Form 20-F 2005

KoSa France Holding
KoSa France Holding S.A.R.L. (new partner of Rhodianyl in the Butachimie Joint Venture) filed a counter-arbitration proceeding
on October 1, 2004 before the Arbitration Court of the International Chamber of Commerce (the “ICC”). At the same time, an initial
arbitration proceeding at the same Arbitration Court was in progress between Rhodianyl SNC and DuPont de Nemours (France)
S.A.S. (its former partner in the Butachimie Joint Venture), in order to counter balance the expected ruling in the Rhodianyl/DuPont
de Nemours (France) S.A.S. case. In the initial arbitration proceeding, Rhodianyl was asking the Arbitration Court to recognize the
non-existence of any geographical limitations and/or material in relation to the sale, marketing export or use of the ADN produced
by Butachimie. This case was decided in favor of Rhodianyl in the final ruling on June 13, 2005 (final ruling, which cannot be
appealed). Under these circumstances, the main claims (principally based on the opposite claims as those made by Rhodianyl
and identical to those of DuPont France in its initial arbitration) made by KoSa France Holding in the counter-arbitration proceeding
– for the amount of approximately €37 million lowered to €21.5 million in January 2006, to which KoSa maintains should be added
sums equaling affected sales in 2006 until the award is rendered, or alternatively a sum of €147 million – are without merit and do
not appear to be admissible by the Arbitration Court of the ICC. An arbitral award should be issued in the third quarter of 2006. We
have not recognized any provision with respect to this matter.
Other procedures
Securities and Exchange Board of India
We are involved in proceedings in India brought by the Securities and Exchange Board of India (“SEBI”), which is seeking to require
us to launch a public tender for 20% of the shares of Albright & Wilson Chemicals India Limited (“AWCIL”), a listed subsidiary of
the group formerly known as Albright & Wilson, which we acquired in 2000. AWCIL is a listed Indian subsidiary of which we now
own 72.79%. We would be required to acquire shares at a price of 278 rupees per share, based on the value of those shares at the
time of our acquisition of Albright & Wilson, and increased by interest accrued since 2000. An adverse decision by the SEBI would
result in an increase in our holding of AWCIL from 72.79% to 92.79%. We would then be required, as a result of crossing the 90%
threshold, to launch a mandatory public tender offer (or “squeeze out”) for the remaining 7.21% of the outstanding shares for the
same price. In this case, we would therefore acquire all shares that we currently do not own (27.21%) for a total of approximately
€7.2 million. We are contesting the SEBI’s proceeding on the merits. A final decision by the High Court of Mumbai, which is hearing
the case on our appeal following an initial unfavorable judgment, is expected to occur in 2006.
Oil for food Program
Two of our subsidiaries, Rhodia Silicones and Rhodia Middle East Jordan, were named in the report of the United Nations independent
investigation committee concerning the “Oil for Food Program” in Iraq. The report notes alleged illicit payments worth $1.7 million
made in regard to petroleum surpluses and humanitarian aid in the context of contracts with Iraq. We are conducting an internal
investigation into this matter. At this stage, we have no knowledge of wrongdoing by our management or employees.
US Department of Justice
In the United States, on January 14, 2004, one of our subsidiaries, Rhodia Inc., entered into a plea agreement with the U.S. Department
of Justice in which it acknowledged the violation of certain provisions of the U.S. Federal Resource Conservation and Recovery Act
regarding waste storage at its former phosphorous manufacturing plant in Silver Bow, Montana. Rhodia Inc. also entered into an
agreement with the U.S. Environmental Protection Agency regarding future assessment and remediation of certain contamination
at the site. This plea agreement was reviewed at a sentencing proceeding in April 2004. An $18 million fine was paid in 2004 and
Rhodia Inc. is subject to a five year probation. In addition, Rhodia Inc. entered into an agreement with the U.S. Environmental
Form 20 - F 2005 - Rhodia
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