<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________
FORM 10-Q
(Mark One)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________to_______
Commission file number 1-12139
SEALED AIR CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 65-0654331
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification
Number)
Park 80 East 07663-5291
Saddle Brook, New Jersey (Zip Code)
(Address of Principal
Executive Offices)
Registrant's telephone number, including area code (201) 791-7600
W. R. Grace & Co.
One Town Center Road, Boca Raton, Florida 33486-1010
(Former Name or Former Address, if Changed Since Last Report)
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 X NO
There were 83,272,061 shares of the registrant's common stock, par value
$0.10 per share, and 36,021,851 shares of the registrant's convertible
preferred stock, par value $.10 per share, outstanding as of April 30,
1998.
</PAGE>
PART I
FINANCIAL INFORMATION
SEALED AIR CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings
For the Three Months Ended March 31, 1998 and 1997
(In thousands of dollars except per share data)
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Net sales $431,035 $422,693
Cost of sales 290,913 274,629
Gross profit 140,122 148,064
Marketing, administrative and
development expenses 94,543 84,759
Operating profit 45,579 63,305
Other income (expense), net (493) 69
Earnings before income taxes 45,086 63,374
Income taxes 18,034 26,114
Net earnings $ 27,052 $ 37,260
Earnings per common share:
Basic $ 0.22 $ 0.47
Diluted $ 0.22 $ 0.47
Weighted average number of
common shares outstanding (000):
Basic 40,648 40,756
Diluted 40,859 40,967
</TABLE>
See accompanying notes to consolidated financial statements.
2
</PAGE>
<PAGE>
SEALED AIR CORPORATION
Consolidated Balance Sheets
March 31, 1998 and December 31, 1997
(In thousands of dollars except share data)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 59,512 $ -
Notes and accounts receivable, less allowance
for doubtful accounts of $11,492 in 1998 and
$7,256 in 1997 416,865 272,194
Inventories 312,609 225,976
Other current assets 57,400 29,188
Total current assets 846,386 527,358
Property and equipment:
Land and buildings 394,257 320,099
Machinery and equipment 1,288,814 1,125,567
Other property and equipment 116,582 119,533
Construction in progress 150,604 187,797
1,950,257 1,752,996
Less accumulated depreciation and amortization 735,363 712,844
Property and equipment, net 1,214,894 1,040,152
Goodwill, less accumulated amortization of
$481 in 1998 and $379 in 1997 1,906,278 13,433
Other assets 179,329 65,888
$4,146,887 $1,646,831
</TABLE>
3
</PAGE>
<PAGE>
SEALED AIR CORPORATION
Consolidated Balance Sheets
March 31, 1998 and December 31, 1997 (Continued)
(In thousands of dollars except share data)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
LIABILITIES, CONVERTIBLE PREFERRED STOCK & EQUITY
<S> <C> <C>
Current Liabilities:
Notes payable and current
installments of long-term debt $284,270 $ -
Accounts payable 152,687 114,907
Other accrued liabilities 159,434 68,710
Income taxes payable 22,210 -
Total current liabilities 618,601 183,617
Long-term debt, less current
installments 1,043,141 -
Deferred income taxes 118,056 13,939
Other non-current liabilities 87,339 96,647
Total liabilities 1,867,137 294,203
Convertible preferred stock $50 per share
redemption value. Authorized 50,000,000
shares, issued 36,021,851 shares in 1998 1,801,093 -
Equity:
Net assets - 1,482,682
Accumulated translation adjustment - (130,054)
Shareholders' equity:
Common stock, $.10 par value. Authorized
400,000,000 shares, issued 83,272,061 shares
in 1998 8,327 -
Additional paid-in capital 593,568 -
Retained earnings 27,052 -
Accumulated translation adjustment (140,171) -
488,776 -
Less deferred compensation 10,119 -
Total equity 478,657 1,352,628
$4,146,887 $1,646,831
</TABLE>
See accompanying notes to consolidated financial statements.
4
</PAGE>
<PAGE>
SEALED AIR CORPORATION AND SUBSIDIARIES
Consolidated Statements (abbreviated) of Cash Flows
For the Three Months Ended March 31, 1998 and 1997
(In thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
Cash Flows From Operating Activities:
<S> <C> <C>
Net earnings $ 27,052 $ 37,260
Adjustments to reconcile net earnings to
net cash provided by operating activities, net of
effect of businesses acquired:
Depreciation and amortization 29,296 24,977
Deferred taxes 19,022 3,142
Net loss on disposals of fixed assets 4,305 67
Cash provided (used) by changes in:
Receivables (5,210) 6,979
Inventories (8,080) (3,777)
Other current assets 4,427 3,670
Other assets (5,142) (2,605)
Accounts payable (12,722) (20,472)
Other accrued liabilities 5,271 (11,176)
Other non-current liabilities 5,656 (3,632)
Net cash provided by operating activities 63,875 34,433
Cash Flows From Investing Activities:
Capital expenditures for property and equipment (16,963) (44,067)
Proceeds from sales of property and equipment 2,701 1,608
Net cash used in investing activities (14,262) (42,459)
Cash Flows From Financing Activities:
Net advances (to) from W. R. Grace & Co. - Conn. (43,779) 8,026
Proceeds from long-term debt 1,258,807 -
Payment of contribution to New Grace (1,256,614) -
Net proceeds on notes payable 986 -
Net cash (used in) provided by
financing activities (40,600) 8,026
Effect of exchange rate changes on cash
and cash equivalents (760) -
Cash and Cash Equivalents:
Increase during the period 8,253 -
Balance, beginning of period - -
Net cash from acquired business 51,259 -
Balance, end of period $ 59,512 $ -
SEALED AIR CORPORATION AND SUBSIDIARIES
Consolidated Statements (abbreviated) of Cash Flows
For the Three Months Ended March 31, 1998 and 1997 (Continued)
(In thousands of dollars)
(Unaudited)
1998 1997
Supplemental Non-Cash Items:
Issuance of 36,021,851 shares of convertible
preferred stock and 40,647,815 shares of
common stock in connection with the
Recapitalization $1,805,158 -
Net assets acquired in exchange for the
issuance of 42,624,246 shares of common stock
in connection with the Merger net of cash
balance of $51,259 acquired $2,089,494 -
</TABLE>
See accompanying notes to consolidated financial statements.
5
</PAGE>
<PAGE>
SEALED AIR CORPORATION AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
For the Three Months Ended March 31, 1998 and 1997
(In thousands of dollars)
(Unaudited)
Three Months Ended
March 31,
1998 1997
Net earnings $27,052 $37,260
Other comprehensive income:
Foreign currency translation adjustments (10,117) (21,037)
Comprehensive income $16,935 $16,223
See accompanying notes to consolidated financial statements.
6
</PAGE>
<PAGE>
SEALED AIR CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1998 and 1997
(Amounts in thousands, except share data)
(Unaudited)
(1) Reorganization and Merger
On March 31, 1998, the Company (formerly known as W. R. Grace & Co.)
and Sealed Air Corporation ("old Sealed Air"), completed a series of
transactions as a result of which:
(a) The specialty chemicals business of the Company was
separated from its packaging business, the packaging
business was contributed to one wholly owned subsidiary
("Cryovac"), and the specialty chemicals business was
contributed to another wholly owned subsidiary ("New
Grace"); the Company and Cryovac borrowed approximately
$1,258,807 under two new credit agreements (the "Credit
Agreements"), discussed below and transferred substantially
all of those funds to New Grace; and the Company distributed
all of the outstanding shares of common stock of New Grace
to its stockholders. These transactions are referred to
below as the "Reorganization."
(b) The Company recapitalized its outstanding shares of
common stock, par value $0.01 per share ("Old Grace Common
Stock"), into a new common stock and Series A convertible
preferred stock (the "Recapitalization").
(c) A subsidiary of the Company merged into old Sealed Air
(the "Merger"), with old Sealed Air being the surviving
corporation. As a result of the Merger, old Sealed Air became
a subsidiary of the Company, and the Company was renamed
Sealed Air Corporation.
(2) Basis of Presentation
The Merger has been accounted for as a purchase of old Sealed Air by
the Company as of March 31, 1998. As a result, the consolidated
statements of earnings and cash flows reflect the operating results of
Cryovac for the first quarter of 1997 and 1998. The consolidated
balance sheet at December 31, 1997 reflects the financial position of
Cryovac only while the consolidated balance sheet at March 31, 1998
reflects the consolidated financial position of Cryovac and old Sealed
Air, as adjusted for the Reorganization, Recapitalization and Merger.
In connection with the Merger, the Company issued 42,624,246 shares of
common stock at a value of $49.52 per share and incurred costs related
to the Merger of approximately $30,000 for a purchase price of
approximately $2,141,000 in exchange for the net assets of old
Sealed Air. The fair value of such net assets acquired by the
Company include approximately $181,000 of property and equipment,
approximately $95,800 of working capital (including a cash balance of
approximately $51,300), and other long-term assets and liabilities
resulting in approximately $1,900,000 of goodwill, which is being
amortized over 40 years. See Note 8 for unaudited pro forma financial
information for the quarter ended March 31, 1998.
All significant intercompany transactions and balances have been
eliminated in consolidation. In management's opinion, all adjustments
(consisting only of normal recurring accruals) necessary for a fair
presentation of the consolidated financial position and results of
operations for the quarter ended March 31, 1998 have been made.
7
</PAGE>
<PAGE>
(3) Equity
Prior to the Merger, Cryovac's operations were conducted by divisions
or subsidiaries of the Company, and Cryovac did not have a separate
identifiable capital structure. Therefore, the balance sheet as of
December 31, 1997 reflects the net assets of Cryovac at such date
rather than shareholders' equity. In connection with the
Recapitalization, the Company recapitalized the outstanding shares of
Old Grace Common Stock into 40,647,815 shares of the Company's common
stock and 36,021,851 shares of Series A convertible preferred stock
(convertible into approximately 31,900,000 shares of the Company's
common stock), each with a par value of $0.10 per share. In
connection with the Merger, the Company issued 42,624,246 shares of
the Company's common stock to the shareholders of old Sealed Air.
The convertible preferred stock votes with the common stock
on an as-converted basis, pays a cash dividend, as declared by the
Board, at an annual rate of $2.00 per share, payable quarterly in
arrears, will be redeemable at the option of the Company beginning
on March 31, 2001, subject to certain conditions, and will be subject
to mandatory redemption on March 31, 2018 at $50.00 per share, plus
accrued and unpaid dividends. Because it is subject to mandatory
redemption, the convertible preferred stock is classified outside
of the shareholders' equity section of the balance sheet at the
mandatory redemption value of $50 per share.
(4) Earnings Per Share
For the first quarters of 1998 and 1997, Cryovac's operations were
conducted by divisions or subsidiaries of the Company and therefore did
not have a separate identifiable capital structure upon which a
calculation of earnings per common share could be based. In February
1998, the Securities and Exchange Commission (SEC) released Staff
Accounting Bulletin No. 98, "Computation of Earnings per Share"
("SAB 98"). SAB 98 revises prior SEC guidance concerning presentations
of earnings per common share information for companies when the
historical financial statements are not indicative of the ongoing
entity. SAB No. 98 requires all companies to present earnings per
common share for all periods for which statement of earnings
information is presented in accordance with Statement of Financial
Accounting Standards No. 128, "Earnings per Share."
Basic and diluted earnings per common share for the first quarters of
1998 and 1997 have been calculated giving retroactive recognition to
the Recapitalization. For purposes of calculating basic and diluted
earnings per common share, net earnings have been reduced by the
dividend that would have been payable on the Company's convertible
preferred stock (if such shares had been outstanding during the quarter)
to arrive at earnings available to common stockholders. The weighted
average number of outstanding common shares used for calculating basic
earnings per common share is calculated on an equivalent share basis
using the weighted average number of shares outstanding of the
Company's common stock for the periods presented, adjusted to
reflect the terms of the Recapitalization. The weighted average
number of common shares used for calculating diluted earnings per
common share also includes the assumed exercise of the outstanding
dilutive stock options. The convertible preferred stock is not
considered in the calculation of diluted earnings per common share
because the treatment of the convertible preferred stock as the common
stock into which it is convertible would be antidilutive (i.e., would
increase earnings per common share). If the shares of the Company's
convertible preferred stock were assumed to be converted into common
stock (which would result in the issuance of approximately
31,900,000 shares of common stock), diluted earnings per
common share would be $0.37 and $0.51 for the quarters ended
March 31, 1998 and 1997, respectively.
The following represents the reconciliation of the numerators and
denominators of the basic and diluted earnings per common share
computations for the three months ended March 31, 1998 and 1997.
Such earnings per common share amounts are not necessarily
indicative of the results that would have occurred had Cryovac been a
stand-alone operation for the quarters ended March 31, 1998 and 1997.
