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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 COMMISSION FILE NUMBER 1-3720
W. R. GRACE & CO.
INCORPORATED UNDER THE LAWS OF THE I.R.S. EMPLOYER IDENTIFICATION NO.
STATE OF NEW YORK 13-3461988
ONE TOWN CENTER ROAD, BOCA RATON, FLORIDA 33486-1010
407/362-2000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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Common Stock, $1 par value ] New York Stock Exchange, Inc.
Common Stock Purchase Rights ] Chicago Stock Exchange,
Incorporated
7-3/4% Notes Due 2002 ]
(issued by W. R. Grace & Co.-Conn., ] New York Stock Exchange, Inc.
a wholly owned subsidiary) and ]
related Guarantees ]
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes __X__ No _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in the Proxy Statement incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. __X__
The aggregate market value of W. R. Grace & Co. voting stock held by
nonaffiliates was approximately $4.3 billion at February 1, 1994.
At March 1, 1994, 93,856,994 shares of W. R. Grace & Co. Common Stock, $1 par
value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT WHERE INCORPORATED
Proxy Statement for Annual Meeting to be
held May 10, 1994 (specified portions) Part III
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TABLE OF CONTENTS
Page
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PART I
Item 1. Business........................................ 1
Introduction................................. 1
Strategic Restructuring...................... 1
Industry Segments............................ 3
Specialty Chemicals........................ 3
Health Care................................ 8
Other Operations............................. 11
Research Activities.......................... 11
Environmental, Health and Safety Matters..... 12
Materials and Energy......................... 13
Item 2. Properties...................................... 13
Item 3. Legal Proceedings............................... 14
Item 4. Submission of Matters to a Vote of Security
Holders...................................... 20
Executive Officers........................................ 20
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters.................. 21
Item 6. Selected Financial Data......................... 22
Item 7. Management's Discussion and Analysis of Finan-
cial Condition and Results of Operations..... 22
Item 8. Financial Statements and Supplementary Data..... 22
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure....... 22
PART III
Item 10. Directors and Executive Officers of the
Registrant................................... 22
Item 11. Executive Compensation.......................... 23
Item 12. Security Ownership of Certain Beneficial Owners
and Management............................... 23
Item 13. Certain Relationships and Related Transactions.. 23
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.......................... 23
Signatures................................................ 27
Financial Supplement...................................... F-1
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PART I
Item 1. Business.
INTRODUCTION
W. R. Grace & Co., through its subsidiaries, is primarily engaged in the
specialty chemical business on a worldwide basis and in specialized health care
activities. In its chemical operations, Grace develops, manufactures and
markets specialty chemicals and materials and related systems. In health care,
Grace is primarily engaged in supplying kidney dialysis and home infusion and
respiratory therapy services and products.
As used in this Report, the term "Company" refers to W. R. Grace & Co., a
New York corporation, and the term "Grace" refers to the Company and/or one or
more of its subsidiaries. Grace's principal executive offices are located at
One Town Center Road, Boca Raton, Florida 33486-1010, and its telephone number
is 407/362-2000. At year-end 1993, Grace had approximately 34,000 full-time
employees worldwide in its continuing operations (approximately 7,000 in
discontinued operations).
Grace's Consolidated Financial Statements for the three years in the period
ended December 31, 1993 ("Consolidated Financial Statements") and certain other
financial information included in the Company's 1993 Annual Report to
Shareholders are set forth in the Financial Supplement to this Report and
incorporated by reference herein.
STRATEGIC RESTRUCTURING
In 1991, Grace announced a new corporate strategy with the principal
objective of enhancing shareholder value. The major components of the strategy
are (a) focusing on core businesses to accelerate growth; (b) upgrading
financial performance, principally by selling or monetizing non-core businesses,
lowering the ratio of debt to total capital and reducing overhead; and (c)
integrating corporate and operating unit functions through global product line
management.
The core businesses referred to above are packaging, health care, catalysts
and other silica-based products, construction products, water treatment and
process chemicals, and container products. As part of its new corporate
strategy, Grace has reorganized the management of these core businesses on the
basis of global product lines. Grace has also organized task forces that are
developing and implementing "best practices" relating to financial planning,
information systems, human resources, logistics and other management functions;
has implemented a process to better
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allocate capital among its businesses; and has retired or refinanced most of its
higher-cost debt.
DIVESTMENTS AND OTHER DISPOSITIONS. Pursuant to its new strategy, Grace
has divested or monetized a number of non-core businesses and has announced
plans to divest others. In 1991, Grace sold its specialty textiles business;
its automotive chemicals and sound deadening components businesses; investments
in two pharmaceutical businesses; its Trinidadian fertilizer operations; its
animal feed businesses; its polyurethane foam sealant manufacturing business;
and its Japanese microwave products business. In 1992, Grace sold its book,
video and software distribution businesses and its organic chemicals business
and related assets. In December 1992, Grace also completed a transaction to
monetize a portion of its cocoa and chocolate business by selling a 21% limited
partnership interest in Grace Cocoa Associates, L.P. ("Grace Cocoa"), which owns
this business and other assets, resulting in Grace's receipt of approximately
$300 million in cash.
During the first half of 1993, Grace sold substantially all of its oil and
gas and energy services businesses for net cash proceeds of $386 million, and it
is in the process of liquidating the remaining miscellaneous assets and
liabilities of those businesses. Grace also sold a number of other non-core
businesses and corporate investments in 1993, including a 50% interest in a
Japanese chemical business (for approximately $31.4 million), a food hygiene
services business (for approximately $11.2 million) and minority investments in
Grace-Sierra Horticultural Products Company and Canonie Environmental Services
Corp. (for proceeds totaling $41.3 million). In January 1994, Grace received
$42.8 million in exchange for the securities of The Restaurant Enterprises
Group, Inc. held by Grace.
In the fourth quarter of 1992, Grace classified Colowyo Coal Company, a
coal mining subsidiary, as a discontinued operation. In the second quarter of
1993, after evaluating the expected contribution of its remaining non-core
businesses to its future performance and growth, Grace reclassified as
discontinued operations its cocoa and battery separators businesses; certain
engineered materials businesses (principally printing products, electromagnetic
radiation control and material technology businesses); and substantially all of
its other non-core businesses. Grace is actively pursuing the sale of these
businesses.
STRATEGIC ACQUISITIONS. As part of its strategy to focus on core business
growth, Grace has made, and expects to continue to make, strategic acquisitions
directly related to its core businesses. In 1992, Grace acquired the North
American food service packaging business of Du Pont Canada for approximately $20
million. In 1993, Grace acquired (a) the water treatment and related operations
of Aquatec Quimica S.A. of Brazil, which has significant operations throughout
South America, as well as operations in Portugal and the
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United States; and (b) the Katalistics fluid cracking catalyst additive business
previously owned by a joint venture between Union Carbide Corporation and
Allied-Signal Inc.
In the 1991-92 period, Grace acquired the Renacare unit of Lloyds Chemists
plc, the leading United Kingdom producer of dialysis concentrate and a
distributor of associated products, as well as additional dialysis centers
located primarily in the United States, for approximately $54 million in the
aggregate. In 1993, Grace acquired Home Intensive Care, Inc., a national
provider of alternate site infusion therapy and dialysis health care services,
for approximately $129 million in cash (inclusive of expenses); Virginia-based
American Homecare Equipment, Inc., a provider of home infusion and respiratory
therapy services, for approximately 116,000 shares of the Company's common stock
and other consideration; and Riggers Medizintechnik GmbH, a German manufacturer
and distributor of dialysis products. Additionally, during 1993, Grace acquired
regional providers of home infusion therapy services and home support nursing
services, as well as 26 additional dialysis centers located primarily in the
United States, for a total of approximately $92 million. In March 1994, Grace
announced that it had agreed to acquire Home Nutritional Services, Inc., a
national provider of home infusion therapy services, for approximately $120
million in cash (inclusive of expenses and debt to be assumed); completion of
the transaction is anticipated during the second quarter of 1994. Grace is
considering additional acquisitions in the health care industry, with a view to
continued development of its international health care business.
See Notes 3, 6, 9 and 11 to the Consolidated Financial Statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Financial Supplement for additional information.
INDUSTRY SEGMENTS
Information concerning the sales and revenues, pretax operating profit and
identifiable assets of Grace's continuing operations by industry segment and
geographic area for 1993, 1992 and 1991 is contained in Note 17 to Grace's
Consolidated Financial Statements in the Financial Supplement.
SPECIALTY CHEMICALS
Grace's specialty chemical operations consist of the development,
manufacture and sale of products and systems in five core market groups (see
"Strategic Restructuring" above). These products and systems typically serve
highly specialized markets and represent an important component (but a
relatively small portion of the cost) of the end products in which they are
used. Accordingly, competition is generally based primarily on technological
capability, customer service and product quality. Grace's specialty
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chemical products and systems are marketed primarily through direct sales
organizations.
The following is a description of the products and services provided by
each of Grace's core specialty chemical businesses.
PACKAGING. Grace's packaging business ("Grace Packaging") provides
high-performance total packaging systems on a worldwide basis, competing
principally by providing superior quality products and services for specialized
customer needs. The principal products and services provided by Grace Packaging
are (a) flexible packaging systems (including material, equipment and services)
for a broad range of perishable foods such as fresh meat, prepared foods, baked
goods, poultry, produce, cheese, and smoked and processed meat products; (b)
shrink films for packaging a variety of consumer and industrial products; (c)
foam trays for supermarkets and poultry and other food processors; and (d) rigid
plastic containers for dairy and other food and non-food products.
Grace Packaging competes through three product groups: flexible packaging
(marketed extensively under the Cryovac-R- registered trademark), foam trays,
and rigid plastic containers.
Cryovac-R- flexible packaging products include shrink bags, shrink films,
laminated films, medical films, and equipment. The Cryovac packaging products
group developed and introduced flexible plastic vacuum shrink packaging in the
late 1940s, contributing to expanded food distribution and marketing by
providing better protection against decay-inducing bacteria and moisture loss.
The market for Cryovac products has subsequently shifted from industrial food
applications toward the retail food market, and Cryovac packaging technology has
also been introduced in non-food applications such as flexible packaging for
display items and electronic and medical products.
The flexible packaging products group emphasizes five core competencies to
differentiate itself from competitors: (1) proprietary film processing
technology; (2) resin technology, permitting the production of materials suited
to specific customer needs; (3) packaging and food science expertise, providing
better understanding of the interaction between packaging materials and packaged
products; (4) complete systems support capability, to provide a single source of
supply for customer needs; and (5) strategically located production, warehousing
and distribution networks.
Foam trays are produced by the Formpac business group of Grace Packaging,
primarily for sale to supermarkets and poultry and other food processors in the
eastern United States. Formpac's proprietary technology has also been
successfully utilized in certain packaging applications outside the United
States, and Formpac is exploring opportunities to expand its business outside
North America.
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Grace Packaging's Omicron business group produces rigid plastic packaging
applications, primarily for dairy products in Australia. These products
utilize proprietary thermoforming technology, involving the controlled thinning
and shaping of hot plastic sheets to increase strength and rigidity while
minimizing weight.
Grace Packaging's sales and revenues were $1.3 billion in 1993 and $1.2
billion in each of 1991 and 1992. Approximately 50% of Grace Packaging's 1993
sales and revenues were generated in North America, 30% in Europe, 10% in Asia
Pacific, and the remainder in Latin America. At year-end 1993, Grace Packaging
employed approximately 9,000 people in 23 production facilities (9 in North
America, 6 in Europe, 5 in Latin America and 3 in Asia Pacific) and 77 sales
offices, serving more than 18,000 customers.
A majority of the raw materials used by Grace Packaging are resins that are
generally available at stable prices. In most cases, multiple sources of raw
materials exist, with at least one source being located in each regional market.
The primary external influence affecting the packaging business is the general
economy; seasonality is not significant to Grace Packaging's business.
