<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) on Rule 14a-12
W. R. Grace & Co.
-----------------
(Name of Registrant as Specified in Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check appropriate box:)
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: N/A
(2) Aggregate number of securities to which transaction applies: N/A
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined): N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total fee paid: N/A
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing and registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
Paul J. Norris
Chairman, President & Chief
[GRACE LOGO] Executive Officer
W. R. Grace & Co.
7500 Grace Drive
Columbia, Maryland 21044
March 28, 2000
To Our Stockholders:
I am pleased to invite you to the Annual Meeting of Stockholders of W. R. Grace
& Co. to be held on Wednesday, May 10, 2000 at 10:00 a.m. at the Ten Oaks
Ballroom, 5000 Signal Bell Lane, Clarksville, Maryland.
During 1999 Grace recorded four consecutive quarters of earnings growth,
reflecting the success of the productivity and growth initiatives implemented at
the beginning of the year. At the meeting, I will report on the continuation of
these initiatives, including our Six Sigma process improvement program, and
discuss our plans to grow the Company in 2000.
Once again, we are offering you the opportunity to vote by telephone, as well as
by proxy or in person. Details about the meeting and how to vote are contained
in the accompanying Annual Notice of Meeting and Proxy Statement. I look forward
to seeing you at the meeting.
Sincerely,
<PAGE>
CONTENTS
Notice of Annual Meeting......................................................1
Election of Directors.........................................................2
Board Committees and Meetings..............................................2
Nominees ..................................................................3
Directors Continuing in Office.............................................3
Compensation...............................................................5
Summary Compensation Table..............................................5
Stock Options...........................................................7
LTIP....................................................................8
Pension Arrangements....................................................8
Employment Agreements...................................................9
Severance Agreements...................................................11
Executive Salary Protection Plan.......................................12
Directors' Compensation and Consulting Arrangements....................12
Compensation Committee Interlocks and Insider Participation............13
Performance Comparison.................................................13
Report of the Compensation Committee on Executive Compensation.........13
Relationships and Transactions with Management and Others.................17
Commercial Transactions................................................17
Legal Proceedings; Indemnification.....................................17
Security Ownership of Management and Others..................................17
Management Security Ownership.............................................17
Ownership and Transactions Reports........................................18
Selection of Independent Accountants.........................................18
Approval of 2000 Stock Incentive Plan .......................................19
Stock Options.............................................................19
Stock Awards..............................................................20
Limitations...............................................................20
Change in Control Provisions..............................................20
Tax Treatment of Stock Incentives.........................................20
Accounting Treatment of Stock Incentives..................................21
General...................................................................21
Other Matters ...............................................................22
Other Business............................................................22
Proxy and Voting Procedures...............................................22
Votes Required............................................................22
Solicitation Procedures...................................................22
Proposals for 2001 Annual Meeting.........................................23
Directions to the 2000 Annual Meeting.....................................23
Exhibit A - 2000 Stock Incentive Plan.......................................A-1
<PAGE>
NOTICE OF ANNUAL MEETING
The Annual Meeting of Stockholders of W. R. Grace & Co. will be held at the
Ten Oaks Ballroom, 5000 Signal Bell Lane, Clarksville, Maryland at 10:00 a.m. on
Wednesday, May 10, 2000. At the Annual Meeting, stockholders will vote on the
following matters:
(1) The election of two directors for a term expiring in 2003;
(2) The selection of PricewaterhouseCoopers LLP as independent accountants
of the Company and its consolidated subsidiaries for 2000;
(3) The approval of the Company's 2000 Stock Incentive Plan; and
(4) Any other business that properly comes before the Annual Meeting.
The Board of Directors has fixed the close of business on March 13, 2000 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting.
Mark A. Shelnitz
Secretary
March 28, 2000
<PAGE>
PROXY STATEMENT
The Annual Meeting of Stockholders of W. R. Grace & Co. will be held on May
10, 2000. The Company is furnishing this Proxy Statement in connection with the
solicitation of proxies to be used at the Annual Meeting and any adjournments.
The Company's mailing address is 7500 Grace Drive, Columbia, Maryland 21044.
This Proxy Statement and the enclosed proxy are first being sent to stockholders
on March 29, 2000.
Only stockholders of record at the close of business on March 13, 2000 are
entitled to vote at the Annual Meeting and any adjournments. At that record
date, 67,186,224 shares of Common Stock were outstanding. The Common Stock is
the Company's only class of voting securities outstanding. See "Other Matters"
for additional information concerning the voting of proxies.
As used in this Proxy Statement, the term "Grace" or "Company" refers to W.
R. Grace & Co., a Delaware corporation or its predecessors and, where
applicable, their consolidated subsidiaries, and the term "Common Stock" refers
to the Company's Common Stock.
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides for the division of the
Board of Directors into three classes, each to serve for a three-year term. The
term of the Class II Directors expires at the 2000 Annual Meeting. Accordingly,
the stockholders will vote on the election of two Class II Directors to serve
for a term expiring in 2003. The biographies of the nominees, John F. Akers and
John J. Murphy, are set forth on page 3, and the biographies of the directors
continuing in office are set forth on pages 3 and 4.
The Board of Directors has designated Mr. Akers and Mr. Murphy as nominees
(on the recommendation of the Nominating Committee), and it is anticipated that
both nominees will be candidates when the election is held. However, if for any
reason either nominee is not a candidate at that time, proxies will be voted for
any substitute nominee designated by the Company (except where a proxy withholds
authority with respect to the election of directors).
BOARD COMMITTEES AND MEETINGS
To facilitate independent director review and to make the most effective
use of the directors' time and capabilities, the Board of Directors has
established the committees described below. None of the members of these
committees is an executive or former executive of the Company or serves or has
ever served as a consultant to the Company.
The Audit Committee is responsible for reviewing the financial information
that the Company provides to stockholders and others, the Company's internal
controls, and its auditing, accounting and financial reporting processes
generally. The Committee's specific responsibilities include (1) recommending to
the Board of Directors the selection of independent accountants to audit the
annual financial statements of the Company, (2) serving as an independent and
objective party to monitor the Company's annual and quarterly financial
reporting process and internal control system, (3) reviewing and appraising the
audit efforts of the Company's independent accountants and internal auditing
department, and (4) providing an open avenue of communication among the
independent accountants, the internal auditors, management and the Board of
Directors. The current members of the Committee are Mr. Murphy (Chair), Mr.
Akers, Mr. Cambre, Dr. Fox and Mr. Vanderslice. All members are independent
under New York Stock Exchange rules. The Committee met four times during 1999.
As delegated by the Board of Directors, the Compensation Committee approves
the salary and annual and long-term incentive compensation of certain officers
and other high-level employees. The Compensation Committee also takes actions
with respect to the Company's benefit plans, programs and arrangements
generally, and the Company's stock incentive plans, determining the recipients
and terms of stock incentives. The current members of the Compensation Committee
are Mr. Akers (Chair), Mr. Cambre, Dr. Fox, Mr. Murphy and Mr. Vanderslice. In
1999, the Compensation Committee met six times.
2
<PAGE>
The Nominating Committee recommends to the Board of Directors candidates
for nomination as directors of the Company and candidates for election as chief
executive officer. The current members of the Committee are Mr. Vanderslice
(Chair), Mr. Akers, Mr. Cambre, Dr. Fox and Mr. Murphy. The Committee met once
in 1999. The Committee will consider candidates recommended by stockholders for
nomination as directors; recommendations should be sent to the Chair of the
Nominating Committee, c/o Mark A. Shelnitz, Secretary, W. R. Grace & Co., 7500
Grace Drive, Columbia, Maryland 21044.
The Company's employment policy prohibits discrimination and encourages
diversity. Consistent with this policy, the Board of Directors (including the
Nominating Committee) recognizes that its composition should reflect the global
nature of the Company's operations and the diversity of its workforce.
Consequently, the Board of Directors intends to achieve greater diversity as
vacancies and other opportunities occur.
The Committee on Corporate Responsibility advises management on the
Company's role in the public sector and its responsibility with respect to
matters of public policy. The Committee met twice in 1999. Its members are Dr.
Fox (Chair), Mr. Akers, Mr. Cambre, Mr. Murphy and Mr. Vanderslice.
The Board of Directors held six meetings in 1999. Each current director
attended 75% or more of the 1999 meetings of the Board and the Board committees
on which he or she served in 1999.
NOMINEES
NOMINEES FOR ELECTION AS CLASS II DIRECTORS - TERM EXPIRING IN 2003
John F. Akers Mr. Akers served as Chairman of the Board and Chief
Director since 1997 Executive Officer of International Business
Age: 65 Machines Corporation from 1985 until his retirement
in 1993, completing a 33-year career with IBM. He
is a director of Hallmark Cards, Inc., Lehman
Brothers Holdings, Inc., The New York Times
Company, PepsiCo, Inc. and Springs Industries, Inc.
A graduate of Yale University with a B.S. in
industrial administration, Mr. Akers formerly
served on the boards of trustees of the California
Institute of Technology and the Metropolitan Museum
of Art, as Chairman of the Board of Governors of
United Way of America, and as a member of President
Bush's Education Policy Advisory Committee.
John J. Murphy Mr. Murphy retired in 1996 as Chairman of the Board
Director since 1997 of Dresser Industries, Inc., a supplier of products
Age: 68 and technical services to the energy industry. He
joined Dresser as an engineer in 1952 and spent his
entire career with Dresser, serving as its Chief
Executive Officer from 1983 to 1995. Since January
1997, he has been a Managing Director of SMG
Management L.L.C., a privately owned investment
group. Mr. Murphy is a director of CARBO Ceramics,
Inc., Kerr-McGee Corporation, PepsiCo, Inc. and
Shaw Industries Ltd.; a former trustee of Southern
Methodist University and St. Bonaventure
University; a former Chairman of the Board of the
U.S.-Russia Business Council; and currently a
graduate member of The Business Council. He
received a bachelor's in mechanical engineering
from Rochester Institute of Technology, a master's
of business administration from Southern Methodist
University and an honorary doctorate of commercial
science from St. Bonaventure University.
DIRECTORS CONTINUING IN OFFICE
CLASS III DIRECTORS -TERM EXPIRING IN 2001
Ronald C. Cambre Mr. Cambre is Chairman and Chief Executive Officer
Director since 1998 of Newmont Mining Corporation. He joined Newmont as
Age: 61 Vice Chairman and CEO in 1993 and has served as
Chairman since 1995. He began his career with
International Paper and subsequently spent 30 years
managing mining and manufacturing operations for
Freeport-McMoRan, both in the U.S. and
internationally. Mr. Cambre is a director of
Cleveland-Cliffs Inc. He also serves on the
Louisiana State University Engineering Advisory
Council and the University of Denver Daniels
College of Business
3
<PAGE>
Executive Advisory Board. Mr. Cambre is a chemical
engineering graduate of Louisiana State University
and also attended the Harvard Business School
Program for Management Development.
Paul J. Norris Mr. Norris is Chairman, President and Chief
Director since 1998 Executive Officer of Grace. He was elected
Age: 52 President and CEO when he joined Grace in November
1998. He assumed the title of Chairman in January
1999. Mr. Norris was previously Senior Vice
President of AlliedSignal Incorporated and
President of its specialty chemicals business since
January 1997. Mr. Norris joined AlliedSignal in
1989 as President of its fluorine
products/chemicals and catalysts businesses. From
1981 to 1989, Mr. Norris served in various
executive capacities with Engelhard Corporation,
including President of catalysts and chemicals,
Senior Vice President and General Manager of
catalysts, and Vice President and Business Director
for petroleum catalysts. Mr. Norris started his
career with Grace in 1971, working in Grace
Davison's catalysts and silica products business.
Mr. Norris serves on the Board of National
Association of Manufacturers. Mr. Norris is a
graduate of Mt. St. Mary's College in Emmitsburg,
Maryland and holds a master's of business
administration from the University of Maryland.
CLASS I DIRECTORS - TERM EXPIRING IN 2002
Marye Anne Fox Dr. Fox is Chancellor of North Carolina State
Director since 1996 University and Professor of Chemistry at that
Age: 52 institution. Previously she was Vice President for
Research and the Waggoner Regents Chair in
Chemistry of the University of Texas, positions she
held from 1994 and 1992, respectively; she was on
the faculty of the University of Texas from 1976
until 1998. Dr. Fox received a B.S. in chemistry
from Notre Dame College, an M.S. in organic
chemistry from Cleveland State University and a
Ph.D. in organic chemistry from Dartmouth College;
she also holds honorary doctoral degrees from Notre
Dame College and Cleveland State University. Dr.
