UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended
March 31, 2008
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or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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(Commission File Number)
001-32410
CELANESE CORPORATION
(Exact Name of Registrant as
Specified in its Charter)
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Delaware
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98-0420726
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(State or Other Jurisdiction
of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.)
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1601 West LBJ Freeway,
Dallas, TX
(Address of Principal
Executive Offices)
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75234-6034
(Zip
Code)
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(Registrants telephone number, including area code)
(972) 443-4000
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes
þ
No
o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See definition of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act.
Large Accelerated
Filer
þ
Accelerated
Filer
o
Non-accelerated
Filer
o
Smaller
Reporting
Company
o
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes
o
No
þ
The number of outstanding shares of the registrants
Series A common stock, $0.0001 par value, as of
April 18, 2008 was 150,978,631.
CELANESE
CORPORATION
Form 10-Q
For the Quarterly Period Ended March 31, 2008
TABLE OF CONTENTS
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Page
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PART I FINANCIAL INFORMATION
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Item 1.
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Financial Statements
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a) Unaudited Interim Consolidated Statements of
Operations for the three months ended March 31, 2008 and
2007
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3
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b) Unaudited Consolidated Balance Sheets as of
March 31, 2008 and December 31, 2007
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4
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c) Unaudited Interim Consolidated Statements of
Shareholders Equity and Comprehensive Income (Loss) for
the three months ended March 31, 2008
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5
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d) Unaudited Interim Consolidated Statements of
Cash Flows for the three months ended March 31, 2008 and
2007
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6
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e) Notes to the Unaudited Interim Consolidated
Financial Statements
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7
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Item 2.
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Managements Discussion and Analysis of Financial Condition
and Results of Operations
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25
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Item 3.
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Quantitative and Qualitative Disclosures about Market Risk
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38
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Item 4.
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Controls and Procedures
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38
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PART II OTHER INFORMATION
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Item 1.
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Legal Proceedings
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39
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Item 1A.
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Risk Factors
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39
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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39
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Item 3.
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Defaults Upon Senior Securities
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39
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Item 4.
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Submission of Matters to a Vote of Security Holders
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39
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Item 5.
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Other Information
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39
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Item 6.
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Exhibits
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40
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Signatures
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41
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Certifications
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42
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2
CELANESE
CORPORATION AND SUBSIDIARIES
UNAUDITED
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
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Three Months Ended March 31,
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2008
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2007
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(in $ millions, except for share and per share data)
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Net sales
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1,846
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1,555
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Cost of sales
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(1,428
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)
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(1,196
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Gross profit
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418
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359
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Selling, general and administrative expenses
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(136
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(116
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Amortization of intangible assets (primarily customer related)
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(19
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)
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(18
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Research and development expenses
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(23
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)
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(17
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)
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Other (charges) gains, net
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(16
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)
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(1
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Foreign exchange gain, net
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7
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Gain (loss) on disposition of assets, net
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3
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(1
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Operating profit
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234
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206
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Equity in net earnings of affiliates
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10
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18
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Interest expense
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(67
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)
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(72
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)
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Interest income
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9
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14
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Dividend income cost investments
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28
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15
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Other income (expense), net
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4
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(10
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Earnings from continuing operations before tax and minority
interests
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218
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171
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Income tax provision
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(73
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)
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(49
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)
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Earnings from continuing operations before minority interests
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145
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122
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Minority interests
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Earnings from continuing operations
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145
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122
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Earnings from discontinued operations:
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Earnings from operation of discontinued operations
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43
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Gain on disposal of discontinued operations
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31
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Income tax benefit
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5
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Earnings from discontinued operations
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79
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Net earnings
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145
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201
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Cumulative preferred stock dividends
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(3
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)
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(2
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)
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Net earnings available to common shareholders
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142
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199
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Earnings per common share basic:
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Continuing operations
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0.93
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0.75
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Discontinued operations
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0.50
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Net earnings available to common shareholders
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0.93
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1.25
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Earnings per common share diluted:
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Continuing operations
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0.87
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0.70
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Discontinued operations
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0.45
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Net earnings available to common shareholders
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0.87
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1.15
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Weighted average shares basic:
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151,993,753
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159,284,888
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Weighted average shares diluted:
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167,306,016
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174,442,332
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See the accompanying notes to the unaudited interim consolidated
financial statements.
3
CELANESE
CORPORATION AND SUBSIDIARIES
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As of
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As of
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March 31,
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December 31,
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2008
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2007
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(in $ millions,
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except share amounts)
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ASSETS
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Current assets:
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Cash and cash equivalents
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763
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825
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Receivables:
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Trade third party and affiliates (net of allowance
for doubtful accounts 2008: $17; 2007: $18)
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1,079
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1,009
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Other
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444
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437
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Inventories
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709
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636
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Deferred income taxes
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69
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70
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Marketable securities, at fair value
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24
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46
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Other assets
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42
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40
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Total current assets
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3,130
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3,063
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Investments
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818
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814
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Property, plant and equipment (net of accumulated
depreciation 2008: $944; 2007: $838)
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2,477
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2,362
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Deferred income taxes
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12
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10
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Marketable securities, at fair value
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222
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215
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Other assets
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309
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303
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Goodwill
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890
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866
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Intangible assets, net
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457
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425
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Total assets
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8,315
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8,058
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LIABILITIES AND SHAREHOLDERS EQUITY
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Current liabilities:
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Short-term borrowings and current installments of long-term
debt third party and affiliates
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253
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272
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Trade payables third party and affiliates
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822
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818
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Other liabilities
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931
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888
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Deferred income taxes
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30
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30
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Income taxes payable
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48
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23
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Total current liabilities
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2,084
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2,031
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Long-term debt
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3,351
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3,284
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Deferred income taxes
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286
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265
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Income taxes payable
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239
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220
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Benefit obligations
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686
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696
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Other liabilities
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544
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495
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Minority interests
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6
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5
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Commitments and contingencies
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Shareholders equity:
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Preferred stock, $0.01 par value, 100,000,000 shares
authorized (2008 and 2007: 9,600,000 issued and outstanding)
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Series A common stock, $0.0001 par value,
400,000,000 shares authorized (2008: 163,361,655 issued and
150,941,469 outstanding; 2007: 162,941,287 issued and
152,102,801 outstanding)
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Series B common stock, $0.0001 par value,
100,000,000 shares authorized (2008 and 2007: 0 shares
issued and outstanding)
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Treasury stock, at cost (2008:
12,420,186 shares; 2007: 10,838,486 shares)
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(463
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)
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(403
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)
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Additional paid-in capital
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483
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469
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Retained earnings
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935
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799
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Accumulated other comprehensive income (loss), net
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164
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197
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Total shareholders equity
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1,119
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1,062
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Total liabilities and shareholders equity
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8,315
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8,058
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See the accompanying notes to the unaudited interim consolidated
financial statements.
4
CELANESE
CORPORATION AND SUBSIDIARIES
SHAREHOLDERS
EQUITY AND COMPREHENSIVE INCOME (LOSS)
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For the Three Months Ended March 31, 2008
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Shares Outstanding
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Amount
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(in $ millions except share data)
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Preferred Stock
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Balance as of the beginning of the period
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9,600,000
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Issuance of preferred stock
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Balance as of the end of the period
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9,600,000
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Series A Common Stock
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Balance as of the beginning of the period
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152,102,801
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Issuance of Series A common stock
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Stock option exercises
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420,368
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Purchases of treasury stock, including related fees
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(1,581,700
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)
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Balance as of the end of the period
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150,941,469
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Treasury Stock
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Balance as of the beginning of the period
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10,838,486
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(403
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)
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Purchases of treasury stock, including related fees
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1,581,700
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(60
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)
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Balance as of the end of the period
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12,420,186
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|
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(463
|
)
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|
|
|
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|
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Additional Paid-in Capital
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|
|
|
|
|
|
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Balance as of the beginning of the period
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|
|
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469
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|
Indemnification of demerger liability
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|
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1
|
|
Stock-based compensation
|
|
|
|
|
|
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3
|
|
Stock option exercises, including related tax benefits
|
|
|
|
|
|
|
10
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|
|
|
|
|
|
|
|
|
|
Balance as of the end of the period
|
|
|
|
|
|
|
483
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|
|
|
|
|
|
|
|
|
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Retained Earnings
|
|
|
|
|
|
|
|
|
Balance as of the beginning of the period
|
|
|
|
|
|
|
799
|
|
Net earnings
|
|
|
|
|
|
|
145
|
|
Series A common stock dividends
|
|
|
|
|
|
|
(6
|
)
|
Preferred stock dividends
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
Balance as of the end of the period
|
|
|
|
|
|
|
935
|
|
|
|
|
|
|
|
|
|
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Accumulated Other Comprehensive Income (Loss), Net
|
|
|
|
|
|
|
|
|
Balance as of the beginning of the period
|
|
|
|
|
|
|
197
|
|
Unrealized loss on securities
|
|
|
|
|
|
|
(11
|
)
|
Foreign currency translation
|
|
|
|
|
|
|
30
|
|
Unrealized loss on interest rate swaps
|
|
|
|
|
|
|
(51
|
)
|
Pension and postretirement benefits
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
Balance as of the end of the period
|
|
|
|
|
|
|
164
|
|
|
|
|
|
|
|
|
|
|
Total Shareholders Equity
|
|
|
|
|
|
|
1,119
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income:
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
|
145
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
Unrealized loss on securities
|
|
|
|
|
|
|
(11
|
)
|
Foreign currency translation
|
|
|
|
|
|
|
30
|
|
Unrealized loss on interest rate swaps
|
|
|
|
|
|
|
(51
|
)
|
Pension and postretirement benefits
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
See the accompanying notes to the unaudited interim consolidated
financial statements.
5
CELANESE
CORPORATION AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(in $ millions)
|
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
145
|
|
|
|
201
|
|
Adjustments to reconcile net earnings to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
Other (charges) gains, net of amounts used
|
|
|
8
|
|
|
|
2
|
|
Depreciation, amortization and accretion
|
|
|
86
|
|
|
|
85
|
|
Deferred income taxes, net
|
|
|
20
|
|
|
|
(34
|
)
|
Loss (gain) on disposition of assets, net
|
|
|
(4
|
)
|
|
|
(30
|
)
|
Other, net
|
|
|
41
|
|
|
|
14
|
|
Operating cash used in discontinued operations
|
|
|
(1
|
)
|
|
|
(61
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Trade receivables third party and affiliates, net
|
|
|
(34
|
)
|
|
|
6
|
|
Inventories
|
|
|
(51
|
)
|
|
|
16
|
|
Other assets
|
|
|
(6
|
)
|
|
|
28
|
|
Trade payables third party and affiliates
|
|
|
12
|
|
|
|
(89
|
)
|
Other liabilities
|
|
|
(50
|
)
|
|
|
(126
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
166
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
Capital expenditures on property, plant and equipment
|
|
|
(81
|
)
|
|
|
(49
|
)
|
Acquisitions and related fees, net of cash acquired
|
|
|
|
|
|
|
(269
|
)
|
Net proceeds from sale of businesses and assets
|
|
|
2
|
|
|
|
578
|
|
Capital expenditures related to Ticona Kelsterbach plant
relocation
|
|
|
(28
|
)
|
|
|
|
|
Proceeds from sale of marketable securities
|
|
|
114
|
|
|
|
32
|
|
Purchases of marketable securities
|
|
|
(111
|
)
|
|
|
(1
|
)
|
Changes in restricted cash
|
|
|
|
|
|
|
46
|
|
Other, net
|
|
|
(34
|
)
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
(138
|
)
|
|
|
325
|
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
Short-term borrowings (repayments), net
|
|
|
(50
|
)
|
|
|
(40
|
)
|
Proceeds from long-term debt
|
|
|
6
|
|
|
|
11
|
|
Repayments of long-term debt
|
|
|
(8
|
)
|
|
|
(1
|
)
|
Purchases of treasury stock, including related fees
|
|
|
(60
|
)
|
|
|
|
|
Stock option exercises
|
|
|
7
|
|
|
|
19
|
|
Dividend payments on Series A common stock and preferred
stock
|
|
|
(9
|
)
|
|
|
(8
|
)
|
Other, net
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(112
|
)
|
|
|
(17
|
)
|
|
|
|
|
|
|
|
|
|
Exchange rate effects on cash
|
|
|
22
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(62
|
)
|
|
|
324
|
|
Cash and cash equivalents at beginning of period
|
|
|
825
|
|
|
|
791
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
|
763
|
|
|
|
1,115
|
|
|
|
|
|
|
|
|
|
|
See the accompanying notes to the unaudited interim consolidated
financial statements.
6
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
|
|
1.
|
Description
of the Company and Basis of Presentation
|
Description
of the Company
Celanese Corporation and its subsidiaries (collectively the
Company) is a leading global integrated chemical and
advanced materials company. The Companys business involves
processing chemical raw materials, such as methanol, carbon
monoxide and ethylene, and natural products, including wood
pulp, into value-added chemicals, thermoplastic polymers and
other chemical-based products.
Basis
of Presentation
In this Quarterly Report on
Form 10-Q,
the term Celanese US refers to the Companys
subsidiary, Celanese US Holdings LLC, a Delaware limited
liability company, and not its subsidiaries. The term
Purchaser refers to the Companys subsidiary,
Celanese Europe Holding GmbH & Co. KG, a German
limited partnership, and not its subsidiaries, except where
otherwise indicated. The term Advisor refers to
Blackstone Management Partners, an affiliate of The Blackstone
Group. The term CAG refers to Celanese GmbH,
formerly known as Celanese AG, its consolidated subsidiaries,
its non-consolidated subsidiaries, ventures and other
investments. With respect to CAG shareholder and similar matters
where the context indicates, CAG only refers to
Celanese GmbH.
The unaudited interim consolidated financial statements for the
three months ended March 31, 2008 and 2007 contained in
this Quarterly Report were prepared in accordance with
accounting principles generally accepted in the United States of
America (US GAAP) for all periods presented. The
unaudited interim consolidated financial statements and other
financial information included in this Quarterly Report, unless
otherwise specified, have been presented to separately show the
effects of discontinued operations.
In the opinion of management, the accompanying unaudited
consolidated balance sheets and related unaudited interim
consolidated statements of operations, cash flows and
shareholders equity and comprehensive income (loss)
include all adjustments, consisting only of normal recurring
items, necessary for their fair presentation in conformity with
US GAAP. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with US
GAAP have been condensed or omitted in accordance with rules and
regulations of the Securities and Exchange Commission
(SEC). These unaudited interim consolidated
financial statements should be read in conjunction with the
Celanese Corporation and Subsidiaries consolidated financial
statements as of and for the year ended December 31, 2007,
as filed on February 29, 2008 with the SEC as part of the
Companys Annual Report on
Form 10-K
(the 2007
Form 10-K).
Operating results for the three months ended March 31, 2008
and 2007 are not necessarily indicative of the results to be
expected for the entire year.
Estimates
and Assumptions
The preparation of consolidated financial statements in
conformity with US GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the
reported amounts of revenues, expenses and allocated charges
during the reporting period. Significant estimates pertain to
impairments of goodwill, intangible assets and other long-lived
assets, purchase price allocations, restructuring costs and
other (charges) gains, net, income taxes, pension and other
postretirement benefits, asset retirement obligations,
environmental liabilities and loss contingencies, among others.
Actual results could differ from those estimates.
Reclassifications
The Company has reclassified certain prior period amounts to
conform to the current periods presentation.
7
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
THE UNAUDITED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
The domination and profit and loss transfer agreement (the
Domination Agreement) was approved at the CAG
extraordinary shareholders meeting on July 31, 2004.
The Domination Agreement between CAG and the Purchaser became
effective on October 1, 2004 and cannot be terminated by
the Purchaser in the ordinary course of business until
September 30, 2009. The Companys subsidiaries,
Celanese International Holdings Luxembourg S.à r.l.
(CIH), and Celanese US, have each agreed to provide
the Purchaser with financing to strengthen the Purchasers
ability to fulfill its obligations under, or in connection with,
the Domination Agreement and to ensure that the Purchaser will
perform all of its obligations under, or in connection with, the
Domination Agreement when such obligations become due,
including, without limitation, the obligation to compensate CAG
for any statutory annual loss incurred by CAG during the term of
the Domination Agreement. If CIH
and/or
Celanese US are obligated to make payments under such guarantees
or other security to the Purchaser, the Company may not have
sufficient funds for payments on its indebtedness when due. The
Company has not had to compensate CAG for an annual loss for any
period during which the Domination Agreement has been in effect.
See additional discussion in the 2007
Form 10-K.
|
|
3.
|
Recent
Accounting Pronouncements
|
In March 2008, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 161,
Disclosures about
Derivative Instruments and Hedging Activities, an amendment of
FASB Statement No. 133
(SFAS No. 161). SFAS No. 161
requires enhanced disclosures about a companys derivative
and hedging activities. These enhanced disclosures will discuss
(a) how and why a company uses derivative instruments,
(b) how derivative instruments and related hedged items are
accounted for under FASB Statement No. 133 and its related
interpretations and (c) how derivative instruments and
related hedged items affect a companys financial position,
results of operations and cash flows. SFAS No. 161 is
effective for fiscal years beginning on or after
November 15, 2008, with earlier adoption allowed. The
Company is currently evaluating the impact of adopting
SFAS No. 161.
4. Acquisitions,
Ventures and Divestitures
Acquisitions
On January 31, 2007, the Company completed the acquisition
of the cellulose acetate flake, tow and film businesses of
Acetate Products Limited (APL), a subsidiary of
Corsadi B.V. The purchase price for the transaction was
approximately £57 million ($112 million), in
addition to direct acquisition costs of approximately
£4 million ($7 million). As contemplated prior to
closing of the acquisition, in September 2007, the Company
closed the acquired tow production plant at Little Heath, United
Kingdom. In accordance with the Companys sponsor services
agreement dated January 26, 2005, as amended, the Company
paid the Advisor $1 million in connection with the
acquisition. The acquired business is included in the
Companys Consumer Specialties segment.
On April 6, 2004, the Company acquired 84% of CAG. During
2005, the Company acquired an additional 14% of CAG. As a result
of the effective registration of the Squeeze-Out (as defined in
Note 11) in the commercial register in Germany in
December 2006, the Company acquired the remaining 2% of CAG in
January 2007. The Companys current ownership percentage in
CAG is 100%.
Ventures
In March 2007, the Company entered into a strategic partnership
with Accsys Technologies PLC (Accsys), and its
subsidiary, Titan Wood, to become the exclusive supplier of
acetyl products to Titan Woods technology licensees for
use in wood acetylation. In conjunction with this partnership,
in May 2007, the Company acquired 8,115,883 shares of
Accsys common stock representing approximately 5.45% of
the total voting shares of Accsys
8
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
THE UNAUDITED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
for 22 million ($30 million). The investment is
treated as an available-for-sale security and is included as a
component of current Marketable securities on the Companys
unaudited consolidated balance sheet. In November 2007, the
Company and Accsys announced that they agreed to amend their
business arrangements so that each company will have a
nonexclusive at-will trading and supply relationship
to give both companies greater flexibility. As part of this
amendment, the Company has the ability to sell its common stock
ownership in Accsys through an orderly placement of the
Companys Accsys shares. As of March 31, 2008, the
Company has sold a total of 3,989,162 shares of
Accsys common stock for approximately
11 million ($16 million), which resulted in a
gain of less than $1 million.
Divestitures/Discontinued
Operations
In connection with the Companys strategy to optimize its
portfolio and divest non-core operations, the Company announced
on December 13, 2006 its agreement to sell its Acetyl
Intermediates segments oxo products and derivatives
businesses, including European Oxo GmbH (EOXO), a
50
/
50
venture between CAG and Degussa AG (Degussa),
to Advent International, for a purchase price of
480 million ($636 million) subject to final
agreement adjustments and the successful exercise of the
Companys option to purchase Degussas 50% interest in
EOXO. On February 23, 2007, the option was exercised and
the Company acquired Degussas interest in the venture for
a purchase price of 30 million ($39 million), in
addition to 22 million ($29 million) paid to
extinguish EOXOs debt upon closing of the transaction. The
Company completed the sale of its oxo products and derivatives
businesses, including the acquired 50% interest in EOXO, on
February 28, 2007. The sale included the oxo and
derivatives businesses at the Oberhausen, Germany, and Bay City,
Texas facilities as well as portions of its Bishop, Texas
facility. Also included were EOXOs facilities within the
Oberhausen and Marl, Germany plants. The former oxo and
derivatives businesses acquired by Advent International was
renamed Oxea. Taking into account agreed deductions by the buyer
for pension and other employee benefits and various costs for
separation activities, the Company received proceeds of
approximately 443 million ($585 million) at
closing. The transaction resulted in the recognition of a
$47 million pre-tax gain, which includes certain working
capital and other adjustments, in 2007. Due to certain
lease-back arrangements between the Company and the buyer and
related environmental obligations of the Company, approximately
$51 million of the transaction proceeds attributable to the
fair value of the underlying land at Bay City ($1 million)
and Oberhausen (36 million) is included in deferred
proceeds in long-term Other liabilities, and divested land with
a book value of $14 million (10 million at
Oberhausen and $1 million at Bay City) remains on the
Companys unaudited consolidated balance sheet.
Third party sales of $5 million for the three months ended
March 31, 2007 would have been eliminated upon
consolidation were the divestiture not accounted for as a
discontinued operation.
In accordance with the Companys sponsor services agreement
dated January 26, 2005, as amended, the Company paid the
Advisor $6 million in connection with the sale of the oxo
products and derivatives businesses.
There were no sales and gross profit for discontinued operations
for the three months ended March 31, 2008. Net sales and
gross profit for discontinued operations for the three months
ended March 31, 2007 were $191 million and
$142 million, respectively.
Asset
Sale
In July 2007, the Company reached an agreement with
Babcock & Brown, a worldwide investment firm, which
specializes in real estate and utilities development, to sell
the Companys Pampa, Texas, facility. The Company will
maintain its chemical operations at the site until at least
2009. Proceeds received upon certain milestone events will be
treated as deferred proceeds and included in long-term Other
liabilities until the transaction is complete (expected to be in
2010), as defined in the sales agreement.
9
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
THE UNAUDITED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
Cost
Method Investments
In February 2007, the Company wrote-off its remaining
1 million ($1 million) cost investment in
European Pipeline Development Company B.V. (EPDC)
and expensed 7 million ($9 million) associated
with contingent liabilities that became payable due to the
Companys decision to exit the pipeline development
project. The investment in EPDC related to the construction of a
pipeline system, solely dedicated to the transportation of
propylene, which was to connect Rotterdam via Antwerp,
Netherlands, with the Companys Oberhausen and Marl
production facilities in Germany. However, on February 15,
2007, EPDC shareholders voted to cease the pipeline project as
originally envisaged and go into liquidation. The Company was a
12.5% shareholder of EPDC.
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(in $ millions)
|
|
|
Finished goods
|
|
|
552
|
|
|
|
500
|
|
Work-in-process
|
|
|
30
|
|
|
|
29
|
|
Raw materials and supplies
|
|
|
127
|
|
|
|
107
|
|
|
|
|
|
|
|
|
|
|
Total inventories
|
|
|
709
|
|
|
|
636
|
|
|
|
|
|
|
|
|
|
|
|
|
6.
|
Goodwill
and Intangible Assets, Net
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineered
|
|
|
Consumer
|
|
|
Industrial
|
|
|
Acetyl
|
|
|
|
|
|
|
Materials
|
|
|
Specialties
|
|
|
Specialties
|
|
|
Intermediates
|
|
|
Total
|
|
|
|
(in $ millions)
|
|
|
As of December 31, 2007
|
|
|
277
|
|
|
|
264
|
|
|
|
47
|
|
|
|
278
|
|
|
|
866
|
|
Adjustments to pre-acquisition tax valuation allowances
|
|
|
(5
|
)
|
|
|
(7
|
)
|
|
|
|
|
|
|
(4
|
)
|
|
|
(16
|
)
|
Exchange rate changes
|
|
|
12
|
|
|
|
8
|
|
|
|
2
|
|
|
|
18
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2008
|
|
|
284
|
|
|
|
265
|
|
|
|
49
|
|
|
|
292
|
|
|
|
890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
THE UNAUDITED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
Other
Intangible Assets, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks and
|
|
|
Customer
|
|
|
Developed
|
|
|
|
|
|
|
|
|
|
Licenses
|
|
|
Tradenames
|
|
|
Relationships
|
|
|
Technology
|
|
|
Other
|
|
|
Total
|
|
|
|
(in $ millions)
|
|
|
Gross Asset Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2007
|
|
|
|
|
|
|
85
|
|
|
|
562
|
|
|
|
12
|
|
|
|
12
|
|
|
|
671
|
|
Additions
(1)
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
|
|
Exchange rate changes
|
|
|
|
|
|
|
3
|
|
|
|
34
|
|
|
|
1
|
|
|
|
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2008
|
|
|
28
|
|
|
|
88
|
|
|
|
596
|
|
|
|
13
|
|
|
|
12
|
|
|
|
737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
(228
|
)
|
|
|
(9
|
)
|
|
|
(9
|
)
|
|
|
(246
|
)
|
Current period amortization
|
|
|
|
|
|
|
|
|
|
|
(18
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
(19
|
)
|
Exchange rate changes
|
|
|
|
|
|
|
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2008
|
|
|
|
|
|
|
|
|
|
|
(261
|
)
|
|
|
(9
|
)
|
|
|
(10
|
)
|
|
|
(280
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value as of March 31, 2008
|
|
|
28
|
|
|
|
88
|
|
|
|
335
|
|
|
|
4
|
|
|
|
2
|
|
|
|
457
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Acquisition of a sole and exclusive license to patents and
patent applications related to acetic acid.
|
Aggregate amortization expense for intangible assets with finite
lives during the three months ended March 31, 2008 and 2007
totaled $19 million and $18 million, respectively.
