Vice President-finance Employment Agreement

EXECUTION COPY


RETENTION AGREEMENT


This Retention Agreement (the "Agreement"), dated August 18, 2004 (the "Termination Date"), is entered into by and between Matthew Friel (the "Executive") and GenTek Inc. (together with its subsidiaries and affiliates, the "Company").


WHEREAS, the Executive has been employed as the Chief Financial Officer of the Company as an employee at-will, and as the Chief Financial Officer of the Company, the Executive (i) was eligible to participate in that certain Company Key Employee Retention Plan (the "KERP") and (ii) was granted the following equity awards pursuant to the Company's 2003 Management and Directors Incentive Plan (the "Incentive Plan"): (x) 20,000 shares of common stock of the Company ("Common Stock") pursuant to the "Emergence Shares" Restricted Stock Agreement executed by the Company and the Executive (such shares, the "Emergence Shares"); (y) 1,167 shares of restricted Common Stock pursuant to the Restricted Stock Agreement executed by the Company and the Executive (such shares, the "Restricted Shares"); and (z) options to purchase 6,613 shares of Common Stock pursuant to the Stock Option Agreement executed by the Company and the Executive (the "Options"), which Equity Awards were granted to the Executive on March 19, 2004 (collectively, the "Equity Awards");


WHEREAS, the Executive and the Company have agreed that, among other things, the Executive shall cease to be employed by the Company as its Chief Financial Officer, and shall instead be employed as the Executive Vice President- Finance & Business Development of the Company, effective as of August 18, 2004;


WHEREAS, in connection with the foregoing, the Executive and the Company have agreed that, among other things, (i) certain provisions of the KERP shall, solely as they shall apply to the Executive, be modified and amended, and (ii) the Executive shall be entitled to receive additional awards of, and based on, Common Stock upon the occurrence of a Change in Control (as defined below); and


NOW, THEREFORE, in consideration of the recitals, promises, and other good and valuable consideration specified herein, the receipt and sufficiency of which is hereby acknowledged, the Executive and the Company (on behalf of all the Beneficiaries), agree as follows:


1. TERM OF AGREEMENT; POSITION AND DUTIES; PRINCIPAL PLACE OF
EMPLOYMENT; DEFINITIONS


1.1 Term of Agreement. Unless earlier terminated by the Executive or the Company as set forth in the provisions of Section 2 below, the Executive's employment with the Company shall be governed by the terms of this Agreement beginning on the date hereof and ending on the later of (a) June 30, 2005 or (b) the date that is nine months after the execution of any agreement regarding transactions which, if consummated, would constitute a Change in Control (a "Transaction Agreement"), so long as the execution of such agreement occurs before June 30, 2005 (the "Term").


1.2 Position and Duties. During the Term, for so long as the Executive remains employed with the Company, effective as of August 18, 2004, the Executive shall serve as Executive Vice President - Finance & Business Development (the "EVP"). As the EVP, the Executive shall be responsible for (a) the financial and accounting functions of the Company, with the Chief Financial Officer of the Company (who shall be responsible for all day-to-day accounting and finance operations and shall sign all financial statements) directly reporting to the Executive and, in accordance with the Company's dual reporting practice, to the Chief Executive Officer of the Company, and (b) the three current active asset sales and any potential Change in Control transaction or series of transactions, and any ancillary transactions that are reasonably related to or in furtherance of such Change in Control transaction or series of transactions. Also as the EVP, the Executive shall report to the Company's Chief Executive Officer with respect to his finance and accounting responsibilities and to the Board of Directors


2


(the "Board") with respect to his business development functions. The Company shall provide adequate resources (including personnel) to permit the Executive to fulfill his responsibilities hereunder as determined in the reasonable and good faith discretion of the Board.


1.3 Compensation and Benefit Programs. During the Term, for so long as the Executive is employed with the Company, the Executive shall be treated no less favorably than any other executive officer of the Company (excluding the Chief Executive Officer of the Company) in terms of the Company's incentive compensation, retirement and welfare benefit and perquisite programs; it being specifically understood that (a) the Executive will be eligible to receive short-term and long-term incentive awards for calendar year 2005 on the same basis as other executive officers of the Company (excluding the Chief Executive Officer of the Company) to the extent that short-term or long-term award plans are established and awards are granted thereunder, (b) the Executive's Annual Salary and annual bonus opportunity will not be reduced after the date hereof, (c) the Executive will receive any excise tax gross-up protection for any taxes imposed on the Executive under Section 4999 of the Code with respect to any compensation or benefits received from the Company on the same basis and to the same extent as any other executive officer of the Company, which protection shall be additive to any such protection afforded the Executive under the KERP on the date hereof, and (d) the Executive's annual bonus for 2004 shall be equal to the Full-Year Earned Bonus (as defined in Section 1.5(c) below), which shall be payable in accordance with the terms of the Bonus Plan (as defined in Section 1.5(c) below). For the avoidance of doubt, the Executive's Annual Salary is, as of the date hereof, $310,000 and his target annual bonus opportunity under the Bonus Plan (as defined in Section 1.5(c) below) for 2004 is 100% of his Annual Salary. To the extent any severance, change-in-control or retention benefits (excluding equity-based awards made to the President of the Company's manufacturing segment) provided to any other executive officer of the Company (excluding the Chief Executive Officer of the Company), at any time while the Executive is employed with the Company during the Term, are more favorable than those provided to the Executive as described herein, the Executive shall be provided the more favorable benefit; provided, however, that for the avoidance of doubt, any such more favorable benefits shall be provided to the Executive incrementally to the benefits provided under the KERP (as modified by this Agreement) and otherwise hereunder, and shall not be additive to such benefits already provided.