CATALYST AND OTHER SILICA-BASED PRODUCTS. This core business ("Grace
Davison") is composed of three principal product groups: fluid cracking
catalysts, polyolefin catalysts, and silica and zeolite adsorbents. These
products involve silica, alumina and zeolite technology and the design and
manufacture of products to meet customer specifications; they are sold to major
oil refiners, plastics and chemical manufacturers, and consumer products
companies.
Fluid cracking catalysts are used by refiners to upgrade oil to more
valuable transportation fuels such as gasoline and jet and diesel fuel. Oil
refining is a highly specialized discipline, demanding that products be tailored
to meet local variations in raw materials and operational needs. Competition is
based on technology, product performance, customer service and price.
Polyolefin catalysts and catalyst supports are essential components used in
manufacturing nearly half of all high density and linear low density produced
polyethylene resins, which are used in products such as packaging film and
plastic pipe. The catalyst business is technology-intensive and focused on
providing products specifically formulated to meet end-user applications.
Manufacturers generally compete on a worldwide basis, and competition has
intensified recently due to excess capacity in the catalyst industry, with
resultant price sensitivity.
Silica and zeolite adsorbents are used in plastics, dentifrices, paints,
insulated glass and other products, and in the refining of edible oils. Silicas
are used in coatings as flatting agents, in plastics to improve handling, in
toothpastes as thickeners and
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cleaners, in food to carry flavors and prevent caking, and in the purification
of edible oils.
Grace Davison's sales and revenues were $572 million in 1993, $519 million
in 1992, and $470 million in 1991; approximately 59% of Grace Davison's 1993
sales and revenues were generated in North America, 34% in Europe, 6% in Asia
Pacific and 1% in Latin America. At year-end 1993, Grace Davison employed
approximately 2,600 persons worldwide in nine facilities (six in the United
States and one each in Canada, Germany and Brazil).
Most raw materials used in the manufacture of Grace Davison products are
available from multiple sources and, in some instances, are produced or supplied
by Grace. Because of the diverse applications of products utilizing Grace
Davison technology and the geographic areas in which such products are used,
seasonality does not have a significant effect on Grace Davison's businesses.
CONSTRUCTION PRODUCTS. Grace Construction Products ("GCP") is a leading
supplier of specialty materials and systems to the world-wide construction
industry. GCP products and systems strengthen concrete, control corrosion,
prevent water damage and protect structural steel against collapse due to fire.
These products include concrete admixtures, cement processing additives, and
fireproofing and waterproofing materials. In North America, GCP also
manufactures and distributes reinforced fiberglass building components, masonry
block additives and products, and vermiculite products used in construction and
other industrial applications. GCP's products are sold to a broad customer base,
including cement manufacturers, ready mixed and precast concrete producers,
specialty subcontractors and applicators, masonry block manufacturers, building
materials distributors and other industrial manufacturers.
GCP is a principal supplier of the products it manufactures, competing
with several large global suppliers and smaller regional competitors.
Competition is based largely on pricing, product performance, proprietary
technology and technical support and service.
GCP's 1993 sales and revenues totaled $333 million (70% in North America,
17% in Europe, 13% in Asia Pacific and less than 1% in Latin America). Sales
and revenues for 1992 and 1991 were $333 million and $345 million, respectively.
At year-end 1993, GCP employed approximately 2,000 persons at approximately 59
production facilities (33 in North America, 9 in Southeast Asia, 7 in Australia,
5 in Europe, 4 in Latin America and 1 in Japan) and 73 sales offices worldwide.
Supplies and raw materials used for manufacturing GCP products are
primarily commodities obtained from multiple sources, including commodity
chemical producers, petroleum companies, other construction industry suppliers
and paper manufacturers. In most instanc-
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ES, there are at least two alternative suppliers for the raw materials utilized
by GCP. The construction business is seasonal, based on weather conditions,
and cyclical, in response to economic conditions and construction demand. To
increase profitability and minimize the impact of cyclical downturns in regional
economies, GCP strives to introduce new and improved products, has implemented a
lower cost structure in North America and Europe and is emphasizing expansion in
European and Southeast Asian markets.
WATER TREATMENT. Grace's water treatment and process chemicals business
("Grace Dearborn") consists of the water treatment and paper industry services
business lines, which market the following products and services: (a) chemical
treatments and systems to prevent corrosion, scale and microbiological growth in
industrial process waters, heating and cooling applications, and industrial
wastewater applications for clarification, sludge de-watering, odor control and
water recycling; (b) paper industry process chemicals, support equipment and
related specialist and consulting services; (c) hydrocarbon processing
chemicals, related support equipment and services to protect and optimize
processing system performance; (d) chemical treatments, support equipment and
services for sugar processing, including processing sugar into alcohol as a
gasoline substitute; (e) chemical treatments to protect industrial canned food
cooking and sterilizing equipment; and (f) paint detackification products and
services to remove paint sludge from water wash paint spray systems.
Grace Dearborn sales and revenues for 1993 totaled $330 million (42% in
North America, 40% in Europe, 16% in Latin America and 2% in Asia Pacific).
Sales and revenues for 1992 and 1991 were $302 million and $292 million,
respectively. At year-end 1993, Grace Dearborn employed approximately 2,800
persons at 21 plants (7 in Latin America, 6 in North America and 4 in each of
Europe and Asia Pacific) and 107 sales offices.
Raw materials used in the Grace Dearborn business lines are readily
available from multiple sources, generally at stable prices. The paper industry
services business is affected by the cyclicality of the global paper market.
The water treatment services business responds to (but is not adversely affected
by) seasonal fluctuations, concentrating on boiler treatment in winter and
cooling system treatment in summer. The effects of seasonality are further
diminished by the geographic diversity of the markets in which Grace Dearborn
competes.
CONTAINER PRODUCTS. Grace's container business ("Grace Container")
consists of three product lines: container sealants, closures and coatings.
The principal products marketed by these product lines include sealing compounds
and related application equipment for food and beverage cans and other rigid
containers; gasketing materials to the metal crown, aluminum roll-on and plastic
closure segments of the glass/closure packaging markets; adhe-
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sive lacquers and associated protective and decorative coatings for plastic and
metal closures; protective and decorative coatings and lacquers for rigid food
and beverage containers; and lubricants used primarily in two-piece can
manufacturing.
Grace Container sales and revenues (excluding those of Grace Specialty
Polymers, discussed below) were $238 million, $253 million and $248 million in
1993, 1992 and 1991, respectively. Its products are marketed internationally,
with 37% of sales and revenues in Europe, 27% in North America, 25% in Asia
Pacific and 11% in Latin America. At year-end 1993, Grace Container employed
approximately 1,830 persons at 25 plants and 39 sales offices worldwide.
Competition is based on providing high-quality customer service, as well as on
price and product quality and reliability. Raw materials are generally
available from multiple sources at stable prices. Although demand for container
packaging and sealant products tends to increase during the warmest months of
the year, the impact of such seasonality on Grace Container is offset almost
entirely by the geographic diversity of the markets in which it competes.
Recently integrated with Grace Container is Grace Specialty Polymers, which
develops formulated engineered polymers for printed circuit board and component
assembly in the electronics, electrical, automotive and defense industries.
These include surface mount and conductive adhesives, capacitor coatings, light
emitting diode encapsulants and conformal coatings. The integration of these
product lines reflects the reliance of both businesses on polymer technology as
an integral feature of the products they manufacture.
HEALTH CARE
Grace's health care business ("Grace Health Care") is primarily engaged in
supplying kidney dialysis and home infusion and respiratory therapy services,
and in the manufacture and sale of products used to provide dialysis and other
medical services.
Grace Health Care provides kidney dialysis and related services for
outpatients with chronic renal failure. At December 31, 1993, Grace Health Care
operated 501 centers providing dialysis and related services (471 in the United
States and Puerto Rico, 23 in Portugal, 4 in Spain, 2 in the Czech Republic and
1 in Argentina); these centers, substantially all of which are leased, average
ap- proximately 5,600 square feet in size. Grace Health Care also provides
inpatient acute dialysis services under contracts with hospitals in the United
States (385 at December 31, 1993) and furnishes dialysis equipment and supplies
to patients who elect home treatment. At December 31, 1993, Grace Health Care
was treating approximately 37,000 patients in the U.S. and 3,000 patients in
other
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countries. Revenues from kidney dialysis services were $1,012 million in 1993,
$860 million in 1992 and $720 million in 1991.
Additionally, Grace Health Care manufactures disposable bloodlines,
dialysis solutions and artificial kidneys (dialyzers), for use in its dialysis
centers and for sale to unaffiliated dialysis facilities and home patients;
distributes dialysis supplies and equipment and other medical products and
supplies manufactured by others; and provides laboratory services (including
hepatitis testing) to dialysis patients. More than two-thirds of the sales of
dialysis and other medical products supplies and equipment reflect sales to
patients not directly treated, or facilities not operated, by Grace Health Care.
Grace Health Care also provides infusion and respiratory therapy services
and other medical equipment and supplies to patients for home use through a
network of 97 locations (96 leased and 1 owned). Infusion therapy includes
intravenous delivery of an expanding range of medications and nutritional
preparations, such as chemotherapy, total parenteral nutrition, antibiotic
therapy and drugs for pain management. Respiratory therapy includes delivery of
oxygen and aerosolized drugs and the use of ventilators. In addition, Grace
Health Care provides home nursing support services through nine branch
locations.
Grace Health Care's business is dependent on the continuation of Medicare
and other third-party insurance coverage for dialysis and home care services and
products. At such time as Medicare becomes a patient's primary payor for
dialysis (generally, 3 months following commencement of treatment or, in the
case of patients covered by employer-sponsored health insurance, 21 months after
commencement of treatment) and/or homecare products and services, Medicare
currently reimburses suppliers of such services and products for approximately
80% of established fees or reasonable charges; the remaining 20% is paid by the
patient and/or his non-Medicare insurance carrier.
Because in most cases the prices of dialysis services and products in the
U.S. are directly or indirectly regulated by Medicare, competition in the
industry is based primarily on quality and accessibility of service. In
addition, some states limit competition under laws that restrict the number of
dialysis facilities within a geographic area based on need, as determined by
state agencies. Competition in the home care business is also based on quality
of service as well as price, and, where state laws do not impose limits on
competition, there are no significant barriers to entering this business. Cost
efficiency, therefore, is also a key element of competition in this market.
Based upon Grace's knowledge and understanding of the health care industry in
general and of other providers of kidney dialysis and infusion therapy, as well
as information obtained from publicly available sources, Grace Health Care
believes that it is among the most cost-efficient of
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the companies in its field and that it is the leading United States supplier of
dialysis services and products and a leading United States provider of infusion
therapy.
Except as noted in the following paragraph, Grace Health Care believes
there are adequate sources of supply for the raw materials and products utilized
in its health care services and medical products businesses. At year-end 1993,
Grace Health Care employed a total of approximately 13,600 persons full-time at
its facilities worldwide. Grace Health Care's businesses generally are not
seasonal or cyclical in nature. It is unclear at this time whether and to what
extent any of the currently proposed reforms in U.S. health care law will affect
Grace Health Care's operations.
National Medical Care, Inc. ("NMC") is Grace's principal health care
subsidiary. In 1993, the United States Food and Drug Administration ("FDA")
issued import alerts with respect to (a) hemodialysis bloodlines manufactured at
NMC's plant located in Reynosa, Mexico and (b) hemodialyzers manufactured in
NMC's Dublin, Ireland facility. Products subject to FDA import alerts may not
enter the United States until the FDA approves the quality assurance systems of
the facility at which such products are manufactured. In January 1994, NMC
entered into a consent decree providing for the resumption of importation of
bloodlines and hemodialyzers following certification by NMC that the relevant
facility complies with FDA regulations and successful completion of an FDA
inspection to verify such compliance. In accordance with the consent decree,
NMC certified compliance to the FDA with respect to the Reynosa, Mexico facility
in January 1994 and the FDA lifted the bloodline import alert in March 1994,
following a thorough reinspection by the FDA and a commitment by NMC to finish
certain studies by May 1994 and, in the interim, to perform additional product
testing. Certification of compliance at the Dublin, Ireland facility is
anticipated in the second quarter of 1994. The consent decree also requires NMC
to certify and maintain compliance with applicable FDA device manufacturing laws
and regulations at all of its United States manufacturing facilities. NMC has
conducted a full review of such facilities and upgraded its quality assurance
systems as necessary, and all certifications required with respect to such
facilities have been filed. No fines or penalties were imposed on NMC as a
result of any of the FDA's actions relating to the import alerts or in
connection with the consent decree. Neither the import alerts nor previously
reported recalls of certain NMC products have had, nor are they expected to
have, a material effect on Grace's results of operations or financial position.