8
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
For the three months ended March 31
1998 1997
Average Average
Income Shares Per Share Income Shares Per Share
(Numerator) Outstanding Amount (Numerator) Outstanding Amount
(Denominator) (Denominator)
Basic EPS
<S> <C> <C> <C> <C> <C> <C>
Net earnings $27,052 $37,260
Less:Preferred dividends 18,011 18,059
Earnings available to
common shareholders $ 9,041 40,647,815 $0.22 $19,201 40,756,065 $0.47
Effect of dilutive securities
Options - 211,000 - - 211,000 -
Diluted EPS
Net earnings plus
assumed conversions $9,041 40,858,815 $0.22 $19,201 40,967,065 $0.47
</TABLE>
(5) Inventory
At March 31, 1998, the components of inventories by major classification
(raw materials, work in process and finished goods) are as follows:
March 31, December 31,
1998 1997
Raw materials $ 64,603 $ 44,043
Work in process 56,574 54,532
Finished goods 206,439 142,282
Subtotal 327,616 240,857
Less LIFO reserve 15,007 14,881
Total inventory $312,609 $225,976
(6) Income Taxes
The Company's effective income tax rates were 40.0% and 41.2% for the
first quarters of 1998 and 1997, respectively. Such rates were higher
than the statutory U.S. federal income tax rate primarily due to state
income taxes. The effective tax rate for the remaining nine months of
1998 is expected to be higher than the first quarter of 1998 primarily
due to the non-deductibility of the goodwill resulting from the Merger
and the non-recurring cumulative effect of providing for the assumed
repatriation of Cryovac's prior years' foreign earnings.
Since all tax liabilities related to earnings of Cryovac prior to
the Merger were or will be paid by W.R. Grace & Co. - Conn.,
there are no current taxes payable reflected in the consolidated
balance sheets at March 31, 1998 and at December 31, 1997 related
to Cryovac. The balance reflected on the consolidated balance sheet
for March 31, 1998 relates only to old Sealed Air.
9
</PAGE>
<PAGE>
(7) Long-Term Debt
At March 31, 1998, long-term debt consisted primarily of borrowings of
$1,258,807 made on March 30, 1998 and March 31, 1998 under the Credit
Agreements described below in connection with the Reorganization.
It also includes certain other loans of the Company's subsidiaries
that were outstanding at March 31, 1998. The balance sheet at
December 31, 1997 does not reflect any long-term debt or notes payable
because prior to the Merger, the Company borrowed for its subsidiaries
and divisions and generally did not allocate such debt to those
subsidiaries or divisions.
In connection with the Reorganization, the Company entered into the
Credit Agreements, which include a $1.0 billion 5-year revolving credit
facility that expires on March 30, 2003 and a $600 million 364-day
revolving credit facility that expires on March 29, 1999. The Credit
Agreements provide that the Company and certain of its subsidiaries,
including Cryovac and old Sealed Air, may borrow for various purposes,
including the refinancing of existing debt, the provision of working
capital and other general corporate needs.
The Company's obligations under the Credit Agreements bear interest at
floating rates. The Credit Agreements provide for changes in borrowing
margins based on financial criteria and impose certain limitations on
the operations of the Company and certain of its subsidiaries. These
limitations include financial covenants relating to interest coverage
and debt leverage as well as certain restrictions on the incurrence of
additional indebtedness, the creation of liens, mergers and
acquisitions, and certain dispositions of property or assets.
The Company was in compliance with these requirements as of
March 31, 1998.
(8) Pro Forma Information
The following table presents selected unaudited pro forma financial
information for the quarter ended March 31, 1998 that was prepared as if
the Reorganization, the Recapitalization and the Merger had occurred on
January 1, 1998. Such information is presented to illustrate how the
Company might have looked if Cryovac had been an independent company and
if the operations of old Sealed Air and Cryovac had been combined for
the first quarter of 1998. This information is not intended to
represent what the Company's actual results of operations would have
been for the quarter ended March 31, 1998.
Historical
Old Pro Forma
Cryovac Sealed Air Consolidated(b)
Net sales $431,035 $213,053 $643,787
Operating profit 45,579 37,987 (a) 83,454
Net earnings 27,052 22,201 (a) 32,805
Basic and diluted earnings
per share (c) - - $.18
(a) Does not reflect transaction expenses of $24,689 incurred by old
Sealed Air during the first quarter of 1998 in connection with the
Merger.
(b) Reflects pro forma adjustments made in combining old Sealed Air
and Cryovac as a result of the Reorganization, the Recapitalization and
the Merger, including, among others, additional goodwill amortization of
$10,344 per quarter, additional interest expense of $20,405 per quarter,
and the elimination of historical allocated corporate
10
</PAGE>
<PAGE>
expenses of the Company of $18,044 partially offset by additional
costs the Company expects to incur to provide corporate services and
certain employee benefit costs.
(c) In calculating pro forma basic and diluted earnings per common
share, $18,011 per quarter of dividends payable on the Company's Series
A convertible preferred stock was deducted to arrive at earnings
available to common shareholders. The weighted average number of
outstanding common shares used to calculate pro forma basic and diluted
earnings per common share was 83,272,000 and 83,483,000 respectively,
(the latter of which includes the assumed exercise of common stock
options held by Cryovac employees that were outstanding prior to the
Merger), respectively. The assumed conversion of the convertible
preferred stock is not considered in the calculation of diluted
earnings per common share as the effect is antidilutive (i.e., would
increase earnings per common share). If the shares of the convertible
preferred stock were treated as if it was converted into common stock,
(which would result in the issuance of approximately 31,900,000 shares
of common stock), pro forma diluted earnings per share would have been
$0.28 per share for the quarter ended March 31, 1998.
11
</PAGE>
<PAGE>
Management's Discussion and Analysis of Results of Operations and
Financial Condition
Since the Merger was consummated on March 31, 1998, the following
discussion relates to the results of operations of the Cryovac packaging
business of the Company ("Cryovac") during the periods ended March 31,
1998 and 1997, except as noted below. During those periods,
Cryovac was operated by divisions or subsidiaries of the Company.
Except as noted below, the following discussion of the financial
condition of the Company relates to the Company after giving effect to
the merger of the Company and old Sealed Air (the "Merger"), and the
transactions related to it, that occurred effective March 31, 1998.
Results of Operations
The Company's net sales increased 2% to $431,035,000 compared with
$422,693,000 in the first quarter of 1997 primarily due to increased
unit volume partially offset by the negative effect of foreign currency
translation. Excluding this negative effect, the increase in net sales
would have been 7% compared with the first quarter of 1997.
Net sales from domestic operations increased 9% compared with the first
quarter of 1997 primarily due to increased unit volume. Net sales from
foreign operations decreased 4% compared with the first quarter of 1997
primarily due to the negative effect of foreign currency translation
which more than offset an increase in unit volume. Excluding this
negative effect, foreign net sales would have increased 5% compared
with the first quarter of 1997.
Cost of sales increased 6% compared with 1997 primarily due to higher
depreciation and other expenses related to capital expenditures made in
prior years, certain manufacturing and product integration costs, and
changes in product mix.
Gross profit declined 5% compared with 1997 primarily reflecting
the increase in cost of sales discussed above. As a percent of sales,
gross profit declined to 32.5% from 35.0% in the first quarter of 1997.
Marketing, administrative and development expenses increased 12%
compared with the first quarter of 1997 primarily reflecting the
Company's higher level of net sales and corporate expenses allocated to
Cryovac by the Company prior to the Merger. These allocated expenses
amounted to $18,044,000 compared with $9,816,000 in 1997. Approximately
$8,400,000 of such expenses in the 1998 period were attributable to
12
</PAGE>
<PAGE>
certain pension expenses that were incurred in connection with the
Merger with respect to Cryovac employees. Such allocated expenses
ceased as a result of the Merger. However, the Company expects to incur
marketing, administrative and development expenses that will partially
offset the savings derived from the elimination of these allocated
expenses.
Operating profit declined 28% and net earnings declined 27% compared with
the first quarter of 1997 primarily due to the factors mentioned above.
The Company expects earnings to be adversely affected this
year by restructuring and integration activities relating to the Merger.
The Company will assess the combined operating structure, business
processes and circumstances that bear upon the operations, facilities
and other assets of the business as part of developing a combined
strategic and operating plan. The objective of such plan will be
to enhance productivity and efficiency of the combined operations by
reducing duplicate functions, facilities and overhead costs.
The Company's effective income tax rate was 40.0% in the first quarter
of 1998 and 41.2% in the first quarter of 1997.
Since Cryovac's operations were conducted during the first quarters
of 1997 and 1998 by divisions or subsidiaries of the Company, Cryovac
did not have a separate identifiable capital structure that could be
used to calculate earnings per share. However, in accordance with
Staff Accounting Bulletin No. 98 ("SAB 98"), basic and diluted
earnings per share has been calculated by retroactively giving
effect to the Recapitalization. Such earnings per share amounts
are not necessarily indicative of the results that would have
occurred had Cryovac been a stand-alone entity for the quarters
ended March 31, 1998 and 1997.
Liquidity and Capital Resources
The Company's principal sources of liquidity are cash flows from
operations and amounts available under the Company's existing lines
of credit, including the Credit Agreements discussed below. Prior
to the consummation of the Merger, Cryovac participated in the
Company's centralized cash management system, whereby cash received
from operations was transferred to, and disbursements were funded from,
centralized corporate accounts. As a result, any cash needs of Cryovac
in excess of cash flows from operations were transferred to these
corporate accounts and used for other corporate purposes. In the
first quarter of 1997, $8,026,000 of net cash was advanced by the
Company to Cryovac pursuant to these procedures. In connection
with the Reorganization, most of the Company's net cash at
March 31, 1998 (other than cash recorded on the balance sheet of
old Sealed Air immediately before the merger) was transferred to
New Grace.
Net cash provided by operating activities amounted to $63,875,000
and $34,433,000 in the first quarters of 1998 and 1997, respectively.
The increase in operating cash flows in 1998 was primarily due to
changes in operating assets and liabilities from improved working
capital management compared with the first quarter of 1997 which more
than offset a decrease in net earnings.
Net cash used for investing activities amounted to approximately
$14,262,000 and $42,459,000 in the first quarters of 1998 and 1997,
respectively. Capital expenditures in the quarter were $16,963,000 in
1998 and $44,067,000 in 1997 reflecting a decrease in 1998 as Cryovac
completed several major manufacturing expansion programs in 1997.
As the assets of old Sealed Air were acquired through the issuance
of the Company's common stock, the consolidated statement of cash
flows for the first quarter of 1998 does not reflect the changes in
the related balance sheet items caused by the addition of old Sealed
Air's assets and liabilities, except for the cash balance of $51,259,000
acquired. The non-cash acquisition of such net assets is reflected as
supplementary information to the consolidated statement of cash flows,
net of cash.
Net cash used by financing activities amounted to approximately
$40,600,000 in the first quarter of 1998 primarily reflecting net
advances made to the Company in the first quarter of 1998 in
connection with the Reorganization and Merger. Cash flows from
financing activities in 1998 also reflected the proceeds from
long-term debt borrowed under the Credit Agreements offset by the
payment of the contribution of funds to New Grace in connection
with the Reorganization. In the first quarter of 1997, $8,026,000
of net cash provided was advanced by the Company pursuant to
the cash management procedures discussed above.
At March 31, 1998, the Company had working capital of $227,785,000,
or 5% of total assets, compared to working capital of $343,741,000,
or 21% of total assets, at December 31, 1997. The decrease in working
capital primarily reflects the increase in notes payable and current
installments of long-term debt of $284,270,000 arising primarily from
the borrowings made under the Credit Agreements discussed below
partially offset by the effect of the combination of the balance sheets
of Cryovac and old Sealed Air at March 31, 1998.
The Company's ratio of current assets to current liabilities (current
ratio) was 1.4 at March 31, 1998 and 2.9 at December 31, 1997. The
Company's ratio of current assets less inventory to current liabilities
(quick ratio) was 0.9 at March 31, 1998 and 1.6 at December 31, 1997.
The decreases in these ratios in 1998 resulted primarily from the
decreases in working capital discussed above.
14
</PAGE>
<PAGE>
Prior to the Merger, Cryovac had no capital structure since it was
operated by divisions or subsidiaries of the Company. In addition,
there was no allocation of the Company's borrowings and related interest
expense, except for interest capitalized as a component of Cryovac's
properties and equipment. Therefore, the financial position of the
Company at December 31, 1997 was not indicative of the financial
position that would have existed if Cryovac had been an independent
stand-alone entity at that time. At March 31, 1998, the consolidated
balance sheet reflects the combined financial position of Cryovac and
old Sealed Air, as adjusted for the Reorganization, Recapitalization
and Merger.