1.4 Principal Place of Employment. During the Term, for so long as the Executive is employed with the Company the Executive's principal places of employment shall be in both of the Company's New Hampshire and New Jersey offices (in each case as in existence as of the date of this Agreement) (each such place, a "Work Location"). Also during the Term, for so long as the Executive is employed with the Company, the Executive shall travel between his residence, any Work Location, and such other locations, in each case to the extent the Board reasonably determines in good faith such travel is necessary for the Executive to properly discharge his duties and functions as set forth in Section 1.2 above; provided that (a) with respect to the duties and responsibilities executed by the Executive in the ordinary course described in clause (a) of Section 1.2 above, the Executive's travel schedule shall be generally consistent with his schedule for the 12-month period immediately prior to the date hereof and (b) with respect to the duties and responsibilities executed in connection with those events set forth in clause (b) of Section 1.2 above, the Executive's travel schedule shall be as the Board determines is reasonably necessary in order for the Executive to fulfill such duties and responsibilities.


1.5 Definitions. For purposes of this Agreement and the KERP, the following terms shall have the following meanings:


(a) "Cause" shall be defined as follows:


(i) Prior to January 31, 2005, "Cause" shall have the meaning
set forth in the KERP; provided that the last sentence of the
definition set forth in the KERP shall be replaced with the
following sentence: "Any determination of Cause shall only be


3


effective if made by at least two-thirds of the entire Board
entitled to vote on such matters."


(ii) On and after January 31, 2005, the definition of "Cause"
shall mean: (A) the willful and continued failure by the
Executive (other than as resulting from his incapacity due to
physical or mental illness) to substantially perform his duties
and obligations to the Company (including without limitation, the
willful and continued refusal to follow the reasonable and lawful
directions of the person or entity to whom the Executive reports)
after (I) receipt of written notice from the Company specifying
in reasonable detail the manner in which the Executive has
substantially failed to perform his duties and obligations and
requesting the Executive to substantially perform his duties and
obligations in the future and (II) the Executive fails to cure
such circumstances within ten (10) business days following the
Executive's receipt of such notice (the "Cure Period"); (B) the
willful and knowing violation of any securities or other similar
laws by the Executive in the course of the performance of his
duties with the Company, (C) theft, fraud or material dishonesty
by the Executive in the course of the performance of his duties
with the Company, (D) intentional and willful misconduct by the
Executive in the conduct of his duties hereunder that results in
material and demonstrable harm to the Company, or (E) conviction
of a felony or a misdemeanor which results in incarceration of
the Executive for more than thirty (30) days. No act or inaction
done at the direction of the Company's Chief Executive Officer or
Board or that the Executive considered to be in, or not opposed
to, the Company's reasonable and best interest shall be
considered to be "willful" hereunder. Any Determination of Cause
hereunder shall only be effective if such determination is made
by at least two-thirds of the entire Board entitled to vote on
such matters.


(b) "Change in Control", as such term is used in this Agreement, shall have the same meaning as such term is defined in the Incentive Plan as in effect as of the date hereof.


(c) "Full-Year Earned Bonus" for a particular calendar year of the Company means the Executive's annual bonus, determined under the applicable terms of the Company's bonus program (the "Bonus Plan") (which shall be applied reasonably and in good faith by the Compensation Committee of the Board) as if the Executive had been employed for the entire calendar year (i.e. not pro-rated for a partial year); provided, however, that any such annual bonus payout formula will be calculated using the Company's and the Executive's year-to-date actual performance measured as of the Termination Date (or, if the Termination Date is not on a month-end, then as of the month-end date nearest to such date) compared against the Bonus Plan targets for the applicable calendar (and bonus plan) year, as if the applicable calendar (and bonus plan) year ended on the Termination Date (or, if the Termination Date is not on a month-end, then as of the month-end date nearest to such date). For calendar year 2004 only, the 25% "quantifiable objectives" portion of the Executive's Full-Year Earned Bonus (the "Quantifiable Objectives Bonus") will be calculated in two pieces. The first piece shall equal a pro rata portion of the Quantifiable Objectives Bonus (which pro-ration shall be based on the number of 2004 calendar days that have elapsed as of the date of the Agreement relative to 364 days) (the "First Portion"). The First Portion shall equal $43,400.00, which amount shall be paid to the Executive at the time provided for in the Bonus Plan or, if earlier, as provided under this Agreement. The remainder of the Quantifiable Objectives Bonus to be paid to the Executive shall be determined based upon the degree to which the New Performance Objectives, as agreed by the parties hereto, are satisfied during the remainder of 2004.


(d) "Good Reason" shall mean the occurrence of any of the following events, without the Executive's consent: (i) a material breach by the Company of any provisions relating to payment or provision of compensation, benefits or equity grants set forth in this Agreement or (ii) a material breach by the Company of Sections 1.2, 1.3, 1.4, 2.5, 2.6, 3, 4 or 5 of this Agreement (including, without limitation, any diminution in, or adverse change to, the Executive's titles, positions, duties, responsibilities or reporting responsibilities set forth in Section 1.2, above, or the ass ...