HEALTH CARE INVESTMENT. Grace has a 47% common equity interest in a
company that serves hospitals and other health care institutions by recruiting
nurses and other trained health care personnel and placing them on temporary
assignments throughout the United States. Grace also owns preferred stock of
the company and op-
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tions, exercisable commencing in 1994, to acquire the balance of such
company's common equity.
See "Strategic Restructuring" above for information concerning 1993 and
early 1994 transactions involving Grace's health care business.
OTHER OPERATIONS
THERMAL AND EMISSION CONTROL SYSTEMS. In 1993, Grace combined its web
processing equipment business and its air emission control catalysts and systems
business to form a new product line in thermal and emission control systems,
named "Grace TEC Systems". The principal products currently marketed by this
product line are (a) air flotation dryers and auxiliary web processing equipment
for the printing, coating and converting industries, and (b) air emission
control catalysts and systems to control volatile organic compounds, carbon
monoxide and nitrogen oxides emissions from power generation, industrial and
automotive sources.
DISCONTINUED OPERATIONS. In the fourth quarter of 1992, Grace classified
Colowyo Coal Company ("Colowyo") as a discontinued operation. Colowyo, a
partnership wholly owned by Grace, operates the largest surface coal mine in
Colorado under federal and state leases covering proven and/or probable surface
reserves of approximately 195 million tons of low-sulfur coal.
In the second quarter of 1993, Grace classified as discontinued operations
its remaining non-core businesses, including Grace Cocoa, an international
producer and supplier of high-quality intermediate cocoa and chocolate products
to the bakery, confectionery, dairy and beverage industries; Grace's battery
separators business; and certain engineered materials businesses, principally
printing products, electromagnetic radiation control and material technology
businesses.
Grace is actively pursuing the divestment of these discontinued operations
and those referred to under "Strategic Restructuring" above. See Notes 3 and 6
to Grace's Consolidated Financial Statements in the Financial Supplement and
"Strategic Restructuring" for additional information.
RESEARCH ACTIVITIES
Grace engages in active research and development programs directed toward
the development of new products and processes and the improvement of, and
development of new uses for, existing products and processes. Research is
carried out by divisional laboratories in the United States, Europe and Japan
and by the Corporate Research Division, which has facilities in Columbia,
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Maryland; Lexington, Massachusetts and Atsugi, Japan. The Research Division's
activities focus on Grace's core product lines and include specialty polymers;
biomedical devices; catalysis; construction materials; photopolymers; specialty
packaging; and process engineering, principally involving the development of
technologies to manufacture chemical specialties and biomedical products. As
part of Grace's commitment to focus resources on core businesses, corporate
research programs for the core product lines are being increased, while funding
in support of non-core businesses and discontinued operations is being
eliminated. In addition, product line and corporate research programs are being
integrated and concentrated on key projects.
Research and development expenses relating to continuing operations
amounted to $135 million in 1993, $130 million in 1992 and $128.1 million in
1991 (including expenses incurred in funding external research projects). The
amount of research and development expenses relating to government- and
customer-sponsored projects (as opposed to projects sponsored by Grace) is not
material.
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
In constructing and operating its facilities, Grace incurs capital and
operating expenditures relating to the protection of the environment, as well as
costs to remediate previously contaminated properties. Costs incurred to
operate and maintain environmental facilities and dispose of hazardous and
non-hazardous wastes with respect to continuing operations were $45 million in
1993, $56 million in 1992 and $38 million in 1991, and are estimated to be $50
million and $54 million in 1994 and 1995, respectively. Grace's capital
expenditures for environmental control facilities relating to continuing
operations were approximately $20 million, $18 million and $17 million in 1993,
1992 and 1991, respectively, and are estimated to be $19 million and $23 million
during 1994 and 1995, respectively. Costs incurred to remediate previously
contaminated sites were $44 million, $35 million and $18 million in 1993, 1992
and 1991, respectively, and are estimated to be $44 million and $35 million in
1994 and 1995, respectively. Such expenditures have not had, and are not
expected to have, a material effect on Grace's other capital expenditures or on
its earnings or competitive position. See Note 11 to Grace's Consolidated
Financial Statements and "Management's Discussion and Analysis of Results of
Operations and Financial Condition" in the Financial Supplement.
Grace has established an Environmental, Health and Safety ("EHS") policy
and related programs that include specialized safety training for employees,
monitoring of the workplace environment, and training and guidance for employees
with respect to EHS regulatory compliance. These programs are supported by a
central EHS department organized in 1993. This department also audits oper-
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ating facilities and manages Grace's environmental remediation activities.
The Responsible Care program of the Chemical Manufacturers Association, in
which Grace's United States chemical operations have participated, has been
extended to Grace operations worldwide under the name "Commitment to Care". The
goal of this program is to promote best management practices in the areas of
product stewardship, employee health and safety, community awareness and
emergency response, process safety, distribution practices and pollution
prevention. Grace's EHS auditing program has also been expanded to include all
facilities worldwide; this program involves the onsite inspection of facilities
for compliance with applicable laws, as well as Grace's policies, standards and
guidelines.
See Item 3, "Legal Proceedings", in this Report, and "Management's
Discussion and Analysis of Results of Operations and Financial Condition" in the
Financial Supplement, for information concerning environmental proceedings to
which Grace is a party.
MATERIALS AND ENERGY
The availability and prices of the raw materials and fuels used by Grace
are subject to worldwide market conditions and governmental policies. On the
basis of existing arrangements, Grace does not anticipate any major disruptions
of its business in 1994 as a result of shortages of raw materials or energy.
Should shortages occur, their effect on Grace's operations would depend upon
their nature, duration and severity and consequently cannot be determined at
this time. However, arrangements have been made, and will continue to be made,
for long-term commitments for many of Grace's raw materials and fuel
requirements from primary sources of supply.
ITEM 2. PROPERTIES.
Grace operates chemical, manufacturing and other types of plants and
facilities (including office and other service facilities) throughout the world.
Grace considers its major operating properties to be in good operating condition
and suitable for their current use. Although Grace believes that the productive
capacity of most of its plants and other facilities is adequate for current
operations and foreseeable growth, it conducts ongoing, long-range forecasting
of its capital requirements to assure that additional capacity will be available
when and as needed (see information regarding Grace's capital expenditures on
page F-28 of the Financial Supplement). Accordingly, Grace does not anticipate
that its operations or income will be materially affected by the absence of
available capacity.
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Additional information regarding Grace's properties is set forth in Item 1
above, in Schedules V and VI on pages F-35 and F-36 of the Financial Supplement
and in Notes 1, 8 and 11 to Grace's Consolidated Financial Statements in the
Financial Supplement.
ITEM 3. LEGAL PROCEEDINGS.
ASBESTOS LITIGATION. Grace is a defendant in lawsuits relating to
previously sold asbestos-containing products and anticipates that it will be
named as a defendant in additional asbestos-related lawsuits in the future. At
year-end 1993, Grace was a defendant in approximately 38,100 asbestos-related
lawsuits representing approximately 56,700 claims (as compared to approximately
30,900 lawsuits and 53,000 claims at year-end 1992). 92 of the lawsuits pending
at year-end 1993 involved claims for property damage allegedly caused by the use
of asbestos-containing materials in the construction of buildings. The
plaintiffs in these lawsuits generally seek, among other things, to have the
defendants absorb the cost of removing, containing or repairing the
asbestos-containing materials in the affected buildings. The remaining
asbestos-related lawsuits involve claims for personal injury. In most of
Grace's asbestos-related lawsuits, it is one of many defendants.
Through year-end 1993, 120 asbestos property damage cases had been
dismissed with respect to Grace without payment of any damages or settlement
amounts; judgments were entered in favor of Grace in twelve cases; in six cases
(four of which are on appeal), Grace was held liable for a total of $68.3
million; and 131 property damage suits and claims had been settled by Grace for
a total of $300.0 million. Grace has recorded a receivable for the insurance
pro- ceeds it expects to receive in connection with these adverse verdicts and
settlements, as well as defense costs initially paid by Grace (see "Insurance
Litigation" below and Note 2 to Grace's Consolidated Financial Statements in the
Financial Supplement).
Included in the asbestos property damage lawsuits pending against Grace and
others at year-end 1993 are the following class actions: (1) a Pennsylvania
state court action (PRINCE GEORGE CENTER, INC. V. U.S. GYPSUM COMPANY, ET AL.,
Court of Common Pleas of Philadelphia County) covering all commercial buildings
in the United States leased in whole or in part to the United States government
on or after May 30, 1986; (2) an action, conditionally certified by the United
States Court of Appeals for the Fourth Circuit in September 1993 and pending in
the United States District Court for the District of South Carolina, covering
all public and private colleges and universities in the United States whose
buildings contain asbestos materials (CENTRAL WESLEYAN COLLEGE, ET AL. V. W. R.
GRACE, ET AL.); (3) an action (IN RE: ASBESTOS SCHOOL LITIGATION), brought in
1983 in the United States District Court for the Eastern District of
Pennsylvania, on behalf of all public and private elementary and secondary
schools in the United States
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that contain asbestos materials, which action has been scheduled for trial in
late 1994 on a limited number of issues; and (4) a purported class action
(ANDERSON MEMORIAL HOSPITAL, ET AL. V. W. R. GRACE & CO., ET AL.), filed in 1992
in the Court of Common Pleas for Hampton County, South Carolina, on behalf of
all entities that own, in whole or in part, any building containing asbestos
materials manufactured by Grace or one of the other named defendants, other than
buildings subject to the class action lawsuits described above and any building
owned by the federal or any state government.
The remaining asbestos lawsuits pending at year-end 1993 involved claims
for personal injury. Through year-end 1993, approximately 7,000 personal injury
lawsuits involving 17,900 claims had been dismissed with respect to Grace
without payment of any damages or settlement amounts (primarily on the basis
that Grace products were not involved), and approximately 11,300 such suits
involving 13,400 claims had been settled for a total of $52.2 million (see
"Insurance Litigation" below). In January 1993, in EDWARD M. CARLOUGH, ET AL.
V. AMCHEM PRODUCTS, INC., ET AL., the United States District Court for the
Eastern District of Pennsylvania conditionally certified a class of all future
asbestos personal injury claimants, including individuals who have been
occupationally exposed to asbestos-containing materials but who do not presently
allege asbestos-related injury. Although Grace is not among the defendants
named in the class action complaint, dissemination of the required class notice
may generate additional litigation against Grace.
In 1991, the Judicial Panel on Multi-District Litigation consolidated in
the United States District Court for the Eastern District of Pennsylvania, for
pre-trial purposes, all asbestos personal injury cases pending in the federal
courts (including approximately 7,000 cases against Grace). To date, no action
has been taken by the court handling the consolidated cases that would indicate
whether the consolidation will affect Grace's cost of disposing of these cases
or its defense costs.
Grace's ultimate exposure in respect of its asbestos-related lawsuits and
claims will depend on the extent to which its insurance will cover damages for
which it may be held liable, amounts paid in settlement and litigation costs.
While (a) Grace's insurance carriers have not acknowledged or have denied the
applicability of their insurance coverage to Grace's asbestos property damage
lawsuits and claims (except as discussed below under "Insurance Litigation"),
(b) Grace is currently in litigation with certain carriers concerning the
applicability and extent of its insurance coverage and (c) the resolution of
certain issues, primarily relating to the availability of coverage for specific
years, will require further judicial proceedings, Grace believes that its
insurance will cover a substantial portion of any damages, settlement amounts
and litigation costs related to its asbestos litigation and
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<PAGE>
claims. Consequently, Grace believes that the resolution of its asbestos
litigation will not have a material adverse effect on its consolidated financial
position or results of operations. See "Insurance Litigation" below and Note 2
to Grace's Consolidated Financial Statements in the Financial Supplement for
additional information.
