EX-99 3 ex99-1.txt EXHIBIT 99.1 GENERAL CHEMICAL INDUSTRIAL PRODUCTS INC. SENIOR SECURED CREDIT FACILITIES Summary of Terms and Conditions November 26, 2003 General Chemical Industrial Products Inc. (the "U.S. Borrower") and General Chemical Canada Ltd. (the "Canadian Borrower") intend to enter into a financial restructuring through a prearranged bankruptcy (the "Bankruptcy") of the U.S. Borrower, pursuant to which, among other things, (i) all of the U.S. Borrower's U.S.$100,000,000 10-5/8% Subordinated Notes ("GCIP Subordinated Notes") will be converted to common equity of the U.S. Borrower ("U.S. Borrower Common Shares") and (ii) outstanding loans in a principal amount of U.S.$45,000,000 under the Credit Agreement dated as of April 30, 1999, as amended on March 7, 2001 and January 23, 2002 (the "Existing Credit Agreement"), to which the U.S. Borrower and the Canadian Borrower are parties, will be reinstated and repaid as a term facility, with the remaining outstanding balance of the obligations under the Credit Agreement being converted to preferred equity of the U.S. Borrower ("U.S. Borrower Preferred Shares" and, together with the U.S. Borrower Common Shares, the "U.S. Borrower Shares"). It is anticipated that the credit agreements for the credit facilities described below will be substantially in the form of the Existing Credit Agreement, as modified to incorporate the following terms: I. Parties U.S. Borrower: General Chemical Industrial Products Inc. (the "U.S. Borrower"). Canadian Borrower: General Chemical Canada Limited (the "Canadian Borrower"; together with the U.S. Borrower, the "Borrowers"). Guarantors: The obligations of the Borrowers under the DIP Credit Facility, the Exit Facility and the Term Facility (as defined below) will be guaranteed by each of the U.S. Borrower's existing and future direct and indirect domestic subsidiaries, jointly and severally, other than General Chemical (Soda Ash) Partners ("Soda Ash") (the "Guarantors"). In addition: (i) the obligations of the Canadian Borrower under the DIP Credit Facility, the Exit Facility and the Term Facility (each as defined below) will be guaranteed by the U.S. Borrower, the Guarantors, General Chemical Canada Holding Inc., and the Canadian subsidiaries of the Canadian Borrower; (ii) except as otherwise provided in this term sheet, the obligations of the Canadian Borrower under the Exit Facility and the Term Facility will be guaranteed by the other direct and indirect foreign subsidiaries of the U.S. Borrower (all such guarantors of the obligations of the Canadian Borrower, collectively, the "Canadian Guarantors"; the Borrowers, the Guarantors and the Canadian Guarantors, collectively, the "Credit Parties"); and (iii) in the event that the lenders under the Existing Credit Agreement designate the U.S. Borrower as the borrower under the Term Facility, as described below, the obligations of the U.S. Borrower under the Term Facility will be guaranteed by the Canadian Borrower. Advisors and Arrangers: J.P. Morgan Securities Inc. ("J.P. Morgan") and The Bank of Nova Scotia ("Scotia" and, collectively with J.P. Morgan, in such capacity, the "Co-Arrangers"). Sole Book Runner and Lead Arranger: J.P. Morgan. U.S. Administrative Agent: JPMorgan Chase Bank ("JPMorgan Chase" and, in such capacity, the "U.S. Administrative Agent"). Canadian Administrative Agent: JPMorgan Chase Bank, Toronto Branch ("JPMorgan Canada" and, in such capacity, the "Canadian Administrative Agent"; together with the U.S. Administrative Agent, the "Administrative Agents"). Lenders: As described in connection with each Credit Facility (collectively, the "Lenders"). II. Type and Amount of Credit Facilities. A. DIP Credit Facility Type and Amount: Revolving credit facility (the "DIP Credit Facility" and, together with the Exit Facility and Term Facility, the "Credit Facilities") in the amount of U.S.$17,500,000, consisting of a facility for revolving loans available to the U.S. Borrower and the Canadian Borrower (the loans thereunder, the "DIP Revolving Loans"; together with the Exit Revolving Loans and the Term Loans, the "Loans") and a facility for letters of credit as described below. Except as described below with respect to the letters of credit, the maximum amount of the DIP Credit Facility available for DIP Revolving Loans shall be the lesser of (i) U.S.$15,000,000 or (ii) U.S.$17,500,000 minus the U.S. Dollar equivalent of the outstanding aggregate 2 face amount of the DIP Letters of Credit (as defined below). It is anticipated that the Canadian Borrower will not commence bankruptcy proceedings in the United States or Canada. The documentation for the DIP Credit Facility will contain provisions acceptable to the Administrative Agents and the Lenders to the effect that, if the Canadian Borrower subsequently commences bankruptcy proceedings, outstanding DIP Revolving Loans to the Canadian Borrower will be treated as if such loans had been extended to the Canadian Borrower after the commencement of its case. Collateral: The obligations of the Credit Parties which are debtors in the Bankruptcy in respect of the DIP Credit Facility shall be secured by a first super-priority priming lien pursuant to Section 364 of the Bankruptcy Code and by a superpriority administrative claim (subject to usual and customary carve outs for fees and expenses of Borrowers' professionals and the U.S. trustee and upon terms and conditions satisfactory to Lenders). The obligations of those Credit Parties which are not debtors in the Bankruptcy in respect of the DIP Credit Facility shall be secured by first priority security interests, charges or other liens in the Collateral described on Annex II, perfected under applicable non-bankruptcy law. Lenders: Not less than three of the lenders under the Existing Credit Agreement, on a pro rata basis (collectively, the "DIP Lenders"). Availability: The DIP Credit Facility shall be available on a revolving basis during the period commencing on the entry of the Interim Order (as defined in Annex II) and ending on the Final Maturity Date of the DIP Credit Facility; provided that any commitment issued for the DIP Credit Facility would expire on December 3, 2003 if the U.S. Borrower had not commenced the Bankruptcy by that date, or on December 8, 2003 if the Interim Order (as defined in Annex II) has not been entered by that date. Letters of Credit: A portion of the DIP Credit Facility not in excess of U.S.$4,000,000 (the "DIP L/C Subfacility") shall be available to the U.S. Borrower and the Canadian Borrower for the issuance of letters of credit (the "DIP Letters of Credit") by JPMorgan Chase and Scotia, respectively (each, in such capacity, an "Issuing Lender"). Letters of credit issued under the Existing Credit Agreement and remaining outstanding at the Closing Date (as defined below) for the DIP Credit Facility will be deemed to be DIP Letters of Credit issued 3 under the DIP L/C Subfacility without any further action by the Borrowers or Lenders. No portion of the DIP L/C Subfacility shall be available for DIP Revolving Loans except those made to reimburse drawings under DIP Letters of Credit. No DIP Letter of Credit shall have an expiration date later than 365 days after the date of issuance. If the Borrowers do not enter into the Exit Facility simultaneously with the consummation of the U.S. Borrower's plan of reorganization in the Bankruptcy (the "Plan"), then upon consummation of the Plan, each Borrower shall deliver to the applicable Administrative Agent cash collateral satisfactory to the Administrative Agents in an amount not less than 105% of the sum of the undrawn amount of outstanding DIP Letters of Credit issued for the account of such Borrower, plus all fees accrued and unpaid and to be accrued in respect of such DIP Letters of Credit, as security for such Borrower's obligations in respect of such DIP Letters of Credit. Drawings under any DIP Letter of Credit shall be reimbursed by the applicable Borrower (whether with its own funds or with the proceeds of DIP Revolving Loans) on the same business day. To the extent that the applicable Borrower does not so reimburse the applicable Issuing Lender, the relevant DIP Lenders under the DIP Credit Facility shall be irrevocably and unconditionally obligated to reimburse such Issuing Lender on a pro rata basis. Interest and Fees: As set forth on Annex I. Intercreditor Agreement: The DIP Lenders and the lenders under the Existing Credit Agreement will enter into an Intercreditor Agreement with respect to the collateral provided by the Credit Parties that are not debtors in the Bankruptcy, on terms satisfactory to the DIP Lenders and the lenders under the Existing Credit Agreement. Such terms shall include, without limitation, (i) subordination of security interests securing the Existing Credit Agreement to security interests securing the DIP Credit Facility, (ii) DIP Lenders to have exclusive authority with respect to enforcement of security interests and (iii) standstill and payment blockage provisions prohibiting payments on the obligations under the Existing Credit Facility from any non-debtor obligor. Cash Hoarding: Borrowers shall remit all cash held by them in excess of $2,000,000 to reduce the balance of DIP Revolving Loans (other than Letters of Credit) that are outstanding. 4 Final Maturity: The earlier of the confirmation of the Plan, or 180 days following the petition date, or 45 days after the entry of the Interim Order if the Final Order (as defined in Annex II) has not been entered. Purpose: The proceeds of the DIP Revolving Loans shall be used to finance the working capital needs of the U.S. Borrower and its subsidiaries in the ordinary course of business during the Bankruptcy, in accordance with the budget to be approved by the DIP Lenders. Other Terms: As set forth on Annex II. Location of U.S. Bankruptcy Filing: New Jersey. B. Exit Facility Type and Amount: Revolving credit facility (the "Exit Facility") in the amount of U.S.$17,500,000 consisting of a facility for revolving loans available to the U.S. Borrower and the Canadian Borrower (the loans thereunder, the "Exit Revolving Loans" and collectively with the Term Loans, the "Exit Loans") and a facility for letters of credit as described below. Except as described below with respect to the letters of credit, the maximum amount of the Exit Facility available for Exit Revolving Loans shall be the lesser of (i) U.S.