Fox has served as Vice Chair of the National
Science Board and has received numerous honors and
awards from a wide variety of educational and
professional organizations. She has also served on
several editorial boards and has authored
approximately 350 publications, including five
books and more than 20 book chapters.
Thomas A. Vanderslice Mr. Vanderslice served as Chairman and Chief
Director since 1996 Executive Officer of M/A-COM, Inc., a designer and
Age: 68 manufacturer of radio frequency and microwave
components, devices and subsystems for commercial
and defense applications, from 1989 until his
retirement in 1995. Previously, he served as
President and Chief Operating Officer of GTE
Corporation and as Chairman and Chief Executive
Officer of Apollo Computer, Inc. He began his
career with General Electric Company, where he
spent 23 years in various technical, management and
executive positions, including Executive Vice
President and sector executive of General
Electric's power systems business. He is a director
of Texaco Inc., and a trustee of Boston College. He
is also a member of the National Academy of
Engineering, the American Chemical Society and the
American Institute of Physics. Mr. Vanderslice
received a bachelor's in chemistry and philosophy
from Boston College and a Ph.D. in chemistry and
physics from Catholic University; he holds several
patents and has written numerous technical
articles.
See "Compensation," "Relationships and Transactions with Management and
Others" and "Security Ownership of Management and Others" for additional
information.
4
<PAGE>
COMPENSATION
Summary Compensation Table. The following Summary Compensation Table
contains information concerning the compensation of (a) Paul J. Norris, Chief
Executive Officer; and (b) the other four most highly compensated executive
officers of Grace who were serving as such at year-end 1999. Certain information
has been omitted from the Summary Compensation Table because it is not
applicable or because it is not required under the rules of the Securities and
Exchange Commission ("SEC").
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
---------------------------------------- --------------------------------------------------------
Awards Payouts
-------------------------- ----------------------------
No. of Shares
Other Restricted Underlying
Name and Principal Annual Stock Options LTIP All Other
Position Year Salary Bonus Compensation Award(a) Granted(b) Payouts(c) Compensation(d)
-------- ---- ------ ----- ------------ -------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
P. J. Norris 1999 $737,500 $942,500 $272,486(e) --- 290,000 N/A $33,354
Chairman, President and 1998(f) 120,833 250,000 $2,966,486 439,026 N/A 3,819
Chief Executive Officer 1997
R. J. Bettacchi 1999 297,500 300,000 --- 45,508 41,733
Senior Vice President 1998 242,500 170,000 130,000 1,905,438 37,358
1997 229,550 170,000 28,320 831,416 23,899
W. B. McGowan 1999 237,000 185,000 123,474(g) --- --- 35,822 18,812
Senior Vice President 1998 228,000 85,000 200,000 66,100 2,321,174 20,932
1997 219,500 100,000 --- 17,531 1,199,565 18,853
D. B. Siegel 1999 275,000 225,000 --- --- 35,822 16,561
Senior Vice President 1998 240,000 108,000 202,000 130,000 1,491,352 16,737
and General Counsel 1997 224,450 125,000 --- 20,903 719,791 14,638
R. M. Tarola 1999 224,130 155,000 100,000 N/A 621
Senior Vice President 1998
and Chief Financial 1997
Officer (h)
</TABLE>
(Footnotes appear on following page)
5
<PAGE>
(a) At December 31, 1999, the dollar value of the 170,733 shares of restricted
stock issued to Mr. Norris was $2,411,604. The restrictions expire in
one-third increments on November 1, 1999, November 1, 2000 and November 1,
2001. At December 31, 1999, the dollar value of the 10,100 shares of
restricted stock issued to Mr. Siegel was $142,663. At December 31, 1999,
the dollar value of the 10,000 shares of restricted stock issued to Mr.
McGowan was $141,250. The restrictions on shares held by Mr. Siegel and Mr.
McGowan expire April 2, 2001. Restrictions on all shares will expire
earlier under certain circumstances such as a change of control.
(b) The share amounts shown in this column reflect adjustments made to give
effect to the March 1998 separation of Grace's packaging business and
merger of such business with Sealed Air Corporation (the "Packaging
Transaction").
(c) The amounts in this column for 1999 represent a portion of amounts paid in
1999 under the Long-Term Incentive Program ("LTIP") for the 1996-1998
Performance Period (See "LTIP" for discussion of LTIP termination and the
impact of the Packaging Transaction). The amounts in this column for 1998
represent amounts paid under the LTIP for the 1995-1997 Performance Period,
the 1996-1998 Performance Period and the 1997-1999 Performance Period. The
amounts in this column for 1997 represent amounts paid under the LTIP for
the 1994-1996 Performance Period.
(d) The amounts in this column for 1999 consist of the following:
(i) above-market interest earned on deferred compensation, as follows:
Mr. Norris -- $2,567; Mr. Bettacchi -- $22,491; Mr. McGowan -- $203;
and Mr. Tarola -- $261;
(ii) the actuarially determined value of company-paid premiums on
"split-dollar" life insurance, as follows: Mr. Bettacchi -- $4,640;
Mr. McGowan -- $6,872; and Mr. Siegel -- $4,494;
(iii) payments made to persons whose personal and/or company contributions
to Grace's Salaried Employees Savings and Investment Plan ("Savings
Plan") would be subject to limitations under federal income tax law,
as follows: Mr. Norris -- $24,825; Mr. Bettacchi -- $9,225; Mr.
McGowan -- $6,360; and Mr. Siegel -- $6,690;
(iv) company contributions to the Savings Plan of $4,800 for each of
Messrs. Norris, Bettacchi, McGowan and Siegel; and
(v) the value of company-provided personal liability insurance, as
follows: Mr. Norris -- $1,162; Messrs. Bettacchi, McGowan and Siegel
-- $577; and Mr. Tarola -- $360.
(e) This amount includes $238,996 of payments made to Mr. Norris under Grace's
relocation program for employees relocating from Boca Raton, Florida to
Columbia, Maryland.
(f) Mr. Norris became President and Chief Executive Officer on November 1, 1998
and Chairman on January 1, 1999.
(g) This amount includes $93,980 of payments made to Mr. McGowan under Grace's
relocation program for employees relocating from Boca Raton, Florida to
Columbia, Maryland.
(h) Mr. Tarola was elected Senior Vice President and Chief Financial Officer on
May 11, 1999.
6
<PAGE>
Stock Options. The following table contains information concerning stock
options granted in 1999, including the potential realizable value of each grant
assuming that the market value of the Common Stock were to appreciate from the
date of grant to the expiration of the option at annualized rates of (a) 5% and
(b) 10%, in each case compounded annually over the term of the option. For
example, the options granted to Mr. Norris in 1999 would produce a pretax gain
of $5,921,742 shown in the table if the market price of the Common Stock rises
at an annual rate of 10% to $33.23 per share by the time the options are
exercised; based on the number and market price of the shares outstanding at
year-end 1999, such an increase in the price of the Common Stock would produce a
corresponding aggregate pretax gain of nearly $1.5 billion for the Company's
stockholders. The assumed rates of appreciation shown in the table have been
specified by the SEC for illustrative purposes only and are not intended to
predict future stock prices, which will depend upon various factors, including
market conditions and future performance and prospects.
Options become exercisable at the time or times determined by the
Compensation Committee of the Board of Directors; the options shown below become
exercisable in three approximately equal annual installments beginning one year
after the date of grant or upon the earlier occurrence of a "change in control"
(see "Employment Agreements" and "Severance Agreements"). All of the options
shown below have purchase prices equal to the fair market value of the Common
Stock at the date of grant.
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock
1999 Grants Price Appreciation for Option Term
---------------------------------------------------------------- ------------------------------------
% of Total
No. of Shares Options
Underlying Granted to Purchase
Options Employees in Price Expiration
NAME Granted 1999 ($/Share) Date 5% 10%
- ---- ------- ---- --------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
P. J. Norris ......... 290,000 12.4% $12.8125 03/03/09 $2,336,733 $5,921,742
R. J. Bettacchi ...... (a)
W. B. McGowan ........ (a)
D. B. Siegel ......... (a)
R. M. Tarola ......... 100,000 4.3% 16.1875 05/10/09 1,018,024 2,579,870
All Stockholders - - - - $604,339,526 $1,531,513,633
Named Executive
Officers' Percentage
of Realizable Value
Gained by All
Stockholders ......... - - - - 0.6% 0.6%
</TABLE>
(a) In 1998, Messrs. Bettacchi and Siegel each received 130,000 stock options
(having a purchase price of $19.4688), and Mr. McGowan received 66,100
stock options (having purchase prices of $19.4688 and $20.1250) which were
designed to cover grants for 1998 and 1999.
The following table contains information concerning stock options exercised
in 1999, including the "value realized" upon exercise (the difference between
the total purchase price of the options exercised and the market value, at the
date of exercise, of the shares acquired), and the value of unexercised
"in-the-money" options held at December 31, 1999 (the difference between the
aggregate purchase price of all such options held and the market value of the
shares covered by such options at December 31, 1999).
7
<PAGE>
<TABLE>
<CAPTION>
Option Exercises in 1999 and Option Values at 12/31/99 (1)
------------------------------------------------------------------------------------------------------
No. of Shares Underlying Value of Unexercised
No. of Shares Unexercised Options at In-the-Money Options at
Acquired on 12/31/99 12/31/99
Name Exercise Value Realized Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ----------------- ----------------- -------------------------------- -----------------------------
<S> <C> <C> <C> <C>
P. J. Norris ...... 0 $ 0 146,342/582,684 $0/$299,063
R. J. Bettacchi ... 0 0 615,626/ 96,107 4,230,343/ 17,019
W. B. McGowan ..... 0 0 229,069/ 49,911 1,311,318/ 10,536
D. B. Siegel ...... 0 0 204,560/ 93,635 818,093/ 12,562
R. M. Tarola ...... 0 0 0/100,000 N/A/ 0
</TABLE>
(1) The number of shares covered by each option and the purchase price of each
option reflect, where applicable in the case of Messrs. Bettacchi, McGowan
and Siegel, adjustments made in connection with the Packaging Transaction.
Long-Term Incentive Program (LTIP). In connection with the Packaging
Transaction and the determination of the Compensation Committee: (a) Performance
Units granted for the 1996-1998 and 1997-1999 Performance Periods vested on a
pro rata basis on March 31, 1998, the completion date of the Packaging
Transaction; (b) the amounts earned under those Units were calculated based on
results achieved through March 31, 1998; (c) 75% of the estimated value of such
vested portions was paid in cash prior to completion of the Packaging
Transaction; (d) the balance of such vested portions was paid in cash following
completion of the Packaging Transaction; and (e) the value of the unvested
portions, which is based on targeted Performance Units and on the final average
price of the Common Stock immediately prior to completion of the Packaging
Transaction, was paid in cash following the end of the respective Performance
Periods (subject to continued service). The Compensation Committee also
determined that no further grants will be made under the LTIP.
Pension Arrangements. Salaried employees of designated units who are 21 or
older and who have one or more years of service are eligible to participate in
the Retirement Plan for Salaried Employees. Under this basic retirement plan,
pension benefits are based upon (a) the employee's average annual compensation
for the 60 consecutive months in which his or her compensation is highest during
the last 180 months of continuous participation and (b) the number of years of
the employee's credited service. For purposes of this basic retirement plan,
compensation generally includes nondeferred base salary and nondeferred annual
incentive compensation (bonus) awards; however, for 1999, federal income tax law
limited to $160,000 the annual compensation on which benefits under this plan
may be based.
Grace also has a Supplemental Executive Retirement Plan under which a
covered employee will receive the full pension to which he or she would be
entitled in the absence of the above and other limitations imposed under federal
income tax law. In addition, this supplemental plan recognizes deferred base
salary, deferred annual incentive compensation awards and, in some cases,
periods of employment during which an employee was ineligible to participate in
the basic retirement plan. An employee will generally be eligible to participate
in the supplemental plan if he or she has an annual base salary of at least
$75,000 and is earning credited service under the basic retirement plan.
The following table shows the annual pensions payable under the basic and
supplemental plans for different levels of compensation and years of credited
service. The amounts shown have been computed on the assumption that the
employee retired at age 65 on January 1, 1999, with benefits payable on a
straight life annuity basis. Such amounts are subject to (but do not reflect) an
offset of 1.25% of an estimate of the employee's primary Social Security benefit
at retirement age for each year of credited service under the basic and
supplemental plans.