ENVIRONMENTAL AND OTHER PROCEEDINGS. Grace (together with other companies)
has been designated a "potentially responsible party" ("PRP") by the United
States Environmental Protection Agency ("EPA") with respect to absorbing the
costs of investigating and remediating pollution at various sites. Grace has
not incurred any material liability with respect to sites as to which such
proceedings have been concluded by agreement with the EPA.
At year-end 1993, proceedings were pending with respect to approximately 35
sites as to which Grace has been designated a PRP. Although federal law
provides that all PRPs may be held jointly and severally liable for the costs of
investigation and remediation of a site, after consideration of the liabilities
of other PRPs with respect to these sites and their respective levels of
financial responsibility, Grace believes that the amount recorded in its
Consolidated Financial Statements for environmental remediation is adequate to
cover its exposure with respect to these sites (see Note 11 to the Consolidated
Financial Statements in the Financial Supplement for further information). In
addition, Grace is presently involved in litigation with its insurance carriers
seeking to hold them responsible for certain amounts for which Grace may be held
liable with respect to these sites. The outcome of such litigation, as well as
the amount of any recovery that Grace may receive in connection therewith, is
presently uncertain.
Grace is also involved in other litigation, including certain environmental
proceedings brought by federal, state and/or local government agencies and
private parties. No such litigation is expected to result in significant
monetary or other sanctions or in other material liabilities. However, as a
voluntary participant in the EPA Toxic Substances Control Act Compliance Audit
Program, Grace agreed to undertake a corporate-wide audit of compliance with
Section 8 of such Act and to pay a stipulated civil penalty for each study or
report that should have been, but was not, submitted to the EPA as required
under such Section. Although final review of the audit is not complete, Grace
believes it will be required to pay the EPA penalties aggregating from $250,000
to $400,000 for information discovered in the course of the audit. In addition,
Grace has voluntarily reported to the EPA violations of certain notification and
related requirements under such Act, and it is anticipated that penalties will
be assessed against Grace in connection therewith; the amount of such penalties
cannot be determined at this time. For additional information, see Note 2 to
Grace's Consolidated Financial Statements in the Financial Supplement.
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In addition, in April 1993, the United States Department of Justice filed
suit against Grace in the United States District Court for the District of
Montana, Great Falls Division, alleging certain violations of the Clean Air Act
in connection with the demolition of a mill in Libby, Montana during late 1991
and early 1992. The complaint seeks damages of up to $25,000 per day for each
of seven alleged violations and injunctive relief against future violations, and
the Department of Justice previously informed Grace that it might seek penalties
of up to $3.3 million in connection therewith. However, subject to certain
conditions, Grace and the Department of Justice have agreed in principle to
settle this matter upon the payment by Grace of penalties substantially lower
than the amount initially contemplated by the Department of Justice.
Further, Hatco Corporation ("Hatco"), which purchased the assets of a Grace
chemical business in 1978, previously instituted a lawsuit against Grace in the
United States District Court for the District of New Jersey seeking recovery of
cleanup costs for waste allegedly generated at a New Jersey facility during the
period of Grace's ownership. Grace has also filed a lawsuit against its
insurance carriers seeking indemnity against any damages assessed against Grace
in the underlying lawsuit, as well as defense costs. In decisions rendered
during 1993, the Court ruled that Grace is responsible for a substantial portion
of Hatco's costs. In an earlier decision, the Court had resolved, in a manner
favorable to Grace, certain legal issues regarding Grace's right to insurance
coverage; however, the ultimate liability of Grace's insurance carriers will be
determined at trial. Remedial costs, and Grace's share of such costs, will be
determined once ongoing site investigations are completed and a remediation plan
is approved by the State of New Jersey, which is not expected to occur before
the latter part of 1994. As a result of the above factors, neither the amount
that Grace may be required to pay Hatco, nor the amount that Hatco may have to
absorb, nor the amount of Grace's recoveries from its insurance carriers can be
reliably estimated at this time. However, based on its investigation to date,
Grace believes that the ultimate resolution of this matter will not have a
material effect on its financial condition.
INSURANCE LITIGATION. Grace is involved in litigation with certain
insurance carriers with respect to asbestos-related claims and environmental
liabilities. Its asbestos-related insurance actions consist of two cases styled
MARYLAND CASUALTY CO. V. W. R. GRACE & CO., both pending in the United States
District Court for the Southern District of New York; STATE OF MISSISSIPPI V.
THE FLINTKOTE CO., ET AL., pending in the Circuit Court of Jackson County,
Mississippi; DAYTON INDEPENDENT SCHOOL DISTRICT V. UNITED STATES MINERAL
PRODUCTS COMPANY, ET AL., pending in the United States District Court for the
Eastern District of Texas; INDEPENDENT SCHOOL DISTRICT NO. 197, ET AL. V. W. R.
GRACE & CO. AND ACCIDENT & CASUALTY INSURANCE CO., ET AL., pending in the First
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Judicial District in Minnesota; THE COUNTY OF HENNEPIN V. CENTRAL NATIONAL
INSURANCE COMPANY, ET AL., pending in the Fourth Judicial District in Minnesota;
ECOLAB, INC. V. CENTRAL NATIONAL INSURANCE CO., pending in the District Court
for Ramsey County, Minnesota; AMERICAN EMPLOYERS' INSURANCE CO., AMERICAN
REINSURANCE CO., AND COMMERCIAL UNION INSURANCE CO., AND UNIGARD SECURITY
INSURANCE CO. V. W. R. GRACE & CO., CONTINENTAL CASUALTY CO., AND MARYLAND
CASUALTY CO., which is pending in the New York state courts; and W. R. GRACE &
CO.-CONN. V. ADMIRAL INSURANCE CO., ET AL., pending in the Superior Court of
California for the County of Los Angeles. Grace's insurance actions relating to
environmental liabilities consist of MARYLAND CASUALTY CO. V. W. R. GRACE & CO.,
pending in the United States District Court for the Southern District of New
York; and HATCO CORP. V. W. R. GRACE & CO.-CONN., pending in the United States
District Court for the District of New Jersey. The relief sought by Grace in
these actions would provide insurance sufficient to cover Grace's estimated
exposure with respect to the actions' subject matter, including damages for
amounts previously expended by Grace to defend claims and satisfy judgments and
settlements (see Note 2 to Grace's Consolidated Financial Statements in the
Financial Supplement). The factual bases underlying these actions are the
nature of the underlying asbestos-related and environmental claims, the language
of the insurance policies sold by the carriers to Grace and the drafting history
of those policies.
In March 1991 (in one of the above asbestos-related cases involving
Maryland Casualty Co.), the United States District Court for the Southern
District of New York held that Grace's primary insurance carriers are obligated
to defend and indemnify Grace for damages (other than certain punitive damages),
settlement amounts and litigation costs with respect to asbestos-related
property damage and personal injury claims; in so holding, the Court determined
that coverage for property damage is triggered by the "discovery of damage"
during the period covered by the relevant policy. On September 1, 1993, the
United States Court of Appeals for the Second Circuit reversed the District
Court's ruling as to a "discovery of damage" trigger for such claims and,
instead, adopted a trigger based on the date of installation of
asbestos-containing materials. In January 1994, the United States Court of
Appeals for the Second Circuit granted Grace's petition for a rehearing
concerning the September 1, 1993 decision. The Second Circuit has requested
that the parties rebrief the issue of the trigger of coverage, which rebriefing
is scheduled to be concluded in April 1994. It is not known whether oral
argument concerning this issue will be scheduled in connection with the
rehearing of this case.
In December 1991, the Mississippi Court referred to above also held that
Grace's primary and excess insurance carriers are obligated to defend and
indemnify Grace, determining that, for purposes of insurance coverage, damage to
buildings from asbestos-containing products occurs at the time such products are
put in place and that the damage continues as long as the building contains the
products
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(referred to as a "continuous trigger"). In November 1992, the Minnesota court
referred to above reached a similar decision in interpreting a Grace insurance
policy.
In 1993, Grace received $74.6 million under settlements with insurance
carriers, in reimbursement for amounts previously expended by Grace in
connection with asbestos-related litigation. These settlements also provide for
future reimbursements of $114.0 million. In early 1994, Grace settled with two
additional insurance carriers and received approximately $88.8 million under
such settlements. Prior to 1993, Grace received payments totalling $97.7
million from insurance carriers ($30.9 million prior to 1991; $35.3 million in
1991 and $31.5 million in 1992), the majority of which represented the aggregate
remaining obligations owed to Grace by those carriers for primary-level
insurance coverage written for the period June 30, 1962 through June 30, 1987.
As a result of the payments received in 1990 and 1991, insurance litigations
were dismissed as to the primary-level product liability insurance coverage
previously sold by the relevant insurers to Grace; however, litigations continue
as to certain other primary- and excess-level carriers.
Grace continues to be involved in litigation with certain of its insurance
carriers, including an affiliated group of carriers, that had agreed to a
settlement and had made a series of payments thereunder during 1993. The group
of carriers subsequently notified Grace that it would not honor the agreement
(which had not been executed) due to the September 1, 1993 decision of the
United States Court of Appeals for the Second Circuit referred to above. Grace
believes that the settlement agreement is binding and initiated action to
enforce the settlement agreement. In January 1994, the United States District
Court for the Eastern District of Texas held that the agreement is enforceable.
The affiliated group of carriers is expected to appeal this ruling to the United
States Court of Appeals for the Fifth Circuit.
See Note 2 to Grace's Consolidated Financial Statements, appearing in the
Financial Supplement for additional information.
FUMED SILICA PLANT LITIGATION. In January 1993, Grace initiated legal
action in the Belgian courts against the Flemish government to recover losses
resulting from the closing of Grace's fumed silica plant in Puurs, Belgium.
(See Note 8 to Grace's Consolidated Financial Statements in the Financial
Supplement for additional information). Grace is seeking damages in excess of
four billion Belgian francs (approximately $120 million at current exchange
rates), plus interest and loss of profits. There are also pending two separate
arbitrations, one involving the engineering company that was responsible for the
design and construction of the fumed silica plant, and the other involving a
claim by the company from which the plant had agreed to purchase hydrogen under
a long-term
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contract. The outcomes of these proceedings may affect the action
filed against the Flemish government.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
This Item is inapplicable, as no matters were submitted to a vote of the
Company's security holders during the fourth quarter of 1993.
EXECUTIVE OFFICERS
The Company's current executive officers are listed below. Executive
officers are elected to serve until the following annual meeting of the
Company's Board of Directors; the next such meeting is scheduled to be held on
May 10, 1994.
NAME AND AGE OFFICE FIRST ELECTED
------------ ------ -------------
J. P. Bolduc (54) President and 08/02/90
Chief Executive Officer 01/01/93
R. H. Beber (60) Executive Vice President 05/10/93
and General Counsel
F. Peter Boer (53) Executive Vice President 01/05/89
Hugh L. Carey (74) Executive Vice President 12/03/87
Jean-Louis Greze (62) Executive Vice President 05/10/93
Constantine L. Hampers (61) Executive Vice President 06/06/91
Donald H. Kohnken (59) Executive Vice President 12/07/89
James P. Neeves (56) Executive Vice President 09/06/90
Brian J. Smith (49) Executive Vice President 07/06/89
and Chief Financial Officer
All the above executive officers have been actively engaged in Grace's
business for the past five years.
Mr. Carey was a partner of Finley, Kumble, Wagner, Heine, Underberg,
Manley, Meyerson & Casey (a law firm) from 1983 to 1987; that firm is currently
involved in bankruptcy proceedings commenced subsequent to Mr. Carey's
departure. Mr. Carey is cooperating with the trustee in bankruptcy to secure a
plan of reorganization that would result in some limited liability for Mr.