$15,000,000 or (ii) U.S.$17,500,000 minus the U.S. Dollar equivalent of the outstanding aggregate face amount of the Exit Letters of Credit (as defined below). Collateral: The obligations of the Credit Parties in respect of the Exit Facility shall be secured as described in Annex II. Lenders: The DIP Lenders, and any lender under the Existing Credit Agreement that elects to be a Lender under the Exit Facility prior to the effective date of a plan of reorganization for the U.S. Borrower, on a pro rata basis (collectively, the "Exit Lenders"). Availability: The Exit Facility shall be available on a revolving basis during the period commencing on the consummation of the Plan and ending on November 30, 2006 (the "Exit Facility Termination Date"). 5 Letters of Credit: A portion of the Exit Facility not in excess of U.S.$4,000,000 (the "Exit L/C Subfacility") shall be available to the U.S. Borrower and the Canadian Borrower for the issuance of letters of credit (the "Exit Letters of Credit") by JPMorgan Chase and Scotia respectively (each, in such capacity, an "Exit Issuing Lender"). Outstanding DIP Letters of Credit will be continued under the Exit Facility as Exit Letters of Credit. No portion of the Exit L/C Subfacility shall be available for Exit Revolving Loans except those made to reimburse drawings under Exit Letters of Credit. No Exit Letter of Credit shall have an expiration date after the earlier of (a) 365 days after the date of issuance and (b) five business days prior to the Exit Facility Termination Date, provided that any Exit Letter of Credit with a one-year term may provide for the renewal thereof for additional one-year periods (which shall in no event extend beyond the date referred to in clause (b) above). Drawings under any Exit Letter of Credit shall be reimbursed by the applicable Borrower (whether with its own funds or with the proceeds of Exit Revolving Loans) on the same business day. To the extent that the applicable Borrower does not so reimburse the applicable Exit Issuing Lender, the relevant Exit Lenders under the Exit Facility shall be irrevocably and unconditionally obligated to reimburse such Exit Issuing Lender on a pro rata basis. Interest and Fees: As set forth on Annex I. Intercreditor Agreement: The Exit Lenders and Term Lenders will enter into an Intercreditor Agreement on terms satisfactory to the Exit Lenders and the Term Lenders. Such terms shall include, without limitation, (i) subordination of security interests securing the Term Facility to security interests securing the Exit Facility, (ii) Exit Lenders to have exclusive authority with respect to enforcement of security interests and (iii) standstill and payment blockage provisions limiting the Borrowers' ability to make principal and interest payments on the Term Facility upon the occurrence of an Event of Default. Cash Hoarding: To be negotiated by Borrowers and U.S. Administrative Agent. Final Maturity: November 30, 2006. Purpose: The proceeds of the Exit Revolving Loans shall be used to (i) repay all obligations under the DIP Facility and (ii) finance the 6 working capital needs of the U.S. Borrower and its subsidiaries in the ordinary course of business. Other Terms: As set forth on Annex II. C. Term Facility Type and Amount: U.S.$45,000,000 of the obligations outstanding under the Existing Credit Agreement (including accrued but unpaid interest(1) but excluding letters of credit) will be converted upon consummation of the Plan to a term loan facility (the "Term Facility") consisting of term loans in an aggregate original principal amount equal to U.S.$45,000,000 (the loans thereunder, the "Term Loans"). Prior to the hearing to approve the Disclosure Statement for the Plan, the lenders under the Existing Credit Agreement, in their sole discretion, will designate whether the Term Loans will be made to the Canadian Borrower or the U.S. Borrower. Collateral: The obligations of the Credit Parties in respect of the Term Facility shall be secured as described in Annex II. Lenders: The Lenders under the Existing Credit Agreement, on a pro rata basis (collectively, the "Term Lenders"). Interest and Fees: As set forth on Annex I. Final Maturity: November 30, 2006. Amortization: There shall be no scheduled amortization of the Term Loans prior to maturity. Preferred Stock: Upon the consummation of the Plan, the outstanding obligations under the Existing Credit Agreement (including accrued but unpaid interest but excluding letters of credit) in excess of $45,000,000 (the "Converted Lender Claims") will be converted into U.S. Borrower Preferred Shares as provided in Part III below. The Converted Lender Claims will include all of the obligations of the U.S. Borrower under the Existing Credit Agreement; the balance of the Converted Lender Claims shall consist of obligations of the Canadian Borrower under the Existing Credit Agreement. Other Terms: As set forth on Annex II. -------- (1) The Lenders under the Existing Credit Agreement will not receive payment of interest on the obligations under the Existing Credit Agreement during the Bankruptcy. 7 III. Issuance of Preferred Shares to Lenders Preferred Stock: Upon the consummation of the Plan, the U.S. Borrower will issue to the Lenders or their designated affiliates U.S. Borrower Preferred Shares (the "Lender Shares") representing 68%(2) of the aggregate outstanding U.S. Borrower Common Shares assuming full conversion of the U.S. Borrower Preferred Shares as provided below (subject to dilution for shares designated for management incentive purposes as described below and for the shares issued upon exercise of the Warrants (as defined below) issued to the Noteholders (as defined below) as described below), in consideration for the provision of the Exit Loans and for the conversion of Converted Lender Claims. The Lender Shares shall be allocated among the Lenders as follows: on the effective date of a plan of reorganization of the U.S. Borrower, 70% of the Lenders Shares will be retained by the Term Lenders, and 30% of the Lenders Shares will be turned over (or the U.S. Borrower will effectuate such turnover through its plan of reorganization) from the Term Lenders to the Exit Lenders, in proportion to the commitments of each Exit Lender under the Exit Facility. Each share of U.S. Borrower Preferred Shares shall be convertible at any time at the option of the holder into one share of U.S. Borrower Common Shares. The U.S. Borrower Preferred Shares shall be voting shares, entitled to one vote per share on all matters. (Provision may be made to issue warrants to purchase U.S. Borrower Preferred Shares to any Lender that so elects. In the event that warrants to purchase U.S. Borrower Preferred Shares are issued, the votes per share to which the issued and outstanding shares of U.S. Borrower Preferred Shares are entitled shall be adjusted so that the holders of such shares have the same voting power that would have been held by the holders of U.S. Borrower Preferred Shares if all such shares were issued upon consummation of the Plan.) If a voluntary or involuntary bankruptcy of the U.S. Borrower occurs, each of the U.S. Borrower Preferred Shares shall be entitled to a liquidation preference equal to the Converted Lender Claims divided by the number of outstanding U.S. Borrower Preferred Shares. The U.S. Borrower Preferred ------------ (2) For purposes of this Term Sheet, except as otherwise specified, references to percentages of U.S. Borrower Shares do not give effect to shares issued to pre-petition shareholders, which as now anticipated would represent one-half of one percent or less of the outstanding U.S. Borrower Shares, subject to adjustment for shares issued for management incentive purposes as described below and for the shares issued upon conversion of the Warrants issued to the Noteholders (each as defined below). 8 Shares shall automatically convert to U.S. Borrower Common Shares upon a Qualifying Public Offering (as defined in part VI below under the heading "Drag-Along/Tag-Along Rights). All of the U.S. Borrower Preferred Shares shall also be converted to U.S. Borrower Common Shares upon an Initial Public Offering (as defined in part VI below under the heading "Registration Rights") if the holders of at least two-thirds of the outstanding U.S. Borrower Preferred Shares shall approve such conversion. A sale of all or substantially all of the assets of the U.S. Borrower or its subsidiaries, or a merger or consolidation involving the U.S. Borrower, shall be considered a liquidation event with respect to the U.S. Borrower Preferred Shares and, except as provided in the first sentence of this paragraph, the distribution of assets to the holders of the U.S. Borrower Preferred Shares upon such liquidation shall be made pro rata with the outstanding U.S. Borrower Common Shares. The U.S. Borrower Preferred Shares shall not be redeemable. The U.S. Borrower Preferred Shares shall have no right to dividends, except that the holders of the U.S. Borrower Preferred Shares shall participate pro rata, on an as-if-converted basis, in any cash or non-cash dividends declared by the Board of Directors of the U.S. Borrower on the U.S. Borrower Common Shares (excluding stock dividends for which there is an adjustment to the conversion ratio as described below). The conversion ratio of the U.S. Borrower Preferred Shares shall be subject to adjustment for stock splits, subdivisions, combinations, and reclassifications. IV. GCIP Subordinated Notes. Conversion to Equity: Upon the consummation of the Plan, 100% of the outstanding GCIP Subordinated Notes shall be converted to U.S. Borrower Common Shares representing 32% of the aggregate outstanding U.S. Borrower Common Shares assuming full conversion of the U.S. Borrower Preferred Shares, subject to dilution for shares designated for management incentive purposes as described below and for the shares issued upon exercise of the Warrants issued to the Noteholders as described below. Warrants: Upon the consummation of the Plan, the holders of the outstanding GCIP Subordinated Notes (the "Noteholders") shall receive from U.S. Borrower warrants (collectively, the "Warrants") to purchase U.S. Borrower Common Shares equal to (i) 15% of the outstanding U.S. Borrower Common Shares (the "15% Warrants"), after giving effect to the 9 conversion of all U.S. Borrower Preferred Shares and the issuance of shares designated for management incentive purposes as described below, and (ii) 10% of the outstanding U.S. Borrower Common Shares (the "10% Warrants") after giving effect to the exercise of the 15% Warrants, the conversion of all U.S. Borrower Preferred Shares and the issuance of shares designated for management incentive purposes as described below. The exercise prices of the Warrants would be established as of the effective date of the Plan (the "Effective Date") in accordance with the formula set forth on Annex III hereto, which provides, among other things, that (i) the exercise prices are calculated on the basis of an enterprise value of the U.S. Borrower as of the Effective Date (the " Enterprise Value") of $75,000,000, (ii) the exercise price of the 15% Warrants is based on a valuation of the U.S. Borrower that would provide the Lenders with a 100% return on their claims under the Existing Credit Agreement (principal, fees and interest) as of the petition date in the Bankruptcy and (iii) the exercise price of the 10% Warrants is based on a valuation that would provide a 120% return on such claims. The number of U.S. Borrower Common Shares for which the Warrants would be exercisable would be subject to adjustment for stock splits, subdivisions, combinations, and reclassifications. The Warrants shall be exercisable until seven years after the Effective Date. The Warrants shall provide for "cashless" exercise in connection with a Qualifying Public Offering. The Warrants shall terminate upon (i) a Qualifying Public Offering, (ii) an Initial Public Offering in connection with which the U.S. Borrower Preferred Shares are converted to U.S. Borrower Common Shares, (iii) a merger or consolidation involving, or a sale of all or substantially all of the assets of, the U.S. Borrower, or (iv) exercise by the Lenders of the Drag-Along Rights described below. V. Management Incentives. Incentive Shares: Options to purchase the U.S. Borrower Common Shares equal to up to 15% of the U.S. Borrower Common Shares (after giving effect to the conversion of all U.S. Borrower Preferred Shares but prior to the exercise of the Warrants) will be made available for management and directors' incentive compensation on terms, including amount and vesting, determined by the Board of Directors of U.S. Borrower as 10 constituted after consummation of the Plan. The exercise price of the options would be equal to the per share equity value calculated utilizing 100% of the equity value of the U.S. Borrower and its subsidiaries at the Effective Date of the Plan and assuming shares outstanding equal to the U.S. Borrower Common Shares issued under the Plan and the U.S. Borrower Preferred Shares. VI. Shareholder/Voting or Other Agreements. Board of Directors: After consummation of the Plan and until the consummation of a Qualifying Public Offering, or an Initial Public Offering in connection with which the U.S. Borrower Preferred Shares are converted to U.S. Borrower Common Shares, the Board of Directors of U.S. Borrower will consist of five members, three of whom will be nominees of the holders of the U.S. Borrower Preferred Shares (or the U.S. Borrower Common Shares issued upon conversion thereof), one of whom will be a nominee of the holders of the U.S. Borrower Common Shares distributed in conversion of the GCIP Subordinated Notes, and one of whom will be the Chief Executive Officer of U.S. Borrower. Lenders' Shareholders Agreement: Lenders will enter into a shareholders agreement, relating to, among other things, (i) procedures to effectuate voting of the U.S. Borrower Preferred Shares (or the U.S. Borrower Common Shares issued upon conversion thereof) held by Lenders or their permitted transferees, including, but not limited to, determination of the nominees to the Board of Directors and (ii) limiting transfers (prior to dates or events to be specified) of a Lender's U.S. Borrower Preferred Shares only to Eligible Assignees of such Lender's Loans under the applicable credit agreement, and only in proportion to the Loans transferred. General Shareholder Agreement: The U.S. Borrower and the Lenders and Noteholders will enter into a Shareholders Agreement (or will be deemed pursuant to the Plan to have entered into a Shareholders Agreement) (the "General Shareholders Agreement"), relating to, among other things: (i) procedures to effectuate the nomination and election of the Board of Directors as provided above; (ii) certain restrictions on transfers of the U.S. Borrower Preferred Shares and U.S. Borrower Common Shares; and (iii) certain relative 11 rights and obligations of the holders of the U.S. Borrower Preferred Shares and the U.S. Borrower Common Shares described below and certain related governance matters. Minority Stockholder Protections: The General Shareholders Agreement will provide that, prior to the consummation of a Qualifying Public Offering, or an Initial Public Offering in connection with which the U.S. Borrower Preferred Shares are converted to U.S. Borrower Common Shares, the U.S. Borrower will not, without approval of the holders holding, in the aggregate, at least a majority of the shares of U.S. Borrower Common Shares issued to the Noteholders pursuant to the Plan and upon exercise of the Warrants: (i) issue or sell equity securities or bonds, debentures, notes or other obligations convertible into, exchangeable for, or any options, warrants or other obligations having rights to purchase, any equity securities for aggregate consideration below the fair market value per share (subject to customary exceptions, such as for management and employee incentive programs); (ii) subject to the liquidation preference of the U.S. Borrower Preferred Shares, redeem or repurchase any shares of U.S. Borrower Shares unless each holder of U.S. Borrower Shares (including holders of U.S. Borrower Preferred Shares on an as-if-converted basis) may participate on a pro rata basis (except redemptions or repurchases from former officers, directors and employees or their heirs or estates); (iii) pay a dividend or distribution on the U.S. Borrower Shares unless such dividend or distribution is paid to all holders of U.S. Borrower Shares on a pro rata basis (including holders of U.S. Borrower Preferred Shares on an as-if-converted basis); (iv) engage (or permit any subsidiary to engage) in any transactions with the Lenders or with a director, an officer or an affiliate of the Lenders or the Borrowers, including financing transactions, unless (a) such transaction is approved by a majority of the members of the Board of Directors of the Borrowers who have no financial interest in such transaction and are not affiliates or designees of any person who has a financial interest in such transaction, or (b) such transaction is fair to the applicable Borrower or subsidiary, as the case may 12 be, from a financial point of view or on terms no less favorable to such Borrower or such subsidiary than those that could be obtained at the time of such transaction in arm's-length dealings with a party who is not an affiliate (which fairness or favorable terms may be conclusively established by the Borrowers with an opinion of a nationally recognized investment banking firm); provided, however, the above restrictions shall not apply to (1) transactions between a Borrower and any wholly owned subsidiary, (2) employment arrangements or employee benefits approved by the Board of Directors with individuals who are operating officers or employees of the Borrowers or their subsidiaries, (3) transactions in which all holders of U.S. Borrower Preferred Shares (on an as-if-converted basis) and U.S. Borrower Common Shares participate on a pro rata basis, (4) payment of reasonable fees and expense reimbursement to the members of the Board of Directors, in an amount not to exceed fees of U.S.$30,000 per annum per director, plus reasonable expenses, unless the Board of Directors determines in good faith that a higher amount is justifiable based on current market practices; (5) issuance or sale of equity securities, or bonds, debentures, notes or other obligations convertible into or exchangeable for, or any options, warrants or other obligations having rights to purchase, any equity securities for aggregate consideration equal to or exceeding the fair market value per share; (6) amendments, modifications, and supplements to or restatements or replacements of the Credit Facilities, so long as after giving effect thereto the total outstanding amounts and unused commitments thereunder do not exceed U.S.