8
<PAGE>
<TABLE>
<CAPTION>
Highest Average Years of Credited Service
Annual ---------------------------------------------------------------------------------------------
Compensation 10 Years 15 Years 20 Years 25 Years 30 Years 35 Years
- ------------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$100,000 $15,000 $22,500 $30,000 $37,500 $45,000 $52,500
200,000 30,000 45,000 60,000 75,000 90,000 105,000
300,000 45,000 67,500 90,000 112,500 135,000 157,500
400,000 60,000 90,000 120,000 150,000 180,000 210,000
500,000 75,000 112,500 150,000 187,500 225,000 262,500
600,000 90,000 135,000 180,000 225,000 270,000 315,000
700,000 105,000 157,500 210,000 262,500 315,000 367,500
800,000 120,000 180,000 240,000 300,000 360,000 420,000
900,000 135,000 202,500 270,000 337,500 405,000 472,500
1,000,000 150,000 225,000 300,000 375,000 450,000 525,000
1,100,000 165,000 247,500 330,000 412,500 495,000 577,500
1,200,000 180,000 270,000 360,000 450,000 540,000 630,000
1,300,000 195,000 292,500 390,000 487,500 585,000 682,500
1,400,000 210,000 315,000 420,000 525,000 630,000 735,000
1,500,000 225,000 337,500 450,000 562,500 675,000 787,500
1,600,000 240,000 360,000 480,000 600,000 720,000 840,000
1,700,000 255,000 382,500 510,000 637,500 765,000 892,500
1,800,000 270,000 405,000 540,000 675,000 810,000 945,000
1,900,000 285,000 427,500 570,000 712,500 855,000 997,500
2,000,000 300,000 450,000 600,000 750,000 900,000 1,050,000
</TABLE>
At December 31, 1999, Messrs. Norris, Bettacchi, McGowan, Siegel and Tarola
had 7.83, 28, 20.83, 22.75 and 0 years of credited service, respectively, under
the basic and supplemental retirement plans. (Mr. Norris' years of credited
service includes his eligible service with Grace from 1975 to 1981.) For
purposes of those plans, the 1999 compensation of such executive officers was as
follows: Mr. Norris -- $987,500; Mr. Bettacchi -- $467,500; Mr. McGowan --
$372,000; Mr. Siegel -- $383,000; and Mr. Tarola -- $224,130. Mr. Tarola is
entitled to additional pension benefits under his employment agreement, and Mr.
Norris is eligible for additional pension benefits under his employment
agreement if his employment continues beyond October 31, 2001, or if he is
terminated without cause (see "Employment Agreements").
Employment Agreements. Mr. Norris has an employment agreement providing for
his service as Chairman, President and Chief Executive Officer of Grace through
October 31, 2001, subject to extension by agreement between Mr. Norris and the
Board of Directors. Under this agreement, Mr. Norris is entitled to an annual
base salary of $725,000, and an annual incentive award (bonus) for each calendar
year that is equal to 65% of his annual base salary, except that $250,000 was
specified as his incentive award for the 1998 calendar year. The agreement also
provides that Mr. Norris' annual base salary and incentive award is generally
subject to annual review by the Board of Directors and the Compensation
Committee. On November 4, 1999, such a review resulted in an increase in his
annual base salary to $800,000 effective November 1, 1999. Under the agreement,
Mr. Norris received upon commencement of his employment on November 1, 1998 a
"non-statutory" stock option grant covering 439,026 shares of Common Stock,
pursuant to Grace's 1998 Stock Incentive Plan, which will generally govern the
terms of the grant (the "Stock Option Grant"). The "strike price" of those
shares is equal to the fair market value of a share of Common Stock at the close
of business as of October 29, 1998, which was $16.75. The Stock Option Grant
will vest in three equal installments, each covering 146,342 shares, on November
1, 1999, November 1, 2000 and November 1, 2001, respectively. However, all
unvested installments will vest immediately if Mr. Norris is terminated not for
cause (or under certain other circumstances). The Compensation Committee will
also consider Mr. Norris for future stock option grants, at the same time that
the Committee considers such grants for other officers of Grace. (On March 4,
1999, Mr. Norris received an additional grant of 290,000 non-statutory stock
options.) Under the agreement, Mr. Norris also received upon his commencement of
employment on November 1, 1998 a restricted
9
<PAGE>
stock award covering 170,733 shares of Common Stock, which will vest in three
equal installments, each covering 56,911 shares, on the same dates (and
generally under the same conditions) outlined above with respect to the vesting
of the options under the Stock Option Grant. Mr. Norris will be eligible to vote
the restricted shares during the period of restriction. The agreement also
provides that Grace will make a stock appreciation payment to Mr. Norris, at the
time he elects to exercise any vested options under the Stock Option Grant or at
the time he elects to cancel such options, provided that the price of a share of
Common Stock is above $10.25 at that time. The payment will be equal to the
number of such shares exercised (or canceled), multiplied by the difference
between (a) the "strike price" of $16.75, or the price of a share of Common
Stock on the date of such exercise if less than $16.75, and (b) $10.25.
In the event that Mr. Norris is terminated by Grace, without cause, before
October 31, 2001, or if Grace does not (before December 31, 2000) offer to
extend his employment agreement beyond October 31, 2001 (on terms at least as
favorable as applicable to the current agreement), he will generally be entitled
to a severance payment equal to 2 times the amount that is 165% of his annual
base salary at the time of his termination. If his employment does not cease
prior to October 31, 2001 (or if he is terminated without cause prior to that
date), the agreement provides that, in determining the benefits payable to Mr.
Norris under Grace's basic and supplemental retirement plans, his years of
service with Grace and his prior employer will be recognized as if those years
were continuous service with Grace, with an offset for any retirement benefits
payable from his prior employer's retirement plans. The agreement also provides
for Mr. Norris' participation in other benefits and compensation programs
generally covering other senior executives of Grace. The foregoing description
of Mr. Norris' employment agreement does not purport to be complete and is
qualified in its entirety by reference to such agreement, which has been filed
with the SEC as an exhibit to Grace's Quarterly Report on Form 10-Q filed
November 13, 1998 for the quarter ended September 30, 1998.
Mr. McGowan has an agreement with Grace that specifies certain terms and
conditions of his employment. Under that agreement, Mr. McGowan agreed to
relocate to Grace's headquarters in Columbia, Maryland in 1999 and will reside
in temporary housing in Maryland through June 2001. The agreement provides that
Mr. McGowan will receive temporary housing assistance of $2,500 per month
through June 2001.
The agreement further provides that, by December 31, 2000, Mr. McGowan and
Grace will reach a mutual agreement regarding whether or not he will remain with
Grace after June 30, 2001. If he remains with Grace after June 30, 2001, he will
relocate his family and household to the Columbia, Maryland area, and will be
eligible for the relocation benefits generally available to other Grace
employees who relocate to that area from Boca Raton, Florida. If he ceases
employment as of that date, Mr. McGowan will be entitled to the severance
benefits that would have applied to him in the event his employment with Grace
had terminated under Grace's "Productivity Effectiveness Program", which was
applicable during 1999 with respect to terminations that occurred as a result of
various reasons, including the relocation of Grace's corporate headquarters from
Boca Raton, Florida to Columbia, Maryland (such severance benefits are referred
to herein as the "PEP Severance Benefits"). In Mr. McGowan's case, those
benefits include a severance payment equal to 1.5 times his weekly base salary
for each year of service with Grace at the time of cessation of employment, plus
an additional 13 weeks of base salary, vesting of stock options previously
awarded to Mr. McGowan, and eligibility for a prorated annual bonus. The
foregoing description of Mr. McGowan's agreement does not purport to be complete
and is qualified in its entirety by reference to such agreement, which has been
filed with the SEC as an exhibit to Grace's 1999 Annual Report on Form 10-K.
Mr. Siegel has an agreement with Grace that specifies certain terms and
conditions of his employment. Under that agreement, Mr. Siegel's annual base
salary was increased to $300,000, effective July 1, 1999, and he will split his
work time between Grace's Boca Raton, Florida office and Grace's corporate
headquarters in Columbia, Maryland, at least until June 30, 2000. In connection
with this arrangement, Grace will provide Mr. Siegel with transportation between
Florida and Maryland, and with housing and transportation when he is working in
Maryland.
By March 31, 2000, Mr. Siegel and Grace will reach a mutual agreement
regarding whether or not he will remain with Grace after June 30, 2000. If it is
determined that he will cease employment with Grace on June 30, 2000, then he
will be entitled to PEP Severance Benefits. In Mr. Siegel's case, the PEP
Severance Benefits include a severance payment equal to 1.5 times his weekly
base salary for each year of service with Grace at the time of
10
<PAGE>
cessation of employment, plus an additional 13 weeks of base salary, vesting of
stock options and of a prorated share of a restricted Common Stock grant
previously awarded to Mr. Siegel, and eligibility for a prorated annual bonus.
In the event that Mr. Siegel's employment with Grace continues after June
30, 2000, he will remain eligible for PEP Severance Benefits if he voluntarily
resigns or is terminated by Grace. Both Mr. Siegel and Grace are required to
give 90-days notice of such resignation or termination. However, if Mr. Siegel
continues employment with Grace until June 30, 2001, then he will no longer be
eligible for PEP Severance Benefits in the event of his voluntary resignation.
If Mr. Siegel relocates his residence to Maryland at any time during his
employment with Grace, he will be entitled to the relocation benefits generally
available to other Grace employees who relocated to Maryland during 1999 in
conjunction with the relocation of Grace's headquarters to that State. The
foregoing description of Mr. Siegel's agreement does not purport to be complete
and is qualified in its entirety by reference to such agreement, which has been
filed with the SEC as an exhibit to Grace's 1999 Annual Report on Form 10-K.
Mr. Tarola has an employment agreement providing for his service as Senior
Vice President and Chief Financial Officer of Grace through November 10, 2002,
subject to extension by agreement between Mr. Tarola and Grace. Under this
agreement, Mr. Tarola is entitled to an annual base salary of $350,000, and an
annual incentive award (bonus) for each calendar year during his term of
employment. That bonus will be targeted to be equal to 45% of his annual base
salary (with a maximum bonus equal to double the targeted bonus for any calendar
year); except that his incentive award for 1999 was set at an amount no less
than $129,000. The agreement also provides that Mr. Tarola's annual base salary
and incentive award is generally subject to annual review and approval of the
Compensation Committee. Under the agreement, Mr. Tarola received a
"non-statutory" stock option grant covering 100,000 shares of Common Stock
In the event that Mr. Tarola is terminated by Grace without cause on or
before November 10, 2002, he will generally be entitled to a severance payment
equal to two times the amount that is 145% of his annual base salary at the time
of his termination. If he is terminated by Grace without cause after that date,
Mr. Tarola will generally be entitled to a severance payment equal to one time
such amount.
If Mr. Tarola's employment does not cease prior to November 10, 2002 (or if
he is terminated without cause prior to that date), the benefits payable to Mr.
Tarola under Grace's basic and supplemental retirement plans will be determined
by adding additional years of credited service under those plans. Generally,
those additional years will be calculated as follows: for each year of credited
service under those plans that he actually earns during his period of employment
with Grace, he will receive credit for one additional year of credited service
under those plans (up to a maximum of 10 additional years of credited service),
except that in no event will Mr. Tarola receive less than 5 years of credited
service, regardless of the date his employment with Grace actually terminates.
The foregoing description of Mr. Tarola's employment agreement does not purport
to be complete and is qualified in its entirety by reference to such agreement,
which has been filed with the SEC as an exhibit to Grace's Quarterly Report on
Form 10-Q filed on August 13, 1999 for the quarter ended June 30, 1999.
Severance Agreements. Grace has severance agreements with all of its
officers. These agreements generally provide that in the event of the
involuntary termination of the individual's employment without cause (including
constructive termination caused by a material reduction in his or her authority
or responsibility or by certain other circumstances) following a "change in
control" of Grace, he or she will generally receive a severance payment equal to
three times the sum of his or her annual base salary plus target annual
incentive compensation (bonus), subject to pro rata reduction in the case of an
officer who is within 36 months of normal retirement age (65). For purposes of
the severance agreements, "change in control" means the acquisition of 20% or
more of the Common Stock (but not if such acquisition is the result of the sale
of Common Stock by Grace that has been approved by the Board), the failure of
Board-nominated directors to constitute a majority of any class of the Board of
Directors, the occurrence of a transaction in which the stockholders of Grace
immediately preceding such transaction do not own more than 50% of the combined
voting power of the corporation resulting from such transaction, or the
liquidation or dissolution of Grace. This description of the severance
agreements does not purport to be complete and is qualified in its entirety by
reference to the form of such agreement, which was filed as an
11
<PAGE>
exhibit to the Registration Statement on Form 10 filed with the SEC by Grace
(named Grace Specialty Chemicals, Inc. at the time of filing) on March 13, 1998.