Carey.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
Except as provided below, the information called for by this Item appears
in the Financial Supplement under the heading "Financial Summary" opposite the
caption "Other Statistics - Common shareholders of record" (page F-29); under
the heading "Quarterly Summary" opposite the captions "Dividends declared per
common share" and "Market price of common stock" (page F-25); and in Note 13 to
Grace's Consolidated Financial Statements (page F-19).
Each share of the Company's Common Stock has an attendant Common Stock
Purchase Right ("Right"). The Rights are not and will not become exercisable
unless and until certain events occur (as described below). Until such events
occur, the Rights will automatically trade with the Common Stock and separate
certificates for the Rights will not be distributed. The Rights will become
exercisable on the tenth business day (or such later business day as may be
fixed by the Company's Board of Directors) after a person or group (a) becomes
an "interested shareholder", as defined in Section 912 of the New York Business
Corporation Law (generally, a beneficial owner of 20% or more of the outstanding
voting stock), or (b) commences a tender offer or exchange offer that would
result in such person or group becoming an interested shareholder. The Rights
will not have any voting power at any time.
When the Rights become exercisable, each Right will initially entitle the
holder to buy from the Company one share of Common Stock for $87.50, subject to
adjustment in certain cases ("purchase price"). If, at any time after the
Rights become exercisable, (a) the Company is involved in a merger or other
business combination in which (i) the Company is not the surviving corporation
or (ii) any of the Common Stock is changed or converted into or exchanged for
stock or other securities of any other person or cash or other property, or (b)
50% of the Company's assets, cash flow or earning power is sold, each Right will
entitle the holder to buy a number of shares of common stock of the acquiring
company having a market value equal to twice the purchase price. Alternatively,
each right not owned by a person who becomes an interested shareholder would
become exercisable for Common Stock (or other consideration) having a market
value equal to twice the purchase price.
The Rights may be redeemed by the Company at $.025 per Right (payable in
cash, Common Stock or any other form of consideration deemed appropriate by the
Board) at any time through the tenth business day (or such later business day as
may be fixed by the Board) after a public announcement that a person or group
has become an interested shareholder; this right of redemption may be reinstated
if all interested shareholders reduce their holdings to
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<PAGE>
10% or less of the outstanding Common Stock. The Rights will expire in January
1997.
The Rights may be amended either before or after they become exercisable.
However, the basic economic terms of the Rights (such as the purchase and
redemption prices and the expiration date) cannot be changed.
ITEM 6. SELECTED FINANCIAL DATA.
The information called for by this Item appears under the heading
"Financial Summary" (page F-29 of the Financial Supplement) and in Notes 5, 6, 9
and 16 to Grace's Consolidated Financial Statements (pages F-12, F-13, F-17 and
F-22 of the Financial Supplement). In addition, Exhibit 12 to this Report (page
F-41 of the Financial Supplement) contains the ratio of earnings to fixed
charges and combined fixed charges and preferred stock dividends for Grace for
the years 1989-1993.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The information called for by this Item appears on pages F-30 to F-33 of
the Financial Supplement.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See the Index to Consolidated Financial Statements and Financial Statement
Schedules and Exhibits on page F-1 of the Financial Supplement.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
This item is inapplicable, as no such changes or disagreements have
occurred.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Except for information regarding the Company's executive officers (see page
20), the information called for by this Item is incorporated in this Report by
reference to the definitive Proxy Statement for the Company's 1994 Annual
Meeting of Shareholders, except for information not deemed to be "soliciting
material" or
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<PAGE>
"filed" with the Securities and Exchange Commission ("SEC"), information subject
to Regulations 14A or 14C under the Securities Exchange Act of 1934 ("Exchange
Act") or information subject to the liabilities of Section 18 of the Exchange
Act.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information called for by Items 11, 12 and 13 is incorporated in this
Report by reference to the definitive Proxy Statement for the Company's 1994
Annual Meeting of Shareholders, except for information not deemed to be
"soliciting material" or "filed" with the SEC, information subject to
Regulations 14A or 14C under the Exchange Act or information subject to the
liabilities of Section 18 of the Exchange Act.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
FINANCIAL STATEMENTS AND SCHEDULES. See the Index to Consolidated
Financial Statements and Financial Statement Schedules and Exhibits on page F-1
of the Financial Supplement.
REPORTS ON FORM 8-K. The Company filed no Reports on Form 8-K during the
fourth quarter of 1993.
EXHIBITS. The exhibits to this Report are listed below. Other than
exhibits that are filed herewith, all exhibits listed below are incorporated
herein by reference. Exhibits indicated by an asterisk (*) are the management
contracts and compensatory plans, contracts or arrangements required to be filed
as exhibits to this Report.
EXHIBIT WHERE LOCATED
------- -------------
Certificate of Incorporation of Exhibit 3 to Form 8-K
W. R. Grace & Co., as amended (filed 6/9/88)
By-laws of W. R. Grace & Co., as Exhibit 3.2 to Form 10-K
amended (filed 3/26/93)
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<PAGE>
Indenture dated as of Septem- Exhibit 4.2 to Form 10-K
ber 29, 1992 among W. R. Grace (filed 3/26/93)
& Co.-Conn., W. R. Grace & Co.
and Bankers Trust Company
Indenture dated as of January Exhibit 4.4 to Form 10-K
28, 1993 among W. R. Grace (filed 3/26/93)
& Co.-Conn., W. R. Grace & Co.
and NationsBank of Georgia, N.A.
Credit Agreement dated as of Exhibit 4.2 to Form 8-K
September 1, 1992 among W. R. (filed 9/26/92)
Grace & Co., W. R. Grace & Co.-
Conn. and the Several Banks Parties
thereto and Chemical Bank, as Agent
Amended and Restated Rights Exhibit to Amendment on
Agreement dated as of June 7, Form 8 to Application for
1990 between W. R. Grace & Co. Registration on Form 8-B
and Manufacturers Hanover Trust (filed 6/19/90)
Company
W. R. Grace & Co. Executive Exhibit 19(f) to Form
Salary Protection Plan, as 8-K (filed 6/9/88)*
amended
W. R. Grace & Co. 1981 Stock Exhibit 28(a) to Form
Incentive Plan, as amended 10-Q (filed 8/13/91)*
W. R. Grace & Co. 1986 Stock Exhibit 28(b) to Form
Incentive Plan, as amended 10-Q (filed 8/13/91)*
W. R. Grace & Co. 1989 Stock Exhibit 28(c) to Form
Incentive Plan, as amended 10-Q (filed 8/13/91)*
Forms of Stock Option Agreements Exhibit 10(h) to Form
10-K (filed 3/28/92)*
Forms of Restricted Share Award Exhibit 10(i) to Form
Agreements 10-K (filed 3/28/92)*
Information Concerning W. R. Pages 10 and 11 of Proxy
Grace & Co. Incentive Compen- Statement (filed 4/10/93)*
sation Program and Deferred
Compensation Program
W. R. Grace & Co. Long-Term Exhibit 10(l) to Form
Incentive Plan 10-K (filed 3/29/91)*
W. R. Grace & Co. Retirement Exhibit 10(o) to Form
Plan for Outside Directors, as 10-K (filed 3/28/92)*
amended
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<PAGE>
Employment Agreement dated August Exhibit 10(r) to Form
7, 1989 between W. R. Grace & Co. 10-K (filed 3/29/91)*
and Joseph R. Wright, Jr.
Employment Agreement dated Exhibit 10(x) to Form
as of April 1, 1991 between 10-K (filed 3/28/92)*
W. R. Grace & Co.-Conn. and
Constantine L. Hampers, as
amended
Housing Loan Agreement dated Exhibit 10(q) to Form
as of August 1, 1987 between 10-K (filed 3/29/88);
W. R. Grace & Co. and J. P. Exhibit 19(i) to Form
Bolduc, related Amendment and 8-K (filed 6/9/88)*
Assignment dated May 10, 1988
Employment Agreement dated Filed herewith*
August 1, 1993 between J. P.
Bolduc and W. R. Grace & Co.
Stock Option Agreement dated Filed herewith*
June 30, 1993 between David L.
Yunich and W. R. Grace & Co.
Stock Option Agreement dated Filed herewith*
June 30, 1993 between David L.
Yunich and W. R. Grace & Co.
National Medical Care, Inc. and Exhibit 10 (aa) to Form
Subsidiaries Executive Bonus 10-K (filed 3/28/92)*
Plans
Retirement Agreement between Exhibit 10.23 to Form 10-K
W. R. Grace & Co. and J. Peter (filed 3/26/93)*
Grace dated December 21, 1992
Executive Severance Agreement Exhibit 10.24 to Form 10-K
dated as of September 1, 1992 (filed 3/26/93)*
between W. R. Grace & Co. and
J. P. Bolduc
Executive Severance Agreement Exhibit 10.26 to Form 10-K
dated September 1, 1992 (filed 3/26/93)*
between W. R. Grace & Co. and
Constantine L. Hampers
Form of Executive Severance Exhibit 10.28 to Form 10-K
Agreement between W. R. Grace (filed 3/26/93)*
& Co. and others
- 25 -
<PAGE>
Consulting Agreement Exhibit 10.29 to Form 10-K
dated June 1, 1992 between (filed 3/26/93)*
W. R. Grace & Co. and
Kamsky Associates, Inc.
Incentive Compensation Agreement Exhibit 10.30 to Form 10-K
dated June 1, 1992 between (filed 3/26/93)*
National Medical Care, Inc.
and Kamsky Associates, Inc.
Consulting Agreement dated as of Filed herewith*
June 16, 1993 by and between
National Medical Care, Inc., The
Humphrey Group, Inc. and Gordon
J. Humphrey
Employment Termination Agreement Filed herewith*
dated June 30, 1993 between
J. R. Wright, Jr. and W. R.
Grace & Co.
W. R. Grace & Co. Supplemental Filed herewith*
Executive Retirement Plan, as
amended
Weighted Average Number of Filed herewith
Shares and Earnings Used in (in Financial Supplement
Per Share Computations to 10-K)
Computation of Ratio of Earnings Filed herewith
to Fixed Charges and Combined (in Financial Supplement
Fixed Charges and Preferred to 10-K)
Stock Dividends
Selected Portions of the 1993 Filed herewith
Annual Report to Shareholders (in Financial Supplement
of W. R. Grace & Co. to 10-K)
List of Subsidiaries of Filed herewith
W. R. Grace & Co.
Consent of Independent Accoun- Filed herewith
tants (in Financial Supplement
to 10-K)
Powers of Attorney Filed herewith
- 26 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this Report to be signed on its behalf by the undersigned, thereun-
to duly authorized.
W. R. GRACE & CO.
By /s/ B. J. Smith
_______________________
B. J. Smith
(Executive Vice President)
Date: March 28, 1994
Pursuant to the requirements of the Securities Exchange
Act of 1934, this Report has been signed below by the following
persons on behalf of the registrant and in the capacities indicated
on March 28, 1994.
SIGNATURE TITLE
--------- -----
J. P. Bolduc* President and Director
(Principal Executive Officer)
G. C. Dacey* R. C. Macauley* ]
E. W. Duffy* R. Milliken* ]
H. A. Eckmann* J. E. Phipps* ]
C. H. Erhart, Jr.* J. A. Puelicher* ]
J. P. Grace* E. W. Pyne* ] Directors
R. H. Grierson* D. W. Robbins, Jr.* ]
C. L. Hampers* G. S. Vance* ]
T. A. Holmes* D. L. Yunich* ]
G. J. Humphrey*
G. P. Jenkins*
/s/ B. J. Smith Executive Vice President
- ----------------------- (Principal Financial Officer)
(B. J. Smith)
/s/ R. N. Sukenik Vice President and Controller
- ----------------------- (Principal Accounting Officer)
(R. N. Sukenik)
____________
* By signing his name hereto, Robert B. Lamm is signing this docu-
ment on behalf of each of the persons indicated above pursuant to
powers of attorney duly executed by such persons and filed with
the Securities and Exchange Commission.