$70,000,000, the maturity date thereof is not earlier than November 30, 2006, and no amortization of the Term Loans is required prior to November 30, 2006 (other than mandatory prepayments contemplated by this term sheet); (7) the granting of the options to management for incentive purposes as contemplated by this term sheet, and the issuance of shares upon exercise thereof, and the issuance of U.S. Borrower Common Shares upon conversion of the U.S. Borrower Preferred Shares; and (8) transactions and arrangements approved pursuant to the Plan; and (v) any amendments or modifications to the General Shareholders Agreement or to the charter or bylaws of the U.S. Borrower (including changes to the number or composition of the Board of Directors) which modify or expressly limit in any material respect, or conflict in any material respect with, the terms of the General Shareholders 13 Agreement in effect as of the Effective Date or which materially and adversely affect the rights and privileges provided to the holders of the U.S. Borrower Common Shares pursuant to the General Shareholders Agreement as in effect on the Effective Date. Preemptive Rights: Prior to the consummation of an Initial Public Offering, each holder of U.S. Borrower Shares and each holder of Warrants (to the extent that the fair market value per share of the U.S. Borrower Common Shares is in excess of the exercise price of such Warrants (such Warrants being "in the money")) shall have the right to purchase its pro rata share (such pro rata share to be based on their ownership of outstanding shares and to be determined on an as-if-converted basis for U.S. Borrower Preferred Shares and based on the number of U.S. Borrower Common Shares for which such "in the money" Warrants are then exercisable) of U.S. Borrower Common Shares or Convertible Securities (as defined below) issued by the U.S. Borrower except for the following exempted issuances: (i) a grant of stock, employee stock options or other convertible securities pursuant to an employee stock option plan, stock purchase plan, or similar incentive or benefit program or agreement that has been approved by the Board of Directors of the U.S. Borrower; (ii) the issuance of any U.S. Borrower Common Shares or Convertible Securities in order to effect any joint venture or other strategic relationship, merger, consolidation or other acquisition of any person, business, division or assets, which joint venture, merger, consolidation or other acquisition has been approved by the Board of Directors of the U.S. Borrower; (iii) the issuance of any U.S. Borrower Common Shares or Convertible Securities to a landlord of, or any insurance surety or insurance provider of, or equipment lessor or lender to, the U.S. Borrower, which issuance has been approved by the Board of Directors of the U.S. Borrower; (iv) the deemed issuance of U.S. Borrower Shares by operation of the antidilution provisions in, or the issuance of any U.S. Borrower Shares under, any Convertible Securities set forth above in clauses (i) - (iii), (v) the issuance of any U.S. Borrower Common Shares pursuant to the exercise of the Warrants; (vi) the issuance of U.S. Borrower Common Shares or Convertible Securities to any person not then employed by the Borrowers and their subsidiaries in connection with such person becoming a management employee of the Borrowers; (vii) the issuance of U.S. Borrower Common Shares or Convertible Securities to a person who is not then a holder of 14 U.S. Borrower Common Shares or Convertible Securities for consideration not less than the fair market value per share; (viii) the issuance of U.S. Borrower Common Shares upon conversion of U.S. Borrower Preferred Shares; and (ix) the issuance of any securities in an Initial Public Offering (as defined below). "Convertible Securities" means (i) stocks, bonds, notes or other securities convertible into or exchangeable for, or which provide the right to purchase, directly or indirectly, U.S. Borrower Common Shares, or (ii) options, warrants or other rights exercisable for or granting the right to purchase, directly or indirectly, U.S. Borrower Common Shares or any of the securities described in clause (i) of this definition. Registration Rights: The U.S. Borrower shall discontinue as a publicly reporting company prior to the Effective Date. Beginning six months after the U.S. Borrower's Initial Public Offering, upon written request from the holders holding, in the aggregate, at least 25% of the Registrable Securities (as defined below) then outstanding (or a lesser percentage if the Registrable Securities they propose to register have an anticipated aggregate offering price of at least U.S.$5,000,000) that the U.S. Borrower file a registration statement under the Securities Act of 1933, as amended (the "Securities Act") on the basis of the rights described further below, then the U.S. Borrower shall give written notice of such request to all holders of shares (but only shares not then subject to restriction or forfeiture rights) and shall use its best efforts to effect the registration under the Securities Act of all Registrable Securities which the holders request to be registered. The U.S. Borrower shall have the right to delay any such registration for up to 90 days if the Board of Directors determines that it would be in the best interests of the U.S. Borrower to do so. Beginning six months after the Initial Public Offering, the holders of Registrable Securities shall be entitled to (i) two demand registrations, (ii) unlimited piggyback registrations, and (iii) up to two Form S-3 registrations in any twelve-month period (provided that the anticipated offering price of the Registrable Securities that they propose to register under Form S-3 is not less than U.S.$1,000,000). The U.S. Borrower shall pay all registration expenses for the above registrations, (including reasonable legal fees of one counsel to the sellers which shall be designated by the holders holding, in the aggregate, a majority of the Registrable 15 Securities being sold) other than underwriter's or seller's discounts, commissions and fees, and comply with reporting requirements to permit sales under Rule 144. All registrations involving an underwriting shall be subject to underwriter cutbacks and all other U.S. Borrower Shares shall be excluded (except shares proposed to be registered by the U.S. Borrower in a U.S. Borrower-initiated registration which shall not be subject to cutback) and holders selling Registrable Securities shall be cutback on a pro rata basis based on the number of shares proposed to be included in the registration. Any modification of the registration rights will require (i) a vote of at least a majority in interest of the Registrable Securities held by the Lenders and (ii) a vote of at least a majority in interest of the Registrable Securities held by the Noteholders. Registration rights may be transferred to any transferee of Registrable Securities pursuant to a transfer that complies with the terms of the General Shareholders Agreement. Each holder of Registrable Securities agrees that it will not sell its shares for a specified period (but not to exceed 180 days) following the effective date of the U.S. Borrower's Initial Public Offering and 90 days following the effective date of any subsequent offering by the U.S. Borrower, provided that all officers, directors and other employees and greater than one percent stockholders are similarly bound, provided, that, no holder of U.S. Borrower Shares will be restricted from selling such shares in any offering subsequent to the Initial Public Offering if such holder and its affiliates beneficially own a number of shares of U.S. Borrower Shares as of the date of such determination equal to one percent (1%) or less of the aggregate outstanding shares of U.S. Borrower Shares. The General Shareholders Agreement will contain such other provisions with respect to registration rights as are reasonable and customary, including cross-indemnification, the period of time in which the registration statement will be kept effective, and underwriting arrangements. The rights of a holder to register Registrable Securities shall terminate with respect to such holder once such holder is legally able to dispose of all of its Registrable Securities in a three-month period pursuant to those provisions of Rule 144 under the Securities Act that are applicable to affiliates. 16 An "Initial Public Offering" means the first to occur of: (1) a sale of U.S. Borrower Common Shares in a firmly underwritten public offering registered under the Securities Act (excluding registration statements filed on Form S-8, or any similar successor form or another form used for a purpose similar to the intended use for such forms), and underwritten by an investment bank approved by vote of a majority of the Board of Directors; and (2) the listing of the U.S. Borrower Common Shares on a national securities exchange or authorization for quotation on the Nasdaq National Market System. "Registrable Securities" means (a) U.S. Borrower Common Shares issued to the Noteholders pursuant to the Plan or upon exercise of the Warrants and (b) U.S. Borrower Common Shares issued upon the conversion of U.S. Borrower Preferred Shares. Drag-Along/Tag-Along Rights: In the event of any sale of U.S. Borrower Preferred Shares or U.S. Borrower Common Shares by the Lenders or their permitted transferees that involves a sale in a single transaction or related transactions of more than 51% of the aggregate outstanding shares of U.S. Borrower Common Shares and U.S. Borrower Preferred Shares held by the Lenders and their permitted transferees, the Lenders shall have the right to require the Noteholders to participate, pro rata, for the same amount and form of consideration and otherwise on the same terms and conditions as the Lenders. The Noteholders shall the right to participate pro rata (based upon their ownership of outstanding U.S. Borrower Common Shares and the number of Common Shares issuable upon Warrants that are then "in the money"), for the same amount and form of consideration and otherwise on the same terms and conditions, in any sale of shares by the Lenders of U.S. Borrower Shares representing more than 15% of the aggregate outstanding U.S. Borrower Shares. Transfers of Registrable Securities in connection with exercise of registration rights, transfers to permitted transferees under the General Shareholders Agreement (including transfers to an existing Lender or to a person that becomes a Lender under the applicable Credit Facility) and transfers effectuated through any stock exchange or other 17 public trading market shall not trigger a Drag-Along Right or Tag-Along Right. The Noteholders shall not be required to make representations or warranties in connection with the exercise of a Drag-Along Right or Tag-Along Right, other than customary representations and warranties with respect to due organization, power and authority, ownership of shares of U.S. Borrower Shares and the ability to freely convey such shares, non-contravention of organizational documents, other agreements and applicable law, and enforceability of obligations under applicable transfer documents. Drag-Along/Tag-Along Rights will terminate upon a Qualifying Public Offering, or upon an Initial Public Offering in connection with which the U.S. Borrower Preferred Shares are converted to U.S. Borrower Common Shares. Drag-Along/Tag-Along Rights shall be binding on any transferee of U.S. Borrower Preferred Shares or U.S. Borrower Common Shares. Drag-Along/Tag-Along Rights shall be transferable to any transferee of U.S. Borrower Shares pursuant to a transfer that that complies with the terms of the General Shareholders Agreement. A "Qualifying Public Offering" means one or more underwritten public offerings of U.S. Borrower Common Shares pursuant to an effective registration statement filed under the Securities Act (excluding registration statements filed on Form S-8 or any similar successor form) at a price per share not less than the price that would be determined based on a valuation of the U.S. Borrower equal to 110% of the valuation utilized for the exercise price of the 10% Warrants and resulting in aggregate gross proceeds to the U.S. Borrower of U.S.