subsidiaries, and
Accounts Receivable Subsidiaries.
Under the current Credit Facility, all Subsidiaries of the Company
(other than Foreign Subsidiaries) 80% or more of the common Equity Interests of
which is owned directly or indirectly by GenTek (other than through any Foreign
Subsidiary) are required to guaranty GenTek's obligations under the Credit
Facility. In addition, GenTek may, at its option, cause any of its other
Subsidiaries to guaranty GenTek's obligations under the Credit Facility.
Pursuant to the Subsidiary Guarantees, if GenTek defaults in payment of
any amount owing in respect of any Notes, each Subsidiary Guarantor will be
obligated to duly and punctually pay the same. Pursuant to the terms of the
indenture, each of the Subsidiary Guarantors has agreed that its obligations
under its Guarantee will be unconditional, irrespective of the absence of any
action to enforce the same or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a guarantor.
Notwithstanding the foregoing, the obligations of each Subsidiary
Guarantor will be limited to an amount not to exceed the maximum amount that can
be guaranteed, as it relates to such Subsidiary Guarantor, without being
voidable under applicable law, including laws relating to fraudulent conveyance
or fraudulent transfer or similar laws affecting the rights of creditors
generally.
If no Default exists or would exist under the indenture, concurrently
with any sale or disposition of any Subsidiary Guarantor by merger, sale of all
or substantially all of its assets, liquidation or otherwise which is in
compliance with the terms of the indenture (other than a transaction subject to
the provisions described under 'Merger and Consolidation') such Subsidiary
Guarantor and each Subsidiary of such Subsidiary Guarantor that is also a
Subsidiary Guarantor will automatically and unconditionally be released from all
obligations under its Subsidiary Guarantee. In addition, subject to the
foregoing conditions, any Subsidiary Guarantor will automatically and
unconditionally be released from all obligations under its Subsidiary Guarantee,
unless GenTek otherwise elects, if such Subsidiary Guarantor:
is designated as an Unrestricted Subsidiary in compliance with the
terms of the Indenture or
ceases to be a guarantor of, or is released from its guarantees of, and
all pledges and security granted in connection with, the Credit
Facility.
OFFER TO PURCHASE UPON CHANGE OF CONTROL
Following the occurrence of a Change of Control, GenTek shall notify the
holders of such occurrence in the manner prescribed by the indenture and shall,
within 30 days after the Change of Control Date, make an Offer to Purchase all
notes then outstanding, and shall purchase all notes validly tendered, at a
purchase price in cash equal to 101% of the aggregate principal amount thereof,
plus accrued and unpaid interest thereon, if any, to the Purchase Date (subject
to the right of holders of record on the relevant record date to receive
interest due on the relevant interest payment date). GenTek's obligations to
make and consummate an Offer to Purchase following the occurrence of a
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Change of Control may be satisfied if another Person makes and consummates such
Offer to Purchase in the manner and at the times prescribed herein.
If a Change of Control occurs which also constitutes an event of default
under the Credit Facility or any other Indebtedness, the lenders under the
Credit Facility or such other Indebtedness would be entitled to exercise the
remedies available to them as lenders under applicable law and pursuant to the
terms of the Credit Facility or such Indebtedness. Any claims of such lenders
holding secured indebtedness of GenTek or Senior Indebtedness will be prior to
any claim of the holders, as more fully discussed elsewhere in this prospectus.
If an Offer to Purchase is made, there can be no assurance that GenTek
will have available funds sufficient to pay for all of the notes that might be
tendered by holders seeking to accept the Offer to Purchase. If GenTek fails to
repurchase all of the notes tendered for purchase, such failure will constitute
an Event of Default under the indenture. See 'Events of Default' below.
If GenTek makes an Offer to Purchase, GenTek will comply with all
applicable tender offer laws and regulations, including, Section 14(e) and
Rule 14e-1 under the Exchange Act, and any other applicable Federal or state
securities laws and regulations and any applicable requirements of any
securities exchange on which the notes are listed, and any violation of the
provisions of the indenture relating to such Offer to Purchase occurring as a
result of such compliance shall not be deemed an Event of Default or an event
that, with the passing of time or giving of notice, or both, would constitute an
Event of Default.
Except as described above with respect to a Change of Control, the
indenture does not contain provisions that permit the holders to require that
GenTek repurchase or redeem the notes in the event of a takeover,
recapitalization or similar transaction.
COVENANTS
The indenture will contain the following covenants:
LIMITATION ON INCURRENCE OF INDEBTEDNESS AND PREFERRED EQUITY INTERESTS.
(1) GenTek will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, Incur any Indebtedness, and (2) GenTek will not permit
any Restricted Subsidiary to issue any Preferred Equity Interests (other than to
the Company or to a Restricted Subsidiary); provided, however, that GenTek
and/or any Restricted Subsidiary may Incur Indebtedness and a Restricted
Subsidiary may issue Preferred Equity Interests (other than Disqualified Equity
Interests) if, at the time of and immediately after giving pro forma effect
thereto and the application of the proceeds therefrom, GenTek's Consolidated
Coverage Ratio would be greater than or equal to:
2.25 to 1.0, if such Indebtedness is Incurred or Preferred
Equity Interest is issued on or prior to February 1, 2001,
and
2.5 to 1.0, if such Indebtedness is Incurred or Preferred
Equity Interest is issued after February 1, 2001.
The provisions of the first paragraph of this covenant will not apply to
the Incurrence of any Permitted Indebtedness.
For purposes of determining compliance with this covenant;
(x) in the event that an item of Indebtedness meets the criteria of more than
one of the categories of Permitted Indebtedness described in clauses (1)
through (11) of the definition thereof or is being considered for
Incurrence pursuant to the first paragraph of this covenant, GenTek shall,
in its sole discretion, classify such item of Indebtedness;
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(A) as any of the appropriate items of Permitted Indebtedness (and not
applied for purposes of calculating the amount of Indebtedness that
may be Incurred under the Consolidated Coverage Ratio of the first
paragraph of this covenant); or
(B) as Indebtedness being Incurred under the Consolidated Coverage Ratio
of the first paragraph of this covenant, and thereafter may, at its
discretion, reclassify such item of Indebtedness from time to time in
any manner that complies with this covenant at the time of such
reclassification; provided that amounts outstanding under clauses (1)
and (4) of Permitted Indebtedness on the Issue Date may not be
reclassified; and
(y) to avoid duplication, with respect to any item of Indebtedness, any other
obligation of the obligor on such Indebtedness (or of any other Person
that could have Incurred such Indebtedness under this covenant) arising
under any guaranty, Lien or letter of credit, bankers' acceptance or other
similar instrument or obligation supporting such Indebtedness shall be
disregarded to the extent that such guaranty, Lien or letter of credit,
bankers' acceptance or other similar instrument or obligation secures the
principal amount of such Indebtedness and the Incurrence of such
Indebtedness has otherwise been included in determining compliance with
this covenant.
LIMITATION ON RESTRICTED PAYMENTS.
GenTek will not, and will not cause or permit any Restricted Subsidiary
to, directly or indirectly,
(1) declare or pay any dividend or any other distribution in respect of any
Equity Interests of GenTek or make any payment or distribution to the
direct or indirect holders (in their capacities as such) of Equity
Interests of GenTek, other than:
(a) any dividends, distributions and payments made to GenTek or any
Restricted Subsidiary and
(b) dividends or distributions payable to any Person solely in Qualified
Equity Interests of GenTek or in options, warrants or other rights to
purchase Qualified Equity Interests of GenTek;
(2) purchase, redeem or otherwise acquire or retire for value any Equity
Interests of GenTek (other than any Equity Interests of GenTek owned by
GenTek or any Restricted Subsidiary);
(3) purchase, redeem, defease or retire for value, or make any principal
payment on, prior to any scheduled maturity, scheduled repayment or
scheduled sinking fund payment, any Subordinated Indebtedness, other than:
(a) any Subordinated Indebtedness held by GenTek or any Restricted
Subsidiary and
(b) any purchase, redemption, defeasance or other acquisition or
retirement for value in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case due
within one year of the date of such acquisition or retirement; or
(4) make any Investment (other than a Permitted Investment) in any Person
(any such payment or any other action described in (1), (2), (3) or (4) each, a
'Restricted Payment'); unless
(A) no Default shall have occurred and be continuing at the time of or
immediately after giving effect to such Restricted Payment;
(B) immediately after giving effect to such Restricted Payment, GenTek would be
able to Incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) under the Consolidated Coverage Ratio of the first paragraph
of the 'Limitation on Incurrence of Indebtedness and Preferred Equity
Interests' covenant; and
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(C) immediately after giving effect to such Restricted Payment, the aggregate
amount of all Restricted Payments declared or made on or after the Issue
Date does not exceed an amount equal to the sum of:
(1) 50% of cumulative Consolidated Net Income determined for the period
(taken as one accounting period) from January 1, 1999 and ending on
the last day of the most recent fiscal quarter immediately preceding
the date of such Restricted Payment for which consolidated financial
statements of GenTek are available (or, if such cumulative
Consolidated Net Income shall be a loss, minus 100% of such loss);
plus
(2) the aggregate net cash proceeds and the Fair Market Value of
property, in each case, received by GenTek either:
(a) as capital contributions to GenTek after the Issue Date; or
(b) from the issue and sale (other than to a Subsidiary of GenTek)
of Qualified Equity Interests of GenTek after the Issue Date
(excluding the net proceeds:
(a) from any issuance or sale of Qualified Equity Interests
or capital contribution if such net proceeds are to be
made the subject of an optional redemption prior to
August 1, 2002; or
(b) from any issuance or sale of Equity Interests or capital
contribution financed, directly or indirectly, using
funds borrowed from GenTek or any Subsidiary of GenTek
until and to the extent such borrowing is repaid; or
(c) from any issuance or sale of Designated Preferred
Stock); plus
(3) the principal amount (or accreted amount (determined in accordance
with GAAP), if less) of any Indebtedness of GenTek or any Restricted
Subsidiary Incurred after the Issue Date which has been converted
into or exchanged for Qualified Equity Interests of GenTek after the
Issue Date; plus
(4) in the case of the disposition or repayment of any Investment
constituting a Restricted Payment made after the Issue Date, an
amount (to the extent not included in the computation of Consolidated
Net Income) equal to the lesser of:
(a) the return of capital with respect to such Investment
(including the proceeds of such disposition); and
(b) the amount of such Investment which was treated as a Restricted
Payment, in either case, less the cost of the disposition of
such Investment and net of taxes to the extent such costs and
taxes exceed the amount, if any, by which the proceeds of such
disposition or repayment exceed the lesser of the amounts
referred to in the preceding such clauses (a) and (b) of this
clause (4); plus
(5) so long as the Designation thereof was treated as a Restricted Payment
made after the Issue Date, with respect to any Unrestricted Subsidiary
as to which a Revocation has occurred in accordance with the
'Designation of Unrestricted Subsidiaries' covenant below, the lesser
of
(a) the Fair Market Value of the Investment of GenTek or any
Restricted Subsidiary in such Subsidiary as of the date of such
Revocation; or
(b) the Designation Amount with respect to such Designation; plus
(6) without duplication;
(a) to the extent not included in the computation of Consolidated
Net Income, the amount of cash dividends or cash distributions
(other than, in the case of an Unrestricted Subsidiary that is
treated as a partnership for tax purposes, to permit GenTek or
a Restricted
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Subsidiary to pay taxes related to its interest in such
Unrestricted Subsidiary) received from any Unrestricted
Subsidiary since the Issue Date; and
(b) the amount equal to the net reduction in Investments in an
Unrestricted Subsidiary resulting from the repayment of
principal of loans or other advances or other transfers of
assets to GenTek or any Restricted Subsidiary from such
Unrestricted Subsidiary; minus
(7) the greater of (x) $0 and (y) the Designation Amount (measured as of
the date of Designation) with respect to any Subsidiary of GenTek
which has been designated as an Unrestricted Subsidiary after the
Issue Date in accordance with the 'Designation of Unrestricted
Subsidiaries' covenant below; plus
(8) $20.0 million.
For purposes of the preceding clause (C), the value of the aggregate net
proceeds received by GenTek upon the issuance of Capital Stock either upon the
conversion of convertible Indebtedness or in exchange for outstanding
Indebtedness or upon the exercise of options, warrants or rights will be the net
proceeds received upon the issuance of such Indebtedness, options, warrants or
rights plus the incremental amount of cash or Fair Market Value of other
property received by GenTek upon the conversion, exchange or exercise thereof.
For purposes of this covenant, the amount of any Restricted Payment, if other
than cash, shall be the Fair Market Value of the asset(s) proposed to be
transferred by GenTek or such Restricted Subsidiary, as the case may be,
pursuant to such Restricted Payment.
The foregoing provisions will not prevent:
(1) the payment of any dividend or distribution on, or redemption of, Equity
Interests within 60 days after the date of declaration of such dividend or
distribution or the giving of formal notice of such redemption, if at the
date of such declaration or giving of such formal notice such payment or
redemption would comply with the provisions of the indenture;
(2) the purchase, redemption, retirement or other acquisition of any Equity
Interests in exchange for, or out of the net cash proceeds of the
substantially concurrent issue and sale (other than to a Subsidiary of
GenTek) of, Qualified Equity Interests of GenTek or a substantially
concurrent capital contribution to GenTek; provided that any such net cash
proceeds and the value of any Qualified Equity Interests issued in exchange
for such retired Equity Interests are excluded from clause (C)(2) of the
preceding paragraph;
(3) the purchase, redemption, retirement, defeasance or other acquisition of
Subordinated Indebtedness, Disqualified Equity Interests of the Company or
Designated Preferred Stock of GenTek or any other payment thereon, made in
exchange for, or out of the net cash proceeds of
(a) a substantially concurrent issue and sale (other than to a Subsidiary
of GenTek) of, Qualified Equity Interests of GenTek or a
substantially concurrent capital contribution to GenTek; provided
that any such net cash proceeds and the value of any Qualified Equity
Interests issued in exchange for Subordinated Indebtedness are
excluded from clauses (C)(2) and (C)(3) of the preceding paragraph;
or
(b) a substantially concurrent issue and sale of other Subordinated
Indebtedness having a Weighted Average Life to Maturity no less than
that of the Subordinated Indebtedness being purchased, redeemed,
retired, defeased or otherwise being acquired; or
(c) a substantially concurrent issue and sale of Disqualified Equity
Interests of GenTek or Designated Preferred Stock of GenTek;
(4) Permitted Equity Incentive Payments;
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(5) any Investment constituting a Restricted Payment in any Person that is made
out of the net cash proceeds received by GenTek either; as
(a) a substantially concurrent capital contribution; or
(b) a substantially concurrent issue and sale (other than to a Subsidiary
of GenTek) of Qualified Equity Interests of GenTek, provided that
such net cash proceeds are excluded from clause (C)(2) of the
preceding paragraph;
(6) any purchase, redemption, repurchase, defeasance or other acquisition or
retirement of Subordinated Indebtedness to the extent required by the
agreement governing such Subordinated Indebtedness, following the
occurrence of a Change of Control (or other similar event described therein
as a 'change of control'), but only if GenTek shall have complied with the
covenant described under ' -- Change of Control' and, if required,
purchased all Notes tendered pursuant to the offer to repurchase all the
Notes required thereby, prior to or concurrently with purchasing or
repaying such Subordinated Indebtedness;
(7) to the extent of surplus legally available therefor pursuant to applicable
law the payment of regular dividends to the holders of common stock of
GenTek in an amount not to exceed $7.5 million per year in the aggregate;
and
(8) the declaration and payment of regularly accruing dividends in cash or
in-kind to holders of Disqualified Equity Interests or Designated Preferred
Stock of GenTek, in each case issued after the Issue Date; provided,
however, that in the case of each of clauses (2) through (8), no Default
shall have occurred and be continuing or would arise therefrom.
In determining the amount of Restricted Payments permissible under this
covenant, amounts expended under clauses (1) and (8) of the immediately
preceding paragraph shall be included as Restricted Payments and amounts
expended pursuant to any other clauses shall be excluded. The amount of any
non-cash Restricted Payment shall be deemed to be equal to the Fair Market Value
thereof at the date of the making of such Restricted Payment. For purposes of
determining compliance with this covenant, in the event that a Restricted
Payment meets the criteria of more than one of the exceptions described in
clauses (1) through (8) above or is entitled to be made pursuant to the first
paragraph of this covenant, GenTek may, in its sole discretion, classify such
Restricted Payment in any manner that complies with this covenant at the time of
such Restricted Payment.
LIMITATION ON LIENS.
GenTek will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, assume, incur, create or suffer to exist any Liens of
any kind against or upon any of their respective properties or assets, whether
owned on the Issue Date or thereafter acquired, or any proceeds therefrom, to
secure any Indebtedness (an 'Initial Lien') unless contemporaneously therewith
effective provision is made, in the case of GenTek, to secure the notes and all
other amounts due under the Indenture and, in the case of a Restricted
Subsidiary that is a Subsidiary Guarantor, to secure such Restricted
Subsidiary's Subsidiary Guarantee and all other amounts due under the indenture,
equally and ratably with such Indebtedness (or, in the event that such
Indebtedness is subordinated in right of payment to the notes or any Subsidiary
Guarantee, prior to such Indebtedness) with a Lien on the same properties and
assets securing such Indebtedness for so long as such Indebtedness is secured by
such Lien, except for:
(1) Liens securing any Senior Indebtedness or Guarantor Senior Indebtedness or
any guaranty of Senior Indebtedness or Guarantor Senior Indebtedness by
GenTek or any Restricted Subsidiary; and
(2) Permitted Liens.
Any Lien created in favor of the notes pursuant hereto will be automatically and
unconditionally released and discharged upon:
(1) the unconditional release and discharge of the Initial Lien to which it
relates; or
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(2) any sale, exchange or transfer to any Person that is not an Affiliate of
GenTek or any Restricted Subsidiary of the property or assets secured by
such Initial Lien, or of all of the Equity Interests held by GenTek and the
Restricted Subsidiaries in, or all or substantially all of the assets of,
the Restricted Subsidiary whose property or assets were the subject of such
Lien, provided that, in the case of this clause (2), the provisions of the
covenant 'Disposition of Proceeds of Asset Sales' are, to the extent
applicable, complied with in connection with such sale, exchange or
transfer.
GenTek and the Subsidiary Guarantors shall not be required to comply
with the foregoing covenant so long as such covenant would be prohibited by the
terms of the Credit Facility without giving effect to a replacement or successor
refinancing thereof.
DISPOSITION OF PROCEEDS OF ASSET SALES.
GenTek will not, and will not cause or permit any Restricted Subsidiary
to, directly or indirectly, make any Asset Sale; unless
(1) GenTek or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the Fair
Market Value of the assets sold or otherwise disposed of; and
(2) at least 75% of such consideration consists of cash, Cash Equivalents or
Permitted Consideration or any combination thereof; provided that the
principal amount (or accreted value) of any:
(A) (x) Indebtedness (other than any Subordinated Indebtedness or Pari
Passu Debt) of the Company or any Restricted Subsidiary that is
actually assumed by the transferee in such Asset Sale and from which
GenTek and the Restricted Subsidiaries are fully and unconditionally
released and (y) Indebtedness of a Restricted Subsidiary that is no
longer a Restricted Subsidiary as a result of such Asset Sale to the
extent that GenTek and each other Restricted Subsidiary are released
from their guarantee of such Indebtedness in connection with such
Asset Sale, shall be deemed to be cash for purposes of determining
the percentage of cash consideration received by GenTek or the
Restricted Subsidiaries; and
(B) notes or other securities or similar obligations received by GenTek
or the Restricted Subsidiaries from such transferee that are
immediately converted, sold or exchanged (or are converted, sold or
exchanged within 90 days of the related Asset Sale) by GenTek or the
Restricted Subsidiaries into cash
shall be deemed to be cash in an amount equal to the net cash proceeds realized
upon such conversion, sale or exchange for purposes of determining the amount of
cash consideration received by the Company or the Restricted Subsidiaries.
With respect to any Asset Sale, GenTek or such Restricted Subsidiary, as
the case may be, may:
(1) apply the Net Cash Proceeds of such Asset Sale within 365 days of receipt
thereof to repay Senior Indebtedness;
(2) apply the Net Cash Proceeds of such Asset Sale to purchase Replacement
Assets; or
(3) apply the Net Cash Proceeds of any Asset Sale within 365 days of receipt
thereof or repay Pari Passu Debt not exceeding the Pari Passu Debt Pro Rata
Share.
Notwithstanding the foregoing:
(x) up to $35.0 million of Net Cash Proceeds in aggregate need not be
applied in accordance with the preceding clauses (1), (2) and (3)
and need not be treated as Unutilized Net Cash Proceeds under the
following paragraph and
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(y) in the event a Restricted Subsidiary that is not a Wholly-Owned
Restricted Subsidiary dividends or distributes to all of its
stockholders on a pro rata basis any Net Cash Proceeds to GenTek or
another Restricted Subsidiary, GenTek or such Restricted Subsidiary
need only apply its share of such Net Cash Proceeds in accordance
with the preceding clause (1), (2) or (3).
To the extent all or part of the Net Cash Proceeds of any Asset Sale are
not applied within 365 days of such Asset Sale in accordance with the preceding
paragraph (except as otherwise permitted therein) or the proviso of the first
paragraph of this covenant (such Net Cash Proceeds, the 'Unutilized Net Cash
Proceeds'), GenTek shall, within 20 days after such 365th day, make an Offer to
Purchase all outstanding notes up to a maximum principal amount (expressed as a
multiple of $1,000) of notes equal to such Unutilized Net Cash Proceeds, at a
purchase price in cash equal to 100% of the principal amount thereof, plus
accrued and unpaid interest thereon, if any, to the Purchase Date; provided that
the Offer to Purchase may be deferred until there are aggregate Unutilized Net
Cash Proceeds equal to or in excess of $50.0 million, at which time the entire
amount of such Unutilized Net Cash Proceeds, and not just the amount in excess
of $50.0 million, shall be applied as required pursuant to this paragraph.
With respect to any Offer to Purchase effected pursuant to this
covenant, among the notes, to the extent the aggregate principal amount of notes
tendered pursuant to such Offer to Purchase exceeds the Unutilized Net Cash
Proceeds to be applied to the repurchase thereof, such notes shall be purchased
pro rata based on the aggregate principal amount of such notes tendered by each
holder. To the extent the Unutilized Net Cash Proceeds exceed the aggregate
amount of notes tendered by the holders pursuant to such Offer to Purchase,
GenTek may retain and utilize any portion of the Unutilized Net Cash Proceeds
not applied to repurchase the notes for any purpose consistent with the other
terms of the indenture.
In the event that GenTek makes an Offer to Purchase the Notes, GenTek
shall comply with any applicable securities laws and regulations, including any
applicable requirements of Section 14(e) of, and Rule 14e-1 under, the Exchange
Act, and any violation of the provisions of the indenture relating to such Offer
to Purchase occurring as a result of such compliance shall not be deemed an
Event of Default or an event that with the passing of time or giving of notice,
or both, would constitute an Event of Default.
Each Holder shall be entitled to tender all or any portion of the Notes
owned by such holder pursuant to the Offer to Purchase, subject to the
requirement that any portion of a note tendered must be tendered in an integral
multiple of $1,000 principal amount and subject to any proration among tendering
holders as described above.
TRANSACTIONS WITH AFFILIATES.
GenTek will not, and will not cause or permit any Restricted Subsidiary
to, directly or indirectly, conduct any business or enter into any transaction
(or series of related transactions) with or for the benefit of any of the
Affiliates of GenTek (each an 'Affiliate Transaction'), unless:
(1) such Affiliate Transaction is on terms, taken as a whole, which are no less
favorable to GenTek or such Restricted Subsidiary, as the case may be, than
would be available at the time in a comparable transaction with an
unaffiliated third party:
(2) if such Affiliate Transaction or series of related Affiliate Transactions
(other than any such Affiliate Transactions between GenTek or a Restricted
Subsidiary and an Accounts Receivable Subsidiary in the ordinary course of
business) involves aggregate payments or other consideration having a Fair
Market Value in excess of $10.0 million, such Affiliate Transaction is in
writing and either:
(A) a majority of the members of the Board of Directors of GenTek that
are disinterested with respect to such Affiliate Transaction shall
have approved such Affiliate Transaction and determined that such
Affiliate Transaction is fair and reasonable to GenTek; or
(B) in the event there are no such members, GenTek has obtained a
Fairness Opinion (as hereinafter defined); and
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(3) if such Affiliate Transaction or series of related Affiliate Transactions
involves aggregate payments or other consideration having a Fair Market
Value in excess of $15.0 million, GenTek shall have obtained a written
opinion from an Independent Financial Advisor (which is delivered to the
Trustee) stating that the terms of such Affiliate Transaction are fair,
from a financial point of view, to GenTek or the Restricted Subsidiary
involved in such Affiliate Transaction, as the case may be.
Notwithstanding the foregoing, the restrictions set forth in this
covenant shall not apply to:
(1) any employment or separation agreement, collective bargaining agreement,
benefit plan, program or arrangement, related trust agreement or any other
similar arrangement for or with any employee, officer or director entered
into by GenTek or any Restricted Subsidiary in the ordinary course of
business, whether before or after the Issue Date;
(2) loans or other advances in an aggregate principal amount not to exceed $2.0
million at any one time outstanding;
(3) transactions between or among GenTek and/or the Restricted Subsidiaries,
provided that transactions not in the ordinary course of business between
or among GenTek and/or Restricted Subsidiaries and in which an Affiliate of
GenTek has a beneficial Equity Interest shall be made in compliance with
the first paragraph of this covenant;
(4) purchases of soda ash, calcium chloride and other products from GCIP and
its Affiliates pursuant to existing agreements or in the ordinary course of
business on terms in aggregate no less favorable than would be available in
a comparable transaction at the time with an unaffiliated third party;
(5) payments made, and performance obligations, pursuant to the Separation
Agreements or the Registration Rights Agreement as such agreements are in
effect on the Issue Date;
(6) payments not to exceed $4.6 million per year (subject to increase as
provided for on the Issue Date) pursuant to the Management Agreement as in
effect on the date of the indenture and other payments of fees for services
rendered from an Affiliate which have been approved by a majority of the
disinterested directors of GenTek;
(7) payments of indemnification or contribution made to any directors,
officers, employees or agents of GenTek or any Restricted Subsidiary as
determined in good faith by the Board of Directors of GenTek or such
Restricted Subsidiary;
(8) any Restricted Payment permitted under the covenant described under
' -- Covenants -- Limitation on Restricted Payments';
(9) the payment of compensation, performance of indemnification or contribution
obligations, or any issuance, grant or award of stock, options, other
equity-related interests or other securities, to employees, officers or
directors in the ordinary course of business; and
(10) any transaction in the ordinary course of business between GenTek or any
Restricted Subsidiary, on the one hand, and a joint venture or similar
entity primarily engaged in a Related Business in which GenTek or any
Restricted Subsidiary has an Equity Interest, on the other hand.
LIMITATION ON SENIOR SUBORDINATED INDEBTEDNESS.
GenTek will not, directly or indirectly, Incur any Indebtedness that by
its terms would expressly rank senior in right of payment to the notes and
expressly rank subordinate in right of payment to any other Indebtedness of
GenTek. GenTek will not permit any Subsidiary Guarantor to, and no Subsidiary
Guarantor will, directly or indirectly, Incur any Indebtedness that by its terms
would expressly rank senior in right of payment to the Subsidiary Guarantee of
such Subsidiary Guarantor and expressly rank subordinate in right of payment to
any other Indebtedness of such Subsidiary Guarantor.
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LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES.
GenTek will not, and shall not cause or permit any Restricted Subsidiary
to, directly or indirectly, create or otherwise cause to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(A) pay dividends or make any other distributions to GenTek or any other
Restricted Subsidiary on its Equity Interests or with respect to any other
interest or participation in; or measured by, its profits, or pay any
Indebtedness owed to GenTek or any other Restricted Subsidiary,
(B) make loans or advances to, or guaranty any Indebtedness or other
obligations of, GenTek or any other Restricted Subsidiary; or
(C) transfer any of its properties or assets to GenTek or any other Restricted
Subsidiary, except for such encumbrances or restrictions existing under or
by reason of:
(1) the Credit Facility as in effect on the Issue Date and any
amendments, restatements, renewals, replacements or refinancings
thereof; provided, however, that any such amendment, restatement,
renewal, replacement or refinancing contains terms and conditions
with respect to such encumbrances or restrictions that are customary
at the time for similar credit facilities, as determined by the Board
of Directors of GenTek;
(2) applicable law or regulations, including regarding restrictions on
the transfer of assets required or imposed by any regulatory
authority having jurisdiction over GenTek or any Restricted
Subsidiary or any of their respective businesses;
(3) any instrument governing Indebtedness or Equity Interests of an
Acquired Person acquired by GenTek or any Restricted Subsidiary as in
effect at the time of such acquisition (except to the extent any such
Indebtedness or Equity Interests were Incurred by such Acquired
Person in connection with, as a result of or in contemplation of such
acquisition); provided that such encumbrances and restrictions are
not applicable to any Restricted Subsidiary, or the properties or
assets of any Restricted Subsidiary, other than the Acquired Person;
(4) (A) non-assignment provisions that restrict in a customary manner
the subletting, assignment or transfer of any property or asset
that is subject to a lease, license or similar contract, or the
assignment or transfer of any lease, license or other contract;
(B) customary provisions restricting dispositions of real property
interests set forth in any easement or similar agreements of
GenTek or any Restricted Subsidiary or;
(C) restrictions on cash or other deposits or net worth imposed by
customers under agreements entered into in the ordinary course
of business;
(5) Purchase Money Indebtedness or Capital Lease Obligations permitted
under the covenants described under ' -- Limitation on Incurrence of
Indebtedness and Preferred Equity Interests' and ' -- Limitation on
Liens' that only imposes encumbrances and restrictions on the
property so acquired;
(6) any agreement for the sale or disposition of the Equity Interests or
assets of any Restricted Subsidiary; provided that such encumbrances
and restrictions described in this clause (6) are only applicable to
such Restricted Subsidiary or assets, as applicable, and any such
sale or disposition is made in compliance with the covenant
' -- Disposition of Proceeds of Asset Sales' above to the extent
applicable thereto;
(7) Permitted Refinancing Indebtedness permitted under clause (5) of the
second paragraph of ' -- Limitation on Incurrence of Indebtedness and
Preferred Equity Interests' above; provided that such encumbrances
and restrictions contained in the agreements governing such
Indebtedness are not materially more restrictive in the aggregate
than those contained in the
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agreements governing the Indebtedness being refinanced immediately
prior to such refinancing, as determined by the Board of Directors of
GenTek;
(8) the indenture or contained in any other indenture governing debt
securities that are not materially more restrictive than those
contained in the indenture, as determined by the Board of Directors
of GenTek;
(9) customary restrictions in any instrument governing Indebtedness of a
Foreign Subsidiary which Indebtedness was incurred and outstanding
(without taking into account any reclassification of Indebtedness)
under clause (6) of the second paragraph of the covenant 'Limitation
on Incurrence of Indebtedness and Preferred Equity Interests';
(10) any agreement or instrument existing on the Issue Date;
(11) any agreement or instrument relating to Indebtedness of an Accounts
Receivables Subsidiary or the sale or financing of accounts
receivables or interests therein by an Accounts Receivables
Subsidiary; or
(12) any agreement or instrument governing or relating to Indebtedness or
Equity Interests of a Subsidiary Guarantor, provided that such
encumbrances or restrictions are terminated or cease to exist upon
the release of such Subsidiary Guarantor from its obligations under
its Subsidiary Guarantee.
Nothing contained in this covenant shall prevent GenTek or any
Restricted Subsidiary from: (1) creating, incurring, assuming or suffering to
exist any Liens otherwise permitted in the 'Limitation on Liens' covenant by
itself; or (2) restricting the sale or other disposition of assets of GenTek or
any of its Restricted Subsidiaries that secure Indebtedness of GenTek or any of
the Restricted Subsidiaries by the customary terms of any Lien incurred in
compliance with the 'Limitation on Liens' covenant.
DESIGNATION OF UNRESTRICTED SUBSIDIARIES.
GenTek may make a Designation only if:
(1) no Default shall have occurred and be continuing at the time of or after
giving effect to such Designation;
(2) except to the extent the Investment is in an Unrestricted Subsidiary and
would be a Permitted Investment, at the time of and after giving effect to
such Designation, GenTek could Incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) under the Consolidated Coverage Ratio
of the first paragraph of 'Limitation on Incurrence of Indebtedness and
Preferred Equity Interests' above; and
(3) except to the extent the Investment in an Unrestricted Subsidiary would be
a Permitted Investment, GenTek would be permitted to make an Investment at
the time of Designation (assuming the effectiveness of such Designation)
pursuant to the first paragraph of 'Limitation on Restricted Payments'
covenant in an amount equal to the Designation Amount.
All Subsidiaries of Unrestricted Subsidiaries shall be automatically
deemed to be Unrestricted Subsidiaries.
GenTek may revoke any Designation of a Subsidiary as an Unrestricted
Subsidiary (a 'Revocation') if:
(1) no Default shall have occurred and be continuing at the time of and after
giving effect to such Revocation;
(2) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding
immediately following such Revocation would, if Incurred at such time, have
been permitted to be Incurred for all purposes of the indenture; and
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(3) any agreement or understanding between such Subsidiary and any of its
Affiliates in effect at the time of Revocation would be permitted by the
'Transactions with Affiliates' covenant as if such agreement or
understanding had occurred at the time of such Revocation.
All Designations and Revocations must be evidenced by resolutions of the
Board of Directors of GenTek, delivered to the trustee certifying compliance
with the foregoing provisions.
PROVISION OF FINANCIAL INFORMATION.
Whether or not GenTek is subject to Section 13(a) or 15(d) of the
Exchange Act, or any successor provision thereto, GenTek shall file with the SEC
(if permitted by SEC practice and applicable law and regulations), so long as
any notes remain outstanding, the annual reports, quarterly reports and other
documents which GenTek would have been required to file with the SEC pursuant to
such Section 13(a) or 15(d) (each, an 'Exchange Act Report') or any successor
provision thereto if GenTek were so subject, such documents to be filed with the
SEC on or prior to the respective dates (the 'Required Filing Dates') by which
GenTek would have been required so to file such documents if GenTek were so
subject. GenTek shall also in any event:
(A) within 15 days of each Required Filing Date (whether or not permitted or
required to be filed with the SEC);
(1) transmit (or cause to be transmitted) by mail to all Holders, as
their names and addresses appear in the Note register, without cost
to such Holders; and
(2) file with the trustee, copies of the annual reports, quarterly
reports and other documents (without exhibits) which GenTek is
required to file with the SEC pursuant to the preceding sentence, or,
if such filing is not so permitted (or, prior to the consummation of
the Exchange Offer, when GenTek is not subject to Section 13(d) or
15(d) of the Exchange Act), information and data of a similar nature;
and
(B) if, notwithstanding the preceding sentence, filing such documents by GenTek
with the SEC is not permitted by SEC practice or applicable law or
regulations, promptly upon written request supply copies of such documents
to any Holder.