By /s/ Robert B. Lamm
------------------------
Robert B. Lamm
(Attorney-in-Fact)
- 27 -
<PAGE>
FINANCIAL SUPPLEMENT
to
Annual Report on Form 10-K for the Year Ended December 31, 1993
W. R. GRACE & CO. AND SUBSIDIARIES
Index to Consolidated Financial Statements
and Financial Statement Schedules and Exhibits
----------------------------------------------
PAGE
----
Report of Independent Accountants on Financial Statement Schedules. . F-2
Consent of Independent Accountants. . . . . . . . . . . . . . . . . . F-2
Report of Independent Accountants . . . . . . . . . . . . . . . . . . F-3
Consolidated Statement of Operations for the three years in the
period ended December 31, 1993 . . . . . . . . . . . . . . . F-4
Consolidated Statement of Cash Flows for the three years in the
period ended December 31, 1993 . . . . . . . . . . . . . . . F-5
Consolidated Balance Sheet as at December 31, 1993 and 1992 . . . . . F-6
Consolidated Statement of Shareholders' Equity for the three
years in the period ended December 31, 1993 . . . . . . . . F-7
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . F-8-F-24
Quarterly Summary - Unaudited . . . . . . . . . . . . . . . . . . . . F-25
Quarterly Statistics. . . . . . . . . . . . . . . . . . . . . . . . . F-26
Worldwide Operations. . . . . . . . . . . . . . . . . . . . . . . . . F-27
Capital Expenditures, Net Fixed Assets and Depreciation and
Lease Amortization . . . . . . . . . . . . . . . . . . . . . F-28
Financial Summary . . . . . . . . . . . . . . . . . . . . . . . . . . F-29
Management's Discussion and Analysis of Results of Operations
and Financial Condition. . . . . . . . . . . . . . . . . . . F-30
Financial Statement Schedules
Schedule II - Amounts receivable from officers and
employees exceeding $100,000 . . . . F-34
Schedule V - Property, plant and equipment . . . . . . . F-35
Schedule VI - Accumulated depreciation, depletion and
amortization of property, plant and
equipment . . . . . . . . . . . . . . . F-36
Schedule VIII - Valuation and qualifying account and
reserves . . . . . . . . . . . . . . . F-37
Schedule IX - Short-term borrowings . . . . . . . . . . . F-38
Schedule X - Supplementary income statement information F-39
Exhibit 11: Weighted Average Number of Shares and Earnings Used in
Per Share Computations . . . . . . . . . . . . . . . . . . . F-40
Exhibit 12: Computation of Ratio of Earnings to Fixed Charges and
Combined Fixed Charges and Preferred Stock Dividends . . . . F-41
The financial data listed above appearing in this Financial Supplement are
incorporated by reference herein. The Financial Statement Schedules should be
read in conjunction with the Consolidated Financial Statements and Notes
thereto. Financial statements of 50%- or less-owned persons and other persons
accounted for by the equity method have been omitted as provided in Rule 3-09 of
Securities and Exchange Commission Regulation S-X. Financial Statement
Schedules not included have been omitted because they are not applicable or the
required information is shown in the Consolidated Financial Statements or Notes
thereto.
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Shareholders and Board of Directors of W. R. Grace & Co.
Our audits of the consolidated financial statements referred to in our report
dated February 8, 1994 appearing on page 25 of the 1993 Annual Report to
Shareholders of W. R. Grace & Co. (which report and consolidated financial
statements are included in this Annual Report on Form 10-K) also included an
audit of the Financial Statement Schedules listed on page F-1 in the Index to
Consolidated Financial Statements and Financial Statement Schedules and Exhibits
of this Form 10-K. In our opinion, these Financial Statement Schedules present
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
PRICE WATERHOUSE
New York, New York
February 8, 1994
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Pros- pectuses
constituting parts of the Registration Statements on Form S-3 (Nos. 33-51041,
33-50983 and 33-25962) and Form S-8 (Nos. 33-7504, 33-15182 and 33-27960) of W.
R. Grace & Co. of our report dated February 8, 1994 appearing on page 25 of the
1993 Annual Report to Shareholders, which report is included at page F-3 of this
Report on Form 10-K. We also consent to the inclusion in this Report of our
report on the Financial Statement Schedules, which appears above.
PRICE WATERHOUSE
New York, New York
March 28, 1994
F-2
<PAGE>
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
Management is responsible for the preparation, as well as the integrity and
objectivity, of the consolidated financial statements and other financial
information included in this report. Such financial information has been
prepared in conformity with generally accepted accounting principles and
accordingly includes certain amounts that represent management's best estimates
and judgments.
For many years, management has maintained internal control systems to assist
it in fulfilling its responsibility for financial reporting, including careful
selection of personnel, segregation of duties, formal business, accounting and
reporting policies and procedures and an extensive internal audit function.
While no system can ensure elimination of all errors and irregularities, Grace's
systems, which are reviewed and modified in response to changing conditions,
have been designed to provide reasonable assurance that assets are safeguarded,
policies and procedures are followed and transactions are properly executed and
reported. The concept of reasonable assurance is based on the recognition that
there are limitations in all systems and that the cost of such systems should
not exceed the benefits to be derived.
The Audit Committee of the Board of Directors, which is comprised of
directors who are neither officers nor employees of nor consultants to Grace,
meets regularly with Grace's senior financial personnel, internal auditors and
independent accountants to review audit plans and results as well as the actions
taken by management in discharging its responsibilities for accounting,
financial reporting and internal control systems. The Audit Committee reports
its findings and also recommends the selection of independent accountants to the
Board of Directors. Grace's management, internal auditors and independent
accountants have direct and confidential access to the Audit Committee at all
times.
The independent accountants are engaged to conduct audits of and render a
report on the consolidated financial statements in accordance with generally
accepted auditing standards. These standards include a review of the systems of
internal controls and tests of transactions to the extent considered necessary
by the independent accountants for purposes of supporting their opinion as set
forth in their report.
B. J. Smith
Executive Vice President
and Chief Financial Officer
REPORT OF INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE February 8, 1994
1177 Avenue of the Americas
New York, NY 10036
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF W. R. GRACE & CO.
In our opinion, the consolidated financial statements appearing on pages F-4
through F-24 of this report present fairly, in all material respects, the
financial position of W. R. Grace & Co. and subsidiaries at December 31, 1993
and 1992, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1993, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Notes 5 and 16, the Company adopted new accounting standards
for income taxes and postretirement benefits in 1992.
F-3
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
W. R. GRACE & CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales and revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,408.4 $4,337.0 $4,386.6
Other income (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . 42.5 69.9 55.7
-------- -------- --------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,450.9 4,406.9 4,442.3
-------- -------- --------
Cost of goods sold and operating expenses. . . . . . . . . . . . . . . . 2,596.8 2,601.5 2,649.2
Selling, general and administrative expenses . . . . . . . . . . . . . . 1,029.7 1,028.0 982.5
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . 227.7 224.9 232.9
Interest expense (Note 9). . . . . . . . . . . . . . . . . . . . . . . . 81.5 90.0 115.4
Research and development expenses. . . . . . . . . . . . . . . . . . . . 135.0 130.0 128.1
Provision relating to asbestos-related insurance coverage (Note 2) . . . 159.0 -- --
Provision relating to a fumed silica plant (Note 8). . . . . . . . . . . -- 140.0 --
-------- -------- --------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,229.7 4,214.4 4,108.1
-------- -------- --------
Income from continuing operations before income taxes. . . . . . . . . . 221.2 192.5 334.2
Provision for income taxes (Note 5). . . . . . . . . . . . . . . . . . . 86.8 134.8 132.5
-------- -------- --------
Income from continuing operations. . . . . . . . . . . . . . . . . . . . 134.4 57.7 201.7
(Loss)/income from discontinued operations (Note 6). . . . . . . . . . . (108.4) (162.2) 16.9
-------- -------- --------
Income/(loss) before cumulative effect of accounting changes . . . . . . 26.0 (104.5) 218.6
Cumulative effect of accounting changes (Notes 5 and 16) . . . . . . . . -- (190.0) --
-------- -------- --------
Net income/(loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26.0 $ (294.5) $ 218.6
-------- -------- --------
-------- -------- --------
Earnings/(loss) per share:
Continuing operations. . . . . . . . . . . . . . . . . . . . . . . . . $ 1.46 $ .64 $ 2.31
Cumulative effect of accounting changes. . . . . . . . . . . . . . . . $ -- $ (2.12) $ --
Net earnings/(loss). . . . . . . . . . . . . . . . . . . . . . . . . . $ .28 $ (3.29) $ 2.50
Fully diluted earnings per share:
Continuing operations. . . . . . . . . . . . . . . . . . . . . . . . . $ 1.45 $ .62 $ 2.23
Cumulative effect of accounting changes. . . . . . . . . . . . . . . . $ -- $ --(1) $ --
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .28 $ --(1) $ 2.40
- ----------------------------------------------------------------------------------------------------------
THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, PAGES F-8 TO F-24, ARE INTEGRAL
PARTS OF THESE STATEMENTS.
<FN>
(1) NOT PRESENTED AS THE EFFECT IS ANTI-DILUTIVE.
</TABLE>
F-4
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DOLLARS IN MILLIONS 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Income from continuing operations before income taxes. . . . . . . . . . . . . . . . $ 221.2 $ 192.5 $ 334.2
Reconciliation to cash provided by operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . 227.7 224.9 232.9
Provision relating to asbestos-related insurance coverage. . . . . . . . . . . . . 159.0 -- --
Provision relating to a fumed silica plant . . . . . . . . . . . . . . . . . . . . -- 140.0 --
Changes in assets and liabilities, excluding businesses acquired/divested
and foreign exchange effect:
(Increase)/decrease in notes and accounts receivable, net . . . . . . . . . . . . (103.2) 48.4 171.2
Increase in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (50.5) (2.3) (30.5)
Proceeds from settlements of interest rate hedge agreements . . . . . . . . . . . 67.9 3.2 --
Net expenditures for asbestos-related insurance coverage. . . . . . . . . . . . . (103.1) (70.3) (54.9)
Increase in accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . 50.1 29.5 11.9
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (167.5) (207.0) (106.3)
------- ------- -------
Net pretax cash provided by operating activities of continuing operations. . . . . . 301.6 358.9 558.5
Net pretax cash provided by operating activities of discontinued operations. . . . . 44.2 178.3 161.3
------- ------- -------
Net pretax cash provided by operating activities . . . . . . . . . . . . . . . . . . 345.8 537.2 719.8
Income taxes paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (102.7) (98.9) (117.5)
------- ------- -------
Net cash provided by operating activities. . . . . . . . . . . . . . . . . . . . . . 243.1 438.3 602.3
------- ------- -------
INVESTING ACTIVITIES
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (309.6) (398.4) (447.0)
Businesses acquired in purchase transactions, net of cash acquired . . . . . . . . . (306.6) (61.2) (131.0)
Increase in net investment in discontinued operations. . . . . . . . . . . . . . . . (43.1) (101.5) (55.9)
Net proceeds from divestments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 464.8 221.2 366.4
Net proceeds from sale/leaseback transactions. . . . . . . . . . . . . . . . . . . . 27.2 -- --
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.4 2.2 (60.1)
------- ------- -------
Net cash used for investing activities . . . . . . . . . . . . . . . . . . . . . . . (151.9) (337.7) (327.6)
------- ------- -------
FINANCING ACTIVITIES (1)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (128.4) (125.9) (122.5)
Repayments of borrowings having original maturities in excess of three months. . . . (512.6) (274.0) (695.6)
Increase in borrowings having original maturities in excess of three months. . . . . 373.0 355.7 319.7
Net increase/(repayments) in borrowings having original maturities of less
than three months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155.7 (508.0) 271.3
Sale of limited partnership interest . . . . . . . . . . . . . . . . . . . . . . . . -- 297.0 --
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4 13.8 45.7
------- ------- -------
Net cash used for financing activities . . . . . . . . . . . . . . . . . . . . . . . (105.9) (241.4) (181.4)
------- ------- -------
Effect of exchange rate changes on cash and cash equivalents . . . . . . . . . . . . (0.5) (3.5) (2.2)
------- ------- -------
(Decrease)/increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . (15.2) (144.3) 91.1
------- ------- -------
Cash and cash equivalents, beginning of year . . . . . . . . . . . . . . . . . . . . 62.8 207.1 116.0
------- ------- -------
Cash and cash equivalents, end of year . . . . . . . . . . . . . . . . . . . . . . . $ 47.6 $ 62.8 $ 207.1
------- ------- -------
------- ------- -------
- -------------------------------------------------------------------------------------------------------------------
THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, PAGES F-8 TO F-24, ARE INTEGRAL
PARTS OF THESE STATEMENTS.