$30,000,000 or more. Information Rights: Until an Initial Public Offering, the U.S. Borrower shall post on its website audited annual financial statements within 90 days after year end and unaudited quarterly financial statements within 45 days after the end of each quarter, or, in the alternative, distribute such financial statements by electronic or regular mail within such time frames to each holder of U.S. Borrower Shares. The information in the reports shall be presented in U.S. dollars. 18 Until an Initial Public Offering, the holders of U.S. Borrower Common Shares issued to the Noteholders under the Plan may appoint a representative who shall have the right, upon reasonable prior written notice and during normal business hours, to (i) visit and inspect the properties of the U.S. Borrower and its subsidiaries, (ii) examine the corporate and financial records of the U.S. Borrower and its subsidiaries and make copies thereof and extracts therefrom and (iii) discuss the affairs, finances and accounts of the U.S. Borrower and its subsidiaries with the directors and executive officers of the U.S. Borrower and its subsidiaries. Such right may not be exercised more frequently than once in any twelve-month period, except in connection with certain extraordinary transactions requiring a vote of shareholders (which shall be further delineated in the General Shareholders Agreement). VII. Other Matters. Downstream Mergers: Prior to the Bankruptcy petition date, New Hampshire Oak will be merged with and into The General Chemical Group Inc. (the "General Chemical Group") with General Chemical Group as the surviving corporation and subsequently, General Chemical Group will be merged with and into the U.S. Borrower with the U.S. Borrower as the surviving corporation. Upon the consummation of the Plan, and provided that the foregoing mergers have occurred and that the Latona management and service agreement has been amended as provided below, the U.S. Borrower will issue to the existing equity holders of General Chemical Group U.S. Borrower Common Shares representing a percentage to be determined (not to exceed one-half of one percent) of the aggregate outstanding U.S. Borrower Common Shares as of the Effective Date, assuming full conversion of the U.S. Borrower Preferred Shares, subject to dilution for shares designated for management incentive purposes and for the shares issued upon exercise of the Warrants issued to the Noteholders. Latona Agreement: Not later than 60 days after the commencement of the bankruptcy, U.S. Borrower and Latona shall agree to consensually amend the management and service agreement with Latona to provide for (i) a term ending one year after the Effective Date, (ii) a reduction of the aggregate compensation payable to Latona under such agreement to the sum of (i) the pro rata portion of Latona's current compensation for the period from October 1, 2003 until the commencement of the Bankruptcy and (ii) $700,000 for the remaining term of the 19 agreement as amended, (iii) a waiver of all claims for damages relating to the amendment to such agreement; (iv) a release by Latona of all claims against the U.S. Borrower and its directors, officers, employees, advisors, and controlling person, and (v) a release by the U.S. Borrower and its subsidiaries of all claims against Latona and its directors, officers, employees, advisors, and controlling person. Plan Releases: The Lenders and the Noteholders will not object if the Plan provides that the U.S. Borrower, its direct and indirect controlling shareholders, and all current and former directors, officers, employees, consultants, financial advisors, attorneys, accountants and other representatives of the U.S. Borrower and its affiliates who served in such capacity on or prior to the Effective Date shall be released from any and all claims, obligations, suits, judgments, damages, rights, causes of action, and liabilities based upon any act or omission, transaction, agreement, event, or occurrence taking place on or before the Effective Date, in any way relating to the U.S. Borrower or its subsidiaries, the Existing Credit Agreement, the Notes, the Bankruptcy, or the negotiation, formulation and preparation of the Plan and any related documents, other than obligations of such persons pursuant to the Plan, so long as (i) the Plan otherwise is substantially in accordance with this term sheet, (ii) Borrowers have complied with all of their obligations described in this term sheet to be performed by them during the Bankruptcy, and (iii) the Plan includes releases, comparable in scope to the release described above, in favor of the Administrative Agents, the Lenders, and the Noteholders, and their respective directors, officers, employees, advisors, and controlling persons. 20 Annex I Interest and Certain Fees ------------------------- Interest Rate Options: The relevant Borrower may elect that the Loans comprising each borrowing bear interest at a rate per annum equal to: (i) the ABR plus the Applicable Margin (in the case of ABR Loans under the DIP Credit Facility, the Exit Facility and Term Facility only); (ii) the U.S. Base Rate plus the Applicable Margin (in the case of U.S. Dollar Loans under the DIP Credit Facility or the Exit Facility only); (iii) the Canadian Dollar Prime Rate plus the Applicable Margin (in the case of Canadian Dollar Loans under the DIP Credit Facility or the Exit Facility only); or (iv) as set forth in the following sentence. In the case of Loans under the DIP Credit Facility and the Exit Facility only, the Canadian Borrower will pay to each Canadian Lender that accepts a Bankers' Acceptance a stamping fee calculated at a rate per annum equal to the Applicable Margin denominated in Canadian Dollars (the "Stamping Fee"). The discount rate for Bankers' Acceptances purchased by a Canadian Lender, if applicable, shall be calculated by the Canadian Administrative Agent on terms customary to the practice of Canadian banks, based on the average of such discount rates as quoted by the applicable reference banks for the applicable face amount and interest period. B/As shall have a term of 30 days during the DIP Credit Facility and 30, 60, 90 or 180 days during the Exit Facility. As used herein: "ABR" means the highest of (i) the rate of interest publicly announced by JPMorgan Chase as its prime rate in effect at its principal office in New York City (the "Prime Rate"), (ii) the secondary market rate for three-month certificates of deposit (adjusted for statutory reserve requirements) plus 1% and (iii) the federal funds effective rate from time to time plus 0.5%. "Applicable Margin" means for ABR Loans, Canadian Base Rate Loans and Canadian Prime Rate Loans, under the DIP Facility and the Exit Facility, 250 basis points, and under the Term Facility, 450 basis points; and for B/As, 375 basis points. "Canadian Dollar Prime Rate" means that rate published by JPMorgan Canada in Canada as its prime lending rate from time to time. "Bankers' Acceptance" or "B/A" means a bankers' acceptance in Canadian Dollars issued by the Canadian Borrower and accepted and, if applicable, purchased by the Canadian Lenders or a depository bill within the meaning of the Depository Bills and Notes Act (Canada). "U.S. Base Rate" means the rate of interest per annum in effect from time to time that is equal to the greater of (a) the rate of interest publicly announced by JPMorgan Canada from time to time as being its reference rate then in effect for determining interest rates for commercial loans in U.S. Dollars made in Canada and (b) the federal funds effective rate in effect from time to time plus 0.5%. Interest Payment Dates: Monthly in arrears, except for any deferred Term Loan interest, as described below. Deferral of Interest: In the event that, at any interest payment date under the Term Facility, the ratio of (i) Free Cash Flow (as defined below) for the most recent trailing twelve-month period for which financial statements have been delivered to the Lenders under the credit documents to (ii) interest expense for the twelve months ending with and including such interest payment date (and assuming that all interest due on such date were paid) is less than 1.2:1, then the applicable Borrower shall have the option of paying all or any portion of the interest on the Term Loans due on such date by the delivery to the Lenders holding Term Loans of notes in the principal amount of the interest so deferred (the "PIK Notes"). The PIK Notes shall bear interest at a rate per annum equal to ABR plus 650 basis points. Such interest shall be compounded annually and added to principal. The PIK Notes and all accrued but unpaid interest thereon shall be due upon final maturity, acceleration or prepayment in full of the Term Loans. "Free Cash Flow" for a period means Adjusted EBITDA of U.S. Borrower and its subsidiaries for such period (excluding results of Soda Ash Partners and the China Joint Venture but including all cash distributions actually received from Soda Ash Partners or the China Joint Venture), minus (i) cash capital expenditures for such period, (ii) cash pension contributions in excess of pension expenses 2 during such period and (iii) cash tax expense during such period. ("Adjusted EBITDA" shall be defined in the same manner as ""Consolidated Cash Flow" under the Existing Credit Agreement.) No cash interest payments on the Term Loans will be permitted if an Event of Default exists under the Exit Facility. Stamping Fee: The Canadian Borrower will pay to each Canadian Lender that accepts a Bankers' Acceptance the applicable Stamping Fee on the date of such acceptance. Facility/Commitment Fees: DIP Facility: The U.S. Borrower and the Canadian Borrower shall, on or prior to the Closing Date for the DIP Facility, pay to the Administrative Agents, for the benefit of the DIP Lenders, an initial closing fee of U.S. $300,000. In addition, the U.S. borrower shall pay to the U.S. Administrative Agent for its account an annual administrative fee of $50,000, payable quarterly in advance. Exit Facility: The U.S. Borrower and the Canadian Borrower shall, on or prior to the Closing Date for the Exit Facility, pay to the Administrative Agents for the benefit of the Exit Lenders, an initial closing fee of U.S.