11
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
THE UNAUDITED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(in $ millions)
|
|
|
Short-term borrowings and current installments of long-term
debt third party and affiliates
|
|
|
|
|
|
|
|
|
Current installments of long-term debt
|
|
|
61
|
|
|
|
44
|
|
Short-term borrowings, principally comprised of amounts due to
affiliates
|
|
|
192
|
|
|
|
228
|
|
|
|
|
|
|
|
|
|
|
Total short-term borrowings and current installments of
long-term debt third party and affiliates
|
|
|
253
|
|
|
|
272
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
|
|
|
|
|
|
Senior Credit Facilities: Term Loan facility due 2014
|
|
|
2,891
|
|
|
|
2,855
|
|
Term notes 7.125%, due 2009
|
|
|
14
|
|
|
|
14
|
|
Pollution control and industrial revenue bonds, interest rates
ranging from 5.7% to 6.7%, due at various dates through 2030
|
|
|
181
|
|
|
|
181
|
|
Obligations under capital leases and other secured borrowings
due at various dates through 2023
|
|
|
146
|
|
|
|
110
|
|
Other bank obligations, interest rates ranging from 5.9% to
7.1%, due at various dates through 2014
|
|
|
180
|
|
|
|
168
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
3,412
|
|
|
|
3,328
|
|
Less: Current installments of long-term debt
|
|
|
61
|
|
|
|
44
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
|
3,351
|
|
|
|
3,284
|
|
|
|
|
|
|
|
|
|
|
Senior
Credit Facility
The Companys senior credit agreement consists of
$2,280 million of US dollar-denominated and
400 million of Euro-denominated term loans due 2014,
a $650 million revolving credit facility terminating in
2013 and a $228 million credit-linked revolving facility
terminating in 2014. Borrowings under the senior credit
agreement bear interest at a variable interest rate based on
LIBOR (for US dollars) or EURIBOR (for Euros), as applicable,
or, for US dollar-denominated loans under certain circumstances,
a base rate, in each case plus an applicable margin. The
applicable margin for the term loans and any loans under the
credit-linked revolving facility is 1.75%, subject to potential
reductions as defined in the senior credit agreement. As of
March 31, 2008, the applicable margin was 1.5% and
continues to be subject to potential adjustments as defined in
the senior credit agreement. The term loans under the senior
credit agreement are subject to amortization at 1% of the
initial principal amount per annum, payable quarterly,
commencing in July 2007. The remaining principal amount of the
term loans is due on April 2, 2014.
As of March 31, 2008, there were $129 million of
letters of credit issued under the credit-linked revolving
facility and $99 million remained available for borrowing.
As of March 31, 2008, there were no outstanding borrowings
or letters of credit issued under the revolving credit facility;
accordingly, $650 million remained available for borrowing.
The senior credit agreement is guaranteed by Celanese Holdings
LLC and certain domestic subsidiaries of Celanese US, and is
secured by a lien on substantially all assets of Celanese US and
such guarantors, subject to certain agreed exceptions, pursuant
to the Guarantee and Collateral Agreement, dated as of
April 2, 2007, by and
12
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
THE UNAUDITED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
among Celanese Holdings LLC, Celanese US, certain subsidiaries
of Celanese US and Deutsche Bank AG, New York Branch, as
Administrative Agent and as Collateral Agent.
The Company is in compliance with all of the covenants related
to its debt agreements as of March 31, 2008.
Interest
Rate Risk Management
To reduce the interest rate risk inherent in the Companys
variable rate debt, the Company utilizes interest rate swap
agreements to convert a portion of the variable rate debt to a
fixed rate obligation. These interest rate swap agreements are
designated as cash flow hedges. In March 2007, the Company
entered into various US dollar and Euro interest rate swap
agreements, which became effective on April 2, 2007, with
notional amounts of $1.6 billion and
150 million, respectively. Effective January 2,
2008, the notional amount of the existing $1.6 billion US
dollar swap decreased by $400 million. On November 16,
2007, the Company entered into an additional US dollar interest
rate swap with a notional amount of $400 million, which
became effective on January 2, 2008.
The components of current Other liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(in $ millions)
|
|
|
Salaries and benefits
|
|
|
131
|
|
|
|
168
|
|
Environmental
|
|
|
19
|
|
|
|
19
|
|
Restructuring
|
|
|
38
|
|
|
|
40
|
|
Insurance
|
|
|
39
|
|
|
|
41
|
|
Sorbates litigation
|
|
|
183
|
|
|
|
170
|
|
Asset retirement obligations
|
|
|
14
|
|
|
|
16
|
|
Derivatives
|
|
|
216
|
|
|
|
129
|
|
Other
|
|
|
291
|
|
|
|
305
|
|
|
|
|
|
|
|
|
|
|
Total current Other liabilities
|
|
|
931
|
|
|
|
888
|
|
|
|
|
|
|
|
|
|
|
The components of long-term Other liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(in $ millions)
|
|
|
Environmental
|
|
|
92
|
|
|
|
96
|
|
Insurance
|
|
|
87
|
|
|
|
78
|
|
Deferred revenue
|
|
|
68
|
|
|
|
71
|
|
Deferred proceeds (see Notes 4 and 17)
|
|
|
100
|
|
|
|
93
|
|
Asset retirement obligations
|
|
|
32
|
|
|
|
31
|
|
Derivatives
|
|
|
61
|
|
|
|
37
|
|
Other
|
|
|
104
|
|
|
|
89
|
|
|
|
|
|
|
|
|
|
|
Total long-term Other liabilities
|
|
|
544
|
|
|
|
495
|
|
|
|
|
|
|
|
|
|
|
13
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
THE UNAUDITED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
The components of net periodic benefit costs recognized are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
Postretirement Benefits
|
|
|
|
Three Months Ended
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(in $ millions)
|
|
|
Components of net periodic benefit cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
|
7
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
Interest cost
|
|
|
42
|
|
|
|
44
|
|
|
|
4
|
|
|
|
5
|
|
Expected return on plan assets
|
|
|
(47
|
)
|
|
|
(50
|
)
|
|
|
|
|
|
|
|
|
Recognized actuarial (gain) loss
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
|
2
|
|
|
|
3
|
|
|
|
3
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company expects to contribute $40 million to its
defined benefit pension plans in 2008. As of March 31,
2008, $8 million of contributions have been made. The
Companys estimates of its US defined benefit pension plan
contributions reflect the provisions of the Pension Funding
Equity Act of 2004 and the Pension Protection Act of 2006.
The Company expects to make benefit payments of $34 million
under the provisions of its other postretirement benefit plans
in 2008. As of March 31, 2008, $8 million of benefit
payments have been made.
The Company participates in multiemployer defined benefit plans
in Europe covering certain employees. The Companys
contributions to the multiemployer defined benefit plans are
based on specified percentages of employee contributions and
aggregate $2 million and $2 million for the three
months ended March 31, 2008 and 2007, respectively.
As a result of the sale of the oxo products and derivatives
businesses in February 2007 (see Note 4), there was a
reduction of approximately 1,076 employees triggering a
settlement and remeasurement of the affected pension plans due
to certain changes in actuarial valuation assumptions. The
settlement and remeasurement resulted in a net increase in the
projected benefit obligation of $44 million with an offset
to Accumulated other comprehensive income (loss), net (net of
tax of $1 million) and a settlement gain of
$11 million (included in Gain on disposal of discontinued
operations) for the pension plan during the three months ended
March 31, 2007.
On February 8, 2008, the Companys Board of Directors
authorized the repurchase of up to $400 million of the
Companys Series A common stock. The authorization
gives management discretion in determining the conditions under
which shares may be repurchased. During the three months ended
March 31, 2008, the Company repurchased
1,581,700 shares of its Series A common stock at an
average purchase price of $37.91 per share for a total of
approximately $60 million pursuant to this authorization.
Purchases of treasury stock reduce the number of shares
outstanding and the repurchased shares may be used by the
Company for compensation programs utilizing the Companys
stock and other corporate purposes. The Company accounts for
treasury stock using the cost method and includes treasury stock
as a component of Shareholders equity.
14
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
THE UNAUDITED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
Other
Comprehensive Income (Loss)
Other comprehensive income (loss) totaled $(33) million and
$(40) million, respectively, for the three months ended
March 31, 2008 and 2007. These amounts were net of tax
benefit of $0 million and $1 million, respectively,
for the three months ended March 31, 2008 and 2007.
|
|
11.
|
Commitments
and Contingencies
|
The Company is involved in a number of legal proceedings,
lawsuits and claims incidental to the normal conduct of
business, relating to such matters as product liability,
antitrust, past waste disposal practices and release of
chemicals into the environment. While it is impossible at this
time to determine with certainty the ultimate outcome of these
proceedings, lawsuits and claims, the Company believes, based on
the advice of legal counsel, that adequate provisions have been
made although the ultimate outcomes may have a material adverse
effect on the financial position, results of operations or cash
flows in any given accounting period.
The following disclosure should be read in conjunction with the
2007
Form 10-K.
Plumbing
Actions
As of both March 31, 2008 and December 31, 2007, the
Company has remaining accruals of $65 million for cases
related to the plumbing actions, of which $3 million is
included in current Other liabilities. The Company believes that
the plumbing actions are adequately provided for in the
Companys consolidated financial statements and that the
plumbing actions will not have a material adverse effect on its
financial position. However, if the Company were to incur an
additional charge for this matter, such a charge would not be
expected to have a material adverse effect on its financial
position, but may have a material adverse effect on the
Companys results of operations or cash flows in any given
accounting period. The Company continuously monitors this matter
and assesses the adequacy of this reserve. The Company has
reached final settlements with CNA Holdings insurers for
their responsibility related to these claims.
Plumbing
Insurance Indemnifications
CAG entered into agreements with insurance companies related to
product liability settlements associated with
Celcon
®
plumbing claims. These agreements, except those with insolvent
insurance companies, require the Company to indemnify
and/or
defend these insurance companies in the event that third parties
seek additional monies for matters released in these agreements.
The indemnifications in these agreements do not provide for time
limitations.
In certain of the agreements, CAG received a fixed settlement
amount. The indemnities under these agreements generally are
limited to, but in some cases are greater than, the amount
received in settlement from the insurance company. The maximum
exposure under these indemnifications is $95 million. Other
settlement agreements have no stated limits.
There are other agreements whereby the settling insurer agreed
to pay a fixed percentage of claims that relate to that
insurers policies. The Company has provided
indemnifications to the insurers for amounts paid in excess of
the settlement percentage. These indemnifications do not provide
for monetary or time limitations.
The Company has reserves associated with these product liability
claims.
Sorbates
Antitrust Actions
Based on the advice of external counsel and a review of the
existing facts and circumstances relating to the sorbates
antitrust matters, including the status of government
investigations, as well as civil claims filed and settled, the
Company has remaining accruals as of March 31, 2008 of
$183 million, included in current Other liabilities. As
15
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
THE UNAUDITED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
of December 31, 2007, the accrual was $170 million.
The change in the accrual amounts is primarily due to
fluctuations in the currency exchange rate between the US dollar
and the Euro. Although the outcome of this matter cannot be
predicted with certainty, the Companys best estimate of
the range of possible additional future losses and fines (in
excess of amounts already accrued), including any that may
result from the above noted governmental proceedings, as of
March 31, 2008 is between $0 and $9 million. The
estimated range of such possible future losses is based on the
advice of external counsel taking into consideration potential
fines and claims, both civil and criminal that may be imposed or
made in other jurisdictions.
Pursuant to the Demerger Agreement with Hoechst AG
(Hoechst), CAG was assigned the obligation related
to the sorbates antitrust matter. However, Hoechst, and its
legal successors, agreed to indemnify CAG for 80% of any costs
CAG may incur relative to this matter. Accordingly, CAG has
recognized a receivable from Hoechst and a corresponding
contribution of capital, net of tax, from this indemnification.
As of March 31, 2008 and December 31, 2007, the
Company has receivables, recorded within current Other assets,
relating to the sorbates indemnification from Hoechst totaling
$147 million and $137 million, respectively.
Shareholder
Litigation
Several minority shareholders of CAG initiated special award
proceedings seeking the courts review of the amounts of
the fair cash compensation and of the guaranteed annual payment
offered under the Domination Agreement. On March 14, 2005,
the Frankfurt District Court dismissed on grounds of
inadmissibility the motions of all minority shareholders
regarding the initiation of these special award proceedings. In
January 2006, the Frankfurt Higher District Court ruled on
appeal that the claims were admissible, and the proceedings
would therefore continue in the lower court. On
December 12, 2006, the Frankfurt District Court appointed
an expert to help determine the value of CAG. In the first
quarter of 2007, certain minority shareholders that received
66.99 per share as fair cash compensation also filed
award proceedings challenging the amount they received as fair
cash compensation.
As a result of the special proceedings discussed above, amounts
paid as fair cash compensation to certain minority shareholders
of CAG could be increased by the court such that minority
shareholders could be awarded amounts in excess of the fair cash
compensation they have previously received.
Guarantees
The Company has agreed to guarantee or indemnify third parties
for environmental and other liabilities pursuant to a variety of
agreements, including asset and business divestiture agreements,
leases, settlement agreements, and various agreements with
affiliated companies. Although many of these obligations contain
monetary
and/or
time
limitations, others do not provide such limitations.
The Company has accrued for all probable and reasonably
estimable losses associated with all known matters or claims
that have been brought to its attention.
These known obligations include the following:
Demerger
Obligations
The Company has obligations to indemnify Hoechst, and its legal
successors, for various liabilities under the Demerger Agreement
as follows:
|
|
|
|
|
The Company agreed to indemnify Hoechst, and its legal
successors, for environmental liabilities associated with
contamination arising under 19 divestiture agreements entered
into by Hoechst prior to the demerger.
|
16
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
THE UNAUDITED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
The Companys obligation to indemnify Hoechst, and its
legal successors, is subject to the following thresholds:
|
|
|
|
|
The Company will indemnify Hoechst, and its legal successors,
against those liabilities up to 250 million;
|
|
|
|
Hoechst, and its legal successors, will bear those liabilities
exceeding 250 million, however the Company will
reimburse Hoechst, and its legal successors, for one-third of
those liabilities for amounts that exceed 750 million
in the aggregate.
|
The aggregate maximum amount of environmental indemnifications
under the remaining divestiture agreements that provide for
monetary limits is approximately 750 million. Three
of the divested agreements do not provide for monetary limits.
Based on the estimate of the probability of loss under this
indemnification, the Company has environmental reserves recorded
in long-term Other liabilities of $27 million and
$27 million as of March 31, 2008 and December 31,
2007, respectively, for this contingency. Where the Company is
unable to reasonably determine the probability of loss or
estimate such loss under an indemnification, the Company has not
recognized any related liabilities (see Note 18).
The Company has also undertaken in the Demerger Agreement to
indemnify Hoechst, and its legal successors, to the extent that
Hoechst is required to discharge liabilities, including tax
liabilities, associated with businesses that were included in
the demerger where such liabilities were not demerged, due to
legal restrictions on the transfers of such items. These
indemnities do not provide for any monetary or time limitations.
The Company has not provided for any reserves associated with
this indemnification. The Company has not made any payments to
Hoechst, and its legal successors, during the three months ended
March 31, 2008 and 2007, respectively, in connection with
this indemnification.
Divestiture
Obligations
The Company and its predecessor companies agreed to indemnify
third-party purchasers of former businesses and assets for
various pre-closing conditions, as well as for breaches of
representations, warranties and covenants. Such liabilities also
include environmental liability, product liability, antitrust
and other liabilities. These indemnifications and guarantees
represent standard contractual terms associated with typical
divestiture agreements and, other than environmental
liabilities, the Company does not believe that they expose the
Company to any significant risk.
The Company has divested numerous businesses, investments and
facilities, through agreements containing indemnifications or
guarantees to the purchasers. Many of the obligations contain
monetary
and/or
time
limitations, ranging from one year to thirty years. The
aggregate amount of guarantees provided for under these
agreements is approximately $2.5 billion as of
March 31, 2008. Other agreements do not provide for any
monetary or time limitations.
Based on historical claims experience and its knowledge of the
sites and businesses involved, the Company believes that it is
adequately reserved for these matters. As of March 31, 2008
and December 31, 2007, the Company has environmental
reserves recorded in long-term Other liabilities in the
aggregate of $25 million and $27 million,
respectively, for these matters.
Polyester
Staple Antitrust Litigation
CNA Holdings, the successor in interest to Hoechst Celanese
Corporation (HCC), Celanese Americas Corporation and
CAG (collectively, the Celanese Entities) and
Hoechst, the former parent of HCC, were named as defendants in
two actions (involving 25 individual participants) filed in
September 2006 by US purchasers of polyester staple fibers
manufactured and sold by HCC. The actions allege that the
defendants participated in a
17
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
THE UNAUDITED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
conspiracy to fix prices, rig bids and allocate customers of
polyester staple sold in the United States. These actions were
consolidated for pre-trial discovery by a Multi-District
Litigation Panel in the United States District Court for the
Western District of North Carolina and are styled
In re
Polyester Staple Antitrust Litigation
, MDL 1516. Already
pending in that consolidated proceeding were five other actions
commenced by five other alleged US purchasers of polyester
staple fibers manufactured and sold by the Celanese Entities,
which also allege the defendants participation in the
conspiracy. The Companys motions for summary judgment
related to these cases were denied in April 2008. Mandatory
mediation is set for May 13, 2008 and a trial is scheduled
for June 2, 2008.
In 1998, HCC sold its polyester staple business as part of its
sale of its Film & Fibers Division to KoSa, Inc. In a
complaint now pending against the Celanese Entities and Hoechst
in the United States District Court for the Southern District of
New York, Koch Industries, Inc., KoSa B.V. (KoSa),
Arteva Specialties, S.à r.l. (Arteva
Specialties) and Arteva Services, S.à r.l. seek,
among other things, indemnification under the asset purchase
agreement pursuant to which KoSa and Arteva Specialties agreed
to purchase the defendants polyester business for all
damages related to the defendants participation in, and
failure to disclose, the alleged conspiracy, or alternatively,
rescission of the agreement. No trial date has been set for this
case.
The Company does not believe that the Celanese Entities engaged
in any conduct that should result in liability in these actions.
However, the outcome of the foregoing actions cannot be
predicted with certainty.
Other
Obligations
The Company is secondarily liable under a lease agreement which
the Company assigned to a third party. The lease expires on
April 30, 2012. The lease liability for the period from
April 1, 2008 to April 30, 2012 is estimated to be
approximately $32 million.
The Company has agreed to indemnify various insurance carriers,
for amounts not in excess of the settlements received, from
claims made against these carriers subsequent to such
settlement. The aggregate amount of guarantees under these
settlements, which is unlimited in term, is approximately
$10 million.
As indemnification obligations often depend on the occurrence of
unpredictable future events, the future costs associated with
them cannot be determined at this time.
Other
Matters
As of March 31, 2008, Celanese Ltd. and/or CNA Holdings,
Inc., both US subsidiaries of the Company, are defendants in
approximately 631 asbestos cases. During the three months ended
March 31, 2008, 27 new cases were filed against the
Company, 24 cases were resolved and two cases were added to the
count after further analysis by outside counsel. Because many of
these cases involve numerous plaintiffs, the Company is subject
to claims significantly in excess of the number of actual cases.
The Company has reserves for defense costs related to claims
arising from these matters. The Company believes that there is
not significant exposure related to these matters.
|
|
12.
|
Fair
Value Measurements
|
On January 1, 2008, the Company adopted the provisions of
SFAS No. 157,
Fair Value Measurements
(SFAS No. 157) for financial assets
and liabilities. SFAS No. 157 became effective for
financial assets and liabilities on January 1, 2008. On
January 1, 2009, the Company will apply the provisions of
SFAS No. 157 for
non-recurring
fair value measurements of non-financial assets and liabilities,
such as goodwill,
indefinite-lived
intangible assets, property, plant and equipment and asset
retirement obligations. SFAS No. 157 defines fair
value, thereby eliminating inconsistencies in guidance found in
various prior accounting pronouncements, and increases
disclosures surrounding fair value calculations.
18
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
THE UNAUDITED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
SFAS No. 157 establishes a three-tiered fair value
hierarchy that prioritizes inputs to valuation techniques used
in fair value calculations. The three levels of inputs are
defined as follows:
|
|
|
|
Level 1
|
unadjusted quoted prices for identical assets or liabilities in
active markets accessible by the Company
|
|
|
Level 2
|
inputs that are observable in the marketplace other than those
inputs classified as Level 1
|
|
|
Level 3
|
inputs that are unobservable in the marketplace and significant
to the valuation
|
SFAS No. 157 requires the Company to maximize the use
of observable inputs and minimize the use of unobservable
inputs. If a financial instrument uses inputs that fall in
different levels of the hierarchy, the instrument will be
categorized based upon the lowest level of input that is
significant to the fair value calculation.
The Companys financial assets and liabilities measured at
fair value on a recurring basis include securities available for
sale and derivative financial instruments. Securities available
for sale include US government and corporate bonds,
mortgage-backed securities and equity securities. Derivative
financial instruments include interest rate swaps and foreign
currency forwards and swaps.
Marketable Securities.
Where possible, the
Company utilizes quoted market prices to measure debt and equity
securities; such items are classified as Level 1 in the
hierarchy and include equity securities and US government bonds.
When quoted market prices for identical assets are unavailable,
varying valuation techniques are used. Common inputs in valuing
these assets include, among others, benchmark yields, issuer
spreads, forward mortgage-backed securities trade prices and
recently reported trades. Such assets are classified as
Level 2 in the hierarchy and typically include
mortgage-backed securities, corporate bonds and other US
government securities.
Derivatives.
Derivative financial instruments
are valued in the market using discounted cash flow techniques.
These techniques incorporate Level 1 and Level 2
inputs such as interest rates and foreign currency exchange
rates. These market inputs are utilized in the discounted cash
flow calculation considering the instruments term,
notional amount, discount rate and credit risk. Significant
inputs to the derivative valuation for interest rate swaps and
foreign currency forwards and swaps are observable in the active
markets and are classified as Level 2 in the hierarchy.
19
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
THE UNAUDITED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
The following fair value hierarchy table presents information
about the Companys assets and liabilities measured at fair
value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement as of
|
|
|
|
|
|
|
March 31, 2008 Using
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
|
|
|
|
|
|
|
Active Markets for
|
|
|
Significant Other
|
|
|
|
|
|
|
Identical Assets
|
|
|
Observable Inputs
|
|
|
As of
|
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
March 31, 2008
|
|
|
|
(in $ millions)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities
|
|
|
109
|
|
|
|
137
|
|
|
|
246
|
|
Derivatives (included in current Other assets)
|
|
|
|
|
|
|
18
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
109
|
|
|
|
155
|
|
|
|
264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Current derivatives (included in current Other liabilities)
|
|
|
|
|
|
|
216
|
|
|
|
216
|
|
Long-term derivatives (included in long-term Other liabilities)
|
|
|
|
|
|
|
61
|
|
|
|
61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
|
|
|
277
|
|
|
|
277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13.
|
Other
(Charges) Gains, Net
|
The components of Other (charges) gains, net are as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(in $ millions)
|
|
|
Employee termination benefits
|
|
|
(7
|
)
|
|
|
|
|
Plant/office closures
|
|
|
(7
|
)
|
|
|
|
|
Ticona Kelsterbach plant relocation (see Note 17)
|
|
|
(2
|
)
|
|
|
|
|
Other
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
Total Other (charges) gains, net
|
|
|
(16
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
Employee termination benefits relate primarily to the
Companys continued strategy to simplify and optimize its
business portfolio. Plant/office closures includes accelerated
depreciation expense primarily related to the planned shutdown
of the Companys Pampa, Texas plant.
Employee termination benefits recorded as Other (charges) gains,
net are recorded as additions to the restructuring reserves. The
changes in the restructuring reserves from December 31,
2007 through March 31, 2008 are as follows:
|
|
|
|
|
|
|
(in $ millions)
|
|
|
Restructuring reserves as of December 31, 2007
|
|
|
45
|
|
Additions
|
|
|
7
|
|
Cash payments
|
|
|
(12
|
)
|
|
|
|
|
|
Restructuring reserves as of March 31, 2008
|
|
|
40
|
|
|
|
|
|
|
20
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
THE UNAUDITED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
Included in the restructuring reserves are $2 million and
$5 million as of March 31, 2008 and December 31,
2007, respectively, of reserves recorded in long-term Other
liabilities.
The Companys effective income tax rate for the three
months ended March 31, 2008 was 33% compared
to 29% for the three months ended March 31, 2007. The
effective income tax rate increased over the period ended
March 31, 2007 primarily due to the US income tax effect on
increased foreign earnings and dividends and an increase to FASB
Interpretation 48,
Accounting for Uncertainty in Income
Taxes an interpretation of FASB Statement
No. 109,
(FIN 48) liabilities for
unrecognized tax benefits and related interest. This increase
was partially offset by earnings in lower tax jurisdictions.