Executive Salary Protection Plan. All officers participate in the Executive
Salary Protection Plan ("ESPP"), which provides that, in the event of a
participant's disability or death prior to age 70, Grace will continue to pay
all or a portion of base salary to the participant or a beneficiary for a period
based on the participant's age at the time of disability or death. Payments
under the ESPP may not exceed 100% of base salary for the first year and 60%
thereafter in the case of disability (50% in the case of death). This
description of the ESPP does not purport to be complete and is qualified in its
entirety by reference to the text of the ESPP, as amended, which was filed as an
exhibit to Grace's predecessor's Annual Report on Form 10-K for the year ended
December 31, 1996.
Directors' Compensation and Consulting Arrangements. Under the compensation
program for nonemployee directors in effect for 1999, (a) each nonemployee
director received an annual retainer of $50,000, of which $35,000 was in the
form of Common Stock and the balance was in cash and/or Common Stock, at the
election of the director; (b) each committee chair received an additional annual
retainer of $3,000 in cash and/or Common Stock, at the election of the director;
and (c) each nonemployee director received $2,000 for each Board meeting and
$1,000 for each committee meeting attended (except that committee chairs
received $1,200 per committee meeting), in cash and/or Common Stock, at the
election of the director.
A nonemployee director may defer payment of all or part of the fees
received for attending Board and committee meetings and/or all or part of the
annual or committee chair retainers referred to above. The cash portion of any
deferral (plus an interest equivalent) is payable to the director or his or her
heirs or beneficiaries in a lump sum or in quarterly installments over two to 20
years following a date specified by the director (but in no event earlier than
the director's termination from service). The interest equivalent on deferred
cash is computed at the higher of (a) the prime rate plus 2 percentage points or
(b) 120% of the prime rate, in either case compounded semiannually. The portion
of the annual retainer payable in Common Stock may be deferred and held, and the
balance of the annual retainer or other retainers and/or fees a director elects
to receive in the form of Common Stock will be deferred and held, in a deferred
compensation trust established by Grace. Common Stock held in the trust will be
delivered to the director following his or her termination from service (or a
subsequent date specified by the director).
Effective for 2000, the Board of Directors, acting upon the recommendation
of the Compensation Committee, approved a revised nonemployee directors'
compensation program. The revised program provides approximately the same total
annual compensation to each director but simplifies administration and offers
directors the opportunity to receive all or a portion of their compensation in
the form of stock options, subject to the approval of the 2000 Stock Incentive
Plan by the stockholders at the 2000 Annual Meeting (see "Approval of 2000 Stock
Incentive Plan").
Under the revised program, the annual retainer, payable after the end of
each calendar year, remains at $50,000 and is payable, at the election of each
director, in the form of Common Stock or options to purchase Common Stock. The
number of option shares will be calculated based on a ratio of three option
shares for each share of Common Stock that would otherwise be payable had a
director elected to receive the annual retainer in Common Stock. The exercise
price of a stock option will be the market value of a share of Common Stock on
the date the stock option is granted. All options granted are immediately
exercisable. The revised program also consolidates the Board and committee
meeting fees into one annual compensation component also payable after the end
of each year. The annual fee for all meetings is $24,000, $30,000 for directors
holding a committee chair, and will be prorated for scheduled meetings not
attended. This fee is payable, at the election of each director, in cash, in
Common Stock or in stock options as described above. A director may also
continue to defer all or part of each payment made in Common Stock or cash on
the terms described above. All stock options will be transferable to family
members or trusts for their benefit. If the 2000 Stock Incentive Plan is not
approved by the stockholders, any election to receive payment of the retainer or
consolidated meeting fee in the form of stock options will be paid in Common
Stock on a deferred basis.
12
<PAGE>
Grace reimburses nonemployee directors for expenses they incur in attending
Board and committee meetings. Grace also maintains business travel accident
insurance coverage for them. In addition, nonemployee directors may receive
$1,000 per day for work performed at the request of Grace.
Compensation Committee Interlocks and Insider Participation. During 1999,
no current or former officer or employee of Grace served on the Compensation
Committee.
Performance Comparison. The following graph and table compare the
cumulative total stockholder return on the Common Stock from December 31, 1994
through December 31, 1999 with the Standard & Poor's 500 Stock Index and the
Standard & Poor's Specialty Chemicals Index (both of which include the Company),
using data supplied by the Compustat Services unit of Standard & Poor's
Corporation. The comparisons reflected in the graph and table are not intended
to forecast the future performance of the Common Stock and may not be indicative
of such future performance. The graph and table assume an investment of $100 in
the Common Stock and each index on December 31, 1994, as well as the
reinvestment of dividends.
[LINE CHART]
DECEMBER 31, 1994 1995 1996 1997 1998 1999
- ------------ ---- ---- ---- ---- ---- ----
W. R. Grace & Co. $100 $156.63 $199.94 $313.65 $257.17 $231.55
S&P 500 Stock Index 100 137.58 169.17 225.60 290.08 351.12
S&P Specialty Chemicals Index 100 131.43 134.81 166.93 142.17 157.37
Report of the Compensation Committee on Executive Compensation. As
delegated by the Board of Directors during 1999, the Compensation Committee
approves all compensation actions with respect to the Company's executive
officers (including the Chief Executive Officer), other officers who report to
the Chief Executive Officer, and other executives whose annual base salaries
exceed $250,000. The Committee also approves all actions under the
13
<PAGE>
Company's stock incentive plans. All actions of the Compensation Committee are
reported to the Board. The Compensation Committee is composed of directors who
are not, and have never been, employees of the Company or any of its
subsidiaries and who have no consulting arrangements or other significant
relationships with the Company.
This Report describes the Company's performance-based compensation
philosophy and executive compensation program, as approved by the Compensation
Committee. In particular, it discusses the compensation decisions made by the
Compensation Committee in 1999 regarding Mr. Norris, the Company's Chairman,
President and Chief Executive Officer, and its other executive officers.
Management and the Compensation Committee use the services of an
independent executive compensation consulting firm for competitive data and
advice regarding the Company's executive compensation program.
Executive Compensation Philosophy and Program Components
The Company's executive compensation program is structured to enable the
Company to compete effectively with other firms in attracting, motivating and
retaining executives of the caliber needed to ensure the Company's future growth
and profitability. The components of this program consist of base salary and, if
warranted, annual incentive compensation (both paid in cash) and long-term
incentives tied to the performance of the Common Stock (in the form of stock
options, restricted stock or a combination of the two). These compensation
components are intended to (1) stimulate performance that benefits the Company
and its stockholders by increasing stockholder value, (2) reward such
performance with competitive levels of compensation, (3) employ and retain key
executives and, (4) unite executive and stockholder interests.
The Company measures the competitiveness of its executive officer
compensation relative to U.S.-based specialty chemicals companies of similar
size. In 1995 (and continuing through 1999), the Compensation Committee adopted
a philosophy that annual compensation paid to executives (consisting of salary
plus annual incentive compensation) should approximate the 50th percentile, and
that long-term incentive opportunities should approximate the 60th percentile,
of those companies' practices when performance objectives are achieved. If
performance objectives are exceeded, executive compensation should be above
those levels, and when performance objectives are not achieved, executive
compensation should be below those levels.
The following sections of this Report describe the compensation program for
executive officers in effect in 1999 and the manner in which the Compensation
Committee and the Board reached their determinations as to performance-based
compensation.
Base Salary
During 1999, salaries of Company executives were generally eligible for
review at intervals of not less than 12 months from the date of the last
increase. Salary increases for executive officers in 1999 were based on (1)
individual performance (as evaluated by the Compensation Committee in its
discretion) and (2) salaries paid to executives in comparable positions in other
companies of similar size in the specialty chemicals industry. To assure
comparability with other companies, as well as consistency and uniformity within
the Company, executive officers' positions, as well as all other management
positions, have been assigned to grades (beginning in 2000 to wider salary
bands) with salary ranges based on the median salary paid to individuals who
hold comparable positions at companies of similar size in the specialty
chemicals industry. Individual salaries are set with reference to the salary
ranges based on individual performance, the time since the last increase, the
amount budgeted for salary increases and discretionary factors. Such factors may
include leadership; ability to contribute to the achievement of the Company's
long-term goals; corporate/business unit strategy; stockholder value creation;
environmental, health and safety achievements; social policy matters; and the
development and implementation of the Company's human resources initiatives,
including diversity initiatives.
14
<PAGE>
Annual Incentive Compensation
For 1999, incentive compensation pools were generated for the business
units, and for the Company overall, based on the extent to which pre-established
targeted 1999 earnings were achieved. Awards to individual executives were
allocated from these formula-based pools.
In order to relate awards under the Company's annual incentive compensation
program more closely to business and individual performance, and to align the
program with those of comparable companies, a targeted award, expressed as a
percentage of base salary, was established for each salary grade in 1996 and has
been continued through 1999. Actual awards were allocated from the incentive
pools established for each strategic business unit and for the Company, based
upon the extent to which targeted earnings were achieved. Individual awards may
range from zero to 200% of the targeted award, based on business and/or
individual performance. In 1999, the incentive pool for executives employed in
corporate functions was based upon the extent to which targeted net income was
achieved; incentive pools for executives employed in the business units
continued to be based on the achievement of pretax income targets, consistent
with the Company's targeted net income.
In 1996, on the recommendation of the Compensation Committee, the Board of
Directors also adopted, and the stockholders approved, a separate annual
incentive compensation program in which the Chairman, President and Chief
Executive Officer would participate, along with other executive officers whose
compensation may exceed $1 million in any year. Under this program which
continued through 1999, the Compensation Committee will, by the end of the first
calendar quarter of each year, approve the participants in the program, the
amount of incentive compensation that may be earned at various levels of
performance, the maximum amount that may be earned by each executive officer
(which may not exceed 130% of the annual base salary of the Chief Executive
Officer in effect at the beginning of the year), and the criteria by which
performance will be measured. The performance criteria is to be selected each
year by the Compensation Committee from one or more of the following: pretax
income, net income, earnings per share, rate of return on assets or capital
employed, cash flow, or net worth of the Company or one or more of its units.
The factors that the Compensation Committee took into consideration in
approving individual awards for the executive officers (excluding Mr. Norris,
whose compensation is discussed below), were (1) 1999 net income results of the
Company significantly exceeded 1998 results and pre-established targets, and (2)
individual contributions and performance. In addition, in determining Mr.
Bettacchi's award, the Compensation Committee took into consideration that 1999
pretax earnings of the Company's Construction Products business also increased
significantly in 1999 over 1998.
Based on these factors, the Compensation Committee approved awards for the
executive officers (excluding Mr. Norris) ranging from 53% to 92% of their
year-end 1999 annual base salaries (prorated for officers who joined Grace after
January 1, 1999).
Long-Term Incentives
The Company's long-term incentives consist (beginning in 1998) of annual
grants of (1) stock options and (2) occasional ad hoc (generally restricted)
stock grants. Long-term incentive opportunities (stock options) are set at the
60th percentile of opportunities provided by other specialty chemicals companies
of similar size.
All stock options granted to executive officers and other key employees
become exercisable in installments over a three-year term beginning one year
after the date of the grant, and the number of options granted to an individual
is based on a range related to the salary grade to which his/her position is
assigned.
Prior to 1998, under the Company's former Long-Term Incentive Program
(LTIP), the Company granted awards of Performance Units for the 1997-1999
performance period as well as stock options to the executive officers (and other
key employees) who were employed with the Company during 1997. The number of
Performance Units and the number of options granted were based on the salary
grades of the recipients' positions. For this period, Performance Units were
earned based on stockholder value creation (i.e., the performance of the Common
Stock as compared to other companies). A partial payment was made with respect
to Performance Units earned for the 1997-
15
<PAGE>
1999 Performance Period in March 1998 in connection with the separation of the
Company's Packaging business unit, and a second payment was made for the final
portion of the 1997-1999 Performance Period in January 2000. In 1998, the LTIP
program was discontinued and no such awards were made in 1998 or thereafter.
Compensation of the Chief Executive Officer
Mr. Norris' 1999 base salary of $737,500 was determined in accordance with
his 1998 employment agreement, described elsewhere in this Proxy Statement,
which initially provided for an annual base salary of $725,000 and was
subsequently increased to $800,000 effective November 1, 1999.