$300,000. In addition the U.S. borrower shall pay to the Administrative Agents for their account an annual administrative fee of $50,000, payable quarterly in advance. Commitment Fees: The U.S. Borrower and the Canadian Borrower shall pay commitment fees in U.S. Dollars equal to 0.5 % per annum of the average daily unused portion of the commitments under the DIP Credit Facility and the Exit Facility, respectively, payable monthly in arrears. Outstanding DIP Letters of Credit and Exit Letters of Credit shall be deemed to be a utilization of the applicable commitment. Letter of Credit Fees: The U.S. Borrower and/or the Canadian Borrower, as applicable, shall pay a commission on all outstanding DIP Letters of Credit and Exit Letters of Credit at a per annum rate 3 equal to the Applicable Margin then in effect with respect to DIP Revolving Loans or Exit Revolving Loans, respectively, on the face amount of each such Letter of Credit. Such commission shall be shared ratably among the Lenders and shall be payable monthly in arrears. A fronting fee equal to .15% per annum on the face amount of each Letter of Credit shall be payable monthly in arrears to the applicable Issuing Lender for its own account. In addition, reasonable and customary administrative, issuance, amendment, payment and negotiation charges shall be payable to the applicable Issuing Lender for its own account. Default Rate: At any time when a Borrower is in default in the payment of any amount due under the Credit Facilities, the entire amount of the outstanding principal shall bear interest at 2% above the rate or rates otherwise applicable thereto. Overdue interest, fees and other amounts shall bear interest at 2% above the rate applicable to ABR Loans or Canadian Base Rate Loans, as applicable (except that any such amounts denominated in Canadian Dollars shall bear interest at 2% above the rate applicable to Canadian Dollar Prime Rate Loans). Rate and Fee Basis: All per annum rates shall be calculated on the basis of a year of 365/366 days and 365 days in the case of B/As for actual days elapsed. Interest Act (Canada) Disclosure: The annual rates of interest and fees to which the rates of interest and fees provided for herein (and stated herein to be calculated on the basis of a 365- (or 366-, as the case may be) year) are equivalent are the rates so determined multiplied by the actual number of days in the applicable calendar year and divided by 365 (or 366, as the case may be). 4 Annex II Other Terms and Conditions of Credit Facilities ----------------------------------------------- Except as otherwise indicated, each of the following terms and conditions will be equally applicable to the DIP Facility, the Exit Facility and the Term Facility. I. Certain Payment Provisions Fees and Interest Rates: As set forth on Annex I. Optional Prepayments and Commitment Reductions: Optional prepayments and commitment reductions shall conform to the optional prepayments and commitment reductions set forth in the Existing Credit Agreement. Mandatory Prepayments and Commitment Reductions: On or before April 15 of each year (commencing with April 15, 2005) 75% of Excess Cash Flow for the prior fiscal year shall be applied, first, to prepay the Term Loans held by those Lenders that participated in the Exit Facility to the extent of the participation in the Exit Facility, second, pro rata to the Term Loans remaining after the repayments in the preceding clause first, and third, to prepay Exit Revolving Loans and to reduce permanently the commitments under the Exit Facility. "Excess Cash Flow" shall be defined as Adjusted EBITDA of U.S. Borrower and its subsidiaries for the applicable period (excluding results of Soda Ash Partners and the China Joint Venture but including all cash distributions actually received from Soda Ash Partners and the China Joint Venture), minus (i) cash restructuring expenses for such period, (ii) cash capital expenditures for such period, (iii) cash pension contributions in excess of pension expenses during such period, (iv) cash interest expenses during such period, (v) cash tax payments for such period, and (vi) any cash prepayments on the Term Loans, plus/minus (i) changes in working capital for such period and (ii) any material non-cash items for such period. All amounts added to or subtracted from Adjusted EBITDA pursuant to the foregoing would exclude Soda Ash Partners and the China Joint Venture, except as otherwise specifically indicated. Each prepayment of the Term Loans shall be applied to the installments thereof in inverse order of maturity and may not be reborrowed. The Borrowers shall make mandatory prepayments of the Loans equal to the Applicable Percentage (as defined below) of the following amounts, which prepayments shall be applied in the same order as indicated in the preceding paragraph: (a) the net proceeds of any sale or issuance of equity (including upon exercise of the Warrants) and the net proceeds of any issuance or incurrence of indebtedness after the Closing Date for the Exit Facility by the U.S. Borrower or any of its subsidiaries (subject to exceptions allowed herein); (b) the net proceeds of any sale or other disposition (including as a result of casualty or condemnation) by the U.S. Borrower or any of its subsidiaries of any assets (except for the sale of inventory in the ordinary course of business and certain other dispositions allowed herein); and (c) any tax refunds received by either Borrower or any of their subsidiaries (other than the U.S. $1,100,000 refund from Revenue Canada for the tax years 1996, 1997, 1998, and 1999). "Applicable Percentage" shall mean: (x) 100% until the aggregate, cumulative amount of prepayments under (a), (b) and (c) above equals U.S.$5,000,000; (y) thereafter, 75%. Notwithstanding the foregoing: (1) in the event that Soda Ash Partners or the China Joint Venture receives any net proceeds of the types described in the foregoing paragraphs (a), (b), and (c), such proceeds shall be required to be applied to the prepayment of the Term Loans and the permanent reduction of the commitments under the Exit Facility only to the extent that the U.S. Borrower shall have received a distribution thereof from Soda Ash Partners or the China Joint Venture; and (2) Borrowers shall not be required to apply proceeds from asset sales and dispositions in the ordinary course to the prepayment of the Loans (A) in the case of any proceeds from a single transaction of less than U.S.$10,000 or (B) in the case of any proceeds from a single transaction of U.S.$10,000 or more but less than U.S.$50,000 unless and until the aggregate amount of such proceeds from and after the commencement of the Bankruptcy exceeds U.S.$150,000. 2 During the Bankruptcy, any net proceeds of the types described in paragraphs (a), (b) and (c) above shall be applied to the repayment of obligations under the Existing Credit Agreement, except that the Applicable Percentage shall be 100% in all cases. The Exit Revolving Loans shall be prepaid and the Exit Letters of Credit shall be cash collateralized or replaced to the extent such extensions of credit exceed the amount of commitments under the Exit Facility, as so reduced. The full face amount of B/As shall be deposited with the Canadian Administrative Agent as cash collateral until the maturity thereof to the extent such extensions of credit exceed the amount of the Exit Facility, as so reduced. II. Collateral The obligations of the Guarantors which are not debtors in the Bankruptcy in respect of the DIP Credit Facility, and the obligations of the U.S. Borrower and the Guarantors in respect of the Exit Facility (including the Canadian Exit Subfacility), shall be secured by a perfected first priority security interest in the following property (in the case of the DIP Credit Facility, to the extent of each non-debtor's interest in such property), and the obligations of the U.S. Borrower and the Guarantors in respect of the Term Facility shall be secured by a perfected second priority security interest in the following property: (a) 100% of the owned capital stock of each of the direct and indirect domestic subsidiaries of the U.S. Borrower, (b) 65% of the owned capital stock of each of the U.S. Borrower's direct and indirect first-tier foreign subsidiaries, including General Chemical Canada Holding Inc. but excluding any of its subsidiaries, and (c) all other tangible and intangible assets (including, without limitation, intellectual property, real property and cash and cash equivalents) of the U.S. Borrower and each Guarantor, except, in the case of clauses (b) and (c) of this sentence, for such stock and those assets as to which the Administrative Agents shall determine in their sole discretion that the costs of obtaining such a security interest are excessive in relation to the value of the security to be afforded thereby. In addition, the obligations of the Canadian Borrower and the Canadian Guarantors under the DIP Credit Facility and Exit Facility shall be secured by a perfected first priority security interest (and hypothec, if applicable) in the following property, and the obligations of the Canadian Borrower and the Canadian Guarantors under the Term Facility shall be secured by a perfected second priority security interest (and hypothec, if 3 applicable) in the following property: (i) 100% of the owned capital stock of all direct and indirect foreign subsidiaries of the Canadian. Borrower (and in the case of the Exit Facility and the Term Facility, such subsidiaries of the U.S. Borrower) and (ii) all other tangible and