In addition, for so long as any notes remain outstanding, until the
completion of the Exchange Offer or the effectiveness of a Shelf Registration
Statement, as the case may be, GenTek will furnish to the Holders and to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act, and, to any beneficial holder of Notes, if not obtainable from
the SEC, information of the type that would be filed with the SEC pursuant to
the foregoing provisions, upon the request of any such holder.
MERGER AND CONSOLIDATION
GenTek shall not consolidate with or merge with or into (whether or not
GenTek is the Surviving Person) any other Person and GenTek shall not and shall
not cause or permit any Restricted Subsidiary to, sell, convey, assign,
transfer, lease or otherwise dispose of all or substantially all of GenTek's and
the Restricted Subsidiaries' properties and assets (determined on a consolidated
basis for GenTek and the Restricted Subsidiaries) to any Person in a single
transaction or series of related transactions, unless:
(1) either
(a) GenTek shall be the Surviving Person or
(b) the Surviving Person (if other than GenTek) shall be a corporation
organized and validly existing under the laws of the United States of
America or any State thereof or the District of Columbia, and shall,
in any such case, expressly assume by a supplemental indenture, the
due
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and punctual payment of the principal of, premium, if any, and
interest on all the notes and the performance and observance of every
covenant of the indenture and the registration rights agreement to be
performed or observed on the part of GenTek;
(2) immediately thereafter, no Default shall have occurred and be continuing;
(3) immediately after giving effect to any such transaction including the
Incurrence by GenTek or any Restricted Subsidiary, directly or indirectly,
of additional Indebtedness (and treating any Indebtedness not previously an
obligation of GenTek or any Restricted Subsidiary in connection with or as
a result of such transaction as having been Incurred at the time of such
transaction), the Surviving Person could Incur, on a pro forma basis after
giving effect to such transaction as if it had occurred at the beginning of
the four quarter period immediately preceding such transaction for which
consolidated financial statements of GenTek are available, at least $1.00
of additional Indebtedness (other than Permitted Indebtedness) under the
Consolidated Coverage Ratio of the first paragraph of the covenant
described under 'Limitation on Incurrence of Indebtedness and Preferred
Equity Interests' above; and
(4) GenTek will have delivered to the Trustee an officers' certificate and a
written opinion from legal counsel (including an employee of or counsel to
GenTek or the trustee) who is reasonably acceptable to the trustee, each
stating that such consolidation, merger or transfer and such supplemental
indenture (if any) comply with the indenture.
Notwithstanding the foregoing clause (3) of the immediately preceding
paragraph, any Restricted Subsidiary may consolidate with, merge into or
transfer all or part of its properties and assets to GenTek or any Subsidiary
Guarantor.
For purposes of the foregoing, the transfer (by lease, assignment, sale
or otherwise, in a single transaction or series of transactions) of all or
substantially all the properties and assets of one or more Restricted
Subsidiaries the Equity Interests of which constitute all or substantially all
the properties and assets of GenTek shall be deemed to be the transfer of all or
substantially all the properties and assets of GenTek.
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the immediately preceding paragraphs in
which GenTek is not the Surviving Person and the Surviving Person is to assume
all the Obligations of GenTek under the notes, the indenture and the
registration rights agreement pursuant to a supplemental indenture, such
Surviving Person shall succeed to, and be substituted for, and may exercise
every right and power of, GenTek and GenTek shall be discharged from its
Obligations under the indenture and the notes.
No Subsidiary Guarantor (other than a Subsidiary Guarantor whose
Subsidiary Guarantee is to be released in accordance with 'The Guarantees'
above) shall consolidate with or merge with or into another Person (other than
GenTek), unless:
(1) the Surviving Person (if other than such Subsidiary Guarantor) is a
corporation organized and validly existing under the laws of the United
States, any State thereof or the District of Columbia;
(2) the Surviving Person (if other than such Subsidiary Guarantor) expressly
assumes by a supplemental indenture all the obligations of such Subsidiary
Guarantor under its Subsidiary Guarantee and the performance and observance
of every covenant of the indenture and the registration rights agreement to
be performed or observed by such Subsidiary Guarantor;
(3) immediately thereafter, no Default or Event of Default shall have occurred
and be continuing; and
(4) if the Surviving Person is not such Subsidiary Guarantor or another
Subsidiary Guarantor, GenTek will have delivered to the trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with the indenture.
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EVENTS OF DEFAULT
The occurrence of any of the following will be defined as an 'Event of
Default' under the indenture:
(a) failure to pay principal of (or premium, if any, on) any note when due
(whether or not prohibited by the provisions of the indenture described
under 'Subordination' above)
(b) failure to pay any interest on any note when due, continued for 30 days or
more (whether or not prohibited by the provisions of the indenture
described under 'Subordination' above);
(c) default in the payment of principal of or interest on any note required to
be purchased pursuant to any Offer to Purchase required by the indenture
when due and payable or failure to pay on the Purchase Date the Purchase
Price for any note validly tendered pursuant to any Offer to Purchase
(whether or not prohibited by the provisions of the indenture described
under 'Subordination' above);
(d) failure to perform or comply with any of the provisions described under
' -- Covenants -- Merger and Consolidation' above;
(e) failure to perform any other covenant or agreement of the Company under the
indenture or in the notes continued for 45 days or more after written
notice to GenTek by the trustee or holders of at least 25% in aggregate
principal amount of the outstanding notes;
(f) default or defaults under the terms of one or more instruments evidencing
or securing Indebtedness of GenTek or any of the Restricted Subsidiaries
having an outstanding principal amount of $25.0 million or more
individually or in the aggregate that have resulted in the acceleration of
the payment of such Indebtedness or failure by GenTek or any of the
Restricted Subsidiaries to pay principal when due at the stated maturity
of any such Indebtedness;
(g) the rendering of a final judgment or judgments (not subject to appeal)
against GenTek or any of the Restricted Subsidiaries in an amount of $25.0
million or more (net of any amounts covered by reputable and creditworthy
insurance companies) which remain undischarged or unstayed for a period of
60 days after the date on which the right to appeal has expired;
(h) certain events of bankruptcy, insolvency or reorganization affecting GenTek
or any of the Restricted Subsidiaries; or
(i) other than as provided in or pursuant to any Subsidiary Guarantee or the
indenture, any Subsidiary Guarantee ceases to be in full force and effect
or any Subsidiary Guarantor denies or disaffirms its obligations under the
indenture or any Subsidiary Guarantee and such Default continues for ten
days.
Subject to the provisions of the indenture relating to the duties of the
trustee, in case an Event of Default shall occur and be continuing, the trustee
will be under no obligation to exercise any of its rights or powers under the
indenture at the request or direction of any of the holders, unless such holders
shall have offered to the trustee reasonable indemnity. Subject to such
provisions for the indemnification of the trustee, the holders of a majority in
aggregate principal amount of the outstanding notes will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the trustee, or exercising any trust or power conferred on such
trustee.
If an Event of Default with respect to the notes (other than an Event of
Default with respect to GenTek described in clause (h) above) occurs and is
continuing, the trustee or the holders of at least 25% in aggregate principal
amount of the outstanding notes, by notice in writing to GenTek, may declare the
unpaid principal of (and premium, if any) and accrued interest to the date of
acceleration on all the outstanding notes to be due and payable immediately and,
upon any such declaration, such principal amount (and premium, if any) and
accrued interest, notwithstanding anything contained in the indenture or the
notes to the contrary will become immediately due and payable; provided,
however, that so long as the Credit Facility shall be in full force and effect,
if an Event of Default shall have occurred and be
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continuing (other than an Event of Default with respect to GenTek described in
clause (h) above), the notes shall not become due and payable until the earlier
to occur of:
(a) five Business Days following delivery of written notice of such
acceleration of the Notes to the agent under the Credit Facility; and
(b) the acceleration of any Indebtedness under the Credit Facility. If an Event
or Default specified in clause (h) above with respect to GenTek occurs
under the indenture, the notes will become immediately due and payable
without any declaration or other act on the part of the trustee or any
holder.
Notwithstanding the foregoing, in the event of a declaration of
acceleration in respect of the notes because an Event of Default specified in
clause (f) above shall have occurred and be continuing, such declaration of
acceleration shall be automatically annulled if the Indebtedness that is the
subject of such Event of Default has been discharged or paid or such Event of
Default shall have been cured or waived by the holders of such Indebtedness and
written notice of such discharge, cure or waiver, as the case may be, shall have
been given to the trustee by GenTek or by the requisite holders of such
Indebtedness or a trustee, fiduciary or agent for such holders, within 60 days
after such declaration of acceleration in respect of the notes and:
(a) no Person shall have commenced judicial proceedings to foreclose upon
assets of GenTek or any of the Restricted Subsidiaries or shall have
exercised any right under applicable law or applicable security documents
to take ownership of any of such assets in lieu of foreclosure; and
(b) no other Event of Default with respect to the notes shall have occurred
which has not been cured or waived during such 60-day period.
Any such declaration with respect to the notes may be rescinded by the
holders of a majority in aggregate principal amount of the outstanding notes
upon the conditions provided in the indenture. For information as to waiver of
defaults, see 'Modification and Waiver' below. The indenture provides that the
trustee shall, within 30 days after the occurrence of any Default with respect
to the notes outstanding, give the holders thereof notice of all uncured
Defaults thereunder known to it. Except in the case of a Default in the payment
of principal of, or premium (if any) or interest on, any note, the trustee may
withhold notice if and so long as a committee of its trust officers in good
faith determines that withholding notice is in the interests of the holders.
No holder will have any right to institute any proceeding with respect
to the indenture or for any remedy thereunder, unless such holder shall have
previously given to the trustee written notice of a continuing Event of Default
thereunder and unless the holders of at least 25% of the aggregate principal
amount of the outstanding notes shall have made written request, and offered
reasonable indemnity, to the trustee to institute such proceeding as the
trustee, and the trustee shall have not have received from the holders of a
majority in aggregate principal amount of such outstanding notes a direction
inconsistent with such request and shall have failed to institute such
proceeding within 60 days. However, such limitations do not apply to a suit
instituted by a holder for enforcement of payment of the principal of and
premium, if any, or interest on such note on or after the respective due dates
expressed in such note.
GenTek will be required to furnish to the trustee annually a statement
as to the performance by it of certain of its obligations under the indenture
and as to any default in such performance.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, INCORPORATOR AND
STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of GenTek or
any of its Affiliates, as such, shall have any liability for any obligations of
GenTek or any of its Affiliates under the notes or the Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each holder of notes by accepting a note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the notes.
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SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE
GenTek may terminate its substantive obligations in respect of the notes
and the indenture (subject to the subordination provisions) by delivering all
outstanding notes to the trustee for cancellation and paying all sums payable by
it on account of principal of, premium, if any, and interest on all Notes or
otherwise. In addition to the foregoing, GenTek may, provided that no Default
has occurred and is continuing or would arise therefrom (or, with respect to a
Default with respect to GenTek specified in clause (h) of 'Events of Default'
above, occurs at any time on or prior to the 91st calendar day after the date of
such deposit (it being understood that this condition shall not be deemed
satisfied until after such 91st day)) under the Indenture and provided that no
default under any Senior Indebtedness would result therefrom, terminate its
substantive obligations in respect of the notes (except for its obligations to
pay the principal of (and premium, if any, on) and the interest on the notes):
by
(1) depositing with the trustee, under the terms of an irrevocable trust
agreement, money or United States Government Obligations sufficient
(without reinvestment) to pay all remaining Indebtedness on such notes to
redemption or maturity, as the case may be;
(2) delivering to the trustee either an opinion of counsel or a ruling directed
to the trustee from the Internal Revenue Service to the effect that the
holders will not recognize income, gain or loss for Federal income tax
purposes as a result of such deposit and termination of obligations;
(3) delivering to the trustee an opinion of counsel to the effect that GenTek's
exercise of its option under this paragraph will not result in any of
GenTek, the trustee or the trust created by GenTek's deposit of funds
pursuant to this provision becoming or being deemed to be an 'investment
company' under the Investment Company Act of 1940, as amended (the
'Investment Act'); and
(4) complying with certain other requirements set forth in the indenture.
In addition, GenTek may, provided that no Default has occurred and is
continuing or would arise therefrom (or, with respect to a Default with respect
to GenTek specified in clause (h) of 'Events of Default' above, occurs at any
time on or prior to the 91st calendar day after the date of such deposit (it
being understood that this condition shall not be deemed satisfied until after
such 91st day)) under the indenture and provided that no default under any
Senior Indebtedness would result therefrom, terminate all of its substantive
obligations in respect of the notes (including its obligations to pay the
principal of (and premium, if any, on) and interest on the notes) by:
(1) depositing with the trustee, under the terms of an irrevocable trust
agreement, money or United States Government Obligations sufficient
(without reinvestment) to pay all remaining Indebtedness on the notes to
redemption or maturity, as the case may be;
(2) delivering to the trustee either a ruling directed to the trustee from the
Internal Revenue Service to the effect that the holders will not recognize
income, gain or loss for Federal income tax purposes as a result of such
deposit and termination of obligations or an opinion of counsel addressed
to the trustee based upon such a ruling or based on a change in the
applicable Federal tax law since the date of the indenture, to such effect;
(3) delivering to the trustee an opinion of counsel to the effect that GenTek's
exercise of its option under this paragraph will not result in any of
GenTek, the Trustee or the trust created by GenTek deposit of funds
pursuant to this provision becoming or being deemed to be an 'investment
company' under the Investment Act; and
(4) complying with certain other requirements set forth in the indenture.
GenTek may make an irrevocable deposit pursuant to this provision only
if at such time it is not prohibited from doing so under the subordination
provisions of the Indenture or certain covenants in the Senior Indebtedness and
GenTek has delivered to the trustee and any paying agent an officers'
certificate to that effect.
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If GenTek exercises its legal defeasance option or its covenant
defeasance option, each Subsidiary Guarantor will be released from all its
obligations with respect to its Note Guarantee and the indenture.
An opinion of counsel delivered pursuant to this provision must be a
written opinion from legal counsel who is reasonably acceptable to the trustee.
The counsel may be an employee of or counsel to GenTek or the trustee.
GOVERNING LAW
The indenture, the notes and the Subsidiary Guarantees will be governed
by the laws of the State of New York without regard to principles of conflicts
of laws.
MODIFICATION AND WAIVER
From time to time, GenTek, the Subsidiary Guarantors and the Trustee,
without the consent of the Holders, may amend the Indenture for certain
specified purposes, including curing ambiguities, defects or inconsistencies and
to make any change does that not, in the opinion of the Trustee, adversely
affect the rights of any of the Holders in any material respect. In formulating
its opinion on such matters, the Trustee will be entitled to rely on such
evidence as it deems appropriate, including, without limitation, solely on an
opinion of counsel. Other modifications and amendments of the Indenture may be
made by GenTek, the Subsidiary Guarantors and the trustee with the consent of
the holders of a majority in aggregate principal amount of the outstanding notes
(including consents obtained in connection with a tender offer or exchange offer
for the notes); provided, however, that no such modification or amendment to the
indenture may, without the consent of the holder of each note affected thereby,
(1) change the maturity of the principal of or any installment of interest on
any such note or alter the optional redemption or repurchase provisions of
any such note or the indenture in a manner adverse to the holders of the
notes;
(2) reduce the principal amount of (or the premium) of any such note;
(3) reduce the rate of or extend the time for payment of interest on any such
note;
(4) change the place or currency of payment of principal of (or premium) or
interest on any such note;
(5) modify any provisions of the indenture relating to the waiver of past
defaults (other than to add sections of the Indenture or the notes subject
thereto) or the right of the holders of notes to institute suit for the
enforcement of any payment on or with respect to any such note or
Subsidiary Guarantee in respect thereof or the modification and amendment
provisions of the indenture and the notes (other than to add sections of
the indenture or the notes which may not be amended, supplemented or
waived without the consent of each holder therein affected);
(6) reduce the percentage of the principal amount of outstanding notes
necessary for amendment to or waiver of compliance with any provision of
the indenture or the notes or for waiver of any Default in respect
thereof;
(7) waive a default in the payment of principal of, interest on, or redemption
payment with respect to, the notes (except a rescission of acceleration of
the notes by the holders as provided in the indenture and a waiver of the
payment default that resulted from such acceleration);
(8) modify the ranking or priority of any note or the Subsidiary Guarantee
thereof by any Subsidiary Guarantor, modify the definition of Senior
Indebtedness or Guarantor Senior Indebtedness or amend or modify the
subordination provisions of the indenture, in any case in any manner
adverse to the holders;
93
(9) modify the provisions of any covenant (or the related definitions) in the
indenture requiring GenTek to make an Offer to Purchase following an event
or circumstance which may give rise to the requirement to make an Offer to
Purchase in a manner materially adverse to the holders affected thereby
otherwise than in accordance with the indenture; or
(10) release any Subsidiary Guarantor from any of its obligations under its
Subsidiary Guarantee or the Indenture, except in compliance with the terms
thereof and of the indenture.
The holders of a majority in aggregate principal amount of the
outstanding notes, on behalf of all holders, may waive compliance by GenTek with
certain restrictive provisions of the indenture. Subject to certain rights of
the trustee, as provided in the indenture, the holders of a majority in
aggregate principal amount of the notes, on behalf of all holders, may waive any
past default under the indenture (including any such waiver obtained in
connection with a tender offer or exchange offer for the notes), except a
default in the payment of principal, premium or interest (other than a payment
default resulting from an acceleration of the notes rescinded as provided in the
indenture) or a default arising from failure to purchase any notes tendered
pursuant to an Offer to Purchase, or a default in respect of a provision that
under the indenture cannot be modified or amended without the consent of each
affected holder.
THE TRUSTEE
Except during the continuance of an Event of Default, the trustee will
perform only such duties as are specifically set forth in the indenture. During
the existence of an Event of Default, the trustee will exercise such rights and
powers vested in it under the indenture and use the same degree of care and
skill in its exercise as a prudent person would exercise under the circumstances
in the conduct of such person's own affairs.
The indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the trustee, should it
become a creditor of GenTek or any other obligor upon the notes, to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claim as security or otherwise. The trustee is
permitted to engage in other transactions with GenTek or an Affiliate of GenTek;
provided, however, that if the trustee acquires any conflicting interest (as
defined in the indenture or in the Trust Indenture Act), it must eliminate such
conflict or resign.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the indenture.
Reference is made to the indenture for a full definition of all such terms, as
well as any other capitalized terms used herein for which no definition is
provided.
'ACCOUNTS RECEIVABLE SUBSIDIARY' means any Subsidiary of GenTek that is,
directly or indirectly, wholly owned by GenTek (other than director qualifying
shares) and engaged solely in
(1) purchasing, financing and collecting accounts receivable obligations of
customers of GenTek or its Subsidiaries;
(2) the sale or financing of such accounts receivable or interests therein and
(3) other activities incident thereto.
'ACQUIRED INDEBTEDNESS' means Indebtedness of a Person
(1) assumed in connection with an Acquisition from such Person or
(2) existing at the time such Person becomes a Restricted Subsidiary or is
merged or consolidated with or into GenTek or any Restricted Subsidiary;
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provided that (i) such Indebtedness was not Incurred by such Person in
connection with or in contemplation of such Acquisition, merger or consolidation
or such Person becoming a Restricted Subsidiary and (ii) Indebtedness of such
Person which is redeemed, defeased, retired or otherwise repaid at the time of
or immediately upon consummation of the transaction by which such Person becomes
a Restricted Subsidiary or at the time of such merger or consolidation or
acquisition of assets shall not be Acquired Indebtedness.
'ACQUIRED PERSON' means, with respect to any specified Person, any other
Person which merges with or into or becomes a Restricted Subsidiary of such
specified Person.
'ACQUISITION' means
(1) any capital contribution (by means of transfers of cash or other property
to others or payments for property or services for the account or use of
others, or otherwise) by GenTek or any Restricted Subsidiary to any other
Person, or any acquisition or purchase of Equity Interests of any other
Person by GenTek or any Restricted Subsidiary, in either case pursuant to
which such Person shall become a Restricted Subsidiary or shall be
consolidated with or merged into GenTek or any Restricted Subsidiary; or
(2) any acquisition by GenTek or any Restricted Subsidiary of the assets of any
Person which constitute substantially all of an operating unit or line of
business of such Person or which is otherwise outside of the ordinary
course of business.
'ADDITIONAL INTEREST' means the liquidated damages payable upon a
registration default.
'AFFILIATE' of any specified person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, 'control'
(including, with correlative meanings, the terms 'controlling,' 'controlled by'
and 'under common control with'), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided, however,
that
(1) beneficial ownership of 10.0% or more of the then outstanding Voting Equity
Interests of a Person shall be deemed to be control for purposes of
compliance with the covenant described under ' -- Covenants -- Transactions
with Affiliates'; and
(2) no individual, other than a director of GenTek or an officer of GenTek with
a policy making function, shall be deemed an Affiliate of GenTek or any of
its Subsidiaries solely by reason of such individual's employment, position
or responsibilities by or with respect to GenTek or any of its
Subsidiaries.
'ASSET SALE' means any direct or indirect sale, conveyance, transfer,
lease (that has the effect of a disposition) or other disposition (including,
without limitation, any merger, consolidation or sale-leaseback transaction) to
any Person other than GenTek or a Restricted Subsidiary, in one transaction or a
series of related transactions, of:
(1) any Equity Interest of any Restricted Subsidiary;
(2) any license, franchise or other authorization of GenTek or any Restricted
Subsidiary that is material to GenTek and the Restricted Subsidiaries;
(3) any assets of GenTek or any Restricted Subsidiary which constitute
substantially all of an operating unit or line of business of GenTek and
the Restricted Subsidiaries; or
(4) any other property or asset of GenTek or any Restricted Subsidiary outside
of the ordinary course of business (including the receipt of proceeds paid
on account of the loss of or damage to any property or asset and awards of
compensation for any asset taken by condemnation, eminent
95
domain or similar proceedings). For the purposes of this definition, the
term 'Asset Sale' shall not include:
(a) any transaction consummated in compliance with 'Merger and
Consolidation' above or the creation of any Lien not prohibited by
the covenant described under ' -- Covenants -- Limitation on Liens'
above; provided that any transaction consummated in compliance with
'Merger and Consolidation' above involving a sale, conveyance,
assignment, transfer, lease or other disposal of less than all of the
properties or assets of GenTek shall be deemed to be an Asset Sale
with respect to the properties or assets of GenTek and the Restricted
Subsidiaries that are not so sold, conveyed, assigned, transferred,
leased or otherwise disposed of in such transaction;
(b) sales and other dispositions of property or equipment that has become
worn out, obsolete or damaged or otherwise unsuitable for use in
connection with the business of GenTek or any Restricted Subsidiary;
(c) surrender or waiver of contractual rights or the settlement, release
or surrender of contract, tort or other claims of any kind; and
(d) the licensing of intellectual property, or leases or subleases to
third parties not interfering in any material respect with the
business of GenTek or any of the Restricted Subsidiaries. For
purposes of the covenant described under
' -- Covenants -- Disposition of Proceeds of Asset Sales,' the term
'Asset Sale' shall not include (a) any dividend or distribution made
in compliance with the covenant described under
' -- Covenants -- Limitation on Restricted Payments'; (b) any
Investment to the extent constituting a Restricted Payment which is
subject to and made in compliance with the covenant described under
' -- Covenants -- Limitation on Restricted Payments' or any Permitted
Investment; provided that if such Investment is part of a transaction
or a series of transactions involving an Investment or payment in
addition to such Restricted Payment or Permitted Investment, the
balance of the transaction will be treated as an Asset Sale; (c) any
disposition or series of related dispositions for aggregate
consideration not to exceed $3.0 million; and (d) any sale,
conveyance or transfer of accounts receivable to an Accounts
Receivable Subsidiary or in the ordinary course of business on
customary terms to third parties that are not Affiliates of GenTek or
any Subsidiary of GenTek for financing purposes.
'CAPITAL LEASE OBLIGATION' means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be so required to be capitalized on the balance sheet in
accordance with GAAP.
'CASH EQUIVALENTS' means:
(1) U.S. dollars, Canadian dollars, the Euro and any other currency that is
convertible into U.S. dollars or Canadian dollars without legal
restrictions or that is utilized by GenTek or any of the Restricted
Subsidiaries in the ordinary course of its business;
(2) securities (including repurchase agreements and reverse repurchase
agreements relating to marketable direct obligations) issued or directly
and fully guaranteed or insured by the government of the United States,
Canada or any country which has adopted the Euro as its currency, or by any
agency or instrumentality thereof, having maturities of not more than
365 days from the date of acquisition;
(3) certificates of deposit and time deposits with maturities of 365 days or
less from the date of acquisition, bankers' acceptances with maturities not
exceeding 365 days and overnight bank deposits, in each case with any
commercial bank having capital and surplus in excess of $500.0 million (or
the foreign currency equivalent thereof);
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3) above
entered into with any financial institution meeting the
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qualifications specified in clause (3) above or with any nationally
recognized securities dealer having total capital funds in excess of
$100,000,000;
(5) commercial paper rated P-1, A-1 or the equivalent thereof by Moody's
Investors Service, Inc. or Standard & Poor's Corporation, respectively, or
at least an equivalent rating category of Duff & Phelps, and in each case
maturing within 365 days after the date of acquisition; and
(6) investments in money market funds complying with the risk limiting
conditions of Rule 2a-7 or any successor rule of the SEC under the
Investment Company Act.
'CHANGE OF CONTROL' means the occurrence of any of the following:
(1) any 'person' (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than one or more Permitted Holders in the aggregate,
is or becomes the 'beneficial owner' (as defined in Rules 13d-3 and 13d-5
under the Exchange Act), directly or indirectly, of a majority of the total
voting power of the Voting Equity Interests of GenTek (including any
successor thereto under the indenture);
(2) the sale, lease, transfer, conveyance or other disposition (other than by
way of merger or consolidation involving GenTek), in one or a series of
related transactions, of all or substantially all of the assets of GenTek
and its Subsidiaries taken as a whole to any 'person' (as such term is used
in Section 13(d)(3) of the Exchange Act) other than one or more Permitted
Holders;
(3) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of GenTek
(together with any new directors whose election by such Board of Directors
or whose nomination for election by the shareholders of GenTek was approved
by a vote of 66 2/3% of the directors of GenTek then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved or approved by a vote of
Permitted Holders who beneficially own, directly or indirectly, a majority
in the aggregate of the total voting power of the Voting Equity Interests
of GenTek) cease for any reason to constitute a majority of the Board of
Directors of GenTek then in office; or
(4) the adoption of a plan relating to the liquidation or dissolution of
GenTek.
'CHANGE OF CONTROL DATE' means the date of the occurrence of a Change of
Control.
'CONSOLIDATED COVERAGE RATIO' as of any date of determination means the
ratio of (A) the aggregate amount of Consolidated EBITDA for the Four Quarter
Period to (B) Consolidated Interest Expense for such Four Quarter Period;
provided, however, that:
(1) if GenTek or any Restricted Subsidiary has Incurred any Indebtedness since
the beginning of such Four Quarter Period that remains outstanding on such
date of determination or if the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness,
Consolidated EBITDA and Consolidated Interest Expense for such Four Quarter
Period shall be calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been Incurred on the first day of
such Four Quarter Period (except that in making such computation, the
amount of Indebtedness under any revolving credit facility outstanding on
the date of such calculation shall be computed based on (X) the average
daily balance of such Indebtedness during such Four Quarter Period or such
shorter period for which such facility was outstanding or (Y) if such
facility was created after the end of such Four Quarter Period, the average
daily balance of such Indebtedness during the period from the date of
creation of such facility to the date of such calculation) and the
discharge of any other Indebtedness repaid, repurchased or otherwise
discharged with the proceeds of such new Indebtedness as if such discharge
had occurred on the first day of such Four Quarter Period;
(2) without duplication, if GenTek or any Restricted Subsidiary has repaid,
repurchased, defeased or otherwise discharged any Indebtedness (each, a
'discharge') since the beginning of the Four Quarter Period that is no
longer outstanding on such date of determination or if the transaction
97
giving rise to the need to calculate the Consolidated Coverage Ratio
involves a discharge of Indebtedness (in each case other than Indebtedness
Incurred under any revolving credit facility unless such Indebtedness has
been permanently repaid and the related commitments terminated),
Consolidated Interest Expense for such Four Quarter Period shall be
calculated after giving effect on a pro forma basis to such discharge of
Indebtedness as if such discharge has occurred on the first day of such
Four Quarter Period;
(3) if since the beginning of such Four Quarter Period GenTek or any Restricted
Subsidiary shall have made any Asset Sale, the Consolidated EBITDA for such
Four Quarter Period shall be reduced by an amount equal to the Consolidated
EBITDA (if positive) directly attributable to the assets that are the
subject of such Asset Sale for such Four Quarter Period or increased by
amount equal to the Consolidated EBITDA (if negative) directly attributable
thereto for such Four Quarter Period and Consolidated Interest Expense for
such Four Quarter Period shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any Indebtedness of
GenTek or any Restricted Subsidiary repaid, repurchased or otherwise
discharged with respect to GenTek and its continuing Restricted
Subsidiaries in connection with such Asset Sale for such Four Quarter
Period (or, if the Equity Interests of any Restricted Subsidiary are sold,
the Consolidated Interest Expense for such Four Quarter Period directly
attributable to the Indebtedness of such Restricted Subsidiary to the
extent GenTek and its continuing Restricted Subsidiaries are no longer
liable for such Indebtedness after such sale);
(4) if since the beginning of such Four Quarter Period GenTek or any Restricted
Subsidiary (by merger or otherwise) shall have made an Acquisition of
assets, including any Acquisition occurring in connection with a
transaction causing a calculation to be made hereunder, Consolidated EBITDA
and Consolidated Interest Expense for such Four Quarter Period shall be
calculated after giving pro forma effect thereto (including the Incurrence
of any Indebtedness) as if such Acquisition occurred on the first day of
such Four Quarter Period; and
(5) if since the beginning of such Four Quarter Period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into
GenTek or any Restricted Subsidiary since the beginning of such Four
Quarter Period) shall have made any Asset Sale or any Acquisition that
would have required an adjustment pursuant to clause (2), (3) or (4) above
if made by GenTek or a Restricted Subsidiary during such Four Quarter
Period, Consolidated EBITDA and Consolidated Interest Expense for such Four
Quarter Period shall be calculated after giving pro forma effect thereto as
if such Asset Sale or Acquisition occurred on, with respect to any
Acquisition, the first day of such Four Quarter Period and, with respect to
any Asset Sale, the day prior to the first day of such Four Quarter Period.
For purposes of this definition:
(a) whenever pro forma effect is to be given to an Acquisition, the amount of
income or earnings and any cost savings relating thereto and the amount of
Consolidated Interest Expense associated with any Indebtedness Incurred in
connection therewith, the pro forma calculations shall be determined in
accordance with Regulation S-X under the Securities Act;
(b) if any Indebtedness bears a floating rate of interest and is being given
pro forma effect, the interest expense on such Indebtedness shall be
calculated as if the rate in effect on the date of determination had been
the applicable rate for the entire period (taking into account the
operation of any agreement under which Hedging Obligations relating to
interest are outstanding applicable to such Indebtedness);
(c) in giving effect to any Indebtedness to be Incurred, if such Indebtedness
bears, at the option of GenTek or a Restricted Subsidiary, a rate of
interest based on a prime or similar rate, a eurocurrency interbank
offered rate or other fixed or floating rate, the interest expense on such
Indebtedness shall be calculated by applying such optional rate as GenTek
may designate; and
98
(d) interest on a Capital Lease Obligation shall be deemed to accrue at an
interest rate determined in good faith by a responsible financial or
accounting officer of GenTek to be the rate of interest implicit in such
Capital Lease Obligation in accordance with GAAP.
'CONSOLIDATED EBITDA' means, for any period, the Consolidated Net Income
for such period, minus (A) any non-cash item increasing Consolidated Net Income
during such period (other than any non-cash item arising from the reversal of an
accrual or reserve previously established in respect of a non-cash item), plus,
without duplication, (B) the following to the extent deducted in calculating
such Consolidated Net Income:
(1) Consolidated Income Tax Expense for such period;
(2) Consolidated Interest Expense for such period;
(3) depreciation expense for such period;
(4) amortization expense for such period (including, without limitation,
goodwill and intangibles);
(5) any out-of-pocket costs and transaction expenses relating to the
underwriting, placement or arrangement for sale of Equity Interests of
GenTek or any Restricted Subsidiary or Incurrences of Indebtedness of
GenTek or any Restricted Subsidiary;
(6) net losses incurred in the retirement of Indebtedness;
(7) all non-cash accruals or cash expenses relating to issuances, grants of
awards of stock, option, other equity-related interests or other securities
to employees, officers or directors in the ordinary course of business; and
(8) all other non-cash items reducing Consolidated Net Income for such period
(other than any non-cash item requiring an accrual or a reserve for cash
disbursements in any future period); provided that, in determining
Consolidated EBITDA, there shall only be included that portion of the items
referred to in clause (A) or (B) related to, or arising in connection with,
any Person all of whose Equity Interests are not beneficially owned
directly or indirectly by GenTek (a 'Specified Person') that is
proportionate to the amount of the net income (loss) of the Specified
Person included in Consolidated Net Income for such period.
'CONSOLIDATED INCOME TAX EXPENSE' means, with respect to GenTek for any
period, the provision for federal, state, local and foreign income taxes payable
by GenTek and the Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP.
'CONSOLIDATED INTEREST EXPENSE' means, with respect to GenTek for any
period, without duplication, the sum of:
(1) the interest expense of GenTek and the Restricted Subsidiaries for such
period as determined on a consolidated basis in accordance with GAAP
(excluding, except to the extent provided in clause (b) or (d) below,
amortization or write-off of debt issuance costs), including, without
limitation:
(a) any amortization of debt discount;
(b) the net cost under Hedging Obligations relating to interest
(including any amortization of discounts);
(c) the interest portion of any deferred payment obligation;
(d) all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing; and
(e) all capitalized interest and all accrued interest; and
(2) to the extent Incurred by GenTek and the Restricted Subsidiaries in such
period but not included in such interest expense, without duplication:
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(a) interest component of Capital Lease Obligations paid, accrued and/or
scheduled to be paid or accrued by GenTek and the Restricted
Subsidiaries during such period as determined on a consolidated basis
in accordance with GAAP; and
(b) dividends and distributions paid, accrued and/or scheduled to be paid
or accrued in respect of Disqualified Equity Interests or Designated
Preferred Stock of GenTek or Preferred Equity Interests of any
Restricted Subsidiary (other than, in each case, (x) any such
dividends or distributions in Qualified Equity Interests of GenTek or
(y) any such dividends or distributions paid or payable to GenTek or
a Restricted Subsidiary) during such period as determined on a
consolidated basis in accordance with GAAP.
In determining Consolidated Interest Expense, there shall only be
included that portion of the items referred to in clause (1) or (2) related to,
or arising in connection with, any Specified Person that is proportionate to the
amount of the net income (loss) of the Specified Person included in Consolidated
Net Income for such period.