FIN 48 liabilities for unrecognized tax benefits and related
interest and penalties are recorded as long-term Income taxes
payable.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineered
|
|
|
Consumer
|
|
|
Industrial
|
|
|
Acetyl
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Materials
|
|
|
Specialties
|
|
|
Specialties
|
|
|
Intermediates
|
|
|
Activities
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(in $ millions)
|
|
|
As of and for the three months ended March 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
294
|
|
|
|
282
|
|
|
|
365
|
|
|
|
1,096
|
(1)
|
|
|
|
|
|
|
(191
|
)
|
|
|
1,846
|
|
Earnings (loss) from continuing operations before tax and
minority interests
|
|
|
39
|
|
|
|
50
|
|
|
|
17
|
|
|
|
206
|
|
|
|
(94
|
)
|
|
|
|
|
|
|
218
|
|
Depreciation and amortization
|
|
|
20
|
|
|
|
14
|
|
|
|
14
|
|
|
|
32
|
|
|
|
3
|
|
|
|
|
|
|
|
83
|
|
Capital
expenditures
(2)
|
|
|
13
|
|
|
|
10
|
|
|
|
11
|
|
|
|
24
|
|
|
|
3
|
|
|
|
|
|
|
|
61
|
|
Total assets
|
|
|
1,876
|
|
|
|
1,178
|
|
|
|
1,055
|
|
|
|
2,769
|
|
|
|
1,437
|
|
|
|
|
|
|
|
8,315
|
|
For the three months ended March 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
262
|
|
|
|
269
|
|
|
|
346
|
|
|
|
839
|
(1)
|
|
|
1
|
|
|
|
(162
|
)
|
|
|
1,555
|
|
Earnings (loss) from continuing operations before tax and
minority interests
|
|
|
50
|
|
|
|
47
|
|
|
|
12
|
|
|
|
136
|
|
|
|
(74
|
)
|
|
|
|
|
|
|
171
|
|
Depreciation and amortization
|
|
|
17
|
|
|
|
11
|
|
|
|
14
|
|
|
|
24
|
|
|
|
2
|
|
|
|
|
|
|
|
68
|
|
Capital expenditures
|
|
|
6
|
|
|
|
9
|
|
|
|
3
|
|
|
|
29
|
|
|
|
2
|
|
|
|
|
|
|
|
49
|
|
Total assets as of December 31, 2007
|
|
|
1,751
|
|
|
|
1,157
|
|
|
|
995
|
|
|
|
2,530
|
|
|
|
1,625
|
|
|
|
|
|
|
|
8,058
|
|
|
|
(1)
|
Includes $191 million and $162 million of
inter-segment sales eliminated in consolidation for the three
months ended March 31, 2008 and 2007, respectively.
|
|
(2)
|
Includes decrease in accrued capital expenditures of
$20 million.
|
21
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
THE UNAUDITED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
Basic
|
|
|
Diluted
|
|
|
Basic
|
|
|
Diluted
|
|
|
|
(in $ millions, except for share and per share data)
|
|
|
Income from continuing operations
|
|
|
145
|
|
|
|
145
|
|
|
|
122
|
|
|
|
122
|
|
Income from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
79
|
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
145
|
|
|
|
145
|
|
|
|
201
|
|
|
|
201
|
|
Less: cumulative preferred stock dividends
|
|
|
(3
|
)
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings available to common shareholders
|
|
|
142
|
|
|
|
145
|
|
|
|
199
|
|
|
|
201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares basic
|
|
|
151,993,753
|
|
|
|
151,993,753
|
|
|
|
159,284,888
|
|
|
|
159,284,888
|
|
Dilutive stock options
|
|
|
|
|
|
|
2,780,077
|
|
|
|
|
|
|
|
3,116,731
|
|
Dilutive restricted stock
|
|
|
|
|
|
|
483,080
|
|
|
|
|
|
|
|
|
|
Assumed conversion of preferred stock
|
|
|
|
|
|
|
12,049,106
|
|
|
|
|
|
|
|
12,040,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares diluted
|
|
|
151,993,753
|
|
|
|
167,306,016
|
|
|
|
159,284,888
|
|
|
|
174,442,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
0.93
|
|
|
|
0.87
|
|
|
|
0.75
|
|
|
|
0.70
|
|
Income from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
0.50
|
|
|
|
0.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
0.93
|
|
|
|
0.87
|
|
|
|
1.25
|
|
|
|
1.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17.
|
Ticona
Kelsterbach Plant Relocation
|
In 2007, the Company finalized a settlement agreement with the
Frankfurt, Germany, Airport (Fraport) to relocate
the Kelsterbach, Germany business, resolving several years of
legal disputes related to the planned Frankfurt airport
expansion. As a result of the settlement, the Company will
transition Ticonas operations from Kelsterbach to the
Hoechst Industrial Park in the Rhine Main area in Germany by
mid-2011. Over a five-year period, Fraport will pay Ticona a
total of 670 million to offset the costs associated
with the transition of the business from its current location
and the closure of the Kelsterbach plant. The amount received
from Fraport has been accounted for as deferred proceeds and is
included in long-term Other liabilities in the unaudited
consolidated balance sheets as of March 31, 2008 and
December 31, 2007.
Below is a summary of the financial statement impact associated
with the Ticona Kelsterbach plant relocation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Total From
|
|
|
|
March 31,
|
|
|
Inception Through
|
|
|
|
2008
|
|
|
2007
|
|
|
March 31, 2008
|
|
|
|
(in $ millions)
|
|
|
Proceeds received from Fraport
|
|
|
|
|
|
|
|
|
|
|
26
|
|
Costs expensed
|
|
|
2
|
|
|
|
|
|
|
|
7
|
|
Costs capitalized
|
|
|
21
(1
|
)
|
|
|
|
|
|
|
61
|
|
|
|
(1)
|
Includes decrease in accrued capital expenditures of
$7 million.
|
22
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
THE UNAUDITED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
General
The Company is subject to
environmental laws and regulations worldwide which impose
limitations on the discharge of pollutants into the air and
water and establish standards for the treatment, storage and
disposal of solid and hazardous wastes. The Company believes
that it is in substantial compliance with all applicable
environmental laws and regulations. The Company is also subject
to retained environmental obligations specified in various
contractual agreements arising from divestiture of certain
businesses by the Company or one of its predecessor companies.
The Companys environmental reserves for remediation
matters were $111 million and $115 million as of
March 31, 2008 and December 31, 2007, respectively.
Remediation
Due to its industrial history and
through retained contractual and legal obligations, the Company
has the obligation to remediate specific areas on its own sites
as well as on divested, orphan or US Superfund sites. In
addition, as part of the demerger agreement between the Company
and Hoechst, a specified portion of the responsibility for
environmental liabilities from a number of Hoechst divestitures
was transferred to the Company. The Company provides for such
obligations when the event of loss is probable and reasonably
estimable. The Company believes that environmental remediation
costs will not have a material adverse effect on the financial
position of the Company, but may have a material adverse effect
on the results of operations or cash flows in any given
accounting period.
US Superfund Sites
In the US, the Company may
be subject to substantial claims brought by US federal or state
regulatory agencies or private individuals pursuant to statutory
authority or common law. In particular, the Company has a
potential liability under the US Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980,
as amended, and related state laws (collectively referred to as
Superfund) for investigation and cleanup costs at
approximately 50 sites. At most of these sites, numerous
companies, including certain companies comprising the Company,
or one of its predecessor companies, have been notified that the
Environmental Protection Agency, state governing bodies or
private individuals consider such companies to be potentially
responsible parties (PRP) under Superfund or related
laws. The proceedings relating to these sites are in various
stages. The cleanup process has not been completed at most sites
and the status of the insurance coverage for most of these
proceedings is uncertain. Consequently, the Company cannot
determine accurately its ultimate liability for investigation or
cleanup costs at these sites. As of both March 31, 2008 and
December 31, 2007, the Company had provisions totaling
$13 million for US Superfund sites.
As events progress at each site for which it has been named a
PRP, the Company accrues, as appropriate, a liability for site
cleanup. Such liabilities include all costs that are probable
and can be reasonably estimated. In establishing these
liabilities, the Company considers its shipment of waste to a
site, its percentage of total waste shipped to the site, the
types of wastes involved, the conclusions of any studies, the
magnitude of any remedial actions that may be necessary and the
number and viability of other PRPs. Often the Company joins with
other PRPs to sign joint defense agreements that settle, among
PRPs, each partys percentage allocation of costs at the
site. Although the ultimate liability may differ from the
estimate, the Company routinely reviews the liabilities and
revises the estimate, as appropriate, based on the most current
information available.
Additional information relating to environmental remediation
activity is contained in the footnotes to the Companys
consolidated financial statements included in the 2007
Form 10-K.
On April 4, 2008, the Company declared a cash dividend on
its 4.25% convertible perpetual preferred stock amounting to
approximately $2 million and a cash dividend of $0.04 per
share on its Series A common stock amounting to
approximately $6 million. Both cash dividends are for the
period February 1, 2008 to April 30, 2008 and will be
paid on May 1, 2008 to holders of record as of
April 15, 2008.
23
CELANESE
CORPORATION AND SUBSIDIARIES
NOTES TO
THE UNAUDITED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
In April 2008, the Company sold 1,375,573 shares of
Accsys common stock for approximately 3 million
($4 million), which resulted in a loss of approximately
$1 million (see Note 4).
On April 16, 2008, the Company announced that it intends to
permanently shut down its emulsions production site at Koper,
Slovenia, pending approval by the shareholders of the local
legal entity, which is expected in May 2008. The decision to
shut down the site will result in the separation of employees
located at the site. The Company will provide assistance to all
employees affected by the shutdown, in compliance with legal
requirements, and will assess the feasibility to transfer many
of the products to its other sites in order to continue to
support customers and minimize the impact to them. The Company
does not expect the shut down of the site to have a material
adverse effect on its results of operations or cash flows.
24
|
|
Item 2.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
In this Quarterly Report on
Form 10-Q,
the term Celanese refers to Celanese Corporation, a
Delaware corporation, and not its subsidiaries. The terms the
Company, we, our and
us, refer to Celanese and its subsidiaries on a
consolidated basis. The term Celanese US refers to
our subsidiary, Celanese US Holdings LLC, a Delaware limited
liability company, formally known as BCP Crystal US Holdings
Corp., a Delaware corporation, and not its subsidiaries. The
term Purchaser refers to our subsidiary, Celanese
Europe Holding GmbH & Co. KG, formerly known as BCP
Crystal Acquisition GmbH & Co. KG, a German limited
partnership, and not its subsidiaries, except where otherwise
indicated.
Managements Discussion and Analysis of Financial Condition
and Results of Operations (MD&A) and other
parts of this Quarterly Report on
Form 10-Q
contain certain forward-looking statements and information
relating to us that are based on the beliefs of our management
as well as assumptions made by, and information currently
available to, us. When used in this document, words such as
anticipate, believe,
estimate, expect, intend,
plan and project and similar
expressions, as they relate to us are intended to identify
forward-looking statements. These statements reflect our current
views with respect to future events, are not guarantees of
future performance and involve risks and uncertainties that are
difficult to predict. Further, certain forward-looking
statements are based upon assumptions as to future events that
may not prove to be accurate. Factors that might cause such
differences include, but are not limited to, those discussed in
the subsection entitled Factors That May Affect Future
Results and Financial Condition below. The following
discussion should be read in conjunction with our 2007
Form 10-K
filed with the Securities and Exchange Commission
(SEC) on February 29, 2008 and the unaudited
interim consolidated financial statements and notes thereto
included elsewhere in this Quarterly Report on
Form 10-Q.
We assume no obligation to revise or update any forward-looking
statements for any reason, except as required by law.
Overview
We are a leading global integrated producer of chemicals and
advanced materials. We are one of the worlds largest
producers of acetyl products, which are intermediate chemicals
for nearly all major industries, as well as a leading global
producer of high-performance engineered polymers that are used
in a variety of high-value end-use applications. As an industry
leader, we hold geographically balanced global positions and
participate in diversified end-use markets. Our operations are
primarily located in North America, Europe and Asia. We combine
a demonstrated track record of execution, strong performance
built on shared principles and objectives, and a clear focus on
growth and value creation.
25
Results
of Operations
Financial
Highlights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
2008
|
|
|
Net Sales
|
|
|
2007
|
|
|
Net Sales
|
|
|
|
(unaudited)
|
|
|
|
(in $ millions, except for percentages)
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
1,846
|
|
|
|
100.0
|
|
|
|
1,555
|
|
|
|
100.0
|
|
Gross profit
|
|
|
418
|
|
|
|
22.6
|
|
|
|
359
|
|
|
|
23.1
|
|
Selling, general and administrative expenses
|
|
|
(136
|
)
|
|
|
(7.4
|
)
|
|
|
(116
|
)
|
|
|
(7.5
|
)
|
Other (charges) gains, net
|
|
|
(16
|
)
|
|
|
(0.9
|
)
|
|
|
(1
|
)
|
|
|
(0.1
|
)
|
Operating profit
|
|
|
234
|
|
|
|
12.7
|
|
|
|
206
|
|
|
|
13.2
|
|
Equity in net earnings of affiliates
|
|
|
10
|
|
|
|
0.5
|
|
|
|
18
|
|
|
|
1.2
|
|
Interest expense
|
|
|
(67
|
)
|
|
|
(3.6
|
)
|
|
|
(72
|
)
|
|
|
(4.6
|
)
|
Dividend income cost investments
|
|
|
28
|
|
|
|
1.5
|
|
|
|
15
|
|
|
|
1.0
|
|
Earnings from continuing operations before tax and minority
interests
|
|
|
218
|
|
|
|
11.8
|
|
|
|
171
|
|
|
|
11.0
|
|
Earnings from continuing operations
|
|
|
145
|
|
|
|
7.9
|
|
|
|
122
|
|
|
|
7.8
|
|
Earnings from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
79
|
|
|
|
5.1
|
|
Net earnings
|
|
|
145
|
|
|
|
7.9
|
|
|
|
201
|
|
|
|
12.9
|
|
Other Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
83
|
|
|
|
4.5
|
|
|
|
68
|
|
|
|
4.4
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(unaudited)
|
|
|
|
(in $ millions)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
Short-term borrowings and current installments of long-term
debt third party and affiliates
|
|
|
253
|
|
|
|
272
|
|
Plus: Long-term debt
|
|
|
3,351
|
|
|
|
3,284
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
3,604
|
|
|
|
3,556
|
|
|
|
|
|
|
|
|
|
|
Summary
of Consolidated Results for the Three Months Ended
March 31, 2008 compared to the Three Months Ended
March 31, 2007
Net
Sales
Net sales for the three months ended March 31, 2008
increased 19% compared to the same period in 2007. Higher prices
and favorable foreign currency impacts (primarily related to the
Euro across all segments) increased net sales 12% and 7%,
respectively. Higher prices were primarily driven by a tight
global supply of acetyl, polyvinyl alcohol (PVOH)
and emulsions products and higher raw material prices, which we
were able to pass on to our customers. Increased volumes also
contributed to an increase in net sales but were equally offset
by the absence of net sales in the first quarter of 2008 from
the divested AT Plastics Films business. Volume increases
due to increased market penetration from several of Advanced
Engineered Materials key products and strong demand in
Asia for acetyl products coupled with the startup of our acetic
acid unit in Nanjing, China in mid-2007, were partially offset
by decreased volumes resulting from the transfer of flake
production to our China ventures, the slowing of the US economy
and the residual effects of both planned and unplanned outages
in the chemicals industry during 2007.
26
Gross
Profit
Gross profit as a percentage of net sales remained relatively
flat for the three months ended March 31, 2008 (22.6%)
compared to the same period in 2007 (23.1%). Higher energy and
raw material costs more than offset the increase in net sales,
causing a slight decrease in gross profit as a percentage of net
sales.
Selling,
General and Administrative Expenses
Selling, general and administrative expenses increased
$20 million for the three months ended March 31, 2008
compared to the same period in 2007. The increase is primarily
due to spending on finance improvement initiatives of
$9 million and expenses related to restricted stock units
of $2 million. The restricted stock unit program was
launched in April 2007.
Other
(Charges) Gains, Net
The components of Other (charges) gains, net are as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(in $ millions)
|
|
|
Employee termination benefits
|
|
|
(7
|
)
|
|
|
|
|
Plant/office closures
|
|
|
(7
|
)
|
|
|
|
|
Ticona Kelsterbach plant relocation
|
|
|
(2
|
)
|
|
|
|
|
Other
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
Total Other (charges) gains, net
|
|
|
(16
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
Employee termination benefits relate primarily to our continued
strategy to simplify and optimize our business portfolio.
Plant/office closures includes accelerated depreciation expense
primarily related to the planned shutdown of our Pampa, Texas
plant.
Operating
Profit
Operating profit increased 14% for the three months ended
March 31, 2008 compared to the same period in 2007. This
increase is principally driven by the increase in gross profit
during the first quarter of 2008 partially offset by the
increase in Selling, general and administrative expenses and
Other (charges) gains, net described above.
Interest
Expense
Interest expense decreased $5 million for the three months
ended March 31, 2008 compared to the same period in 2007.
The decrease is primarily related to lower interest rates on our
senior credit agreement compared to the interest rates on the
senior discount notes and senior subordinated notes, which were
fully repaid by May 2007. The decrease was partially offset by
an increase in interest expense due to China financing
activities in 2008.
Equity
in Net Earnings of Affiliates
Equity in net earnings of affiliates decreased $8 million
for the three months ended March 31, 2008 compared to the
same period in 2007. The decrease primarily relates to decreased
earnings at our Advanced Engineered Materials affiliates
due to unfavorable price and volume fluctuations.
Income
Taxes
Our effective income tax rate for the three months ended
March 31, 2008 was 33% compared to 29% for the three months
ended March 31, 2007. The effective income tax rate
increased over the period ended March 31, 2007 primarily
due to the US income tax effect on increased foreign earnings
and dividends and an increase to Financial Accounting Standards
Board (FASB) Interpretation 48,
Accounting
for Uncertainty in Income Taxes an
27
interpretation of FASB Statement No. 109
liabilities for
unrecognized tax benefits and related interest. This increase
was partially offset by earnings in lower tax jurisdictions.
Expansion
in China
The acetic acid facility located in our Nanjing, China complex
has been running at full production rates since June 2007 and we
commenced production of vinyl acetate emulsions at the complex
during the fourth quarter of 2007. During the first quarter of
2008, we commissioned the startup of our
Celstran
®
long fiber-reinforced thermoplastic unit in Nanjing. Operations
for four other plants at the complex are expected to begin by
2009.
The complex brings world-class scale to one site for the
production of acetic acid, vinyl acetate monomer
(VAM), acetic anhydride, emulsions,
Celstran
®
long fiber-reinforced thermoplastic, UHMW-PE (GUR),
an ultra-high molecular weight polyethylene and compounding. We
believe the Nanjing complex will further enhance our
capabilities to better meet the growing needs of our customers
in a number of industries across Asia.
28
Selected
Data by Business Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
2008
|
|
|
2007
|
|
|
in $
|
|
|
|
(unaudited)
|
|
|
|
(in $ millions)
|
|
|
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced Engineered Materials
|
|
|
294
|
|
|
|
262
|
|
|
|
32
|
|
Consumer Specialties
|
|
|
282
|
|
|
|
269
|
|
|
|
13
|
|
Industrial Specialties
|
|
|
365
|
|
|
|
346
|
|
|
|
19
|
|
Acetyl Intermediates
|
|
|
1,096
|
|
|
|
839
|
|
|
|
257
|
|
Other Activities
|
|
|
|
|
|
|
1
|
|
|
|
(1
|
)
|
Inter-segment Eliminations
|
|
|
(191
|
)
|
|
|
(162
|
)
|
|
|
(29
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Net Sales
|
|
|
1,846
|
|
|
|
1,555
|
|
|
|
291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (Charges) Gains, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced Engineered Materials
|
|
|
(3
|
)
|
|
|
|
|
|
|
(3
|
)
|
Consumer Specialties
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
|
|
Industrial Specialties
|
|
|
(3
|
)
|
|
|
|
|
|
|
(3
|
)
|
Acetyl Intermediates
|
|
|
(7
|
)
|
|
|
|
|
|
|
(7
|
)
|
Other Activities
|
|
|
(2
|
)
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Charges, Net
|
|
|
(16
|
)
|
|
|
(1
|
)
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Profit (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced Engineered Materials
|
|
|
30
|
|
|
|
36
|
|
|
|
(6
|
)
|
Consumer Specialties
|
|
|
50
|
|
|
|
48
|
|
|
|
2
|
|
Industrial Specialties
|
|
|
17
|
|
|
|
12
|
|
|
|
5
|
|
Acetyl Intermediates
|
|
|
177
|
|
|
|
132
|
|
|
|
45
|
|
Other Activities
|
|
|
(40
|
)
|
|
|
(22
|
)
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Profit
|
|
|
234
|
|
|
|
206
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (Loss) from Continuing Operations Before Tax and
Minority Interests
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced Engineered Materials
|
|
|
39
|
|
|
|
50
|
|
|
|
(11
|
)
|
Consumer Specialties
|
|
|
50
|
|
|
|
47
|
|
|
|
3
|
|
Industrial Specialties
|
|
|
17
|
|
|
|
12
|
|
|
|
5
|
|
Acetyl Intermediates
|
|
|
206
|
|
|
|
136
|
|
|
|
70
|
|
Other Activities
|
|
|
(94
|
)
|
|
|
(74
|
)
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Earnings from Continuing Operations Before Tax and
Minority Interests
|
|
|
218
|
|
|
|
171
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation & Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced Engineered Materials
|
|
|
20
|
|
|
|
17
|
|
|
|
3
|
|
Consumer Specialties
|
|
|
14
|
|
|
|
11
|
|
|
|
3
|
|
Industrial Specialties
|
|
|
14
|
|
|
|
14
|
|
|
|
|
|
Acetyl Intermediates
|
|
|
32
|
|
|
|
24
|
|
|
|
8
|
|
Other Activities
|
|
|
3
|
|
|
|
2
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Depreciation & Amortization
|
|
|
83
|
|
|
|
68
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
Factors
Affecting First Quarter 2008 Segment Net Sales Compared to First
Quarter 2007
The charts below set forth the percentage increase (decrease) in
net sales from the 2007 period and to the 2008 period
attributable to each of the factors indicated for the following
business segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
|
|
|
Price
|
|
|
Currency
|
|
|
Other
|
|
|
Total
|
|
|
|
(in percentages)
|
|
|
Advanced Engineered Materials
|
|
|
6
|
|
|
|
(2
|
)
|
|
|
8
|
|
|
|
|
|
|
|
12
|
|
Consumer Specialties
|
|
|
(10
|
)
|
|
|
5
|
|
|
|
3
|
|
|
|
7
|
(b)
|
|
|
5
|
|
Industrial Specialties
|
|
|
(11
|
)
|
|
|
10
|
|
|
|
7
|
|
|
|
(1
|
)
(a)
|
|
|
5
|
|
Acetyl Intermediates
|
|
|
8
|
|
|
|
17
|
|
|
|
6
|
|
|
|
|
|
|
|
31
|
|
Total
Company
(c)
|
|
|
1
|
|
|
|
12
|
|
|
|
7
|
|
|
|
(1
|
)
|
|
|
19
|
|
|
|
|
(a)
|
|
Includes the loss of sales related to the AT Plastics
Films business.
|
|
(b)
|
|
Includes net sales from the Acetate Products Limited
(APL) acquisition.
|
|
(c)
|
|
Includes the effects of the captive insurance companies.
|
Summary
by Business Segment for the Three Months Ended March 31,
2008 compared to the Three Months Ended March 31,
2007
Advanced
Engineered Materials
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
2008
|
|
|
2007
|
|
|
in $
|
|
|
|
(unaudited)
|
|
|
|
(in $ millions, except for percentages)
|
|
|
Net sales
|
|
|
294
|
|
|
|
262
|
|
|
|
32
|
|
Net sales variance:
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
|
|
|
6
|
%
|
|
|
|
|
|
|
|
|
Price
|
|
|
(2
|
)%
|
|
|
|
|
|
|
|
|
Currency
|
|
|
8
|
%
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (charges) gains, net
|
|
|
(3
|
)
|
|
|
|
|
|
|
(3
|
)
|
Operating profit
|
|
|
30
|
|
|
|
36
|
|
|
|
(6
|
)
|
Operating margin
|
|
|
10.2
|
%
|
|
|
13.7
|
%
|
|
|
|
|
Earnings from continuing operations before tax and minority
interests
|
|
|
39
|
|
|
|
50
|
|
|
|
(11
|
)
|
Depreciation and amortization
|
|
|
20
|
|
|
|
17
|
|
|
|
3
|
|
Our Advanced Engineered Materials segment develops, produces and
supplies a broad portfolio of high-performance technical
polymers for application in automotive and electronics products
and in other consumer and industrial applications, often
replacing metal or glass. The primary products of Advanced
Engineered Materials are polyacetal products (POM),
polybutylene terephthalate (PBT) and GUR. POM and
PBT are used in a broad range of products including automotive
components, electronics and appliances. GUR is used in battery
separators, conveyor belts, filtration equipment, coatings and
medical devices.
Advanced Engineered Materials net sales increased
$32 million to $294 million for the three months ended
March 31, 2008 compared to the same period in 2007. Higher
volumes and favorable foreign currency impacts improved net
sales by 6% and 8%, respectively, while lower prices decreased
net sales by 2%. Volume increased in most major business lines
during the three months ended March 31, 2008 due to
increased market penetration, successful implementation of new
projects and a continued strong business environment,
particularly in Europe. Advanced Engineered Materials
experienced a slight decline in average pricing primarily driven
by a larger mix of sales from lower priced products.
30
Operating profit decreased $6 million for the three months
ended March 31, 2008 compared to the same period in 2007 as
higher net sales were more than offset by higher raw material
and energy costs and increased Other (charges) gains, net. Other
(charges) gains, net primarily consists of charges related to
the relocation of our Ticona plant in Kelsterbach. See
Ticona Kelsterbach Plant Relocation below.
Earnings from continuing operations before tax and minority
interests decreased $11 million for the three months ended
March 31, 2008 compared to the same period in 2007 due to
lower operating profits and decreased net earnings from equity
affiliates resulting from unfavorable price and volume
fluctuations.
Ticona
Kelsterbach Plant Relocation
In 2007, we finalized a settlement agreement with the Frankfurt,
Germany, Airport (Fraport) to relocate our
Kelsterbach, Germany, Ticona business resolving several years of
legal disputes related to the planned Frankfurt airport
expansion. As a result of the settlement, we will transition
Ticonas operations from Kelsterbach to the Hoechst
Industrial Park in the Rhine Main area in Germany by mid-2011.
Over a five-year period, Fraport will pay Ticona a total of
670 million to offset the costs associated with the
transition of the business from its current location and the
closure of the Kelsterbach plant.
Below is a summary of the financial statement impact associated
with the Ticona Kelsterbach plant relocation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Total From
|
|
|
|
March 31,
|
|
|
Inception Through
|
|
|
|
2008
|
|
|
2007
|
|
|
March 31, 2008
|
|
|
|
(in $ millions)
|
|
|
Proceeds received from Fraport
|
|
|
|
|
|
|
|
|
|
|
26
|
|
Costs expensed
|
|
|
2
|
|
|
|
|
|
|
|
7
|
|
Costs capitalized
|
|
|
21
(1
|
)
|
|
|
|
|
|
|
61
|
|
|
|
(1)
|
Includes decrease in accrued capital expenditures of
$7 million.
|
Consumer
Specialties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
2008
|
|
|
2007
|
|
|
in $
|
|
|
|
(unaudited)
|
|
|
|
(in $ millions, except for percentages)
|
|
|
Net sales
|
|
|
282
|
|
|
|
269
|
|
|
|
13
|
|
Net sales variance:
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
|
|
|
(10
|
)%
|
|
|
|
|
|
|
|
|
Price
|
|
|
5
|
%
|
|
|
|
|
|
|
|
|
Currency
|
|
|
3
|
%
|
|
|
|
|
|
|
|
|
Other
|
|
|
7
|
%
|
|
|
|
|
|
|
|
|
Other (charges) gains, net
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
|
|
Operating profit
|
|
|
50
|
|
|
|
48
|
|
|
|
2
|
|
Operating margin
|
|
|
17.7
|
%
|
|
|
17.8
|
%
|
|
|
|
|
Earnings from continuing operations before tax and minority
interests
|
|
|
50
|
|
|
|
47
|
|
|
|
3
|
|
Depreciation and amortization
|
|
|
14
|
|
|
|
11
|
|
|
|
3
|
|
Our Consumer Specialties segment consists of our Acetate
Products and Nutrinova businesses. Our Acetate Products business
primarily produces and supplies acetate tow, which is used in
the production of filter products. We also produce acetate flake
which is processed into acetate fiber in the form of a tow band.