intangible assets (including, without limitation, intellectual property and real property) of the Canadian Borrower and direct and indirect foreign subsidiaries of the Canadian Borrower (and in the case of the Exit Facility and the Term Facility, such subsidiaries of the U.S. Borrower) except, in the case of clauses (i) and (ii) of this sentence, for such stock and those assets as to which the Administrative Agents shall determine in their sole discretion that the costs of obtaining such a security interest (and hypothec, if applicable) are excessive in relation to the value of the security to be afforded thereby. III. Certain Conditions Initial Conditions: The availability of each of the Credit Facilities shall be conditioned upon satisfaction of such conditions to funding as are customary for senior secured credit facilities of the type described herein. It is anticipated that the conditions would also include, among other things, satisfaction of the following on or before a date to be specified by the Administrative Agents for the applicable Credit Facility (the date upon which all such conditions shall be satisfied for a Credit Facility, the "Closing Date" for such Credit Facility): (a) Each Credit Party shall have executed and delivered satisfactory definitive financing documentation with respect to the Credit Facilities (the "Credit Documentation"). The credit agreement for each Credit Facility shall be substantially in the form of the Existing Credit Agreement with the changes thereto described in this Term Sheet and Annex I and Annex II hereto, and in the case of the Credit Documentation for the DIP Credit Facilities, such other provisions as the U.S. Administrative Agent customarily includes in debtor-in-possession credit documentation for similar facilities. (b) The applicable Lenders and the Administrative Agents shall have received all fees required to be paid on or before the Closing Date for the Credit Facility. (c) The applicable Lenders shall have received a satisfactory business plan for fiscal years 2003 through 2006 for each of the U.S. Borrower and its subsidiaries and of the Canadian Borrower and its subsidiaries. 4 (d) The applicable Lenders shall have received such legal opinions (including opinions from counsel to the U.S. Borrower, the Canadian Borrower and their respective subsidiaries as may be required by the Administrative Agents), documents and other instruments as are customary for transactions of this type or as the Administrative Agents may reasonably request. (e) The Lenders shall have received the results of a recent lien search in each relevant jurisdiction with respect to the Borrowers and their respective subsidiaries, and such search shall reveal no liens on any of the assets of the Borrowers or their subsidiaries except for liens permitted by the Credit Documentation or otherwise satisfactory to the Lenders. (f) All actions necessary to perfect the Administrative Agents' security interests in the collateral under the applicable Credit Facility shall have been taken. (g) With respect to the Exit Facility and the Term Facility, the Plan shall be satisfactory to the Lenders, shall have been confirmed by the Bankruptcy Court (and the relevant Canadian court, if applicable) and shall be consummated contemporaneously with the Closing Date for such Credit Facilities. (h) All governmental and third party approvals necessary or in the reasonable opinion of the U.S. Administrative Agent advisable in connection with the applicable Credit Facility and the consummation of the Bankruptcy shall have been obtained and be in full force and effect, and all applicable waiting periods shall have expired without any action being taken or threatened by any competent authority which would restrain, prevent or otherwise impose conditions on the Exit Facility or the Term Facility or the consummation of the Bankruptcy. On-Going Conditions: The making of each extension of credit under the DIP Facility and the Exit Facility shall be conditioned upon (a) the accuracy of all representations and warranties in the Credit Documentation for such Credit Facility in all material respects and (b) there being no default or event of default in existence at the time of, or after giving effect to the making of, such extension of credit. As used herein and in the Credit Documentation a "Material Adverse Effect" means a material adverse effect on (a) the business, operations, property, condition (financial or otherwise) or prospects of the U.S. Borrower and its subsidiaries (including, for the avoidance of 5 doubt, Soda Ash Partners) taken as a whole, or (b) the validity or enforceability of any of the Credit Documentation or the rights or remedies of the Administrative Agents and the Lenders thereunder. DIP Facility Conditions: The making of the initial and each subsequent extension of credit under the DIP Facility shall be subject to such additional conditions as are customary for debtor-in-possession credit facilities and are otherwise satisfactory to the Administrative Agents and the DIP Lenders, including, without limitation, (i) the entry of appropriate interim orders (the "Interim Orders") and final orders (the "Final Orders") of the U.S. Bankruptcy Court and relevant Canadian court (if applicable), approving the DIP Facility and authorizing the borrowings and security interests thereunder and otherwise in form and substance acceptable to the Administrative Agents and (ii) the filing by the U.S. Borrower, on or before the later of 15 days after the filing of its petition commencing the Bankruptcy or December 19, 2003, of the Plan and the disclosure statement therefor and of appropriate motions related to the solicitation of approval and confirmation of such Plan, which Plan shall be acceptable in all respects to the Administrative Agents and the Lenders and, among other things, (i) provide that all of the GCIP Subordinated Notes shall be converted to U.S. Borrower Common Shares representing 32% of the aggregate outstanding U.S. Borrower Common Shares and U.S. Borrower Preferred Shares (on an as-if-converted basis), subject to dilution for shares designated for management incentive purposes `and shares issued upon exercise of the Warrants, and (ii) approve the Exit Facility and the Term Facility. IV. Certain Documentation Matters The Credit Documentation shall contain representations, warranties, covenants and events of default substantially similar to those set forth in the Existing Credit Agreement and other terms deemed appropriate by the Lenders, including, without limitation: 6 Representations and Warranties: Financial statements (including pro forma financial statements); absence of undisclosed liabilities; no change with Material Adverse Effect; corporate existence; compliance with law; corporate power and authority; enforceability of Credit Documentation; no conflict with law or contractual obligations; no material litigation; no default; ownership of property; liens; intellectual property; taxes; Federal Reserve regulations; ERISA; Canadian pension plans and benefit plans; Investment Company Act; subsidiaries; environmental matters; solvency; labor matters; accuracy of disclosure; and creation and perfection of security interests. Affirmative Covenants: Delivery of financial statements, reports, accountants' letters, projections, officers' certificates and other information requested by the applicable Lenders; payment of other obligations; maintenance of existence and material rights and privileges; compliance with laws and material contractual obligations; maintenance of property and insurance; maintenance of books and records; right of the Lenders to inspect property and books and records; notices of defaults, litigation and other material events; compliance with environmental laws; and further assurances (including, without limitation, with respect to security interests in after-acquired property). Additional affirmative covenants in the Credit Documentation for the DIP Credit Facility shall include: monthly and year-to-date actual to budgeted financial results from prior delivered budget; weekly cash flow updates with comparison of actual cash position to forecasts; delivery of each report or other submission to the U.S. Trustee or the creditors committee in the Bankruptcy; and delivery of copies of pleadings, motions, financial information, and other documentation filed with the Bankruptcy Court or relevant Canadian court, if applicable. Financial Covenants: Financial covenants under the Exit Facility and Term Facility shall include, among others: o Maximum Leverage Ratio. o Minimum Fixed Interest Ratio. o Minimum Adjusted EBITDA. Such financial covenants will be tested on the last day of each fiscal quarter. 7 Financial covenants under the DIP Credit Facility shall include Minimum Adjusted EBITDA and Maximum Facility Usage. Minimum Adjusted EBITDA will be tested monthly. Maximum Facility Usage will be tested continuously. Negative Covenants: U.S. Borrower and its Subsidiaries shall not be permitted to incur new indebtedness subject to certain exceptions including: o In the case of the Exit Facility and the Term Facility, intercompany loans to domestic subsidiaries (other than the Canadian Borrower and China joint venture) not to exceed US$1,000,000 at any time o Intercompany loans from foreign subsidiaries to foreign subsidiaries o Loans from domestic subsidiaries to foreign subsidiaries (other than the Canadian Borrower and China joint venture) up to U.S.$1,000,000 o In the case of the Exit Facility and the Term Facility, Indebtedness of newly acquired subsidiaries up to U.S.$1,000,000 o In the case of the DIP Facility, indebtedness related to certain hedging agreements, limited to an aggregate termination value of $250,000 in the case of interest rate swaps o Indebtedness in respect of reclamation bonds, performance bonds, letters of credit and surety bonds up to $8,500,000 in the aggregate excluding letters of credit supporting reclamation or performance bonds separately included in measuring compliance with this covenant o In the case of the Exit Facility and the Term Facility, Indebtedness incurred to refinance indebtedness permitted pursuant to the above, provided it matures no less than 95 days after the maturity at the Term Facility or Exit Facility. o Indebtedness of Soda Ash Partners up to U.S.