In connection with the Reorganization, the Company entered into two
Credit Agreements (the "Credit Agreements"), the first of which is a
$1.0 billion 5-year revolving credit facility that expires on
March 30, 2003 and the second of which is a $600 million 364-day
revolving credit facility that expires on March 29, 1999. The Credit
Agreements provide that the Company and certain of its subsidiaries,
including Cryovac and old Sealed Air, may borrow for various purposes,
including the refinancing of existing debt, the provision of working
capital and for other general corporate needs. Initial borrowings of
$1,258,807,000 were made in connection with the Reorganization.
The Company's obligations under the Credit Agreements bear interest at
floating rates. The Credit Agreements provide for changes in borrowing
margins based on financial criteria and impose certain limitations on the
operations of the Company and certain of its subsidiaries. These
limitations include financial covenants relating to interest coverage and
debt leverage as well as certain restrictions on the incurrence of
additional indebtedness, the creation of liens, mergers and acquisitions,
and certain dispositions of property or assets. The Company was in
compliance with these requirements as of March 31, 1998.
At March 31, 1998, the Company had available lines of credit, including
those available under the Credit Agreements, of approximately
$1,664,295,000 of which approximately $373,851,000 were unused. Such
lines of credit permit the Company and certain of its subsidiaries to
make borrowings for working capital and other corporate purposes.
15
</PAGE>
<PAGE>
Since Cryovac did not have a separate identifiable capital structure
before the Merger, the balance sheet as of December 31, 1997 reflects
the net assets of Cryovac at such date rather than shareholders' equity.
In connection with the Recapitalization, the Company recapitalized the
outstanding shares of Old Grace Common Stock into outstanding shares of
a new common stock and Series A convertible preferred stock.
In connection with the Merger, the Company issued 42,624,246 shares
of the Company's common stock to the shareholders' of old Sealed Air.
The convertible preferred stock votes with the common stock
on an as-converted basis, pays a cash dividend, as declared by the
Board, at an annual rate of $2.00 per share, payable quarterly in
arrears, will be redeemable at the option of the Company beginning
on March 31, 2001, subject to certain conditions, and will be subject
to mandatory redemption on March 31, 2018 at $50.00 per share, plus
accrued and unpaid dividends. Because it is subject to mandatory
redemption, the convertible preferred stock is classified outside
of the shareholders' equity section of the balance sheet at the
mandatory redemption value of $50 per share.
The Company's shareholders' equity was $478,657,000 at March 31, 1998.
The decrease in total equity (shareholders' equity of $478,657,000 at
March 31, 1998 and net assets of $1,352,628,000 at December 31, 1997) was
primarily due to the cash transferred to New Grace in connection with
the Reorganization partially offset by the stock issued in connection
with the merger with old Sealed Air.
Other Matters
Environmental Matters
The Company is subject to loss contingencies resulting from environmental
laws and regulations, and it accrues for anticipated costs associated
with investigatory and remediation efforts when an assessment has
indicated that a loss is probable and can be reasonably estimated. These
accruals do not take into account any discounting for the time value of
money and are not reduced by potential insurance recoveries, if any.
Environmental liabilities are reassessed whenever circumstances become
better defined and/or remediation efforts and their costs can be better
estimated. These liabilities are evaluated periodically based on
available information, including the progress of remedial investigation
at each site, the current status of discussions with regulatory
authorities regarding the methods and extent of remediation and the
apportionment of costs among potentially responsible parties. As some of
these issues are decided (the outcomes of which are subject to
uncertainties) and/or new sites are assessed and costs can be reasonably
estimated, the Company adjusts the recorded accruals, as necessary.
However, the Company believes that it has adequately reserved for all
probable and estimable environmental exposures.
16
</PAGE>
<PAGE>
Year 2000 Computer System Compliance
The Company has conducted a comprehensive review of its computer systems
to identify systems that could be affected by the "Year 2000" issue and
is implementing a plan to resolve the issue. The Company currently
believes that, with modifications to existing software and by converting
to new software, the Year 2000 issue will not pose significant
operational problems. However, if such modifications and conversions
are not completed in a timely manner, the Year 2000 issue may have a
material impact on the operations of the Company. It is anticipated
that costs associated with modifying the existing systems will not be
material to the Company's consolidated financial position.
Recently Issued Statements of Financial Accounting Standards
In February 1998, The Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits," which
became effective for the Company for the annual period beginning
January 1, 1998. SFAS No. 132 requires additional information about
the changes in the benefit obligation and fair value of plan assets
during the period, while standardizing the disclosure requirements
for pensions and other postretirement benefits. The Company will
include such disclosures in its Form 10-K filing for the year ended
December 31, 1998.
In June 1997, the Financial Accounting Standards Board released Statement
No. 130, "Reporting Comprehensive Income" ("SFAS 130") and Statement No.
131, "Disclosures About Segments of an Enterprise and Related
Information" ("SFAS 131"). Both statements became effective for the
Company beginning January 1, 1998. These statements require disclosure
of certain components of changes in equity and certain information about
operating segments and geographic areas of operation. The Company
adopted SFAS 130 in the first quarter of 1998 ("see Consolidated
Statements of Comprehensive Income"). The Company has also adopted SFAS
131 which does not require interim period reporting in the year of
adoption. The Company is completing its evaluation of the disclosure
requirements of SFAS 131 and will begin such disclosures in its Form 10-K
filing for the year ended December 31, 1998. These statements do not
have any effect on the results of operations or financial position of the
Company.
Forward-Looking Statements
Certain statements made by the Company in this report and in future oral
and written statements by management of the Company may be forward-
looking in nature, or "forward-looking statements." These forward-
looking statements are based upon management's current expectations
concerning future events and discuss, among other things, anticipated
future performance and future business plans. Forward-looking statements
are identified by such words and phrases as "expects," "believes," "will
continue," "plans to," "could be," and similar expressions. Forward-
looking statements are necessarily subject to uncertainties, many of
which are outside the control of the Company, that could cause actual
results to differ materially from such statements.
While the Company is not aware that any of the factors listed below will
adversely affect the future performance of the Company, the Company
recognizes that it is subject to a number of uncertainties, such as
general economic, business and market conditions, conditions in the
industries and markets that use the Company's packaging materials and
other products, the development and success of new products, the
Company's success in entering new markets, competitive factors,
difficulties in integrating the Cryovac and old Sealed Air businesses,
raw material availability and pricing, changes in the Company's
relationship
17
</PAGE>
<PAGE>
with customers and suppliers, future litigation and claims (including
environmental matters) against the Company, changes in domestic or
foreign laws or regulations, or difficulties related to the Year 2000
issue.
18
</PAGE>
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
The Company's Annual Report on Form 10-K for the year ended December 31
1997 reported in Item 3 a number of pending legal proceedings.
In connection with the transactions between the Company and Sealed Air
Corporation described in note 1 of the Notes to Consolidated Financial
Statements in Part I of this Quarterly Report on Form 10-Q, which
description is incorporated herein by reference, liability for all
such legal proceedings except certain environmental proceedings
were assumed by New Grace on March 31, 1998 in the Reorganization
and Merger. The Company retained certain environmental liabilities
at certain sites. While it is often difficult to estimate potential
environmental liabilities and the future impact of environmental
matters, based upon the information currently available to the
Company and its exposure in dealing with such matters, the Company
believes that its potential liability with respect to such sites
is not material to the Company's consolidated financial position.
Item 2. Changes in Securities and Use of Proceeds.
On March 31, 1998, the company completed a series of transactions under
an Agreement and Plan of Merger dated as of August 14, 1997 (the "Merger
Agreement") among the Company, old Sealed Air and a subsidiary of the
Company. These transactions are described in detail in Items 2 and 5 of
the Company's Current Report on Form 8-K, Date of Report March 31, 1998,
which Items are filed as exhibits hereto and incorporated herein by
reference. In connection with such transactions, the Company
recapitalized its outstanding common stock into a new common stock and
Series A convertible preferred stock. The rights of the holders of the
Company's new common stock and Series A convertible preferred stock are
set forth in the Company's Amended and Restated Certificate of
Incorporation and its by-laws, which are filed as exhibits hereto and
incorporated herein by reference.
Item 4. Submission of Matters to a Vote of Security Holders.
On March 20, 1998, the Company held a special meeting of stockholders in
order to approve and adopt the Merger Agreement and to approve an
amendment to the Company's certificate of incorporation to repeal certain
provisions requiring 80% stockholder approval for such repeal. The
stockholders approved the Merger Agreement but failed to approve the
repeal of the provisions for which 80% approval was required.
A total of 57,428,974 shares of the common stock of the Company were
voted in person or by proxy at the March 20 meeting, representing
approximately 76.8% of the shares entitled to vote at such meeting. The
votes cast on the matters before the meeting were as follows:
Number of Votes
Approval of Merger Agreement For 56,826,611
Against 363,379
Abstentions 238,984
Approval of repeal of certain For 56,562,225
provisions of the certificate Against 617,026
of incorporation Abstentions 249,722
Item 5. Other Information
On March 23, 1998, old Sealed Air held a special meeting of stockholders
at which the stockholders approved the Merger Agreement. A total of
29,232,324 shares of common stock of old Sealed Air were voted in person
or by proxy at the March 23 special meeting, representing 68.6% of the
shares entitled to vote at such meeting. The votes cast on the Merger
Agreement were at follows:
Number of Votes
Approval of Merger Agreement For 29,131,317
Against 67,262
Abstentions 33,745
19
</PAGE>
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit Number Description
2 Distribution Agreement dated as of March 30, 1998 among
the Company, W. R. Grace-Conn. ("Grace-Conn.") and
W.R.Grace & Co. ("New Grace") [incorporated by
reference to Exhibit 2.2 to the Company's Current Report
on Form 8-K, Date of Report March 31, 1998, File No. 1-
12139].
3.1 Amended and Restated Certificate of Incorporation of the
Company as currently in effect.
3.2 Amended and Restated By-Laws of the Company
[incorporated by reference to Exhibit 3.2 to the
Company's Current Report of Form 8-K, Date of Report
March 31, 1998, File No. 1-12139].
10.1 Employee Benefits Allocation Agreement dated as of March
30, 1998 among the Company, Grace-Conn. And New Grace
[incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K, Date of Report
March 31, 1998, File No. 1-12139].
10.2 Tax Sharing Agreement dated as of March 30, 1998 among
the Company, Grace-Conn. And New Grace [incorporated by
reference to Exhibit 10.2 to the Company's Current
Report on Form 8-K, Date of Report March 31, 1998, File
No. 1-12139].
10.3 Global Revolving Credit Agreement (5-year) dated as of
March 30, 1998 among the Company, certain of its
subsidiaries including Cryovac, Inc., ABN AMRO Bank
N.V., Bankers Trust Company, Bank of America National
Trust and Savings Association, NationsBank, N.A. and
other banks party thereto [incorporated by reference
to Exhibit 10.3 to the Company's Current Report of Form
8-K, Date of Report March 31, 1998, File No. 1-12139].
10.4 Global Revolving Credit Agreement (364-day) dated as of
March 30,1998 among the Company, certain of its
subsidiaries includingCryovac, Inc., ABN AMRO Bank N.V.,
Bankers Trust Company, Bank of America National Trust
and Savings Association, NationsBank, N.A. and other
banks party thereto [incorporated by reference to Exhibit
10.4 to the Company's Current Report on Form 8-K, Date of
Report March 31, 1998, File No. 1-12139].
27 Financial Data Schedule
99 Items 2 and 5 of the Company's Current Report on Form
8-K filed on April 15, 1998, File No. 1-12139.
(b) Reports on Form 8-K:
The Company filed the following Reports on Form 8-K since the
beginning of 1998:
Date of Filing Disclosures
February 9, 1998 Announcement of 1997 fourth quarter and full
year results.
April 6, 1998 as
amended April 29, Changes in the Company's Certifying Accountants
1998 from Price Waterhouse LLP to KPMG Peat Marwick
LLP.
20
</PAGE>
<PAGE>
April 15, 1998 Closing of the transactions under the Merger
Agreement. The Report also disclosed changes in
the Board of Directors and officers of the
Company, the approval of an Amended and Restated
Certificate of Incorporation for the Company and
the adoption of new by-laws for the Company.
The Report included the following financial
statements:
1. Consolidated Financial Statements for the
years ended December 31, 1997, 1996 and 1995
for Sealed Air Corporation (US).
2. Grace Packaging Special-Purpose Combined
Financial Statements as of December 31, 1997,
1996 and 1995 and for each of the three years
ended December 31, 1997.
3. Unaudited pro forma condensed consolidated
financial information for the year ended
December 31, 1997 giving effect to the
transactions under the Merger Agreement.
21
</PAGE>
<PAGE>
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.