Mr. Norris' annual incentive compensation award for 1999 was determined
according to the formula approved by the Compensation Committee in March 1999.
The formula was based on achievement of specified levels of 1999 net income in
excess of 1998 net income. On March 4, 1999, Mr. Norris was granted a stock
option covering 290,000 shares at an option price of $12.8125; these options
become exercisable in three annual installments beginning in March 2000.
Mr. Norris' base salary and the size of his stock option grant were
determined based on competitive practices among (1) companies of similar size in
the specialty chemicals industry, and (2) the need to employ and retain an
experienced chief executive officer from the specialty chemicals industry.
Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code prohibits the Company from
deducting annual compensation in excess of $1 million paid to the executive
officers named in the Summary Compensation Table of the Proxy Statement, unless
such compensation is performance-based and satisfies certain other conditions.
It is the Committee's view that, with the exception of any discretionary
annual incentive compensation payments or non-performance-based payments
provided for under Mr. Norris' employment agreement, amounts awarded under the
Company's executive compensation program qualify as performance-based
compensation and are therefore expected to be fully deductible.
COMPENSATION COMMITTEE*
John F. Akers, Chair
Ronald C. Cambre
Marye Anne Fox
John J. Murphy
Thomas A. Vanderslice
- --------
* Messrs. Akers, Cambre, Murphy and Vanderslice and Dr. Fox joined the
Compensation Committee in January 1997, March 1999, March 1997, May 1996 and
April 1998, respectively.
16
<PAGE>
RELATIONSHIPS AND TRANSACTIONS WITH MANAGEMENT AND OTHERS
Commercial Transactions. During 1999, no director, executive officer (or
any member of any of their respective immediate families) or, to the Company's
knowledge, any holder of more than 5% of the Common Stock, had a direct or
indirect material interest in any transaction (or any proposed transaction) to
which the Company was a party.
Legal Proceedings; Indemnification. During 1999 there were no legal
proceedings pending in which any current officers or directors of the Company
were parties or had a material interest adverse to the Company.
SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS
MANAGEMENT SECURITY OWNERSHIP
The following table sets forth the Common Stock beneficially owned,
directly or indirectly, as of January 31, 2000 by (1) each person known to Grace
to be the beneficial owner of more than 5% of the outstanding shares of Common
Stock, and (2) each current director and nominee, each of the executive officers
named in the Summary Compensation Table set forth under "Election of Directors
- -- Compensation," and such directors and all executive officers as a group.
<TABLE>
<CAPTION>
Shares of Common Stock
Beneficial Owner Beneficially Owned Percent
- ---------------- ------------------ -------
<S> <C> <C>
Morgan Stanley Dean Witter & Co. (1) (2) ......... 6,214,548 8.97%
1585 Broadway
New York, NY 10036
FMR Corp. (1) .................................... 3,778,183 5.45%
62 Devonshire Street
Boston, MA 02109
Sasco Capital, Inc. (1) .......................... 3,628,010 5.24%
10 Sasco Hill Road
Fairfield, CT 06430
J. F. Akers ...................................... 1,205 *
11,287 (T)
R. J. Bettacchi .................................. *
625,066 (O)
5,097 (T)
R. C. Cambre ..................................... 3,362 *
M. A. Fox ........................................ 3,455 *
2,834 (T)
W. B. McGowan .................................... 10,000 *
234,913 (O)
15,063 (T)
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Shares of Common Stock
Beneficial Owner Beneficially Owned Percent
- ---------------- ------------------ -------
<S> <C> <C>
J. J. Murphy ..................................... 1,139 *
5,510 (T)
P. J. Norris ..................................... 195,733 *
243,009 (O)
635 (T)
D. B. Siegel ..................................... 15,100 *
211,528 (O)
18,278 (T)
R. M. Tarola ..................................... 5,000 *
T. A. Vanderslice ................................ 1,731 *
9,061 (T)
Directors and executive officers as a group ...... 248,275 2.39%
1,373,609 (O)
69,103 (T)
</TABLE>
* Indicates less than 1%
(O) Shares covered by stock options exercisable on or within 60 days after
January 31, 2000.
(T) Shares owned by trusts and other entities as to which the person has the
power to direct voting and/or investment.
(1) The ownership information set forth is based in its entirety on material
contained in a Schedule 13G, dated February 2000, filed with the SEC, which
stated that the securities were not acquired for the purpose of changing or
influencing the control of Grace.
(2) Joint filing with Miller Anderson & Sherrerd, LLP, 1 Tower Bridge Suite
1100, West Conshohocken, PA 19428, a wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.
OWNERSHIP AND TRANSACTIONS REPORTS
Under Section 16 of the Securities Exchange Act of 1934, the Company's
directors, certain of its officers, and beneficial owners of more than 10% of
the outstanding Common Stock are required to file reports with the SEC and the
New York Stock Exchange concerning their ownership of and transactions in Common
Stock; such persons are also required to furnish the Company with copies of such
reports. Based solely upon the reports and related information furnished to the
Company, the Company believes that all such filing requirements were complied
with in a timely manner during and with respect to 1999.
SELECTION OF INDEPENDENT ACCOUNTANTS
On the recommendation of the Audit Committee, the Board of Directors has
selected PricewaterhouseCoopers LLP ("PwC") to be the independent accountants of
the Company and its consolidated subsidiaries for 2000. Although the submission
of this matter for stockholder ratification at the Annual Meeting is not
required by law or the Company's By-laws, the Board is nevertheless doing so to
determine the stockholders' views. If the selection is not ratified, the Board
will reconsider its selection of independent accountants.
PwC and its predecessors have acted as independent accountants of the
Company and its consolidated subsidiaries since 1906. Its fees and expenses for
the 1999 audit are expected to be approximately $1.9 million. In
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<PAGE>
addition, during 1999 PwC performed special audits and reviews in connection
with acquisitions and divestments, consulted with the Company on various matters
and performed other services for the Company (including audits of the financial
statements of certain employee benefit plans and certain units of the Company)
for fees and expenses totaling approximately $3.2 million. A representative of
PwC will attend the Annual Meeting, will be available to answer questions and
will have an opportunity to make a statement if he wishes to do so. Members of
the Audit Committee are also expected to attend.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE SELECTION
OF PRICEWATERHOUSECOOPERS LLP.
APPROVAL OF 2000 STOCK INCENTIVE PLAN
The Company's 2000 Stock Incentive Plan ("2000 Plan") is designed to enable
the Company to attract, motivate and retain key employees and directors, to link
their incentives directly to the performance of the Common Stock, and to unite
their interests with those of the stockholders. The 2000 Plan is administered by
the Compensation Committee.
Under the 2000 Plan, stock incentives may be granted to key employees and
directors in the form of stock options, stock awards or a combination of the
two, for such consideration and upon such other terms as the Compensation
Committee may determine. The terms of the 2000 Plan as applied to employees are
substantially similar to those of the Company's prior stock incentive plans. The
2000 Plan also provides for the issuance of stock options or shares of Common
Stock to non-employee directors. The 2000 Plan, if approved by the Company's
stockholders, would replace the 1998 Stock Plan for Nonemployee Directors.
STOCK OPTIONS
The 2000 Plan permits the Company to grant to key employees and directors
options to purchase Common Stock at a purchase price equal to not less than 100%
of the fair market value of the Common Stock on the date the option is granted.
The maximum term of an option is ten years and one month from the date of grant.
The purchase price and any withholding tax that may be due on the exercise of an
option may be paid in cash, in shares of Common Stock (subject to certain
conditions), or a combination of the two. Each option is exercisable at the time
or times determined by the Compensation Committee. In general, unless the
Compensation Committee shall approve a longer period (not to exceed three
years), an option granted to an employee terminates three months after the
optionee ceases to be an employee, except that it terminates (1) immediately, if
the employee resigns without the consent of the Compensation Committee (or the
Board of Directors) or if his or her employment is terminated for cause, or (2)
three years after death, incapacity or retirement.
The 2000 Plan authorizes the grant of Incentive Stock Options ("ISOs"),
which are accorded special tax treatment under Section 422 of the Internal
Revenue Code of 1986, as amended ("Code"), as discussed below, as well as
nonstatutory options.
The 2000 Plan authorizes the Company, upon the request of the holder of an
option, to cancel the option to the extent it is exercisable and either (1) pay
the holder of the option cash equal to the excess, if any, of the fair market
value of the shares covered by the option over their purchase price on the date
of cancellation, (2) transfer to the holder Common Stock with a fair market
value equal to such excess, or (3) pay such excess partly in cash and partly in
Common Stock; this right to cancel an option is referred to as a "stock
appreciation right" or "SAR."
Under the 2000 Plan, an outstanding option may be amended by the
Compensation Committee, provided that the holder of the option agrees to any
amendment that would adversely affect the option and that the option as so
amended is consistent with the 2000 Plan. The 2000 Plan specifically prohibits
the surrender of an outstanding option in exchange for the grant of a new option
with a lower purchase price or the repricing of the option to an exercise price
below the price on the date of grant (other than in the case of adjustment for
stock splits, recapitalizations and similar events).
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<PAGE>
The foregoing outlines certain provisions of the 2000 Plan relating to
stock options; documentation relating to individual stock options may contain
other permitted terms.
STOCK AWARDS
A stock award is an issuance of shares of Common Stock or an undertaking to
issue such shares in the future (other than an option). Shares subject to a
stock award are valued at not less than 100% of their fair market value on the
date the award is granted, whether or not they are subject to restrictions. It
is anticipated that stock awards to employees will in some cases be (1) made
contingent upon the attainment of one or more specified performance objectives
and/or (2) subject to restrictions on the sale or other disposition of the stock
awards. Stock awards issued to nonemployee directors are made in payment of
their retainer and/or Board meeting and committee meeting fees according to
elections made by individual directors.
The foregoing outlines certain features of stock awards required or
permitted under the 2000 Plan; documentation relating to individual stock awards
may contain other permitted terms.
LIMITATIONS
Up to 8,000,000 shares of Common Stock (subject to adjustment for stock
splits, recapitalizations and similar events) may be issued pursuant to stock
incentives under the 2000 Plan. The market value of these shares based on the
closing price of Common Stock on March 13, 2000 was $80 million. These shares of
Common Stock would represent approximately 12% of the Common Stock outstanding
at March 13, 2000. Currently, approximately 12.6 million shares are subject to
outstanding options issued under existing stock incentive plans of the Company.
Of these 12.6 million options, 5.8 million represent incremental options
resulting from adjustments to preserve the economic benefit of options
outstanding prior to the Packaging Transaction, and 4.9 million are held by
former employees of the Company under the terms of retirement and termination
programs of the Company.
Shares not issued when a stock incentive terminates, and shares issued
pursuant to stock incentives that are subsequently reacquired by the Company
from the recipient or his/her estate, will again be available for grants under
the 2000 Plan. Under the 2000 Plan, (1) stock options granted to any one person
may not represent more than 15% of the total number of shares issuable pursuant
to the 2000 Plan; (2) stock incentives granted to any one person may not
represent more than 15% of such total number of shares; and (3) no more than 3%
of such shares may be subject to stock awards that are neither contingent upon
the attainment of performance objectives nor subject to restrictions on sale or
other disposition. In addition, the 2000 Plan imposes certain limitations upon
the grant of ISOs.
Options are not assignable or transferable except as may be provided in the
relevant option agreement and except by will or the laws of descent and
distribution and, in the case of nonstatutory options, pursuant to a qualified
domestic relations order (as defined in the Code).
CHANGE IN CONTROL PROVISIONS
Upon a change in control of the Company (as defined in the 2000 Plan), all
stock options will vest and become fully exercisable, and all stock awards will
vest and become free of all restrictions. In addition, option holders will have
the right, subject to certain restrictions, to elect, within the 60-day period
following a change in control, to receive, in cancellation of their options, a
cash payment equal to (1) the difference between the change in control price (as
defined in the 2000 Plan) and the purchase price per share under their options
times (2) the number of shares as to which they are exercising this right.
TAX TREATMENT OF STOCK INCENTIVES
Under the present provisions of the Code, the federal income tax treatment
of stock incentives under the 2000 Plan is as follows. Generally, holders are
not taxed upon the receipt of options, but recognize ordinary income upon the
exercise of nonstatutory stock options in an amount equal to the difference
between the fair market value of the stock acquired and the purchase price paid
for such stock. Holders of ISOs do not recognize ordinary income as a result of
the exercise of such options if certain holding period requirements are met. In
that case, the ISO holder
20
<PAGE>
will recognize capital gain upon disposition of the
stock and the Company can take no deduction. The difference between the option
price and the fair market value of the stock on the date of exercise of an ISO
is generally treated as a minimum tax preference item. Holders of stock awards
are generally taxed when stock is delivered and vested or when cash is paid
pursuant to such awards whichever is earlier. The Company will generally be
permitted a tax deduction equal to the amount of ordinary income recognized by
the holder of a stock incentive at the time the holder recognizes such income.