$7,500,000 incurred to finance the purchase of newly acquired equipment o In the case of the Exit Facility and the Term Facility, other indebtedness up to U.S.$2,500,000 incurred to finance the purchase of newly acquired equipment U.S. Borrower and its Subsidiaries shall not be permitted to incur any new lien subject to certain exceptions including: 8 o Liens to secure up to U.S.$7,500,000 of obligations of Soda Ash Partners incurred to finance the purchase of newly acquired equipment o In the case of the Exit Facility and the Term Facility, Liens to secure up to U.S.$2,500,000 of other obligations incurred to finance the purchase of newly acquired equipment U.S. Borrower and its Subsidiaries shall not be permitted to merge, consolidate, liquidate, dissolve or sell substantially all assets subject, in the case of the Exit Facility and the Term Facility, to certain exceptions including: o Asset Sales to the Canadian Borrower at fair market value as determined by the Board of Directors o Mergers or asset sales by a Subsidiary that is not a guarantor into or to one of the U.S. Borrower's Subsidiaries provided that domestic companies may merge into or transfer assets to foreign subsidiaries only if the value of assets involved in all such transactions during the term of the Exit Facility does not exceed U.S.$500,000. In the case of the DIP Facility, Borrowers will be able to dispose of assets in Manistee, Michigan and excess real property in Amherstburg, Ontario. U.S. Borrower and its Subsidiaries shall not be permitted to pay dividends or make other payments in respect of capital stock subject to certain exceptions including: o Payments to the U.S. Borrower, the Canadian Borrower or a guarantor o Payments by a non-guarantor to one of the U.S. Borrower's Subsidiaries o Payments by Soda Ash Partners pursuant to its partnership agreement so long as U.S. Borrower (directly or through one or more wholly owned subsidiaries) receives not less than 51% of any such payment o In the case of the Exit Facility and the Term Facility, payments of up to U.S.$250,000 to enable the repurchase of U.S. Borrower Shares held by a management employee or the employees estate upon termination of employment, disability or death. 9 In the case of the Exit Facility and the Term Facility, Capital expenditures by the U.S. Borrower and its Subsidiaries (including Soda Ash Partners) shall be limited based on projections to be agreed upon (plus a cushion of U.S.$2,000,000). Any amount unused in one fiscal year (up to a maximum of U.S.$2,000,000) shall carry over to the next fiscal year but not the following fiscal year. U.S. Borrower and its Subsidiaries shall not be permitted to make new investments subject to certain exceptions including: o Ordinary course employee loans for travel, entertainment and relocation not exceeding US$5,000 individually and US$25,000 in the aggregate o Investments in the Canadian Borrower solely to fund pension obligations o Investments by non-guarantors in the U.S. Borrower and its Subsidiaries o Investments of up to U.S.$5,000,000 in Soda Ash Partners necessary for Soda Ash Partners to operate in the ordinary course and to fund mandatory capital calls o Investments in the China Joint Venture not to exceed U.S.$1,500,000 for out-of-pocket expenses and the contribution of certain assets located in Manistee, Michigan to be identified on a schedule approved by the Administrative Agents and the Lenders o In the case of the Exit Facility and the Term Facility, other investments up to U.S.$2,000,000 Borrowers and their subsidiaries shall not pay any fees or other amounts to Latona until the management and service agreement has been amended as described above in this term sheet. The Plan shall not provide for the payment of any amounts in respect of any claim by Latona for fees in excess of those permitted to be paid under this term sheet. The following shall also be subject to limitations substantially similar to those in the Existing Credit Agreement (subject to such additional limitations in the case of the DIP Facility as the Lenders and the Administrative Agents may require): guarantee obligations; sales of assets; leases; optional payments and modifications of subordinated and other debt instruments; transactions with affiliates; sale and leasebacks; changes in fiscal year; negative pledge clauses; and changes in lines of business. 10 Events of Default: Nonpayment of principal when due; nonpayment of interest or other amounts after a grace period of three business days; material inaccuracy of representations and warranties; violation of covenants (subject, in the case of certain covenants, to a grace period to be agreed upon); cross-default to Indebtedness aggregating $2,500,000 or more; bankruptcy events; certain ERISA events or comparable events under Canadian pension laws and regulations; judgments of $2,500,000 or more (to the extent not insured); actual or asserted invalidity of any guarantee, security document or security interest; failure to maintain at least 51% economic ownership of, and remain the managing partner of, Soda Ash Partners; and a change of control (to be defined in context of new equity ownership of the U.S. Borrower). In addition, the following additional events of default, among others, shall be included in the Credit Documentation for the DIP Credit Facility: appointment of a trustee or examiner; entry of an order affecting the Interim orders or Final Orders without the Administrative Agents' and Required Lenders' approval; the Plan does not provide for the full and final payment of the DIP Facility upon consummation; any person seeks approval of a lien or claim ranking senior to the security interests of the DIP Lenders, except for the permitted carve outs; or conversion of the Bankruptcy to a case under chapter 7. Voting: Amendments and waivers with respect to the Credit Documentation shall require the approval of Lenders holding not less than a majority of the aggregate amount of the Loans, participations in Letters of Credit and unused commitments under the applicable Credit Facility, except that (a) the consent of each Lender directly affected thereby shall be required with respect to (i) reductions in the amount, or extensions of the scheduled date of final maturity, of any Loan, (ii) reductions in the rate of interest or any fee or extensions of any due date thereof, (iii) increases in the amount or extensions of the expiry date of any Lender's commitment and (iv) modifications to the pro rata provisions of the Credit Documentation and (b) the consent of 100% of the Lenders shall be required with respect to (i) modifications to any of the voting percentages and (ii) releases of significant Guarantors or all or substantially all of the collateral. Assignments and Participations: The Lenders shall be permitted to assign and sell participations in their Loans and commitments, subject, in the case of assignments (other than to another Lender or to an 11 affiliate of a Lender), to the consent of the U.S. Administrative Agent and the Issuing Lenders. In the case of partial assignments (other than to another Lender or to an affiliate of a Lender), the minimum assignment amount shall be U.S.$2,000,000 (or the Canadian Dollar equivalent thereof). No minimum shall apply in the case of an assignment of the entire remaining amount of a Lender's DIP Commitment or commitment under the Exit Facility or Term Loan. Participants shall have the same benefits as the Lenders with respect to yield protection and increased cost provisions. Voting rights of participants shall be limited to those matters with respect to which the affirmative vote of the Lender from which it purchased its participation would be required as described under "Voting" above. Pledges of Loans in accordance with applicable law shall be permitted without restriction. Promissory notes shall be issued under the Credit Facilities only upon request. Consistent with the Shareholders Agreement among the Lenders, the documentation for the Credit Facilities will provide that, prior to dates or events to be specified, each Lender will not directly or indirectly sell its interest in the Term Loans or Exit Loans separately from, and without transferring a proportionate amount of, the U.S. Borrower Preferred Shares associated therewith (or the U.S. Borrower Common Shares issued upon conversion of such U.S. Borrower Preferred Shares). Yield Protection: The Credit Documentation shall contain reasonable customary provisions protecting the Lenders against increased costs or loss of yield resulting from changes in reserve, tax, capital adequacy and other requirements of law and from the imposition of or changes in withholding or other taxes. Expenses and Indemnification: The Borrowers shall pay (a) all reasonable out-of-pocket expenses of the Administrative Agents associated with the preparation, execution, delivery and administration of the Credit Documentation and any amendment or waiver with respect thereto, including without limitation, the reasonable fees, disbursements and other charges of counsel, financial advisors and other professionals (and the Lenders shall be entitled solely to reimbursement of the costs of internal counsel) and (b) all reasonable out-of-pocket expenses of the Administrative Agents and Lenders (including the fees, disbursements and other charges of counsel, financial advisors and other professionals) in connection with the enforcement of the Credit Documentation. 12 The Administrative Agents and the Lenders (and their affiliates and their respective officers, directors, employees, advisors and agents) will have no liability for, and will be indemnified and held harmless against, any loss, liability, cost or expense incurred in respect of the Credit Facilities or the use or the proposed use of proceeds thereof (except to the extent resulting from the gross negligence or willful misconduct of the indemnified party). Governing Law and Forum: State of New York. U.S. Counsel to the Administrative Agents and J.P. Morgan, as Arranger: Kelley Drye & Warren LLP. Canadian Counsel to the Canadian Administrative Agent: McMillan Binch LLP. 13