SEALED AIR CORPORATION
Date: May 15, 1998 By s/Jeffrey S. Warren
Jeffrey S. Warren
Controller
(Authorized Executive
Officer and Chief
Accounting Officer)
22
</PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary information extracted from the consolidated
statement of earnings for the three months ended March 31, 1998 and the
consolidated balance sheet at March 31, 1998 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0001012100
<NAME> SEALED AIR CORPORATION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 59512000
<SECURITIES> 0
<RECEIVABLES> 428357000
<ALLOWANCES> 11492000
<INVENTORY> 312609000
<CURRENT-ASSETS> 846386000
<PP&E> 1950257000
<DEPRECIATION> 735363000
<TOTAL-ASSETS> 4146887000
<CURRENT-LIABILITIES> 618601000
<BONDS> 0
0
1801093000
<COMMON> 8327000
<OTHER-SE> 480449000
<TOTAL-LIABILITY-AND-EQUITY> 4146887000
<SALES> 431035000
<TOTAL-REVENUES> 431035000
<CGS> 290913000
<TOTAL-COSTS> 290913000
<OTHER-EXPENSES> 94543000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 82000
<INCOME-PRETAX> 45086000
<INCOME-TAX> 18034000
<INCOME-CONTINUING> 27052000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27052000
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
</TABLE>
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
SEALED AIR CORPORATION
FIRST: The name of the corporation is Sealed Air
Corporation (the Corporation ).
SECOND: The registered office of the Corporation in the
State of Delaware is to be located at The Prentice-Hall
Corporation System, Inc., 1013 Centre Road, Wilmington, New
Castle County, Delaware 19805. Its registered agent at such
address is The Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is 450,000,000,
consisting of 400,000,000 shares of Common Stock, par value $0.10
per share (the Common Stock ), and 50,000,000 shares of
Preferred Stock, par value $0.10 per share (the Preferred
Stock ).
The Preferred Stock may be issued from time to time in one
or more series. The powers, designations, preferences and other
rights and qualifications, limitations or restrictions of the
Preferred Stock of each series shall be such as are stated and
expressed in this Article Fourth and, to the extent not stated
and expressed herein, shall be such as may be fixed by the Board
of Directors (authority so to do being hereby expressly granted)
and stated and expressed in a resolution or resolutions adopted
by the Board of Directors providing for the initial issue of
Preferred Stock of such series. Such resolution or resolutions
shall (a) fix the dividend rights of holders of shares of such
series, (b) fix the terms on which stock of such series may be
redeemed if the shares of such series are to be redeemable, (c)
fix the rights of the holders of stock of such series upon
dissolution or any distribution of assets, (d) fix the terms or
amount of the sinking fund, if any, to be provided for the
purchase or redemption of stock of such series, (e) fix the terms
upon which the stock of such series may be converted into or
exchanged for stock of any other class or classes or of any one
or more series of Preferred Stock if the shares of such series
are to be convertible or exchangeable, (f) fix the voting rights,
if any, of the shares of such series and (g) fix such other
powers, designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations
or restrictions thereof desired to be so fixed.
Except to the extent otherwise provided in the resolution or
resolutions of the Board of Directors providing for the initial
issue of shares of a particular series or expressly required by
law, holders of shares of Preferred Stock of any series shall be
entitled to one vote for each share thereof so held, shall vote
share for share with the holders of the Common Stock without
distinction as to class and shall not be entitled to vote
separately as a class or series of a class. The number of shares
of Preferred Stock authorized to be issued may be increased or
decreased from time to time by the affirmative vote of the
holders of a majority of the voting power of the then outstanding
Voting Stock, and the holders of the Preferred Stock shall not be
entitled to vote separately as a class or series of a class on
any such increase or decrease. For the purposes of this Amended
and Restated Certificate of Incorporation, Voting Stock shall
mean the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors.
All shares of any one series of Preferred Stock shall be
identical with each other in all respects except that shares of
any one series issued at different times may differ as to the
dates from which dividends thereon shall accumulate, and all
series of Preferred Stock shall rank equally and be identical in
all respects except as specified in the respective resolutions of
the Board of Directors providing for the initial issue thereof.
Subject to the prior and superior rights of the Preferred Stock
as set forth in any resolution or resolutions of the Board of
Directors providing for the initial issuance of any particular
series of Preferred Stock, such dividends (payable in cash, stock
or otherwise) as may be determined by the Board of Directors may
be declared and paid on the Common Stock from time to time out of
any funds legally available therefor and the Preferred Stock
shall not be entitled to participate in any such dividend.
One series of Preferred Stock authorized hereby shall be
Series A Convertible Preferred Stock, as follows:
1. Number of Shares and Designation. 36,021,851 shares of
Preferred Stock of the Corporation shall constitute a series of
Preferred Stock designated as Series A Convertible Preferred
Stock (the Series A Preferred Stock ). The number of shares of
Series A Preferred Stock may be increased (to the extent of the
Corporation s authorized and unissued Preferred Stock) or
decreased (but not below the number of shares of Series A
Preferred Stock then outstanding) by further resolution duly
adopted by the Board of Directors and the filing of a certificate
of increase or decrease, as the case may be, with the Secretary
of State of Delaware.
2. Rank. The Series A Preferred Stock shall, with respect
to payment of dividends, redemption payments and rights upon
liquidation, dissolution or winding up of the affairs of the
Corporation, (i) rank senior and prior to the Common Stock and
each other class or series of equity securities of the
Corporation, whether currently issued or issued in the future,
that by its terms ranks junior to the Series A Preferred Stock
(whether with respect to payment of dividends, redemption
payments or rights upon liquidation, dissolution or winding up of
the affairs of the Corporation) (all of such equity securities,
including the Common Stock, are collectively referred to herein
as the Junior Securities ), (ii) rank on a parity with each
other class or series of equity securities of the Corporation
(other than the Common Stock), whether currently issued or issued
in the future, that does not by its terms expressly provide that
it ranks senior to or junior to the Series A Preferred Stock
(whether with respect to payment of dividends, redemption
payments or rights upon liquidation, dissolution or winding up of
the affairs of the Corporation) (all of such equity securities
are collectively referred to herein as the Parity Securities ),
and (iii) rank junior to each other class or series of equity
securities of the Corporation, whether currently issued or issued
in the future, that by its terms ranks senior to the Series A
Preferred Stock (whether with respect to payment of dividends,
redemption payments or rights upon liquidation, dissolution or
winding up of the affairs of the Corporation) (all of such equity
securities are collectively referred to herein as the Senior
Securities ). The respective definitions of Junior Securities,
Parity Securities and Senior Securities shall also include any
rights or options exercisable or exchangeable for or convertible
into any of the Junior Securities, Parity Securities or Senior
Securities, as the case may be.
3. Dividends.
(a) The holders of shares of Series A Preferred Stock shall
be entitled to receive, when, as and if declared by the Board of
Directors, out of funds legally available for the payment of
dividends, cash dividends at the annual rate of $2.00 per share.
Such dividends shall be payable quarterly in arrears, in equal
amounts, on April 1, July 1, October 1 and January 1 of each year
(unless such day is not a Business Day (as defined below), in
which event such dividends shall be payable on the next
succeeding Business Day), commencing July 1, 1998 (each such
payment date being a Dividend Payment Date and from the date of
issuance until the first Dividend Payment Date and each such
quarterly period thereafter being a Dividend Period ).
Dividends on shares of Series A Preferred Stock shall be
cumulative from the date of issue, whether or not in any Dividend
Period there shall be funds of the Corporation legally available
for the payment of dividends. The amount of dividends payable
for each full Dividend Period shall be computed by dividing the
annual dividend rate by four. The amount of dividends payable on
the Series A Preferred Stock for the initial Dividend Period, or
for any other period shorter or longer than a full Dividend
Period, shall be computed on the basis of a 360-day year of
twelve 30-day months. As used herein, the term Business Day
means any day except a Saturday, Sunday or day on which banking
institutions are legally authorized to close in the City of New
York.
(b) Each dividend shall be payable to the holders of record
of shares of Series A Preferred Stock as they appear on the stock
records of the Corporation at the close of business on such
record dates (each, a Dividend Payment Record Date ), which
shall be not more than 60 days nor less than 10 days preceding
the Dividend Payment Date thereof, as shall be fixed by the Board
of Directors. Accrued and unpaid dividends for any past Dividend
Periods may be declared and paid at any time, without reference
to any Dividend Payment Date, to holders of record on such date,
not more than 60 days nor less than 10 days preceding the payment
date thereof, as may be fixed by the Board of Directors. No
interest, or sum of money in lieu of interest, shall be payable
in respect of any dividend payment or payments on the Series A
Preferred Stock that may be in arrears.
(c) Except as described in the next succeeding sentence, so
long as any shares of Series A Preferred Stock are outstanding,
(i) no dividends shall be declared or paid or set apart for
payment, or other distribution declared or made, on any Parity
Securities for any period unless the Corporation has paid or
contemporaneously pays or declares and sets apart for payment on
the Series A Preferred Stock all accrued and unpaid dividends for
all Dividend Periods terminating on or prior to the date of
payment of such dividends, and (ii) no dividends shall be
declared or paid or set apart for payment, or other distribution
declared or made, on the Series A Preferred Stock for any
Dividend Period unless the Corporation has paid or
contemporaneously pays or declares and sets apart for payment on
any Parity Securities all accrued and unpaid dividends for all
dividend payment periods terminating on or prior to the Dividend
Payment Date for such dividends. Unless and until dividends
accrued but unpaid in respect of all past Dividend Periods with
respect to the Series A Preferred Stock and all past dividend
periods with respect to any Parity Securities at the time
outstanding shall have been paid in full or a sum sufficient for
such payment is set apart, all dividends declared by the
Corporation upon shares of Series A Preferred Stock and upon all
Parity Securities shall be declared ratably in proportion to the
respective amounts of dividends accrued and unpaid on the Series
A Preferred Stock and Parity Securities.
(d) So long as any shares of Series A Preferred Stock are
outstanding, no dividends shall be declared or paid or set apart
for payment, or other distribution declared or made, upon any
Junior Securities (other than dividends or distributions paid in
shares of, or options, warrants or rights to subscribe for or
purchase shares of Junior Securities), nor shall any Junior
Securities be redeemed, purchased or otherwise acquired (other
than a redemption, purchase or other acquisition of shares of
Common Stock made for purposes of any employee or director
incentive or benefit plans or arrangements of the Corporation or
any subsidiary of the Corporation) for any consideration (nor
shall any moneys be paid to or made available for a sinking fund
for the redemption of any shares of any such Junior Securities)
by the Corporation, directly or indirectly (except by conversion
into or exchange for Junior Securities), unless in each case (i)
the full cumulative dividends on all outstanding shares of Series
A Preferred Stock and any other Parity Securities shall have been
paid or set apart for payment for all past Dividend Periods with
respect to the Series A Preferred Stock and all past dividend
periods with respect to such Parity Securities and (ii)
sufficient funds shall have been paid or set apart for the
payment of the dividend for the current Dividend Period with
respect to the Series A Preferred Stock and for the current
dividend period with respect to such Parity Securities.
(e) The Corporation shall not, directly or indirectly, make
any payment on account of any purchase, redemption, retirement or
other acquisition of any Parity Securities (other than for
consideration payable solely in Junior Securities) unless all
accrued and unpaid dividends on the Series A Preferred Stock for
all Dividend Payment Periods ending on or before such payment for
such Parity Securities shall have been paid or declared and set
apart for payment.
(f) If at any time the Corporation issues any Senior
Securities and the Corporation shall have failed to declare and
pay or set apart for payment accrued and unpaid dividends on such
Senior Securities, in whole or in part, then (except to the
extent allowed by the terms of the Senior Securities) no
dividends shall be declared or paid or set apart for payment on
the Series A Preferred Stock unless and until all accrued and
unpaid dividends with respect to the Senior Securities, including
the full dividends for the then-current dividend period, shall
have been declared and paid or set apart for payment.
4. Liquidation Preference.
(a) The liquidation preference for the shares of Series A
Preferred Stock shall be $50.00 per share, plus an amount equal
to the dividends accrued and unpaid thereon, whether or not
declared, to the payment date (the Liquidation Value ).
(b) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the
holders of shares of Series A Preferred Stock shall not be
entitled to receive the Liquidation Value of such shares until
payment in full or provision has been made for the payment in
full of all claims of creditors of the Corporation and the
liquidation preferences for all Senior Securities, and shall be
entitled to receive the Liquidation Value of such shares before
any payment or distribution of any assets of the Corporation
shall be made or set apart for holders of any Junior Securities.
Subject to clause (i) above, if the assets of the Corporation are
not sufficient to pay in full the Liquidation Value payable to
the holders of shares of Series A Preferred Stock and the
liquidation preference payable to the holders of any Parity
Securities, then such assets, or the proceeds thereof, shall be
distributed among the holders of shares of Series A Preferred
Stock and any such other Parity Securities ratably in accordance
with the Liquidation Value for the Series A Preferred Stock and
the liquidation preference for the Parity Securities,
respectively. Upon payment in full of the Liquidation Value to
which the holders of shares of Series A Preferred Stock are
entitled, the holders of shares of Series A Preferred Stock will
not be entitled to any further participation in any distribution
of assets of the Corporation.