However, this deduction may be limited with respect to a stock incentive granted
to an individual who is the chief executive officer or one of the four other
most highly compensated executive officers of the Company in any year if the
award fails to comply with the requirements for "qualified performance-based
compensation" under the Section 162(m) of the Code. Under Section 162(m),
compensation in excess of $1 million for each such individual may not be
deducted unless certain exceptions apply such as the exception for
performance-based compensation. Moreover, the acceleration of vesting of options
and stock awards as a result of a change in control could result in "excess
parachute payments," which could also reduce or eliminate the Company's
deduction.
The foregoing discussion is provided as general information only and is
not intended to be and does not constitute specific tax advice. In addition, it
does not address the impact of state and local taxes or securities laws
restrictions.
The Company has a right to withhold any sums required by federal, state
or local tax laws with respect to the exercise of any option or SAR or the
vesting of any stock award, or to require payment of such amounts before shares
are delivered under a stock option or award.
ACCOUNTING TREATMENT OF STOCK INCENTIVES
No expense is incurred when an option not containing an SAR is granted or
exercised, so long as the purchase price equals or exceeds the quoted fair
market value of the Common Stock on the date of grant. The Company's tax
deduction described above in the case of nonstatutory options is reported as an
adjustment to shareholders' equity. Stock awards result in compensation expense
based on the quoted fair market value of the shares covered by the awards, the
timing and recording of which depend on the terms of the individual award.
GENERAL
Authorized but unissued shares of Common Stock, as well as shares held by
the Company or a subsidiary, may be used for purposes of the 2000 Plan.
The 2000 Plan permits certain variations from the terms described above in
the case of grants of stock incentives to non-U.S. employees and the assumption
of, or the grant of options in substitution for, options held by employees of
acquired companies. The 2000 Plan may be amended or terminated by the
Compensation Committee without stockholder approval, except as specified in the
2000 Plan, and except that no amendment or termination may adversely affect any
stock incentive granted under the 2000 Plan without the consent of the holder.
No preemptive rights are applicable to the shares covered by the 2000 Plan. Any
cash proceeds received by the Company in connection with stock incentives
granted under the 2000 Plan are expected to be used for general corporate
purposes.
It is not possible to state which key employees will be granted stock
incentives under the 2000 Plan, or the value or number of shares subject to any
particular stock incentive, since these matters will be determined by the
Compensation Committee in the future based on an individual's ability to
contribute to the profitability, growth and success of the Company. Stock
incentives granted over the last two years under the 1998 Stock Incentive Plan
averaged 3 million shares per year, and it is anticipated that between 2.5
million and 3 million stock incentives will be granted in the future under the
2000 Plan to key employees. At March 13, 2000, there were 7 executive officers
and 453 other current and former employees holding options and/or shares under
the Company's stock incentive plans.
The 2000 Plan is being submitted for stockholder approval in connection
with provisions of the Code that may limit the Company's ability to deduct
compensation in excess of $1 million per year paid to any executive officer
named in the Summary Compensation Table; such limitation may not apply to
certain performance-based
21
<PAGE>
compensation arrangements (such as the 2000 Plan) approved by stockholders. If
the 2000 Plan is not approved by the stockholders (see "Other Matters -- Votes
Required"), the Company will reconsider the alternatives available with respect
to stock incentives and other forms of long-term, performance-based
compensation.
Exhibit A to this Proxy Statement sets forth the text of the 2000 Plan, and
the foregoing summary is qualified in its entirety by reference to the text of
the 2000 Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE 2000 PLAN.
OTHER MATTERS
OTHER BUSINESS
The Company does not know of any other business that will be presented for
consideration at the Annual Meeting. However, if any other business should come
before the Annual Meeting, the persons named in the enclosed proxy (or their
substitutes) will have discretion to act in accordance with their best judgment.
PROXY AND VOTING PROCEDURES
The enclosed proxy covers the shares held of record by a stockholder at the
close of business on March 13, 2000. In addition, the proxy covers shares held
at that date in such stockholder's accounts under the Company's Dividend
Reinvestment Plan and/or Savings Plan if such accounts carry the same federal
tax identification number as the shares held of record.
The proxy enables a stockholder to vote on the proposals covered by this
Proxy Statement. The shares represented by each valid proxy received in a timely
manner will be voted in accordance with the choices indicated on the proxy.
Stockholders may also vote by using the toll-free number listed on the proxy
card. The telephone voting procedure is designed to verify stockholders through
use of a control number printed on each proxy card. The procedure allows you to
vote your shares and to confirm that your instructions have been properly
recorded. Please see your proxy card for specific instructions. Whether voting
by mail or telephone, a proxy may be revoked by written notice to the Company
prior to the Annual Meeting, or at the Annual Meeting before it is voted or, if
voting by telephone, a subsequent vote at a later time will supersede a prior
vote.
The Company has adopted a policy that all proxies, ballots and other voting
materials that identify the votes of specific stockholders are to be kept
permanently confidential, except as required by law. The policy provides that
access to such materials is limited to the vote tabulators and the independent
inspectors of voting, who must certify compliance with such policy.
VOTES REQUIRED
Under the Company's By-laws, the election of directors requires the
affirmative vote of a plurality of the votes cast on the election at the Annual
Meeting, and the approval of the other matters to be voted on at the Annual
Meeting requires the affirmative vote of a majority of the votes cast on each
matter at the Annual Meeting.
Under Delaware law and the Company's Certificate of Incorporation and
By-laws, abstentions and votes withheld, as well as "broker non-votes," (1) are
counted in determining the number of shares represented at the Annual Meeting,
but are not voted for the election of directors (thereby having the effect of a
vote withheld with respect to such election), and (2) are not voted or deemed
cast for or against other proposals submitted to the stockholders (thereby
having no effect on the vote with respect to such other proposals).
SOLICITATION PROCEDURES
Proxies will be solicited primarily by mail; however, employees of the Company
may also solicit proxies in person or otherwise. In addition, the Company has
retained D. F. King & Co., Inc. to solicit proxies by mail, telephone and/or
22
<PAGE>
otherwise and will pay such firm a fee estimated at $13,000, plus reasonable
expenses, for these services. Certain holders of record (such as brokers,
custodians and nominees) are being requested to distribute proxy materials to
beneficial owners and to obtain such beneficial owners' instructions concerning
the voting of proxies. The Company will pay all costs of the proxy solicitation,
and will reimburse brokers and other persons for the expenses they incur in
sending proxy materials to beneficial owners and compensate them for such
services in accordance with the rules of the New York Stock Exchange.
PROPOSALS FOR 2001 ANNUAL MEETING
Any stockholder wishing to submit a proposal for inclusion in the Proxy
Statement for the 2001 Annual Meeting, pursuant to the stockholder proposal
rules of the SEC, should submit the proposal in writing to Secretary, W. R.
Grace & Co., 7500 Grace Drive, Columbia, Maryland 21044. The Company must
receive a proposal by November 29, 2000 in order to consider it for inclusion in
the 2001 Proxy Statement.
In addition, under the Company's By-laws any stockholder must notify the
Company not earlier than February 9, 2001 and not later than March 11, 2001, and
furnish certain information to the Company, in order to bring a matter of
business before an annual meeting or to nominate a person for election as a
director. Any communications relating to those By-law provisions should be
directed to the Company's Secretary at the above address.
DIRECTIONS TO THE 2000 ANNUAL MEETING
From I-95, take exit 38B and head west on Route 32. Take the Clarksville,
Route 108, exit (Exit 20). At the end of the exit ramp, take a right turn onto
Route 108. Then take the first right onto Signal Bell Lane. Parking for the Ten
Oaks Ballroom will be immediately on your right.
23
<PAGE>
EXHIBIT A
W. R. GRACE & CO.
2000 STOCK INCENTIVE PLAN
1. Purposes. The purposes of this Plan are (a) to enable Key Persons to
have incentives related to Common Stock, (b) to encourage Key Persons to
increase their interest in the growth and prosperity of the Company and to
stimulate and sustain constructive and imaginative thinking by Key Persons, (c)
to further the identity of interests of Key Persons with the interests of the
Company's stockholders, and (d) to induce the service or continued service of
Key Persons and to enable the Company to compete with other organizations
offering similar or other incentives in obtaining and retaining the services of
the most highly qualified individuals.
2. Definitions. When used in this Plan, the following terms shall have the
meanings set forth in this section 2.
Board of Directors: The Board of Directors of the Company.
cessation of service (or words of similar import): When a person ceases to
be an employee of the Company or a Subsidiary, or ceases to serve as a Director,
as appropriate. For purposes of this definition, if an entity that was a
Subsidiary ceases to be a Subsidiary, persons who immediately thereafter remain
employees of that entity (and are not employees of the Company or an entity that
is a Subsidiary) shall be deemed to have ceased service.
Change in Control: Shall be deemed to have occurred if (a) the Company
determines that any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or a corporation owned, directly
or indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, has become the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of 20% or more of the outstanding Common Stock of the Company
(provided, however, that a Change in Control shall not be deemed to have
occurred if such person has become the beneficial owner of 20% or more of the
outstanding Common Stock as the result of a sale of Common Stock by the Company
that has been approved by the Board of Directors); (b) individuals who are
"Continuing Directors" (as defined below) cease to constitute a majority of any
class of the Board of Directors; (c) there occurs a reorganization, merger,
consolidation or other corporate transaction involving the Company (a "Corporate
Transaction"), in each case, with respect to which the stockholders of the
Company immediately prior to such Corporate Transaction do not, immediately
after the Corporate Transaction, own 50% or more of the combined voting power of
the corporation resulting from such Corporate Transaction; or (d) the
stockholders of the Company approve a complete liquidation or dissolution of the
Company. "Continuing Director" means any member of the Board of Directors who
was such a member on the date on which this Plan was approved by the Board of
Directors and any successor to such a Continuing Director who is approved as a
nominee or elected to succeed a Continuing Director by a majority of Continuing
Directors who are then members of the Board of Directors.
Change in Control Price: The higher of (a) the highest reported sales
price, regular way, as reported in The Wall Street Journal or another newspaper
of general circulation, of a share of Common Stock in any transaction reported
on the New York Stock Exchange Composite Tape or other national exchange on
which such shares are listed or on NASDAQ during the 60-day period prior to and
including the date of a Change in Control or (b) if the Change in Control is the
result of a tender or exchange offer or a Corporate Transaction, the highest
price per share of Common Stock paid in such tender or exchange offer or
Corporate Transaction; provided, however, that in the case of Incentive Stock
Options, the Change in Control Price shall be in all cases the Fair Market Value
of the Common Stock on the date such Incentive Stock Option is exercised. To the
extent that the consideration paid in any Corporate Transaction or other
transaction described above consists in whole or in part of securities or other
noncash consideration, the value of such securities or other noncash
consideration shall be determined in the sole discretion of the Board of
Directors.
A-1
<PAGE>
Code: The Internal Revenue Code of 1986, as amended.
Committee: The Compensation Committee of the Board of Directors of the
Company or any other committee designated by the Board of Directors to
administer stock incentive and stock option plans of the Company and the
Subsidiaries generally or this Plan specifically.
Common Stock: The common stock of the Company, par value $.01 per share, or
such other class of shares or other securities or property as may be applicable
pursuant to the provisions of section 8.
Company: W. R. Grace & Co., a Delaware corporation formerly named Grace
Specialty Chemicals, Inc.
Continuing Director: The meaning set forth in the definition of "Change in
Control" above.
Corporate Transaction: The meaning set forth in the definition of "Change
in Control" above.
Director: A member of the Board of Directors of the Company who is not an
employee of the Company.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exercise Period: The meaning set forth in section 14(b) of this Plan.
Fair Market Value: (a) The mean between the high and low sales prices of a
share of Common Stock in New York Stock Exchange composite transactions on the
applicable date, as reported in The Wall Street Journal or another newspaper of
general circulation, or, if no sales of shares of Common Stock were reported for
such date, for the next preceding date for which such sales were so reported, or
(b) the fair market value of a share of Common Stock determined in accordance
with any other reasonable method approved by the Committee.