'CONSOLIDATED NET INCOME' means, for any period, the consolidated net
income (loss) of GenTek and the Restricted Subsidiaries determined on a
consolidated basis in accordance with GAAP; provided, however, that there shall
be excluded from such Consolidated Net Income:
(1) any net income (loss) of any Person that is not a Restricted Subsidiary,
except that (A) subject to the limitations contained in clause (4) below,
GenTek's equity in the net income of any such Person for such period shall
be included in such Consolidated Net Income up to the aggregate amount of
cash actually distributed by such Person during such period to GenTek or a
Restricted Subsidiary as a dividend or other distribution (subject, in the
case of a dividend or other distribution to a Restricted Subsidiary, to the
limitations contained in clause (3) below) and (B) GenTek's equity in a net
loss of any such Person (other than an Unrestricted Subsidiary) for such
period shall be included in determining such Consolidated Net Income;
(2) for purposes of the covenant described under ' -- Covenants -- Limitation
on Restricted Payments,' any net income (loss) of any Person acquired by
GenTek or a Restricted Subsidiary in a 'pooling of interests' transaction
for any period prior to the date of such acquisition;
(3) any net income (loss) of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions or loans or advances by
such Restricted Subsidiary, directly or indirectly, to GenTek except that
(A) subject to the limitations contained in (4) below, GenTek's equity in
the net income of any such Restricted Subsidiary for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash
that could have been distributed or delivered by such Restricted Subsidiary
during such period to GenTek or a Restricted Subsidiary as a dividend or
other distribution as a loan or other advance if such receiving Restricted
Subsidiary would not itself be subject to such a restriction and in the
case of loans or other advances to GenTek, that GenTek's obligations in
respect of such loans or advances would be subordinated to the Notes (it
being understood that, in the case of a Joint Venture, any restriction
constituting a consent requirement of the other holders of Equity Interests
in such Joint Venture shall be deemed received, absent historical or stated
intent to the contrary), (B) GenTek's equity in a net loss of any such
Restricted Subsidiary for such period shall be included in determining such
Consolidated Net Income but only up to the aggregate Investment of GenTek
or any Restricted Subsidiary in such Restricted Subsidiary and (C) for so
long as, and during the periods when, such Restricted Subsidiary is a
Subsidiary Guarantor, the net income (loss) of such Restricted Subsidiary
shall be included in Consolidated Net Income;
(4) any gain or loss realized upon the sale or other disposition of any asset
of GenTek or the Restricted Subsidiaries (including pursuant to any
sale/leaseback transaction) that is not sold or otherwise disposed of in
the ordinary course of business and any gain or loss realized upon the sale
or other disposition of any Equity Interests of any Person;
(5) the cumulative effect of a change in accounting principles;
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(6) any item classified as an extraordinary, unusual or nonrecurring gain, loss
or charge (including, but not limited to, any such item related to, or
arising in connection with the Spin-Off or to any Asset Sale or Acquisition
by GenTek or any Restricted Subsidiary after the Issue Date), in each case
on an after-tax basis;
(7) all deferred financing costs written off and premiums paid in connection
with any early extinguishment of Indebtedness;
(8) the write-off of assets in connection with purchase accounting of assets
acquired by GenTek and the Restricted Subsidiaries (including assets
acquired in an Acquisition) if such write-offs are done at the time of, or
within three months after, such acquisition, in each case to the extent not
involving a cash payment; and
(9) any non-cash compensation charge arising from any grant of stock, stock
options or other equity-based awards.
'CONSOLIDATED TANGIBLE ASSETS' means, as of any date of determination,
the total assets, less goodwill and other intangibles shown on the balance sheet
of GenTek and the Restricted Subsidiaries as of the most recent date for which
such a balance sheet is available, determined on a consolidated basis in
accordance with GAAP.
'CONSOLIDATION' means the consolidation of the amounts of each of the
Restricted Subsidiaries with those of GenTek in accordance with GAAP
consistently applied; provided, however, that 'consolidation' will not include
consolidation of the accounts of any Unrestricted Subsidiary, but the interest
of GenTek or any Restricted Subsidiary in an Unrestricted Subsidiary will be
accounted for as an investment. The term 'consolidated' has a correlative
meaning.
'CREDIT FACILITY' means the Credit Agreement, dated as of April 30,
1999, among GenTek, Noma Inc., the lenders and agents named therein and The
Chase Manhattan Bank, as Administrative Agent, including any deferrals,
renewals, extensions, replacements, refinancings or refundings thereof, or
amendments, modifications or supplements thereto and any agreement providing
therefor (including any restatements thereof and any increases in the amount of
commitments thereunder), whether by or with the same or any other lender,
creditor, group of lenders or group of creditors, and including related notes,
guaranty and note agreements, collateral security documents and other
instruments and agreements executed in connection therewith. Without limiting
the generality of the foregoing, 'Credit Facility' shall include any agreement
changing the maturity of the Indebtedness Incurred thereunder or contemplated
thereby, adding Subsidiaries of GenTek as additional borrowers or guarantors
thereunder, increasing the amount of Indebtedness Incurred thereunder or
available to be borrowed thereunder or otherwise altering the terms and
conditions thereof.
'DEFAULT' means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
'DESIGNATED PREFERRED STOCK' means Preferred Equity Interests (not
constituting Disqualified Equity Interests) of GenTek that are designated as
Designated Preferred Stock pursuant to an officer's certificate of GenTek
delivered to the trustee.
'DESIGNATED SENIOR INDEBTEDNESS' means (a) any Indebtedness outstanding
under the Credit Facility and (b) any other Senior Indebtedness or Guarantor
Senior Indebtedness which, at the time of determination, has an aggregate
principal amount outstanding, together with any commitments to lend additional
amounts, of at least $25.0 million, if the instrument governing such Senior
Indebtedness or Guarantor Senior Indebtedness expressly states that such
Indebtedness is 'Designated Senior Indebtedness' for purposes of the indenture
and an officers' certificate of GenTek setting forth such designation by GenTek
has been filed with the trustee.
'DESIGNATION' means a designation by GenTek after the Issue Date of any
Subsidiary of GenTek as an 'Unrestricted Subsidiary' under the indenture.
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'DESIGNATION AMOUNT' means, with respect to any Subsidiary being
designated as an 'Unrestricted Subsidiary' pursuant to the 'Designation of
Unrestricted Subsidiary' covenant, an amount equal to the Fair Market Value of
the Investment of GenTek and the Restricted Subsidiaries in such Subsidiary on
such date.
'DISQUALIFIED EQUITY INTEREST' means any Equity Interest to the extent
that, by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable at the option of the holder thereof), or upon
the happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or, at the option of the holder thereof,
in whole or in part, redeemable or exchangeable into Indebtedness on or prior to
the maturity date of the notes; provided any Equity Interests that would not
constitute Disqualified Equity Interests but for provisions thereof giving
holders thereof the right to require such Person to repurchase or redeem such
Capital Stock upon the occurrence of a 'change of control' or 'sale of assets'
occurring prior to the final stated maturity of the notes shall not constitute
Disqualified Equity Interests if the 'change of control' or 'asset sale'
provisions applicable to such Capital Stock are not more favorable to the
holders of such Capital Stock than the similar provisions of the covenants
described under 'Change of Control' and 'Disposition of Proceeds of Asset Sales'
and such provisions require an offer to purchase and are first complied with;
provided, further, that if such Equity Interest is issued pursuant to any plan
for the benefit of directors, officers or employees of GenTek or of any of its
Subsidiaries (or by any such plan to such directors, officers or employees),
such Equity Interest shall not constitute a Disqualified Equity Interest solely
because it may be required to be repurchased by GenTek pursuant to customary
provisions of the plan or in order to satisfy applicable statutory or regulatory
obligations.
'ELIGIBLE SUBSIDIARIES' means all Restricted Subsidiaries, other than
(1) Foreign Subsidiaries;
(2) Subsidiaries of Foreign Subsidiaries, and
(3) Accounts Receivable Subsidiaries.
'EQUITY INTEREST' in any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited, and
membership interests in such Person, including any Preferred Equity Interests
(but excluding debt securities convertible or exchangeable into any of the
foregoing).
'EQUITY ISSUANCE' means any public or private issuance of Equity
Interests of GenTek.
'ESOP' means an employee stock ownership plan for the benefit of the
employees of GenTek or its Subsidiaries.
'EXCHANGE ACT' means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
'EXPIRATION DATE' means the expiration date of the Offer to Purchase.
'FAIR MARKET VALUE' means, with respect to any asset, the price (after
taking into account any liabilities relating to such assets) which could be
negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing and able buyer, neither of which is under any
compulsion to complete the transaction; provided that the Fair Market Value of
any such asset or assets shall be determined conclusively by the Board of
Directors of GenTek acting in good faith, and shall be evidenced by resolutions
of the Board of Directors of GenTek delivered to the Trustee.
'FOREIGN SUBSIDIARY' means:
(1) any Subsidiary of GenTek that is not organized under the laws of the United
States of America or any state thereof or the District of Columbia and
conducts its principal operations outside the United States; and
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(2) any Subsidiary of GenTek that has no material assets other than securities
of one or more Foreign Subsidiaries and other assets relating to an
ownership interest in such securities or Subsidiaries.
'FOUR QUARTER PERIOD' means the four quarter period of the most recent
four consecutive fiscal quarters ending prior to the date of the relevant
determination for which consolidated financial statements of GenTek are
available.
'GAAP' means generally accepted accounting principles in the United
States of America as in effect on the Issue Date (for purposes of the
definitions of the terms 'Consolidated Coverage Ratio,' 'Consolidated EBITDA,'
'Consolidated Interest Expense,' 'Consolidated Tangible Assets' and
'Consolidated Net Income' and all defined terms in the indenture to the extent
used in or relating to any of the foregoing definitions, and all ratios and
computations based on any of the foregoing definitions) and as in effect from
time to time (for all other purposes of the indenture), including those set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations based on GAAP contained in
the indenture shall be computed in conformity with GAAP as consistently applied.
'GCIP' means General Chemical Industrial Products Inc.
'GCG' means The General Chemical Group Inc.
'GUARANTOR SENIOR INDEBTEDNESS' means, at any date,
(1) all Obligations of a Subsidiary Guarantor under the Credit Facility;
(2) all Hedging Obligations of a Subsidiary Guarantor;
(3) all Obligations of a Subsidiary Guarantor under stand-by letters of credit;
and
(4) all Obligations under other Indebtedness of a Subsidiary Guarantor
including principal, premium, if any, and interest on such Indebtedness,
unless the instrument under which such Indebtedness of a Subsidiary
Guarantor for money borrowed is Incurred expressly provides that such
Indebtedness for money borrowed is not senior or superior in right of
payment to the Subsidiary Guarantee, and all renewals, extensions,
modifications, amendments or refinancings thereof. Notwithstanding the
foregoing, Guarantor Senior Indebtedness shall not include:
(a) to the extent that it may constitute Indebtedness, any Obligation for
federal, state, local, foreign or other taxes;
(b) any Indebtedness of a Subsidiary Guarantor to any Subsidiary of a
Subsidiary Guarantor, unless and for so long as such Indebtedness has
been pledged to secure Obligations under the Credit Facility or other
Guarantor Senior Indebtedness;
(c) any Obligation in respect of any trade payable Incurred for the
purchase of goods or goods or materials, or for services obtained,
in the ordinary course of business;
(d) Indebtedness evidenced by the Subsidiary Guarantee;
(e) Indebtedness of a Subsidiary Guarantor that is expressly subordinate
or junior in right of payment to any other Indebtedness of a
Subsidiary Guarantor;
(f) to the extent that it may constitute Indebtedness, any obligation
owing under leases (other than Capital Lease Obligations), subleases
or licenses; and
(g) any obligation that by operation of law is subordinate to any general
unsecured obligations of a Subsidiary Guarantor.
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'GUARANTY' means, as applied to any obligation,
(1) a guaranty (other than by endorsement of negotiable instruments for deposit
or collection in the ordinary course of business), direct or indirect, in
any manner, of any part or all of such obligation; and
(2) an agreement, direct or indirect, contingent or otherwise, the practical
effect of which is to assure in any way the payment or performance (or
payment of damages in the event of non-performance) of all or any part of
such obligation, including, without limiting the foregoing, the payment of
amounts drawn down by letters of credit. A guaranty shall include, without
limitation, any agreement to maintain or preserve any other Person's
financial condition or to cause any other Person to achieve certain levels
of operating results.
'HEDGING OBLIGATIONS' means, with respect to any Person, the Obligations
of such Person under
(1) interest rate swap agreements, interest rate cap agreements and interest
rate collar agreements,
(2) other agreements or arrangements relating to fluctuations in interest rates
and
(3) foreign currency, commodity or energy hedge, exchange or similar agreements
(agreements referred to in this definition being referred to herein as
'Hedging Agreements').
'INCUR' means, with respect to any Indebtedness or other obligation of
any Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guaranty or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and 'Incurrence,' 'Incurred' and 'Incurring' shall have meanings
correlative to the foregoing); provided, however, that (i) a change in generally
accepted accounting principles that results in an obligation of such Person that
exists at such time becoming Indebtedness shall not be deemed an Incurrence of
such Indebtedness and (ii) neither the accrual of interest nor the accretion of
original issue discount shall be deemed an Incurrence of Indebtedness (although
the amount of such accrual or accretion at any date at which an outstanding
amount of Indebtedness is to be calculated shall be included in the calculation
of such outstanding principal amount). Indebtedness of any Acquired Person or
any of its Subsidiaries existing at the time such Acquired Person becomes a
Restricted Subsidiary (or is merged into or consolidated with the Company or any
Restricted Subsidiary), whether or not such Indebtedness was Incurred in
connection with, as a result of, or in contemplation of, such Acquired Person
becoming a Restricted Subsidiary (or being merged into or consolidated with the
Company or any Restricted Subsidiary), shall be deemed Incurred at the time any
such Acquired Person becomes a Restricted Subsidiary or merges into or
consolidates with the Company or any Restricted Subsidiary.
'INDEBTEDNESS' means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and whether
or not contingent,
(1) every obligation of such Person for money borrowed;
(2) every obligation of such Person evidenced by bonds, debentures, notes or
other similar instruments, including obligations incurred in connection
with the acquisition of property, assets or businesses;
(3) every reimbursement obligation of such Person with respect to letters of
credit, bankers' acceptances or similar facilities issued for the account
of such Person;
(4) every obligation of such Person issued or assumed as the deferred purchase
price of property or services and every conditional sale obligation (but
excluding (a) trade accounts payable incurred in the ordinary course of
business and payable in accordance with industry practices or (b) other
accrued liabilities arising in the ordinary course of business which are
not overdue or which are being contested in good faith);
(5) every Capital Lease Obligation of such Person;
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(6) every net obligation under Hedging Obligations of such Person; and
(7) every obligation of the type referred to in clauses (1) through (6) of
another Person and all dividends of another Person the payment of which, in
either case, such Person has guaranteed or is responsible or liable for,
directly or indirectly, as obligor, guarantor or otherwise. Indebtedness:
(a) shall never be calculated taking into account any cash and Cash
Equivalents held by such Person;
(b) shall not include obligations of any Person
(i) for federal, state, local or other taxes, which are not
overdue (taking account of any extensions) or subject to
dispute,
(ii) arising from reclamation obligations, or any bonding thereof
(unless required by and in compliance with applicable laws
and regulations, to the extent such reclamation obligations
are due after the final Stated Maturity of the notes),
(iii) arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument
inadvertently drawn against insufficient funds in the
ordinary course of business, provided that such obligations
are extinguished within three Business Days of their
Incurrence,
(iv) resulting from the endorsement of negotiable instruments for
collection in the ordinary course of business and consistent
with past business practices and
(v) under stand-by letters of credit to the extent collateralized
by cash or Cash Equivalents;
(c) which provides that an amount less than the principal amount thereof
shall be due upon any declaration of acceleration thereof shall be
deemed to be Incurred or outstanding in an amount equal to the
accreted value thereof at the date of determination;
(d) shall include the liquidation preference and any mandatory redemption
payment obligations (excluding currently accruing dividends) in
respect of any Disqualified Equity Interests or Designated Preferred
Equity Interests of GenTek or any Preferred Equity Interests of any
Restricted Subsidiary; and
(e) shall not include obligations under performance bonds, performance
guaranties, surety bonds and appeal bonds, letters of credit or
similar obligations, incurred in the ordinary course of business.
For purposes of determining compliance with any U.S. dollar-denominated
restriction on the Incurrence of Indebtedness denominated in a foreign currency,
the U.S. dollar-equivalent principal amount of such Indebtedness Incurred
pursuant thereto shall be calculated based on the relevant currency exchange
rate in effect on the date that such Indebtedness was Incurred if such
Indebtedness is Incurred to refinance other Indebtedness denominated in a
foreign currency, and such refinancing would cause the applicable U.S.
dollar-denominated restriction to be exceeded if calculated at the relevant
currency exchange rate in effect on the date of such refinancing, such U.S.
dollar-denominated restriction shall be deemed not to have been exceeded so long
as the principal amount of such refinancing Indebtedness does not exceed the
principal amount of such Indebtedness being refinanced. The principal amount of
any Indebtedness Incurred to refinance other Indebtedness, if Incurred in a
different currency from the Indebtedness being refinanced, shall be calculated
based on the currency exchange rate applicable to the currencies in which such
respective Indebtedness is denominated that is in effect on the date of such
refinancing.
'INDEPENDENT FINANCIAL ADVISOR' means a nationally recognized
accounting, appraisal, investment banking firm or consultant that is, in the
judgment of GenTek's Board of Directors, qualified to perform the task for which
it has been engaged:
105
(1) which does not, and whose directors, officers and employees or Affiliates
do not, have a direct or indirect financial interest in GenTek; and
(2) which, in the judgment of the Board of Directors of GenTek, is otherwise
independent and qualified to perform the task for which it is to be
engaged.
'INTEREST' means, with respect to the notes, the sum of any cash
interest and any Additional Interest on the notes.
'INVESTMENT' means, with respect to any Person, any direct or indirect
loan, advance, guaranty or other extension of credit (other than trade
receivables created on customary terms in the ordinary course of business) or
capital contribution to (by means of transfers of cash or other property or
assets to others or payments for property or services for the account or use of
others, or otherwise), or purchase or acquisition of capital stock, bonds,
notes, debentures or other securities or evidences of Indebtedness issued by,
any other Person. Unless the context otherwise requires, the amount of any
Investment shall be the original cost of such Investment, plus the cost of all
additions thereto, and minus the amount of any portion of such Investment repaid
to such Person in cash as a repayment of principal or a return of capital, as
the case may be, but without any other adjustments for increases or decreases in
value, or write-ups, write-downs or write-offs with respect to such Investment.
In determining the amount of any Investment constituting a guaranty, the maximum
potential amount of such guaranty shall be considered the amount of the
Investment and, in determining the amount of any Investment involving a transfer
of any property or asset other than cash, such property shall be valued at its
Fair Market Value at the time of such transfer. A guaranty of performance by
GenTek or any Restricted Subsidiary in the delivery of the product or material
requirements of a customer or third party in the ordinary course of business
shall not constitute an Investment. If the Issuer or any of the Restricted
Subsidiaries sells or otherwise disposes of any Capital Stock of any direct or
indirect Restricted Subsidiary such that, after giving effect to any such sale
or disposition, such entity ceases to be a Subsidiary, the Issuer shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the Fair Market Value of the Capital Stock of such Restricted
Subsidiary not sold or disposed of.
'ISSUE DATE' means the original issue date of the notes.
'JOINT VENTURE' means any joint venture with respect to a Related
Business constituting a Subsidiary, involving GenTek and one or more Persons, to
which GenTek has contributed assets (whether in the form of cash, property or
services).
'LIEN' means any lien, mortgage, charge, security interest,
hypothecation, assignment for security or encumbrance of any kind (including any
conditional sale or capital lease or other title retention agreement, any lease
in the nature thereof, and any agreement to give any security interest).
'MANAGEMENT AGREEMENT' means the management agreement as in effect on
the Issue Date between GenTek and Latona Associates Inc. (and its permitted
successors and assigns thereunder), as it may be amended, modified or replaced
after the Issue Date with the approval of a majority of the disinterested
directors of GenTek in accordance with the covenant described under
' -- Covenants -- Transactions with Affiliates.'
'MATURITY DATE' means August 1, 2009.
'NET CASH PROCEEDS' means the aggregate proceeds in the form of cash or
Cash Equivalents received by GenTek or any Restricted Subsidiary in respect of
any Asset Sale, including all cash or Cash Equivalents received upon any sale,
liquidation or other exchange of proceeds of Asset Sales received in a form
other than cash or Cash Equivalents, net of:
(1) the direct costs relating to such Asset Sale (including, without
limitation, legal, accounting and investment banking fees, underwriters or
placement agents' fees, discounts or commissions, sales commissions, and
costs incurred in preparing the respective properties or assets for sale)
and any relocation or severance expenses incurred as a result thereof;
106
(2) taxes paid or payable as a result thereof (after taking into account any
available tax credits or deductions and any tax sharing arrangements);
(3) amounts required to be applied to the repayment of Indebtedness secured by
a Lien on the asset or assets that were the subject of such Asset Sale;
(4) amounts deemed, in good faith, appropriate by the Board of Directors of
GenTek to be provided as a reserve, in accordance with GAAP, against any
liabilities associated with such assets which are the subject of such Asset
Sale (provided that the amount of any such reserves shall be deemed to
constitute Net Cash Proceeds at the time such reserves shall have been
released or are not otherwise required to be retained as a reserve); and
(5) with respect to Asset Sales by Restricted Subsidiaries, the portion of such
cash payments attributable to Persons holding a minority interest in such
Restricted Subsidiary.
'OBLIGATIONS' means any principal, interest (including, with respect to
Designated Senior Indebtedness only, Post-Petition Interest), penalties, fees,
indemnifications, reimbursement obligations, damages and other liabilities
payable under the documentation governing any Indebtedness.
'OFFER TO PURCHASE' means a written offer sent by or on behalf of GenTek
by first-class mail, postage prepaid, to each holder at his address appearing in
the register for the Notes on the date of the written offer offering to purchase
up to the principal amount of notes specified in such written offer at the
purchase price specified in such written offer (as determined pursuant to the
indenture). Unless otherwise required by applicable law, the written offer shall
specify the Expiration Date of the Offer to Purchase, which shall be not less
than 20 Business Days nor more than 60 days after the date of such written
offer, and the Purchase Date for purchase of notes to occur no later than five
Business Days after the Expiration Date. GenTek shall notify the trustee at
least 15 Business Days (or such shorter period as is acceptable to the trustee)
prior to the mailing of the written offer of GenTek's obligation to make an
Offer to Purchase, and the written offer shall be mailed by GenTek or, at
GenTek's request, by the Trustee in the name and at the expense of GenTek. The
written offer shall contain all the information required by applicable law to be
included therein. The written offer shall also contain information concerning
the business of GenTek and its Subsidiaries which GenTek in good faith believes
will enable such Holders to make an informed decision with respect to the Offer
to Purchase (which at a minimum will include:
(1) the most recent annual and quarterly financial statements and 'Management's
Discussion and Analysis of Financial Condition and Results of Operations'
contained in the documents required to be filed with the Trustee pursuant
to the Indenture (which requirements may be satisfied by delivery of such
documents together with the written offer);
(2) a description of material developments in GenTek's business subsequent to
the date of the latest of such financial statements referred to in
clause (i) (including a description of the events requiring GenTek to make
the Offer to Purchase);
(3) if applicable, appropriate pro forma financial information concerning the
Offer to Purchase and the events requiring GenTek to make the Offer to
Purchase and
(4) any other information required by applicable law to be included therein).
The written offer shall contain all instructions and materials necessary
to enable such holders to tender notes pursuant to the Offer to Purchase. The
written offer shall also state:
(1) the Section of the indenture pursuant to which the Offer to Purchase is
being made;
(2) the Expiration Date and the Purchase Date;
(3) the Purchase Amount;
(4) the Purchase Price;
107
(5) that the Holder may tender all or any portion of the notes registered in
the name of such holder and that any portion of a note tendered must be
tendered in an integral multiple of $1,000 principal amount;
(6) the place or places where notes are to be surrendered for tender pursuant
to the Offer to Purchase;
(7) that interest on any note not tendered or tendered but not purchased by
GenTek pursuant to the Offer to Purchase will continue to accrue;
(8) that on the Purchase Date the Purchase Price will become due and payable
upon each note being accepted for payment pursuant to the Offer to Purchase
and that interest thereon shall cease to accrue on and after the Purchase
Date;
(9) that each holder electing to tender all or any portion of a note pursuant
to the Offer to Purchase will be required to surrender such note at the
place or places specified in the written offer prior to the close of
business on the Expiration Date (such note being, if GenTek or the trustee
so requires, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to GenTek and the trustee duly executed by,
the holder thereof or his attorney duly authorized in writing);
(10) that holders will be entitled to withdraw all or any portion of notes
tendered if GenTek (or its Paying Agent) receives, not later than the close
of business on the fifth Business Day next preceding the Expiration Date, a
telegram, telex, facsimile transmission or letter setting forth the name of
the holder, the principal amount of the note the holder tendered, the
certificate number of the note the holder tendered and a statement that
such holder is withdrawing all or a portion of his tender;
(11)that (a) if notes in an aggregate principal amount less than or equal to the
Purchase Amount are duly tendered and not withdrawn pursuant to the Offer to
Purchase, GenTek shall purchase all such notes and (b) if notes in an
aggregate principal amount in excess of the Purchase Amount are tendered and
not withdrawn pursuant to the Offer to Purchase, GenTek shall purchase notes
having an aggregate principal amount equal to the Purchase Amount on a pro
rata basis (with such adjustments as may be deemed appropriate so that only
notes in denominations of $1,000 principal amount or integral multiples
thereof shall be purchased); and
(12) that in the case of any holder whose note is purchased only in part, GenTek
shall execute and the trustee shall authenticate and deliver to the holder
of such note without service charge, a new note or notes, of any authorized
denomination as requested by such holder, in an aggregate principal amount
equal to and in exchange for the unpurchased portion of the note so
tendered.
An Offer to Purchase shall be governed by and effected in accordance
with the provisions above pertaining to any such written offer.
'OPERATING PARTNERSHIP' means any Person
(1) in which GenTek beneficially owns less than a majority of the Voting Equity
Interests and
(2) which has been organized for the purpose of engaging in a line or lines of
business similar to a line or lines of business of GenTek or any Restricted
Subsidiary or in a Related Business.
'PARI PASSU DEBT' means Indebtedness of GenTek or a Subsidiary Guarantor
that neither constitutes Senior Indebtedness or Guarantor Senior Indebtedness,
as applicable, nor Subordinated Indebtedness.
'PARI PASSU DEBT PRO RATA SHARE' means the amount of the applicable Net
Cash Proceeds obtained by multiplying the amount of such Net Cash Proceeds by a
fraction,
(1) the numerator of which is the aggregate accreted value and/or principal
amount, as the case may be, of all Pari Passu Debt outstanding at the time
of the applicable Asset Sale with respect to which GenTek is required to
use Net Cash Proceeds to repay or make an offer to purchase or repay and
108
(2) the denominator of which is the sum of (a) the aggregate principal amount
of all Notes outstanding at the time of the applicable Asset Sale and
(b) the aggregate principal amount or the aggregate accreted value, as the
case may be, of all Pari Passu Debt outstanding at the time of the
applicable Offer to Purchase with respect to which GenTek is required to
use the applicable Net Cash Proceeds to offer to repay or make an offer to
purchase or repay.
'PERMITTED CONSIDERATION' means consideration received in connection
with an Asset Sale consisting of
(1) any Investment by GenTek or a Restricted Subsidiary made for strategic
purposes in a customer, supplier, competitor or a company engaged in a
Related Business, provided that, at the time of and after giving effect to
such Asset Sale, the aggregate amount of all such Investments treated as
Permitted Consideration would not exceed 10% of Consolidated Tangible
Assets as of the most recent balance sheet date,
(2) Replacement Assets and
(3) any combination of the consideration described in clause (1) or (2) above.
'PERMITTED DESIGNEE' with respect to any Permitted Holder means
(1) a spouse or child or other lineal descendants (in the case of an
individual) of such Permitted Holder,
(2) any trust principally for the benefit of such Permitted Holder or a spouse
or child or other lineal descendant of such Permitted Holder,
(3) in the event of death or incompetence of a Permitted Holder, such Permitted
Holder's estate, heirs, executor, administrator, committee or other court
appointed representative,
(4) any foundation or not-for-profit organization established by a Permitted
Holders, or
(5) any Person so long as one or more Permitted Holders in the aggregate own a
majority of the Voting Equity Interests of such person.
'PERMITTED EQUITY INCENTIVE PAYMENTS' means
(1) distributions, loans or advances made by GenTek to members of GenTek's or
its Subsidiaries' management to the extent used to fund the repurchase,
redemption or other acquisition or retirement for value of any Equity
Interests of GenTek held by any member of GenTek's or any of its
Subsidiaries' management pursuant to any management equity subscription
agreement or stock option agreement in effect as of the date of the
Indenture and as the same may be amended, modified or replaced in
accordance with the covenant described under ' -- Covenants -- Transactions
with Affiliates';
(2) payments of any amounts to an ESOP or other stock plan for employees of
GenTek or any of its Subsidiaries; and
(3) payments to members of management of GenTek and its Subsidiaries pursuant
to equity incentive plans of GenTek to the extent such payments are
reflected as expenses in the calculation of Consolidated Net Income;
provided that the aggregate amount of payments made under the preceding
clauses (1), (2) and (3) shall not exceed the sum of $5.0 million in any
calendar year plus the Net Cash Proceeds received by GenTek since the Issue
Date from, or as a capital contribution from, the issuance or sale to
employees of GenTek and its Subsidiaries of Qualified Equity Interests, to
the extent such Net Cash Proceeds are not and have not been included in any
calculation under clause (c)(2) of the first paragraph (a) or under any
clause (other than clause (v)) of the second paragraph of the covenant
described under ' -- Covenants -- Limitation on Restricted Payments.'
109
'PERMITTED HEDGING OBLIGATIONS' means any Hedging Obligations that are
Incurred (a) in the ordinary course of business and (b) for the purpose of
hedging (x) interest rate risk to GenTek or any Restricted Subsidiary with
respect to any fixed or floating rate Indebtedness of GenTek or any Restricted
Subsidiary (including all Hedging Obligations Incurred in connection with the
Credit Facility), (y) currency risk to GenTek or any Restricted Subsidiary in
the ordinary course of business or (z) the risk to GenTek and the Restricted
Subsidiaries of fluctuations in the cost of raw materials, energy inputs or
other commodities used in the ordinary course of business of GenTek and the
Restricted Subsidiaries.
'PERMITTED HOLDER' means Paul M. Meister, Paul M. Montrone, Richard R.
Russell and their respective Permitted Designees.
'PERMITTED INDEBTEDNESS' means:
(1) the Incurrence by GenTek or any Restricted Subsidiary of Indebtedness under
the Credit Facility; provided that the aggregate principal amount of
Indebtedness (with letters of credit being deemed to have a principal
amount at any time equal to the aggregate then undrawn and unexpired amount
thereof plus the aggregate amount of drawings thereunder that have not then
been reimbursed) outstanding under the Credit Facility after giving effect
to such Incurrence does not exceed an amount equal to:
(a) $550.0 million; plus
(b) in the case of a Credit Facility constituting a refinancing (or a
successive refinancing) of the initial Credit Facility, an amount
equal to the amount of reasonable fees, underwriting discounts,
premiums and other costs and expenses incurred in connection with
such refinancing;
(2) the Incurrence by GenTek or any Restricted Subsidiary of Indebtedness under
the Notes, the Subsidiary Guarantees and the indenture;
(3) the Incurrence by GenTek or any Restricted Subsidiary of Purchase Money
Indebtedness or Capital Lease Obligations; provided that, after giving
effect to any such Incurrence, the aggregate principal amount (or accreted
value, as applicable) of all outstanding Indebtedness Incurred under this
clause (3), when aggregated with all outstanding Permitted Refinancing
Indebtedness (including any successive refinancings) Incurred under clause
(5) below to refinance Indebtedness Incurred under this clause (3), does
not exceed at any time outstanding the greater of:
(a) $30.0 million; and
(b) 5% of Consolidated Tangible Assets;
(4) (a) the Incurrence of Indebtedness by Foreign Subsidiaries; provided that
the aggregate principal amount of all outstanding Indebtedness
Incurred by Foreign Subsidiaries under this clause (4) does not exceed
the greater of:
(A) $75.0 million; and
(B) 15.0% of Consolidated Tangible Assets; and
(b) guarantees by GenTek or any Restricted Subsidiary in respect of
Indebtedness permitted by the foregoing clause (a);
(5) the Incurrence by GenTek or any Restricted Subsidiary of Permitted
Refinancing Indebtedness in exchange for, or the net proceeds of which are
used to refund, refinance or replace, Indebtedness that was Incurred under
the first paragraph hereof or clause (2) or (3) of this definition;
(6) the Incurrence or issuance by GenTek or any Restricted Subsidiary of
intercompany Indebtedness or Preferred Equity Interests between or among
GenTek and any of the Restricted Subsidiaries; provided that:
110
(a) if GenTek is the obligor on any such Indebtedness to a Restricted
Subsidiary such Indebtedness is expressly subordinated to the prior
payment in full in cash of all Obligations with respect to the notes
(unless Designated Senior Indebtedness expressly prohibits such
subordination); and
(b) (x) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness or Preferred Equity Interests being
held by a Person other than GenTek or a Restricted Subsidiary thereof
and (y) any sale or other transfer of any such Indebtedness or
Preferred Equity Interests to a Person that is neither GenTek nor a
Restricted Subsidiary thereof (other than to secure the Designated
Senior Indebtedness) shall be deemed, in each case, to constitute an
Incurrence of such Indebtedness or issuance of Preferred Equity
Interests by GenTek or such Restricted Subsidiary, as the case may
be, that was not permitted by this clause (6);
(7) Indebtedness arising from any agreement entered into by GenTek or any of
the Restricted Subsidiaries providing for indemnification, purchase price
adjustment, customary earn-out arrangements or similar obligations (other
than guarantees of Indebtedness Incurred by any Person acquiring all or any
portion of the assets disposed of pursuant to an Asset Sale); provided that
such Indebtedness is Incurred or assumed, to the extent applicable, in
compliance with the 'Disposition of Proceeds of Asset Sales' covenant;
(8) the Incurrence by GenTek or any Restricted Subsidiary of Permitted Hedging
Obligations;
(9) the Incurrence by GenTek or any Restricted Subsidiary of Indebtedness
represented by trade letters of credit, reclamation, performance or surety
bonds, completion guarantees or similar arrangements, in each case, in the
ordinary course of business;
(10) the Incurrence by GenTek or any Restricted Subsidiary of additional
Indebtedness and the issuance by any Restricted Subsidiary of Preferred
Equity Interests in an aggregate principal amount or liquidation preference
or other priority claim (or accreted value, as applicable) at any time
outstanding not to exceed $50.0 million at any one time outstanding; and
(11) the issuance by GenTek of any Disqualified Equity Interests or any
Restricted Subsidiary of any Preferred Equity Interests in connection with
an Acquisition by GenTek or such Restricted Subsidiary, provided that the
Fair Market Value of the Equity Interests issued does not exceed 30% of the
Fair Market Value of the total consideration paid by GenTek and the
Restricted Subsidiaries for such Acquisition.