(c) Neither a consolidation or merger of the Corporation
with or into any other entity, nor a merger of any other entity
with or into the Corporation, nor a sale or transfer of all or
any part of the Corporation s assets for cash, securities or
other property shall be considered a liquidation, dissolution or
winding up of the Corporation within the meaning of this Section
4.
5. Redemption.
(a) Optional Redemption. The Series A Preferred Stock
shall not be redeemable prior to March 31, 2001. During the
period from March 31, 2001 until March 31, 2003, the Corporation
may redeem at its option shares of Series A Preferred Stock in
accordance with this Section 5 only if the last reported sales
price of a share of Common Stock in its principal trading market
for any 20 trading days within a period of 30 consecutive trading
days ending on the trading day prior to the date of mailing the
notice of redemption is at least $70.6563 (subject to equitable
adjustment in circumstances giving rise to adjustment of the
Conversion Price under Section 7(c)). At any time on or after
March 31, 2001, to the extent the Corporation shall have funds
legally available to redeem shares of Series A Preferred Stock
and if permitted by the immediately preceding sentence, the
Corporation may redeem shares of Series A Preferred Stock, in
whole or in part, at the option of the Corporation, at the
applicable cash redemption price per share set forth below for
any redemption during the 12-month period beginning on March 31
of the year indicated:
Year Redemption Price Per Share
2001 $51.40
2002 $51.20
2003 $51.00
2004 $50.80
2005 $50.60
2006 $50.40
2007 $50.20
Thereafter $50.00
plus, in each case, an amount equal to the dividends accrued and
unpaid thereon, whether or not declared, up to but not including
the redemption date. From and after March 31, 2008, the
Corporation may redeem shares of Series A Preferred Stock, at any
time in whole or in part, at the option of the Corporation, at a
cash redemption price per share of $50.00 plus an amount equal to
the dividends accrued and unpaid thereon, whether or not
declared, up to but not including the redemption date.
(b) Mandatory Redemption. To the extent the Corporation
shall have funds legally available for such payment, on March 31,
2018 (the Mandatory Redemption Date ), the Corporation shall
redeem all outstanding shares of Series A Preferred Stock at a
redemption price of $50.00 per share in cash, together with
accrued and unpaid dividends thereon, whether or not declared, up
to but not including such redemption date, without interest. If
the Corporation is unable or shall fail to discharge its
obligation to redeem all outstanding shares of Series A Preferred
Stock on the Mandatory Redemption Date (the Mandatory Redemption
Obligation ): (i) dividends on the Series A Preferred Stock
shall continue to accrue, without interest, in accordance with
Section 3, and (ii) the Mandatory Redemption Obligation shall be
discharged as soon thereafter as the Corporation is able to
discharge such Mandatory Redemption Obligation. If and for so
long as any Mandatory Redemption Obligation with respect to the
Series A Preferred Stock shall not be fully discharged on the
Mandatory Redemption Date, the Corporation shall not (x) directly
or indirectly, redeem, purchase, or otherwise acquire any Parity
Securities or discharge any mandatory or optional redemption,
sinking fund or other similar obligation in respect of any Parity
Securities (except in connection with a redemption, sinking fund
or other similar obligation to be satisfied pro rata with the
Series A Preferred Stock) or (y) declare or pay or set apart for
payment any dividends or other distributions upon any Junior
Securities, or, directly or indirectly, discharge any mandatory
or optional redemption, sinking fund or other similar obligation
in respect of any Junior Securities.
6. Procedures for Redemption.
(a) If fewer than all of the outstanding shares of Series A
Preferred Stock are to be redeemed pursuant to Section 5, the
shares shall be redeemed on a pro rata basis (according to the
number of shares of Series A Preferred Stock held by each holder,
with any fractional shares rounded to the nearest whole share) or
in such other manner as the Board of Directors may determine, as
may be prescribed by resolution of the Board of Directors.
Notwithstanding the provisions of Section 5 and this Section 6,
unless full cumulative cash dividends (whether or not declared)
on all outstanding shares of Series A Preferred Stock shall have
been paid or contemporaneously are declared and paid or set apart
for payment for all Dividend Periods terminating on or prior to
the applicable redemption date, none of the shares of Series A
Preferred Stock shall be redeemed, and no sum shall be set aside
for such redemption, unless shares of Series A Preferred Stock
are redeemed pro rata.
(b) In the event of a redemption of shares of Series A
Preferred Stock pursuant to Section 5, notice of such redemption
shall be given by first class mail, postage prepaid, mailed not
less than 15 days nor more than 60 days prior to the redemption
date, to each holder of record of the shares to be redeemed at
such holder s address as the same appears on the stock register
of the Corporation; provided that neither the failure to give
such notice nor any defect therein shall affect the validity of
the giving of notice for the redemption of any share of Series A
Preferred Stock to be redeemed, except as to the holder to whom
the Corporation has failed to give said notice or except as to
the holder whose notice was defective. Each such notice shall
state: (i) the redemption date; (ii) the number of shares of
Series A Preferred Stock to be redeemed and, if fewer than all
the shares held by such holder are to be redeemed, the number of
shares to be redeemed from such holder; (iii) the redemption
price; (iv) the place or places where certificates for such
shares are to be surrendered for payment of the redemption price;
and (v) that dividends on the shares to be redeemed will cease to
accrue on such redemption date. Any notice mailed in the manner
herein provided shall be conclusively presumed to have been duly
given whether or not the holder receives the notice.
(c) If a notice of redemption has been given pursuant to
Section 6(b) and if, on or before the redemption date, the funds
necessary for such redemption (including all dividends on the
shares of Series A Preferred Stock to be redeemed that will
accrue to but not including the redemption date) shall have been
set aside by the Corporation, separate and apart from its other
funds, in trust for the pro rata benefit of the holders of the
shares so called for redemption, then on the redemption date,
notwithstanding that any certificates for such shares have not
been surrendered for cancellation, (i) dividends shall cease to
accrue on the shares of Series A Preferred Stock to be redeemed,
(ii) the holders of such shares shall cease to be stockholders
with respect to those shares, shall have no interest in or claims
against the Corporation by virtue thereof and shall have no
voting or other rights with respect thereto, except the
conversion rights provided in Section 7 (in accordance with
Section 6(e)) and the right to receive the monies payable upon
such redemption, without interest thereon, upon surrender (and
endorsement, if required by the Corporation) of their
certificates, and (iii) the shares evidenced thereby shall no
longer be outstanding. Subject to applicable escheat laws, any
monies so set aside by the Corporation and unclaimed at the end
of two years from the redemption date shall revert to the general
funds of the Corporation, after which reversion the holders of
such shares so called for redemption shall look only to the
general funds of the Corporation for the payment of the
redemption price, without interest. Any interest accrued on
funds so deposited shall belong to the Corporation and be paid
thereto from time to time.
(d) Upon surrender in accordance with the Corporation s
notice of redemption of the certificates for any shares so
redeemed (properly endorsed or assigned for transfer, if the
Board of Directors shall so require and the notice shall so
state), such shares shall be redeemed by the Corporation at the
redemption price aforesaid. In case fewer than all the shares
represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares
without cost to the holder thereof.
(e) If a notice of redemption has been given pursuant to
Section 6(b) and any holder of shares of Series A Preferred Stock
shall, prior to the close of business on the Business Day
preceding the redemption date, give written notice to the
Corporation pursuant to Section 7 of the conversion of any or all
of the shares to be redeemed held by the holder (accompanied by a
certificate or certificates for such shares, duly endorsed or
assigned to the Corporation, and any necessary transfer tax
payment, as required by Section 7), then such redemption shall
not become effective as to such shares to be converted and such
conversion shall become effective as provided in Section 7,
whereupon any funds deposited by the Corporation for the
redemption of such shares shall (subject to any right of the
holder of such shares to receive the dividend payable thereon as
provided in Section 7) immediately upon such conversion be
returned to the Corporation or, if then held in trust by the
Corporation, shall automatically and without further corporate
action or notice be discharged from the trust.
7. Conversion.
(a) Right to Convert.
(i) Subject to the provisions of this Section 7, each
holder of shares of Series A Preferred Stock shall have the
right, at any time and from time to time, at such holder s
option, to convert any or all of such holder s shares of Series A
Preferred Stock, in whole or in part, into fully paid and
non-assessable shares of Common Stock at the conversion price of
$56.525 per share of Common Stock, subject to adjustment as
described in Section 7(c) (as adjusted, the Conversion Price ).
The number of shares of Common Stock into which a share of the
Series A Preferred Stock shall be convertible (calculated as to
each conversion to the nearest 1/1,000,000th of a share) shall be
determined by dividing $50.00 by the Conversion Price in effect
at the time of conversion.
(ii) If shares of Series A Preferred Stock are called for
redemption in accordance with Section 5(a), the right to convert
shares so called for redemption shall terminate at the close of
business on the Business Day immediately preceding the date fixed
for redemption unless the Corporation shall default in making
payment of the amount payable upon such redemption, in which case
the conversion rights for such shares shall continue.
(b) Mechanics of Conversion.
(i) To exercise the conversion right, the holder of shares
of Series A Preferred Stock to be converted shall surrender the
certificate or certificates representing such shares at the
office of the Corporation (or any transfer agent of the
Corporation previously designated by the Corporation to the
holders of Series A Preferred Stock for this purpose) with a
written notice of election to convert completed and signed,
specifying the number of shares to be converted. Unless the
shares issuable upon conversion are to be issued in the same name
as the name in which such shares of Series A Preferred Stock are
registered, each share surrendered for conversion shall be
accompanied by instruments of transfer, in form satisfactory to
the Corporation, duly executed by the holder or the holder s duly
authorized attorney and an amount sufficient to pay any transfer
or similar tax in accordance with Section 7(b)(vii). As promptly
as practicable after the surrender by the holder of the
certificates for shares of Series A Preferred Stock as aforesaid,
the Corporation shall issue and shall deliver to such holder, or
on the holder s written order to the holder s transferee, a
certificate or certificates for the whole number of shares of
Common Stock issuable upon the conversion of such shares and a
check payable in an amount corresponding to any fractional
interest in a share of Common Stock as provided in Section
7(b)(viii).
(ii) Each conversion shall be deemed to have been effected
immediately prior to the close of business on the first Business
Day (the Conversion Date ) on which the certificates for shares
of Series A Preferred Stock shall have been surrendered and such
notice received by the Corporation as aforesaid. At such time on
the Conversion Date:
(w) the person in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon
such conversion shall be deemed to have become the holder of
record of the shares of Common Stock represented thereby at such
time;
(x) such shares of Series A Preferred Stock shall no longer
be deemed to be outstanding and all rights of a holder with
respect to such shares surrendered for conversion shall
immediately terminate except the right to receive the Common
Stock and other amounts payable pursuant to this Section 7;
(y) in lieu of dividends on such Series A Preferred Stock
pursuant to Section 3, such shares of Series A Preferred Stock
shall participate equally and ratably with the holders of shares
of Common Stock in all dividends paid on the Common Stock; and
(z) the right of the Corporation to redeem such shares of
Series A Preferred Stock shall terminate, regardless of whether a
notice of redemption has been mailed as aforesaid.
All shares of Common Stock delivered upon conversion of the
Series A Preferred Stock will, upon delivery, be duly and validly
issued and fully paid and non-assessable, free of all liens and
charges and not subject to any preemptive rights.
(iii) Holders of shares of Series A Preferred Stock at the
close of business on a Dividend Payment Record Date shall be
entitled to receive the dividend payable on such shares on the
corresponding Dividend Payment Date notwithstanding the
conversion thereof following such Dividend Payment Record Date
and prior to such Dividend Payment Date. However, shares of
Series A Preferred Stock surrendered for conversion during the
period between the close of business on any Dividend Payment
Record Date and the opening of business on the corresponding
Dividend Payment Date (except shares converted after the issuance
of a notice of redemption during such period, which shall be
entitled to such dividend on the Dividend Payment Date) must be
accompanied by payment of an amount equal to the dividend payable
on such shares on such Dividend Payment Date; provided that
notwithstanding such surrender of shares for conversion after
such Dividend Payment Record Date, the holders thereof at the
close of business on such Dividend Payment Record Date shall be
entitled to receive the dividend payable on such shares on the
corresponding Dividend Payment Date. A holder of shares of
Series A Preferred Stock on a Dividend Payment Record Date who
(or whose transferee) tenders any such shares for conversion into
shares of Common Stock on such Dividend Payment Date will receive
the dividend payable by the Corporation on such shares of Series
A Preferred Stock on such date, and the converting holder need
not include payment of the amount of such dividend upon surrender
of shares of Series A Preferred Stock for conversion.