Incentive Stock Option: A stock option that states that it is an incentive
stock option and that is intended to meet the requirements of Section 422 of the
Code and the regulations thereunder applicable to incentive stock options, as in
effect from time to time.
issuance (or words of similar import): The issuance of authorized but
unissued Common Stock or the transfer of issued Common Stock held by the Company
or a Subsidiary.
Key Person: Either (i) an employee of the Company or a Subsidiary who, in
the opinion of the Committee, has contributed or can contribute significantly to
the growth and successful operations of the Company or one or more Subsidiaries
or (ii) a Director. The grant of a Stock Incentive to an employee shall be
deemed a determination by the Committee that such person is a Key Person.
Nonstatutory Stock Option: An Option that is not an Incentive Stock Option.
Option: An option granted under this Plan to purchase shares of Common
Stock.
Option Agreement: An agreement setting forth the terms of an Option.
Plan: The 2000 Stock Incentive Plan of the Company herein set forth, as the
same may from time to time be amended.
service: Service to the Company or a Subsidiary as an employee or as a
Director (as appropriate). "To serve" has a correlative meaning.
Spread: The meaning set forth in section 14(b) of this Plan.
Stock Award: An issuance of shares of Common Stock or an undertaking (other
than an Option) to issue such shares in the future.
A-2
<PAGE>
Stock Incentive: A stock incentive granted under this Plan in one of the
forms provided for in section 3.
Subsidiary: A corporation (or other form of business association) of which
shares (or other ownership interests) having 50% or more of the voting power
regularly entitled to vote for directors (or equivalent management rights) are
owned, directly or indirectly, by the Company, or any other entity designated as
such by the Board of Directors; provided, however, that in the case of an
Incentive Stock Option, the term "Subsidiary" shall mean a Subsidiary (as
defined by the preceding clause) that is also a "subsidiary corporation" as
defined in Section 424(f) of the Code and the regulations thereunder, as in
effect from time to time.
3. Grants of Stock Incentives. (a) Subject to the provisions of this Plan,
the Committee may at any time and from time to time grant Stock Incentives under
this Plan to, and only to, Key Persons.
(b) The Committee may grant a Stock Incentive to be effective at a
specified future date or upon the future occurrence of a specified event. For
the purposes of this Plan, any such Stock Incentive shall be deemed granted on
the date it becomes effective. An agreement or other commitment to grant a Stock
Incentive that is to be effective in the future shall not be deemed the grant of
a Stock Incentive until the date on which such Stock Incentive becomes
effective.
(c) A Stock Incentive may be granted in the form of:
(i) a Stock Award, or
(ii) an Option, or
(iii) a combination of a Stock Award and an Option.
4. Stock Subject to this Plan. (a) Subject to the provisions of paragraph
(c) of this section 4 and the provisions of section 8, the maximum number of
shares of Common Stock that may be issued pursuant to Stock Incentives granted
under this Plan shall not exceed Eight Million (8,000,000).
(b) Authorized but unissued shares of Common Stock and issued shares of
Common Stock held by the Company or a Subsidiary, whether acquired specifically
for use under this Plan or otherwise, may be used for purposes of this Plan.
(c) If any shares of Common Stock subject to a Stock Incentive shall not be
issued and shall cease to be issuable because of the termination, in whole or in
part, of such Stock Incentive or for any other reason, or if any such shares
shall, after issuance, be reacquired by the Company or a Subsidiary from the
recipient of such Stock Incentive, or from the estate of such recipient, for any
reason, such shares shall no longer be charged against the limitation provided
for in paragraph (a) of this section 4 and may again be made subject to Stock
Incentives.
(d) Of the total number of shares specified in paragraph (a) of this
section 4 (subject to adjustment as specified therein), during the term of this
Plan as defined in section 9, (i) no more than 15% may be subject to Options
granted to any one Key Person and (ii) no more than 15% may be subject to Stock
Incentives granted to any one Key Person.
5. Stock Awards. Except as otherwise provided in section 12, Stock
Incentives in the form of Stock Awards shall be subject to the following
provisions:
(a) For purposes of this Plan, all shares of Common Stock subject to a
Stock Award shall be valued at not less than 100% of the Fair Market Value of
such shares on the date such Stock Award is granted, regardless of whether or
when such shares are issued pursuant to such Stock Award and whether or not such
shares are subject to restrictions affecting their value.
A-3
<PAGE>
(b) Shares of Common Stock subject to a Stock Award may be issued to a Key
Person at the time the Stock Award is granted, or at any time subsequent
thereto, or in installments from time to time. In the event that any such
issuance shall not be made at the time the Stock Award is granted, the Stock
Award may provide for the payment to such Key Person, either in cash or shares
of Common Stock, of amounts not exceeding the dividends that would have been
payable to such Key Person in respect of the number of shares of Common Stock
subject to such Stock Award (as adjusted under section 8) if such shares had
been issued to such Key Person at the time such Stock Award was granted. Any
Stock Award may provide that the value of any shares of Common Stock subject to
such Stock Award may be paid in cash, on each date on which shares would
otherwise have been issued, in an amount equal to the Fair Market Value on such
date of the shares that would otherwise have been issued.
(c) The material terms of each Stock Award shall be determined by the
Committee. Each Stock Award shall be evidenced by a written instrument
consistent with this Plan. It is intended that a Stock Award would be (i) made
contingent upon the attainment of one or more specified performance objectives
and/or (ii) subject to restrictions on the sale or other disposition of the
Stock Award or the shares subject thereto for a period of three or more years;
provided, however, that (x) a Stock Award may include restrictions and
limitations in addition to those provided for herein and (y) of the total number
of shares specified in paragraph (a) of section 4 (subject to adjustment as
specified therein), up to 3% may be subject to Stock Awards not subject to
clause (i) or clause (ii) of this sentence.
(d) A Stock Award shall be granted for such lawful consideration as may be
provided for therein.
6. Options. Except as otherwise provided in section 12, Stock Incentives in
the form of Options shall be subject to the following provisions:
(a) The purchase price per share of Common Stock shall not be less than
100% of the Fair Market Value of a share of Common Stock on the date the Option
is granted; and such purchase price per share of Common Stock shall not be
reduced, by action of the Board of Directors or otherwise, at any time after the
date the Option is granted (subject to section 8 hereof). The purchase price and
any withholding tax that may be due on the exercise of an Option may be paid in
cash, or, if so provided in the Option Agreement, (i) in shares of Common Stock
(including shares issued pursuant to the Option being exercised and shares
issued pursuant to a Stock Award granted subject to restrictions as provided for
in paragraph (c) of section 5), or (ii) in a combination of cash and such
shares; provided, however, that no shares of Common Stock delivered in payment
of the purchase price may be "immature shares," as determined in accordance with
generally accepted accounting principles in effect at the time. Any shares of
Common Stock delivered to the Company in payment of the purchase price or
withholding tax shall be valued at their Fair Market Value on the date of
exercise. No certificate for shares of Common Stock shall be issued upon the
exercise of an Option until the purchase price for such shares has been paid in
full.
(b) If so provided in the Option Agreement (but subject to paragraph (i) of
this section 6), the Company shall, upon the request of the holder of the Option
and at any time and from time to time, cancel all or a portion of the Option
then subject to exercise and either (i) pay the holder an amount of money equal
to the excess, if any, of the Fair Market Value, at such time or times, of the
shares subject to the portion of the Option so canceled over the purchase price
for such shares, or (ii) issue shares of Common Stock to the holder with a Fair
Market Value, at such time or times, equal to such excess, or (iii) pay such
excess by a combination of money and shares.
(c) Each Option may be exercisable in full at the time of grant, or may
become exercisable in one or more installments and at such time or times or upon
the occurrence of such events, as may be specified in the Option Agreement, as
determined by the Committee. Unless otherwise provided in the Option Agreement,
an Option, to the extent it is or becomes exercisable, may be exercised at any
time in whole or in part until the expiration or termination of such Option.
(d) Each Option shall be exercisable during the life of the holder only by
him and, after his death, only by his estate or by a person who acquires the
right to exercise the Option by will or the laws of descent and distribution. An
Option, to the extent that it shall not have been exercised or canceled, shall
terminate as follows after the holder ceases to serve: (i) if the holder shall
voluntarily cease to serve without the consent of the Committee or shall have
his service terminated for cause, the Option shall terminate immediately upon
cessation of service; (ii) if the holder
A-4
<PAGE>
shall cease to serve by reason of death, incapacity or retirement under a
retirement plan of the Company or a Subsidiary, the Option shall terminate three
years after the date on which he ceased to serve; and (iii) except as provided
in the next sentence, in all other cases the Option shall terminate three months
after the date on which the holder ceased to serve unless the Committee shall
approve a longer period (which approval may be given before or after cessation
of service) not to exceed three years. If the holder shall die or become
incapacitated during the three-month period (or such longer period as the
Committee may approve) referred to in the preceding clause (iii), the Option
shall terminate three years after the date on which he ceased to serve. A leave
of absence for military or governmental service or other purposes shall not, if
approved by the Committee (which approval may be given before or after the leave
of absence commences), be deemed a cessation of service within the meaning of
this paragraph (d). Notwithstanding the foregoing provisions of this paragraph
(d) or any other provision of this Plan, no Option shall be exercisable after
expiration of a period of ten years and one month from the date the Option is
granted. Where a Nonstatutory Option is granted for a term of less than ten
years and one month, the Committee may, at any time prior to the expiration of
the Option, extend its term for a period ending not later than ten years and one
month from the date the Option was granted. Such an extension shall not be
deemed the grant of a new Option under this Plan.
(e) No Option nor any right thereunder may be assigned or transferred
except by will or the laws of descent and distribution and except, in the case
of a Nonstatutory Option, pursuant to a qualified domestic relations order (as
defined in the Code), unless otherwise provided in the Option Agreement.
(f) An Option may, but need not, be an Incentive Stock Option. All shares
of Common Stock that may be made subject to Stock Incentives under this Plan may
be made subject to Incentive Stock Options; provided, however, that (i) no
Incentive Stock Option may be granted more than ten years after the effective
date of this Plan, as provided in section 9; and (ii) the aggregate Fair Market
Value (determined as of the time an Incentive Stock Option is granted) of the
shares subject to each installment becoming exercisable for the first time in
any calendar year under Incentive Stock Options granted on or after January 1,
1987 (under all plans, including this Plan, of his employer corporation and its
parent and subsidiary corporations) to the Key Person to whom such Incentive
Stock Option is granted shall not exceed $100,000.
(g) The material terms of each Option shall be determined by the Committee.
Each Option shall be evidenced by a written instrument consistent with this
Plan, and shall specify whether the Option is an Incentive Stock Option or a
Nonstatutory Option. An Option may include restrictions and limitations in
addition to those provided for in this Plan.
(h) Options shall be granted for such lawful consideration as may be
provided for in the Option Agreement.
(i) Subject to section 8 hereof, no transaction or series of transactions
shall have the effect of exchanging all or any portion of any Option granted
under this Plan (a "Previously Granted Option") for, or replacing all or any
portion of any Previously Granted Option with, a new Option, where the purchase
price per share of Common Stock under the new Option is less than such purchase
price applicable under the Previously Granted Option.
7. Combination of Stock Awards and Options. (a) Stock Incentives authorized
by paragraph (c)(iii) of section 3 in the form of combinations of Stock Awards
and Options shall be subject to the following provisions: (a) A Stock Incentive
may be a combination of any form of Stock Award and any form of Option;
provided, however, that the terms and conditions of such Stock Incentive
pertaining to a Stock Award are consistent with section 5 and the terms and
conditions of such Stock Incentive pertaining to an Option are consistent with
section 6.
(b) Such combination Stock Incentive shall be subject to such other terms
and conditions as may be specified therein, including without limitation a
provision terminating in whole or in part a portion thereof upon the exercise in
whole or in part of another portion thereof.
(c) The material terms of each combination Stock Incentive shall be
determined by the Committee. Each combination Stock Incentive shall be evidenced
by a written instrument consistent with this Plan.
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8. Adjustment Provisions. (a) In the event that any reclassification,
split-up (whether by a dividend payable in Common Stock or otherwise) or
consolidation of the Common Stock shall be effected, or the outstanding shares
of Common Stock are, in connection with a merger or consolidation of the Company
or a sale by the Company of all or a part of its assets, exchanged for a
different number or class of shares of stock or other securities or property of
the Company or for shares of the stock or other securities or property of any
other corporation or person, (i) the number, kind and class of shares or other
securities or property that may be issued pursuant to Stock Incentives
thereafter granted, (ii) the number, kind and class of shares or other
securities or property that have not been issued under outstanding Stock
Incentives, (iii) the purchase price to be paid per share or other unit under
outstanding Stock Incentives, and (iv) the price to be paid per share or other
unit by the Company or a Subsidiary for shares or other securities or property
issued pursuant to Stock Incentives that are subject to a right of the Company
or a Subsidiary to re-acquire such shares or other securities or property, shall
in each case be equitably adjusted as determined by the Committee.