'PERMITTED INVESTMENTS' means:
(1) any Investment in GenTek, any Restricted Subsidiary or a Person that
becomes a Restricted Subsidiary, or is merged with or into or consolidated
with GenTek or a Restricted Subsidiary (provided GenTek or a Restricted
Subsidiary is the survivor), as a result of or in connection with such
Investment;
(2) cash or Cash Equivalents;
(3) Investments in prepaid expenses, negotiable instruments held for collection
and lease, utility and workers' compensation, performance and other similar
deposits;
(4) loans and advances to employees made in the ordinary course of business not
to exceed $3.0 million in the aggregate at any one time outstanding;
(5) Permitted Hedging Obligations;
(6) bonds, notes, debentures or other securities received as consideration from
any Asset Sale that is subject to and made in compliance with the covenant
described under ' -- Covenants -- Disposition of Proceeds of Asset Sales',
provided that, in the case of any Permitted Consideration (excluding
Replacement Assets) received from any Asset Sale to the extent it exceeds
25% of the total
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consideration received from such Asset Sale ('Excess Permitted
Consideration'), such Excess Permitted Consideration shall not be permitted
under this clause (f) but rather must be permitted under another clause or
clauses of this definition or otherwise under the covenant 'Limitation on
Restricted Payments';
(7) transactions with officers, directors and employees of GenTek or any
Restricted Subsidiary entered into in compliance with
' -- Covenants -- Transactions with Affiliates' (including compensation or
employee benefit arrangements with any such director or employee);
(8) any Investment to the extent that the consideration paid by GenTek or a
Restricted Subsidiary therefor consists of Qualified Equity Interests of
GenTek;
(9) to the extent not otherwise included in other clauses of this definition,
Investments in Operating Partnerships or Unrestricted Subsidiaries or
Investments representing Excess Permitted Consideration in an aggregate
amount at any time outstanding not to exceed an amount equal to (a) the
greater of (x) $75.0 million or (y) 15.0% of Consolidated Tangible Assets
plus (b) to the extent not reinvested under this clause (9), any cash
return of capital (whether realized as a result of payments from the
respective Person in which the Permitted Investment was made, the receipt
of net cash proceeds from the sale of the respective Permitted Investment
or otherwise) realized on a Permitted Investment made after the Issue Date
pursuant to this clause (9) (provided such amount under this subclause (b)
shall be excluded from Consolidated Net Income for purposes of the covenant
described under ' -- Covenants -- Limitation on Restricted Payments');
(10) securities or other Investments received in settlement of debts created in
the ordinary course of business and owing to GenTek or any Restricted
Subsidiary, or as a result of foreclosure, perfection or enforcement of any
Lien, or in satisfaction of judgments, including in connection with any
bankruptcy proceeding or other reorganization of another Person;
(11) receivables owing to GenTek or any Restricted Subsidiary created in the
ordinary course;
(12) Investments in the form of the sale (on a 'true sale' non-recourse basis,
other than customary securitization undertakings) or the servicing of
receivables transferred from GenTek or any Restricted Subsidiary, or
transfers of cash, to an Accounts Receivable Subsidiary as a capital
contribution or in exchange for Indebtedness of such Accounts Receivable
Subsidiary or cash and Investments by an Accounts Receivable Subsidiary
incurred in connection with the sale or financing of accounts receivable,
in each case in the ordinary course of business and on customary terms;
(13) Investments in the Notes; and
(14) Investments in any Person not to exceed $20.0 million at any time
outstanding.
'PERMITTED JUNIOR SECURITIES' means any securities of GenTek or any
other Person provided for by a plan of reorganization or readjustment succeeding
to the assets and liabilities of GenTek that are (1) equity securities without
special covenants or (2) subordinated in right of payment to all Senior
Indebtedness that may at the time be outstanding, to substantially the same
extent as, or to a greater extent than, the notes are subordinated as provided
in the indenture, in any event pursuant to a court order so providing and as to
which:
(1) the rate of interest on such securities shall not exceed the effective rate
of interest on the notes on the date of the indenture;
(2) such securities shall not be entitled to the benefits of covenants or
defaults materially more beneficial to the holders of such securities than
those in effect with respect to the notes on the date of the indenture and
(3) such securities shall not provide for amortization (including sinking fund
and mandatory prepayment provisions) commencing prior to the date one year
following the final scheduled maturity date of the Senior Indebtedness (as
modified by the plan of reorganization or readjustment pursuant to which
such securities are issued);
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provided that, in each case with respect to clauses (1) and (2) above, (x) if a
new corporation results from any such reorganization or readjustment, such
corporation assumes all Senior Indebtedness that will be outstanding after
giving effect thereto and (y) the rights of the holders of the Senior
Indebtedness are not, without the consent of such holders, altered or impaired,
including, without limitation, such rights being impaired within the meaning of
Section 1124 of Title 11 of the United States Code, or any impairment of the
right to receive interest accruing during the pendency of a bankruptcy or
insolvency proceeding, including proceedings under Title 11 of the United States
Code.
'PERMITTED LIENS' means:
(1) Liens on property of a Person existing at the time such Person becomes a
Subsidiary of GenTek (or at the time GenTek or a Restricted Subsidiary
acquires such property) or is merged into or consolidated with GenTek or
any Restricted Subsidiary; provided, however, that such Liens were in
existence prior to the contemplation of such merger or consolidation and do
not secure any property or assets of GenTek or any Restricted Subsidiary
other than the property or assets subject to the Liens prior to such merger
or consolidation;
(2) Liens imposed by law such as carriers', warehousemen's and mechanics' Liens
and other similar Liens arising in the ordinary course of business which
secure payment of obligations not more than 60 days past due or which are
being contested in good faith and by appropriate proceedings;
(3) Liens existing on the Issue Date or provided for under written arrangements
existing on the Issue Date;
(4) Liens securing only the Notes;
(5) Liens in favor of GenTek or any Restricted Subsidiary;
(6) Liens for taxes, assessments or governmental charges or claims that are not
yet delinquent or the nonpayment of which in the aggregate would not
reasonably be expected to have a material adverse effect on GenTek and the
Restricted Subsidiaries or that are being contested in good faith by
appropriate proceedings; provided, however, that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall
have been made therefor;
(7) easements, reservation of rights of way, restrictions and other similar
easements, licenses, restrictions on the use of properties, or minor
imperfections of title that in the aggregate do not in any case materially
detract from the properties subject thereto or interfere with the ordinary
conduct of the business of GenTek and the Restricted Subsidiaries;
(8) pledges, deposits or Liens in connection with workers' compensation,
unemployment insurance and other social security and other similar
legislation or other insurance-related obligations (including, without
limitation, pledges or deposits securing liability to insurance carriers
under insurance or self-insurance arrangements;
(9) pledges, deposits or Liens to secure the performance of bids, tenders,
trade, government or other contracts (other than for borrowed money),
obligations for utilities, leases, licenses, statutory obligations,
completion guarantees, surety, judgment, appeal or performance bonds, other
similar bonds, instruments or obligations, and other obligations of a like
nature incurred in the ordinary course of business;
(10) (A) mortgages, liens, security interests, restrictions, encumbrances or
any other matters of record that have been placed by any developer,
landlord or other third party on property over which GenTek or any
Restricted Subsidiary has easement rights or on any leased property
and subordination or similar agreements relating thereto; and
(B) any condemnation or eminent domain proceedings affecting any real
property;
(11) Liens arising out of judgments, decrees, orders or awards not constituting
any Event of Default in respect of which GenTek shall in good faith be
prosecuting an appeal or proceedings for review,
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which appeal or proceedings shall not have been finally terminated, or if
the period within which such appeal or proceedings may be initiated shall
not have expired;
(12) Liens securing Hedging Obligations Incurred in compliance with the covenant
described under ' -- Covenants -- Limitation on Incurrence of Indebtedness
and Preferred Equity Interests';
(13) Liens securing Purchase Money Indebtedness; provided, however, that
(a) such Liens secure Indebtedness in an amount not in excess of the
original purchase price or the original cost of any such assets or
repair, addition or improvement thereto (plus an amount equal to the
reasonable fees and expenses in connection with the incurrence of
such Indebtedness),
(b) such Liens do not extend to any other assets of GenTek or the
Restricted Subsidiaries (and, in the case of repair, addition or
improvements to any such assets, such Lien extends only to the assets
(and improvements thereto or thereon) repaired, added to or
improved),
(c) the Incurrence of such Indebtedness is permitted by
' -- Covenants -- Limitation on Incurrence of Indebtedness and
Preferred Equity Interests' above and
(d) such Liens attach within 180 days of such purchase, construction,
installation, repair, addition or improvement;
(14) Liens to secure Indebtedness permitted by clause (4) of the definition of
Permitted Indebtedness;
(15) Liens to secure any refinancings, renewals, extensions, modifications or
replacements (collectively, 'refinancing') (or successive refinancings), in
whole or in part, of any Indebtedness secured by Liens referred to in this
definition (other than clause (22) below) so long as such Lien does not
extend to any other property (other than improvements thereto or proceeds
or dividends or distributions in respect thereof);
(16) Liens securing letters of credit entered into in the ordinary course of
business and consistent with past business practice;
(17) Liens on and pledges of the Equity Interests of any Unrestricted Subsidiary
securing any Indebtedness of such Unrestricted Subsidiary;
(18) Liens securing Acquired Indebtedness, provided that such Liens do not
extend to any other assets or property of GenTek or any Restricted
Subsidiary;
(19) leases, subleases, licenses or sublicenses to third parties;
(20) any Lien with respect to the Equity Interests of any joint venture or
similar arrangement pursuant to any joint venture or similar agreement;
(21) Liens to secure Indebtedness or other obligations of an Accounts Receivable
Subsidiary; and
(22) other Liens securing up to $20.0 million of Indebtedness (other than
Subordinated Indebtedness or Pari Passu Indebtedness).
'PERMITTED REFINANCING INDEBTEDNESS' means any Indebtedness of GenTek or
any of the Restricted Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of GenTek or any of the Restricted Subsidiaries (other than
intercompany Indebtedness); provided that:
(1) the principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount of (or
accreted value, if applicable), plus accrued interest on, the Indebtedness
so extended, refinanced, renewed, replaced, defeased or refunded (plus the
amount of reasonable fees, underwriting discount, premiums and all other
costs and expenses incurred in connection therewith);
114
(2) except in the case of Senior Indebtedness or Indebtedness of a Restricted
Subsidiary, such Permitted Refinancing Indebtedness has a final maturity
date not earlier than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life
to Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced, defeased
or refunded is subordinated in right of payment to the notes, such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the
notes on terms at least as favorable to the holders as those contained in
the documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; and
(4) if such Indebtedness being extended, refinanced, renewed, defeased or
refunded, constitutes Preferred Equity Interests of a Restricted Subsidiary
or Disqualified Equity Interests, then the Permitted Refinancing
Indebtedness shall also constitute Capital Stock of the respective issuer
of the Capital Stock being extended, refinanced, renewed, replaced,
defeased or refunded.
'PERSON' means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, limited liability
limited partnership, trust, unincorporated organization or government or any
agency or political subdivision thereof.
'POST-PETITION INTEREST' means, with respect to any Indebtedness of any
Person, all interest accrued or accruing on such Indebtedness after the
commencement of any bankruptcy, insolvency or liquidation proceeding against
such Person in accordance with and at the contract rate (including, without
limitation, any rate applicable upon default) specified in the agreement or
instrument creating, evidencing or governing such Indebtedness, whether or not,
pursuant to applicable law or otherwise, the claim for such interest is allowed
as a claim in such bankruptcy, insolvency or liquidation proceeding.
'PREFERRED EQUITY INTEREST,' in any Person, means an Equity Interest of
any class or classes (however designated) which is preferred as to the payment
of dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over Equity
Interests of any other class in such Person. Preferred Equity Interests of any
Acquired Person or any of its Subsidiaries existing at the time such Acquired
Person becomes a Restricted Subsidiary (or is merged into or consolidated with
GenTek or any Restricted Subsidiary) shall be deemed issued at such time.
'PURCHASE AMOUNT' means the aggregate principal amount of the
outstanding notes offered to be purchased by GenTek pursuant to the Offer to
Purchase (including, if less than 100%, the manner by which such amount has been
determined pursuant to the Section of the indenture requiring the Offer to
Purchase).
'PURCHASE DATE' means the settlement date for the purchase of notes in
connection with an Offer to Purchase.
'PURCHASE MONEY INDEBTEDNESS' means Indebtedness of GenTek or any
Restricted Subsidiary Incurred for the purpose of financing all or any part of
the acquisition (whether directly or through the acquisition of the Equity
Interests of any Person), leasing, construction or improvement of any property,
plant or equipment used in the business of GenTek or any Restricted Subsidiary,
provided that the aggregate principal amount of such Indebtedness does not
exceed such purchase price or cost.
'PURCHASE PRICE' means the purchase price to be paid by GenTek for each
$1,000 aggregate principal amount of notes accepted for payment (as specified
pursuant to the indenture).
'QUALIFIED EQUITY INTEREST' in any Person means any Equity Interest in
such Person other than any Disqualified Equity Interest.
'REDEMPTION DATE' means the date fixed for the redemption of the notes
in accordance with 'Selection and Notice of Redemption.'
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'RELATED BUSINESS' means:
(1) those businesses in which GenTek or any of the Restricted Subsidiaries is
engaged on the date of the Indenture, or that are similar or reasonably
related, complementary or incidental thereto or extensions or developments
thereof; and
(2) any business (the 'Other Business') which forms a part of a business (the
'Acquired Business') which is acquired by GenTek or any of the Restricted
Subsidiaries if a portion of the Acquired Business meets the requirements
of clause (1) of this definition.
'REPLACEMENT ASSETS' means:
(1) properties and capital assets acquired, constructed or improved by GenTek
or a Restricted Subsidiary for use in their business or in a Related
Business, or
(2) Equity Interests in any Person acquired in an Acquisition if such Person
thereby becomes a Restricted Subsidiary.
'RESTRICTED SUBSIDIARY' means any Subsidiary of GenTek that has not been
designated by the Board of Directors of GenTek, by a resolution of the Board of
Directors of GenTek delivered to the trustee, as an Unrestricted Subsidiary
pursuant to the covenant ' -- Designation of Unrestricted Subsidiaries' above.
Any such designation may be revoked by a resolution of the Board of Directors of
GenTek delivered to the Trustee, subject to the provisions of such covenant. An
Accounts Receivable Subsidiary shall not constitute a Restricted Subsidiary.
'REVOCATION' means a revocation by GenTek of any Designation of a
Subsidiary as an Unrestricted Subsidiary.
'SEC' means the Securities and Exchange Commission.
'SENIOR INDEBTEDNESS' means, at any date,
(1) all Obligations of GenTek under the Credit Facility;
(2) all Hedging Obligations of GenTek;
(3) all Obligations of GenTek under stand-by letters of credit; and
(4) all Obligations under other Indebtedness of GenTek including principal,
premium, if any, and interest on such Indebtedness, unless the instrument
under which such Indebtedness of GenTek for money borrowed is Incurred
expressly provides that such Indebtedness for money borrowed is not senior
or superior in right of payment to the Notes, and all renewals, extensions,
modifications, amendments or refinancings thereof. Notwithstanding the
foregoing, Senior Indebtedness shall not include:
(a) to the extent that it may constitute Indebtedness, any Obligation for
federal, state, local, foreign or other taxes;
(b) any Indebtedness of GenTek to any Subsidiary of GenTek, unless and
for so long as such Indebtedness has been pledged to secure
Obligations under the Credit Facility or other Senior Indebtedness;
(c) any Obligation in respect of any trade payable Incurred for the
purchase of goods or materials, or for services obtained, in the
ordinary course of business;
(d) Indebtedness evidenced by the Notes;
(e) Indebtedness of GenTek that is expressly subordinate or junior in
right of payment to any other Indebtedness of GenTek;
(f) to the extent that it may constitute Indebtedness, any obligation
owing under leases (other than Capital Lease Obligations), subleases
or licenses or Management Agreements; and
(g) any obligation that by operation of law is subordinate to any general
unsecured obligations of GenTek.
'SEPARATION AGREEMENTS' means, collectively, the Separation Agreement
dated as of April 15, 1999 among the Company, GCG, General Chemical Corporation
and GCIP, the Employee Benefits Agreement dated April 28, 1999 between GenTek
and GCG, the Transition Support Agreement dated as of April 28, 1999 between
GenTek and GCG, the Intellectual Property Agreement dated as of April 28, 1999
between GenTek, GCG, General Chemical Corporation and GCIP and the Tax Sharing
Agreement dated April 28, 1999 between GenTek and GCG, and the Sublease
Agreement, dated as of April 28,
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1999, between General Chemical Corporation and GCIP, as the same may be amended,
modified or replaced in accordance with the Indenture.
'STATED MATURITY,' when used with respect to any note or any installment
of interest thereon, means the date specified in such note as the fixed date on
which the principal of such note or such installment of interest is due and
payable.
'SUBORDINATED INDEBTEDNESS' means, with respect to GenTek, any
Indebtedness of the Company which is expressly subordinated in right of payment
to the notes.
'SUBSIDIARY' means, with respect to any Person, (a) any corporation of
which the outstanding Voting Equity Interests having at least a majority of the
votes entitled to be cast in the election of directors shall at the time be
owned, directly or indirectly, by such Person, or (b) any other Person of which
at least a majority of Voting Equity Interests are at the time, directly or
indirectly, owned by such first named Person.
'SUBSIDIARY GUARANTEE' means the guaranty of GenTek's obligations under
the indenture and the notes by a Subsidiary Guarantor pursuant to, and in
accordance with, the indenture.
'SUBSIDIARY GUARANTOR' means each Person that Incurs a Subsidiary
Guarantee pursuant to the indenture in accordance with the terms thereof;
provided that upon the release or discharge of such Person from its Subsidiary
Guarantee in accordance with the indenture, such Person ceases to be a
Subsidiary Guarantor.
'SURVIVING PERSON' means, with respect to any Person involved in a
merger or consolidation or the sale, conveyance, assignment, transfer, lease or
other disposal of all or substantially all of a Person's properties and assets,
the Person formed by or surviving such merger or consolidation or receiving
(whether through a sale, conveyance, assignment, transfer or other disposition)
such properties or assets.
'UNITED STATES GOVERNMENT OBLIGATIONS' means direct non-callable
obligations of the United States of America for the payment of which the full
faith and credit of the United States is pledged.
'UNRESTRICTED SUBSIDIARY' means any Subsidiary of GenTek designated as
such pursuant to 'Covenants -- Designation of Unrestricted Subsidiaries' above.
Any such designation may be revoked by a resolution of the Board of Directors of
GenTek delivered to the Trustee, subject to the provisions of such covenant.
'UNUTILIZED NET CASH PROCEEDS' has the meaning set forth in the third
paragraph under 'Covenants -- Disposition of Proceeds of Asset Sales' above.
'VOTING EQUITY INTERESTS' means Equity Interests in a corporation or
other Person either:
(x) with voting power under ordinary circumstances entitling the holders
thereof to vote for the election of the Board of Directors or other
governing body of such corporation or Person; or
(y) for purposes of the definition of 'Change of Control' only, directly or
indirectly accompanied with other rights to direct the policies,
management or affairs of such Person pursuant to contract or otherwise.
'WEIGHTED AVERAGE LIFE TO MATURITY' means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the sum
of the products obtained by multiplying (1) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment of final maturity, in respect thereof, by
(2) the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
aggregate principal amount of such Indebtedness.
'WHOLLY OWNED RESTRICTED SUBSIDIARY' means any Restricted Subsidiary all
of the outstanding Equity Interests (other than directors' qualifying shares) of
which are owned, directly or indirectly, by GenTek.
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of material United States income tax
consequences of the exchange of the old notes for the new notes and the
ownership and disposition of the new notes. This summary applies only to a
beneficial owner of a new note who acquires the new notes in exchange for old
notes that such holder acquired for cash at the original offering from the
initial purchasers and for the original offering price thereof.
This summary is based on provisions of the Internal Revenue Code of
1986, existing and proposed Treasury regulations promulgated thereunder and
administrative and judicial interpretations thereof, all as of the date hereof
and all of which are subject to change, possibly on a retroactive basis.
This summary does not address the tax consequences to subsequent
purchasers of the Notes and is limited to acquirors who hold the notes as
'capital assets' within the meaning of section 1221 of the Code. This summary
does not address all of the tax consequences that may be relevant to particular
acquirors in light of their personal circumstances, or to acquirors who are
subject to special rules (such as banks and other financial institutions, real
estate investment trusts, regulated investment companies, insurance companies,
tax-exempt organizations, dealers in securities, persons who have hedged the
interest rate on the notes, partnerships and other pass-through entities or
persons whose functional currency is not the U.S. dollar). In addition, this
summary does not include any description of the tax laws of any state, local or
non-U.S. government that may be applicable to a particular acquiror.
As used herein, the term 'U.S. Holder' means a beneficial owner of a
note that is, for U.S. federal income tax purposes:
(1) a citizen or individual resident of the United States;
(2) a corporation created or organized in the United States or under the laws
of the United States or of any state of the United States;
(3) an estate whose income is includable in gross income for U.S. federal
income tax purposes regardless of its source; or
(4) a trust if:
(A) a court within the United States is able to exercise primary
supervision over the administration of the trust; and
(B) at least one U.S. person has authority to control all substantial
decisions of the trust.
PROSPECTIVE ACQUIRORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE PARTICULAR U.S. FEDERAL INCOME AND ESTATE TAX CONSEQUENCES TO
THEM OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE NOTES, AS WELL AS THE
TAX CONSEQUENCES UNDER STATE, LOCAL, NON-U.S. AND OTHER TAX LAWS AND THE
POSSIBLE EFFECTS OF CHANGES IN TAX LAWS.
THE EXCHANGE OFFER
The exchange of an old note for a new note of a U.S. Holder pursuant to
the exchange offer will not constitute a taxable exchange of the old notes, and
thus a U.S. Holder will not recognize taxable gain or loss upon receipt of a new
note. As a result, each U.S. Holder will have the same adjusted tax basis and
holding period in the new notes as it had in the old notes immediately before
the exchange.
INCOME TAXATION OF U.S. HOLDERS
PAYMENT OF INTEREST ON THE NOTES. In general, interest paid on a note
will be taxable to a U.S. Holder as ordinary interest income, as received or
accrued, in accordance with such holder's regular method of accounting for
federal income tax purposes.
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LIQUIDATED DAMAGES. Since the old notes provide for the payment of
liquidated damages in the circumstances described in 'The Exchange Offer -- Our
Obligations Under the Registration Rights Agreement,' the notes may be subject
to special rules under the Treasury Regulations that are applicable to debt
instruments that provide for one or more contingent payments. Under the Treasury
Regulations, however, the special rules applicable to contingent payment debt
instruments will not apply if, as of the issue date, the contingency is either
'remote' or 'incidental.' GenTek intends to take the position that, solely for
these purposes, at the time of the original offering, the payment of liquidated
damages was a remote or incidental contingency. GenTek's determination that such
payments were a remote or incidental contingency for these purposes is binding
on a U.S. Holder, unless such U.S. Holder discloses in the proper manner to the
Internal Revenue Service that it is taking a different position. Prospective
investors should consult their tax advisors as to the tax considerations
relating to the payment of liquidated damages, in particular in connection with
the Treasury Regulations relating to contingent payment interests.
SALE, EXCHANGE OR RETIREMENT OF THE NOTES. Upon the sale, exchange,
redemption, retirement at maturity or other disposition of a note, a U.S. Holder
will generally recognize taxable gain or loss equal to the difference between
the sum of the cash and the fair market value of all other property received on
such disposition (except to the extent such cash or property is attributable to
accrued interest, which will be taxable as ordinary income) and such holder's
adjusted tax basis in the note.
Gain or loss recognized on the disposition of a note generally will be
capital gain or loss, and will be long-term capital gain or loss if, at the time
of such disposition, the holder's holding period for the note is more than one
year.
BACKUP WITHHOLDING AND INFORMATION REPORTING. In general, a U.S. Holder
will be subject to backup withholding at the rate of 31% with respect to
payments of interest, principal and premium, if any, paid on, and the proceeds
of a disposition of, a note, unless the holder:
(1) is an entity that is exempt from withholding (including corporations,
tax-exempt organizations and certain qualified nominees) and, when
required, demonstrates this fact; or
(2) provides GenTek with its taxpayer identification number (which for an
individual would be the holder's social security number), certifies under
penalties of perjury that the taxpayer identification number provided to
GenTek is correct and that the holder has not been notified by the Internal
Revenue Service that it is subject to backup withholding due to
underreporting of interest or dividends, and otherwise complies with
applicable requirements of the backup withholding rules. In addition, such
payments of principal, premium and interest to U.S. holders that are not
exempt entities will generally be subject to information reporting
requirements.
A U.S. Holder who does not provide GenTek with its correct taxpayer
identification number may be subject to penalties imposed by the Internal
Revenue Service.
GenTek will report to U.S. holders and the Internal Revenue Service the
amount of any 'reportable payments' (including any interest paid) and any
amounts withheld with respect to the notes during the calendar year.
The amount of any backup withholding from a payment to a U.S. holder
will be allowed as a credit against such holder's federal income tax liability
and may entitle such holder to a refund, provided that the required information
is furnished to the Internal Revenue Service. Treasury Regulations, generally
effective for payments made after December 31, 2000, modify the certification
requirements for backup withholding. It is possible that GenTek and other
withholding agents may request a new withholding exemption from holders in order
to qualify for continued exemption from backup withholding under these new
withholding regulations.
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TAXATION OF NON-U.S. HOLDERS
PAYMENT OF INTEREST ON THE NOTES. In general, payments of interest
received by any holder of a note that is not a U.S. Holder will not be subject
to a U.S. federal income tax (or any withholding thereof, except as described
below under 'Backup Withholding and Information Reporting'), provided that:
(1) under an exemption for portfolio interest,
(A) the non-U.S. holder does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of
GenTek that is entitled to vote;
(B) the holder is not a 'controlled foreign corporation' (generally, a
non-U.S. corporation controlled by U.S. shareholders) that is related
to GenTek actually or constructively through stock ownership; and
(C) either:
(x) the beneficial owner of the note, under penalties of perjury,
provides GenTek or its agent with the beneficial owner's name
and address and certifies that it is not a U.S. person on
Internal Revenue Service Form W-8 (or a suitable substitute or
successor form); or
(y) a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary
course of its trade or business holds the note and certifies
to GenTek or its agent under penalties of perjury that such a
Form W-8 (or suitable substitute or successor form) has been
received by it from the beneficial owner or qualifying
intermediary and furnishes the payor a copy thereof;
(2) the non-U.S. holder is subject to U.S. federal income tax with respect to
the note on a net basis because payments received with respect to the note
are effectively connected with the conduct of a trade or business within
the United States by the holder (in which case the holder may also be
subject to U.S. 'branch profits tax') and the holder provides General
Chemical with a properly executed Internal Revenue Service Form 4224 or a
successor form; or
(3) the non-U.S. holder is entitled to the benefits of an income tax treaty
under which the interest is exempt from U.S. withholding tax and the holder
or such holder's agent provides a properly executed Internal Revenue
Service Form 1001 or a successor form claiming the exemption.
Payments of interest not exempt from U.S. federal income tax as described above
will be subject to withholding at the rate of 30% (subject to reduction under
the applicable income tax treaty).
The new withholding regulations generally will be effective with respect
to payments made after December 31, 2000. The new withholding regulations
generally will not affect the certification rules described in the preceding
paragraph, but will provide alternative methods for satisfying such
requirements. The new withholding regulations may require that a non-U.S. holder
(including a non-U.S. partnership or a partner thereof) obtain a taxpayer
identification number and make certifications if interest in respect of a note
is not portfolio interest and the non-U.S. holder wishes to claim a reduced rate
of withholding under an income tax treaty. It is possible that GenTek and other
withholding agents may request a new withholding exemption from non-U.S. holders
in order to qualify for continued exemption from withholding under the new
withholding regulations. Each non-U.S. holder should consult its own tax advisor
regarding the application of the new withholding regulations.
SALE, EXCHANGE OR RETIREMENT OF THE NOTES. A non-U.S. holder generally
will not be subject to U.S. federal income tax (or withholding thereof) in
respect of gain realized on the sale, exchange, redemption, retirement at
maturity or other disposition of notes, unless:
(1) the gain is effectively connected with the conduct of a trade or business
within the United States by the holder; or
(2) the holder is an individual who is present in the United States for a
period or periods aggregating 183 or more days in the taxable year of the
disposition and certain other conditions are met.
120
With respect to a non-U.S. holder subject to U.S. federal income tax as
described in the preceding paragraph, an exchange of a note for an exchange note
will not be treated as a taxable exchange of the note. The old notes provide for
the payment of liquidated damages in the circumstances described in 'The
Exchange Offer -- Our Obligations Under The Registration Rights Agreement.'
Non-U.S. holders should consult their tax advisors as to the tax considerations
relating to debt instruments that provide for one or more contingent payments,
in particular as to the availability of the exemption for portfolio interest,
and the ability of holders to claim the benefits of income tax treaty exemptions
from U.S. withholding tax on interest, in respect of such liquidated damages.
BACKUP WITHHOLDING AND INFORMATION REPORTING. Under current Treasury
Regulations, backup withholding and certain information reporting do not apply
to payments made by GenTek or a paying agent to non-U.S. holders if the
certification described under 'Payment of Interest on the Notes' is received,
provided that the payor does not have actual knowledge that the holder is a U.S.
person. If any payments of principal and interest are made to the beneficial
owner of a note by or through the non-U.S. office of a non-U.S. custodian,
non-U.S. nominee or other non-U.S. agent of such beneficial owner, or if the
non-U.S. office of a non-U.S. 'broker' (as defined in applicable Treasury
Regulations) pays the proceeds of the sale of a note or a coupon to the seller
thereof, backup withholding and information reporting will not apply.
Information reporting requirements (but not backup withholding) will apply,
however, to a payment by a non-U.S. office of a broker that is a U.S. person,
that derives 50% or more of its gross income for certain periods from the
conduct of a trade or business in the United States, or that is a 'controlled
foreign corporation' (generally, a non-U.S. corporation controlled by U.S.
shareholders) with respect to the United States, unless the broker has
documentary evidence in its records that the holder is a non-U.S. person and
other conditions are met, or the holder otherwise establishes an exemption.
Payment by a U.S. office of a broker is subject to both backup withholding at a
rate of 31% and information reporting unless the holder certifies under
penalties of perjury that it is a non-U.S. person, or otherwise establishes an
exemption. A non-U.S. holder may obtain a refund or a credit against such
holder's U.S. federal income tax liability of any amounts withheld under the
backup withholding rules, provided the required information is furnished to the
Internal Revenue Service.
In addition, interest on a note owned by a non-U.S. holder may be
required to be reported annually on IRS Form 1042S, in which case such form will
be filed with the IRS and furnished to the holder.
The new withholding regulations revise the procedures that withholding
agents and payees must follow to comply with, or to establish an exemption, from
these information reporting and backup withholding provisions for payments after
December 31, 2000. It is possible that GenTek and other withholding agents may
request a new withholding exemption from non-U.S. holders in order to qualify
for continued exemption from backup withholding under the new withholding
regulations. Each non-U.S. holder should consult its own tax advisor regarding
the application to such holder of the new withholding regulations.
ESTATE TAX. Subject to applicable estate tax treaty provisions, notes
held at the time of death (or theretofore transferred subject to certain
retained rights or powers) by an individual who at the time of death is a
non-U.S. holder will not be included in such holder's gross estate for U.S.
federal estate tax purposes, provided that (a) the individual does not actually
or constructively own 10% or more of the total combined voting power of all
classes of stock of GenTek entitled to vote and (b) the income on the notes is
not effectively connected with the conduct of a U.S. trade or business by the
individual.
121
PLAN OF DISTRIBUTION
Each broker-dealer that receives new notes for its own account pursuant
to the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of such new notes. This prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of new notes received in exchange for old notes where
such old notes were acquired as a result of market-making activities or other
trading activities. GenTek has agreed that, for a period of 180 days after the
expiration date, it will make this prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. In
addition, until 180 days after the expiration of the exchange offer on [ ],
all dealers effecting transactions in the new notes may be required to deliver a
prospectus.
GenTek will not receive any proceeds from any sale of new notes by
broker-dealers. New notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the new notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such new notes. Any broker-dealer that
resells new notes that were received by it for its own account pursuant to the
exchange offer and any broker or dealer that participates in a distribution of
such new notes may be deemed to be an 'underwriter' within the meaning of the
Securities Act and any profit on any such resale of new notes and any commission
or concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The letter of transmittal states that, by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an 'underwriter' within the
meaning of the Securities Act.
For a period of 180 days after the expiration date GenTek will promptly
send additional copies of this prospectus and any amendment or supplement to
this prospectus to any broker-dealer that requests such documents in the letter
of transmittal. GenTek has agreed to pay all expenses incident to the exchange
offer including the expenses of one counsel for the holders of the old notes
other than commissions or concessions of any broker-dealers and will indemnify
the holders of the old notes including any broker-dealers against certain
liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The enforceability of the new notes will be passed on for GenTek by
Debevoise & Plimpton, New York, New York.
EXPERTS
The consolidated financial statements as of December 31, 1998 and 1997
and for each of the three years in the period ended December 31, 1998 included
in this prospectus and the related financial statement schedule included
elsewhere in the registration statement have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report appearing herein and
elsewhere in the registration statement, and have been so included in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
The financial statements of Noma Industries Limited as of December 31,
1998 and 1997 and for each of the three years in the period ended December 31,
1998 included in the Form 10, filed by GenTek, Inc., incorporated by reference
in this prospectus have been audited by Deloitte & Touche LLP, Chartered
Accountants, independent auditors, as stated in their report which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
The financial statements of Krone AG as of December 31, 1998 and 1997
and for each of the two years in the period ended December 31, 1998 included in
the Current Report on Form 8-K, filed
122
November 3, 1999 by GenTek, Inc., incorporated by reference in this prospectus
have been audited by Deloitte & Touche GmbH, independent auditors, as stated in
their report which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
FINANCIAL STATEMENTS OF NOMA AND KRONE
We have filed the financial statements of Noma with the Commission as
part of our Registration Statement on Form 10, which is incorporated herein by
reference. We have also filed with the Commission the financial statements of
Krone as part of our Current Report on Form 8-K filed on November 3, 1999, which
also is incorporated herein by reference. We describe in the next paragraph how
you can examine the information that we have filed or will file in the future
with the Commission; in addition, we will send you copies of these and any other
exhibits to the registration statement if you direct a request for copies to the
address given in 'Important Information About This Prospectus' prior to the
deadline stated in that section.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-4 to register with the
Commission the new notes to be issued in exchange for the old notes. This
prospectus is part of that registration statement. As allowed by the
Commission's rules, this prospectus does not contain all of the information you
can find in the registration statement or the exhibits to the registration
statement.