The successful completion of the acquisition of APL on
January 31, 2007 further increases our global position and
enhances our ability to service our customers. Our Nutrinova
business produces and sells
Sunett
®
,
a high intensity sweetener, and food protection ingredients,
such as sorbates, for the food, beverage and pharmaceuticals
industries.
31
Consumer Specialties net sales increased 5% to
$282 million for the three months ended March 31, 2008
compared to the same period in 2007. Higher tow pricing on
continued strong demand, favorable currency impacts and an
additional month of sales from the APL acquisition drove
the increase in net sales. The increase was partially offset by
lower acetate flake volumes as a result of the shift in flake
production to our China ventures.
Operating profit was $2 million higher for the three months
ended March 31, 2008 compared to the same period in 2007.
Higher overall pricing offset increases in freight, raw material
and energy costs during the three months ended March 31,
2008. Lower manufacturing costs due to the Edmonton flake
shutdown in 2007 were offset by higher deprecation resulting
from the APL acquisition.
Earnings from continuing operations before tax and minority
interests increased 6% for the three months ended March 31,
2008 compared to the same period in 2007. The increases were
driven principally by the changes in operating profit discussed
above.
Industrial
Specialties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
2008
|
|
|
2007
|
|
|
in $
|
|
|
|
(unaudited)
|
|
|
|
(in $ millions, except for percentages)
|
|
|
Net sales
|
|
|
365
|
|
|
|
346
|
|
|
|
19
|
|
Net sales variance:
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
|
|
|
(11
|
)%
|
|
|
|
|
|
|
|
|
Price
|
|
|
10
|
%
|
|
|
|
|
|
|
|
|
Currency
|
|
|
7
|
%
|
|
|
|
|
|
|
|
|
Other
|
|
|
(1
|
)%
|
|
|
|
|
|
|
|
|
Other (charges) gains, net
|
|
|
(3
|
)
|
|
|
|
|
|
|
(3
|
)
|
Operating profit
|
|
|
17
|
|
|
|
12
|
|
|
|
5
|
|
Operating margin
|
|
|
4.7
|
%
|
|
|
3.5
|
%
|
|
|
|
|
Earnings from continuing operations before tax and minority
interests
|
|
|
17
|
|
|
|
12
|
|
|
|
5
|
|
Depreciation and amortization
|
|
|
14
|
|
|
|
14
|
|
|
|
|
|
Our Industrial Specialties segment includes our Emulsions, PVOH
and AT Plastics businesses. Our Emulsions business is a global
leader which produces a broad product portfolio, specializing in
vinyl acetate/ethylene emulsions and is the recognized authority
on low VOC (volatile organic compounds), an
environmentally-friendly technology. As a global leader, our
PVOH business produces and sells a broad portfolio of
performance PVOH chemicals engineered to meet specific customer
requirements. Our emulsions and PVOH products are used in a wide
array of applications including paints and coatings, adhesives,
building and construction, glass fiber, textiles and paper. AT
Plastics offers a complete line of low-density polyethylene and
specialty ethylene vinyl acetate copolymers. AT Plastics
products are used in many applications including flexible
packaging films, lamination film products, hot melt adhesives,
medical tubing and automotive carpeting.
Industrial Specialties net sales increased 5% to
$365 million during the three months ended March 31,
2008 compared to the same period in 2007. The increase was
primarily driven by higher pricing and favorable foreign
currency impacts. Higher overall pricing was primarily due to
market tightness and increasing raw material costs which allowed
for upward movement in pricing across all regions. The increase
was partially offset by decreased volumes and the absence of net
sales in the first quarter of 2008 from the divested AT
Plastics Films business. Volumes decreased in the
Emulsions and PVOH businesses due to the slowing of the US
economy. Volumes in the Emulsions business further declined due
to the residual effects of the unplanned outage of the acetic
acid unit at our Clear Lake, Texas facility, together with other
global planned and unplanned production outages in the chemicals
industry during 2007.
Operating profit increased by $5 million to
$17 million for the three months ended March 31, 2008
compared to the same period in 2007. Gross profit margins
improved as higher prices more than offset raw material costs.
The
32
increase in gross profit margins was partially offset by Other
(charges) gains, net in 2008 which includes employee termination
and accelerated depreciation costs related to our plan to
simplify and optimize our PVOH and Emulsions businesses.
Earnings from continuing operations before tax and minority
interests increased $5 million for the three months ended
March 31, 2008 compared to the same period in 2007,
principally driven by higher operating profits.
Acetyl
Intermediates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
2008
|
|
|
2007
|
|
|
in $
|
|
|
|
(unaudited)
|
|
|
|
(in $ millions, except for percentages)
|
|
|
Net sales
|
|
|
1,096
|
|
|
|
839
|
|
|
|
257
|
|
Net sales variance:
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
|
|
|
8
|
%
|
|
|
|
|
|
|
|
|
Price
|
|
|
17
|
%
|
|
|
|
|
|
|
|
|
Currency
|
|
|
6
|
%
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (charges) gains, net
|
|
|
(7
|
)
|
|
|
|
|
|
|
(7
|
)
|
Operating profit
|
|
|
177
|
|
|
|
132
|
|
|
|
45
|
|
Operating margin
|
|
|
16.1
|
%
|
|
|
15.7
|
%
|
|
|
|
|
Earnings from continuing operations before tax and minority
interests
|
|
|
206
|
|
|
|
136
|
|
|
|
70
|
|
Depreciation and amortization
|
|
|
32
|
|
|
|
24
|
|
|
|
8
|
|
Our Acetyl Intermediates segment produces and supplies acetyl
products, including acetic acid, VAM, acetic anhydride and
acetate esters. These products are generally used as starting
materials for colorants, paints, adhesives, coatings, medicines
and more. Other chemicals produced in this segment are organic
solvents and intermediates for pharmaceutical, agricultural and
chemical products.
Acetyl Intermediates net sales increased 31% during the
three months ended March 31, 2008 compared to the same
period in 2007. Increases were due to higher prices across all
regions, increased volumes and favorable currency impacts. The
tight supply of acetyl products in Europe coupled with higher
methanol and ethylene prices drove price increases during the
period. Increases in volume were primarily driven by strong
demand in Asia and the startup of our acetic acid plant in
Nanjing, China in mid-2007.
Operating profit increased 34% to $177 million for the
three months ended March 31, 2008 compared to the same
period in 2007. Increases in raw material costs, depreciation
and amortization expense, Other (charges) gains, net and
research and development costs were more than offset by
increases in net sales. Depreciation and amortization expense
increased primarily as a result of the startup of our acetic
acid plant in Nanjing, China. Other (charges) gains, net of
$7 million were primarily related to the planned shutdown
of our Pampa, Texas facility. Research and development costs
increased primarily due to a ramp up of research and development
projects in China, including research and development activities
associated with the sole and exclusive license to patents and
patent applications related to acetic acid.
Earnings from continuing operations before tax and minority
interests increased 51% for the three months ended
March 31, 2008 compared to the same period in 2007 due to
higher operating profit and dividend income from our cost
investment. Dividend income from our cost investment, Ibn Sina,
increased $12 million for the three months ended
March 31, 2008 compared to the same period in 2007 as a
result of higher earnings from expanding margins for methanol
and methyl tertiary-butyl ether.
Other
Activities
Other Activities primarily consists of corporate center costs,
including financing and administrative activities, and the
captive insurance companies.
33
Net sales decreased by $1 million for the three months
ended March 31, 2008 compared to the same period in 2007.
The decrease was driven by the decrease in third-party revenues
from our captive insurance companies. We do not expect
third-party revenues from our captive insurance companies to
increase significantly in the near future.
The operating loss for Other Activities increased by
$18 million for the three months ended March 31, 2008
compared to the same period in 2007. The increase in operating
loss was due primarily to spending on finance improvement
initiatives of $7 million. Other (charges) gains, net
increased by $2 million primarily due to severance.
The loss from continuing operations before tax and minority
interests increased $20 million to $94 million for the
three months ended March 31, 2008 compared to the same
period in 2007. The loss was mainly due to the reasons specified
above and to lower equity earnings, partially offset by a
reduction in interest expense.
Liquidity
and Capital Resources
Our primary source of liquidity is cash generated from
operations, available cash and cash equivalents and dividends
from our portfolio of strategic investments. In addition, we
have availability under our senior credit agreement to assist,
if required, in meeting our working capital needs and other
contractual obligations. We believe we will have available
resources to meet our liquidity requirements, including debt
service, for the remainder of 2008 and for the subsequent twelve
months. If our cash flow from operations is insufficient to fund
our debt service and other obligations, we may be required to
use other means available to us such as increasing our
borrowings, reducing or delaying capital expenditures, seeking
additional capital or seeking to restructure or refinance our
indebtedness. There can be no assurance, however, that we will
continue to generate cash flows at or above current levels or
that we will be able to maintain our ability to borrow under our
revolving credit facilities.
Cash
Flows
Cash and cash equivalents as of March 31, 2008 were
$763 million, which was a decrease of $62 million from
December 31, 2007. See below for details on the change in
cash and cash equivalents from December 31, 2007 to
March 31, 2008.
Net Cash
Provided by Operating Activities
Cash flow from operations increased by $154 million during the
three months ended March 31, 2008 as compared to the three
months ended March 31, 2007. A decrease in adjustments to
cash used in discontinued operations of $60 million and a
decrease in the amount of cash used for general operations were
the primary drivers in the cash flow increase. The adjustment to
operating cash used in discontinued operations during the three
months ended March 31, 2007 is primarily due to working
capital changes to the oxo and derivatives businesses. The
decrease in cash used for general operations was due to lower
spending on taxes of $45 million and the long-term
incentive plan of $30 million during the three months ended
March 31, 2008 as compared to March 31, 2007. An
increase in dividends from our equity affiliates of
$22 million offset cash used in operations during 2008.
Net Cash
Used in Investing Activities
Net cash from investing activities decreased from a cash inflow
of $325 million for the three months ended March 31,
2007 to a cash outflow of $138 million for the same period
in 2008. Cash outflow during the three months ended
March 31, 2008 were primarily the result of capital
expenditures of $81 million and costs spent on the Ticona
Kelsterbach plant relocation of $28 million. The
significant cash inflow during the three months ended
March 31, 2007 was driven by the sale of our oxo products
and derivatives businesses partially offset by the cash outflow
for the APL acquisition.
Our cash outflow for capital expenditures were $81 million
and $49 million for the three months ended March 31,
2008 and 2007, respectively. Capital expenditures were primarily
related to major replacements of equipment, capacity expansions,
major investments to reduce future operating costs, and
environmental and health and safety initiatives. Capital
expenditures during the first quarter of 2008 and 2007,
respectively, also included costs for the expansion of our
Nanjing, China site into an integrated chemical complex. Capital
expenditures are expected to be approximately $300 million
for 2008.
34
Net Cash
Used in Financing Activities
Net cash from financing activities increased to a cash outflow
of $112 million for the three months ended March 31,
2008 compared to a cash outflow of $17 million for the same
period in 2007. The increase primarily relates to our
$60 million repurchase of shares of our Series A
common stock. Increased payments on short-term borrowings of
$10 million and less cash received from stock option
exercises of $12 million also contributed to the increase
in the net cash outflow in 2008.
Liquidity
Our contractual obligations, commitments and debt service
requirements over the next several years are significant. As
stated above, our primary source of liquidity is cash generated
from operations, available cash and cash equivalents and
dividends from our portfolio of strategic investments. In
addition, we have availability under our senior credit agreement
to assist, if required, in meeting our working capital needs and
other contractual obligations.
Celanese has no material assets other than the stock of its
subsidiaries and no independent external operations of its own.
As such, we generally will depend on the cash flow of our
subsidiaries to meet our obligations under our preferred stock,
our Series A common stock and our senior credit agreement.
Debt and
Capital
Holders of our preferred stock are entitled to receive, when, as
and if declared by our Board of Directors, out of funds legally
available, cash dividends at the rate of 4.25% per annum (or
$1.06 per share) of liquidation preference, payable quarterly in
arrears commencing on May 1, 2005. Dividends on the
preferred stock are cumulative from the date of initial
issuance. As of March 31, 2008, the dividend is expected to
result in an annual payment of approximately $10 million.
The preferred stock is convertible, at the option of the holder,
at any time into approximately 1.26 shares of our
Series A common stock, subject to adjustments, per $25.00
liquidation preference of the preferred stock. During the three
months ended March 31, 2008 and 2007, we paid
$3 million and $2 million of cash dividends on our
preferred stock. On April 4, 2008, we declared a
$2 million cash dividend on our preferred stock, which will
be paid on May 1, 2008.
In July 2005, our Board of Directors adopted a policy of
declaring, subject to legally available funds, a quarterly cash
dividend on each share of our Series A common stock at an
annual rate initially equal to approximately 1% of the $16.00
initial public offering price per share of our Series A
common stock (or $0.16 per share) unless our Board of Directors
in its sole discretion determines otherwise. During the three
months ended March 31, 2008 and 2007, we paid
$6 million of cash dividends in each period on our
Series A common stock and on April 4, 2008, we
declared a $6 million cash dividend which will be paid on
May 1, 2008. Based upon the number of outstanding shares as
of March 31, 2008, the annual cash dividend payment is
approximately $24 million.
Our senior credit agreement consists of $2,280 million of
US
dollar-denominated
and 400 million of Euro-denominated term loans due
2014, a $650 million revolving credit facility terminating
in 2013 and a $228 million credit-linked revolving facility
terminating in 2014. Borrowings under the senior credit
agreement bear interest at a variable interest rate based on
LIBOR (for US dollars) or EURIBOR (for Euros), as applicable,
or, for US dollar-denominated loans under certain circumstances,
a base rate, in each case plus an applicable margin. The
applicable margin for the term loans and any loans under the
credit-linked revolving facility is 1.75%, subject to potential
reductions as defined in the senior credit agreement. As of
March 31, 2008, the applicable margin was 1.5% and
continues to be subject to potential adjustments as defined in
the senior credit agreement. The term loans under the senior
credit agreement are subject to amortization at 1% of the
initial principal amount per annum, payable quarterly commencing
in July 2007. The remaining principal amount of the term loans
will be due on April 2, 2014.
As of March 31, 2008, we had total debt of
$3,604 million compared to $3,556 million as of
December 31, 2007. We were in compliance with all of the
covenants related to our debt agreements as of March 31,
2008.
As of March 31, 2008, there were $129 million of
letters of credit issued under the credit-linked revolving
facility and $99 million remained available for borrowing.
As of March 31, 2008, there were no outstanding
35
borrowings or letters of credit issued under the revolving
credit facility; accordingly, $650 million remained
available for borrowing.
In March 2008, Crystal US Holdings 3 LLC, a subsidiary
of Celanese Corporation, was upgraded by Moodys Investors
Service with a positive outlook and a corporate credit rating of
Ba2 from Ba3.
Contractual Debt Obligations.
There have been
no material revisions to our contractual obligations as filed in
our Annual Report on
Form 10-K
as of and for the year ended December 31, 2007 with the SEC
on February 29, 2008.
Purchases
of Treasury Stock
On February 8, 2008, our Board of Directors authorized the
repurchase of up to $400 million of our Series A
common stock. The authorization gives management discretion in
determining the conditions under which shares may be
repurchased. During the three months ended March 31, 2008,
we repurchased 1,581,700 shares of our Series A common
stock at an average purchase price of $37.91 per share for a
total of approximately $60 million pursuant to this
authorization.
Treasury stock purchases reduce the number of shares outstanding
and the repurchased shares may be used by us for compensation
programs utilizing our stock and other corporate purposes. We
account for treasury stock using the cost method and include
treasury stock as a component of Shareholders equity.
Expiring
Cross Currency Swaps
To protect the foreign currency exposure of a net investment in
a foreign operation, we entered into cross currency swaps with
certain financial institutions in 2004. Under the terms of the
cross currency swap arrangements, we pay approximately
13 million in interest and receive approximately
$16 million in interest on June 15 and December 15 of each
year. Upon maturity of the cross currency swap arrangements in
June 2008, we will pay approximately 276 million and
receive approximately $333 million.
Domination
Agreement
The domination and profit and loss transfer agreement (the
Domination Agreement) was approved at the CAG
extraordinary shareholders meeting on July 31, 2004.
The Domination Agreement between CAG and the Purchaser became
effective on October 1, 2004 and cannot be terminated by
the Purchaser in the ordinary course of business until
September 30, 2009. Our subsidiaries, CIH, formerly
Celanese Caylux Holdings Luxembourg S.C.A., and Celanese US,
have each agreed to provide the Purchaser with financing to
strengthen the Purchasers ability to fulfill its
obligations under, or in connection with, the Domination
Agreement and to ensure that the Purchaser will perform all of
its obligations under, or in connection with, the Domination
Agreement when such obligations become due, including, without
limitation, the obligation to compensate CAG for any statutory
annual loss incurred by CAG during the term of the Domination
Agreement. If CIH
and/or
Celanese US are obligated to make payments under such guarantees
or other security to the Purchaser, we may not have sufficient
funds for payments on our indebtedness when due. We have not had
to compensate CAG for an annual loss for any period during which
the Domination Agreement has been in effect.
Off-Balance
Sheet Arrangements
We have not entered into any material off-balance sheet
arrangements.
Critical
Accounting Policies and Estimates
Our consolidated financial statements are based on the selection
and application of significant accounting policies. The
preparation of consolidated financial statements in conformity
with accounting principles generally accepted in the United
States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the
reported amounts of revenues, expenses and allocated charges
during
36
the reporting period. Actual results could differ from those
estimates. However, we are not currently aware of any reasonably
likely events or circumstances that would result in materially
different results.
We describe our significant accounting policies in Note 3,
Summary of Accounting Policies, of the Notes to Consolidated
Financial Statements included in our Annual Report on
Form 10-K
as of and for the year ended December 31, 2007. We discuss
our critical accounting policies and estimates in MD&A in
our Annual Report on
Form 10-K
as of and for the year ended December 31, 2007.
There have been no material revisions to the critical accounting
policies as filed in our Annual Report on
Form 10-K
as of and for the year ended December 31, 2007 with the SEC
on February 29, 2008.
On January 1, 2008, we adopted the provisions of Statement
of Financial Accounting Standard No. 157,
Fair Value
Measurements
(SFAS No. 157) for
financial assets and liabilities. SFAS No. 157 defines
fair value, thereby eliminating inconsistencies in guidance
found in various prior accounting pronouncements, and increases
disclosures surrounding fair value calculations. The adoption of
SFAS No. 157 for financial assets and liabilities did
not have a material impact on our statement of operations,
financial position or cash flows for the three months ended
March 31, 2008.
SFAS No. 157 establishes a three-tiered fair value
hierarchy that prioritizes inputs to valuation techniques used
in fair value calculations. The three levels of inputs are
defined as follows:
Level 1 unadjusted quoted prices for identical
assets or liabilities in active markets accessible by us
Level 2 inputs that are observable in the
marketplace other than those inputs classified as Level 1
Level 3 inputs that are unobservable in the
marketplace and significant to the valuation
SFAS No. 157 requires us to maximize the use of
observable inputs and minimize the use of unobservable inputs.
If a financial instrument uses inputs that fall in different
levels of the hierarchy, the instrument will be categorized
based upon the lowest level of input that is significant to the
fair value calculation.
Our financial assets and liabilities measured at fair value on a
recurring basis include securities available for sale and
derivative financial instruments. Securities available for sale
include US government and corporate bonds, mortgage-backed
securities and equity securities. Derivative financial
instruments include interest rate swaps and foreign currency
forwards and swaps.
Marketable Securities.
Where possible, we
utilize quoted market prices to measure debt and equity
securities; such items are classified as Level 1 in the
hierarchy and include equity securities and US government bonds.
When quoted market prices for identical assets are unavailable,
varying valuation techniques are used. Common inputs in valuing
these assets include, among others, benchmark yields, issuer
spreads, forward mortgage-backed securities trade prices and
recently reported trades. Such assets are classified as
Level 2 in the hierarchy and typically include
mortgage-backed securities, corporate bonds and other US
government securities.
Derivatives.
Derivative financial instruments
are valued in the market using discounted cash flow techniques.
These techniques incorporate Level 1 and Level 2
inputs such as interest rates and foreign currency exchange
rates. These market inputs are utilized in the discounted cash
flow calculation considering the instruments term,
notional amount, discount rate and credit risk. Significant
inputs to the derivative valuation for interest rate swaps and
foreign currency forwards and swaps are observable in the active
markets and are classified as Level 2 in the hierarchy.
Recent
Accounting Pronouncements
See Notes 3 and 12 of the unaudited interim consolidated
financial statements included in this
Form 10-Q
for a discussion of recent accounting pronouncements.
Factors
That May Affect Future Results and Financial Condition
Because of the following factors, as well as other factors
affecting our operating results and financial condition, past
financial performance should not be considered to be a reliable
indicator of future performance, and
37
investors should not use historical trends to anticipate results
or trends in future periods. In addition, many factors could
cause our actual results, performance or achievements to be
materially different from any future results, performance or
achievements that may be expressed or implied by such
forward-looking statements. These factors include, among other
things:
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|
|
|
|
changes in general economic, business, political and regulatory
conditions in the countries or regions in which we operate;
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|
|
|
the length and depth of product and industry business cycles
particularly in the automotive, electrical, electronics and
construction industries;
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|
changes in the price and availability of raw materials,
particularly changes in the demand for, supply of, and market
prices of fuel oil, natural gas, coal, electricity and
petrochemicals such as ethylene, propylene and butane;
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the ability to pass increases in raw material prices on to
customers or otherwise improve margins through price increases;
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|
the ability to maintain plant utilization rates and to implement
planned capacity additions and expansions;
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|
the ability to reduce production costs and improve productivity
by implementing technological improvements to existing plants;
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increased price competition and the introduction of competing
products by other companies;
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changes in the degree of intellectual property and other legal
protection afforded to our products;
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compliance costs and potential disruption or interruption of
production due to accidents or other unforeseen events or delays
in construction of facilities;
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potential liability for remedial actions under existing or
future environmental regulations;
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potential liability resulting from pending or future litigation,
or from changes in the laws, regulations or policies of
governments or other governmental activities in the countries in
which we operate;
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changes in currency exchange rates and interest rates; and
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various other factors, both referenced and not referenced in
this document.
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Many of these factors are macroeconomic in nature and are,
therefore, beyond our control. Should one or more of these risks
or uncertainties materialize, or should underlying assumptions
prove incorrect, our actual results, performance or achievements
may vary materially from those described in this Quarterly
Report as anticipated, believed, estimated, expected, intended,
planned or projected. We neither intend nor assume any
obligation to update these forward-looking statements, which
speak only as of their dates.
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Item 3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
Market risk for our Company has not changed materially from the
foreign exchange, interest rate and commodity risks disclosed in
Item 7A in our Annual Report on
Form 10-K
as of and for the year ended December 31, 2007 as filed
with the SEC on February 29, 2008.
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Item 4.
|
Controls
and Procedures
|
Under the supervision and with the participation of our
management, including the Chief Executive Officer and Chief
Financial Officer, we have evaluated the effectiveness of our
disclosure controls and procedures pursuant to Exchange Act
Rule 13a-15(b)
as of the end of the period covered by this report. Based on
that evaluation, the Chief Executive Officer and Chief Financial
Officer have concluded that these disclosure controls and
procedures are effective.
Changes
in Internal Control Over Financial Reporting
There were no changes in our internal control over financial
reporting that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting during our first quarter of 2008.
38
PART II
OTHER INFORMATION
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|
Item 1.
|
Legal
Proceedings
|
We are involved in a number of legal proceedings, lawsuits and
claims incidental to the normal conduct of our business,
relating to such matters as product liability, antitrust, past
waste disposal practices and release of chemicals into the
environment. While it is impossible at this time to determine
with certainty the ultimate outcome of these proceedings,
lawsuits and claims, we believe, based on the advice of legal
counsel, that adequate provisions have been made and that the
ultimate outcomes will not have a material adverse effect on our
financial position, but may have a material adverse effect on
our results of operations or cash flows in any given accounting
period. See also Note 11 to the unaudited interim
consolidated financial statements for a discussion of legal
proceedings.
There have been no material revisions to the legal
proceedings as filed in our Annual Report on
Form 10-K
as of and for the year ended December 31, 2007 with the SEC
on February 29, 2008.
There have been no material revisions to the Risk
factors as filed in our Annual Report on
Form 10-K
as of and for the year ended December 31, 2007 with the SEC
on February 29, 2008.
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|
Item 2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
The table below sets forth information regarding repurchases of
our Series A common stock during the three months ended
March 31, 2008:
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|
Approximate Dollar
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|
|
|
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Total Number of
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|
Value of Shares
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|
|
Total Number
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|
Average
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|
|
Shares Purchased as
|
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|
Remaining to be
|
|
|
|
of Shares
|
|
|
Price Paid
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|
Part of Publicly
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|
Purchased Under
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Period
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|
Purchased
(1)
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|
per Share
|
|
|
Announced Program
|
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|
the Program
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|
|
January 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 2008
|
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|
64,400
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|
|
$
|
39.86
|
|
|
|
64,400
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|
$
|
397,000,000
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|
March 2008
|
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|
1,517,300
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|
|
$
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37.83
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|
|
|
1,517,300
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|
$
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340,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total
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1,581,700
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|
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|
1,581,700
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(1)
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Purchased pursuant to the $400 million share repurchase
program publicly announced on February 11, 2008. This
repurchase program does not have an expiration date.
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Item 3.
|
Defaults
Upon Senior Securities
|
None.
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Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
None.