(b) In the event that there shall occur any spin-off or other distribution
of assets of the Company to its shareholders (including without limitation an
extraordinary dividend), (i) the number, kind and class of shares or other
securities or property that may be issued pursuant to Stock Incentives
thereafter granted, (ii) the number, kind and class of shares or other
securities or property that have not been issued under outstanding Stock
Incentives, (iii) the purchase price to be paid per share or other unit under
outstanding Stock Incentives, and (iv) the price to be paid per share or other
unit by the Company or a Subsidiary for shares or other securities or property
issued pursuant to Stock Incentives that are subject to a right of the Company
or a Subsidiary to re-acquire such shares or other securities or property, shall
in each case be equitably adjusted as determined by the Committee.
9. Term. This Plan shall be deemed adopted and shall become effective on
the date it is approved and adopted by the shareholders of the Company.
10. Administration. (a) This Plan shall be administered by the Committee,
which shall have full authority to act in the matter of selection of Key Persons
and in granting Stock Incentives to them and such other authority as is granted
to the Committee by this Plan. Notwithstanding any other provision of this Plan,
the Board of Directors may exercise any and all powers of the Committee with
respect to this Plan, except to the extent that the possession or exercise of
any power by the Board of Directors would cause any Stock Incentive to become
subject to, or to lose an exemption from, Section 162(m) of the Code or Section
16(b) of the Exchange Act.
(b) The Committee may establish such rules and regulations, not
inconsistent with the provisions of this Plan, as it deems necessary to
determine eligibility to be granted Stock Incentives under this Plan and for the
proper administration of this Plan, and may amend or revoke any rule or
regulation so established. The Committee may make such determinations and
interpretations under or in connection with this Plan as it deems necessary or
advisable. All such rules, regulations, determinations and interpretations shall
be binding and conclusive upon the Company, its Subsidiaries, its shareholders
and its directors, officers and employees, and upon their respective legal
representatives, beneficiaries, successors and assigns, and upon all other
persons claiming under or through any of them.
(c) Members of the Board of Directors and members of the Committee acting
under this Plan shall be fully protected in relying in good faith upon the
advice of counsel and shall incur no liability in the performance of their
duties, except as otherwise provided by applicable law.
11. General Provisions. (a) Nothing in this Plan or in any instrument
executed pursuant hereto shall confer upon any person any right to continue in
the service of the Company or a Subsidiary, or shall affect the right of the
Company or of a Subsidiary to terminate the service of any person with or
without cause.
(b) No shares of Common Stock shall be issued pursuant to a Stock Incentive
unless and until all legal requirements applicable to the issuance of such
shares have, in the opinion of counsel to the Company, been complied with. In
connection with any such issuance, the person acquiring the shares shall, if
requested by the Company, give assurances, satisfactory to counsel to the
Company, in respect of such matters as the Company or a Subsidiary may deem
desirable to assure compliance with all applicable legal requirements.
A-6
<PAGE>
(c) No person (individually or as a member of a group), and no beneficiary
or other person claiming under or through him, shall have any right, title or
interest in or to any shares of Common Stock allocated or reserved for the
purposes of this Plan or subject to any Stock Incentive except as to such shares
of Common Stock, if any, as shall have been issued to him.
(d) In the case of a grant of a Stock Incentive to a Key Person who is
employed by a Subsidiary, such grant may provide for the issuance of the shares
covered by the Stock Incentive to the Subsidiary, for such consideration as may
be provided, upon the condition or understanding that the Subsidiary will
transfer the shares to the Key Person in accordance with the terms of the Stock
Incentive.
(e) In the event the laws of a country in which the Company or a Subsidiary
has employees prescribe certain requirements for Stock Incentives to qualify for
advantageous tax treatment under the laws of that country (including, without
limitation, laws establishing options analogous to Incentive Stock Options), the
Committee, may, for the benefit of such employees, amend, in whole or in part,
this Plan and may include in such amendment additional provisions for the
purposes of qualifying the amended plan and Stock Incentives granted thereunder
under such laws; provided, however, that (i) the terms and conditions of a Stock
Incentive granted under such amended plan may not be more favorable to the
recipient than would be permitted if such Stock Incentive had been granted under
this Plan as herein set forth, (ii) all shares allocated to or utilized for the
purposes of such amended plan shall be subject to the limitations of section 4,
and (iii) the provisions of the amended plan may restrict but may not extend or
amplify the provisions of sections 9 and 13.
(f) The Company or a Subsidiary may make such provisions as either may deem
appropriate for the withholding of any taxes that the Company or a Subsidiary
determines is required to be withheld in connection with any Stock Incentive.
(g) Nothing in this Plan is intended to be a substitute for, or shall
preclude or limit the establishment or continuation of, any other plan, practice
or arrangement for the payment of compensation or benefits to directors,
officers or employees generally, or to any class or group of such persons, that
the Company or any Subsidiary now has or may hereafter put into effect,
including, without limitation, any incentive compensation, retirement, pension,
group insurance, stock purchase, stock bonus or stock option plan.
12. Acquisitions. If the Company or any Subsidiary should merge or
consolidate with, or purchase stock or assets or otherwise acquire the whole or
part of the business of, another entity, the Company, upon the approval of the
Committee, (a) may assume, in whole or in part and with or without modifications
or conditions, any stock incentives granted by the acquired entity to its
directors, officers, employees or consultants in their capacities as such, or
(b) may grant new Stock Incentives in substitution therefor. Any such assumed or
substitute Stock Incentives may contain terms and conditions inconsistent with
the provisions of this Plan (including the limitations set forth in paragraph
(d) of section 4), including additional benefits for the recipient; provided,
however, that if such assumed or substitute Stock Incentives are Incentive Stock
Options, such terms and conditions are permitted under the plan of the acquired
entity. For the purposes of any applicable plan provision involving time or a
date, a substitute Stock Incentive shall be deemed granted as of the date of
grant of the original stock incentive.
13. Amendments and Termination. (a) This Plan may be amended or terminated
by the Board of Directors upon the recommendation of the Committee; provided,
however, that, without the approval of the stockholders of the Company, no
amendment shall be made which (i) causes this Plan to cease to comply with
applicable law, (ii) permits any person who is not a Key Person to be granted a
Stock Incentive (except as otherwise provided in section 12), (iii) amends the
provisions of paragraph (d) of section 4, paragraph (a) of section 5 or
paragraph (a) or paragraph (f) of section 6 to permit shares to be valued at, or
to have a purchase price of, respectively, less than the percentage of Fair
Market Value specified therein, (iv) amends section 9 to extend the date set
forth therein, or (v) amends this section 13.
(b) No amendment or termination of this Plan shall adversely affect any
Stock Incentive theretofore granted, and no amendment of any Stock Incentive
granted pursuant to this Plan shall adversely affect such Stock Incentive,
without the consent of the holder thereof.
A-7
<PAGE>
14. Change in Control Provisions. (a) Notwithstanding any other provision
of this Plan to the contrary, in the event of a Change in Control:
(i) Any Options outstanding as of the date on which such Change in
Control occurs, and which are not then exercisable and vested, shall become
fully exercisable and vested to the full extent of the original grant; and
(ii) All restrictions and deferral limitations applicable to Stock
Incentives shall lapse, and Stock Incentives shall become free of all
restrictions and become fully vested and transferable to the full extent of the
original grant.
(b) Notwithstanding any other provision of this Plan, during the 60-day
period from and after a Change in Control (the "Exercise Period"), unless the
Committee shall determine otherwise at the time of grant, the holder of an
Option shall have the right, in lieu of the payment of the purchase price for
the shares of Common Stock being purchased under the Option, by giving notice to
the Company, to elect (within the Exercise Period) to surrender all or part of
the Option to the Company and to receive cash, within 30 days after such notice,
in an amount equal to the amount by which the Change in Control Price per share
of Common Stock on the date of such election shall exceed the purchase price per
share of Common Stock under the Option (the "Spread") multiplied by the number
of shares of Common Stock subject to the Option as to which the right subject to
this Section 14(b) shall have been exercised.
(c) Notwithstanding any other provision of this Plan, if any right granted
pursuant to this Plan to receive cash in respect of a Stock Incentive would make
a Change in Control transaction ineligible for pooling-of-interests accounting
that, but for the nature of such grant, would otherwise be eligible for such
accounting treatment, the Committee shall have the ability to substitute for
such cash Common Stock with a Fair Market Value equal to the amount of such
cash.
A-8
<PAGE>
Please mark your votes as indicated in this example [X]
THE DIRECTORS RECOMMEND A VOTE FOR PROPOSALS 1, 2 AND 3.
1. Election of Directors FOR Withhold WITHHOLD
For the nominees authority to vote
listed below (except [ ] for the nominees [ ]
as marked to the listed below
contrary below)
2. Selection of FOR AGAINST ABSTAIN
PricewaterhouseCoopers LLP as
independent accountants [ ] [ ] [ ]
3. Approval of 2000 Stock
Incentive Plan [ ] [ ] [ ]
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, STRIKE A LINE
THROUGH THE NOMINEE'S NAME BELOW.)
Nominees: 01 JOHN F. AKERS 02 JOHN J. MURPHY
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IF NO CHOICE IS SPECIFIED, THE SHARES WILL BE VOTED FOR THE NOMINEES LISTED
ABOVE, AND FOR PROPOSALS 2 AND 3
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Please let us know whether you plan to attend the Annual Meeting.
[ ] Yes, I plan to attend the Annual Meeting.
Date Signature Signature
-------------------- ------------------- ------------------
Please sign exactly as name appears above. When signing on behalf of a
corporation estate, trust or another stockholder, please give that party's full
name and state your full title or capacity or otherwise indicate that you are
authorized to sign.
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FOLD AND DETACH HERE
VOTING BY PHONE
CALL TOLL-FREE 1-800-840-1208 ON A TOUCH TONE TELEPHONE 24 HOURS
A DAY - 7 DAYS A WEEK
THERE IS NO CHARGE TO YOU FOR THIS CALL. HAVE YOUR PROSY CARD IN HAND.
YOU WILL BE ASKED TO ENTER A CONTROL NUMBER, WHICH IS LOCATED IN
THE BOX IN THE LOWER RIGHT HAND CORNER OF THIS FORM.
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OPTION 1: To vote the Board of Directors recommends on ALL proposals, press 1
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WHEN ASKED, PLEASE CONFIRM YOUR SELECTION BY PRESSING 1.
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OPTION 2: If you choose to vote on each proposal separately, press 0, You will
hear these instructions:
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Proposal 1 - To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL nominees,
press 9. to WITHHOLD FOR AN INDIVIDUAL nominee, press 0 and listen to the
instructions.
Proposal 2 - To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
Proposal 3 - To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
WHEN ASKED, PLEASE CONFIRM YOUR SELECTION BY PRESSING 1.
NOTE: If you vote by telephone, THERE IS NO NEED TO MAIL BACK your proxy card.
THANK YOU FOR VOTING.
<PAGE>
GRACE PROXY
FOR THE ANNUAL MEETING OF STOCKHOLDERS OF W. R. GRACE & CO., TO BE HELD AT
10:00A.M. ON WEDNESDAY, MAY 10, 2000, AT THE TEN OAKS BALLROOM, 5000 SIGNAL BELL
LANE, CLARKSVILLE, MARYLAND.
The undersigned hereby appoints Robert M. Tarola and Mark A. Shelnitz as agents
to act and vote on behalf of the undersigned at the Grace Annual Meeting of
Stockholders to be held on May 10, 2000, and any adjournments. As more fully
described in the Proxy Statement for the meeting, such agents (or their
substitutes) are directed to vote as indicated here and are authorized to vote
in their discretion upon any other business that properly comes before the
meeting.
YOUR VOTE IS IMPORTANT.
Please vote promptly. You have three voting options: (1) vote in person at the
Annual Meeting of Stockholders; (2) vote by phone by calling 800-840-1208 (see
instructions on the reverse side); or (3) date, sign and return this card in the
postage-paid envelope provided.
SHAREHOLDERS QUESTIONS/COMMENTS:
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THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
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FOLD AND DETACH HERE