Upon effectiveness of the registration statement of which this
prospectus is a part, we will file annual, quarterly and other information with
the Commission. You may read and copy any reports, statements and other
information we file at the Commission's public reference rooms in Washington,
D.C., New York, New York, and Chicago, Illinois. Please call 1-800-SEC-0330 for
further information on the public reference rooms. Our filings will also be
available to the public from commercial document retrieval services and at the
web site maintained by the Commission at http://www.sec.gov.
The indenture for the notes requires us to distribute to the holders of
the notes annual reports containing our financial statements audited by our
independent auditors and quarterly reports containing unaudited condensed
consolidated financial statements for the first three quarters of each fiscal
year.
123
GENTEK INC.
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Report................................ F-2
Consolidated Statements of Operations for the three years
ended December 31, 1998................................... F-3
Consolidated Balance Sheets at December 31, 1997 and 1998... F-4
Consolidated Statements of Cash Flows for the three years
ended December 31, 1998................................... F-5
Consolidated Statements of Changes in Equity (Deficit) for
the three years ended December 31, 1998................... F-6
Notes to the Consolidated Financial Statements.............. F-7
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Operations for the three months
ended September 30, 1998
and 1999, and the nine months ended September 30, 1998 and
1999...................................................... F-29
Consolidated Balance Sheets at December 31, 1998 and
September 30, 1999........................................ F-30
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1998
and 1999.................................................. F-31
Notes to the Unaudited Consolidated Financial Statements.... F-32
F-1
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
GENTEK INC.:
We have audited the accompanying consolidated balance sheets of GenTek
Inc. and subsidiaries as of December 31, 1997 and 1998, and the related
consolidated statements of operations, changes in equity (deficit) and cash
flows for each of the three years in the period ended December 31, 1998. Our
audits also included the financial statement schedule in the Index at Item 21.
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 GenTek Inc. and subsidiaries
at December 31, 1997 and 1998, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1998 in
conformity with generally accepted accounting principles. Also, in our opinion,
such financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as whole, presents fairly in all
material respects the information set forth therein.
Deloitte & Touche LLP
Parsippany, New Jersey
February 11, 1999
(March 18, 1999 as to Notes 1 and 3 and July 12, 1999 as to Note 18)
F-2
GENTEK INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEARS ENDED DECEMBER 31,
------------------------------
1996 1997 1998
-------- -------- --------
Net revenues................................................ $330,120 $368,516 $443,919
Cost of sales............................................... 229,237 251,912 326,626
Selling, general and administrative expense................. 52,160 49,078 65,572
-------- -------- --------
Operating profit.......................................... 48,723 67,526 51,721
Interest expense............................................ 10,747 8,855 14,624
Interest income............................................. 1,404 1,475 1,165
Foreign currency transaction (gains) losses................. (83) 442 629
Other expense, net.......................................... 263 169 320
-------- -------- --------
Income from continuing operations before income taxes and
extraordinary item..................................... 39,200 59,535 37,313
Income tax provision........................................ 18,425 26,261 (3,756)
-------- -------- --------
Income from continuing operations before extraordinary
item................................................... 20,775 33,274 41,069
Income from discontinued operations (net of tax of
$2,395)................................................... 25,833 23,041 10,299
-------- -------- --------
Income before extraordinary item.......................... 46,608 56,315 51,368
Extraordinary item -- loss from extinguishment of debt (net
of tax)................................................... -- -- 3,661
-------- -------- --------
Net income................................................ $ 46,608 $ 56,315 $ 47,707
-------- -------- --------
-------- -------- --------
EARNINGS PER COMMON SHARE -- BASIC:
Income from continuing operations........................... $ .98 $ 1.55 $ 1.95
Income from discontinued operations (net of tax)............ 1.21 1.08 .49
Extraordinary item -- loss from extinguishment of debt (net
of tax)................................................... -- -- .17
-------- -------- --------
Net income................................................ $ 2.19 $ 2.63 $ 2.27
-------- -------- --------
-------- -------- --------
EARNINGS PER COMMON SHARE -- ASSUMING DILUTION:
Income from continuing operations........................... $ .95 $ 1.48 $ 1.88
Income from discontinued operations (net of tax)............ 1.18 1.02 .47
Extraordinary item -- loss from extinguishment of debt (net
of tax)................................................... -- -- .17
-------- -------- --------
Net income................................................ $ 2.13 $ 2.50 $ 2.18
-------- -------- --------
-------- -------- --------
See the accompanying notes to the consolidated financial statements.
F-3
GENTEK INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31,
-------------------
1997 1998
-------- --------
ASSETS
Current assets:
Cash and cash equivalents................................. $ 20,401 $ 61,310
Receivables, net.......................................... 49,803 60,620
Inventories............................................... 25,328 37,619
Deferred income taxes..................................... 9,850 11,494
Other current assets...................................... 153 826
-------- --------
Total current assets................................... 105,535 171,869
Property, plant and equipment, net.......................... 160,154 196,526
Goodwill, net of amortization............................... 19,192 71,444
Other assets................................................ 19,432 21,687
Net assets of discontinued operations....................... 85,505 75,292
-------- --------
Total assets........................................... $389,818 $536,818
-------- --------
-------- --------
LIABILITIES AND EQUITY (DEFICIT)
Current liabilities:
Accounts payable.......................................... $ 32,116 $ 42,813
Accrued liabilities....................................... 48,846 51,965
Income taxes payable...................................... 2,662 8,960
Current portion of long-term debt......................... 17,392 50,802
-------- --------
Total current liabilities.............................. 101,016 154,540
Long-term debt.............................................. 240,612 306,729
Other liabilities........................................... 142,429 130,245
-------- --------
Total liabilities...................................... 484,057 591,514
-------- --------
Equity (deficit):
Preferred Stock, $.01 par value; authorized 10,000,000
shares; none issued or outstanding..................... -- --
Common Stock, $.01 par value; authorized 100,000,000
shares; issued and outstanding: 12,558,697 and
12,654,489 shares at December 31, 1997 and 1998,
respectively........................................... 126 127
Class B Common Stock, $.01 par value; authorized
40,000,000 shares; issued and outstanding: 9,758,421
shares at December 31, 1997 and 1998................... 97 97
Capital deficit........................................... (183,814) (182,563)
Accumulated other comprehensive loss...................... (2,197) (2,446)
Retained earnings......................................... 118,855 162,378
Treasury stock, at cost: 1,362,898 and 1,641,166 shares at
December 31, 1997 and 1998............................. (27,306) (32,289)
-------- --------
Total equity (deficit)................................. (94,239) (54,696)
-------- --------
Total liabilities and equity (deficit)................. $389,818 $536,818
-------- --------
-------- --------
See the accompanying notes to the consolidated financial statements.
F-4
GENTEK INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEARS ENDED DECEMBER 31,
------------------------------
1996 1997 1998
-------- -------- --------
Cash flows from operating activities:
Net income................................................ $ 46,608 $ 56,315 $ 47,707
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................ 14,099 16,296 23,065
Net loss on disposition/impairment of long-term
assets.............................................. 673 431 11,910
Unrealized exchange (gain) loss...................... 31 1,405 1,313
Restricted unit plan costs........................... 11,319 1,302 1,309
Loss on extinguishment of debt....................... -- -- 6,056
Income from discontinued operations.................. (25,833) (23,041) (10,299)
(Increase) decrease in receivables................... (2,412) (4,835) 1,216
Increase in inventories.............................. (2,441) (1,597) (2,596)
Increase (decrease) in accounts payable.............. (216) 1,944 6,241
Decrease in accrued liabilities...................... (14,312) (1,656) (1,871)
Increase in income taxes payable..................... 459 1,440 6,298
Increase (decrease) in other liabilities and assets,
net................................................. 10,862 8,175 (33,081)
-------- -------- --------
Net cash provided by continuing operations........ 38,837 56,179 57,268
-------- -------- --------
Cash flows from investing activities:
Capital expenditures...................................... (19,231) (26,203) (33,737)
Proceeds from sales or disposals of long-term assets...... 43 63 767
Payments from related parties............................. 14,000 -- --
Cash provided by discontinued operations.................. 16,392 331 20,512
Acquisition of businesses net of cash acquired*........... -- (30,130) (90,935)
-------- -------- --------
Net cash provided by (used for) investing
activities...................................... 11,204 (55,939) (103,393)
-------- -------- --------
Cash flows from financing activities:
Net proceeds from initial public offering................. 40,600 -- --
Proceeds from long-term debt.............................. 20,000 49,000 389,858
Repayment of long-term debt............................... (76,886) (45,536) (293,778)
Payments to acquire treasury stock........................ (123) (27,183) (5,485)
Exercise of stock options................................. -- -- 445
Dividends................................................. (1,668) (5,368) (4,184)
-------- -------- --------
Net cash provided by (used for) financing
activities...................................... (18,077) (29,087) 86,856
-------- -------- --------
Effect of exchange rate changes on cash..................... 30 (843) 178
-------- -------- --------
Increase (decrease) in cash and cash equivalents............ 31,994 (29,690) 40,909
Cash and cash equivalents at beginning of period............ 18,097 50,091 20,401
-------- -------- --------
Cash and cash equivalents at end of period.................. $ 50,091 $ 20,401 $ 61,310
-------- -------- --------
-------- -------- --------
Supplemental information:
Cash paid for income taxes................................ $ 23,051 $ 35,179 $ 19,754
-------- -------- --------
-------- -------- --------
Cash paid for interest.................................... $ 22,809 $ 20,923 $ 29,353
-------- -------- --------
-------- -------- --------
* Purchase of businesses net of cash acquired:
Working capital, other than cash....................... $ 3,110 $(14,303)
Plant, property and equipment.......................... (43,007) (36,436)
Other assets........................................... (19,593) (41,622)
Noncurrent liabilities................................. 29,360 1,426
-------- --------
Net cash used to acquire businesses............... $(30,130) $(90,935)
-------- --------
-------- --------
See the accompanying notes to the consolidated financial statements.
F-5
GENTEK INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
FOR THE THREE YEARS ENDED DECEMBER 31, 1998
ACCUMULATED
OTHER
CLASS B COMPREHENSIVE
COMMON COMMON TREASURY CAPITAL INCOME RETAINED COMPREHENSIVE
STOCK STOCK STOCK DEFICIT (LOSS) EARNINGS TOTAL INCOME
------ ------- -------- --------- ------------- -------- --------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Balance at December 31, 1995..... $ 197 $-- $ -- $(237,140) $(1,362) $ 22,969 $(215,336)
Net income..................... -- -- -- -- -- 46,608 46,608 46,608
Foreign currency translation... -- -- -- -- (73) -- (73) (44)
-------
Comprehensive income........... -- -- -- -- -- -- -- $46,564
-------
-------
Dividends (per share $.125).... -- -- -- -- -- (2,780) (2,780)
Proceeds from initial public
offering..................... 25 -- -- 40,575 -- -- 40,600
Conversion of common stock to
Class B Common Stock......... (197) 197 -- -- -- -- --
Conversion of Class B Common
Stock to common stock........ 54 (54) -- -- -- -- --
Restricted unit plan grants,
cancellations, tax benefits
and other.................... 1 -- -- 11,350 -- -- 11,351
Purchase of treasury stock..... -- -- (123) -- -- -- (123)
----- ---- -------- --------- ------- -------- ---------
Balance at December 31, 1996..... 80 143 (123) (185,215) (1,435) 66,797 (119,753)
Net income..................... -- -- -- -- -- 56,315 56,315 $56,315
Foreign currency translation... -- -- -- -- (762) -- (762) (461)
-------
Comprehensive income........... -- -- -- -- -- -- -- $55,854
-------
-------
Dividends (per share $.20)..... -- -- -- -- -- (4,257) (4,257)
Conversion of Class B Common
Stock to common stock........ 46 (46) -- -- -- -- --
Restricted unit plan grants,
cancellations, tax benefits
and other.................... -- -- -- 1,401 -- -- 1,401
Purchase of treasury stock..... -- -- (27,183) -- -- -- (27,183)
----- ---- -------- --------- ------- -------- ---------
Balance at December 31, 1997..... 126 97 (27,306) (183,814) (2,197) 118,855 (94,239)
Net income..................... -- -- -- -- -- 47,707 47,707 $47,707
Foreign currency translation... -- -- -- -- (249) -- (249) (150)
-------
Comprehensive income........... -- -- -- -- -- -- -- $47,557
-------
-------
Dividends (per share $.20)..... -- -- -- -- -- (4,184) (4,184)
Restricted unit plan grants,
cancellations, tax benefits
and other.................... 1 -- -- 1,313 -- -- 1,314
Purchase of treasury stock..... -- -- (4,983) (62) -- -- (5,045)
----- ---- -------- --------- ------- -------- ---------
Balance at December 31, 1998..... $ 127 $ 97 $(32,289) $(182,563) $(2,446) $162,378 $ (54,696)
----- ---- -------- --------- ------- -------- ---------
----- ---- -------- --------- ------- -------- ---------
F-6
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1 -- BASIS OF PRESENTATION
GenTek Inc.'s ('GenTek' or the 'Company') manufacturing and performance
products businesses (the 'GenTek Business') were formerly part of the businesses
of The General Chemical Group Inc. (GCG). GCG separated the GenTek Business from
GCG's soda ash and calcium chloride business (the Industrial Chemicals Business)
through a spinoff (the 'Spinoff'). GCG accomplished the Spinoff by transferring
the GenTek Business to GenTek, and distributing the common stock of GenTek to
GCG's shareholders on April 30, 1999 (the 'Spinoff Date').
Since the Spinoff Date, GCG and GenTek have been separate, stand-alone
companies with GenTek operating the GenTek Business, and GCG operating the
Industrial Chemicals Business. GenTek's common stock is listed on the New York
Stock Exchange (under the symbol 'GK').
The Spinoff has been treated as a reverse spinoff for financial
statement purposes because a greater proportion of the former assets and
operations of GCG are held by GenTek. Therefore, the Spinoff has been reflected,
for financial statement presentation, as if GenTek formed a new company
consisting of the Industrial Chemicals Segment and distributed the stock of the
company as a dividend to GenTek's stockholders, with the assets and operations
of the Performance Products and Manufacturing Segments remaining with GenTek.
Accordingly, the GenTek financial statements reflect the financial position and
results of operations of the Performance Products and Manufacturing Segments as
continuing operations and the financial position and results of operations of
the Industrial Chemicals Business as discontinued operations.
For the purpose of governing certain ongoing relationships between GCG
and GenTek after the Spinoff and to provide mechanisms for an orderly
transition, GCG and GenTek have entered into various agreements. Management
believes that the agreements are comparable to those which would have been
reached in arm's length negotiations with unaffiliated parties.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
All highly liquid instruments purchased with a maturity of three months
or less are considered to be cash equivalents.
Inventories are valued at the lower of cost or market, using the
last-in, first-out ('LIFO') method for most domestic production inventories and
the first-in, first-out ('FIFO') or average-cost method for all other
inventories. Production inventory costs include material, labor and factory
overhead.
Property, plant and equipment are carried at cost and are depreciated
principally using the straight line method. Estimated lives range from 5 to 35
years for buildings and leasehold improvements and one to 20 years for machinery
and equipment.
The Company evaluates the recovery of long-lived assets not held for
sale by measuring the carrying value of these assets against the estimated
undiscounted future cash flows associated with them. At the time such
evaluations indicate that the future cash flows are not sufficient to recover
the carrying value of such assets, the carrying values are adjusted to their
fair values, which have been determined on a discounted cash flow basis. During
1998, based on these evaluations, the Company recorded an $11,600 impairment
charge, which is included in cost of sales, primarily related to two of its
manufacturing facilities in its Performance Products Segment.
Goodwill, which represents the excess of purchase price over fair value
of net assets acquired, is amortized on a straight line basis over a period
which ranges from 25 to 35 years. The Company
F-7
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
assesses the recoverability of this intangible asset by determining whether the
amortization of the goodwill balance over its remaining life can be recovered
through undiscounted future operating cash flows of the acquired operation. As
of December 31, 1997 and 1998, goodwill is reflected net of accumulated
amortization of $400 and $2,671, respectively.
Accruals for environmental liabilities are recorded based on current
interpretations of environmental laws and regulations when it is probable that a
liability has been incurred and the amount of such a liability can be reasonably
estimated. Liabilities for environmental matters were $16,244 and $25,016 at
December 31, 1997 and 1998, respectively. These amounts do not include estimated
third-party recoveries nor have they been discounted.
The Company does not hold or issue financial instruments for trading
purposes. Amounts to be paid or received under interest swap agreements are
recognized as increases or reductions in interest expense in the periods to
which they relate.
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, 'Accounting for Derivative
Instruments and Hedging Activities' ('FAS 133'). FAS 133 requires that all
derivative instruments be measured at fair value and recognized in the balance
sheet as either assets or liabilities. The Company is required to adopt FAS 133
for fiscal years beginning after June 15, 1999. The Company does not expect that
the adoption of FAS 133 will have a material effect on the Company's results of
operations or financial condition.
The capital deficit at December 31, 1995 of $237,140 arose as a result
of dividends and distributions in prior periods exceeding accumulated earnings
and capital contributions.
Certain prior-period amounts have been reclassified to conform with the
current presentation.
NOTE 3 -- DISCONTINUED OPERATIONS
Discontinued operations represent the Industrial Chemicals Business of
GCG (see Note 1). An allocation of certain assets, liabilities and expenses has
been made related to discontinued operations. In the opinion of management,
expenses have been allocated to the discontinued operations in a reasonable and
consistent basis using management's estimate of services provided to the
discontinued business by GCG. General corporate overhead expenses have not been
allocated to discontinued operations. However, such allocations are not
necessarily indicative of the level of expenses which might have been incurred
had the Industrial Chemicals Business been operating as a stand-alone entity
during the periods presented or expected to be incurred after the spinoff.
Prior to the Spinoff Date, the Industrial Chemicals Business
participated in the Company's centralized cash management and financing program,
and income from discontinued operations includes an allocation of net interest
expense. Net interest expense has been allocated to the Industrial Chemicals
Business assuming that the Industrial Chemicals Business' pro rata base
borrowing requirements was $150,000 for all periods. The allocations were made
consistently in each year, and management believes the allocations are
reasonable. However, these interest costs would not necessarily be indicative of
what the actual costs would have been had the Industrial Chemicals Business
operated as a separate, stand-alone public entity. Subsequent to the Spinoff,
the Industrial Chemicals Business is responsible for these cash management
functions using its own resources or purchased services and will be responsible
for the costs associated with operating a public company.
The Industrial Chemicals Business' financial results include the costs
incurred by The General Chemical Group pension and postretirement benefit plans
for employees and retirees of the Industrial Chemicals Business. Also, the
provision for income taxes has been determined as if the Industrial Chemicals
Business had filed separate tax returns under its existing structure for the
periods presented.
F-8
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
The assets and liabilities of the Industrial Chemicals Business are
classified on the balance sheet as 'Net assets of discontinued operations' and
consist of the following:
DECEMBER 31,
-------------------
1997 1998
-------- --------
ASSETS
Current assets:
Cash and cash equivalents......................... $ 1,352 $ 1,127
Receivables, net.................................. 72,917 58,601
Inventories....................................... 20,630 25,508
Deferred income taxes............................. 4,295 4,392
Other current assets.............................. 2,217 1,659
-------- --------
Total current assets......................... 101,411 91,287
Property, plant and equipment, net..................... 144,035 141,808
Other assets........................................... 16,729 15,619
-------- --------
Total assets from discontinued operations.... $262,175 $248,714
-------- --------
LIABILITIES
Current liabilities:
Accounts payable.................................. $ 29,216 $ 24,298
Accrued liabilities............................... 24,412 25,146
Income taxes payable.............................. 1,914 1,988
-------- --------
Total current liabilities.................... 55,542 51,432
Other liabilities...................................... 77,827 78,561
Minority interest...................................... 43,301 43,429
-------- --------
Total liabilities from discontinued
operations................................. 176,670 173,422
-------- --------
Net assets of discontinued operations.................. $ 85,505 $ 75,292
-------- --------
-------- --------
The results from operations of the Industrial Chemicals Business are
reflected in the Statements of Operations as 'Income from Discontinued
Operations' and are summarized as follows:
YEARS ENDED DECEMBER 31,
------------------------------
1996 1997 1998
-------- -------- --------
Net revenues............................................... $298,945 $289,700 $261,469
Cost of sales.............................................. 198,802 204,769 202,338
Selling, general and administrative expense................ 19,650 15,365 16,634
-------- -------- --------
Operating profit........................................... 80,493 69,566 42,497
Interest expense........................................... 13,001 12,747 11,747
Interest income............................................ 1,029 1,029 930
Foreign currency transaction (gains) losses................ (86) 185 447
Other expense, net......................................... 441 285 524
-------- -------- --------
Income before minority interest and income taxes........... 68,166 57,378 30,709
Minority interest.......................................... 31,635 24,253 16,666
-------- -------- --------
Income before income taxes................................. 36,531 33,125 14,043
Income tax provision....................................... 10,698 10,084 3,744
-------- -------- --------
Net income............................................ $ 25,833 $ 23,041 $ 10,299
-------- -------- --------
-------- -------- --------
F-9
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 4 -- CAPITAL STOCK
The Company's authorized capital stock consists of 100,000,000 shares of
Common Stock, par value $.01 per share, of which 11,195,799 and 11,013,323 were
outstanding at December 31, 1997 and 1998, respectively, and 40,000,000 shares
of Class B Common Stock, par value $.01 per share, which has ten votes per
share, is subject to significant restrictions on transfer and is convertible at
any time into Common Stock on a share-for-share basis, of which 9,758,421 shares
were outstanding at December 31, 1997 and 1998. The Common Stock and Class B
Common Stock are substantially identical, except for the disparity in voting
power, restriction on transfer and conversion provisions.
The Company's Preferred Stock, par value $.01 per share, consists of
10,000,000 authorized shares, none of which were outstanding at December 31,
1997 and 1998.
During the second quarter of 1997, a former stockholder converted all
4.4 million shares of Class B Common Stock into an identical number of shares of
Common Stock. On April 23, 1997, the Company purchased approximately 1.3 million
shares of Common Stock from the same stockholder, at a price of $20 per share.
During 1997 and 1998, the Company purchased 1,356,573 and 278,268 shares of
Common Stock, respectively. These purchases were funded from the Company's cash
balance and have been recorded as treasury stock.
NOTE 5 -- EARNINGS PER SHARE
The computation of basic earnings per share is based on the weighted
average number of common shares and contingently issuable shares outstanding
during the period. The computation of diluted earnings per share assumes the
foregoing and, in addition, the exercise of all stock options and restricted
units, using the treasury stock method.
The components of the denominator for basic earnings per common share
and diluted earnings per common share are reconciled as follows:
YEARS ENDED
DECEMBER 31,
-----------------------
1997 1998
---------- ----------
Basic earnings per common share:
Weighted average common shares outstanding.................. 21,424,401 21,048,240
---------- ----------
---------- ----------
Diluted earnings per common share:
Weighted average common shares outstanding.................. 21,424,401 21,048,240
Options..................................................... 1,078,241 807,404
---------- ----------
Total.................................................. 22,502,642 21,855,644
---------- ----------
---------- ----------
Options to purchase 10,000 and 398,500 of common stock were outstanding
during 1997 and 1998, respectively, but were not included in the computation of
diluted earnings per common share because the exercise price was greater than
the average market price of the common shares. The options, which expire during
2007 and 2008, were still outstanding at December 31, 1998.
NOTE 6 -- ACQUISITIONS
On July 1, 1997 the Company acquired for $30,130 all of the outstanding
stock of Peridot Holdings, Inc. ('Peridot'), a manufacturer and supplier of
sulfuric acid and water treatment chemicals. On February 6, 1998, the Company
acquired for $6,999 all of the outstanding stock of Sandco Automotive Ltd.
('Sandco'), a manufacturer of engine parts for the North American automobile
industry and its aftermarket. On April 1, 1998, the Company acquired for $83,936
all of the outstanding stock of Reheis Inc. ('Reheis'), a leading producer and
supplier of the active chemical ingredients in antiperspirants and
over-the-counter antacids, as well as a supplier of pharmaceutical intermediates
and other products.
F-10
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
Funding for these transactions was provided by existing cash and borrowings
under the Company's existing credit facilities. The acquisitions were accounted
for under the purchase method, and accordingly, the net assets and results of
operations are included in the financial statements from the date of their
respective acquisitions. The allocation of purchase price for the
above-mentioned acquisitions are based on valuation information available to the
Company which is subject to change as such information is finalized. Goodwill is
being amortized on a straight line basis over a period which ranges from 25 to
35 years. Had the Sandco and Reheis acquisitions occurred as of January 1, 1997,
net sales would have been $457,195 and $459,684 for 1997 and 1998, respectively;
income before extraordinary items would have been $54,309 ($2.41 per share) and
$50,717 ($2.32 per share) for 1997 and 1998, respectively; and net income would
have been $54,309 ($2.41 per share) and $47,056 ($2.15 per share) for 1997 and
1998, respectively.
NOTE 7 -- INCOME TAXES
Income from continuing operations before income taxes is as follows:
YEARS ENDED DECEMBER 31,
---------------------------
1996 1997 1998
------- ------- -------
United States............................................... $36,433 $58,314 $34,150
Foreign..................................................... 2,767 1,221 3,163
------- ------- -------
Total.................................................. $39,200 $59,535 $37,313
------- ------- -------
------- ------- -------
The components of the income tax provision are as follows:
YEARS ENDED DECEMBER 31,
---------------------------
1996 1997 1998
------- ------- -------
United States:
Current................................................ $12,363 $24,669 $(3,532)
Deferred............................................... 2,262 (3,120) (3,776)
Foreign:
Current................................................ 1,117 589 911
Deferred............................................... (65) (97) (18)
State:
Current................................................ 2,262 4,890 3,470
Deferred............................................... 486 (670) (811)
------- ------- -------
Total............................................. $18,425 $26,261 $(3,756)
------- ------- -------
------- ------- -------
A summary of the components of deferred tax assets and liabilities is as
follows:
DECEMBER 31,
-------------------------
1997 1998
-------- --------
Postretirement benefits..................................... $ 19,390 $ 19,507
Nondeductible accruals...................................... 35,888 43,830
Other....................................................... 2,472 3,372
-------- --------
Deferred tax assets.................................... 57,750 66,709
-------- --------
Property, plant and equipment............................... 28,788 32,977
Pensions.................................................... 1,860 2,007
Inventory................................................... 3,754 3,437
Other....................................................... 1,048 2,965
-------- --------
Deferred tax liabilities............................... 35,450 41,386
-------- --------
Net deferred tax assets..................................... $ 22,300 $ 25,323
-------- --------
-------- --------
F-11
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
The difference between the Company's effective income tax rate and the
United States statutory rate is reconciled below:
YEARS ENDED
DECEMBER 31,
----------------------------
1996 1997 1998
----- ----- ------
U.S. federal statutory rate................................. 35.0% 35.0% 35.0%
State income taxes, net of federal benefit.................. 4.3 4.5 4.5
Tax effect of foreign operations............................ 6.7 4.1 (5.8)
Reversal of provision for disputed items.................... -- -- (44.1)
Other....................................................... 1.0 .5 .3
----- ----- ------
Total.................................................. 47.0% 44.1% (10.1)%
----- ----- ------
----- ----- ------
In connection with the Spinoff, GenTek entered into a tax sharing
agreement with GCG which requires GenTek to indemnify and hold harmless GCG for
consolidated tax liabilities attributable to periods before the Spinoff Date.
The IRS examinations of the Company's federal income tax returns for
1990 and 1991 resulted in the issuance of a deficiency notice during 1995. The
Company filed an administrative appeal with the IRS in 1995 contesting the items
denoted in the deficiency notice. At December 31, 1997, the Company had accrued
$25,388 for this notice, which was included in other liabilities on the balance
sheet. During 1998 the Company entered into a settlement agreement with the IRS
settling all items denoted in the original deficiency notice. The settlement
agreement binds the IRS for all years subsequent to 1989 on the items denoted in
the original deficiency notice. The Company recorded an income tax benefit of
$19,527 in connection with the reversal of amounts previously accrued in
connection with the deficiency notice settlement agreement.
NOTE 8 -- PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
The Company maintains several defined benefit pension plans covering
substantially all employees. A participating employee's annual postretirement
pension benefit is determined by the employee's credited service and, in most
plans, final average annual earnings with the Company. Vesting requirements are
five years in the U.S. and two years in Canada. The Company's funding policy is
to annually contribute the statutorily required minimum amount as actuarially
determined. The Company also maintains several plans providing postretirement
benefits other than pensions covering substantially all hourly and certain
salaried employees. The Company funds these benefits on a pay-as-you-go basis.
The long-term portion of accrued postretirement benefit cost related to
continuing operations of $48,184 and $48,766 at December 31, 1997 and 1998,
respectively, is included in other liabilities on the balance sheet.
OTHER POSTRETIREMENT
PENSION BENEFITS BENEFITS
DECEMBER 31, DECEMBER 31,
------------------------------ ---------------------------
1996 1997 1998 1996 1997 1998
-------- -------- -------- ------- ------- -------
UNITED STATES:
Components of Net Periodic Benefit Cost
Service Cost....................... $ 4,748 $ 5,217 $ 5,645 $ 1,455 $ 1,575 $ 1,568
Interest Cost...................... 13,125 13,873 14,935 3,587 3,896 4,046
Expected Return on Plan Assets..... (12,241) (13,466) (15,156) -- -- --
Amortization of Net Prior
Service Cost.................. 841 843 910 (1,604) (1,604) (1,604)
(Gain)/Loss................... 80 46 10 (757) (587) (628)
-------- -------- -------- ------- ------- -------
Net Periodic Benefit Cost.......... $ 6,553 $ 6,513 $ 6,344 $ 2,681 $ 3,280 $ 3,382
-------- -------- -------- ------- ------- -------
-------- -------- -------- ------- ------- -------
F-12
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
OTHER POSTRETIREMENT
PENSION BENEFITS BENEFITS
DECEMBER 31, DECEMBER 31,
------------------- ---------------------
1997 1998 1997 1998
-------- -------- --------- ---------
Change in Benefit Obligation
Benefit Obligation at Prior Measurement Date........ $187,760 $203,495 $ 55,578 $ 57,522
Service Cost........................................ 5,217 5,533 1,575 1,568
Interest Cost....................................... 13,873 14,856 3,896 4,046
Actuarial (Gain)/Loss............................... 960 22,332 (1,800) (948)
Benefits Paid....................................... (9,077) (10,648) (2,318) (2,989)
Plan Amendments..................................... 699 -- -- --
Business Combinations............................... 4,063 1,333 591 --
-------- -------- -------- --------
Benefit Obligation at Measurement Date.............. $203,495 $236,901 $ 57,522 $ 59,199
-------- -------- -------- --------
-------- -------- -------- --------
OTHER POSTRETIREMENT
PENSION BENEFITS BENEFITS
DECEMBER 31, DECEMBER 31,
------------------- ---------------------
1997 1998 1997 1998
-------- -------- --------- ---------
Change in Plan Assets
Fair Value of Assets at Prior Measurement Date...... $166,661 $193,301 $ -- $ --
Actual Return on Plan Assets........................ 29,122 17,124 -- --
Employer Contributions.............................. 2,470 3,065 2,318 2,989
Benefits Paid....................................... (9,077) (10,649) (2,318) (2,989)
Business Combinations............................... 4,125 1,147 -- --
-------- -------- -------- --------
Fair Value of Assets at Measurement Date............ $193,301 $203,988 $ -- $ --
-------- -------- -------- --------
-------- -------- -------- --------
Reconciliation of Funded Status
Funded Status....................................... $(10,194) $(32,913) $(57,522) $(59,199)
Unrecognized Net
Transition (Asset)/Obligation.................. -- 13 -- --
Prior Service Cost............................. 7,091 6,178 (11,104) (9,500)
(Gain)/Loss.................................... (23,796) (3,540) (8,309) (8,629)
-------- -------- -------- --------
Net Amount Recognized............................... $(26,899) $(30,262) $(76,935) $(77,328)
-------- -------- -------- --------
-------- -------- -------- --------
The assumptions used in accounting for the plans in 1996, 1997 and 1998
were:
PENSION PLANS
---------------------------------------
1996 1997 1998
----------- ----------- -----------
Discount rate............................................... 7 1/2% 7 1/2% 6 3/4%
Long-term rate of return on assets.......................... 9% 9% 9%
Average rate of increase in employee compensation........... 5% 5% 5%
The assumption used in accounting for the medical plans in 1998 was an 8
percent health care cost trend rate (decreasing to 6 percent in the year 2001
and beyond). A one percent increase in the health care trend rate would increase
the accumulated postretirement benefit obligation by $3,881 at year end 1998 and
the net periodic cost by $330 for the year. A one percent decrease in the health
care trend rate would decrease the accumulated postretirement benefit obligation
by $4,206 at year end 1998 and the net periodic cost by $357 for the year.
The assumption used in accounting for the plans in 1997 was a 10 percent
health care cost trend rate (decreasing to 7 1/2 percent in the year 2000 and
beyond).
F-13
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
The dates used to measure plan assets and liabilities were October 31,
1997 and 1998 for all plans. Pension plan assets are invested primarily in
stocks, bonds, short-term securities and cash equivalents.
OTHER POSTRETIREMENT
PENSION BENEFITS BENEFITS
DECEMBER 31, DECEMBER 31,
-------------------------- -------------------------
1996 1997 1998 1996 1997 1998
------- ------ ------- ------- ------ ------
CANADA:
Components of Net Periodic Benefit Cost
Service Cost............................. $ 1,494 $1,352 $ 1,463 $ 310 $ 302 $ 332
Interest Cost............................ 3,727 3,868 3,789 864 1,032 1,014
Expected Return on Plan Assets........... (4,662) (4,877) (4,881) -- -- --
Amortization of Net Prior Service Cost... 92 90 84 -- -- --
(Gain)/Loss.............................. 467 432 458 -- -- --
------- ------ ------- ------- ------ ------
Net Periodic Benefit Cost........... $ 1,118 $ 865 $ 913 $ 1,174 $1,334 $1,346
------- ------ ------- ------- ------ ------
------- ------ ------- ------- ------ ------
OTHER POSTRETIREMENT
PENSION BENEFITS BENEFITS
DECEMBER 31, DECEMBER 31,
----------------- ---------------------
1997 1998 1997 1998
------- ------- --------- ---------
Change in Benefit Obligation
Benefit Obligation at Prior Measurement Date.......... $50,714 $55,493 $ 13,297 $ 14,631
Service Cost.......................................... 1,349 1,457 302 330
Interest Cost......................................... 3,857 3,773 1,029 1,010
Actuarial (Gain)/Loss................................. 3,977 5,823 592 (934)
Foreign Currency Translation.......................... (899) (3,701) (235) (977)
Benefits Paid......................................... (3,505) (3,240) (354) (370)
------- ------- -------- --------
Benefit Obligation at Measurement Date........... $55,493 $59,605 $ 14,631 $ 13,690
------- ------- -------- --------
------- ------- -------- --------
Change in Plan Assets
Fair Value of Assets at Prior Measurement Date........ $59,940 $66,181 $ -- $ --
Actual Return on Plan Assets.......................... 10,611 2,633 -- --
Employer Contributions................................ 1,085 1,643 354 370
Foreign Currency Translation.......................... (1,950) (4,412) -- --
Benefits Paid......................................... (3,505) (3,240) (354) (370)
------- ------- -------- --------
Fair Value of Assets at Measurement Date......... $66,181 $62,805 $ -- $ --
------- ------- -------- --------
------- ------- -------- --------
Reconciliation of Funded Status
Funded Status......................................... $11,576 $ 3,201 $(14,631) $(13,691)
Unrecognized Net Prior Service Cost................... 834 695 -- --
(Gain)/Loss........................................... 6,392 13,560 1,340 316
------- ------- -------- --------
Net Amount Recognized............................ $18,802 $17,456 $(13,291) $(13,375)
------- ------- -------- --------
------- ------- -------- --------
The assumptions used in accounting for the plans in 1996, 1997 and 1998
were:
PENSION PLANS
---------------------------------------
1996 1997 1998
----------- ----------- -----------
Estimated discount rate..................................... 8% 7 1/2% 6 3/4%
Estimated long-term rate of return on assets................ 9% 9% 9%
Average rate of increase in employee compensation........... 5 1/4% 5 1/4% 5 1/4%
F-14
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
The assumption used in accounting for the medical plans in 1998 was an
8.4 percent health care cost trend rate (decreasing to 6 percent in the year
2003 and beyond). A one percent increase in the health care trend rate would
increase the accumulated postretirement benefit obligation by $2,803 at year end
1998 and the net periodic cost by $289 for the year. A one percent decrease in
the health care trend rate would decrease the accumulated postretirement benefit
obligation by $2,209 at year end 1998 and the net periodic cost by $223 for the
year.