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|
Item 5.
|
Other
Information
|
None.
39
|
|
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|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
3
|
.1
|
|
Second Amended and Restated Certificate of Incorporation
(incorporated by reference to Exhibit 3.1 to the Current
Report on
Form 8-K
filed with the SEC on January 28, 2005).
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3
|
.2
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|
Second Amended and Restated By-laws, effective as of
February 8, 2008 (incorporated by reference to
Exhibit 3.2 to the Current Report on
Form 8-K
filed with the SEC on February 14, 2008).
|
|
3
|
.3
|
|
Certificate of Designations of 4.25% Convertible Perpetual
Preferred Stock (incorporated by reference to Exhibit 3.2
to the Current Report on
Form 8-K
filed with the SEC on January 28, 2005).
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|
10
|
.1
|
|
Change in Control Agreement, dated April 1, 2008, between
the Company and David N. Weidman, together with a schedule
identifying other substantially identical agreements between the
Company and each of its named executive officers identified
thereon and identifying the material differences between each of
those agreements and the filed Change of Control Agreement
(incorporated by reference to Exhibit 10.1 to the Current
Report on Form 8-K filed with the SEC on April 7, 2008).
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|
10
|
.2
|
|
Change in Control Agreement, dated April 1, 2008, between
the Company and Sandra Beach Lin, together with a schedule
identifying other substantially identical agreements between the
Company and each of its executive officers identified thereon
and identifying the material differences between each of those
agreements and the filed Change of Control Agreement (filed
herewith).
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|
10
|
.3
|
|
Change in Control Agreement, dated April 1, 2008, between
the Company and Curtis S. Shaw (filed herewith).
|
|
31
|
.1
|
|
Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
|
|
31
|
.2
|
|
Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
|
|
32
|
.1
|
|
Certification of Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
|
|
32
|
.2
|
|
Certification of Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
|
PLEASE NOTE:
It is inappropriate for readers
to assume the accuracy of, or rely upon any covenants,
representations or warranties that may be contained in
agreements or other documents filed as Exhibits to, or
incorporated by reference in, this Quarterly Report. Any such
covenants, representations or warranties may have been qualified
or superseded by disclosures contained in separate schedules or
exhibits not filed with or incorporated by reference in this
Quarterly Report, may reflect the parties negotiated risk
allocation in the particular transaction, may be qualified by
materiality standards that differ from those applicable for
securities law purposes, and may not be true as of the date of
this Quarterly Report or any other date and may be subject to
waivers by any or all of the parties. Where exhibits and
schedules to agreements filed or incorporated by reference as
Exhibits hereto are not included in these exhibits, such
exhibits and schedules to agreements are not included or
incorporated by reference herein.
40
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CELANESE CORPORATION
Name: David N. Weidman
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Title:
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Chairman of the Board of Directors and
|
Chief Executive Officer
Date: April 23, 2008
Name: Steven M. Sterin
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Title:
|
Senior Vice President and
|
Chief Financial Officer
Date: April 23, 2008
41
Exhibit 10.2
CHANGE IN CONTROL AGREEMENT
This CHANGE IN CONTROL AGREEMENT (the
Agreement
) is entered into on April 1, 2008 (the
Effective Date
) by and between Celanese Corporation (the
Company
) and Sandra Beach Lin (the
Executive
).
The Company considers it essential to foster the continued employment of key management
personnel. The Board of Directors of the Company (the
Board
) believes that it is in the best
interests of the Company and its stockholders to assure the Company will have the continued
dedication of Executive, notwithstanding the possibility, threat or occurrence of a Change in
Control. The Board believes it is imperative to diminish the inevitable distraction of Executive
by virtue of the personal uncertainties and risks created by a pending or threatened Change in
Control and to encourage Executives full attention and dedication to the Company currently and in
the event of any threatened or pending Change in Control. The Company also requests, and the
Executive desires to give the Company, certain assurances with regard to the protection of
Confidential Information and Intellectual Property of the Company and its Affiliates. Therefore,
the Company and the Executive have entered into this Agreement.
In consideration of the premises and mutual covenants contained herein and for other good and
valuable consideration, the parties agree as follows:
1.
Definitions:
a.
Affiliate
shall mean, when used with respect to any person or entity, any other person or
entity which controls, is controlled by or is under common control with the specified person or
entity. As used in the immediately preceding sentence, the term control (with correlative
meanings for controlled by and under common control with) shall mean, with respect to any
entity, the ownership, directly or indirectly, of fifty percent (50%) or more of the outstanding
equity interests in such entity.
b.
Beneficial Owner
shall have the meaning given such term in Rule 13d-3 of the General
Rules and Regulations under the Securities Exchange Act of 1934, as amended (the
Exchange Act
).
c.
Cause
shall mean (i) Executives willful failure to perform Executives duties hereunder
(other than as a result of total or partial incapacity due to physical or mental illness) for a
period of 30 days following written notice by the Company to Executive of such failure, (ii)
conviction of, or a plea of nolo contendere to, (x) a felony under the laws of the United States or
any state thereof or any similar criminal act in a jurisdiction outside the United States or (y) a
crime involving moral turpitude, (iii) Executives willful malfeasance or willful misconduct which
is demonstrably injurious to the Company or its Affiliates, (iv) any act of fraud by Executive, (v)
any material violation of the Companys code of conduct, (vi) any material violation of the
Companys policies concerning harassment or discrimination, (vii) Executives conduct that causes
material harm to the business reputation of the Company or its Affiliates, or (viii) Executives
breach of the provisions of Sections 7 (Confidentiality; Intellectual Property) or 8
(Non-Competition; Non-Solicitation) of this Agreement.
1
d. A
Change In Control
will be deemed to have occurred for purposes hereof, upon any one of
the following events: (a) any person (within the meaning of Sections 13(d) and 14(d) of the
Exchange Act), other than the Company (including its subsidiaries, directors, and executive
officers) has become the Beneficial Owner of thirty percent (30%) or more of the combined voting
power of the Companys then outstanding common stock or equivalent in voting power of any class or
classes of the Companys outstanding securities ordinarily entitled to vote in elections of
directors (
Voting Securities
) (other than as a result of an issuance of securities by the Company
approved by Incumbent Directors, or open market purchases approved by Incumbent Directors at the
time the purchases are made); (b) individuals who constitute the Board as of the Effective Date
(the
Incumbent Directors
) have ceased for any reason to constitute at least a majority thereof,
provided that any person becoming a director after the Effective Date whose election, or nomination
for election by the Companys stockholders, was approved by a majority of the directors comprising
the Incumbent Board, either by a specific vote or by approval of the proxy statement of the Company
in which such person is named as a nominee for director without objection to such nomination shall
be an Incumbent Director; provided, however, that no individual initially elected or nominated as a
director of the Company as a result of an actual or threatened election contest with respect to the
election or removal of directors (
Election Contest
) or other actual or threatened solicitation of
proxies or consents by or on behalf of any Person other than the Board (
Proxy Contest
), including
by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest, shall
be deemed an Incumbent Director; (c) the stockholders of the Company approve a reorganization,
merger, consolidation, statutory share exchange or similar form of corporate transaction, or the
sale or other disposition of all or substantially all of the Companys assets (a
Transaction
),
unless immediately following such Transaction, (i) all or substantially all of the Persons who were
the Beneficial Owners of the Voting Securities outstanding immediately prior to such Transaction
are the Beneficial Owners of more than 50% of the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors of the entity resulting
from such Transaction (including, without limitation, an entity which as a result of such
Transaction owns the Company or all or substantially all of the Companys assets or stock either
directly or through one or more subsidiaries, the
Surviving Entity
) in substantially the same
proportions as their ownership, immediately prior to such Transaction, of the Voting Securities,
(ii) no Person is the Beneficial Owner of 30% or more of the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of directors of the
Surviving Entity, and (iii) at least a majority of the members of the board of directors of the
Surviving Entity are Incumbent Directors; or (d) approval by the Companys stockholders of a
complete liquidation and dissolution of the Company.
However, if in any circumstance in which the foregoing definition would be operative and with
respect to which the income tax under Section 409A of the Code would apply or be imposed, but where
such tax would not apply or be imposed if the meaning of the term Change in Control met the
requirements of Section 409A(a)(2)(A)(v) of the Code, then the term Change in Control herein
shall mean, but only for the transaction so affected, a change in control event within the
meaning of Treas. Reg. §1.409A3(i)(5).
e.
Change In Control Protection Period
shall mean that period commencing on the date that
the Company or a third party publicly announces an event that, if consummated, would constitute a
Change In Control and ending (i) on the date that the
2
circumstances giving rise to the announcement of the event are abandoned or withdrawn, or (ii)
if such transaction is consummated, two years after the Change In Control.
f.
COBRA
shall mean those provisions of the Consolidated Omnibus Budget Reconciliation Act
of 1986, as amended, related to continuation of group health and dental plan coverage as set forth
in Code section 4980B.
g.
Code
shall mean the Internal Revenue Code of 1986, as amended from time to time.
h.
Competitive Business
shall mean businesses that compete with products and services
offered by the Company in those countries where the Company or any of its Affiliates manufactures,
produces, sells, leases, rents, licenses or otherwise provides its products or services during the
two (2) years preceding the Termination Date (including, without limitation, businesses which the
Company or its Affiliates have specific plans to conduct in the future that were disclosed or made
available to Executive), provided that, if Executives duties were limited to particular product
lines or businesses during such period, the Competitive Business shall be limited to those product
lines or businesses in those countries for which the Executive had such responsibility.
i.
Confidential Information
shall mean any non-public, proprietary or confidential
information, including without limitation trade secrets, know-how, research and development,
software, databases, inventions, processes, formulae, technology, designs and other intellectual
property, information concerning finances, investments, profits, pricing, costs, products,
services, vendors, customers, clients, partners, investors, personnel, compensation, benefits,
recruiting, training, advertising, sales, marketing, promotions, government and regulatory
activities and approvals concerning the past, current or future business, activities and operations
of the Company, its Affiliates and/or any third party that has disclosed or provided any of same to
the Company or its Affiliates on a confidential basis. Confidential Information also includes
any information designated as a trade secret or proprietary information by operation of law or
otherwise, but shall not be limited by such designation. Confidential Information shall not
include any information that is (i) generally known to the industry or the public other than as a
result of Executives breach of this covenant; (ii) made legitimately available to Executive by a
third party without breach of any confidentiality obligation; or (iii) required by law to be
disclosed; provided that Executive shall give prompt written notice to the Company of such
requirement, disclose no more information than is so required, and cooperate with any attempts by
the Company to obtain a protective order or similar treatment.
j.
Controlled Group
shall mean all corporations or business entities that are, along with
the Company, members of a controlled group of corporations or businesses, as defined in Code
Sections 414(b) and 414(c), except that the language at least 50 percent is used instead of at
least 80 percent in applying the rules of Code Sections 414(b) and 414(c).
k.
Fiscal Year
shall mean the fiscal year of the Company.
l.
Good Reason
shall mean any of the following conditions which occurs without the consent
of the Executive: (i) a material diminution in the Executives base salary or
3
annual bonus opportunity; (ii) a material diminution in the Executives authority, duties, or
responsibilities (including status, offices, titles and reporting requirements); (iii) a material
change in the geographic location at which the Executive must perform his duties; (iv) failure of
the Company to pay compensation or benefits when due, or (v) any other action or inaction that
constitutes a material breach by the Company of this Agreement. The conditions described above
will not constitute Good Reason unless the Executive provides written notice to the Company of
the existence of the condition described above within 90 days after the initial existence of such
condition. In addition, the conditions described above will not constitute Good Reason unless
the Company fails to remedy the condition within a period of thirty (30) days after receipt of the
notice described in the preceding sentence. If the Company fails to remedy the condition within
the period referred to in the preceding sentence, Executive may terminate his employment with the
Company for Good Reason within in the next thirty (30) days following the expiration of the cure
period.
m.
Notice of Termination
shall mean a notice which shall indicate the general reasons for
the termination employment and the circumstances claimed to provide a basis for termination of
employment or other Separation of Service under the provision so indicated.
n.
Person
shall mean any person, firm, partnership, joint venture, association, corporation
or other business organization, entity or enterprise whatsoever.
o.
Restricted Period
shall be (i) one year from the Termination Date in the event of a
Separation from Service that occurs during the Service Term (as defined hereinafter) other than in
the case of an involuntary Separation from Service without Cause, (ii) in the case of an
involuntary Separation from Service without Cause during the Service Term, an amount of time in
whole months equal to the number of months salary the Company agrees to provide to Executive in
severance, whether paid over time or in a lump sum; and (iii) two years from the Termination Date
in the event of a Separation from Service following a Change In Control where Executive receives
the Change In Control Payment (as defined hereinafter).
p.
Separation from Service
shall mean an event after which the Executive shall no longer
provide services to the members of the Controlled Group, whether voluntarily or involuntarily as
determined by the Committee (as hereafter defined) in accordance with Treas. Reg. §1.409A-1(h)(1).
A Separation from Service shall occur when Executive has experienced a termination of employment
from the members of the Controlled Group. Executive shall be considered to have experienced a
termination of employment when the facts and circumstances indicate that the Executive and the
Company reasonably anticipate that either (i) no further services will be performed for the members
of the Controlled Group after a certain date, or (ii) that the level of bona fide services the
Executive will perform for the members of the Controlled Group after such date (whether as an
employee or as an independent contractor) will permanently decrease to no more than 20% of the
average level of bona fide services performed by such Executive (whether as an employee or an
independent contractor) over the immediately preceding 36-month period (or the full period of
services to the members of the Controlled Group if the Executive has been providing services to the
members of the Controlled Group less than 36 months). If Executive is on military leave, sick
leave, or other bona fide leave of absence, the employment relationship between the Executive and
the members of the Controlled Group shall be treated as continuing intact, provided that the period
of such leave does not
4
exceed 6 months, or if longer, so long as the Executive retains a right to reemployment with
the members of the Controlled Group under an applicable statute or by contract. If the period of a
military leave, sick leave, or other bona fide leave of absence exceeds 6 months and the Executive
does not retain a right to reemployment under an applicable statute or by contract, the employment
relationship shall be considered to be terminated for purposes of this Agreement as of the first
day immediately following the end of such 6-month period. In applying the provisions of this
paragraph, a leave of absence shall be considered a bona fide leave of absence only if there is a
reasonable expectation that the Executive will return to perform services for any members of the
Controlled Group.
Notwithstanding the foregoing provisions, if Executive provides services for the Company as both an
employee and as a non-employee director, to the extent permitted by Treas. Reg. §1.409A-1(h)(5) the
services provided by such Executive as a non-employee director shall not be taken into account in
determining whether the Executive has experienced a Separation from Service.
q.
Target Bonus
shall mean the target bonus for Executive under any annual bonus plan in
effect from time to time as determined by the Compensation Committee (the
Committee
) or the
Board.
r.
Termination Date
shall mean the date upon which a Separation from Service with respect to
an Executive occurs.
2.
Term of Change In Control Agreement
.
a. This Agreement shall be for an initial term (the
Initial Term
) of two years and shall
continue to renew for consecutive two year terms thereafter (a
Renewal Term
), unless either party
shall give written notice to the other (a
Notice of Non-Renewal
) that such agreement shall not
renew at least ninety days prior to the expiration of the Initial Term or Renewal Term then in
effect. Notwithstanding the foregoing, the Company may not give a Notice of Non-Renewal during the
Change In Control Protection Period.
b. This Agreement, except those provisions which shall survive under Section 11(k), shall
terminate upon the termination of Executives employment for any reason other than the termination
of Executives employment during the Change In Control Protection Period (x) by the Company without
Cause or (y) by the Executive with Good Reason. No payment under this Agreement will be due to
Executive upon termination of Executives employment for any reason other than as specified in (x)
or (y) above.
3.
Executives Incumbent Position
.
a. Unless notified otherwise by the Chief Executive Officer of the Company or the Board,
Executive shall serve as Executive Vice President & President Ticona (
Executives Incumbent
Position)
. In such position, Executive shall have such duties and authority as shall be
determined from time to time by the Chief Executive Officer and the Board. If requested, Executive
shall also serve as a member of the Board without additional compensation. The period during which
the Executive shall be employed by the Company shall be called the
Service Term
.
5
b. Except as provided in Section 5, (i) either Company or Executive may terminate the
employment relationship at any time, with or without Cause or Good Reason, (ii) this Agreement
shall not be construed as giving the Executive any right to be retained in the employ of the
Company or its Affiliates, (iii) the Company may at any time terminate the Executive free from any
liability of any claim under this Agreement, except as expressly provided herein; and (iv) the
Company may demote Executive at any time in its absolute and sole discretion without liability to
the Executive.
c. During the Service Term, Executive will devote Executives full business time and best
efforts to the performance of Executives duties hereunder and will not engage in any other
business, profession or occupation for compensation or otherwise which would conflict or interfere
with the rendition of such services either directly or indirectly, without the prior written
consent of the Board; provided that nothing herein shall preclude Executive, (i) subject to the
prior approval of the Board, from accepting appointment to or continuing to serve on any board of
directors or trustees of any business corporation or any charitable organization or (ii) from
participating in charitable activities or managing personal investments; provided in each case, and
in the aggregate, that such activities do not conflict or interfere with the performance of
Executives duties hereunder or conflict with Sections 7 or 8. Executive shall promote the
goodwill of the Company with its employees, customers, stockholders, vendors, and the general
public. During the Service Term, reasonable business expenses incurred by Executive in the
performance of Executives duties hereunder and to support the goodwill and business relationships
of the Company shall be reimbursed by the Company in accordance with Company policies.
4.
Obligations of the Company upon Change In Control with Respect to Long-Term Incentive
Awards and Deferred Compensation.
The effect of a change in control on any long-term incentive awards (cash or equity) or
deferred compensation previously granted to the Executive under the 2008 Deferred Compensation
Plan, 2004 Stock Incentive Plan or the 2004 Deferred Compensation Plan, as amended, (the
Long-Term
Incentive Awards
) shall be governed by the terms and conditions of the applicable individual award
agreements or deferral agreements and the Celanese Corporation 2008 Deferred Compensation Plan, the
2004 Stock Incentive Plan or the 2004 Deferred Compensation Plan, as amended (collectively, the
Long-Term Incentive Award Agreements
), and shall not be governed by this Agreement.
5.
Termination of Employment Connected with a Change In Control.
a. Upon Executives Separation from Service during the Change In Control Protection Period,
Executive shall receive the Change In Control Payment if and only if the following conditions
occur:
(i) The Change In Control is consummated;
(ii) Executive is employed in the Executive Incumbent Position or some substantially
equivalent or higher position for the Company as of the commencement of the Change In Control
Protection Period;
6
(iii) Executives employment is terminated either by the Company without Cause or by the
Executive with Good Reason such that a Separation from Service occurs;
(iv) Within fifty (53) days after both conditions in Sections 5(a)(i) and 5(a)(iii), or at the
expiration of twenty-one (21) days following the presentation of the release, Executive executes a
release of all claims, known or unknown, against the Company, its Affiliates, and their respective
agents in a form satisfactory to the Company similar to that attached hereto as Exhibit A and does
not timely revoke such release before the expiration of seven days following his or her execution
of the release; and
(v) Within fifty (53) days after both conditions in Sections 5(a)(i) and 5(a)(iii), Executive
reaffirms in writing in a manner satisfactory to the Company his or her obligations under Sections
7 and 8 of this Agreement.
b. The
Change In Control Payment
shall be equal to two times the sum of (i) Executives then
current annualized base salary; and (ii) the higher of (x) Executives Target Bonus in effect on
the last day of the Fiscal Year that ended immediately prior to the year in which the Termination
Date occurs, or (y) the average of the cash bonuses paid by the Company to Executive for the three
Fiscal Years preceding the Termination Date.
c. The Change In Control Payment shall be paid in a single lump sum to Executive six (6)
months and one day after the Executives Termination Date, together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code.
d. Provided that (i) all of the conditions in Section 5(a) are met, (ii) Executive makes a
timely COBRA election, and (iii) Executive has complied in all material respects with regard to the
obligations of Sections 7 and 8 of this Agreement, if the Executive timely remits to the Company
the applicable COBRA premiums for such coverage, the Company will continue to provide group
health and dental coverage under the Companys medical plan for Executive and his or her dependents
during the Restricted Period; and will reimburse Executive for all premiums paid by Executive for
such continued coverage. Such reimbursements will be made within thirty (30) days after
Executives payment of such premiums (or submission of a request for reimbursement and satisfactory
proof of such payment) but in no event later than on or before the last day of the Executives tax
year following the tax year in which the expense was incurred. The amount of COBRA premiums and
health and dental expenses eligible for reimbursement during Executives tax year may not affect
the COBRA premiums and health and dental expenses eligible for reimbursement in any other tax year.
e. Certain Further Payments Due Executive
(i) In the event that any amount or benefit paid or distributed to Executive pursuant to this
Agreement and/or any amounts or benefits otherwise paid or distributed to Executive by the Company
that are treated as parachute payments under Section 280G of the Code (such payments, collectively,
the
Covered Payments
), are or become subject to the tax imposed under Section 4999 of the Code or
any similar tax that may hereafter
7
be imposed (the
Excise Tax
), the Company will pay to Executive an additional amount (the
Tax Reimbursement Payment
), such that the net amount retained by Executive with respect to such
Covered Payments, after deduction of any Excise Tax (as well as any penalties and interest thereon)
on the Covered Payments and any Federal, state and local income tax, payroll tax, and Excise Tax on
the Tax Reimbursement Payment provided for by this subsection (e), but before deduction for any
Federal, state or local income or employment tax withholding on such Covered Payments, will be
equal to the amount of the Covered Payments, together with an amount equal to the product of any
deductions disallowed to Executive for federal, state, or local income tax purposes because of the
inclusion of the Tax Reimbursement Payment in Executives adjusted gross income multiplied by the
highest applicable marginal rate of federal, state, or local income taxation, respectively, for the
calendar year in which the Tax Reimbursement Payment is to be made. The time for payment of the
Tax Reimbursement Payment is set forth in subsection (e)(v) below. The Tax Reimbursement Payment
is intended to place the Executive in the same position he would have been in if the Excise Tax did
not apply.
(ii) For purposes of determining whether any of the Covered Payments will be subject to the
Excise Tax and the amount of such Excise Tax,
(A) such Covered Payments will be treated as parachute payments within the meaning of
Section 280G of the Code, and all parachute payments in excess of the base amount (as defined
under Section 280G(b)(3) of the Code) will be treated as subject to the Excise Tax, unless, and
except to the extent that, in the good faith judgment of a public accounting firm appointed by the
Company or tax counsel selected by such accounting firm (the
Accountants
), the Company has a
reasonable basis to conclude that such Covered Payments (in whole or in part) either do not
constitute parachute payments or represent reasonable compensation for personal services actually
rendered (within the meaning of Section 280G(b)(4)(B) of the Code) in excess of the base amount,
or such parachute payments are otherwise not subject to such Excise Tax; and
(B) the value of any non-cash benefits or any deferred payment or benefit will be determined
by the Accountants in accordance with the principles of Section 280G of the Code.
(iii) For purposes of determining the amount of the Tax Reimbursement Payment, Executive will
be deemed to pay:
(A) Federal income taxes at the highest applicable marginal rate of Federal income taxation
for the calendar year in which the Tax Reimbursement Payment is to be made; and
(B) any applicable state and local income taxes at the highest applicable marginal rate of
taxation for the calendar year in which the Tax Reimbursement Payment is to be made, net of the
maximum reduction in Federal income taxes which could be obtained from the deduction of such state
or local taxes if paid in such year.
(iv) In the event that the Excise Tax amount, if any, initially determined to be payable to
the United States Treasury Department pursuant to this subsection
8
(e) is later determined by the Accountants or pursuant to any proceeding or negotiations with
the Internal Revenue Service to exceed the amount taken into account hereunder at the time the Tax
Reimbursement Payment was initially determined (including, but not limited to, by reason of any
payment the existence or amount of which could not be determined at the time of the Tax
Reimbursement Payment), the Company will make an additional Tax Reimbursement Payment, in respect
of such excess (including making a full Tax Reimbursement Payment in the event of an initial
determination that no Excise Tax amount was due) (as well as any interest or penalty payable with
respect to such payment) at the time specified in subsection (e)(v) below.
In the event that the Excise Tax is subsequently determined by the Accountants or pursuant to
any proceeding or negotiations with the Internal Revenue Service to be less than the amount taken
into account under this subsection (e) in calculating the Tax Reimbursement Payment made, Executive
will repay to the Company, at the time specified in subsection (e)(v) below, the portion of such
prior Tax Reimbursement Payment that would not have been paid if the amount of the Excise Tax had
been accurately calculated in determining such Tax Reimbursement Payment, plus interest on the
amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code.
Notwithstanding the foregoing, in the event any portion of the Tax Reimbursement Payment to be
refunded to the Company has been paid to any Federal, state or local tax authority, repayment
thereof will not be required until actual refund or credit of such portion has been made to
Executive, and interest payable to the Company will not exceed interest received or credited to
Executive by such tax authority for the period it held such portion. Executive and the Company
will mutually agree upon the course of action to be pursued (and the method of allocating the
expenses thereof) if Executives good faith claim for refund or credit is denied (in whole or in
part); provided that Executive will remain responsible to repay the Company for any such unrefunded
Tax Reimbursement Payments to the extent Executive ultimately prevails in such claim.
(v) The Tax Reimbursement Payment (or portion thereof) provided for in this subsection (e)
will be paid to Executive within 5 days after Executive remits the Excise Tax to the Internal
Revenue Service but no later than the end of the Executives tax year following the tax year in
which the Executive remits the Excise Tax to the Internal Revenue Service. Further, in the event
that the initial Tax Reimbursement Payment was too little and additional Tax Reimbursement Payments
are subsequently determined to be payable to Executive pursuant to subsection (e)(iv) above, such
Tax Reimbursement Payment or additional Tax Reimbursement Payment amount will be made by the
Company to Executive within 5 days after the date that Executive remits such portion to the
Internal Revenue Service, but no later than the end of the Executives tax year following the tax
year in which the Executive remits such portion to the Internal Revenue Service. In the event that
the amount of the estimated Tax Reimbursement Payment exceeds the amount subsequently determined to
have been due, subject to the provisions of subsection (e)(iv), such excess will be payable by
Executive to the Company on the fifth (5th) business day after written demand by the Company for
payment (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code).