<FN>
(1) SEE NOTE 9 TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR SUPPLEMENTAL
INFORMATION RELATING TO NONCASH FINANCING ACTIVITIES.
</TABLE>
F-5
<PAGE>
CONSOLIDATED BALANCE SHEET
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DOLLARS IN MILLIONS, EXCEPT PAR VALUE December 31, 1993 1992
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . $ 47.6 $ 62.8
Notes and accounts receivable, net (Note 7). . . . . . . . . . . . . . . 657.4 690.4
Inventories (Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . 441.0 592.9
Net assets of discontinued operations, current (Note 6). . . . . . . . . 761.3 606.3
Deferred income taxes (Note 5) . . . . . . . . . . . . . . . . . . . . . 31.8 96.8
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 36.2 42.2
---------- ----------
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . 1,975.3 2,091.4
Properties and equipment, net (Note 8) . . . . . . . . . . . . . . . . . 1,454.1 1,707.9
Net assets of discontinued operations, noncurrent. . . . . . . . . . . . -- 108.5
Goodwill, less accumulated amortization of $53.2(1992--$50.1). . . . . . 481.6 298.6
Asbestos-related insurance receivable (Note 2) . . . . . . . . . . . . . 962.3 358.3
Other assets (Note 7). . . . . . . . . . . . . . . . . . . . . . . . . . 1,235.3 1,033.9
---------- ----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,108.6 $ 5,598.6
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt (Note 9) . . . . . . . . . . . . . . . . . . . . . . . . $ 532.6 $ 464.7
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 414.6 423.6
Income taxes (Note 5). . . . . . . . . . . . . . . . . . . . . . . . . . 126.5 158.1
Other current liabilities. . . . . . . . . . . . . . . . . . . . . . . . 621.9 593.2
Minority interests, current (Note 12). . . . . . . . . . . . . . . . . . 297.0 --
---------- ----------
TOTAL CURRENT LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . 1,992.6 1,639.6
Long-term debt (Note 9). . . . . . . . . . . . . . . . . . . . . . . . . 1,173.5 1,354.5
Other noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . 613.8 666.1
Deferred income taxes (Note 5) . . . . . . . . . . . . . . . . . . . . . 97.4 96.4
Liability for asbestos-related litigation (Note 2) . . . . . . . . . . . 713.7 --
Minority interests, noncurrent (Note 12) . . . . . . . . . . . . . . . . -- 297.0
---------- ----------
TOTAL LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . 4,591.0 4,053.6
---------- ----------
COMMITMENTS AND CONTINGENCIES (NOTES 2, 9 AND 11)
SHAREHOLDERS' EQUITY (NOTE 13)
Preferred stocks, $100 par value . . . . . . . . . . . . . . . . . . . . 7.4 7.5
Common stock, $1.00 par value; 300,000,000 shares authorized;
outstanding at December 31: 1993 - 93,465,000; 1992 - 89,892,000 . . . 93.5 89.9
Paid in capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 287.8 151.4
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,196.2 1,298.6
Cumulative translation adjustments . . . . . . . . . . . . . . . . . . . (67.3) (2.4)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . . . . 1,517.6 1,545.0
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY . . . . . . . . . . . . . . $ 6,108.6 $ 5,598.6
---------- ----------
---------- ----------
- --------------------------------------------------------------------------------------------------
</TABLE>
THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, PAGES F-8 TO F-24, ARE INTEGRAL
PARTS OF THESE STATEMENTS.
F-6
<PAGE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DOLLARS IN MILLIONS 1993 1992 1991
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
PREFERRED STOCKS
Balance, beginning of year . . . . . . . . . $ 7.5 $ 7.5 $ 7.5
Other. . . . . . . . . . . . . . . . . . . . (.1) -- --
-------- -------- --------
BALANCE, END OF YEAR . . . . . . . . . . . . 7.4 7.5 7.5
-------- -------- --------
Common Stock
Balance, beginning of year . . . . . . . . . 89.9 88.6 86.1
Conversion of notes and debentures . . . . . 2.8 -- --
Stock options and awards . . . . . . . . . . .7 1.3 2.5
Acquisition. . . . . . . . . . . . . . . . . .1 -- --
-------- -------- --------
BALANCE, END OF YEAR . . . . . . . . . . . . 93.5 89.9 88.6
-------- -------- --------
PAID IN CAPITAL
Balance, beginning of year . . . . . . . . . 151.4 120.1 61.6
Conversion of notes and debentures . . . . . 109.7 -- --
Stock options and awards . . . . . . . . . . 22.9 31.1 58.4
Acquisition. . . . . . . . . . . . . . . . . 3.7 -- --
Other. . . . . . . . . . . . . . . . . . . . .1 .2 .1
-------- -------- --------
BALANCE, END OF YEAR . . . . . . . . . . . . 287.8 151.4 120.1
-------- -------- --------
RETAINED EARNINGS
Balance, beginning of year . . . . . . . . . 1,298.6 1,719.0 1,622.9
Net income/(loss). . . . . . . . . . . . . . 26.0 (294.5) 218.6
Dividends paid . . . . . . . . . . . . . . . (128.4) (125.9) (122.5)
-------- -------- --------
BALANCE, END OF YEAR . . . . . . . . . . . . 1,196.2 1,298.6 1,719.0
-------- -------- --------
CUMULATIVE TRANSLATION ADJUSTMENTS
Balance, beginning of year . . . . . . . . . (2.4) 90.0 134.4
Translation adjustments . . . . . . . . . . (64.9) (92.4) (44.4)
-------- -------- --------
BALANCE, END OF YEAR . . . . . . . . . . . . (67.3) (2.4) 90.0
-------- -------- --------
TOTAL SHAREHOLDERS' EQUITY . . . . . . . . . $1,517.6 $1,545.0 $2,025.2
-------- -------- --------
-------- -------- --------
- -------------------------------------------------------------------------------
</TABLE>
THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, PAGES F-8 TO F-24, ARE INTEGRAL
PARTS OF THESE STATEMENTS.
F-7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
- -------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING AND FINANCIAL REPORTING POLICIES
- -------------------------------------------------------------------------------
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of W. R. Grace & Co. and all majority-owned companies (collectively
Grace). Intercompany transactions and balances are eliminated in consolidation.
Investments in affiliated companies (20% - 50% owned) are accounted for under
the equity method.
RECLASSIFICATIONS Certain amounts in the prior years' consolidated financial
statements have been reclassified to conform to the current year's presentation
and as required with respect to discontinued operations.
CASH EQUIVALENTS Cash equivalents consist of highly liquid instruments with
maturities of three months or less when purchased. The recorded amount
approximates fair value because of the short maturities of these investments.
INVENTORIES Inventories are stated at the lower of cost or market. Due to the
diversified nature of Grace's operations, several methods of determining cost
are used, including first-in/first-out, average and, for substantially all U.S.
chemical inventories, last-in/first-out. Market value for raw and packaging
materials is based on current cost and, for other inventory classifications, on
net realizable value.
PROPERTIES AND EQUIPMENT Properties and equipment are stated at the lower of
cost or net realizable value. Depreciation of properties and equipment is
generally computed using the straight-line method over the estimated useful
lives of the assets. Interest is capitalized in connection with major project
expenditures and amortized, generally on a straight-line basis, over the
estimated useful lives of the assets.
Fully depreciated assets are retained in properties and equipment and related
accumulated depreciation accounts until they are removed from service. In the
case of disposals, assets and related depreciation are removed from the accounts
and the net amount, less any proceeds from disposal, is charged or credited to
income.
GOODWILL AND OTHER AMORTIZATION Goodwill arises from certain purchase
transactions and is amortized using the straight-line method over appropriate
periods not exceeding 40 years. Patient relationships (see Note 7) are amortized
using the straight-line method over 17 years.
INCOME TAXES Effective January 1, 1992, Grace adopted Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." The
Statement requires the use of an asset and liability approach for the accounting
and financial reporting of income taxes.
FOREIGN CURRENCY TRANSLATION Foreign currency transactions and financial
statements (except for those relating to countries with highly inflationary
economies) are translated into U.S. dollars at current exchange rates, except
that revenues, costs and expenses are translated at average exchange rates
during each reporting period. The financial statements of subsidiaries located
in countries with highly inflationary economies must be remeasured as if the
functional currency were the U.S. dollar. The remeasurement creates translation
adjustments that are reflected in net income. The allocation for income taxes
included in the translation adjustments account in shareholders' equity was not
significant.
EARNINGS PER SHARE Primary earnings per share are computed on the basis of the
weighted average number of common shares outstanding. Fully diluted earnings per
share assume the conversion of convertible debentures (with an increase in net
income for the after-tax interest savings) and the issuance of common stock
equivalents related to stock options.
FINANCIAL INSTRUMENTS Grace enters into interest rate swaps, options and caps,
and foreign currency contracts to manage exposure to fluctuations in interest
and foreign currency exchange rates.
The differentials paid or received on interest rate agreements are accrued
and recognized as adjustments to interest expense; gains and losses realized
upon settlement of these agreements are deferred and amortized to interest
expense over a period relevant to the agreement if the underlying hedged
instrument remains outstanding, or immediately if the underlying hedged
instrument is settled. Premiums paid on caps are amortized to interest expense
over the term of the cap.
Gains and losses on foreign currency contracts offset gains and losses
resulting from the underlying transactions. Gains and losses on contracts that
hedge specific foreign currency commitments are deferred and recognized in net
income in the period in which the transaction is consummated. Gains and losses
on contracts that hedge net investments in foreign subsidiaries are recognized
in the cumulative translation adjustments account in shareholders' equity.
F-8
<PAGE>
- -------------------------------------------------------------------------------
2. ASBESTOS AND RELATED INSURANCE LITIGATION
- -------------------------------------------------------------------------------
Grace is a defendant in lawsuits relating to previously sold asbestos-containing
products and anticipates that it will be named as a defendant in additional
asbestos- related lawsuits in the future. At December 31, 1993, Grace was a
defendant in approximately 38,100 asbestos- related lawsuits representing
approximately 56,700 claims (versus approximately 30,900 lawsuits and 53,000
claims at December 31, 1992). Of the lawsuits pending at December 31, 1993, 92
(105 at December 31, 1992) involved claims for property damage allegedly caused
by the use of asbestos-containing materials in the construction of buildings.
The plaintiffs in these lawsuits generally seek, among other things, to have the
defendants absorb the cost of removing, containing or repairing the asbestos-
containing materials in the affected buildings. The remaining asbestos-related
lawsuits involved claims for personal injury. In most of these lawsuits, Grace
is one of many defendants.
PROPERTY DAMAGE LITIGATION
Through December 31, 1993, 120 asbestos property damage cases had been dismissed
with respect to Grace without payment of any damages or settlement amounts;
judgments were entered in favor of Grace in twelve cases; in six cases (four of
which are on appeal), Grace was held liable for a total of $68.3; and 131
property damage suits and claims had been settled by Grace for a total of
$300.0. Grace has recorded a receivable for the insurance proceeds it expects to
receive in connection with these adverse verdicts and settlements, as well as
for defense costs initially paid by Grace. (See "Insurance Litigation" below.)
On September 1, 1993, the U.S. Court of Appeals for the Second Circuit issued a
decision regarding the availability of insurance coverage with respect to
Grace's asbestos property damage litigation and claims. In January 1994, the
Court granted Grace's petition for a re- hearing concerning such decision.