The assumption used in accounting for the plans in 1997 was a 10 percent
health care cost trend rate (decreasing to 7 1/2 percent in the year 2003 and
beyond).
The dates used to measure plan assets and liabilities were October 31,
1997 and 1998 for all plans. Plan assets are invested primarily in stocks,
bonds, short-term securities and cash equivalents.
Following the Spinoff, the Industrial Chemicals Business and the GenTek
Business assumed responsibility for pension and other postretirement benefits
for retirees whose last work assignment was with their respective business and
the active employees of each or their respective businesses. Separate defined
benefit plans have been established for both companies, with assets included in
trusts under qualified pension plans being divided between the trusts. Each
domestic plan received the legally required funding as specified under the
Employee Retirement Income Security Act of 1974 and foreign plans received
funding as specified under the applicable statutory requirements.
GCG's net periodic benefit cost for pension and other postretirement
benefits disclosed above includes amounts related to the Industrial Chemicals
Business retirees who participated in certain of the Company's defined benefits
and postretirement benefits plans. GCG's periodic benefit cost has been
allocated to the Industrial Chemicals Business and is included in 'Discontinued
Operations' in the Statement of Operations. Periodic benefit cost allocated to
discontinued operations was $5,400, $5,380 and $4,618 for 1998, 1997 and 1996,
respectively.
NOTE 9 -- COMMITMENTS AND CONTINGENCIES
Future minimum rental payments for operating leases (primarily for
transportation equipment, offices and warehouses) related to continuing
operations having initial or remaining noncancellable lease terms in excess of
one year as of December 31, 1998 are as follows:
YEARS ENDING
DECEMBER 31,
- ------------
1999........................................................ $ 5,180
2000........................................................ 4,286
2001........................................................ 2,188
2002........................................................ 1,901
2003 and thereafter......................................... 1,883
-------
$15,438
-------
-------
Rental expense for the years ended December 31, 1996, 1997 and 1998 was
$4,239, $4,621, and $5,632, respectively.
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
F-15
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
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 $16,244 and $20,116 at December 31,
1997 and 1998, respectively. These amounts do not include estimated third-party
recoveries nor have they been discounted.
Avtex Site at Front Royal, Virginia. On March 22, 1990, the EPA issued
to the Company a Notice of Potential Liability pursuant to Section 107(a) of
CERCLA (the 'Notice') with respect to a site located in Front Royal, Virginia
(the 'Avtex Site'), owned at the time by Avtex Fibers Front Royal, Inc., which
has filed for bankruptcy. A sulfuric acid plant adjacent to the main Avtex Site
was previously owned and operated by the Company. On September 30, 1998, the EPA
issued an administrative order under Section 106 of CERCLA (the 'Order'), which
requires the Company, AlliedSignal, Inc. and Avtex to undertake certain removal
actions at the acid plant. On October 19, 1998, the Company delivered to the EPA
written notice of its intention to comply with the Order, subject to numerous
defenses. The requirements of the Order include preparation of a study to
determine the extent of any contamination at the acid plant site. The Company
has provided for the estimated costs of $1,600 for these activities in its
accrual for environmental liabilities relating to the Order. The Company is
working cooperatively with the EPA with respect to compliance with the Order and
believes that such compliance will not have a material effect on the Company's
results of operations or financial condition.
In addition to the matters discussed above, the Company is involved in
other claims, litigation, administrative proceedings and investigations and
remediation relative to environmental matters. Although the amount of any
ultimate liability which could arise with respect to these matters cannot be
accurately predicted, it is the opinion of management, based upon currently
available information and the accruals established, that any such liability will
have no material adverse effect on the Company's financial condition, results of
operations or cash flows.
NOTE 10 -- RELATED PARTY TRANSACTIONS
MANAGEMENT AGREEMENT
Prior to the Spinoff, GCG was party to a management agreement with
Latona Associates (which is controlled by a stockholder of GCG) under which GCG
receives corporate supervisory and administrative services and strategic
guidance for a quarterly fee of $1,018, $1,099 and $1,195 per quarter for the
years 1996, 1997 and 1998, respectively.
Latona has agreed to provide its services separately to GenTek and GCG.
GenTek will pay Latona, subsequent to the Spinoff, a quarterly fee of $1,125, to
be adjusted after 1999 for increases in the U.S. consumer price index. In
addition, if Latona provides advisory services to GenTek in connection with any
acquisition, business combination or other strategic transaction, GenTek will
pay Latona Associates additional fees comparable with fees received by
investment banking firms for such services. During 1998, the Company paid Latona
$500 in connection with the acquisition of Reheis. This agreement expires on
December 31, 2004.
F-16
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 11 -- ADDITIONAL FINANCIAL INFORMATION
The following are summaries of selected balance sheet items:
DECEMBER 31,
---------------------
1997 1998
------- -------
Receivables
Trade....................................................... $51,730 $62,810
Other....................................................... 1,626 1,536
Allowance for doubtful accounts............................. (3,553) (3,726)
------- -------
$49,803 $60,620
------- -------
------- -------
Inventories
Raw materials............................................... $ 8,093 $11,395
Work in process............................................. 3,090 6,049
Finished products........................................... 9,999 15,706
Supplies and containers..................................... 4,146 4,469
------- -------
$25,328 $37,619
------- -------
------- -------
Inventories valued at LIFO amounted to $16,835 and $17,450 at
December 31, 1997 and 1998, respectively, which were below estimated replacement
cost by $615 and $730, respectively. The impact of LIFO liquidations in 1996,
1997 and 1998 was not significant.
DECEMBER 31,
------------------------
1997 1998
Property, Plant and Equipment -------- ---------
Land and improvements..................................... $ 20,876 $ 26,219
Machinery and equipment................................... 194,992 261,260
Buildings and leasehold improvements...................... 31,637 43,912
Construction in progress.................................. 10,111 19,178
-------- ---------
257,616 350,569
Less accumulated depreciation and amortization............ (97,462) (154,043)
-------- ---------
$160,154 $ 196,526
-------- ---------
-------- ---------
DECEMBER 31,
---------------------
1997 1998
Accrued Liabilities ------- -------
Wages, salaries and benefits................................ $17,820 $17,616
Taxes, other than income taxes.............................. 2,867 3,256
Other....................................................... 28,159 31,093
------- -------
$48,846 $51,965
------- -------
------- -------
F-17
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 12 -- LONG-TERM DEBT
Long-term debt consists of the following:
DECEMBER DECEMBER
MATURITIES 1997 1998
---------- -------- --------
Bank Term Loan A -- floating rate........................... 2000-2004 $ -- $100,000
Bank Term Loan B -- floating rate........................... 1999-2006 -- 199,000
Bank Term Loan -- floating rate............................. 1999-2001 65,217 --
Senior Subordinated Notes -- 9.25%.......................... 2003 100,000 --
Canada Senior Notes -- 9.09%................................ 1999 50,787 48,269
$130,000 U.S. Revolving Credit Facility -- floating rate.... 42,000 --
General Chemical Canada Limited
Revolving Credit Facility -- floating rate................ 2000 -- 3,877
Other Debt -- floating rate................................. -- 6,385
-------- --------
Total Debt............................................. 258,004 357,531
Less: Current Portion.................................. 17,392 50,802
-------- --------
Net Long-Term Debt..................................... $240,612 $306,729
-------- --------
-------- --------
As of December 31, 1998, aggregate maturities of long-term debt for each
of the years in the five year period ending December 31, 2003 were $50,802,
$11,780, $19,700, $13,250 and $23,250.
On June 15, 1998 the Company entered into a new credit facility
consisting of a $100,000 Term Loan ('Term Loan A') maturing on June 15, 2004, a
$200,000 Term Loan ('Term Loan B') maturing on June 15, 2006 and a $300,000
Revolving Credit Facility maturing on June 15, 2004. The term loans and
revolving credit facility bear interest at a rate equal to a spread over a
reference rate. The rate in effect at December 31, 1998 for Term Loan A and Term
Loan B was 6.25 percent and 7.25 percent, respectively. Term Loan A is payable
in consecutive quarterly installments commencing March 31, 2000. Term Loan B is
payable in consecutive quarterly installments commencing September 30, 1998. The
facility is secured by a first priority security interest in all of the capital
stock of the Company's domestic subsidiaries and 65 percent of the capital stock
of the Company's foreign subsidiaries.
General Chemical Canada Limited has a C$15,000 Revolving Credit Facility
maturing June 22, 2000. This facility bears interest at a rate equal to a spread
over a reference rate.
Commitment fees paid for the above-mentioned facilities were $414, $274,
and $446 for 1996, 1997 and 1998, respectively.
NOTE 13 -- STOCK OPTION PLAN AND RESTRICTED UNIT PLAN
The Company's 1996 Stock Option and Incentive Plan (the 'Plan') provides
for the issuance of up to 2,200,000 shares of Common Stock. The Plan authorizes
the granting of incentive and nonqualified stock options, stock appreciation
rights, restricted and unrestricted stock and performance share awards to
executives, directors and other key persons. Any incentive stock options granted
under the Plan must have an exercise price at least equal to the market value of
the shares on the day the option is granted and a maximum term of 10 years.
F-18
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
Information with respect to all stock options is summarized below:
AVERAGE OPTION
PRICE PER
SHARES SHARE
--------- --------------
Options Outstanding at December 31, 1995.................... -- $--
Options Granted........................................ 1,281,000 17.66
Options Exercised...................................... -- --
Options Forfeited...................................... 10,000 17.50
---------
Options Outstanding at December 31, 1996.................... 1,271,000 17.66
Options Granted........................................ 100,000 22.70
Options Exercised...................................... -- --
Options Forfeited...................................... 29,800 18.23
---------
Options Outstanding at December 31, 1997.................... 1,341,200 18.02
Options Granted........................................ 398,500 23.72
Options Exercised...................................... 25,200 17.67
Options Forfeited...................................... 35,000 18.24
---------
Options Outstanding at December 31, 1998.................... 1,679,500 $19.37
---------
---------
The Company applies APB Opinion 25 in accounting for the Plan. Had
compensation cost for this plan been determined under FASB Statement No. 123,
the Company's net income for 1996 would have been reduced to $45,623 with basic
earnings per common share of $2.14 and diluted earnings per share of $2.08. Net
income for 1997 would have been reduced to $55,140 with basic earnings per
common share of $2.57 and diluted earnings per share of $2.45. Net income for
1998 would have been reduced to $45,857 with basic earnings per common share of
$2.18 and diluted earnings per share of $2.10. For purposes of this calculation,
the fair value of each option grant was estimated on the grant date using the
Black-Scholes option-pricing model with the following assumptions used for 1996,
1997 and 1998, respectively: dividend yield of 1.0 percent, 0.7 percent and 1.5
percent, respectively; expected volatility of 27 percent, 41 percent and 42
percent, respectively; weighted average risk-free interest rate of 6.42 percent,
5.50 percent and 4.65 percent, respectively; and, weighted average expected
lives of six years. All options granted under the stock option plan had an
exercise price equal to the market price of the Company's stock on the grant
date.
The Company's Restricted Unit Plan provides for the issuance of 850,000
units, with each unit representing one share of Common Stock to be issued to the
participant upon the occurrence of certain conditions ('vesting') unless the
participant elects to defer receipt thereof. All awards are subject to a five
year vesting schedule under which a portion of each participant's award vests
annually over a five year period. Dividend equivalents on outstanding units
accrue to the benefit of the participants and are paid at the time dividends are
paid to Common Stockholders. 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
$11,319, $1,302 and $1,309 for 1996, 1997 and 1998, respectively.
NOTE 14 -- FINANCIAL INSTRUMENTS
SWAP AGREEMENTS
The Company does not enter into financial instruments for trading
purposes. The Company periodically enters into interest rate swap agreements to
effectively convert a portion of its floating-rate to fixed-rate debt in order
to reduce the Company's exposure to movements in interest rates. Such agreements
involve the exchange of fixed and floating interest rate payments over the life
of the
F-19
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
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:
INTEREST RATE
NOTIONAL -------------------
DECEMBER 31, AMOUNT MATURITIES RECEIVE(1) PAY(2)
------------ -------- ---------- ---------- ------
1997........................................... $ 75,000 1998-1999 5.8% 6.8%
1998........................................... $100,000 1999-2006 5.6% 6.6%
- ------------
(1) Three-month LIBOR.
(2) Represents the weighted average rate.
At December 31, 1998, the Company was also party to a currency and
interest rate swap, which partially hedges the Company's Canadian subsidiary's
9.09 percent Senior Notes. The agreement, which matures in 1999, provides for
the payment of C$48,400 at a fixed rate of 7.54 percent in exchange for the
receipt of US$35,000 at a fixed rate of 9.09 percent. Unrealized gains and
losses on the currency portion of the swap are recognized and offset the foreign
exchange gain or loss on the related debt in the consolidated statements of
operations. Net amounts paid or received on the interest portion of the swap are
accrued as adjustments to interest expense.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments are as
follows:
DECEMBER 31, 1997 DECEMBER 31, 1998
--------------------- ---------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ---------- -------- ----------
Long-term debt.................................. $258,004 $262,918 $357,531 $357,737
Unrealized gain on swap agreements.............. $ -- $ 521 $ -- $ 309
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.
F-20
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 15 -- GEOGRAPHIC AND INDUSTRY SEGMENT INFORMATION
The accounting policies of the segments are the same as those described
in the summary of significant accounting policies.
Geographic area information for continuing operations is summarized as
follows:
TOTAL REVENUES OPERATING PROFIT IDENTIFIABLE ASSETS
------------------------------ --------------------------- -------------------
1996 1997 1998 1996 1997 1998 1997 1998
-------- -------- -------- ------- ------- ------- -------- --------
United States(1)..... $318,946 $358,774 $423,441 $46,052 $66,342 $47,734 $298,926 $437,892
Foreign(2)........... 17,228 15,710 26,173 2,671 1,184 3,987 5,387 23,634
Elimination(3)....... (6,054) (5,968) (5,695) -- -- -- -- --
-------- -------- -------- ------- ------- ------- -------- --------
$330,120 $368,516 $443,919 $48,723 $67,526 $51,721 $304,313 $461,526
-------- -------- -------- ------- ------- ------- -------- --------
-------- -------- -------- ------- ------- ------- -------- --------
- ------------
(1) Includes export sales of $4,946, $5,430 and $4,914 for the years ended
December 31, 1996, 1997 and 1998, respectively.
(2) Principally Canada.
(3) Sales between geographic areas are recorded at prices comparable to market
prices charged to third-party customers and are eliminated in consolidation.
Industry segment information for continuing operations is summarized as
follows:
TOTAL REVENUES OPERATING PROFIT
------------------------------ ---------------------------
1996 1997 1998 1996 1997 1998
---- ---- ---- ---- ---- ----
(unaudited)
Performance Products................................... $240,895 $260,351 $315,787 $43,202 $48,292 $25,711
Manufacturing.......................................... 89,225 108,165 128,132 12,472 23,531 30,649
-------- -------- -------- ------- ------- -------
Total Segment...................................... 330,120 368,516 443,919 55,674 71,823 56,360
Eliminations and other corporate expenses.............. -- -- -- (6,951) (4,297) (4,639)
-------- -------- -------- ------- ------- -------
Consolidated........................................... $330,120 $368,516 $443,919 $48,723 $67,526 $51,721
-------- -------- --------
-------- -------- --------
Interest expense....................................... 10,747 8,855 14,624
Other income, net...................................... (1,224) (864) (216)
------- ------- -------
Consolidated income from continuing operations before
income taxes and extraordinary item.................. $39,200 $59,535 $37,313
------- ------- -------
------- ------- -------
CAPITAL EXPENDITURES DEPRECIATION AND AMORTIZATION
--------------------------- ------------------------------
1996 1997 1998 1996 1997 1998
---- ---- ---- ---- ---- ----
Performance Products.............................. $17,612 $23,563 $24,260 $11,332 $13,688 $19,763
Manufacturing..................................... 1,619 2,640 9,477 2,767 2,608 3,302
------- ------- ------- ------- ------- -------
Consolidated...................................... $19,231 $26,203 $33,737 $14,099 $16,296 $23,065
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
IDENTIFIABLE ASSETS
-------------------
DECEMBER 31,
-------------------
1997 1998
---- ----
Performance Products........................................ $245,734 381,202
Manufacturing............................................... 56,586 78,267
Corporate................................................... 1,993 2,057
-------- --------
Consolidated................................................ $304,313 $461,526
-------- --------
-------- --------
F-21
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 16 -- SUMMARIZED FINANCIAL INFORMATION
The Company has issued its Senior Subordinated Notes due 2009 which are
fully and unconditionally guaranteed, on a joint and several basis, by all of
the Company's wholly owned, domestic subsidiaries ('Subsidiary Guarantors'). The
non-guarantor subsidiaries are foreign or are part of the Industrial Chemicals
Business which are no longer part of GenTek as a result of the Spinoff.
The following condensed consolidating financial information illustrates
the composition of the combined Subsidiary Guarantors. The Company believes that
the separate complete financial statements of the respective guarantors would
not provide additional material information which would be useful in assessing
the financial composition of the Subsidiary Guarantors.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
SUBSIDIARY NON-GUARANTOR
PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ---------- ------------ ------------ ------------
Net revenues.......................... $ -- $ 312,895 $ 17,225 $ -- $ 330,120
Cost of sales......................... -- 216,661 12,576 -- 229,237
Selling, general and administrative
expenses............................ 4,389 46,572 1,199 -- 52,160
--------- --------- --------- -------- ---------
Operating profit................. (4,389) 49,662 3,450 -- 48,723
Interest expense...................... -- 10,747 -- -- 10,747
Other (income) expense, net........... (177) (1,041) (6) -- (1,224)
--------- --------- --------- -------- ---------
Income before continuing
operations before income taxes
and extraordinary item......... (4,212) 39,956 3,456 -- 39,200
Income tax provision.................. (1,594) 18,741 1,278 -- 18,425
Equity in income from subsidiaries.... 49,226 28,011 -- (77,237) --
--------- --------- --------- -------- ---------
Income from continuing operations
before extraordinary item........... 46,608 49,226 2,178 (77,237) 20,775
Income from discontinued operations
(net of tax)........................ -- -- 25,833 -- 25,833
--------- --------- --------- -------- ---------
Income before extraordinary
item........................... 46,608 49,226 28,011 (77,237) 46,608
Extraordinary item (net of tax)....... -- -- -- -- --
--------- --------- --------- -------- ---------
Net income....................... $ 46,608 $ 49,226 $ 28,011 $(77,237) $ 46,608
--------- --------- --------- -------- ---------
--------- --------- --------- -------- ---------
F-22
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
SUBSIDIARY NON-GUARANTOR
PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ---------- ------------ ------------ ------------
Net revenues.......................... $ -- $ 352,806 $ 15,710 $ -- $ 368,516
Cost of sales......................... -- 240,210 11,702 -- 251,912
Selling, general and administrative
expenses............................ 2,562 45,335 1,181 -- 49,078
--------- --------- --------- -------- ---------
Operating profit................. (2,562) 67,261 2,827 -- 67,526
Interest expense...................... -- 8,855 -- -- 8,855
Other (income) expense, net........... 33 (901) 4 -- (864)
--------- --------- --------- -------- ---------
Income before continuing
operations before income taxes
and extraordinary item......... (2,595) 59,307 2,823 -- 59,535
Income tax provision.................. (1,111) 26,329 1,043 -- 26,261
Equity in income from subsidiaries.... 57,799 24,821 -- (82,620) --
--------- --------- --------- -------- ---------
Income from continuing operations
before extraordinary item...... 56,315 57,799 1,780 (82,620) 33,274
Income from discontinued operations
(net of tax)........................ -- -- 23,041 -- 23,041
--------- --------- --------- -------- ---------
Income before extraordinary
item........................... 56,315 57,799 24,821 (82,620) 56,315
Extraordinary item (net of tax)....... -- -- -- -- --
--------- --------- --------- -------- ---------
Net income....................... $ 56,315 $ 57,799 $ 24,821 $(82,620) $ 56,315
--------- --------- --------- -------- ---------
--------- --------- --------- -------- ---------
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
SUBSIDIARY NON-GUARANTOR
PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ---------- ------------ ------------ ------------
Net revenues.......................... $ -- $ 410,778 $ 33,141 $ -- $ 443,919
Cost of sales......................... -- 301,347 25,279 -- 326,626
Selling, general and administrative
expenses............................ 2,758 59,621 3,193 -- 65,572
--------- --------- --------- -------- ---------
Operating profit................. (2,758) 49,810 4,669 -- 51,721
Interest expense...................... 455 13,790 379 -- 14,624
Other (income) expense, net........... 30 (208) (38) -- (216)
--------- --------- --------- -------- ---------
Income before continuing
operations before income taxes
and extraordinary item......... (3,243) 36,228 4,328 -- 37,313
Income tax provision.................. (1,469) (3,599) 1,312 -- (3,756)
Equity in income from subsidiaries.... 49,481 13,315 -- (62,796) --
--------- --------- --------- -------- ---------
Income from continuing operations
before extraordinary item...... 47,707 53,142 3,016 (62,796) 41,069
Income from discontinued operations
(net of tax)........................ -- -- 10,299 -- 10,299
--------- --------- --------- -------- ---------
Income before extraordinary
item........................... 47,707 53,142 13,315 (62,796) 51,368
Extraordinary item (net of tax)....... -- 3,661 -- -- 3,661
--------- --------- --------- -------- ---------
Net income....................... $ 47,707 $ 49,481 $ 13,315 $(62,796) $ 47,707
--------- --------- --------- -------- ---------
--------- --------- --------- -------- ---------
F-23
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1997
SUBSIDIARY NON-GUARANTOR
PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ---------- ------------ ------------ ------------
Current assets:
Cash and cash equivalents......... $ 51 $ 20,350 $-- $ -- $ 20,401
Receivables, net.................. -- 47,010 2,793 -- 49,803
Inventories....................... -- 24,177 1,151 -- 25,328
Other current assets.............. -- 10,003 -- -- 10,003
-------- -------- ------- -------- --------
Total current assets......... 51 101,540 3,944 -- 105,535
Property, plant and equipment, net..... -- 158,658 1,496 -- 160,154
Goodwill, net of amortization.......... -- 19,192 -- -- 19,192
Intercompany receivable (payable)...... (51,394) 51,394 -- -- --
Investment in subsidaries.............. (40,856) 88,410 -- (47,554) --
Other assets........................... 2,324 17,108 -- -- 19,432
Net assets of discontinued
businesses........................... -- -- 85,505 -- 85,505
-------- -------- ------- -------- --------
Total assets................. $(89,875) $436,302 $90,945 $(47,554) $389,818
-------- -------- ------- -------- --------
-------- -------- ------- -------- --------
Current liabilities:
Accounts payable.................. $ 379 $ 30,320 $ 1,417 $ -- $ 32,116
Accrued liabilities............... 3,698 47,475 335 -- 51,508
Current portion of long-term
debt............................ -- 17,392 -- -- 17,392
-------- -------- ------- -------- --------
Total current liabilities.... 4,077 95,187 1,752 -- 101,016
Long-term debt......................... -- 240,612 -- -- 240,612
Other liabilities...................... 287 141,359 783 -- 142,429
-------- -------- ------- -------- --------
Total liabilities............ 4,364 477,158 2,535 -- 484,057
Equity (deficit)....................... (94,239) (40,856) 88,410 (47,554) (94,239)
-------- -------- ------- -------- --------
Total liabilities and equity
(deficit).................. $(89,875) $436,302 $90,945 $(47,554) $389,818
-------- -------- ------- -------- --------
-------- -------- ------- -------- --------
F-24
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1998
SUBSIDIARY NON-GUARANTOR
PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ---------- ------------ ------------ ------------
Current assets:
Cash and cash equivalents......... $ 3,147 $ 57,159 $ 1,004 $ -- $ 61,310
Receivables, net.................. 1,900 53,009 5,711 -- 60,620
Inventories....................... -- 33,731 3,888 -- 37,619
Other current assets.............. -- 11,864 456 -- 12,320
-------- --------- ------- -------- --------
Total current assets......... 5,047 155,763 11,059 -- 171,869
Property, plant and equipment, net..... -- 185,784 10,742 -- 196,526
Goodwill, net of amortization.......... -- 69,533 1,911 -- 71,444
Intercompany receivable (payable)...... 231,395 (231,282) (113) -- --
Investment in subsidaries.............. 9,410 84,830 -- (94,240) --
Other assets........................... 2,172 19,480 35 -- 21,687
Net assets of discontinued
businesses........................... -- -- 75,292 -- 75,292
-------- --------- ------- -------- --------
Total assets................. $248,024 $ 284,108 $98,926 $(94,240) $536,818
-------- --------- ------- -------- --------
-------- --------- ------- -------- --------
Current liabilities:
Accounts payable.................. $ 2,550 $ 35,816 $ 4,447 $ -- $ 42,813
Accrued liabilities............... 677 59,075 1,173 -- 60,925
Current portion of long-term
debt............................ 2,000 48,270 532 -- 50,802
-------- --------- ------- -------- --------
Total current liabilities.... 5,227 143,161 6,152 -- 154,540
Long-term debt......................... 297,000 3,876 5,853 -- 306,729
Other liabilities...................... 493 127,661 2,091 -- 130,245
-------- --------- ------- -------- --------
Total liabilities............ 302,720 274,698 14,096 -- 591,514
Equity (deficit)....................... (54,696) 9,410 84,830 (94,240) (54,696)
-------- --------- ------- -------- --------
Total liabilities and equity
(deficit).................. $248,024 $ 284,108 $98,926 $(94,240) $536,818
-------- --------- ------- -------- --------
-------- --------- ------- -------- --------
F-25
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996
SUBSIDIARY NON-GUARANTOR
PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ---------- ------------ ------------ ------------
Net cash provided by (used in) operating
activities............................ $ (2,012) $ 38,870 $ 1,979 $-- $ 38,837
--------- --------- --------- ------- ---------
Cash flows from investing activities:
Cash provided by discontinued
operations....................... -- -- 16,392 -- 16,392
Other.............................. -- (4,875) (313) -- (5,188)
--------- --------- --------- ------- ---------
Net cash provided by (used in) investing
activities............................ -- (4,875) 16,079 -- 11,204
--------- --------- --------- ------- ---------
Cash flows from financing activities:
Intercompany cash transfers........ (36,795) 54,883 (18,088) -- --
Other.............................. 38,809 (56,886) -- -- (18,077)
--------- --------- --------- ------- ---------
Net cash provided by (used in) financing
activities............................ 2,014 (2,003) (18,088) -- (18,077)
--------- --------- --------- ------- ---------
Effect of exchange rates on cash........ -- -- 30 -- 30
--------- --------- --------- ------- ---------
Increase (decrease) in cash and cash
equivalents........................... 2 31,992 -- -- 31,994
Cash and cash equivalents at beginning
of year............................... -- 18,097 -- -- 18,097
--------- --------- --------- ------- ---------
Cash and cash equivalents at end of
year.................................. $ 2 $ 50,089 $ -- $-- $ 50,091
--------- --------- --------- ------- ---------
--------- --------- --------- ------- ---------
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997
SUBSIDIARY NON-GUARANTOR
PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ---------- ------------ ------------ ------------
Net cash provided by (used in) operating
activities............................ $ (4,048) $ 57,579 $ 2,648 $-- $ 56,179
--------- --------- --------- ------- ---------
Cash flows from investing activities:
Acquisition of businesses net of
cash acquired.................... -- (30,130) -- -- (30,130)
Cash provided by discontinued
operations....................... -- -- 331 -- 331
Other.............................. -- (26,105) (35) -- (26,140)
--------- --------- --------- ------- ---------
Net cash provided by (used in) investing
activities............................ -- (56,235) 296 -- (55,939)
--------- --------- --------- ------- ---------
Cash flows from financing activities:
Intercompany cash transfers........ 36,648 (34,547) (2,101) -- --
Other.............................. (32,551) 3,464 -- -- (29,087)
--------- --------- --------- ------- ---------
Net cash provided by (used in) financing
activities............................ 4,097 (31,083) (2,101) -- (29,087)
--------- --------- --------- ------- ---------
Effect of exchange rates on cash........ -- -- (843) -- (843)
--------- --------- --------- ------- ---------
Increase (decrease) in cash and cash
equivalents........................... 49 (29,739) -- -- (29,690)
Cash and cash equivalents at beginning
of year............................... 2 50,089 -- -- 50,091
--------- --------- --------- ------- ---------
Cash and cash equivalents at end of
year.................................. $ 51 $ 20,350 $ -- $-- $ 20,401
--------- --------- --------- ------- ---------
--------- --------- --------- ------- ---------
F-26
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
SUBSIDIARY NON-GUARANTOR
PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ---------- ------------ ------------ ------------
Net cash provided by (used in) operating
activities............................ $ (4,166) $ 56,803 $ 4,631 $-- $ 57,268
--------- --------- --------- ------- ---------
Cash flows from investing activities:
Acquisition of businesses net of
cash acquired.................... -- (90,935) -- -- (90,935)
Cash provided by discontinued
operations....................... -- -- 20,512 -- 20,512
Other.............................. -- (32,170) (800) -- (32,970)
--------- --------- --------- ------- ---------
Net cash provided by (used in) investing
activities............................ -- (123,105) 19,712 -- (103,393)
--------- --------- --------- ------- ---------
Cash flows from financing activities:
Intercompany cash transfers........ (280,040) 309,942 (29,902) -- --
Other.............................. 287,302 (206,831) 6,385 -- 86,856
--------- --------- --------- ------- ---------
Net cash provided by (used in) financing
activities............................ 7,262 103,111 (23,517) -- 86,856
--------- --------- --------- ------- ---------
Effect of exchange rates on cash........ -- -- 178 -- 178
--------- --------- --------- ------- ---------
Increase (decrease) in cash and cash
equivalents........................... 3,096 36,809 1,004 -- 40,909
Cash and cash equivalents at beginning
of year............................... 51 20,350 -- -- 20,401
--------- --------- --------- ------- ---------
Cash and cash equivalents at end of
year.................................. $ 3,147 $ 57,159 $ 1,004 $-- $ 61,310
--------- --------- --------- ------- ---------
--------- --------- --------- ------- ---------
NOTE 17 -- UNAUDITED QUARTERLY INFORMATION
1997
----------------------------------------------------
FIRST SECOND THIRD FOURTH YEAR
----- ------ ----- ------ ----
Net revenues................................. $ 86,000 $ 88,212 $ 97,456 $ 96,848 $368,516
Income from continuing operations............ 7,310 9,379 8,941 7,644 33,274
Income from discontinued operations.......... 4,404 7,879 6,161 4,597 23,041
Net income................................... 11,714 17,258 15,102 12,241 56,315
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Earnings per common share -- basic:
Income from continuing operations....... .34 .44 .42 .36 1.55
Income from discontinued operations..... .21 .37 .29 .21 1.08
-------- -------- -------- -------- --------
Net income......................... .55 .81 .71 .57 2.63
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Earnings per common share -- assuming
dilution:
Income from continuing operations....... .32 .42 .40 .34 1.48
Income from discontinued operations..... .20 .35 .27 .20 1.02
-------- -------- -------- -------- --------
Net income......................... .52 .77 .67 .54 2.50
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
F-27
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
(DOLLARS IN THOUSANDS)
1998
----------------------------------------------------
FIRST SECOND THIRD FOURTH YEAR
----- ------ ----- ------ ----
Net revenues................................. $100,536 $118,355 $112,562 $112,466 $443,919
Income from continuing operations before
extraordinary item......................... 7,751 10,497 8,725 14,096 41,069
Income (loss) from discontinued operations... 2,110 4,189 3,041 959 10,299
Income before extraordinary item............. 9,861 14,686 11,766 15,055 51,368
Net income................................... 9,861 11,025(1) 11,766 15,055(2) 47,707
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Earnings per common share -- basic:
Income from continuing operations....... .37 .49 .42 .67 1.95
Income from discontinued operations..... .10 .20 .14 .05 .49
Extraordinary item -- loss on extinguishment
of debt (net of tax)....................... -- .17 -- -- .17
-------- -------- -------- -------- --------
Net income......................... .47 .52 .56 .72 2.27
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Earnings per common share -- assuming
dilution:
Income from continuing operations....... .35 .48 .40 .65 1.88
Income from discontinued operations..... .10 .19 .14 .04 .47
Extraordinary item -- loss from
extinguishment of debt (net of tax)........ -- .17 -- -- .17
-------- -------- -------- -------- --------
Net income......................... .45 .50 .54 .69 2.18
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Note: Basic earnings per common share calculations are based on the
weighted average number of shares outstanding during each of the
quarters. Diluted earnings per common share assume the foregoing
and, in addition, the exercise of all stock options and restricted
units. The sum of the four quarters may not equal the full year
computation due to rounding.
(1) In the second quarter of 1998, the Company recorded an extraordinary loss of
$3,661 ($.17 per share) related to the early retirement of certain
outstanding indebtedness.
(2) During the fourth quarter of 1998, the Company recorded a one-time charge of
$12,885 ($7,789 after tax or $.36 per share) primarily due to an asset
impairment writedown for two of the Company's manufacturing facilities and
incremental accruals of $11,300 ($6,831 after tax or $.31 per share)
principally related to litigation and environmental spending. During the
fourth quarter of 1998, the Company also recorded a non-recurring gain of
$19,500 ($.89 per share) related to an income tax settlement.
NOTE 18 -- SUBSEQUENT EVENTS
On February 23, 1999, the Company acquired for approximately $58,000
Defiance Inc., a manufacturer of specialty antifriction bearings for the
transportation industry and a provider of vehicle testing services, tooling
design and preproduction dies and components primarily for the automotive
industry. On April 6, 1999, the Company acquired for approximately $220,000 Noma
Industries Limited, a leading North American producer of insulated wire and
wire-related products for the automotive, appliance and electronic industries.