Company will reimburse the Executive for any interest, penalties or surcharge that may be imposed
on the Executive in connection with any Excise Tax (including a reimbursement of any additional
taxes imposed as a result of the reimbursement of any such interest, penalties or surcharge) within
5 days after payment by the Executive, but in no event later than on or before the last day of the
Executives tax year following the tax year in which the interest, penalties, surcharge or other
taxes are
9
imposed, such reimbursement obligation shall remain in effect during the applicable statute of
limitations relating to any such interest, penalties or surcharge (but in no event shall remain in
effect for longer than 10 years), and the amount of expenses eligible for reimbursement hereunder
during Executives tax year will not affect the expenses eligible for reimbursement in any other
tax year.
(vi) The Tax Reimbursement Payment due under this subsection (e) shall not exceed two million
dollars ($2,000,000).
(vii) If the amount of the Covered Payments is equal to or less than 110% of the product of
2.99 and Executives applicable base amount (as such term is defined for purposes of Section 4999
of the Code), the Covered Payments under this Agreement or otherwise shall be reduced by the
minimum amount necessary so that none of the Covered Payments are subject to the excise tax under
Section 4999 of the Code; provided, however, that this subsection (e)(vii) shall not apply if, even
after all Covered Payments due hereunder are reduced to zero, the value of the Covered Payments
would still be subject to the excise tax under Section 4999 of the Code, in which case no reduction
of any Covered Payments shall be made.
f. Notwithstanding any provision of this Agreement to the contrary, if Executive is a
Specified Employee within the meaning of Treasury Regulation §1.409A-1(i) and if any payment
under this Agreement provides for a deferral of compensation within the meaning of Treasury
Regulation §1.409A-1(b) and if such payment would otherwise occur before the date that is six (6)
months after the Executives Termination Date, then such payment shall be delayed and shall occur
on the date that is six (6) months and one (1) day after the Termination Date (or, if earlier, the
date of the Executives death), together with interest at the rate provided in Section
1274(b)(2)(B) of the Code.
6.
Exclusivity of Benefits.
Executive acknowledges that this Agreement supercedes and
replaces all prior agreements or understandings Executive may have with the Company with respect to
compensation or benefits that may become payable in connection with or as a result of a change in
control of the Company, whether or not such change in control constitutes a Change In Control,
including any provisions contained in any employment agreement, offer letter or change in control
agreement, except with respect to any Long-Term Incentive Awards which shall be governed by the
terms of the Long-Term Incentive Award Agreements. This Agreement also describes all payments and
benefits that the Company shall be obligated to provide to Executive upon Executives Separation
from Service during a Change In Control Protection Period and shall constitute Executives
agreement to waive any rights to payment under the Celanese Americas Separation Pay Plan, any
similar or successor plan adopted by the Company, and any other term of employment contained in any
employment agreement, offer letter, change in control agreement or otherwise (other than benefits
to which he/she may be entitled, if any: (i) under any Celanese plan qualified under Section 401(a)
of the Internal Revenue Code, including the Celanese Americas Retirement Pension Plan and Celanese
Americas Retirement Savings Plan; and (ii) under the 2008 Celanese Deferred Compensation Plan) to
the extent that the circumstances giving right to such right to payment would constitute a
Separation of Service during a Change In Control Protection Period.
10
7.
Confidentiality; Intellectual Property.
a. Confidentiality.
(i) Based upon the assurances given by the Executive in this Agreement, the Company will
provide Executive with access to its Confidential Information. Executive hereby reaffirms that all
Confidential Information received by Executive prior to the termination of this Agreement is the
exclusive property of the Company and Executive releases any individual claim to the Confidential
Information.
(ii) Executive will not at any time (whether during or after Executives employment with the
Company) (x) retain or use for the benefit, purposes or account of Executive or any other Person;
or (y) disclose, divulge, reveal, communicate, share, make available, transfer or provide access to
any Person outside the Company (other than its professional advisers who are bound by
confidentiality obligations), any Confidential Information without the prior written authorization
of the Board.
(iii) Upon termination of Executives employment with the Company for any reason, Executive
shall (x) cease and not thereafter commence use of any Confidential Information or intellectual
property (including without limitation, any patent, invention, copyright, trade secret, trademark,
trade name, logo, domain name or other source indicator) owned or used by the Company or its
Affiliates; (y) immediately destroy, delete, or return to the Company, at the Companys option, all
originals and copies in any form or medium (including memoranda, books, papers, plans, computer
files, letters and other data) in Executives possession or control (including any of the foregoing
stored or located in Executives office, home, laptop or other computer, whether or not Company
property) that contain Confidential Information or otherwise relate to the business of the Company
or its Affiliates, except that Executive may retain only those portions of any personal notes,
notebooks and diaries that do not contain any Confidential Information; and (z) notify and fully
cooperate with the Company regarding the delivery or destruction of any other Confidential
Information of which Executive is or becomes aware.
(iv) If Executive has previously entered into any confidentiality or non-disclosure agreements
with any former employer, Executive hereby represents and warrants that such confidentiality and/or
non-disclosure agreement or agreements have been fully disclosed and provided to the Company prior
to commencing employment with the Company.
b. Intellectual Property.
(i) If Executive has created, invented, designed, developed, contributed to or improved any
works of authorship, inventions, intellectual property, materials, documents or other work product
(including without limitation, research, reports, software, databases, systems, applications,
presentations, textual works, content, or audiovisual materials) (
Works
), either alone or with
third parties, prior to Executives employment by the Company, that are relevant to or implicated
by such employment (
Prior Works
), Executive hereby grants the Company a perpetual, non-exclusive,
royalty-free, worldwide, assignable, sublicensable license under all rights and intellectual
property rights (including rights under patent, industrial
11
property, copyright, trademark, trade secret, unfair competition and related laws) therein for
all purposes in connection with the Companys current and future business. A list of all such
Works as of the date hereof is attached hereto as
Exhibit B
.
(ii) If Executive creates, invents, designs, develops, contributes to or improves any Works,
either alone or with third parties, at any time during Executives employment by the Company and
within the scope of such employment and/or with the use of any of the Company resources (
Company
Works
), Executive shall promptly and fully disclose same to the Company and hereby irrevocably
assigns, transfers and conveys, to the maximum extent permitted by applicable law, all rights and
intellectual property rights therein (including rights under patent, industrial property,
copyright, trademark, trade secret, unfair competition and related laws) to the Company to the
extent ownership of any such rights does not vest originally in the Company.
(iii) Executive agrees to keep and maintain adequate and current written records (in the form
of notes, sketches, drawings, and any other form or media requested by the Company) of all Company
Works. The records will be available to and remain the sole property and intellectual property of
the Company at all times.
(iv) Executive shall take all requested actions and execute all requested documents (including
any licenses or assignments required by a government contract) at the Companys expense (but
without further remuneration) to assist the Company in validating, maintaining, protecting,
enforcing, perfecting, recording, patenting or registering any of the Companys rights in the Prior
Works and Company Works. If the Company is unable for any other reason to secure Executives
signature on any document for this purpose, then Executive hereby irrevocably designates and
appoints the Company and its duly authorized officers and agents as Executives agent and attorney
in fact, to act for and in Executives behalf and stead to execute any documents and to do all
other lawfully permitted acts in connection with the foregoing.
(v) Executive shall not improperly use for the benefit of, bring to any premises of, divulge,
disclose, communicate, reveal, transfer or provide access to, or share with the Company any
confidential, proprietary or non-public information or intellectual property relating to a former
employer or other third party without the prior written permission of such third party. Executive
hereby indemnifies, holds harmless and agrees to defend the Company and its officers, directors,
partners, employees, agents and representatives from any breach of the foregoing covenant.
Executive shall comply with all relevant policies and guidelines of the Company, including
regarding the protection of confidential information and intellectual property and potential
conflicts of interest. Executive acknowledges that the Company may amend any such policies and
guidelines from time to time, and that Executive remains at all times bound by their most current
version.
c. In the event Executive leaves the employ of the Company, Executive hereby grants consent to
notification by the Company to any subsequent employer about Executives rights and obligations
under this Agreement.
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8.
Non-Competition; Non-Solicitation.
a. Executive acknowledges and recognizes the highly competitive nature of the businesses of
the Company and its Affiliates and accordingly agrees as follows:
(i) During the Service Term and for the Restricted Period, Executive will not, whether on
Executives own behalf or on behalf of or in conjunction with any Person, directly or indirectly
solicit or assist in soliciting in competition with the Company or its Affiliates, the business of
any customer, prospective customer, client or prospective client:
(A) with whom Executive had personal contact or dealings on behalf of the Company or its
Affiliates during the one year period preceding the termination of Executives employment;
(B) with whom employees directly or indirectly reporting to Executive have had personal
contact or dealings on behalf of the Company or its Affiliates during the one-year immediately
preceding the termination of Executives employment; or
(C) for whom Executive had direct or indirect responsibility during the one year period
immediately preceding the termination of Executives employment.
(ii) During the Restricted Period, Executive will not directly or indirectly:
(A) engage in any Competitive Business;
(B) enter the employ of, or render any services to, any Person (or any division or controlled
or controlling affiliate of any Person) who or which engages in a Competitive Business;
(C) acquire a financial interest in, or otherwise become actively involved with, any
Competitive Business, directly or indirectly, as an individual, partner, stockholder, officer,
director, principal, agent, trustee or consultant; or
(D) interfere with, or attempt to interfere with, business relationships (whether formed
before, on or after the date of this Agreement) between the Company or any of its Affiliates and
customers, clients, suppliers partners, members or investors of the Company or its Affiliates.
(iii) Notwithstanding anything to the contrary in this Agreement, Executive may directly or
indirectly own, solely as an investment, securities of any Person engaged in the business of the
Company or its Affiliates which are publicly traded on a national or regional stock exchange or on
the over-the-counter market if Executive (i) is not a controlling Person of, or a member of a group
which controls, such Person and (ii) does not, directly or indirectly, own 5% or more of any class
of securities of such Person.
(iv) During the Restricted Period, Executive will not, whether on Executives own behalf or on
behalf of or in conjunction with any Person, directly or indirectly:
13
(A) solicit, interview, encourage, or take any other action that would tend to influence in
any manner any employee of the Company or its Affiliates to leave the employment of the Company or
its Affiliates (other than as a result of a general advertisement of employment made by Executives
subsequent employer or business, not directed at any such employee); or
(B) hire any such employee who was employed by the Company or its Affiliates as of the
Termination Date or who left the employment of the Company or its Affiliates coincident with, or
within one year prior to or after, the Termination Date.
(v) During the Restricted Period, Executive will not, directly or indirectly, solicit or
encourage any consultant then under contract with the Company or its Affiliates to cease to work
with the Company or its Affiliates.
b. It is expressly understood and agreed that although Executive and the Company consider the
restrictions contained in this Section 8 to be reasonable, if a final judicial determination is
made by a court of competent jurisdiction that the time or territory or any other restriction
contained in this Agreement is an unenforceable restriction against Executive, the provisions of
this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum
time and territory and to such maximum extent as such court may judicially determine or indicate to
be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction
contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make
it enforceable, such finding shall not affect the enforceability of any of the other restrictions
contained herein.
c. Prior to the commencement thereof, Executive will provide written notice to the Company of
any employment or other activity that would potentially violate the provisions of Sections 7 or 8
and, if Executive wishes to do so, Executive may ask the Board to modify or waive the protections
of this Section 8, but nothing in this Agreement shall limit in any manner the Boards absolute
discretion not to do so.
9.
Enforcement of Promises Concerning the Protection of the Companys Confidential Information
and Goodwill.
Executive acknowledges and agrees that the Companys remedies at law for a breach or
threatened breach of any of the provisions of Section 7 or Section 8 would be inadequate and the
Company would suffer irreparable damages as a result of such breach or threatened breach. In
recognition of this fact, Executive agrees that, in the event of such a breach in or threatened
breach, in addition to any remedies at law, the Company, without posting any bond, shall be
entitled to obtain equitable relief in the form of specific performance, temporary restraining
order, temporary or permanent injunction or any other equitable remedy which may then be available.
In addition, and without limiting the Companys ability to obtain such equitable relief, Executive
shall not be entitled to any Change In Control Payment if Executive materially violates the
provisions of Sections 7 or 8 and, to the extent that such payments have already been made,
Executive shall repay all Change In Control Payments immediately upon demand by the Company.
14
10.
Section 409A Acknowledgement and Release
. Executive understands that payments under this
Agreement are potentially subject to Section 409A of the Code and that if this Agreement does not
satisfy an exception to Code Section 409A or does not comply with the requirements of Section 409A
and the applicable guidance thereunder, then Executive may incur adverse tax consequences under
Section 409A. Executive acknowledges and agrees that (a) Executive is solely responsible for all
obligations arising as a result of the tax consequences associated with payments under this
Agreement including, without limitation, any taxes, interest or penalties associated with Section
409A, (b) Executive is not relying upon any written or oral statement or representation by the
Company or any Affiliate thereof, or any of their respective employees, directors, officers,
attorneys or agents (collectively, the
Company Parties
) regarding the tax effects associated with
the execution of this Agreement and the payment under this Agreement, and (c) in deciding to enter
into this Agreement, Executive is relying on his or her own judgment and the judgment of the
professionals of his or her choice with whom Executive has consulted. Executive hereby releases,
acquits and forever discharges the Company Parties from all actions, causes of actions, suits,
debts, obligations, liabilities, claims, damages, losses, costs and expenses of any nature
whatsoever, known or unknown, on account of, arising out of, or in any way related to the tax
effects associated with the execution of this Agreement and any payment hereunder.
11.
Miscellaneous
.
a. Governing Law; Jurisdiction; Venue. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, without regard to conflicts of laws principles
thereof. Any action concerning or relating to this Agreement shall be filed only in the federal
and state courts sitting in Dallas County, Texas.
b. Entire Agreement; Amendments. This Agreement contains the entire understanding of the
parties with respect to any Change In Control or the subject matter of this Agreement, provided
however, that the effects of a change in control pursuant to the Long-Term Incentive Award
Agreements shall be governed by the terms of such agreements and shall not be affected by this
Agreement.
c. No Waiver. The failure of a party to insist upon strict adherence to any term of this
Agreement, or any term of any agreement with any other employee, on any occasion shall not be
considered a waiver of such partys rights or deprive such party of the right thereafter to insist
upon strict adherence to that term or any other term of this Agreement.
d. Severability. In the event that any one or more of the provisions of this Agreement shall
be or become invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions of this Agreement shall not be affected thereby.
e. Assignment. This Agreement, and all of Executives rights and duties hereunder, shall not
be assignable or delegable by Executive. Any purported assignment or delegation by Executive in
violation of the foregoing shall be null and void ab initio and of no force and effect. This
Agreement may be assigned, in whole or in part, by the Company to a Person which is an Affiliate or
a successor in interest to all or a substantial part of the business
15
operations of the Company. Upon such assignment, the rights and obligations of the Company
hereunder shall become the rights and obligations of such Affiliate or successor Person.
f. Successors; Binding Agreement. This Agreement shall inure to the benefit of and be binding
upon personal or legal representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
g. Notice. For the purpose of this Agreement, notices and all other communications provided
for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered
by hand or overnight courier or three days after it has been mailed by United States registered
mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth
below in this Agreement, or to such other address as either party may have furnished to the other
in writing in accordance herewith, except that notice of change of address shall be effective only
upon receipt.
If to the Company:
1601 West LBJ Freeway
Dallas, TX 75234-6034
Attention: General Counsel
If to Executive:
Executives home address as set forth in the personnel records of the Company
h. Cooperation. Executive shall provide Executives reasonable cooperation in connection with
any action or proceeding (or any appeal from any action or proceeding) which relates to events
occurring during Executives employment hereunder.
i. Withholding Taxes. The Company may withhold from any amounts payable under this Agreement
such Federal, state and local taxes as may be required to be withheld pursuant to any applicable
law or regulation.
j. Counterparts. This Agreement may be signed in counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon the same
instrument.
k. Survival. The provisions of Sections 1 and 7 through 9 of this Agreement shall survive the
termination of this Agreement.
16
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and
year first above written.
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EXECUTIVE:
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Celanese Corporation:
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By:
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/s/ Sandra Beach Lin
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By:
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/s/ Kevin J. Rogan
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Sandra Beach Lin
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Date:
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April 1, 2008
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Date:
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April 1, 2008
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17
EXHIBIT A
FORM OF GENERAL RELEASE AGREEMENT
AGREEMENT AND GENERAL RELEASE
Celanese Corporation and its Affiliates (the Company), 1601 West LBJ Freeway, Dallas, Texas
75234 and Sandra Beach Lin, his or her heirs, executors, administrators, successors, and assigns
(Executive), enter into this Agreement and General Release (the Release) and agree as follows:
1.
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Last Day of Employment (Separation Date)
. The last day of employment with the Company
is [Insert Date] (the Separation Date).
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2.
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Consideration
. In consideration for signing this Release and compliance with the
promises made herein, Company and Executive agree:
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a.
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Change In Control Payment.
The Company will pay the Change In Control Payment, as
defined in the Change In Control Agreement between the Company and Executive dated on or about
April 1, 2008 (the CIC Agreement)
1
and provide the reimbursements set forth in
the CIC Agreement. Executive agrees that such payments are the exclusive payments due to
Executive arising out of the separation of Executives employment.
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b.
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Unused Vacation.
The Company will pay to Executive wages for prorated unused
vacation as of the Separation Date.
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c.
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Benefits.
The Executive shall be entitled to elect to continue group health and
dental coverage under COBRA and shall be reimbursed for such premiums as provided in the CIC
Agreement. Executives rights in any other employee benefit plans of the Company will be as
provided in the relevant plan documents.
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3.
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No Consideration Absent Execution of this Agreement
. Executive understands and
agrees that he/she would not receive the consideration specified in Paragraph 2 above,
unless the Executive signs this Agreement and General Release on the signature page without
having revoked this Release pursuant to paragraph 14 below and the fulfillment of the promises
contained herein.
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4.
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General Release of Claims
. Executive knowingly and voluntarily releases and forever
discharges the Company and its Affiliates, together with its predecessors, successors and
assigns and the current and former employees, officers, directors and agents thereof
(collectively, the Released Parties), of and from any and all claims, known and unknown,
asserted and unasserted, Executive has or may have as of the date of execution of this Release
to the full extent permitted by law, in all countries and jurisdictions in which the Released
Parties conduct their respective business, including but not limited to the United States of
America.
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5.
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Executive acknowledges and agrees that he/she has been paid all amounts owed to Executive as
compensation, whether in the form of salary, bonus, equity compensation, benefits or
otherwise. The release in Section 4 of this Release includes, but is not limited to, any
alleged violation of the following, as may be amended or in effect:
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1
All capitalized terms shall have the same meaning as
set forth in the CIC Agreement, unless otherwise stated.
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(a) any action arising under or relating to any federal or state statute or local ordinance,
such as:
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Title VII of the Civil Rights Act of 1964;
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The Civil Rights Act of 1991;
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Sections 1981 through 1988 of Title 42 of the United States Code;
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The Employee Retirement Income Security Act of 1974;
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The Immigration Reform and Control Act;
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The Family and Medical Leave Act;
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The Americans with Disabilities Act of 1990;
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The Age Discrimination in Employment Act of 1967;
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The Workers Adjustment and Retraining Notification Act;
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The Occupational Safety and Health Act;
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The Sarbanes-Oxley Act of 2002;
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The Texas Commission on Human Rights Act;
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The Texas Minimum Wage Law;
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Equal Pay Law for Texas; and
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The Vocational Rehabilitation Act.
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(b) any other national, federal, state, province, or local civil or human rights law, or any
other local, state, province, national or federal law, regulation or ordinance; or any law,
regulation or ordinance of a foreign country, including but not limited to the Federal
Republic of Germany and the United Kingdom;
(c) any action under public policy, contract, tort, common law or equity, including, but not
limited to, claims based on alleged breach of an obligation or duty arising in contract or
tort, such as breach of contract, fraud, quantum meruit, invasion of privacy, wrongful
discharge, defamation, infliction of emotional distress, assault, battery, malicious
prosecution, false imprisonment, harassment, negligence, gross negligence, and strict
liability;
(d) any claim for lost, unpaid, or unequal wages, salary, or benefits, including, without
limitation, any claim under the Fair Labor Standards Act, the Employee Retirement Income
Security Act, the Equal Pay Act, the Texas Minimum Wage Law, the Texas Equal Pay Law, or any
other local, state, or federal statute concerning classifications, wages, salary, or
benefits, including calculations and deductions relating to same, as well as the employment,
labor and benefits laws and regulations in all countries in addition to the United States of
America, including but not limited to the United Kingdom and the Federal Republic of
Germany; and
(e) any other claim regardless of the forum in which it might be brought, if any, which
Executive has, might have, or might claim to have against any of the Released Parties, for
any and all injuries, harm, damages, wages, benefits, salary, reimbursements, penalties,
costs, losses, expenses, attorneys fees, and/or liability or other detriment, if any,
whatsoever and whenever incurred, suffered, or claimed by the Executive.
6.
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Affirmations
. Executive affirms that he/she has not filed, caused to be filed, or
presently is a party to any claim, complaint, or action against the Released Parties in any
forum or form, provided that this Release shall not affect the rights or responsibilities of
the Equal Employment Opportunity Commission, or any other federal, state, or local authority
with similar responsibilities (collectively, the Commission) to enforce any employment
discrimination law, and that this Release shall not
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shall affect the right of Executive to file a charge of discrimination with the Commission or
participate in any investigation. However, Executive waives any right to participate in any
payment or benefit arising from any such charge, claim, or investigation.
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Executive further affirms that he/she has reported all hours worked as of the date of this
Release and has been paid and/or has received all leave (paid or unpaid), compensation, wages,
bonuses, commissions, and/or benefits to which he/she may be entitled and that no other leave
(paid or unpaid), compensation, wages, bonuses, commissions and/or benefits are due to him/her,
except as provided specifically in this Release. Executive furthermore affirms that he/she has
no known workplace injuries or occupational diseases and has been provided and/or has not been
denied any leave requested under the Family and Medical Leave Act.
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Executive reaffirms that he or she will comply fully with Sections 7 through 9 of the CIC
Agreement and that, if he or she violates such provisions, all consideration paid hereunder will
be immediately due and payable back to the Company.
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7.
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Governing Law and Interpretation
. This Release shall be governed and conformed in
accordance with the laws of the State of Texas, without regard to its conflict of laws
provision. In the event the Executive or Company breaches any provision of this Release,
Executive and Company affirm that either may institute an action to specifically enforce any
term or terms of this Release. Should any provision of this Release be declared illegal or
unenforceable by any court of competent jurisdiction and cannot be modified to be enforceable,
excluding the general release language, such provision shall immediately become null and void,
leaving the remainder of this Release in full force and effect.
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8.
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Non-admission of Wrongdoing
. The parties agree that neither this Release nor the
furnishing of the consideration for this Release shall be deemed or construed at anytime for
any purpose as an admission by Company of any liability or unlawful conduct of any kind.
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9.
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Neutral Reference.
If contacted by another organization, the Company will only
provide dates of employment and position.
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10.
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Non
-
Disparagement.
Executive agrees not to disparage, or make disparaging remarks or
send any disparaging communications concerning, the Company, its reputation, its business,
and/or its directors, officers and managers. Likewise the Companys senior management agrees
not to disparage, or make any disparaging remark or send any disparaging communication
concerning Executive, his reputation and/or his business.
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11.
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Future Cooperation after Separation Date.
After separation, Executive agrees to make
reasonable efforts to assist Company including but not limited to: assisting with transition
duties, assisting with issues that arise after separation of employment and assisting with the
defense or prosecution of any lawsuit or claim. This includes but is not limited to providing
deposition testimony, attending hearings and testifying on behalf of the Company. The Company
will reimburse Executive for reasonable time and expenses in connection with any future
cooperation after the separation date. Time and expenses can include loss of pay or using
vacation time at a future employer. The Company shall reimburse the Executive within 30 days
of remittance by Executive to the Company of such time and expenses incurred, but in no event
later than the end of the Executives tax year following the tax year in which the Executive
incurs such time and expenses and such reimbursement obligation shall remain in effect for
five years and the amount of expenses eligible for reimbursement hereunder during Executives
tax year will not affect the expenses eligible for reimbursement in any other tax year.
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12.
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Injunctive Relief.
Executive agrees and acknowledges that the Company will be
irreparably harmed by any breach, or threatened breach by him/her of this Agreement and that
monetary damages would be grossly inadequate. Accordingly, he/she agrees that in the event of
a breach, or threatened breach by him/her of this Agreement the Company shall be entitled to
apply for immediate injunctive or other preliminary or equitable relief, as appropriate, in
addition to all other remedies at law or equity.
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13.
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Review Period
. Executive is hereby advised he/she has until [Insert Date],
twenty-one (21) calendar days, to review this Release and to consult with an attorney prior to
execution of this Release. Executive agrees that any modifications, material or otherwise,
made to this Release do not restart or affect in any manner the original twenty-one (21)
calendar day consideration period.
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14.
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Revocation Period and Effective Date
. In the event that Executive elects to sign and
return to the Company a copy of this Agreement, he/she has a period of seven (7) days (the
Revocation Period) following the date of such execution to revoke this Release, after which
time this agreement will become effective (the Effective Date) if not previously revoked.
In order for the revocation to be effective, written notice must be received by the Company no
later than close of business on the seventh day after the Executive signs this Release at
which time the Revocation Period shall expire.
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15.
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Amendment
. This Release may not be modified, altered or changed except upon express
written consent of both parties wherein specific reference is made to this Release.
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16.
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Entire Agreement
. This Release sets forth the entire agreement between the parties
hereto, and fully supersedes any prior obligation of the Company to the Executive. Executive
acknowledges that he/she has not relied on any representations, promises, or agreements of any
kind made to him/her in connection with his/her decision to accept this Release, except for
those set forth in this Release.
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17.
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HAVING ELECTED TO EXECUTE THIS AGREEMENT AND GENERAL RELEASE, TO FULFILL THE PROMISES AND TO
RECEIVE THE SUMS AND BENEFITS IN SECTION 2 ABOVE, EXECUTIVE FREELY AND KNOWINGLY, AND AFTER
DUE CONSIDERATION, ENTERS INTO THIS RELEASE INTENDING TO WAIVE, SETTLE AND RELEASE ALL CLAIMS
HE/SHE HAS OR MIGHT HAVE AGAINST COMPANY.