(iv) Except as provided in clause (iii) above and in Section
7(c), the Corporation shall make no payment or adjustment for
accrued and unpaid dividends on shares of Series A Preferred
Stock, whether or not in arrears, on conversion of such shares or
for dividends in cash on the shares of Common Stock issued upon
such conversion.
(v) The Corporation covenants that it will at all times
reserve and keep available, free from preemptive rights, such
number of its authorized but unissued shares of Common Stock as
shall be required for the purpose of effecting conversions of the
Series A Preferred Stock. Prior to the delivery of any
securities which the Corporation shall be obligated to deliver
upon conversion of the Series A Preferred Stock, the Corporation
shall comply with all applicable federal and state laws and
regulations which require action to be taken by the Corporation.
(vi) The Corporation will pay any and all documentary stamp
or similar issue or transfer taxes payable in respect of the
issuance or delivery of shares of Common Stock on conversion of
the Series A Preferred Stock pursuant hereto; provided that the
Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance or
delivery of shares of Common Stock in a name other than that of
the holder of the Series A Preferred Stock to be converted, and
no such issuance or delivery shall be made unless and until the
person requesting such issuance or delivery has paid to the
Corporation the amount of any such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid.
(vii) In connection with the conversion of any shares of
Series A Preferred Stock, no fractions of shares of Common Stock
shall be issued, but in lieu thereof the Corporation shall pay a
cash adjustment in respect of such fractional interest in an
amount equal to such fractional interest multiplied by the Daily
Price (as defined below) per share of Common Stock on the
Conversion Date. In the absence of a Daily Price, the Board of
Directors shall in good faith determine the current market price
on such basis as it considers appropriate, and such current
market price shall be used to calculate the cash adjustment. As
used herein, Daily Price means (w) if the shares of such class
of Common Stock are then listed and traded on the New York Stock
Exchange, Inc. ( NYSE ), the closing price on such day as
reported on the NYSE Composite Transactions Tape; (x) if the
shares of such class of Common Stock are not then listed and
traded on the NYSE, the closing price on such day as reported by
the principal national securities exchange on which the shares
are listed and traded; (y) if the shares of such class of Common
Stock are not then listed and traded on any such securities
exchange, the last reported sale price on such day on the
National Market of the National Association of Securities
Dealers, Inc. Automated Quotation System ( NASDAQ ); or (z) if
the shares of such class of Common Stock are not then traded on
the NASDAQ National Market, the average of the highest reported
bid and lowest reported asked price on such day, as reported by
NASDAQ.
(c) Adjustments to Conversion Price. The Conversion Price
shall be adjusted from time to time as follows:
(i) If, at any time after the date of issuance of the
Series A Preferred Stock, the Corporation shall pay a dividend
or make a distribution on any class of its capital stock in
shares of its Common Stock, subdivide its outstanding shares of
Common Stock into a greater number of shares or combine its
outstanding shares of Common Stock into a smaller number of
shares, the Conversion Price in effect immediately prior thereto
shall be adjusted as provided below so that the Conversion Price
thereafter shall be determined by multiplying the Conversion
Price at which the shares of Series A Preferred Stock were
theretofore convertible by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding
immediately prior to such action, and the denominator of which
shall be the number of shares of Common Stock outstanding
immediately following such action. Such adjustment shall be made
whenever any event listed above shall occur and shall become
effective retroactively immediately after the record date in the
case of a dividend and immediately after the effective date in
the case of a subdivision or combination.
(ii) If, at any time after the date of issuance of the
Series A Preferred Stock, the Corporation shall issue rights or
warrants to all holders of its Common Stock entitling them (for a
period expiring within 45 days after the record date for
determining stockholders entitled to receive such rights or
warrants) to subscribe for or purchase shares of Common Stock at
a price per share less than the current market price per share of
Common Stock at the record date therefor (as determined in
accordance with the provisions of Section 7(c)(iv)), the Current
Market Price ), or in case the Corporation shall issue to all
holders of its Common Stock other securities convertible into or
exchangeable for Common Stock for a consideration per share of
Common Stock deliverable upon conversion or exchange thereof less
than the Current Market Price, then the Conversion Price in
effect immediately prior thereto shall be adjusted as provided
below so that the Conversion Price therefor shall be equal to the
price determined by multiplying the Conversion Price at which
shares of Series A Preferred Stock were theretofore convertible
by a fraction of which the numerator shall be the sum of (1) the
number of shares of Common Stock outstanding on the date of
issuance of the convertible or exchangeable securities, rights or
warrants and (2) the number of additional shares of Common Stock
that the aggregate offering price for the number of shares of
Common Stock so offered would purchase at the Current Market
Price per share of Common Stock, and of which the denominator
shall be the sum of the number of shares of Common Stock
outstanding on the date of issuance of such convertible or
exchangeable securities, rights or warrants and the number of
additional shares of Common Stock offered for subscription or
purchase, or issuable upon such conversion or exchange. Such
adjustment shall be made whenever such convertible or
exchangeable securities, rights or warrants are issued, and shall
become effective immediately after the record date for the
determination of stockholders entitled to receive such
securities. However, upon the expiration of any right or warrant
to purchase Common Stock, the issuance of which resulted in an
adjustment in the Conversion Price pursuant to this Section
7(c)(ii), if any such right or warrant shall expire and shall not
have been exercised, the Conversion Price shall be recomputed
immediately upon such expiration and effective immediately upon
such expiration shall be increased to the price it would have
been (but reflecting any other adjustments to the Conversion
Price made pursuant to the provisions of this Section 7(c) after
the issuance of such rights or warrants) had the adjustment of
the Conversion Price made upon the issuance of such rights or
warrants been made on the basis of offering for subscription or
purchase only that number of shares of Common Stock actually
purchased upon the exercise of such rights or warrants. No
further adjustment shall be made upon exercise of any right,
warrant, convertible security or exchangeable security if any
adjustment shall have been made upon issuance of such security.
(iii) If, at any time after the date of issuance of the
Series A Preferred Stock, the Corporation shall distribute to all
holders of its Common Stock (including any dividend paid in
connection with a consolidation or merger in which the
Corporation is the continuing corporation) any shares of capital
stock of the Corporation or its subsidiaries (other than Common
Stock) or evidences of its indebtedness, cash or other assets
(excluding dividends payable solely in cash that may from time to
time be fixed by the Board of Directors, or dividends or
distributions in connection with the liquidation, dissolution or
winding up of the Corporation) or rights or warrants to subscribe
for or purchase any of its securities or those of its
subsidiaries or securities convertible or exchangeable for Common
Stock (excluding those securities referred to in Section
7(c)(ii)), then in each such case the Conversion Price in effect
immediately prior thereto shall be adjusted as provided below so
that the Conversion Price thereafter shall be equal to the price
determined by multiplying (A) the Conversion Price in effect on
the record date mentioned below by (B) a fraction, the numerator
of which shall be the Current Market Price per share of Common
Stock on the record date mentioned below less the then fair
market value (as determined by the Board of Directors, whose good
faith determination shall be conclusive) as of such record date
of the assets, evidences of indebtedness or securities so paid
with respect to one share of Common Stock, and the denominator of
which shall be the Current Market Price per share of Common Stock
on such record date; provided, however, that in the event the
then fair market value (as so determined) so paid with respect to
one share of Common Stock is equal to or greater than the Current
Market Price per share of Common Stock on the record date
mentioned above, in lieu of the foregoing adjustment, adequate
provision shall be made so that each holder of shares of Series A
Preferred Stock shall have the right to receive the amount and
kind of assets, evidences of indebtedness, or securities such
holder would have received had such holder converted each such
share of Series A Preferred Stock immediately prior to the record
date for such dividend. Such adjustment shall be made whenever
any such payment is made, and shall become effective
retroactively immediately after the record date for the
determination of stockholders entitled to receive the payment.
(iv) For the purpose of any computation under Sections
7(c)(ii) or 7(c)(iii), the Current Market Price per share of
Common Stock at any date shall be deemed to be the average Daily
Price for the 30 consecutive trading days commencing 35 trading
days before the day in question.
(v) No adjustment in the Conversion Price shall be required
unless the adjustment would require an increase or decrease of at
least 1% in the Conversion Price then in effect; provided,
however, that any adjustments that by reason of this Section
7(c)(v) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All
calculations under this Section 7(c) shall be made to the nearest
cent.
(vi) In the event that, at any time as a result of an
adjustment made pursuant to Section 7(c)(i) or 7(c)(iii), the
holder of any shares of Series A Preferred Stock thereafter
surrendered for conversion shall become entitled to receive any
shares of the Corporation or its subsidiaries, other than shares
of the Common Stock, thereafter the number of such other shares
so receivable upon conversion of any share of Series A Preferred
Stock shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in Sections
7(c)(i) through 7(c)(v), and the other provisions of this Section
7 with respect to the Common Stock shall apply on like terms to
any such other shares.
(vii) Whenever the Conversion Price is adjusted, as herein
provided, the Corporation shall promptly file with the transfer
agent for the Series A Preferred Stock a certificate of an
officer of the Corporation setting forth the Conversion Price
after the adjustment and setting forth a brief statement of the
facts requiring such adjustment and a computation thereof. The
certificate shall be prima facie evidence of the correctness of
the adjustment. The Corporation shall promptly cause a notice of
the adjusted Conversion Price to be mailed to each registered
holder of shares of Series A Preferred Stock.
(viii) In case of any reclassification of the Common Stock,
any consolidation of the Corporation with, or merger of the
Corporation into, any other entity, any merger of another entity
into the Corporation (other than a merger that does not result in
any reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock of the Corporation), any sale
or transfer of all or substantially all of the assets of the
Corporation or any compulsory share exchange pursuant to which
share exchange the Common Stock is converted into other
securities, cash or other property, then lawful provision shall
be made as part of the terms of such transaction whereby the
holder of each share of Series A Preferred Stock then outstanding
shall have the right thereafter, during the period such share
shall be convertible, to convert such share only into the kind
and amount of securities, cash and other property receivable upon
the reclassification, consolidation, merger, sale, transfer or
share exchange by a holder of the number of shares of Common
Stock of the Corporation into which a share of Series A Preferred
Stock would have been convertible immediately prior to the
reclassification, consolidation, merger, sale, transfer or share
exchange. The Corporation, the person formed by the
consolidation or resulting from the merger or which acquires such
assets or which acquires the Corporation s shares, as the case
may be, shall make provisions in its certificate or articles of
incorporation or other constituent documents to establish such
rights and to ensure that the dividend, voting and other rights
of the holders of Series A Preferred Stock established herein are
unchanged, except as permitted by Section 9 and applicable law.
The certificate or articles of incorporation or other constituent
documents shall provide for adjustments, which, for events
subsequent to the effective date of the certificate or articles
of incorporation or other constituent documents, shall be as
nearly equivalent as may be practicable to the adjustments
provided for in this Section 7. The provisions of this Section
7(c)(viii) shall similarly apply to successive reclassifications,
consolidations, mergers, sales, transfers or share exchanges.
(d) Optional Reduction in Conversion Price. The
Corporation may at its option reduce the Conversion Price from
time to time by any amount for any period of time if the period
is at least 20 days and if the reduction is irrevocable during
the period. Whenever the Conversion Price is so reduced, the
Corporation shall mail to holders of record of the Series A
Preferred Stock a notice of the reduction at least 15 days before
the date the reduced Conversion Price takes effect, stating the
reduced Conversion Price and the period it will be in effect. A
voluntary reduction of the Conversion Price does not change or
adjust the Conversion Price otherwise in effect for purposes of
Section 7(c).
8. Status of Shares. All shares of Series A Preferred
Stock that are at any time redeemed pursuant to Section 5 or
converted pursuant to Section 7 and all shares of Series A
Preferred Stock that are otherwise reacquired by the Corporation
shall (upon compliance with any applicable provisions of the laws
of the State of Delaware) have the status of authorized but
unissued shares of Preferred Stock, without designation as to
series, subject to reissuance by the Board of Directors as shares
of any one or more other series.
9. Voting Rights.
(a) The holders of record of shares of Series A Preferred
Stock shall not be entitled to any voting rights except as
hereinafter provided in this Section 9 or as otherwise provided
by law.
(b) The holders of the shares of Series A Preferred Stock
(i) shall be entitled to vote with the holders of the Common
Stock on all matters submitted for a vote of holders of Common
Stock (voting together with the holders of Common Stock as one
class), (ii) shall be entitled to a number of votes equal to the
number of votes to which shares of Common Stock issuable upon
conversion of such shares of Series A Preferred Stock would have
been entitled if such shares of Common Stock had been outstanding
at the time of the applicable vote and related record date and
(iii) shall be entitled to notice of any stockholders meeting in
accordance with the Certificate of Incorporation and Bylaws of
the Corporation.