On July 2, 1999, the Company acquired Structural Kinematics, a leading provider
of testing and engineering services to the automotive, truck and agricultural
equipment industries.
On July 12, 1999, the Company announced that it has agreed to purchase
Berlin-based Krone AG from Jenoptik AG. Krone is a leading global supplier of
connection and distribution technology for telecommunications and data networks.
The Krone acquisition is expected to be completed during the third quarter. The
acquisitions will be financed through existing credit facilities and additional
debt securities.
F-28
GENTEK INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1998 1999 1998 1999
-------- -------- -------- --------
Net revenues..................................... $112,562 $263,834 $331,453 $609,324
Cost of sales.................................... 80,692 195,792 234,935 453,938
Selling, general and administrative expense...... 13,951 34,159 40,347 80,003
-------- -------- -------- --------
Operating profit............................... 17,919 33,883 56,171 75,383
Interest expense................................. 4,099 13,077 10,626 25,378
Interest income.................................. 336 146 678 739
Foreign currency transaction (gains) losses...... 107 (787) 398 (1,175)
Other (income) expense, net...................... (109) 123 11 262
-------- -------- -------- --------
Income from continuing operations before income
taxes and extraordinary item................ 14,158 21,616 45,814 51,657
Income tax provision............................. 5,432 10,896 18,841 23,890
-------- -------- -------- --------
Income from continuing operations before
extraordinary item.......................... 8,726 10,720 26,973 27,767
Income from discontinued operations (net of
tax)........................................... 3,040 -- 9,339 1,006
-------- -------- -------- --------
Income before extraordinary item............... 11,766 10,720 36,312 28,773
Extraordinary item -- loss from extinguishment of
debt (net of tax of $2,395 and $3,231,
respectively).................................. -- -- 3,661 4,939
-------- -------- -------- --------
Net income..................................... $ 11,766 $ 10,720 $ 32,651 $ 23,834
-------- -------- -------- --------
-------- -------- -------- --------
EARNINGS PER COMMON SHARE -- BASIC:
Income from continuing operations................ $ .42 $ .51 $ 1.28 $ 1.32
Income from discontinued operations (net of
tax)........................................... .14 -- .44 .05
Extraordinary item -- loss from extinguishment of
debt (net of tax).............................. -- -- .17 .23
-------- -------- -------- --------
Net income..................................... $ .56 $ .51 $ 1.55 $ 1.14
-------- -------- -------- --------
-------- -------- -------- --------
EARNINGS PER COMMON SHARE -- ASSUMING DILUTION:
Income from continuing operations................ $ .40 $ .50 $ 1.23 $ 1.29
Income from discontinued operations (net of
tax)........................................... .14 -- .43 .05
Extraordinary item -- loss from extinguishment of
debt (net of tax).............................. -- -- .17 .23
-------- -------- -------- --------
Net income....................................... $ .54 $ .50 $ 1.49 $ 1.11
-------- -------- -------- --------
-------- -------- -------- --------
See the accompanying notes to the consolidated financial statements.
F-29
GENTEK INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents................................. $ 61,310 $ 34,459
Receivables, net.......................................... 60,620 211,999
Inventories............................................... 37,619 118,012
Deferred income taxes..................................... 11,494 27,645
Other current assets...................................... 826 25,108
-------- ----------
Total current assets................................... 171,869 417,223
Property, plant and equipment, net.......................... 196,526 353,096
Goodwill, net of amortization............................... 71,444 393,357
Other assets................................................ 21,687 31,808
Net assets of discontinued operations....................... 75,292 --
-------- ----------
Total assets........................................... $536,818 $1,195,484
-------- ----------
-------- ----------
LIABILITIES AND EQUITY (DEFICIT)
Current liabilities:
Accounts payable.......................................... $ 42,813 $ 90,052
Accrued liabilities....................................... 60,925 161,752
Current portion of long-term debt......................... 50,802 43,236
-------- ----------
Total current liabilities.............................. 154,540 295,040
Long-term debt.............................................. 306,729 712,204
Other liabilities........................................... 130,245 175,755
-------- ----------
Total liabilities...................................... 591,514 1,182,999
-------- ----------
Equity (deficit):
Preferred Stock, $.01 par value; authorized 10,000,000
shares; none issued or outstanding..................... -- --
Common Stock, $.01 par value; authorized 100,000,000
shares; issued: 12,654,489 and 16,876,017 shares at
December 31, 1998 and September 30, 1999,
respectively........................................... 127 168
Class B Common Stock, $.01 par value; authorized
40,000,000 shares; issued 9,758,421 and 3,958,421
shares at December 31, 1998 and September 30, 1999,
respectively........................................... 97 40
Capital deficit........................................... (182,563) (848)
Accumulated other comprehensive income.................... (2,446) 98
Retained earnings......................................... 162,378 13,289
Treasury stock, at cost: 1,641,166 and 16,192 shares at
December 31, 1998 and September 30, 1999,
respectively........................................... (32,289) (262)
-------- ----------
Total equity (deficit)................................. (54,696) 12,485
-------- ----------
Total liabilities and equity (deficit)................. $536,818 $1,195,484
-------- ----------
-------- ----------
See the accompanying notes to the consolidated financial statements.
F-30
GENTEK INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1998 1999
--------- -----------
Cash flows from operating activities:
Net income................................................ $ 32,651 $ 23,834
Adjustments to reconcile net income to net cash provided
by continuing operations:
Depreciation and amortization........................ 17,539 31,156
Net loss on disposition of long-term assets.......... 113 219
Unrealized exchange gain (loss)...................... 898 (779)
Restricted unit plan costs........................... 843 607
Loss on extinguishment of debt....................... 6,056 8,170
Income from discontinued operations.................. (6,680) (1,006)
Increase in receivables.............................. (4,547) (21,875)
Increase in inventories.............................. (3,060) (77)
(Decrease) in accounts payable....................... (1,207) (1,331)
Increase (decrease) in accrued liabilities........... (2,438) 11,251
Increase (decrease) in other liabilities and assets,
net................................................. (7,601) (3,165)
--------- ---------
Net cash provided by continuing operations........ 32,567 47,004
--------- ---------
Cash flows from investing activities:
Capital expenditures...................................... (22,185) (22,258)
Proceeds from sales or disposals of long term assets...... 256 354
Cash provided by discontinued operations.................. 19,509 122,711
Acquisition of businesses net of cash acquired*........... (90,935) (445,020)
--------- ---------
Net cash used for investing activities................. (93,355) (344,213)
--------- ---------
Cash flows from financing activities:
Proceeds from long-term debt.............................. 383,428 846,827
Repayment of long-term debt............................... (290,804) (573,435)
Payment to acquire treasury stock......................... (4,000) (635)
Exercise of stock options................................. 314 --
Dividends................................................. (2,099) (2,079)
--------- ---------
Net cash provided by financing activities.............. 86,839 270,678
--------- ---------
Effect of exchange rate changes on cash................... (368) (320)
--------- ---------
Increase (decrease) in cash and cash equivalents............ 25,683 (26,851)
Cash and cash equivalents at beginning of period............ 20,401 61,310
--------- ---------
Cash and cash equivalents at end of period.................. $ 46,084 $ 34,459
--------- ---------
--------- ---------
Supplemental information:
Cash paid for income taxes................................ $ 16,721 $ 25,020
--------- ---------
--------- ---------
Cash paid for interest.................................... $ 16,830 $ 17,696
--------- ---------
--------- ---------
*Purchase of businesses net of cash acquired:
Working Capital, other than cash.......................... $ (14,303) $ (79,008)
Plant, property and equipment............................. (36,436) (158,078)
Other assets.............................................. (41,622) (341,309)
Noncurrent liabilities.................................... 1,426 133,375
--------- ---------
Net cash used to acquire businesses.................... $ (90,935) $(445,020)
--------- ---------
--------- ---------
See the accompanying notes to the consolidated financial statements.
F-31
GENTEK INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
GenTek Inc.'s ('GenTek' or the 'Company') manufacturing and performance
products businesses owned by the Company as of April 30, 1999 (the 'GenTek
Business') were formerly part of The General Chemical Group Inc. ('GCG'). GCG
separated the GenTek Business from GCG's soda ash and calcium chloride business
(the 'Industrial Chemicals Business') through a spinoff (the 'Spinoff'). GCG
accomplished the Spinoff by transferring the GenTek Business to GenTek, and
distributing the common stock of GenTek to GCG's shareholders on April 30, 1999
(the 'Spinoff Date'). Since the Spinoff Date, GCG and GenTek have been separate,
stand-alone companies with GenTek operating the GenTek Business, and GCG
operating the Industrial Chemicals Business.
The Spinoff has been treated as a reverse spinoff for financial
statement purposes because the GenTek Business constitutes a greater proportion
of GCG's assets and operations. Therefore, the Spinoff has been reflected, for
financial statement presentation, as if GenTek formed a new company consisting
of the Industrial Chemicals Segment and distributed the stock of that company as
a dividend to GenTek's stockholders, with the assets and operations of the
Performance Products and Manufacturing Segments remaining with GenTek.
Accordingly, the GenTek financial statements reflect the financial position and
results of operations of the Performance Products and Manufacturing Segments as
continuing operations and the financial position and results of operations of
the industrial chemicals business as discontinued operations. The distribution
of the net liabilities of the industrial chemicals business has been recorded as
a capital contribution to the Company.
For the purpose of governing certain ongoing relationships between GCG
and GenTek after the Spinoff and to provide mechanisms for an orderly
transition, GCG and GenTek entered into various agreements which are described
in Amendment No. 2 to the Registration Statement on Form 10 (file
no. 001-14789) of GenTek (the 'Form 10') filed with the Securities and Exchange
Act of 1934.
The accompanying unaudited consolidated financial statements have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission (the 'SEC'). The financial statements do not include
certain information and footnotes required by generally accepted accounting
principles. In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation have been
included. Operating results for the nine months ended September 30, 1999 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1999. These statements should be read in conjunction with the
annual financial statements included elsewhere in this prospectus.
NOTE 2 -- DISCONTINUED OPERATIONS
Discontinued operations represent the Industrial Chemical Business of
GCG (see Note 1). Prior to the Spinoff Date an allocation of certain assets,
liabilities and expenses was made related to discontinued operations. In the
opinion of management, expenses were allocated to the discontinued operations in
a reasonable and consistent basis using management's estimate of services
provided to the discontinued business by GCG. General corporate overhead
expenses were not allocated to discontinued operations. However, such
allocations are not necessarily indicative of the level of expenses which might
have been incurred had the industrial chemicals business been operating as a
stand-alone entity during the periods presented or expected to be incurred in
the future.
In connection with the Spinoff, General Chemical Industrial Products, a
subsidiary of GCG, entered into certain financing arrangements prior to the
completion of the Spinoff. Out of the proceeds, approximately $130,000 was used
to repay outstanding borrowings of GCG under credit facilities existing prior to
the Spinoff.
F-32
GENTEK INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
(UNAUDITED)
NOTE 3 -- STOCKHOLDER'S EQUITY
Prior to the Spinoff, a stockholder converted 5.8 million shares of GCG
Class B Common Stock into an identical number of shares of GCG Common Stock. On
the Spinoff Date, GCG issued shares of Common Stock and Class B Stock of GenTek
and distributed them to the holders of GCG's stock on a one-for-one basis.
Accordingly, as of the Spinoff Date, the equity accounts have been reclassified
to reflect the formation of GenTek and the issuance of its stock by recording
the par value of the stock issued and reclassifying all other equity to paid in
capital.
In conjunction with the Spinoff, the distribution of the net liabilities
of the industrial chemicals business has been recorded as a capital contribution
of $46,815 to the Company. Certain industrial chemical business asset and
liability balances, including but not limited to pension, postretirement and
deferred taxes, have been recorded based on preliminary estimates. As a result,
the capital contribution recorded by the Company reflects these estimates and is
subject to adjustment based on the final calculation of these balances.
NOTE 4 -- COMPREHENSIVE INCOME
Total comprehensive income is comprised of net income and foreign
currency translation gains and losses. Total comprehensive income for the three
months ended September 30, 1998 and 1999 was $11,824 and $10,764, respectively.
Total comprehensive income for the nine months ended September 30, 1998 and 1999
was $32,638 and $24,063, respectively.
NOTE 5 -- EARNINGS PER SHARE
The computation of basic earnings per share is based on the weighted
average number of common shares and contingently issuable shares outstanding
during the period. The computation of diluted earnings per share also includes
the exercise of all stock options and restricted units, using the treasury stock
method.
The shares outstanding used for the basic and diluted earnings per
common share computation are reconciled as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -----------------------
1998 1999 1998 1999
---- ---- ---- ----
Basic earnings per common share:
Weighted average common shares
outstanding............................... 21,099,838 20,989,245 21,085,181 20,942,676
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Diluted earnings per common share:
Weighted average common shares
outstanding............................... 21,099,838 20,989,245 21,085,181 20,942,676
Options..................................... 776,724 442,800 894,297 494,766
---------- ---------- ---------- ----------
Total.................................. 21,876,562 21,432,045 21,979,478 21,437,442
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
At September 30, 1998 and 1999 options to purchase 423,500 shares and
1,574,500 shares of common stock, respectively, were not included in the
computation of diluted earnings per common share because the exercise price was
greater than the average market price of the common shares. The options, which
expire from 2007 through 2009, were still outstanding at September 30, 1999.
F-33
GENTEK INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
(UNAUDITED)
NOTE 6 -- ACQUISITIONS
On February 23, 1999, the Company acquired for $58,020 through a cash
tender offer, Defiance Inc. ('Defiance'), a manufacturer of specialty
antifriction bearings for the transportation industry and a provider of vehicle
testing services, tooling design and preproduction dies and components primarily
for the automotive industry. On April 6, 1999, the Company acquired for
approximately $220,000 Noma Industries Limited ('Noma'), a leading North
American producer of insulated wire and wire-related products for the
automotive, appliance and electronic industries. On August 20, 1999, the Company
acquired for approximately $222,000, including approximately $63,000 in assumed
debt, Berlin-based Krone AG from Jenoptik AG. Krone is a leading global supplier
of connector and distribution technology for telecommunications and data
networks. In addition, during the third quarter the Company made two small
acquisitions (Structural Kinematics, a leading provider of testing and
engineering services to the automotive, truck and agricultural equipment
industries, and the business of Pacific Pac International Inc. ('Pacific Pac'),
a supplier of ultra high-purity solvents to the electronics industry). Funding
for these transactions was provided by existing cash and borrowings under the
Company's existing debt and credit facilities. The acquisitions are accounted
for under the purchase method, and accordingly, the net assets and results of
operations are included in the financial statements from the date of their
respective acquisitions. The allocation of purchase price of Defiance, Noma,
Structural Kinematics, Krone and Pacific Pac is based on valuation information
available to the Company which is subject to change as such information is
finalized. Goodwill is being amortized on a straight line basis over a period
which ranges from 25 to 35 years. The following proforma information presents
the results of operations as if the acquisitions had occurred on January 1,
1998. The proforma information has been prepared for comparative purposes and is
not necessarily indicative of what would have occurred had the acquisitions
occurred on such date or of results which may occur in the future. Had the
acquisitions occurred as of January 1, 1998, net sales would have been
$1,135,000 and $896,917, income before extraordinary items would have been
$26,522 ($1.21 per share) and $26,392 ($1.23 per share) and net income would
have been $33,160 ($1.51 per share) and $22,459 ($1.05 per share) for 1998 and
the nine months ended September 30, 1999.
NOTE 7 -- ADDITIONAL FINANCIAL INFORMATION
The components of inventories were as follows:
DECEMBER 31, SEPTEMBER 30,
1998 1999
---- ----
(UNAUDITED)
Raw materials........................................... $11,395 $ 43,622
Work in process......................................... 6,049 22,054
Finished products....................................... 15,706 47,759
Supplies and containers................................. 4,469 4,577
------- --------
$37,619 $118,012
------- --------
------- --------
F-34
GENTEK INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
(UNAUDITED)
NOTE 8 -- LONG-TERM DEBT
Long-term debt consists of the following:
DECEMBER 31, SEPTEMBER 30,
MATURITIES 1998 1999
---------- ---- ----
(UNAUDITED)
Bank Term Loans -- floating rates.......... 1999-2007 $299,000 $249,625
$300,000 Revolving Credit
Facility -- floating rate................. 2005 -- 215,000
Senior Subordinated Notes -- 11%............ 2009 -- 200,000
Canada Senior Notes -- 9.09%................ 1999 48,269 --
General Chemical Canada Limited Revolving
Credit Facility -- floating rate.......... 2000 3,877 --
Other Debt -- floating rate................. 6,385 90,815
-------- --------
Total Debt............................. 357,531 755,440
Less: Current Portion.................. 50,802 43,236
-------- --------
Net Long-Term Debt..................... $306,729 $712,204
-------- --------
-------- --------
On April 30, 1999, the Company entered into a new credit facility with a
syndicate of banks and other financial institutions consisting of a $100,000
Term Loan ('Tranche A') maturing on April 30, 2005, a $150,000 Term Loan
('Tranche B') maturing on April 30, 2007 and a $300,000 Revolving Credit
Facility maturing on April 30, 2005. The term loans and revolving credit
facility bear interest at a rate equal to a spread over a reference rate.
Tranche A is payable in consecutive quarterly installments commencing
September 30, 2000. Tranche B is payable in consecutive quarterly installments
which commenced on July 31, 1999. The facility is secured by a first priority
security interest in all of the capital stock of the Company's domestic
subsidiaries, and 65 percent of the capital stock of the Company's foreign
subsidiaries. The proceeds were used to repay outstanding borrowings of GCG
under its existing credit facilities prior to the Spinoff, resulting in an
extraordinary loss from the extinguishment of debt of $4,939, net of a tax
benefit of $3,231.
On August 9, 1999, the Company issued $200,000 11% Senior Subordinated
Notes due 2009. Net proceeds of the offering of $193,000 were used to repay a
portion of the borrowing outstanding under the Company's Revolving Credit
Facility.
NOTE 9 -- DIVIDENDS
On September 21, 1999, GenTek's Board of Directors declared a quarterly
cash dividend of $.05 per share of Common Stock and Class B Common Stock,
payable October 16, 1999, to shareholders of record on October 1, 1999.
NOTE 10 -- RELATED PARTY TRANSACTIONS
MANAGEMENT AGREEMENT
The Company is party to a management agreement with Latona Associates
('Latona') which is controlled by a stockholder of the Company under which the
Company receives corporate supervisory and administrative services and strategic
guidance. Prior to the Spinoff, Latona provided these services to the GenTek
Business pursuant to its agreement with GCG. The Company was charged $3,369 and
$3,618 for the nine months ended September 30, 1998 and 1999, respectively. In
connection with the Spinoff, Latona agreed to provide its services separately to
GenTek and GCG. GenTek pays Latona, for periods subsequent to the Spinoff, a
quarterly fee of $1,125, to be adjusted after 1999 for increases in
F-35
GENTEK INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
(UNAUDITED)
U.S. CPI. In addition, if Latona provides advisory services to GenTek in
connection with any acquisition, business combination or other strategic
transaction, GenTek pays Latona Associates additional fees comparable to fees
received by investment banking firms for such services. During 1998, the Company
paid Latona $500 in connection with acquisitions. During 1999, GenTek was
charged fees of $3,600 in the aggregate in connection with the acquisitions of
Defiance, Noma and Krone. GenTek's agreement with Latona expires on
December 31, 2004.
TRANSITION SUPPORT AGREEMENT
After the Spinoff, GenTek provides GCG with certain administrative
services pursuant to the Transition Support Agreement. For the three and nine
months ended September 30, 1999, GenTek charged GCG $916 and $1,534,
respectively, related to this agreement.
OTHER TRANSACTIONS
GCG supplies soda ash and calcium chloride to General Chemical
Corporation ('GCC'), a wholly-owned subsidiary of GenTek. For the nine months
ended September 30, 1998 and 1999, purchases from GCG amounted to $4,045 and
$10,045, respectively.
NOTE 11 -- SEGMENT INFORMATION
Industry segment information for continuing operations is summarized as
follows:
TOTAL REVENUES OPERATING PROFIT
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- ------------------
1998 1999 1998 1999
---- ---- ---- ----
Performance Products..................... $238,265 $254,613 $39,188 $ 34,071
Manufacturing............................ 93,188 315,102 21,842 48,939
Telecommunications Equipment............. -- 39,609 -- 2,941
-------- -------- ------- --------
Total Segment....................... 331,453 609,324 61,030 85,951
Eliminations and other corporate
expenses............................... -- -- (4,859) (10,568)
-------- -------- ------- --------
Consolidated............................. $331,453 $609,324 56,171 75,383
-------- --------
-------- --------
Interest expense......................... 10,626 25,378
Other income, net........................ 269 1,652
------- --------
Consolidated income from continuing
operations before income taxes......... $45,814 $ 51,657
------- --------
------- --------
IDENTIFIABLE ASSETS
----------------------------
DECEMBER 31, SEPTEMBER 30,
1998 1999
---- ----
Performance Products.................................... $381,202 $ 344,737
Manufacturing........................................... 78,267 483,703
Telecommunications Equipment............................ -- 358,152
Corporate............................................... 2,057 8,892
-------- ----------
Consolidated............................................ $461,526 $1,195,484
-------- ----------
-------- ----------
The Telecommunications Equipment segment is comprised of the businesses
of Krone which were acquired by the Company on August 20, 1999. Krone is a
leading global supplier of connection and distribution technology for
telecommunications and data networks.
F-36
GENTEK INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
(UNAUDITED)
NOTE 12 -- SUMMARIZED FINANCIAL INFORMATION
The Company's 11% Senior Subordinated Notes due 2009 are fully and
unconditionally guaranteed, on a joint and several basis, by all of the
Company's wholly owned, domestic subsidiaries ('Subsidiary Guarantors'). The
non-guarantor subsidiaries are foreign or are part of the Industrial Chemicals
Business which are no longer part of GenTek as a result of the Spinoff.
The following condensed consolidating financial information illustrates
the composition of the combined Subsidiary Guarantors. The Company believes that
the separate complete financial statements of the respective guarantors would
not provide additional material information which would be useful in assessing
the financial composition of the Subsidiary Guarantors.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998
SUBSIDIARY NON-GUARANTOR
PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ---------- ------------ ------------ ------------
Net revenues............................. $ -- $307,157 $24,296 $ -- $331,453
Cost of sales............................ -- 216,493 18,442 -- 234,935
Selling, general and administrative
expense................................ 1,386 36,774 2,187 -- 40,347
------- -------- ------- -------- --------
Operating profit.................... (1,386) 53,890 3,667 -- 56,171
Interest expense......................... 252 10,110 264 -- 10,626
Other (income) expense, net.............. 24 (255) (38) -- (269)
------- -------- ------- -------- --------
Income from continuing operations
before income taxes and
extraordinary item................ (1,662) 44,035 3,441 -- 45,814
Income tax provision..................... (795) 18,648 988 -- 18,841
Equity in income from subsidiaries....... 33,518 11,792 -- (45,310) --
------- -------- ------- -------- --------
Income from continuing operations
before extraordinary item......... 32,651 37,179 2,453 (45,310) 26,973
Income from discontinued operations (net
of tax)................................ -- -- 9,339 -- 9,339
------- -------- ------- -------- --------
Income before extraordinary item.... 32,651 37,179 11,792 (45,310) 36,312
Extraordinary item -- net of tax......... -- 3,661 -- -- 3,661
------- -------- ------- -------- --------
Net income.......................... $32,651 $ 33,518 $11,792 $(45,310) $ 32,651
------- -------- ------- -------- --------
------- -------- ------- -------- --------
F-37
GENTEK INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
(UNAUDITED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
SUBSIDIARY NON-GUARANTOR
PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ---------- ------------ ------------ ------------
Net revenues............................. $ -- $449,163 $175,238 $(15,077) $609,324
Cost of sales............................ -- 335,745 133,270 (15,077) 453,938
Selling, general and administrative
expense................................ 7,299 53,585 19,119 -- 80,003
------- -------- -------- -------- --------
Operating profit.................... (7,299) 59,833 22,849 -- 75,383
Interest expense......................... 20,874 18,741 6,187 (20,424) 25,378
Other (income) expense, net.............. (20,399) (3,194) 1,517 20,424 (1,652)
------- -------- -------- -------- --------
Income from continuing operations
before income taxes and
extraordinary item................ (7,774) 44,286 15,145 -- 51,657
Income tax provision..................... (3,197) 20,338 6,749 -- 23,890
Equity in income from subsidiaries....... 33,350 9,402 -- (42,752) --
------- -------- -------- -------- --------
Income from continuing operations
before extraordinary item......... 28,773 33,350 8,396 (42,752) 27,767
Income from discontinued operations
(net of tax)........................... -- -- 1,006 -- 1,006
------- -------- -------- -------- --------
Income before extraordinary item.... 28,773 33,350 9,402 (42,752) 28,773
Extraordinary item -- net of tax......... 4,939 -- -- -- 4,939
------- -------- -------- -------- --------
Net income.......................... $23,834 $ 33,350 $ 9,402 $(42,752) $ 23,834
------- -------- -------- -------- --------
------- -------- -------- -------- --------
F-38
GENTEK INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
(UNAUDITED)
CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 1999
SUBSIDIARY NON-GUARANTOR
PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ---------- ------------ ------------ ------------
Current assets:
Cash.............................. $ 120 $ 7,711 $ 26,628 $ -- $ 34,459
Receivables....................... 4,366 101,521 106,112 -- 211,999
Inventories....................... -- 49,907 68,105 -- 118,012
Other current assets.............. 1,509 32,837 18,407 -- 52,753
-------- -------- -------- --------- ----------
Total current assets......... 5,995 191,976 219,252 -- 417,223
Property, plant and equipment, net..... -- 256,112 96,984 -- 353,096
Goodwill, net of amortization.......... -- 96,611 296,746 -- 393,357
Intercompany receivable (payable)...... 443,108 (439,218) (3,890) -- --
Investment in subsidiaries............. 83,068 217,211 -- (300,279) --
Other assets........................... 334 23,124 8,350 -- 31,808
-------- -------- -------- --------- ----------
Total assets................. $532,505 $345,816 $617,442 $(300,279) $1,195,484
-------- -------- -------- --------- ----------
-------- -------- -------- --------- ----------
Current liabilites:
Accounts payable.................. $ 6 $ 49,561 $ 40,485 $ -- $ 90,052
Accrued liabilites................ 4,514 65,973 91,265 -- 161,752
Current portion of long-term
debt............................ -- 1,176 42,060 -- 43,236
-------- -------- -------- --------- ----------
Total current liabilites..... 4,520 116,710 173,810 -- 295,040
Long-term debt......................... 515,000 8,264 188,940 -- 712,204
Other liabilities...................... 500 137,774 37,481 -- 175,755
-------- -------- -------- --------- ----------
Total liabilites............. 520,020 262,748 400,231 -- 1,182,999
Equity (deficit)....................... 12,485 83,068 217,211 (300,279) 12,485
-------- -------- -------- --------- ----------
Total liabilites and equity
(deficit).................. $532,505 $345,816 $617,442 $(300,279) $1,195,484
-------- -------- -------- --------- ----------
-------- -------- -------- --------- ----------
F-39
GENTEK INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
(UNAUDITED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1998
SUBSIDIARY NON-GUARANTOR
PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ---------- ------------ ------------ ------------
Net cash provided by (used in)
operating activities................ $ (905) $ 29,063 $ 4,409 $-- $ 32,567
Cash flows from investing activities:
Acquisition of businesses net of
cash acquired.................. -- (90,935) -- -- (90,935)
Cash provided by discontinued
operations..................... -- -- 19,509 -- 19,509
Other............................ -- (21,644) (285) -- (21,929)
--------- --------- -------- ------ --------
Net cash provided by (used in)
investing activities................ -- (112,579) 19,224 -- (93,355)
--------- --------- -------- ------ --------
Cash flows from financing activities:
Intercompany cash transfers...... (281,412) 310,188 (28,776) --
Other............................ 291,241 (210,787) 6,385 86,839
--------- --------- -------- ------ --------
Net cash provided by (used in)
financing activities................ 9,829 99,401 (22,391) -- 86,839
--------- --------- -------- ------ --------
Effect of exchange rates on cash...... -- -- (368) -- (368)
--------- --------- -------- ------ --------
Increase (decrease) in cash and cash
equivalents......................... 8,924 15,885 874 -- 25,683
Cash and cash equivalents at beginning
of period........................... 51 20,350 -- -- 20,401
--------- --------- -------- ------ --------
Cash and cash equivalents at end of
period.............................. $ 8,975 $ 36,235 $ 874 $-- $ 46,084
--------- --------- -------- ------ --------
--------- --------- -------- ------ --------
F-40
GENTEK INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
(UNAUDITED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999
SUBSIDIARY NON-GUARANTOR
PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ---------- ------------ ------------ ------------
Net cash provided by (used in)
operating activities................ $ (1,144) $ 39,371 $ 8,777 $-- $ 47,004
Cash flows from investing activities:
Acquisition of businesses net of
cash acquired.................. -- (445,020) -- -- (445,020)
Cash provided by discontinued
operations..................... -- -- 122,711 -- 122,711
Other............................ -- (18,274) (3,630) -- (21,904)
--------- --------- -------- ------ --------
Net cash provided by (used in)
investing activities................ -- (463,294) 119,081 -- (344,213)
--------- --------- -------- ------ --------
Cash flows from financing activities:
Intercompany cash transfers...... (215,169) 320,787 (105,618) -- --
Other............................ 213,286 53,688 3,704 -- 270,678
--------- --------- -------- ------ --------
Net cash provided by (used in)
financing activities................ (1,883) 374,475 (101,914) -- 270,678
--------- --------- -------- ------ --------
Effect of exchange rates on cash...... -- -- (320) -- (320)
--------- --------- -------- ------ --------
Increase (decrease) in cash and cash
equivalents......................... (3,027) (49,448) 25,624 -- (26,851)
Cash and cash equivalents at beginning
of period........................... 3,147 57,159 1,004 -- 61,310
--------- --------- -------- ------ --------
Cash and cash equivalents at end of
period.............................. $ 120 $ 7,711 $ 26,628 $-- $ 34,459
--------- --------- -------- ------ --------
--------- --------- -------- ------ --------
F-41
GENTEK INC. [LOGO]
OFFER TO EXCHANGE FOR ALL OUTSTANDING
11% SENIOR SUBORDINATED NOTES DUE 2009
-----------------------------
PROSPECTUS
-----------------------------
------------------------------------------------
BROKER-DEALER PROSPECTUS
DELIVERY REQUIREMENTS
Until 2000, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealer's obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
Each broker-dealer that receives new notes for its own account in the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of such new notes. The letter of transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an 'underwriter' within the meaning of the Securities Act of
1933. This prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of new notes received
in exchange for old notes where such old notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. We have agreed that, for a period of 180 days after the expiration
date, we will make this prospectus available to any broker-dealer for use in
connection with any such resale.
------------------------------------------------
, 1999
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
GenTek is incorporated under the laws of the State of Delaware. Section
145 of the Delaware Corporation Law, as amended, and Article VIII of GenTek's
Amended and Restated Certificate of Incorporation provide for the
indemnification, except in certain circumstances set forth below, of officers,
directors, employees and agents of GenTek for certain expenses incurred in
connection with any threatened, pending or completed action, suit, or
proceeding, whether civil, criminal, administrative or investigative, and for
the purchase and maintenance of insurance by GenTek on behalf of officers,
directors, employees and agents of GenTek and its subsidiaries (including
officers, directors, employees and agents of the other Registrants) against any
liability asserted against, and incurred by, any such officer, director,
employee or agent in such capacity. Set forth below is the text of Section 145
and the text of Article VIII of GenTek's Amended and Restated Certificate of
Incorporation.
Section 145 of the Delaware Corporation Law, as amended, provides as
follows:
'145 INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS;
INSURANCE. -- (a) A corporation shall have power to indemnify any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that the person is or
was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by the
person in connection with such action, suit or proceeding if this person
acted in good faith and in a manner the person reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe
the person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which
this person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that the person's conduct was
unlawful.
(b) A corporation shall have power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that the person is or
was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or
settlement of such action or suit if the person acted in good faith and in
a manner the person reasonably believed to be in or not opposed to the best
interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such expenses which the
Court of Chancery or such other court shall deem proper.
(c) To the extent that a present or former director or officer of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein,
II-1
such person shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection
therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the present or former director, officer, employee or agent is proper in
the circumstances because the person has met the applicable standard of
conduct set forth in subsections (a) and (b) of this section. Such
determination shall be made, with respect to a person who is a director or
officer at the time of such determination, (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even
though less than a quorum, or (2) by a committee of such directors
designated by majority vote of such directors, even though less than a
quorum, or (3) if there are no such directors, or if such directors so
direct, by independent legal counsel in a written opinion, or (4) by the
stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that such person is not
entitled to be indemnified by the corporation as authorized in this
section. Such expenses (including attorneys' fees) incurred by former
directors and officers or other employees and agents may be so paid upon
such terms and conditions, if any, as the corporation deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action
in such person's official capacity and as to action in another capacity
while holding such office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against such person and incurred by such person in
any such capacity, or arising out of such person's status as such, whether
or not the corporation would have the power to indemnify such person
against such liability under this section.
(h) For purposes of this section, references to 'the corporation' shall
include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as such
person would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this section, references to 'other enterprises'
shall include employee benefit plans; references to 'fines' shall include
any excise taxes assessed on a person with respect to any employee benefit
plan; and references to 'serving at the request of the corporation' shall
include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee, or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner such person reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to
II-2
have acted in a manner 'not opposed to the best interests of the
corporation' as referred to in this section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction
to hear and determine all actions for advancement of expenses or
indemnification brought under this section or under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise. The Court of
Chancery may summarily determine a corporation's obligation to advance
expenses (including attorney's fees).'
Article VIII of the Amended and Restated Certificate of Incorporation
of GenTek provides as follows:
'Article VIII LIMITATION OF LIABILITY. A Director of the Corporation
shall not be personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a Director, except
for liability (i) for any breach of the Director's duty of loyalty to
the Corporation or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL or (iv) for any
transaction from which the Director derived an improper personal
benefit. If the DGCL is amended after the effective date of this Amended
and Restated Certificate of Incorporation to authorize corporation
action further eliminating or limiting the personal liability of
Directors, then the liability of a Director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the DGCL, as so
amended.'
As permitted by Section 145 of the General Corporation Law of the State
of Delaware, as amended, GenTek has purchased and maintains insurance providing
for reimbursement to elected directors and officers of GenTek and its
subsidiaries (including the other Registrants), subject to certain exceptions,
of amounts they may be legally obligated to pay, including but not limited to
damages, judgments, settlements, costs and attorneys' fees (but not including
fines, penalties or matters not insurable under the law), as a result of claims
and legal actions instituted against them to recover for their acts while
serving as directors or officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) LIST OF EXHIBITS
2.1 -- Amendment No. 2 to Form 10 of GenTek Inc. for registration of Securities of GenTek
Inc. Incorporated by reference to GenTek Inc.'s Registration Statement Amendment
No. 2 on Form 10 (File No. 001-14789) filed with the Securities and Exchange
Commission on April 8, 1999 (the '1999 GenTek Form 10').