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IN WITNESS WHEREOF, the parties hereto knowingly and voluntarily executed this Release as of the
date set forth below.
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EXECUTIVE:
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Celanese Corporation:
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By:
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By:
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Sandra Beach Lin
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Date:
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Date:
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21
EXHIBIT B
[List of Works]
22
Schedule I
1. The Company entered into a Change of Control Agreement with each of Kevin J. Rogan and Miguel A.
Desdin that varied from the one entered into with Sandra Beach Lin by:
(a) modifying Section 1(o) to provide, in its entirety, as follows:
Restricted Period
shall be (i) one year from the Termination Date in the event of a
Separation from Service that occurs during the Service Term (as defined hereinafter) other than in
the case of an involuntary Separation from Service without Cause, (ii) in the case of an
involuntary Separation from Service without Cause during the Service Term, an amount of time in
whole months equal to the number of months salary the Company agrees to provide to Executive in
severance, whether paid over time or in a lump sum; and (iii) eighteen months from the Termination
Date in the event of a Separation from Service following a Change In Control where Executive
receives the Change In Control Payment (as defined hereinafter).
(b) modifying Section 5(b) to provide, in its entirety, as follows:
The
Change In Control Payment
shall be equal to one and one half (1.5) times the sum of (i)
Executives then current annualized base salary; and (ii) the higher of (x) Executives Target
Bonus in effect on the last day of the Fiscal Year that ended immediately prior to the year in
which the Termination Date occurs, or (y) the average of the cash bonuses paid by the Company to
Executive for the three Fiscal Years preceding the Termination Date.
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Exhibit 10.3
CHANGE IN CONTROL AGREEMENT
This CHANGE IN CONTROL AGREEMENT (the
Agreement
) is entered into on April 1, 2008 (the
Effective Date
) by and between Celanese Corporation (the
Company
) and Curtis S. Shaw (the
Executive
).
The Company considers it essential to foster the continued employment of key management
personnel. The Board of Directors of the Company (the
Board
) believes that it is in the best
interests of the Company and its stockholders to assure the Company will have the continued
dedication of Executive, notwithstanding the possibility, threat or occurrence of a Change in
Control. The Board believes it is imperative to diminish the inevitable distraction of Executive
by virtue of the personal uncertainties and risks created by a pending or threatened Change in
Control and to encourage Executives full attention and dedication to the Company currently and in
the event of any threatened or pending Change in Control. The Company also requests, and the
Executive desires to give the Company, certain assurances with regard to the protection of
Confidential Information and Intellectual Property of the Company and its Affiliates. Therefore,
the Company and the Executive have entered into this Agreement.
In consideration of the premises and mutual covenants contained herein and for other good and
valuable consideration, the parties agree as follows:
1.
Definitions:
a.
Affiliate
shall mean, when used with respect to any person or entity, any other person or
entity which controls, is controlled by or is under common control with the specified person or
entity. As used in the immediately preceding sentence, the term control (with correlative
meanings for controlled by and under common control with) shall mean, with respect to any
entity, the ownership, directly or indirectly, of fifty percent (50%) or more of the outstanding
equity interests in such entity.
b.
Beneficial Owner
shall have the meaning given such term in Rule 13d-3 of the General
Rules and Regulations under the Securities Exchange Act of 1934, as amended (the
Exchange Act
).
c.
Cause
shall mean (i) Executives willful failure to perform Executives duties hereunder
(other than as a result of total or partial incapacity due to physical or mental illness) for a
period of 30 days following written notice by the Company to Executive of such failure, (ii)
conviction of, or a plea of nolo contendere to, (x) a felony under the laws of the United States or
any state thereof or any similar criminal act in a jurisdiction outside the United States or (y) a
crime involving moral turpitude, (iii) Executives willful malfeasance or willful misconduct which
is demonstrably injurious to the Company or its Affiliates, (iv) any act of fraud by Executive, (v)
any material violation of the Companys code of conduct, (vi) any material violation of the
Companys policies concerning harassment or discrimination, (vii) Executives conduct that causes
material harm to the business reputation of the Company or its Affiliates, or (viii) Executives
breach of the provisions of Sections 7 (Confidentiality; Intellectual Property) or 8
(Non-Competition; Non-Solicitation) of this Agreement.
1
d. A
Change In Control
will be deemed to have occurred for purposes hereof, upon any one of
the following events: (a) any person (within the meaning of Sections 13(d) and 14(d) of the
Exchange Act), other than the Company (including its subsidiaries, directors, and executive
officers) has become the Beneficial Owner of thirty percent (30%) or more of the combined voting
power of the Companys then outstanding common stock or equivalent in voting power of any class or
classes of the Companys outstanding securities ordinarily entitled to vote in elections of
directors (
Voting Securities
) (other than as a result of an issuance of securities by the Company
approved by Incumbent Directors, or open market purchases approved by Incumbent Directors at the
time the purchases are made); (b) individuals who constitute the Board as of the Effective Date
(the
Incumbent Directors
) have ceased for any reason to constitute at least a majority thereof,
provided that any person becoming a director after the Effective Date whose election, or nomination
for election by the Companys stockholders, was approved by a majority of the directors comprising
the Incumbent Board, either by a specific vote or by approval of the proxy statement of the Company
in which such person is named as a nominee for director without objection to such nomination shall
be an Incumbent Director; provided, however, that no individual initially elected or nominated as a
director of the Company as a result of an actual or threatened election contest with respect to the
election or removal of directors (
Election Contest
) or other actual or threatened solicitation of
proxies or consents by or on behalf of any Person other than the Board (
Proxy Contest
), including
by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest, shall
be deemed an Incumbent Director; (c) the stockholders of the Company approve a reorganization,
merger, consolidation, statutory share exchange or similar form of corporate transaction, or the
sale or other disposition of all or substantially all of the Companys assets (a
Transaction
),
unless immediately following such Transaction, (i) all or substantially all of the Persons who were
the Beneficial Owners of the Voting Securities outstanding immediately prior to such Transaction
are the Beneficial Owners of more than 50% of the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors of the entity resulting
from such Transaction (including, without limitation, an entity which as a result of such
Transaction owns the Company or all or substantially all of the Companys assets or stock either
directly or through one or more subsidiaries, the
Surviving Entity
) in substantially the same
proportions as their ownership, immediately prior to such Transaction, of the Voting Securities,
(ii) no Person is the Beneficial Owner of 30% or more of the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of directors of the
Surviving Entity, and (iii) at least a majority of the members of the board of directors of the
Surviving Entity are Incumbent Directors; or (d) approval by the Companys stockholders of a
complete liquidation and dissolution of the Company.
However, if in any circumstance in which the foregoing definition would be operative and with
respect to which the income tax under Section 409A of the Code would apply or be imposed, but where
such tax would not apply or be imposed if the meaning of the term Change in Control met the
requirements of Section 409A(a)(2)(A)(v) of the Code, then the term Change in Control herein
shall mean, but only for the transaction so affected, a change in control event within the
meaning of Treas. Reg. §1.409A3(i)(5).
e.
Change In Control Protection Period
shall mean that period commencing on the date that
the Company or a third party publicly announces an event that, if consummated, would constitute a
Change In Control and ending (i) on the date that the
2
circumstances giving rise to the announcement of the event are abandoned or withdrawn, or (ii)
if such transaction is consummated, two years after the Change In Control.
f.
COBRA
shall mean those provisions of the Consolidated Omnibus Budget Reconciliation Act
of 1986, as amended, related to continuation of group health and dental plan coverage as set forth
in Code section 4980B.
g.
Code
shall mean the Internal Revenue Code of 1986, as amended from time to time.
h.
Competitive Business
shall mean businesses that compete with products and services
offered by the Company in those countries where the Company or any of its Affiliates manufactures,
produces, sells, leases, rents, licenses or otherwise provides its products or services during the
two (2) years preceding the Termination Date (including, without limitation, businesses which the
Company or its Affiliates have specific plans to conduct in the future that were disclosed or made
available to Executive), provided that, if Executives duties were limited to particular product
lines or businesses during such period, the Competitive Business shall be limited to those product
lines or businesses in those countries for which the Executive had such responsibility.
i.
Confidential Information
shall mean any non-public, proprietary or confidential
information, including without limitation trade secrets, know-how, research and development,
software, databases, inventions, processes, formulae, technology, designs and other intellectual
property, information concerning finances, investments, profits, pricing, costs, products,
services, vendors, customers, clients, partners, investors, personnel, compensation, benefits,
recruiting, training, advertising, sales, marketing, promotions, government and regulatory
activities and approvals concerning the past, current or future business, activities and operations
of the Company, its Affiliates and/or any third party that has disclosed or provided any of same to
the Company or its Affiliates on a confidential basis. Confidential Information also includes
any information designated as a trade secret or proprietary information by operation of law or
otherwise, but shall not be limited by such designation. Confidential Information shall not
include any information that is (i) generally known to the industry or the public other than as a
result of Executives breach of this covenant; (ii) made legitimately available to Executive by a
third party without breach of any confidentiality obligation; or (iii) required by law to be
disclosed; provided that Executive shall give prompt written notice to the Company of such
requirement, disclose no more information than is so required, and cooperate with any attempts by
the Company to obtain a protective order or similar treatment.
j.
Controlled Group
shall mean all corporations or business entities that are, along with
the Company, members of a controlled group of corporations or businesses, as defined in Code
Sections 414(b) and 414(c), except that the language at least 50 percent is used instead of at
least 80 percent in applying the rules of Code Sections 414(b) and 414(c).
k.
Fiscal Year
shall mean the fiscal year of the Company.
l.
Good Reason
shall mean any of the following conditions which occurs without the consent
of the Executive: (i) a material diminution in the Executives base salary or
3
annual bonus opportunity; (ii) a material diminution in the Executives authority, duties, or
responsibilities (including status, offices, titles and reporting requirements); (iii) a material
change in the geographic location at which the Executive must perform his duties; (iv) failure of
the Company to pay compensation or benefits when due, or (v) any other action or inaction that
constitutes a material breach by the Company of this Agreement. The conditions described above
will not constitute Good Reason unless the Executive provides written notice to the Company of
the existence of the condition described above within 90 days after the initial existence of such
condition. In addition, the conditions described above will not constitute Good Reason unless
the Company fails to remedy the condition within a period of thirty (30) days after receipt of the
notice described in the preceding sentence. If the Company fails to remedy the condition within
the period referred to in the preceding sentence, Executive may terminate his employment with the
Company for Good Reason within in the next thirty (30) days following the expiration of the cure
period.
m.
Notice of Termination
shall mean a notice which shall indicate the general reasons for
the termination employment and the circumstances claimed to provide a basis for termination of
employment or other Separation of Service under the provision so indicated.
n.
Person
shall mean any person, firm, partnership, joint venture, association, corporation
or other business organization, entity or enterprise whatsoever.
o.
Restricted Period
shall be (i) one year from the Termination Date in the event of a
Separation from Service that occurs during the Service Term (as defined hereinafter) other than in
the case of an involuntary Separation from Service without Cause, (ii) in the case of an
involuntary Separation from Service without Cause during the Service Term, an amount of time in
whole months equal to the number of months salary the Company agrees to provide to Executive in
severance, whether paid over time or in a lump sum; and (iii) two years from the Termination Date
in the event of a Separation from Service following a Change In Control where Executive receives
the Change In Control Payment (as defined hereinafter).
p.
Separation from Service
shall mean an event after which the Executive shall no longer
provide services to the members of the Controlled Group, whether voluntarily or involuntarily as
determined by the Committee (as hereafter defined) in accordance with Treas. Reg. §1.409A-1(h)(1).
A Separation from Service shall occur when Executive has experienced a termination of employment
from the members of the Controlled Group. Executive shall be considered to have experienced a
termination of employment when the facts and circumstances indicate that the Executive and the
Company reasonably anticipate that either (i) no further services will be performed for the members
of the Controlled Group after a certain date, or (ii) that the level of bona fide services the
Executive will perform for the members of the Controlled Group after such date (whether as an
employee or as an independent contractor) will permanently decrease to no more than 20% of the
average level of bona fide services performed by such Executive (whether as an employee or an
independent contractor) over the immediately preceding 36-month period (or the full period of
services to the members of the Controlled Group if the Executive has been providing services to the
members of the Controlled Group less than 36 months). If Executive is on military leave, sick
leave, or other bona fide leave of absence, the employment relationship between the Executive and
the members of the Controlled Group shall be treated as continuing intact, provided that the period
of such leave does not
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exceed 6 months, or if longer, so long as the Executive retains a right to reemployment with
the members of the Controlled Group under an applicable statute or by contract. If the period of a
military leave, sick leave, or other bona fide leave of absence exceeds 6 months and the Executive
does not retain a right to reemployment under an applicable statute or by contract, the employment
relationship shall be considered to be terminated for purposes of this Agreement as of the first
day immediately following the end of such 6-month period. In applying the provisions of this
paragraph, a leave of absence shall be considered a bona fide leave of absence only if there is a
reasonable expectation that the Executive will return to perform services for any members of the
Controlled Group.
Notwithstanding the foregoing provisions, if Executive provides services for the Company as both an
employee and as a non-employee director, to the extent permitted by Treas. Reg. §1.409A-1(h)(5) the
services provided by such Executive as a non-employee director shall not be taken into account in
determining whether the Executive has experienced a Separation from Service.
q.
Target Bonus
shall mean the target bonus for Executive under any annual bonus plan in
effect from time to time as determined by the Compensation Committee (the
Committee
) or the
Board.
r.
Termination Date
shall mean the date upon which a Separation from Service with respect to
an Executive occurs.
2.
Term of Change In Control Agreement
.
a. This Agreement shall be for an initial term (the
Initial Term
) of two years and shall
continue to renew for consecutive two year terms thereafter (a
Renewal Term
), unless either party
shall give written notice to the other (a
Notice of Non-Renewal
) that such agreement shall not
renew at least ninety days prior to the expiration of the Initial Term or Renewal Term then in
effect. Notwithstanding the foregoing, the Company may not give a Notice of Non-Renewal during the
Change In Control Protection Period.
b. This Agreement, except those provisions which shall survive under Section 11(k), shall
terminate upon the termination of Executives employment for any reason other than the termination
of Executives employment during the Change In Control Protection Period (x) by the Company without
Cause or (y) by the Executive with Good Reason. No payment under this Agreement will be due to
Executive upon termination of Executives employment for any reason other than as specified in (x)
or (y) above.
3.
Executives Incumbent Position
.
a. Unless notified otherwise by the Chief Executive Officer of the Company or the Board,
Executive shall serve as Executive Vice President, General Counsel & Corporate Secretary
(
Executives Incumbent Position)
. In such position, Executive shall have such duties and
authority as shall be determined from time to time by the Chief Executive Officer and the Board.
If requested, Executive shall also serve as a member of the Board without additional compensation.
The period during which the Executive shall be employed by the Company shall be called the
Service
Term
.
5
b. Except as provided in Section 5, (i) either Company or Executive may terminate the
employment relationship at any time, with or without Cause or Good Reason, (ii) this Agreement
shall not be construed as giving the Executive any right to be retained in the employ of the
Company or its Affiliates, (iii) the Company may at any time terminate the Executive free from any
liability of any claim under this Agreement, except as expressly provided herein; and (iv) the
Company may demote Executive at any time in its absolute and sole discretion without liability to
the Executive.
c. During the Service Term, Executive will devote Executives full business time and best
efforts to the performance of Executives duties hereunder and will not engage in any other
business, profession or occupation for compensation or otherwise which would conflict or interfere
with the rendition of such services either directly or indirectly, without the prior written
consent of the Board; provided that nothing herein shall preclude Executive, (i) subject to the
prior approval of the Board, from accepting appointment to or continuing to serve on any board of
directors or trustees of any business corporation or any charitable organization or (ii) from
participating in charitable activities or managing personal investments; provided in each case, and
in the aggregate, that such activities do not conflict or interfere with the performance of
Executives duties hereunder or conflict with Sections 7 or 8. Executive shall promote the
goodwill of the Company with its employees, customers, stockholders, vendors, and the general
public. During the Service Term, reasonable business expenses incurred by Executive in the
performance of Executives duties hereunder and to support the goodwill and business relationships
of the Company shall be reimbursed by the Company in accordance with Company policies.
4.
Obligations of the Company upon Change In Control with Respect to Long-Term Incentive
Awards and Deferred Compensation.
The effect of a change in control on any long-term incentive awards (cash or equity) or
deferred compensation previously granted to the Executive under the 2008 Deferred Compensation
Plan, 2004 Stock Incentive Plan or the 2004 Deferred Compensation Plan, as amended, (the
Long-Term
Incentive Awards
) shall be governed by the terms and conditions of the applicable individual award
agreements or deferral agreements and the Celanese Corporation 2008 Deferred Compensation Plan, the
2004 Stock Incentive Plan or the 2004 Deferred Compensation Plan, as amended (collectively, the
Long-Term Incentive Award Agreements
), and shall not be governed by this Agreement.
5.
Termination of Employment Connected with a Change In Control.
a. Upon Executives Separation from Service during the Change In Control Protection Period,
Executive shall receive the Change In Control Payment if and only if the following conditions
occur:
(i) The Change In Control is consummated;
(ii) Executive is employed in the Executive Incumbent Position or some substantially
equivalent or higher position for the Company as of the commencement of the Change In Control
Protection Period;
6
(iii) Executives employment is terminated either by the Company without Cause or by the
Executive with Good Reason such that a Separation from Service occurs;
(iv) Within fifty (53) days after both conditions in Sections 5(a)(i) and 5(a)(iii), or at the
expiration of twenty-one (21) days following the presentation of the release, Executive executes a
release of all claims, known or unknown, against the Company, its Affiliates, and their respective
agents in a form satisfactory to the Company similar to that attached hereto as Exhibit A and does
not timely revoke such release before the expiration of seven days following his or her execution
of the release; and
(v) Within fifty (53) days after both conditions in Sections 5(a)(i) and 5(a)(iii), Executive
reaffirms in writing in a manner satisfactory to the Company his or her obligations under Sections
7 and 8 of this Agreement.
b. The
Change In Control Payment
shall be equal to two times the sum of (i) Executives then
current annualized base salary; and (ii) the higher of (x) Executives Target Bonus in effect on
the last day of the Fiscal Year that ended immediately prior to the year in which the Termination
Date occurs, or (y) the average of the cash bonuses paid by the Company to Executive for the three
Fiscal Years preceding the Termination Date.
c. The Change In Control Payment shall be paid in a single lump sum to Executive six (6)
months and one day after the Executives Termination Date, together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code.
d. Provided that (i) all of the conditions in Section 5(a) are met, (ii) Executive makes a
timely COBRA election, and (iii) Executive has complied in all material respects with regard to the
obligations of Sections 7 and 8 of this Agreement, if the Executive timely remits to the Company
the applicable COBRA premiums for such coverage, the Company will continue to provide group
health and dental coverage under the Companys medical plan for Executive and his or her dependents
during the Restricted Period; and will reimburse Executive for all premiums paid by Executive for
such continued coverage. Such reimbursements will be made within thirty (30) days after
Executives payment of such premiums (or submission of a request for reimbursement and satisfactory
proof of such payment) but in no event later than on or before the last day of the Executives tax
year following the tax year in which the expense was incurred. The amount of COBRA premiums and
health and dental expenses eligible for reimbursement during Executives tax year may not affect
the COBRA premiums and health and dental expenses eligible for reimbursement in any other tax year.
e. Certain Further Payments Due Executive
(i) In the event that any amount or benefit paid or distributed to Executive pursuant to this
Agreement and/or any amounts or benefits otherwise paid or distributed to Executive by the Company
that are treated as parachute payments under Section 280G of the Code (such payments, collectively,
the
Covered Payments
), are or become subject to the tax imposed under Section 4999 of the Code or
any similar tax that may hereafter
7
be imposed (the
Excise Tax
), the Company will pay to Executive an additional amount (the
Tax Reimbursement Payment
), such that the net amount retained by Executive with respect to such
Covered Payments, after deduction of any Excise Tax (as well as any penalties and interest thereon)
on the Covered Payments and any Federal, state and local income tax, payroll tax, and Excise Tax on
the Tax Reimbursement Payment provided for by this subsection (e), but before deduction for any
Federal, state or local income or employment tax withholding on such Covered Payments, will be
equal to the amount of the Covered Payments, together with an amount equal to the product of any
deductions disallowed to Executive for federal, state, or local income tax purposes because of the
inclusion of the Tax Reimbursement Payment in Executives adjusted gross income multiplied by the
highest applicable marginal rate of federal, state, or local income taxation, respectively, for the
calendar year in which the Tax Reimbursement Payment is to be made. The time for payment of the
Tax Reimbursement Payment is set forth in subsection (e)(v) below. The Tax Reimbursement Payment
is intended to place the Executive in the same position he would have been in if the Excise Tax did
not apply.
(ii) For purposes of determining whether any of the Covered Payments will be subject to the
Excise Tax and the amount of such Excise Tax,
(A) such Covered Payments will be treated as parachute payments within the meaning of
Section 280G of the Code, and all parachute payments in excess of the base amount (as defined
under Section 280G(b)(3) of the Code) will be treated as subject to the Excise Tax, unless, and
except to the extent that, in the good faith judgment of a public accounting firm appointed by the
Company or tax counsel selected by such accounting firm (the
Accountants
), the Company has a
reasonable basis to conclude that such Covered Payments (in whole or in part) either do not
constitute parachute payments or represent reasonable compensation for personal services actually
rendered (within the meaning of Section 280G(b)(4)(B) of the Code) in excess of the base amount,
or such parachute payments are otherwise not subject to such Excise Tax; and
(B) the value of any non-cash benefits or any deferred payment or benefit will be determined
by the Accountants in accordance with the principles of Section 280G of the Code.
(iii) For purposes of determining the amount of the Tax Reimbursement Payment, Executive will
be deemed to pay:
(A) Federal income taxes at the highest applicable marginal rate of Federal income taxation
for the calendar year in which the Tax Reimbursement Payment is to be made; and
(B) any applicable state and local income taxes at the highest applicable marginal rate of
taxation for the calendar year in which the Tax Reimbursement Payment is to be made, net of the
maximum reduction in Federal income taxes which could be obtained from the deduction of such state
or local taxes if paid in such year.
(iv) In the event that the Excise Tax amount, if any, initially determined to be payable to
the United States Treasury Department pursuant to this subsection
8
(e) is later determined by the Accountants or pursuant to any proceeding or negotiations with
the Internal Revenue Service to exceed the amount taken into account hereunder at the time the Tax
Reimbursement Payment was initially determined (including, but not limited to, by reason of any
payment the existence or amount of which could not be determined at the time of the Tax
Reimbursement Payment), the Company will make an additional Tax Reimbursement Payment, in respect
of such excess (including making a full Tax Reimbursement Payment in the event of an initial
determination that no Excise Tax amount was due) (as well as any interest or penalty payable with
respect to such payment) at the time specified in subsection (e)(v) below.
In the event that the Excise Tax is subsequently determined by the Accountants or pursuant to
any proceeding or negotiations with the Internal Revenue Service to be less than the amount taken
into account under this subsection (e) in calculating the Tax Reimbursement Payment made, Executive
will repay to the Company, at the time specified in subsection (e)(v) below, the portion of such
prior Tax Reimbursement Payment that would not have been paid if the amount of the Excise Tax had
been accurately calculated in determining such Tax Reimbursement Payment, plus interest on the
amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code.
Notwithstanding the foregoing, in the event any portion of the Tax Reimbursement Payment to be
refunded to the Company has been paid to any Federal, state or local tax authority, repayment
thereof will not be required until actual refund or credit of such portion has been made to
Executive, and interest payable to the Company will not exceed interest received or credited to
Executive by such tax authority for the period it held such portion. Executive and the Company
will mutually agree upon the course of action to be pursued (and the method of allocating the
expenses thereof) if Executives good faith claim for refund or credit is denied (in whole or in
part); provided that Executive will remain responsible to repay the Company for any such unrefunded
Tax Reimbursement Payments to the extent Executive ultimately prevails in such claim.
(v) The Tax Reimbursement Payment (or portion thereof) provided for in this subsection (e)
will be paid to Executive within 5 days after Executive remits the Excise Tax to the Internal
Revenue Service but no later than the end of the Executives tax year following the tax year in
which the Executive remits the Excise Tax to the Internal Revenue Service. Further, in the event
that the initial Tax Reimbursement Payment was too little and additional Tax Reimbursement Payments
are subsequently determined to be payable to Executive pursuant to subsection (e)(iv) above, such
Tax Reimbursement Payment or additional Tax Reimbursement Payment amount will be made by the
Company to Executive within 5 days after the date that Executive remits such portion to the
Internal Revenue Service, but no later than the end of the Executives tax year following the tax
year in which the Executive remits such portion to the Internal Revenue Service. In the event that
the amount of the estimated Tax Reimbursement Payment exceeds the amount subsequently determined to
have been due, subject to the provisions of subsection (e)(iv), such excess will be payable by
Executive to the Company on the fifth (5th) business day after written demand by the Company for
payment (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code).
Company will reimburse the Executive for any interest, penalties or surcharge that may be imposed
on the Executive in connection with any Excise Tax (including a reimbursement of any additional
taxes imposed as a result of the reimbursement of any such interest, penalties or surcharge) within
5 days after payment by the Executive, but in no event later than on or before the last day of the
Executives tax year following the tax year in which the interest, penalties, surcharge or other
taxes are
9
imposed, such reimbursement obligation shall remain in effect during the applicable statute of
limitations relating to any such interest, penalties or surcharge (but in no event shall remain in
effect for longer than 10 years), and the amount of expenses eligible for reimbursement hereunder
during Executives tax year will not affect the expenses eligible for reimbursement in any other
tax year.
(vi) The Tax Reimbursement Payment due under this subsection (e) shall not exceed two million
dollars ($2,000,000).