(c) If and whenever six quarterly dividends (whether or not
consecutive) payable on the Series A Preferred Stock have not
been paid in full or if the Corporation shall have failed to
discharge its Mandatory Redemption Obligation on or after the
Redemption Date, the number of directors then constituting the
Board of Directors shall be increased by two and the holders of
shares of Series A Preferred Stock, together with the holders of
shares of every other series of preferred stock upon which like
rights to vote for the election of two additional directors have
been conferred and are exercisable (resulting from either the
failure to pay dividends or the failure to redeem) (any such
other series is referred to as the Preferred Shares ), voting as
a single class regardless of series, shall be entitled to elect
the two additional directors to serve on the Board of Directors
at any annual meeting of stockholders or special meeting held in
place thereof, or at a special meeting of the holders of the
Series A Preferred Stock and the Preferred Shares called as
hereinafter provided. Whenever all arrears in dividends on the
Series A Preferred Stock and the Preferred Shares then
outstanding shall have been paid and dividends thereon for the
current quarterly dividend period shall have been paid or
declared and set apart for payment, or the Corporation shall have
fulfilled its Mandatory Redemption Obligation, as the case may
be, then the right of the holders of the Series A Preferred Stock
and the Preferred Shares to elect such additional two directors
shall cease (but subject always to the same provisions for the
vesting of such voting rights in the case of any similar future
arrearages in six quarterly dividends or failure to fulfill any
Mandatory Redemption Obligation), and the terms of office of all
persons elected as directors by the holders of the Series A
Preferred Stock and the Preferred Shares shall forthwith
terminate and the number of the Board of Directors shall be
reduced accordingly. At any time after such voting power shall
have been so vested in the holders of shares of Series A
Preferred Stock and the Preferred Shares, the secretary of the
Corporation may, and upon the written request of any holder of
Series A Preferred Stock (addressed to the secretary at the
principal office of the Corporation) shall, call a special
meeting of the holders of the Series A Preferred Stock and of the
Preferred Shares for the election of the two directors to be
elected by them as herein provided, such call to be made by
notice similar to that provided in the Bylaws of the Corporation
for a special meeting of the stockholders or as required by law.
If any such special meeting required to be called as above
provided shall not be called by the secretary within 20 days
after receipt of any such request, then any holder of shares of
Series A Preferred Stock may call such meeting, upon the notice
above provided, and for that purpose shall have access to the
stock records of the Corporation. The directors elected at any
such special meeting shall hold office until the next annual
meeting of the stockholders or special meeting held in lieu
thereof if such office shall not have previously terminated as
above provided. If any vacancy shall occur among the directors
elected by the holders of the Series A Preferred Stock and the
Preferred Shares, a successor shall be elected by the Board of
Directors, upon the nomination of the then-remaining director
elected by the holders of the Series A Preferred Stock and the
Preferred Shares or the successor of such remaining director, to
serve until the next annual meeting of the stockholders or
special meeting held in place thereof if such office shall not
have previously terminated as provided above.
(d) So long as any shares of Series A Preferred Stock are
outstanding:
(i) the Corporation shall not, without the written
consent or affirmative vote at a meeting called for that
purpose by holders of at least 66-2/3% of the outstanding
shares of Series A Preferred Stock, voting as a single
class, amend, alter or repeal any provision of the
Corporation s Certificate of Incorporation (by merger or
otherwise) so as to materially and adversely affect the
preferences, rights or powers of the Series A Preferred
Stock; provided that any such amendment, alteration or
repeal to create, authorize or issue any Junior Securities
or Parity Securities, or any security convertible into, or
exchangeable or exercisable for, shares of Junior Securities
or Parity Securities, shall not be deemed to have any such
material adverse effect;
(ii) the Corporation shall not, without the written
consent or affirmative vote at a meeting called for that
purpose of at least 66-2/3% of the votes entitled to be cast
by the holders of shares of Series A Preferred Stock and of
all other series of Preferred Stock upon which like rights
to vote upon the matters specified herein have been
conferred and are exercisable, voting as a single class
regardless of series, create, authorize or issue any Senior
Securities, or any security convertible into, or
exchangeable or exercisable for, shares of Senior
Securities; and
(iii) the Corporation shall not, without the
written consent or affirmative vote at a meeting called for
that purpose of at least a majority of the votes entitled to
be cast by the holders of shares of Series A Preferred Stock
and of all other series of Preferred Stock upon which like
rights to vote upon the matters specified herein have been
conferred and are exercisable, voting as a single class
regardless of series, create, authorize or issue any new
class of Parity Securities; provided that this clause (iii)
shall not limit the right of the Corporation to issue Parity
Securities in connection with any merger in which the
Corporation is the surviving entity;
provided that no such consent or vote of the holders of Series A
Preferred Stock shall be required if at or prior to the time when
such amendment, alteration or repeal is to take effect, or when
the issuance of any such securities is to be made, as the case
may be, all shares of Series A Preferred Stock at the time
outstanding shall have been called for redemption by the
Corporation and the funds necessary for such redemption shall
have been set aside in accordance with Sections 5 and 6.
(c) The consent or votes required in Sections 9(c) and 9(d)
shall be in addition to any approval of stockholders of the
Corporation which may be required by law or pursuant to any
provision of the Corporation s Certificate of Incorporation or
Bylaws, which approval shall be obtained by vote of the
stockholders of the Corporation in the manner provided in Section
9(b).
10. No Other Rights.
(a) The shares of Series A Preferred Stock shall not have
any relative, participating, optional or other special rights and
powers except as set forth herein or as may be required by law.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: The private property of the stockholders shall not
be subject to the payment of the corporate debts to any extent
whatever except as otherwise provided by law.
SEVENTH: In furtherance, and not in limitation of the
powers conferred by statute, the Board of Directors is expressly
authorized:
A. To adopt, amend or repeal the by-laws of the
Corporation; provided, however, that the by-laws adopted by
the Board of Directors under the powers hereby conferred may
be amended or repealed by the Board of Directors or by the
stockholders having voting power with respect thereto,
provided further that in the case of amendments by
stockholders, the affirmative vote of the holders of at
least 80 percent of the voting power of the then outstanding
Voting Stock, voting together as a single class, shall be
required to alter, amend or repeal any provision of the by-
laws;
B. To authorize and cause to be executed mortgages and
liens, with or without limit as to amount, upon the real and
personal property of the Corporation;
C. To authorize the guaranty by the Corporation of
securities, evidences of indebtedness and obligations of
other persons, corporations and business entities;
D. By resolution adopted by a majority of the whole
board, to designate one or more committees, each committee
to consist of two or more of the directors of the
Corporation, which, to the extent provided in the
resolution, shall have and may exercise the powers of the
Board of Directors in the management of the business and
affairs of the Corporation and may authorize the seal of the
Corporation to be affixed to all papers which may require
it. Such committee or committees shall have such name or
names as may be determined from time to time by resolution
adopted by the Board of Directors. The Board of Directors
may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified
member at any meeting of the committee. The members of any
such committee present at any meeting and not disqualified
from voting may, whether or not they constitute a quorum,
unanimously appoint another member of the Board of Directors
to act at the meeting in the place of any absent or
disqualified member.
All corporate powers of the Corporation shall be exercised by the
Board of Directors except as otherwise provided herein or by law.
Notwithstanding anything contained in this Amended and Restated
Certificate of Incorporation to the contrary, the affirmative
vote of the holders of at least 80 percent of the voting power of
the then outstanding Voting Stock, voting together as a single
class, shall be required to amend, repeal or adopt any provision
inconsistent with paragraph A of this ARTICLE SEVENTH.
EIGHTH: Any property of the Corporation constituting less
than all of its assets including goodwill and its corporate
franchise, deemed by the Board of Directors to be not essential
to the conduct of the business of the Corporation, may be sold,
leased, exchanged or otherwise disposed of by authority of the
Board of Directors. All of the property and assets of the
Corporation including its goodwill and its corporate franchises,
may be sold, leased or exchanged upon such terms and conditions
and for such consideration (which may be in whole or in part
shares of stock and/or other securities of any other corporation
or corporations) as the Board of Directors shall deem expedient
and for the best interests of the Corporation, when and as
authorized by the affirmative vote of the holders of a majority
of the voting power of the then outstanding Voting Stock given at
a stockholders meeting duly called for that purpose upon at
least 20 days notice containing notice of the proposed sale,
lease or exchange.
NINTH: A director or officer of the Corporation shall not
be disqualified by his office from dealing or contracting with
the Corporation either as a vendor, purchaser or otherwise, nor
shall any transaction or contract of the Corporation be void or
voidable by reason of the fact that any director or officer or
any firm of which any director or officer is a member or any
corporation of which any director or officer is a stockholder,
officer or director, is in any way interested in such transaction
or contract, provided that such transaction or contract is or
shall be authorized, ratified or approved either (1) by a vote of
a majority of a quorum of the Board of Directors or of a
committee thereof, without counting in such majority any director
so interested (although any director so interested may be
included in such quorum), or (2) by a majority of a quorum of the
stockholders entitled to vote at any meeting. No director or
officer shall be liable to account to the Corporation for any
profits realized from any such transaction or contract
authorized, ratified or approved as aforesaid by reason of the
fact that he, or any firm of which he is a member or any
corporation of which he is a stockholder, officer or director,
was interested in such transaction or contract. Nothing herein
contained shall create liability in the events above described or
prevent the authorization, ratification or approval of such
contracts in any other manner permitted by law.
TENTH: Any contract, transaction or act of the Corporation
or of the Board of Directors which shall be approved or ratified
by a majority of a quorum of the stockholders entitled to vote at
any meeting shall be as valid and binding as though approved or
ratified by every stockholder of the Corporation; but any failure
of the stockholders to approve or ratify such contract,
transaction or act, when and if submitted, shall not be deemed in
any way to invalidate the same or to deprive the Corporation, its
directors or officers of their right to proceed with such
contract, transaction or act.
ELEVENTH: Each person who is or was or has agreed to become
a director or officer of the Corporation, and each such person
who is or was serving or who has agreed to serve at the request
of the Board of Directors or an officer of the Corporation as an
employee or agent of the Corporation or as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, including service with
respect to employee benefit plans (including the heirs,
executors, administrators or estate of such person), shall be
indemnified by the Corporation, in accordance with the by-laws of
the Corporation, to the fullest extent permitted from time to
time by the General Corporation Law of the State of Delaware as
the same exists or may hereafter be amended (but, in the case of
any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights
than said law permitted prior to such amendment) or any other
applicable laws as presently or hereafter in effect. Without
limiting the generality or the effect of the foregoing, the
Corporation may enter into one or more agreements with any person
which provide for indemnification greater than or different from
that provided in this ARTICLE ELEVENTH. Any amendment or repeal
of this ARTICLE ELEVENTH shall not adversely affect any right or
protection existing hereunder in respect of any act or omission
occurring prior to such amendment or repeal.
TWELFTH: A director of the Corporation shall not be
personally liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director,
except for liability (1) for any breach of the director s duty of
loyalty to the Corporation or its stockholders, (2) for acts or
omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (3) under Section 174
of the General Corporation Law of the State of Delaware, or (4)
for any transaction from which the director derived an improper
personal benefit. Any amendment or repeal of this ARTICLE
TWELFTH shall not adversely affect any right or protection of a
director of the Corporation existing hereunder in respect of any
act or omission occurring prior to such amendment or repeal.
THIRTEENTH: Whenever a compromise or arrangement is
proposed between this corporation and its creditors or any class
of them and/or between this corporation and its stockholders or
any class of them, any court of equitable jurisdiction within the
State of Delaware may, on the application in a summary way of
this corporation or of any creditor or stockholder thereof or on
the application of any receiver or receivers appointed for this
corporation under Section 291 of Title 8 of the Delaware Code or
on the application of trustees in dissolution or of any receiver
or receivers appointed for this corporation under Section 279 of
Title 8 of the Delaware Code, order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, to be
summoned in such manner as the said court directs. If a majority
in number representing three-fourths in value of the creditors or
class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, agree to
any compromise or arrangement and to any reorganization of this
corporation as consequence of such compromise or arrangement, the
said compromise or arrangement and the said reorganization shall,
if sanctioned by the court to which the said application has been
made, be binding on all the creditors or class of creditors,
and/or on all the stockholders or class of stockholders, of this
corporation, as the case may be, and also on this corporation.
FOURTEENTH: Meetings of stockholders and directors may be
held within or without the State of Delaware, as the by-laws may
provide. The books of account of the Corporation may be kept
(subject to any provision contained in the statutes) outside the
State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the by-laws of
the Corporation. Elections of directors need not be by written
ballot unless the by-laws of the Corporation shall so provide.