2.2 -- Separation Agreement among the Company, GenTek Inc., The General Chemical Group
Inc. and General Chemical Corporation. Incorporated by reference to the relevant
exhibit to the 1999 GenTek Form 10.
2.3 -- Stock Purchase Agreement, dated 12, 1999, between Jenoptik AG and GenTek Inc.
Incorporated by reference to the Current Report of GenTek Inc. on Form 8-K (File
No. 001-14789) filed with the Securities and Exchange Commission on September 3,
1999.
3.1 -- Amended and Restated Certificate of Incorporation of the Company. Incorporated by
reference to the relevant exhibit to the 1999 GenTek Form 10.
3.2 -- Amended and Restated By-Laws of the Company. Incorporated by reference to the
relevant exhibit to the 1999 GenTek Form 10.
*3.3 -- Certificate of Incorporation of General Chemical Corporation.
*3.4 -- Bylaws of General Chemical Corporation.
*3.5 -- Certificate of Incorporation of Toledo Technologies Inc.
II-3
EXHIBIT NO. DESCRIPTION
- ----------- -----------
*3.6 -- Bylaws of Toledo Technologies Inc.
*3.7 -- Certificate of Incorporation of Printing Developments
Inc.
*3.8 -- Bylaws of Printing Developments Inc.
*3.9 -- Certificate of Incorporation of Balcrank Products Inc.
*3.10 -- Bylaws of Balcrank Products Inc.
*3.11 -- Certificate of Incorporation of HMC Patents Holding
Company Inc.
*3.12 -- Bylaws of HMC Patents Holding Company Inc.
*3.13 -- Certificate of Incorporation of Waterside Urban Renewal
Corporation.
*3.14 -- Bylaws of Waterside Urban Renewal Corporation.
*3.15 -- Certificate of Incorporation of Reheis Inc.
*3.16 -- Bylaws of Reheis Inc.
*3.17 -- Certificate of Incorporation of Defiance, Inc.
*3.18 -- Bylaws of Defiance, Inc.
*3.19 -- Articles of Incorporation of Binderline Draftline,
Inc.
*3.20 -- Bylaws of Binderline Draftline, Inc.
*3.21 -- Articles of Incorporation of Defiance Precision
Products, Inc.
*3.22 -- Bylaws of Defiance Precision Products, Inc.
*3.23 -- Articles of Incorporation of Hy-Form Products, Inc.
*3.24 -- Bylaws of Hy-Form Products, Inc.
*3.25 -- Articles of Incorporation of Defiance Testing and
Engineering Services, Inc.
*3.26 -- Bylaws of Defiance Testing and Engineering Services, Inc.
*3.27 -- Certificate of Incorporation of Noma Corporation.
*3.28 -- Bylaws of Noma Corporation.
*3.29 -- Certificate of Incorporation of PCT Mexico Corporation.
*3.30 -- Bylaws of PCT Mexico Corporation.
*3.31 -- Certificate of Incorporation of Noma O.P. Inc.
*3.32 -- Bylaws of Noma O.P. Inc.
*3.33 -- Certificate of Incorporation of Electronic Interconnect
Systems Inc.
*3.34 -- Bylaws of Electronic Interconnect Systems Inc.
*3.35 -- Certificate of Incorporation of Defiance Kinematics Inc.
*3.36 -- Certificate of Incorporation of HN Investment Holdings
Inc.
*3.37 -- Bylaws of HN Investment Holdings Inc.
*3.38 -- Certificate of Incorporation of PPI Holdings,
Inc.
*3.39 -- Bylaws of PPI Holdings, Inc.
4.1 -- Indenture, dated as of August 9, 1999, between the
Company and U.S. National Trust Association, as Trustee.
Incorporated by reference to the relevant exhibit to
GenTek Inc.'s 10-Q for the nine months ended
September 30, 1999 filed with the Securities and Exchange
Commission on November 15, 1999 (the 'GenTek Third Quarter
1999 10-Q').
4.2 -- Exchange and Registration Rights Agreement, dated as of
August 9, 1999, among the Company, Chase Securities Inc.,
Wasserstein Perella Securities, Inc. and First Union
Capital Markets Corporation. Incorporated by reference to
the relevant exhibit to the GenTek Third Quarter 1999
10-Q.
5.1 -- Opinion of Debevoise & Plimpton.
10.01 -- GenTek Inc. Restricted Unit Plan for Non-Employee
Directors. Incorporated by reference to the relevant
exhibit to the 1999 GenTek Form 10.
10.02 -- GenTek Inc. Retirement Plan for Non-Employee Directors.
Incorporated by reference to the relevant exhibit to the
1999 GenTek Form 10.
10.03 -- GenTek Inc. Performance Plan. Incorporated by reference
to the relevant exhibit to the 1999 GenTek Form 10.
10.04 -- GenTek Inc. Long-Term Incentive Plan. Incorporated by
reference to the relevant exhibit to the 1999 GenTek
Form 10.
10.05 -- Employee Benefits Agreement among The General Chemical
Group Inc., General Chemical Industrial Products Inc. and
General Chemical Corporation. Incorporated by reference to
the relevant exhibit to the 1999 GenTek Form 10.
II-4
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.06 -- Tax Sharing Agreement between GenTek Inc. and The General
Chemical Group Inc. Incorporated by reference to the
relevant exhibit to the 1999 GenTek Form 10.
10.07 -- Intellectual Property Agreement among General Chemical
Corporation, The General Chemical Group Inc., GenTek Inc.
and General Chemical Industrial Products Inc. Incorporated
by reference to the relevant exhibit to the 1999 GenTek
Form 10.
10.08 -- Management Agreement between GenTek Inc. and Latona
Associates Inc. Incorporated by reference to the relevant
exhibit to the 1999 GenTek Form 10.
10.09 -- Registration Rights Agreement between Paul M. Montrone
and the General Chemical Group Inc., as assumed by GenTek
Inc. with respect to Common Stock of GenTek Inc.
Incorporated by reference to the relevant exhibit to the
1999 GenTek Form 10.
10.10 -- Credit Agreement, dated as of April 30, 1999, among the
Company, Noma Acquisition Corp., the several Lenders from
time to time parties thereto, The Chase Manhattan Bank, as
Administrative Agent, The Bank of Nova Scotia, as
Syndication Agent, and Bankers Trust Company as
Documentation Agent. Incorporated by reference to the
relevant exhibit to GenTek Inc.'s 10-Q for the three
months ended March 31, 1999 filed with the Securities and
Exchange Commission on May 17, 1999 (the 'GenTek First
Quarter 1999 10-Q').
10.11 -- Guarantee and Pledge Agreement, dated as of April 30,
1999, made by the Company and certain of its subsidiaries
in favor of the Chase Manhattan Bank, as Administrative
Agent. Incorporated by reference to the relevant exhibit
to the GenTek First Quarter 1999 10-Q.
12.1 -- Computations of Ratio of Earnings to Fixed Charges.
21.1 -- Subsidiaries of the Company.
23.1 -- Consent of Deloitte & Touche LLP.
23.2 -- Consent of Deloitte & Touche LLP, Chartered Accountants.
23.3 -- Consent of Deloitte & Touche GmbH.
23.4 -- Consent of Debevoise & Plimpton. Included in Exhibit 5.1
hereto.
24.1 -- Powers of Attorney.
*25.1 -- Statement of Eligibility and Qualification Under the
Trust Indenture Act (Form T-1) of Exchange Agent.
*99.1 -- Form of Letter of Transmittal used in connection with the
Exchange Offer.
*99.2 -- Notice of Guaranteed Delivery used in connection with the
Exchange Offer.
- ------------
* To be filed by amendment.
(b) FINANCIAL STATEMENT SCHEDULES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
BALANCE AT ADDITIONS
BEGINNING OF CHARGED DEDUCTIONS BALANCE AT
PERIOD TO INCOME FROM RESERVES END OF PERIOD
------------ --------- ------------- -------------
Year ended December 31, 1996
Allowance for doubtful accounts............ $3,652 $ 55 $(288) $3,419
Year ended December 31, 1997
Allowance for doubtful accounts............ $3,419 $134 $-- $3,553
Year ended December 31, 1998
Allowance for doubtful accounts............ $3,553 $584 $(411) $3,726
II-5
BALANCE AT ADDITIONS
BEGINNING OF CHARGED DEDUCTIONS BALANCE AT
PERIOD TO INCOME FROM RESERVES END OF PERIOD
------------ --------- ------------- -------------
Year ended December 31, 1996
Environmental Liabilities.................. $16,628 $ 6,771 $(7,080) $16,319
Year ended December 31, 1997
Environmental Liabilities.................. $16,319 $ 5,546 $(5,621) $16,244
Year ended December 31, 1998
Environmental Liabilities.................. $16,244 $10,674 $(6,802) $20,116
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
GenTek's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrants pursuant to the foregoing provisions, or otherwise,
the Registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrants of expenses incurred or paid by a director, officer
or controlling person of the Registrants in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrants will,
unless in the opinion of their counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
(c) The undersigned Registrants hereby undertake to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
(d) The undersigned Registrants hereby undertake to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement. Notwithstanding
the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not
exceed that which is registered) and any deviation from
II-6
the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20 percent change in the maximum
aggregate offering price set forth in the `Calculation of
Registration Fee' table in the effective registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement; provided, however, that paragraphs (a)(1)(i)
and (a)(1)(ii) do not apply if the registration statement is on Form
S-3, Form S-8 or Form F-3, and the information required to be
included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in
the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
II-7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, GenTek Inc.
has caused this Registration Statement on Form S-4 to be signed on its behalf by
the undersigned, thereunto duly authorized, on the 17th day of November, 1999.
GENTEK INC.
By: *
...................................
NAME: RICHARD R. RUSSELL
TITLE: PRESIDENT AND CHIEF EXECUTIVE
OFFICER
Pursuant to the requirements of this Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
PRINCIPAL EXECUTIVE OFFICER:
* President and Chief Executive Officer November 17, 1999
..........................................
RICHARD R. RUSSELL
PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER:
* Vice President, Chief Financial Officer and November 17, 1999
.......................................... Treasurer
WILLIAM C. KEIGHTLEY
DIRECTORS:
* Chairman and Director November 17, 1999
..........................................
PAUL M. MONTRONE
* Vice Chairman and Director November 17, 1999
..........................................
PAUL M. MEISTER
* Director November 17, 1999
..........................................
RICHARD R. RUSSELL
* Director November 17, 1999
..........................................
JOHN W. GILDEA
* Director November 17, 1999
..........................................
SCOTT M. SPERLING
* Director November 17, 1999
..........................................
IRA STEPANIAN
* Director November 17, 1999
..........................................
BRUCE KOEPFGEN
*By: /S/ MICHAEL R. HERMAN
..........................................
MICHAEL R. HERMAN
ATTORNEY-IN-FACT
II-8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, General
Chemical Corporation has caused this Registration Statement on Form S-4 to be
signed on its behalf by the undersigned, thereunto duly authorized, on the 17th
day of November, 1999.
GENERAL CHEMICAL CORPORATION
By: *
...................................
NAME: RICHARD R. RUSSELL
TITLE: PRESIDENT AND CHIEF EXECUTIVE
OFFICER
Pursuant to the requirements of this Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
PRINCIPAL EXECUTIVE OFFICER:
* President and Chief Executive Officer November 17, 1999
..........................................
RICHARD R. RUSSELL
PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER:
* Vice President, Chief Financial Officer and November 17, 1999
.......................................... Treasurer
WILLIAM C. KEIGHTLEY
DIRECTORS:
* Director November 17, 1999
..........................................
WILLIAM C. KEIGHTLEY
* Chairman and Director November 17, 1999
..........................................
RICHARD R. RUSSELL
*By: /S/ MICHAEL R. HERMAN
..........................................
MICHAEL R. HERMAN
ATTORNEY-IN-FACT
II-9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Toledo
Technologies Inc. has caused this Registration Statement on Form S-4 to be
signed on its behalf by the undersigned, thereunto duly authorized, on the 17th
day of November, 1999.
TOLEDO TECHNOLOGIES INC.
By: *
...................................
NAME: RALPH M. PASSINO
TITLE: CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of this Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
PRINCIPAL EXECUTIVE OFFICER:
* Chief Executive Officer November 17, 1999
..........................................
RALPH M. PASSINO
PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER:
* President November 17, 1999
..........................................
PAUL KESSLER
DIRECTORS:
* Director November 17, 1999
..........................................
WILLIAM C. KEIGHTLEY
* Director November 17, 1999
..........................................
RICHARD R. RUSSELL
*By: /S/ MICHAEL R. HERMAN
..........................................
MICHAEL R. HERMAN
ATTORNEY-IN-FACT
II-10
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Printing
Developments Inc. has caused this Registration Statement on Form S-4 to be
signed on its behalf by the undersigned, thereunto duly authorized, on the 17th
day of November, 1999.
PRINTING DEVELOPMENTS INC.
By: *
...................................
NAME: JAMES N. TANIS
TITLE: CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of this Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
PRINCIPAL EXECUTIVE OFFICER:
* Chief Executive Officer November 17, 1999
..........................................
JAMES N. TANIS
PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER:
* Vice President and Treasurer November 17, 1999
..........................................
WILLIAM C. KEIGHTLEY
DIRECTORS
* Director November 17, 1999
..........................................
RICHARD R. RUSSELL
* Director November 17, 1999
..........................................
WILLIAM C. KEIGHTLEY
*By: /S/ MICHAEL R. HERMAN
..........................................
MICHAEL R. HERMAN
ATTORNEY-IN-FACT
II-11
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Balcrank
Products Inc. has caused this Registration Statement on Form S-4 to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 17th day of
November, 1999.
BALCRANK PRODUCTS INC.
By: *
...................................
NAME: RALPH M. PASSINO
TITLE: PRESIDENT
Pursuant to the requirements of this Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
PRINCIPAL EXECUTIVE OFFICER:
* President November 17, 1999
..........................................
RALPH M. PASSINO
PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER:
* Vice President and Treasurer November 17, 1999
..........................................
WILLIAM C. KEIGHTLEY
DIRECTORS:
* Director November 17, 1999
..........................................
RICHARD R. RUSSELL
* Director November 17, 1999
..........................................
WILLIAM C. KEIGHTLEY
*By: /S/ MICHAEL R. HERMAN
..........................................
MICHAEL R. HERMAN
ATTORNEY-IN-FACT
II-12
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, HMC Patents
Holding Company Inc. has caused this Registration Statement on Form S-4 to be
signed on its behalf by the undersigned, thereunto duly authorized, on the 17th
day of November, 1999.
HMC PATENTS HOLDING COMPANY INC.
By: *
...................................
NAME: RICHARD R. RUSSELL
TITLE: PRESIDENT AND CHIEF EXECUTIVE
OFFICER
Pursuant to the requirements of this Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
PRINCIPAL EXECUTIVE OFFICER:
* President November 17, 1999
..........................................
RICHARD R. RUSSELL
PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER:
* Vice President and Treasurer November 17, 1999
..........................................
WILLIAM C. KEIGHTLEY
DIRECTORS:
* Director November 17, 1999
..........................................
RICHARD R. RUSSELL
* Director November 17, 1999
..........................................
WILLIAM C. KEIGHTLEY
*By: /S/ MICHAEL R. HERMAN
..........................................
MICHAEL R. HERMAN
ATTORNEY-IN-FACT
II-13
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Waterside
Urban Renewal Corporation has caused this Registration Statement on Form S-4
to be signed on its behalf by the undersigned, thereunto duly authorized, on the
17th day of November, 1999.
WATERSIDE URBAN RENEWAL CORPORATION
By: *
...................................
NAME: JAMES N. TANIS
TITLE: PRESIDENT
Pursuant to the requirements of this Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
PRINCIPAL EXECUTIVE OFFICER:
* President November 17, 1999
..........................................
JAMES N. TANIS
PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER:
* Vice President, Finance November 17, 1999
..........................................
MATTHEW WALSH
DIRECTORS:
* Director November 17, 1999
..........................................
RICHARD R. RUSSELL
* Director November 17, 1999
..........................................
WILLIAM C. KEIGHTLEY
*By: /S/ MICHAEL R. HERMAN
..........................................
MICHAEL R. HERMAN
ATTORNEY-IN-FACT
II-14
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Reheis Inc.
has caused this Registration Statement on Form S-4 to be signed on its behalf by
the undersigned, thereunto duly authorized, on the 17th day of November, 1999.
REHEIS INC.
By: *
...................................
NAME: JAMES N. TANIS
TITLE: CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of this Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
PRINCIPAL EXECUTIVE OFFICER:
* Chief Executive Officer November 17, 1999
..........................................
JAMES N. TANIS
PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER:
* Vice President and Treasurer November 17, 1999
..........................................
WILLIAM C. KEIGHTLEY
DIRECTORS:
* Director November 17, 1999
..........................................
RICHARD R. RUSSELL
* Director November 17, 1999
..........................................
WILLIAM C. KEIGHTLEY
*By: /S/ MICHAEL R. HERMAN
..........................................
MICHAEL R. HERMAN
ATTORNEY-IN-FACT
II-15
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Defiance,
Inc. has caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, on the 17th day of
November, 1999.
DEFIANCE, INC.
By: *
...................................
NAME: RALPH M. PASSINO
TITLE: PRESIDENT AND CHIEF EXECUTIVE
OFFICER
Pursuant to the requirements of this Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
PRINCIPAL EXECUTIVE OFFICER
* President and Chief Executive Officer November 17, 1999
..........................................
RALPH M. PASSINO
PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER:
* Vice President, Chief Financial Officer and November 17, 1999
.......................................... Treasurer
WILLIAM C. KEIGHTLEY
DIRECTORS:
* Director November 17, 1999
..........................................
PAUL M. MEISTER
* Director November 17, 1999
..........................................
TODD M. DUCHENE
*By: /S/ MICHAEL R. HERMAN
..........................................
MICHAEL R. HERMAN
ATTORNEY-IN-FACT
II-16
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Binderline
Draftline, Inc. has caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 17th day of
November, 1999.
BINDERLINE DRAFTLINE, INC.
By: *
...................................
NAME: RALPH M. PASSINO
TITLE: CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of this Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
PRINCIPAL EXECUTIVE OFFICER:
* Chief Executive Officer November 17, 1999
..........................................
RALPH M. PASSINO
PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER:
* Vice President and Treasurer November 17, 1999
..........................................
WILLIAM C. KEIGHTLEY
DIRECTORS:
* Director November 17, 1999
..........................................
RICHARD R. RUSSELL
* Director November 17, 1999
..........................................
WILLIAM C. KEIGHTLEY
*By: /S/ MICHAEL R. HERMAN
..........................................
MICHAEL R. HERMAN
ATTORNEY-IN-FACT
II-17
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Defiance
Precision Products, Inc. has caused this Registration Statement on Form S-4 to
be signed on its behalf by the undersigned, thereunto duly authorized, on the
17th day of November, 1999.
DEFIANCE PRECISION PRODUCTS, INC.
By: *
...................................
NAME: RALPH M. PASSINO
TITLE: CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of this Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
PRINCIPAL EXECUTIVE OFFICER:
* Chief Executive Officer November 17, 1999
..........................................
RALPH M. PASSINO
PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER:
* Vice President and Treasurer November 17, 1999
..........................................
WILLIAM C. KEIGHTLEY
DIRECTORS:
* Director November 17, 1999
..........................................
RICHARD R. RUSSELL
* Director November 17, 1999
..........................................
WILLIAM C. KEIGHTLEY
*By: /S/ MICHAEL R. HERMAN
..........................................
MICHAEL R. HERMAN
ATTORNEY-IN-FACT
II-18
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Hy-Form
Products, Inc. has caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 17th day of
November, 1999.
HY-FORM PRODUCTS, INC.
By: *
...................................
NAME: RALPH M. PASSINO
TITLE: PRESIDENT AND CHIEF EXECUTIVE
OFFICER
Pursuant to the requirements of this Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
PRINCIPAL EXECUTIVE OFFICER:
* President and Chief Executive Officer November 17, 1999
..........................................
RALPH M. PASSINO
PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER:
* Vice President and Treasurer November 17, 1999
..........................................
WILLIAM C. KEIGHTLEY
DIRECTORS:
* Director November 17, 1999
..........................................
RICHARD R. RUSSELL
* Director November 17, 1999
..........................................
WILLIAM C. KEIGHTLEY
*By: /S/ MICHAEL R. HERMAN
..........................................
MICHAEL R. HERMAN
ATTORNEY-IN-FACT
II-19
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Defiance
Testing and Engineering Services, Inc. has caused this Registration Statement on
Form S-4 to be signed on its behalf by the undersigned, thereunto duly
authorized, on the 17th day of November, 1999.
DEFIANCE TESTING AND ENGINEERING
SERVICES, INC.
By: *
...................................
NAME: RALPH M. PASSINO
TITLE: CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of this Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
PRINCIPAL EXECUTIVE OFFICER:
* Chief Executive Officer November 17, 1999
..........................................
RALPH M. PASSINO
PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER:
* Vice President and Treasurer November 17, 1999
..........................................
WILLIAM C. KEIGHTLEY
DIRECTORS:
* Director November 17, 1999
..........................................
RICHARD R. RUSSELL
* Director November 17, 1999
..........................................
WILLIAM C. KEIGHTLEY
*By: /S/ MICHAEL R. HERMAN
..........................................
MICHAEL R. HERMAN
ATTORNEY-IN-FACT
II-20
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Noma
Corporation has caused this Registration Statement on Form S-4 to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 17th day of
November, 1999.
NOMA CORPORATION
By: *
...................................
NAME: BODO B. KLINK
TITLE: PRESIDENT AND SECRETARY
Pursuant to the requirements of this Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
PRINCIPAL EXECUTIVE OFFICER:
* President and Secretary November 17, 1999
..........................................
BODO B. KLINK
PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER:
* President and Secretary November 17, 1999
..........................................
BODO B. KLINK
DIRECTORS:
* Director November 17, 1999
..........................................
BODO B. KLINK
* Director November 17, 1999
..........................................
WILLIAM C. KEIGHTLEY
*By: /S/ MICHAEL R. HERMAN
..........................................
MICHAEL R. HERMAN
ATTORNEY-IN-FACT
II-21
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, PCT Mexico
Corporation has caused this Registration Statement on Form S-4 to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 17th day of
November, 1999.
PCT MEXICO CORPORATION
By: *
...................................
NAME: BODO B. KLINK
TITLE: PRESIDENT
Pursuant to the requirements of this Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
PRINCIPAL EXECUTIVE OFFICER:
* President November 17, 1999
..........................................
BODO B. KLINK
PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER:
* Vice President and Treasurer November 17, 1999
..........................................
WILLIAM C. KEIGHTLEY
DIRECTORS:
* Director November 17, 1999
..........................................
RICHARD R. RUSSELL
* Director November 17, 1999
..........................................
WILLIAM C. KEIGHTLEY
*By: /S/ MICHAEL R. HERMAN
..........................................
MICHAEL R. HERMAN
ATTORNEY-IN-FACT
II-22
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Noma O.P.
Inc. has caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, on the 17th day of
November, 1999.
NOMA O.P. INC.
By: *
...................................
NAME: BODO B. KLINK
TITLE: VICE PRESIDENT AND SECRETARY
Pursuant to the requirements of this Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
PRINCIPAL EXECUTIVE OFFICER AMD ACCOUNTING
OFFICER:
* Vice President and Secretary November 17, 1999
..........................................
BODO B. KLINK
DIRECTORS:
* Director November 17, 1999
..........................................
BODO B. KLINK
* Director November 17, 1999
..........................................
WILLIAM C. KEIGHTLEY
/S/ MICHAEL R. HERMAN
*By ......................................
MICHAEL R. HERMAN
ATTORNEY-IN-FACT
II-23
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Electronic
Interconnect Systems Inc. has caused this Registration Statement on Form S-4 to
be signed on its behalf by the undersigned, thereunto duly authorized, on the
17th day of November, 1999.
ELECTRONIC INTERCONNECT SYSTEMS INC.
By: *
...................................
NAME: BODO B. KLINK
TITLE: VICE PRESIDENT AND SECRETARY
Pursuant to the requirements of this Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
PRINCIPAL EXECUTIVE OFFICER:
* Vice President and Secretary November 17, 1999
..........................................
BODO B. KLINK
PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER:
* Vice President, Finance November 17, 1999
..........................................
GRANT CRANDALL
DIRECTORS:
* Director November 17, 1999
..........................................
BODO B. KLINK
* Director November 17, 1999
..........................................
WILLIAM C. KEIGHTLEY
*By: /S/ MICHAEL R. HERMAN
..........................................
MICHAEL R. HERMAN
ATTORNEY-IN-FACT
II-24
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Defiance
Kinematics Inc. has caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 17th day of
November, 1999.
DEFIANCE KINEMATICS INC.
By: *
...................................
NAME:
TITLE:
Pursuant to the requirements of this Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
PRINCIPAL EXECUTIVE OFFICER:
* Chief Executive Officer November 17, 1999
..........................................
RALPH M. PASSINO
PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER:
* Vice President and Treasurer November 17, 1999
..........................................
WILLIAM C. KEIGHTLEY
DIRECTORS:
* Director November 17, 1999
..........................................
RICHARD R. RUSSELL
* Director November 17, 1999
..........................................
WILLIAM C. KEIGHTLEY
*By: /S/ MICHAEL R. HERMAN
..........................................
MICHAEL R. HERMAN
ATTORNEY-IN-FACT
II-25
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, HN
Investment Holdings Inc. has caused this Registration Statement on Form S-4 to
be signed on its behalf by the undersigned, thereunto duly authorized, on the
17th day of November, 1999.
HN INVESTMENT HOLDINGS INC.
By: *
...................................
NAME: TODD M. DUCHENE
TITLE: VICE PRESIDENT
Pursuant to the requirements of this Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
PRINCIPAL EXECUTIVE OFFICER:
* Vice President November 17, 1999
..........................................
TODD M. DUCHENE
PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER:
* Vice President November 17, 1999
..........................................
PAUL M. MEISTER
DIRECTORS:
* Director November 17, 1999
..........................................
TODD M. DUCHENE
* Director November 17, 1999
..........................................
PAUL M. MEISTER
*By: /S/ MICHAEL R. HERMAN
..........................................
MICHAEL R. HERMAN
ATTORNEY-IN-FACT
II-26
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, PPI
Holdings, Inc. has caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 17th day of
November, 1999.
PPI HOLDINGS, INC.
By: *
...................................
NAME: JAMES N. TANIS
TITLE: CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of this Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
PRINCIPAL EXECUTIVE OFFICER:
* Chief Executive Officer November 17, 1999
..........................................
JAMES N. TANIS
PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER:
* Vice President and Treasurer November 17, 1999
..........................................
WILLIAM C. KEIGHTLEY
DIRECTORS:
* Director November 17, 1999
..........................................
RICHARD R. RUSSELL
* Director November 17, 1999
..........................................
WILLIAM C. KEIGHTLEY
*By: /S/ MICHAEL R. HERMAN
..........................................
MICHAEL R. HERMAN
ATTORNEY-IN-FACT
II-27
EXHIBIT INDEX
EXHIBIT PAGE
NO. NUMBER
--- ------
2.1 Amendment No. 2 to Form 10 of GenTek Inc. for registration
of Securities of GenTek Inc. Incorporated by reference to
GenTek Inc.'s Registration Statement Amendment No. 2 on
Form 10 (File No. 001-14789) filed with the Securities and
Exchange Commission on April 8, 1999 (the '1999 GenTek
Form 10').................................................
2.2 Separation Agreement among the Company, GenTek Inc., The
General Chemical Group Inc. and General Chemical
Corporation. Incorporated by reference to the relevant
exhibit to the 1999 GenTek Form 10........................
2.3 Stock Purchase Agreement, dated 12, 1999, between Jenoptik
AG and GenTek Inc. Incorporated by reference to the
Current Report of GenTek Inc. on Form 8-K (File
No. 001-14789) filed with the Securities and Exchange
Commission on September 3, 1999...........................
3.1 Amended and Restated Certificate of Incorporation of the
Company. Incorporated by reference to the relevant exhibit
to the 1999 GenTek Form 10................................
3.2 Amended and Restated By-Laws of the Company. Incorporated by
reference to the relevant exhibit to the 1999 GenTek
Form 10...................................................
*3.3 Certificate of Incorporation of General Chemical
Corporation...............................................
*3.4 Bylaws of General Chemical Corporation......................
*3.5 Certificate of Incorporation of Toledo Technologies Inc.....
*3.6 Bylaws of Toledo Technologies Inc...........................
*3.7 Certificate of Incorporation of Printing Developments
Inc.......................................................
*3.8 Bylaws of Printing Developments Inc.........................
*3.9 Certificate of Incorporation of Balcrank Products Inc.......
*3.10 Bylaws of Balcrank Products Inc.............................
*3.11 Certificate of Incorporation of HMC Patents Holding Company
Inc.......................................................
*3.12 Bylaws of HMC Patents Holding Company Inc...................
*3.13 Certificate of Incorporation of Waterside Urban Renewal
Corporation................................................
*3.14 Bylaws of Waterside Urban Renewal Corporation................
*3.15 Certificate of Incorporation of Reheis Inc..................
*3.16 Bylaws of Reheis Inc........................................
*3.17 Certificate of Incorporation of Defiance, Inc...............
*3.18 Bylaws of Defiance, Inc.....................................
*3.19 Articles of Incorporation of Binderline Draftline,
Inc.......................................................
*3.20 Bylaws of Binderline Draftline, Inc.........................
*3.21 Articles of Incorporation of Defiance Precision Products,
Inc.......................................................
*3.22 Bylaws of Defiance Precision Products, Inc..................
*3.23 Articles of Incorporation of Hy-Form Products, Inc.......
*3.24 Bylaws of Hy-Form Products, Inc.............................
*3.25 Articles of Incorporation of Defiance Testing and
Engineering Services, Inc.................................
*3.26 Bylaws of Defiance Testing and Engineering Services, Inc....
*3.27 Certificate of Incorporation of Noma Corporation............
*3.28 Bylaws of Noma Corporation..................................
*3.29 Certificate of Incorporation of PCT Mexico Corporation......
*3.30 Bylaws of PCT Mexico Corporation............................
*3.31 Certificate of Incorporation of Noma O.P. Inc...............
*3.32 Bylaws of Noma O.P. Inc.....................................
*3.33 Certificate of Incorporation of Electronic Interconnect
Systems Inc...............................................
*3.34 Bylaws of Electronic Interconnect Systems Inc...............
*3.35 Certificate of Incorporation of Defiance Kinematics Inc.....
*3.36 Certificate of Incorporation of HN Investment Holdings
Inc.......................................................
*3.37 Bylaws of HN Investment Holdings Inc........................
*3.38 Certificate of Incorporation of PPI Holdings, Inc...........
*3.39 Bylaws of PPI Holdings, Inc.................................
EXHIBIT PAGE
NO. NUMBER
--- ------
4.1 Indenture, dated as of August 9, 1999, between the Company
and U.S. National Trust Association, as Trustee.
Incorporated by reference to the relevant exhibit to
GenTek Inc.'s 10-Q for the nine months ended
September 30, 1999 filed with the Securities and Exchange
Commission on November 15, 1999 (the 'GenTek Third Quarter
1999 10-Q')...............................................
4.2 Exchange and Registration Rights Agreement, dated as of
August 9, 1999, among the Company, Chase Securities Inc.,
Wasserstein Perella Securities, Inc. and First Union
Capital Markets Corporation. Incorporated by reference to
the relevant exhibit to the GenTek Third Quarter 1999
10-Q......................................................
5.1 Opinion of Debevoise & Plimpton.............................
10.01 GenTek Inc. Restricted Unit Plan for Non-Employee Directors.
Incorporated by reference to the relevant exhibit to the
1999 GenTek Form 10.......................................
10.02 GenTek Inc. Retirement Plan for Non-Employee Directors.
Incorporated by reference to the relevant exhibit to the
1999 GenTek Form 10.......................................
10.03 GenTek Inc. Performance Plan. Incorporated by reference to
the relevant exhibit to the 1999 GenTek Form 10...........
10.04 GenTek Inc. Long-Term Incentive Plan. Incorporated by
reference to the relevant exhibit to the 1999 GenTek
Form 10...................................................
10.05 Employee Benefits Agreement among The General Chemical Group
Inc., General Chemical Industrial Products Inc. and
General Chemical Corporation. Incorporated by reference to
the relevant exhibit to the 1999 GenTek Form 10...........
10.06 Tax Sharing Agreement between GenTek Inc. and The General
Chemical Group Inc. Incorporated by reference to the
relevant exhibit to the 1999 GenTek Form 10...............
10.07 Intellectual Property Agreement among General Chemical
Corporation, The General Chemical Group Inc., GenTek Inc.
and General Chemical Industrial Products Inc. Incorporated
by reference to the relevant exhibit to the 1999 GenTek
Form 10...................................................
10.08 Management Agreement between GenTek Inc. and Latona
Associates Inc. Incorporated by reference to the relevant
exhibit to the 1999 GenTek Form 10........................
10.09 Registration Rights Agreement between Paul M. Montrone and
the General Chemical Group Inc., as assumed by GenTek Inc.
with respect to Common Stock of GenTek Inc. Incorporated
by reference to the relevant exhibit to the 1999 GenTek
Form 10...................................................
10.10 Credit Agreement, dated as of April 30, 1999, among the
Company, Noma Acquisition Corp., the several Lenders from
time to time parties thereto, The Chase Manhattan Bank, as
Administrative Agent, The Bank of Nova Scotia, as
Syndication Agent, and Bankers Trust Company as
Documentation Agent. Incorporated by reference to the
relevant exhibit to GenTek Inc.'s 10-Q for the three
months ended March 31, 1999 filed with the Securities and
Exchange Commission on May 17, 1999 (the 'GenTek First
Quarter 1999 10-Q').......................................
10.11 Guarantee and Pledge Agreement, dated as of April 30, 1999,
made by the Company and certain of its subsidiaries in
favor of the Chase Manhattan Bank, as Administrative
Agent. Incorporated by reference to the relevant exhibit
to the GenTek First Quarter 1999 10-Q.....................
12.1 Computations of Ratio of Earnings to Fixed Charges..........
21.1 Subsidiaries of the Company.................................
23.1 Consent of Deloitte & Touche LLP............................
23.2 Consent of Deloitte & Touche LLP, Chartered Accountants.....
23.3 Consent of Deloitte & Touche GmbH...........................
23.4 Consent of Debevoise & Plimpton. Included in Exhibit 5.1
hereto....................................................
24.1 Powers of Attorney..........................................
*25.1 Statement of Eligibility and Qualification Under the Trust
Indenture Act (Form T-1) of Exchange Agent................
*99.1 Form of Letter of Transmittal used in connection with the
Exchange Offer............................................
*99.2 Notice of Guaranteed Delivery used in connection with the
Exchange Offer............................................
- ------------
* To be filed by amendment.
STATEMENT OF DIFFERENCES
------------------------
The trademark symbol shall be expressed as .......................... 'TM'
The registered trademark symbol shall be expressed as ............... 'r'