(vii) If the amount of the Covered Payments is equal to or less than 110% of the product of
2.99 and Executives applicable base amount (as such term is defined for purposes of Section 4999
of the Code), the Covered Payments under this Agreement or otherwise shall be reduced by the
minimum amount necessary so that none of the Covered Payments are subject to the excise tax under
Section 4999 of the Code; provided, however, that this subsection (e)(vii) shall not apply if, even
after all Covered Payments due hereunder are reduced to zero, the value of the Covered Payments
would still be subject to the excise tax under Section 4999 of the Code, in which case no reduction
of any Covered Payments shall be made.
f. Notwithstanding any provision of this Agreement to the contrary, if Executive is a
Specified Employee within the meaning of Treasury Regulation §1.409A-1(i) and if any payment
under this Agreement provides for a deferral of compensation within the meaning of Treasury
Regulation §1.409A-1(b) and if such payment would otherwise occur before the date that is six (6)
months after the Executives Termination Date, then such payment shall be delayed and shall occur
on the date that is six (6) months and one (1) day after the Termination Date (or, if earlier, the
date of the Executives death), together with interest at the rate provided in Section
1274(b)(2)(B) of the Code.
6.
Exclusivity of Benefits.
Executive acknowledges that this Agreement supercedes and
replaces all prior agreements or understandings Executive may have with the Company with respect to
compensation or benefits that may become payable in connection with or as a result of a change in
control of the Company, whether or not such change in control constitutes a Change In Control,
including any provisions contained in any employment agreement, offer letter or change in control
agreement, except benefits under the Letter Agreement elected pursuant to the following paragraph
and with respect to any Long-Term Incentive Awards which shall be governed by the terms of the
Long-Term Incentive Award Agreements. This Agreement also describes all payments and benefits that
the Company shall be obligated to provide to Executive upon Executives Separation from Service
during a Change In Control Protection Period and shall constitute Executives agreement to waive
any rights to payment under the Celanese Americas Separation Pay Plan, any similar or successor
plan adopted by the Company, and any other term of employment contained in any employment
agreement, offer letter, change in control agreement or otherwise (other than benefits to which
he/she may be entitled, if any: (i) under any Celanese plan qualified under Section 401(a) of the
Internal Revenue Code, including the Celanese Americas Retirement Pension Plan and Celanese
Americas Retirement Savings Plan; and (ii) under the 2008 Celanese Deferred Compensation Plan) to
the extent that the circumstances giving right to such right to payment would constitute a
Separation of Service during a Change In Control Protection Period.
10
The parties hereto acknowledge the existence of that certain letter agreement, dated March 18,
2005, between Celanese and Executive (the Letter Agreement). The parties hereto further
acknowledge that the Letter Agreement continues to be legal, valid, binding, and enforceable in
accordance with its terms. In addition, notwithstanding anything to the contrary set forth in this
Agreement, the parties hereto acknowledge that Executive may, at any time, and from time to time,
elect to enforce his rights pursuant to the Letter Agreement instead of enforcing his rights
pursuant to this Agreement, in which case the Letter Agreement shall survive and govern, and this
Agreement shall cease to be effective, except with respect to Sections 7, 8, and 9 of this
Agreement which shall be effective as of the date hereof and shall survive any such election by
Executive.
7.
Confidentiality; Intellectual Property.
a. Confidentiality.
(i) Based upon the assurances given by the Executive in this Agreement, the Company will
provide Executive with access to its Confidential Information. Executive hereby reaffirms that all
Confidential Information received by Executive prior to the termination of this Agreement is the
exclusive property of the Company and Executive releases any individual claim to the Confidential
Information.
(ii) Executive will not at any time (whether during or after Executives employment with the
Company) (x) retain or use for the benefit, purposes or account of Executive or any other Person;
or (y) disclose, divulge, reveal, communicate, share, make available, transfer or provide access to
any Person outside the Company (other than its professional advisers who are bound by
confidentiality obligations), any Confidential Information without the prior written authorization
of the Board.
(iii) Upon termination of Executives employment with the Company for any reason, Executive
shall (x) cease and not thereafter commence use of any Confidential Information or intellectual
property (including without limitation, any patent, invention, copyright, trade secret, trademark,
trade name, logo, domain name or other source indicator) owned or used by the Company or its
Affiliates; (y) immediately destroy, delete, or return to the Company, at the Companys option, all
originals and copies in any form or medium (including memoranda, books, papers, plans, computer
files, letters and other data) in Executives possession or control (including any of the foregoing
stored or located in Executives office, home, laptop or other computer, whether or not Company
property) that contain Confidential Information or otherwise relate to the business of the Company
or its Affiliates, except that Executive may retain only those portions of any personal notes,
notebooks and diaries that do not contain any Confidential Information; and (z) notify and fully
cooperate with the Company regarding the delivery or destruction of any other Confidential
Information of which Executive is or becomes aware.
(iv) If Executive has previously entered into any confidentiality or non-disclosure agreements
with any former employer, Executive hereby represents and warrants that
11
such confidentiality and/or non-disclosure agreement or agreements have been fully disclosed
and provided to the Company prior to commencing employment with the Company.
b. Intellectual Property.
(i) If Executive has created, invented, designed, developed, contributed to or improved any
works of authorship, inventions, intellectual property, materials, documents or other work product
(including without limitation, research, reports, software, databases, systems, applications,
presentations, textual works, content, or audiovisual materials) (
Works
), either alone or with
third parties, prior to Executives employment by the Company, that are relevant to or implicated
by such employment (
Prior Works
), Executive hereby grants the Company a perpetual, non-exclusive,
royalty-free, worldwide, assignable, sublicensable license under all rights and intellectual
property rights (including rights under patent, industrial property, copyright, trademark, trade
secret, unfair competition and related laws) therein for all purposes in connection with the
Companys current and future business. A list of all such Works as of the date hereof is attached
hereto as
Exhibit B
.
(ii) If Executive creates, invents, designs, develops, contributes to or improves any Works,
either alone or with third parties, at any time during Executives employment by the Company and
within the scope of such employment and/or with the use of any of the Company resources (
Company
Works
), Executive shall promptly and fully disclose same to the Company and hereby irrevocably
assigns, transfers and conveys, to the maximum extent permitted by applicable law, all rights and
intellectual property rights therein (including rights under patent, industrial property,
copyright, trademark, trade secret, unfair competition and related laws) to the Company to the
extent ownership of any such rights does not vest originally in the Company.
(iii) Executive agrees to keep and maintain adequate and current written records (in the form
of notes, sketches, drawings, and any other form or media requested by the Company) of all Company
Works. The records will be available to and remain the sole property and intellectual property of
the Company at all times.
(iv) Executive shall take all requested actions and execute all requested documents (including
any licenses or assignments required by a government contract) at the Companys expense (but
without further remuneration) to assist the Company in validating, maintaining, protecting,
enforcing, perfecting, recording, patenting or registering any of the Companys rights in the Prior
Works and Company Works. If the Company is unable for any other reason to secure Executives
signature on any document for this purpose, then Executive hereby irrevocably designates and
appoints the Company and its duly authorized officers and agents as Executives agent and attorney
in fact, to act for and in Executives behalf and stead to execute any documents and to do all
other lawfully permitted acts in connection with the foregoing.
(v) Executive shall not improperly use for the benefit of, bring to any premises of, divulge,
disclose, communicate, reveal, transfer or provide access to, or share with the Company any
confidential, proprietary or non-public information or intellectual property relating to a former
employer or other third party without the prior written permission of such
12
third party. Executive hereby indemnifies, holds harmless and agrees to defend the Company
and its officers, directors, partners, employees, agents and representatives from any breach of the
foregoing covenant. Executive shall comply with all relevant policies and guidelines of the
Company, including regarding the protection of confidential information and intellectual property
and potential conflicts of interest. Executive acknowledges that the Company may amend any such
policies and guidelines from time to time, and that Executive remains at all times bound by their
most current version.
c. In the event Executive leaves the employ of the Company, Executive hereby grants consent to
notification by the Company to any subsequent employer about Executives rights and obligations
under this Agreement.
8.
Non-Competition; Non-Solicitation.
a. Executive acknowledges and recognizes the highly competitive nature of the businesses of
the Company and its Affiliates and accordingly agrees as follows:
(i) During the Service Term and for the Restricted Period, Executive will not, whether on
Executives own behalf or on behalf of or in conjunction with any Person, directly or indirectly
solicit or assist in soliciting in competition with the Company or its Affiliates, the business of
any customer, prospective customer, client or prospective client:
(A) with whom Executive had personal contact or dealings on behalf of the Company or its
Affiliates during the one year period preceding the termination of Executives employment;
(B) with whom employees directly or indirectly reporting to Executive have had personal
contact or dealings on behalf of the Company or its Affiliates during the one-year immediately
preceding the termination of Executives employment; or
(C) for whom Executive had direct or indirect responsibility during the one year period
immediately preceding the termination of Executives employment.
(ii) During the Restricted Period, Executive will not directly or indirectly:
(A) engage in any Competitive Business;
(B) enter the employ of, or render any services to, any Person (or any division or controlled
or controlling affiliate of any Person) who or which engages in a Competitive Business;
(C) acquire a financial interest in, or otherwise become actively involved with, any
Competitive Business, directly or indirectly, as an individual, partner, stockholder, officer,
director, principal, agent, trustee or consultant; or
13
(D) interfere with, or attempt to interfere with, business relationships (whether formed
before, on or after the date of this Agreement) between the Company or any of its Affiliates and
customers, clients, suppliers partners, members or investors of the Company or its Affiliates.
(iii) Notwithstanding anything to the contrary in this Agreement, Executive may directly or
indirectly own, solely as an investment, securities of any Person engaged in the business of the
Company or its Affiliates which are publicly traded on a national or regional stock exchange or on
the over-the-counter market if Executive (i) is not a controlling Person of, or a member of a group
which controls, such Person and (ii) does not, directly or indirectly, own 5% or more of any class
of securities of such Person.
(iv) During the Restricted Period, Executive will not, whether on Executives own behalf or on
behalf of or in conjunction with any Person, directly or indirectly:
(A) solicit, interview, encourage, or take any other action that would tend to influence in
any manner any employee of the Company or its Affiliates to leave the employment of the Company or
its Affiliates (other than as a result of a general advertisement of employment made by Executives
subsequent employer or business, not directed at any such employee); or
(B) hire any such employee who was employed by the Company or its Affiliates as of the
Termination Date or who left the employment of the Company or its Affiliates coincident with, or
within one year prior to or after, the Termination Date.
(v) During the Restricted Period, Executive will not, directly or indirectly, solicit or
encourage any consultant then under contract with the Company or its Affiliates to cease to work
with the Company or its Affiliates.
b. It is expressly understood and agreed that although Executive and the Company consider the
restrictions contained in this Section 8 to be reasonable, if a final judicial determination is
made by a court of competent jurisdiction that the time or territory or any other restriction
contained in this Agreement is an unenforceable restriction against Executive, the provisions of
this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum
time and territory and to such maximum extent as such court may judicially determine or indicate to
be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction
contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make
it enforceable, such finding shall not affect the enforceability of any of the other restrictions
contained herein.
c. Prior to the commencement thereof, Executive will provide written notice to the Company of
any employment or other activity that would potentially violate the provisions of Sections 7 or 8
and, if Executive wishes to do so, Executive may ask the Board to modify or waive the protections
of this Section 8, but nothing in this Agreement shall limit in any manner the Boards absolute
discretion not to do so.
14
9.
Enforcement of Promises Concerning the Protection of the Companys Confidential Information
and Goodwill.
Executive acknowledges and agrees that the Companys remedies at law for a breach or
threatened breach of any of the provisions of Section 7 or Section 8 would be inadequate and the
Company would suffer irreparable damages as a result of such breach or threatened breach. In
recognition of this fact, Executive agrees that, in the event of such a breach in or threatened
breach, in addition to any remedies at law, the Company, without posting any bond, shall be
entitled to obtain equitable relief in the form of specific performance, temporary restraining
order, temporary or permanent injunction or any other equitable remedy which may then be available.
In addition, and without limiting the Companys ability to obtain such equitable relief, Executive
shall not be entitled to any Change In Control Payment if Executive materially violates the
provisions of Sections 7 or 8 and, to the extent that such payments have already been made,
Executive shall repay all Change In Control Payments immediately upon demand by the Company.
10.
Section 409A Acknowledgement and Release
. Executive understands that payments under this
Agreement are potentially subject to Section 409A of the Code and that if this Agreement does not
satisfy an exception to Code Section 409A or does not comply with the requirements of Section 409A
and the applicable guidance thereunder, then Executive may incur adverse tax consequences under
Section 409A. Executive acknowledges and agrees that (a) Executive is solely responsible for all
obligations arising as a result of the tax consequences associated with payments under this
Agreement including, without limitation, any taxes, interest or penalties associated with Section
409A, (b) Executive is not relying upon any written or oral statement or representation by the
Company or any Affiliate thereof, or any of their respective employees, directors, officers,
attorneys or agents (collectively, the
Company Parties
) regarding the tax effects associated with
the execution of this Agreement and the payment under this Agreement, and (c) in deciding to enter
into this Agreement, Executive is relying on his or her own judgment and the judgment of the
professionals of his or her choice with whom Executive has consulted. Executive hereby releases,
acquits and forever discharges the Company Parties from all actions, causes of actions, suits,
debts, obligations, liabilities, claims, damages, losses, costs and expenses of any nature
whatsoever, known or unknown, on account of, arising out of, or in any way related to the tax
effects associated with the execution of this Agreement and any payment hereunder.
11.
Miscellaneous
.
a. Governing Law; Jurisdiction; Venue. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, without regard to conflicts of laws principles
thereof. Any action concerning or relating to this Agreement shall be filed only in the federal
and state courts sitting in Dallas County, Texas.
b. Entire Agreement; Amendments. This Agreement and the Letter Agreement contain the entire
understanding of the parties with respect to any Change In Control or the subject matter of this
Agreement, provided however, that the effects of a change in control pursuant to the Long-Term
Incentive Award Agreements shall be governed by the terms of such agreements and shall not be
affected by this Agreement.
15
c. No Waiver. The failure of a party to insist upon strict adherence to any term of this
Agreement, or any term of any agreement with any other employee, on any occasion shall not be
considered a waiver of such partys rights or deprive such party of the right thereafter to insist
upon strict adherence to that term or any other term of this Agreement.
d. Severability. In the event that any one or more of the provisions of this Agreement shall
be or become invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions of this Agreement shall not be affected thereby.
e. Assignment. This Agreement, and all of Executives rights and duties hereunder, shall not
be assignable or delegable by Executive. Any purported assignment or delegation by Executive in
violation of the foregoing shall be null and void ab initio and of no force and effect. This
Agreement may be assigned, in whole or in part, by the Company to a Person which is an Affiliate or
a successor in interest to all or a substantial part of the business operations of the Company.
Upon such assignment, the rights and obligations of the Company hereunder shall become the rights
and obligations of such Affiliate or successor Person.
f. Successors; Binding Agreement. This Agreement shall inure to the benefit of and be binding
upon personal or legal representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
g. Notice. For the purpose of this Agreement, notices and all other communications provided
for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered
by hand or overnight courier or three days after it has been mailed by United States registered
mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth
below in this Agreement, or to such other address as either party may have furnished to the other
in writing in accordance herewith, except that notice of change of address shall be effective only
upon receipt.
If to the Company:
1601 West LBJ Freeway
Dallas, TX 75234-6034
Attention: Senior Vice President - Human Resources
If to Executive:
Executives home address as set forth in the personnel records of the Company
h. Cooperation. Executive shall provide Executives reasonable cooperation in connection with
any action or proceeding (or any appeal from any action or proceeding) which relates to events
occurring during Executives employment hereunder.
i. Withholding Taxes. The Company may withhold from any amounts payable under this Agreement
such Federal, state and local taxes as may be required to be withheld pursuant to any applicable
law or regulation.
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j. Counterparts. This Agreement may be signed in counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon the same
instrument.
k. Survival. The provisions of Sections 1 and 7 through 9 of this Agreement shall survive the
termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and
year first above written.
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EXECUTIVE:
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Celanese Corporation:
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By:
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By:
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Curtis S. Shaw
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Date:
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Date:
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17
EXHIBIT A
FORM OF GENERAL RELEASE AGREEMENT
AGREEMENT AND GENERAL RELEASE
Celanese Corporation and its Affiliates (the Company), 1601 West LBJ Freeway, Dallas, Texas
75234 and Curtis S. Shaw, his or her heirs, executors, administrators, successors, and assigns
(Executive), enter into this Agreement and General Release (the Release) and agree as follows:
1.
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Last Day of Employment (Separation Date)
. The last day of employment with the Company
is [Insert Date] (the Separation Date).
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2.
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Consideration
. In consideration for signing this Release and compliance with the
promises made herein, Company and Executive agree:
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a.
Change In Control Payment.
The Company will pay the Change In Control Payment, as
defined in the Change In Control Agreement between the Company and Executive dated on or about
April 1, 2008 (the CIC Agreement)
1
and provide the reimbursements set forth in
the CIC Agreement. Executive agrees that such payments are the exclusive payments due to
Executive arising out of the separation of Executives employment.
b.
Unused Vacation.
The Company will pay to Executive wages for prorated unused
vacation as of the Separation Date.
c.
Benefits.
The Executive shall be entitled to elect to continue group health and
dental coverage under COBRA and shall be reimbursed for such premiums as provided in the CIC
Agreement. Executives rights in any other employee benefit plans of the Company will be as
provided in the relevant plan documents.
3.
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No Consideration Absent Execution of this Agreement
. Executive understands and
agrees that he/she would not receive the consideration specified in Paragraph 2 above,
unless the Executive signs this Agreement and General Release on the signature page without
having revoked this Release pursuant to paragraph 14 below and the fulfillment of the promises
contained herein.
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4.
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General Release of Claims
. Executive knowingly and voluntarily releases and forever
discharges the Company and its Affiliates, together with its predecessors, successors and
assigns and the current and former employees, officers, directors and agents thereof
(collectively, the Released Parties), of and from any and all claims, known and unknown,
asserted and unasserted, Executive has or may have as of the date of execution of this Release
to the full extent permitted by law, in all countries and jurisdictions in which the Released
Parties conduct their respective business, including but not limited to the United States of
America.
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5.
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Executive acknowledges and agrees that he/she has been paid all amounts owed to Executive as
compensation, whether in the form of salary, bonus, equity compensation, benefits or
otherwise. The release in Section 4 of this Release includes, but is not limited to, any
alleged violation of the following, as may be amended or in effect:
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1
All capitalized terms shall have the same meaning as
set forth in the CIC Agreement, unless otherwise stated.
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(a) any action arising under or relating to any federal or state statute or local ordinance,
such as:
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Title VII of the Civil Rights Act of 1964;
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The Civil Rights Act of 1991;
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Sections 1981 through 1988 of Title 42 of the United States Code;
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The Employee Retirement Income Security Act of 1974;
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The Immigration Reform and Control Act;
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The Family and Medical Leave Act;
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The Americans with Disabilities Act of 1990;
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The Age Discrimination in Employment Act of 1967;
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The Workers Adjustment and Retraining Notification Act;
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The Occupational Safety and Health Act;
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The Sarbanes-Oxley Act of 2002;
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The Texas Commission on Human Rights Act;
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The Texas Minimum Wage Law;
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Equal Pay Law for Texas; and
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The Vocational Rehabilitation Act.
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(b) any other national, federal, state, province, or local civil or human rights law, or any
other local, state, province, national or federal law, regulation or ordinance; or any law,
regulation or ordinance of a foreign country, including but not limited to the Federal
Republic of Germany and the United Kingdom;
(c) any action under public policy, contract, tort, common law or equity, including, but not
limited to, claims based on alleged breach of an obligation or duty arising in contract or
tort, such as breach of contract, fraud, quantum meruit, invasion of privacy, wrongful
discharge, defamation, infliction of emotional distress, assault, battery, malicious
prosecution, false imprisonment, harassment, negligence, gross negligence, and strict
liability;
(d) any claim for lost, unpaid, or unequal wages, salary, or benefits, including, without
limitation, any claim under the Fair Labor Standards Act, the Employee Retirement Income
Security Act, the Equal Pay Act, the Texas Minimum Wage Law, the Texas Equal Pay Law, or any
other local, state, or federal statute concerning classifications, wages, salary, or
benefits, including calculations and deductions relating to same, as well as the employment,
labor and benefits laws and regulations in all countries in addition to the United States of
America, including but not limited to the United Kingdom and the Federal Republic of
Germany; and
(e) any other claim regardless of the forum in which it might be brought, if any, which
Executive has, might have, or might claim to have against any of the Released Parties, for
any and all injuries, harm, damages, wages, benefits, salary, reimbursements, penalties,
costs, losses, expenses, attorneys fees, and/or liability or other detriment, if any,
whatsoever and whenever incurred, suffered, or claimed by the Executive.
6.
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Affirmations
. Executive affirms that he/she has not filed, caused to be filed, or
presently is a party to any claim, complaint, or action against the Released Parties in any
forum or form, provided that this Release shall not affect the rights or responsibilities of
the Equal Employment Opportunity Commission, or any other federal, state, or local authority
with similar responsibilities (collectively, the Commission) to enforce any employment
discrimination law, and that this Release shall not
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shall affect the right of Executive to file a charge of discrimination with the Commission or
participate in any investigation. However, Executive waives any right to participate in any
payment or benefit arising from any such charge, claim, or investigation.
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Executive further affirms that he/she has reported all hours worked as of the date of this
Release and has been paid and/or has received all leave (paid or unpaid), compensation, wages,
bonuses, commissions, and/or benefits to which he/she may be entitled and that no other leave
(paid or unpaid), compensation, wages, bonuses, commissions and/or benefits are due to him/her,
except as provided specifically in this Release. Executive furthermore affirms that he/she has
no known workplace injuries or occupational diseases and has been provided and/or has not been
denied any leave requested under the Family and Medical Leave Act.
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Executive reaffirms that he or she will comply fully with Sections 7 through 9 of the CIC
Agreement and that, if he or she violates such provisions, all consideration paid hereunder will
be immediately due and payable back to the Company.
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7.
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Governing Law and Interpretation
. This Release shall be governed and conformed in
accordance with the laws of the State of Texas, without regard to its conflict of laws
provision. In the event the Executive or Company breaches any provision of this Release,
Executive and Company affirm that either may institute an action to specifically enforce any
term or terms of this Release. Should any provision of this Release be declared illegal or
unenforceable by any court of competent jurisdiction and cannot be modified to be enforceable,
excluding the general release language, such provision shall immediately become null and void,
leaving the remainder of this Release in full force and effect.
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8.
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Non-admission of Wrongdoing
. The parties agree that neither this Release nor the
furnishing of the consideration for this Release shall be deemed or construed at anytime for
any purpose as an admission by Company of any liability or unlawful conduct of any kind.
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9.
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Neutral Reference.
If contacted by another organization, the Company will only
provide dates of employment and position.
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10.
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Non
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Disparagement.
Executive agrees not to disparage, or make disparaging remarks or
send any disparaging communications concerning, the Company, its reputation, its business,
and/or its directors, officers and managers. Likewise the Companys senior management agrees
not to disparage, or make any disparaging remark or send any disparaging communication
concerning Executive, his reputation and/or his business.
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11.
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Future Cooperation after Separation Date.
After separation, Executive agrees to make
reasonable efforts to assist Company including but not limited to: assisting with transition
duties, assisting with issues that arise after separation of employment and assisting with the
defense or prosecution of any lawsuit or claim. This includes but is not limited to providing
deposition testimony, attending hearings and testifying on behalf of the Company. The Company
will reimburse Executive for reasonable time and expenses in connection with any future
cooperation after the separation date. Time and expenses can include loss of pay or using
vacation time at a future employer. The Company shall reimburse the Executive within 30 days
of remittance by Executive to the Company of such time and expenses incurred, but in no event
later than the end of the Executives tax year following the tax year in which the Executive
incurs such time and expenses and such reimbursement obligation shall remain in effect for
five years and the amount of expenses eligible for reimbursement hereunder during Executives
tax year will not affect the expenses eligible for reimbursement in any other tax year.
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12.
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Injunctive Relief.
Executive agrees and acknowledges that the Company will be
irreparably harmed by any breach, or threatened breach by him/her of this Agreement and that
monetary damages would be grossly inadequate. Accordingly, he/she agrees that in the event of
a breach, or threatened breach by him/her of this Agreement the Company shall be entitled to
apply for immediate injunctive or other preliminary or equitable relief, as appropriate, in
addition to all other remedies at law or equity.
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13.
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Review Period
. Executive is hereby advised he/she has until [Insert Date],
twenty-one (21) calendar days, to review this Release and to consult with an attorney prior to
execution of this Release. Executive agrees that any modifications, material or otherwise,
made to this Release do not restart or affect in any manner the original twenty-one (21)
calendar day consideration period.
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14.
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Revocation Period and Effective Date
. In the event that Executive elects to sign and
return to the Company a copy of this Agreement, he/she has a period of seven (7) days (the
Revocation Period) following the date of such execution to revoke this Release, after which
time this agreement will become effective (the Effective Date) if not previously revoked.
In order for the revocation to be effective, written notice must be received by the Company no
later than close of business on the seventh day after the Executive signs this Release at
which time the Revocation Period shall expire.
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15.
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Amendment
. This Release may not be modified, altered or changed except upon express
written consent of both parties wherein specific reference is made to this Release.
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16.
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Entire Agreement
. This Release sets forth the entire agreement between the parties
hereto, and fully supersedes any prior obligation of the Company to the Executive. Executive
acknowledges that he/she has not relied on any representations, promises, or agreements of any
kind made to him/her in connection with his/her decision to accept this Release, except for
those set forth in this Release.
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17.
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HAVING ELECTED TO EXECUTE THIS AGREEMENT AND GENERAL RELEASE, TO FULFILL THE PROMISES AND TO
RECEIVE THE SUMS AND BENEFITS IN SECTION 2 ABOVE, EXECUTIVE FREELY AND KNOWINGLY, AND AFTER
DUE CONSIDERATION, ENTERS INTO THIS RELEASE INTENDING TO WAIVE, SETTLE AND RELEASE ALL CLAIMS
HE/SHE HAS OR MIGHT HAVE AGAINST COMPANY.
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IN WITNESS WHEREOF, the parties hereto knowingly and voluntarily executed this Release as of the
date set forth below.
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EXECUTIVE:
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Celanese Corporation:
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By:
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By:
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Curtis S. Shaw
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Date:
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Date:
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21
EXHIBIT B
[List of Works]
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