FIFTEENTH: Subject to the rights of the holders of any
series of Preferred Stock or any other series or class of stock
as set forth in this Amended and Restated Certificate of
Incorporation to elect additional directors under specific
circumstances, any action required or permitted to be taken by
the stockholders of the Corporation must be effected at a duly
called annual or special meeting of stockholders of the
Corporation and may not be effected by any consent in writing in
lieu of a meeting of such stockholders. Notwithstanding anything
contained in this Amended and Restated Certificate of
Incorporation to the contrary, the affirmative vote of at least
80 percent of the voting power of the then outstanding Voting
Stock, voting together as a single class, shall be required to
amend, repeal or adopt any provision inconsistent with this
ARTICLE FIFTEENTH.
SIXTEENTH: Subject to the rights of the holders of any
series of Preferred Stock or any other series or class of stock
as set forth in this Amended and Restated Certificate of
Incorporation to elect additional directors under specified
circumstances, the number of directors of the Corporation shall
be fixed, and may be increased or decreased from time to time, in
such manner as may be prescribed by the by-laws.
Unless and except to the extent that the by-laws of the
Corporation shall so require, the election of directors of the
Corporation need not be by written ballot.
The directors, other than those who may be elected by the
holders of any series of Preferred Stock or any other series or
class of stock as set forth in this Amended and Restated
Certificate of Incorporation, shall be divided into three
classes, as nearly equal in number as possible. One class of
directors shall be initially elected for a term expiring at the
annual meeting of stockholders to be held in 1997, another class
shall be initially elected for a term expiring at the annual
meeting of stockholders to be held in 1998, and another class
shall be initially elected for a term expiring at the annual
meeting of stockholders to be held in 1999. Members of each
class shall hold office until their successors are elected and
qualified. At each succeeding annual meeting of the stockholders
of the Corporation, the successors of the class of directors
whose term expires at that meeting shall be elected by a
plurality vote of all votes cast at such meeting to hold office
for a term expiring at the annual meeting of stockholders held in
the third year following the year of their election.
Subject to the rights of the holders of any series of
Preferred Stock or any other series or class of stock as set
forth in this Amended and Restated Certificate of Incorporation
to elect additional directors under specified circumstances, any
director may be removed from office at any time by the
shareholders, but only for cause.
Notwithstanding anything contained in this Amended and
Restated Certificate of Incorporation to the contrary, the
affirmative vote of the holders of at least 80 percent of the
voting power of the then outstanding Voting Stock, voting
together as a single class, shall be required to amend, repeal or
adopt any provision inconsistent with this ARTICLE SIXTEENTH.
SEVENTEENTH: The Corporation reserves the right to amend,
alter, change or repeal any provision contained in this
certificate of incorporation, in the manner now or hereafter
prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
EXHIBIT 99
ITEMS 2 AND 5 OF THE COMPANY'S CURRENT REPORT ON FORM 8-K
FILED APRIL 15, 1998, FILE NO. 1-12139
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On March 31, 1998, the Registrant, a Delaware corporation
formerly known as W. R. Grace & Co., and Sealed Air Corporation
(US), a Delaware corporation formerly known as Sealed Air
Corporation ( Sealed Air ), completed a series of related
transactions as a result of which:
(1) the Registrant s specialty chemicals business was
separated from its packaging business, the packaging business was
contributed to one wholly owned subsidiary ( Cryovac ), and the
specialty chemicals business was contributed to another wholly
owned subsidiary ( New Grace ), pursuant to a Distribution
Agreement dated as of March 30, 1998 among the Registrant, W. R.
Grace & Co.-Conn. ( Grace-Conn. ) and New Grace;
(2) the Registrant and Cryovac borrowed approximately
$1.259 billion under the New Credit Agreements (as defined below)
and transferred substantially all of those funds to New Grace and
Grace-Conn. (the Cash Transfer ); a portion of the Cash Transfer
was used by New Grace and Grace-Conn. to repay substantially all
of Grace-Conn. s outstanding debt, certain of which was
guaranteed by the Registrant;
(3) the Registrant distributed all of the outstanding
shares of common stock of New Grace to the Registrant s
stockholders;
(4) the Registrant recapitalized its outstanding shares of
common stock into a new common stock and Series A convertible
preferred stock (the Recapitalization ); and
(5) a subsidiary of the Registrant merged into Sealed Air
with Sealed Air being the surviving corporation (the Merger ),
pursuant to an Agreement and Plan of Merger dated as of August
14, 1997 among the Registrant, Sealed Air, and a subsidiary of
the Registrant (the Merger Agreement ).
The Merger and the related transactions described above were
approved by the Registrant s stockholders at a special meeting
held on March 20, 1998, and the Merger was approved by Sealed
Air s stockholders at a special meeting held on March 23, 1998.
As a result of these transactions, New Grace became a separate
publicly owned corporation named W. R. Grace & Co., and the
Registrant, which now operates the businesses of Sealed Air and
Cryovac, was renamed Sealed Air Corporation. As used in this
Form 8-K, New Sealed Air refers to the Registrant after giving
effect to the Merger.
In the Recapitalization, the outstanding shares of the
Registrant s common stock were converted into 40,647,803 shares
of new common stock and 36,000,000 shares of Series A convertible
preferred stock. On a per share basis, each share of the
Registrant s common stock outstanding on March 31, 1998 was
converted into the right to receive 0.536 of a share of new
common stock and 0.475 of a share of Series A convertible
preferred stock. In addition, outstanding options to purchase
common stock of the Registrant that were held by Cryovac's
employees were converted into options to purchase approximately
489,307 shares of the Registrant s common stock.
Pursuant to the Merger Agreement, each of the 42,624,246
shares of Sealed Air s common stock outstanding on March 31, 1998
was converted into the right to receive one share of the
Registrant s new common stock.
As a result of these transactions, the Registrant s former
stockholders received, in the aggregate, approximately 63% of the
capital stock of the Registrant, and the former Sealed Air
stockholders received the remaining 37%.
The Registrant has appointed First Chicago Trust Company of
New York (the Exchange Agent ) to serve as Exchange Agent with
respect to the shares issued in the Recapitalization and the
Merger. The Exchange Agent has mailed to each stockholder of
record of the Registrant s common stock outstanding on March 31,
1998 a letter of transmittal and instructions for surrendering
their common stock certificates for shares of the Registrant s
new common and Series A convertible preferred stock. No
fractional shares of the Registrant s new common or Series A
convertible preferred stock will be issued. Instead, the
Exchange Agent will distribute to the Registrant s stockholders
otherwise entitled to receive such fractional shares the pro-rata
cash proceeds realized from a sale of those shares in the open
market, net of sales expenses.
The terms and conditions of the Merger Agreement, the
Distribution Agreement and related agreements were determined
through negotiations among the parties thereto as described under
the heading The Reorganization and Merger Background in the
Joint Proxy Statement/Prospectus dated February 13, 1998 (the
Joint Proxy Statement/Prospectus ), which was filed by the
Registrant with the Securities and Exchange Commission (the
SEC ) on the same date as part of the Registrant s Registration
Statement on Form S-4 (Registration No. 333-46281).
The separation of the Registrant s specialty chemicals and
packaging businesses, the spinoff of New Grace, the
Recapitalization and the Merger, as well as the principal terms
of the Merger Agreement, the Distribution Agreement and related
agreements, are described under the heading The Distribution and
Merger Agreements in the Joint Proxy Statement/Prospectus, which
description is incorporated herein by reference. The Merger
Agreement, filed with the SEC as Exhibit 2.1 to the Registrant s
Form 8-K on August 18, 1997, and the Distribution Agreement,
attached as Exhibit 2.2 hereto, are incorporated herein by
reference, and the description of their terms herein is qualified
in its entirety by reference to the said agreements.
Prior to the Merger, Sealed Air was an independent, publicly
owned global manufacturer of a wide range of protective and
specialty packaging materials and systems, and Cryovac was
operated as a division of Grace-Conn. The Registrant intends to
integrate the businesses of Sealed Air and Cryovac to achieve
operating efficiencies. However, specific decisions regarding
the steps to be taken to integrate the two businesses have not
yet been made.
In connection with the transactions described above, the
Registrant entered into a five-Year Credit Agreement and a 364-
Day Credit Agreement (together, the New Credit Agreements ),
each dated as of March 30, 1998, with a syndicate of banks (the
Banks) arranged by ABN AMRO Bank N.V., Bankers Trust Company,
Bank of America National Trust and Savings Association and
NationsBank, N.A. (the Agent Banks ). The initial borrowings of
$1.259 billion under the New Credit Agreements provided the
funds needed for the Registrant and Cryovac to make the Cash
Transfer and to pay certain fees and expenses related to the
Merger and related transactions. All loans outstanding under the
New Credit Agreements are guaranteed by the Registrant s material
domestic subsidiaries, including Sealed Air and Cryovac.
The principal terms of the New Credit Agreements are
described under the heading The New Credit Agreements in the
Joint Proxy Statement/Prospectus, which description is
incorporated herein by reference. The New Credit Agreements are
attached as exhibits hereto and are incorporated herein by
reference. The description herein of their terms is qualified in
its entirety by reference to the New Credit Agreements.
The foregoing discussion is qualified in its entirety by
reference to the Merger Agreement, the Distribution Agreement,
the Employee Benefits Allocation Agreement, and the Tax Sharing
Agreement that are filed as exhibits hereto and are incorporated
herein by reference.
ITEM 5. OTHER EVENTS.
Following the completion of the transactions described in
Item 2 of this Form 8-K, the Board of Directors of the Registrant
(the New Sealed Air Board ) took various actions, certain of
which are described below.
In accordance with the Merger Agreement, four outside
directors of the Registrant immediately prior to the Merger (Hank
Brown, Christopher Cheng, Virginia A. Kamsky and John E. Phipps)
became directors of New Sealed Air and elected as additional
directors the seven individuals who were serving as directors of
Sealed Air immediately prior to the Merger (John K. Castle,
Lawrence R. Codey, T. J. Dermot Dunphy, Charles F. Farrell, Jr.,
David Freeman, Alan H. Miller and Robert L. San Soucie). In
addition, the New Sealed Air Board elected T. J. Dermot Dunphy,
the Chairman and Chief Executive Officer of Sealed Air, as its
Chairman.
The Registrant s Board appointed the following persons to
serve as the officers of the Registrant:
Name Position
T. J. Dermot Dunphy Chief Executive Officer
William V. Hickey President and Chief
Operating Officer
J. Gary Kaenzig, Jr. Executive Vice
President
Bruce A. Cruikshank Senior Vice President
Robert A. Pesci Senior Vice President
Jonathan B. Baker Vice President
James A. Bixby Vice President
Leonard R. Byrne Vice President
Mary A. Coventry Vice President
Jean-Luc Debry Vice President
Paul B. Hogan Vice President
James P. Mix Vice President
Abraham N. Reichental Vice President
Horst Tebbe Vice President - Finance
and Chief Financial
Officer
Alan S. Weinberg Vice President
Jeffrey S. Warren Controller
H. Katherine White Secretary
Linda B. Massengill Assistant Secretary
Barbara A. Pieczonka Assistant Secretary
Each of these individuals except for Messrs. Kaenzig,
Weinberg and Byrne was an officer of Sealed Air prior to the
Merger. Prior to the Merger, Mr. Kaenzig was a Senior Vice
President of the Registrant and President of the Registrant s
packaging business, and Messrs. Weinberg and Byrne were
executives of the Registrant s packaging business.
In connection with the Merger, the Registrant s stockholders
approved an Amended and Restated Certificate of Incorporation
(the New Sealed Air Charter ). The New Sealed Air Charter is
substantially identical to the certificate of incorporation of
Sealed Air, except as described under the heading The New Sealed
Air Charter in the Joint Proxy Statement/Prospectus, which
description is incorporated herein by reference, and except for
three Supermajority Provisions contained in the Registrant s
certificate of incorporation, which are also described therein.
The Registrant sought the approval of its stockholders to repeal
these Supermajority Provisions in connection with their approval
of the Merger. However, the Registrant was unable to obtain the
approval of stockholders owning at least 80% of the outstanding
shares of its common stock, so the Supermajority Provisions
remain in force. The Registrant intends to continue to seek
stockholder approval of the repeal of the Supermajority
Provisions.
The New Sealed Air Board has also adopted Amended and
Restated By-laws (the New Sealed Air By-laws ). The New Sealed
Air By-laws are substantially the same as the Sealed Air By-laws
except as required to reflect the Supermajority Provisions and
the Series A convertible preferred stock.
A summary of the principal differences between the rights of
stockholders of the Registrant and Sealed Air prior to the Merger
and the rights of stockholders of New Sealed Air after the Merger is
provided under the heading "Comparison of Stockholders Rights" in
the Joint Proxy Statement/Prospectus, which summary is incorporated
herein by reference. The New Sealed Air Charter and New Sealed Air
By-laws are attached as Exhibits 3.1 and 3.2, respectively, hereto
and incorporated herein by reference, and the description of
their terms herein is qualified in its entirety by reference to
these documents.