Included in the asbestos property damage lawsuits pending against Grace and
others at year-end 1993 are the following purported class actions: (1) a
Pennsylvania state court action, certified in 1992, covering all commercial
buildings in the U.S. leased in whole or in part to the U. S. government on or
after May 30, 1986; (2) an action, certified by the U.S. Court of Appeals for
the Fourth Circuit in September 1993 and pending in a U.S. District Court in
South Carolina, covering all public and private colleges and universities in the
U. S. whose buildings contain asbestos materials; (3) an action, brought in
1983 in a U.S. District Court in Pennsylvania, on behalf of all public and
private elementary and secondary schools in the U.S. that contain asbestos
materials, which has been scheduled for trial in late 1994 on a limited number
of issues; and (4) an action filed in a South Carolina state court in 1992 on
behalf of all entities that own, in whole or in part, any building containing
asbestos materials manufactured by Grace or one of the other named defendants,
other than buildings subject to the class action lawsuits described above, as
well as any building owned by the federal or any state government.
PERSONAL INJURY LITIGATION
Through December 31, 1993, approximately 7,000 asbestos personal injury lawsuits
involving 17,900 claims had been dismissed with respect to Grace without payment
of any damages or settlement amounts (primarily on the basis that Grace products
were not involved), and approximately 11,300 such suits involving 13,400 claims
had been settled for a total of $52.2.
In January 1993, the U.S. District Court for the Eastern District of
Pennsylvania conditionally certified a class of all future asbestos personal
injury claimants, including individuals who have been occupationally exposed to
asbestos-containing materials but who do not presently allege asbestos-related
injury. Although Grace is not among the defendants named in the class action
complaint, dissemination of the required class notice may generate additional
litigation against Grace.
RANGE OF POTENTIAL EXPOSURE
Although personal injury cases are generally similar to each other (differing
only in the type of asbestos-related illness allegedly suffered by the
plaintiff), each property damage case is unique in that building type, size and
utilization and difficulty of abatement, if necessary, vary from structure to
structure; thus, the amounts involved in prior dispositions of property damage
cases are not necessarily indicative of the amounts that may be required to
dispose of such cases in the future. In addition, in property damage cases,
information regarding product identification on a building-by-building basis
(I.E., whether or not Grace products were actually used in the construction of
the building), the age, type, size and use of the building, the jurisdictional
history of prior cases and the court in which the case is pending provide the
only meaningful guidance as to potential future costs. However, much of this
information is not yet available in a majority of the property damage cases
currently pending against Grace. Accordingly, estimates of future costs to
dispose of these cases are, in most instances, based on incomplete information,
as well as assumptions that may not be accurate. Further, the filing of the
class actions and uncertainty with respect to the class certification in the
national elementary and secondary schools class action (see "Property Damage
Litigation" above) make it more difficult to reliably predict the costs Grace
will incur in disposing of asbestos-related litigation.
F-9
<PAGE>
Subject to the preceding qualifications (which Grace believes to be
significant), Grace has attempted to determine its future costs to dispose of
this litigation and has concluded that it is probable that the personal injury
and property damage cases pending at December 31, 1993 can be disposed of for a
total amount estimated at $813.7 (inclusive of legal fees and expenses), of
which Grace has recorded $713.7 as a noncurrent liability and $100.0 as a
current liability. This compares to the estimated liability (current and
noncurrent) of $848.0 at September 30, 1993, reflecting payments made in the
fourth quarter of 1993. In addition, Grace has recorded a receivable of $962.3
for the insurance proceeds it expects to receive in reimbursement for prior
payments and estimated future payments to dispose of asbestos- related
litigation. This compares to the receivable of $644.0 at September 30, 1993,
which reflected a $300.0 after-tax provision recorded in the third quarter of
1993 related to the Second Circuit Court of Appeals decision, while the fourth
quarter 1993 activity included the partial reversal of such provision, as well
as insurance proceeds received during the quarter. (See "Insurance Litigation"
below.)
Grace has also settled coverage disputes with certain insurance carriers.
These settlements provide for future payments of $114.0 and have been recorded
as notes receivable. Further, Grace continues to seek to recover the balance of
the payments it has made with respect to asbestos-related litigation from its
excess insurers and from insurance companies that sold insurance policies to
predecessor companies of Grace, as discussed below.
INSURANCE LITIGATION
Grace's ultimate exposure in respect of its asbestos- related lawsuits and
claims will depend on the extent to which its insurance will cover damages for
which it may be held liable, amounts paid in settlement and litigation costs. In
March 1991, the U. S. District Court for the Southern District of New York held
that Grace's primary insurance carriers are obligated to defend and indemnify
Grace with respect to damages (other than certain punitive damages), settlement
amounts and litigation costs in connection with both personal injury and
property damage asbestos claims. The court held that coverage for asbestos
property damage is triggered by the "discovery of damage" during the policy
period.
On September 1, 1993, the U.S. Court of Appeals for the Second Circuit issued
a decision regarding the availability of insurance coverage with respect to
Grace's asbestos litigation and claims. The Court of Appeals reversed the
District Court's ruling as to a "discovery of damage" trigger for asbestos
property damage claims and instead adopted a trigger based on the date of
installation of asbestos-containing materials. As a result of this decision,
Grace recorded an after-tax provision of $300.0 during the third quarter of 1993
to reflect the reduction in insurance coverage for its asbestos property damage
lawsuits and claims. In January 1994, the U.S. Court of Appeals for the Second
Circuit granted Grace's petition for a re-hearing concerning the September 1,
1993 decision. In view of the Court's action, during the fourth quarter of 1993,
Grace reversed $200.0 of the after-tax provision recorded in the third quarter.
In December 1991, the Circuit Court for Jackson County, Mississippi held that
Grace's primary and excess insurance carriers are obligated to defend and
indemnify Grace, holding that for the purposes of insurance coverage, damage to
buildings from asbestos-containing products occurs at the time such products are
put in place and that the damage continues as long as the building contains the
products (a "continuous trigger"). A similar decision was rendered by a
Minnesota state court in November 1992.
In 1993, Grace received $74.6 under settlements with insurance carriers, in
reimbursement for monies previously expended by Grace in connection with
asbestos-related litigation ; as mentioned above, these settlements also provide
for future reimbursements of $114.0. In early 1994, Grace settled with two
additional insurance carriers and received approximately $88.8 under such
settlements. Prior to 1993, Grace received payments totalling $97.7 from
insurance carriers, the majority of which represented the aggregate remaining
obligation owed to Grace by those carriers for primary level insurance coverage
written by them for the period June 30, 1962 through June 30, 1987.
Grace continues to be involved in litigation with certain of its insurance
carriers, including an affiliated group of carriers that had agreed to a
settlement and had made a series of payments under that agreement in 1993. The
group of carriers subsequently notified Grace that it would no longer honor the
agreement (which had not been executed) due to the September 1, 1993 U.S. Court
of Appeals decision discussed above. Grace believes that the settlement
agreement (which involves approximately $200.0 of the asbestos-related
receivable of $962.3 at December 31, 1993) is binding and initiated action to
enforce the settlement agreement. In January 1994, the U.S. District Court for
the Eastern District of Texas held the agreement to be enforceable. The
affiliated group of carriers is expected to appeal this ruling to the U.S. Court
of Appeals for the Fifth Circuit.
For the period October 20, 1962 through June 30, 1985--the most relevant
period for asbestos-related litigation--Grace purchased, on an annual basis, as
much as eight levels of excess insurance coverage. In general, excess policies
provide that when claims paid exhaust coverage at one level, the insured may
seek payment from the carriers at the next higher level. For that 23-year
period, the first six levels of excess insurance available from insurance
companies that Grace believes to be solvent (based primarily upon reports from a
leading independent insurance rating service) provide coverage in excess of $1.4
billion. If, however, the amount available in the first six levels should prove
to be insufficient, Grace has substantial additional coverage available in its
two remaining levels of excess coverage. In Grace's opinion, it is probable that
recoveries from its excess insurance coverage will be available to satisfy
Grace's asbestos- related exposure after giving effect to the provision recorded
in 1993. Consequently, Grace believes that the resolution of its
asbestos-related litigation will not have a material effect on its consolidated
financial position or results of operations.
F-10
<PAGE>
- -------------------------------------------------------------------------------
3. ACQUISITIONS, DIVESTMENTS AND STRATEGIC RESTRUCTURING
- -------------------------------------------------------------------------------
ACQUISITIONS
Businesses acquired in 1993 consisted primarily of health care and water
treatment businesses. Grace acquired Home Intensive Care, Inc. in the second
quarter of 1993 for approximately $129.0 in cash (inclusive of related costs)
and acquired other health care businesses during 1993 for an aggregate of
approximately $115.0 in cash and $3.8 in common stock. Grace also acquired Latin
America's largest water treatment business in the first quarter of 1993 for
approximately $57.6 in cash.
In July 1992, Grace completed the purchase of the common stock of Grace
Energy Corporation (Grace Energy) not owned by Grace for $77.3 in cash. See Note
6 for a discussion of 1993 divestment activity with respect to Grace Energy's
businesses. During 1992, Grace continued to expand its health care operations
through the acquisition of several businesses and facilities for consideration
totalling $44.2 in cash.
In 1991, Grace purchased the 25% minority interest in Grace Cocoa for $74.6
in cash and purchased an initial 47% common equity interest in a health care
service company. In addition, Grace Energy purchased its former partner's 50%
interest in Colowyo Coal Company (Colowyo) for $34.2 in cash plus related debt
repayments.
All of the above transactions were accounted for as purchases, and the
results of operations of the acquired businesses are included in the
consolidated financial statements from the respective dates of acquisition.
DIVESTMENTS
In 1993, Grace completed the sale of substantially all of the oil and gas
operations of Grace Energy, along with certain corporate investments; see Note 6
for further information. Other non-core businesses divested during 1993 included
a 50% interest in a Japanese chemical business and a food industry hygiene
services business for approximately $31.4 and $11.2, respectively.
In December 1992, Grace sold its organic chemicals business and related net
assets for approximately $100.0 in cash plus non-voting preferred stock of the
buyer. In March 1992, Grace sold its book, video and software distribution
business (Grace Distribution), which was classified as a discontinued operation
in the fourth quarter of 1991; see Note 6 for further information.
STRATEGIC RESTRUCTURING
The 1991 net gain on strategic restructuring of $6.1 (see Note 4) includes gains
of $108.8, inclusive of cumulative translation gains of $37.9, on the
disposition of certain non-core businesses and investments. Offsetting these
gains were expenses related to the relocation of Grace's corporate headquarters
from New York to Florida, provisions for litigation and certain environmental
and plant closure expenses and a reserve for the costs of restructuring
activities.
- -------------------------------------------------------------------------------
4. OTHER INCOME
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1993 1992 1991
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest . . . . . . . . . . . . . . . . . . $30.4 $12.5 $12.8
Net gain on strategic restructuring. . . . . -- -- 6.1
Equity in earnings of affiliated companies . 1.0 3.4 2.2
Other, net . . . . . . . . . . . . . . . . . 11.1 54.0 34.6
----- ----- -----
$42.5 $69.9 $55.7
----- ----- -----
----- ----- -----
- -------------------------------------------------------------------------------
</TABLE>
Other, net in 1993 represents principally the gain on the sale of a 50% interest
in a Japanese chemical business (see Note 3), offset by provisions for
environmental and plant closure expenses. Interest income in 1993 includes
$21.9 relating to the settlement of prior years' Federal income tax returns.
F-11
<PAGE>
- -------------------------------------------------------------------------------
5. INCOME TAXES
- -------------------------------------------------------------------------------
Effective January 1, 1992, Grace adopted SFAS No. 109, "Accounting for Income
Taxes," which applies an asset and liability approach requiring the recognition
of deferred tax assets and liabilities with respect to the expected future tax
consequences of events that have been recorded in the consolidated financial
statements and tax returns. If it is more likely than not that all or a portion
of a deferred tax asset will not be realized, a valuation allowance must be
recognized. As permitted under SFAS No. 109, Grace elected not to restate prior
periods' consolidated financial statements to give effect to SFAS No. 109.
Excluding the deferred tax benefit recognized upon the adoption of SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions," the
effect of the adoption of SFAS No. 109 on Grace's 1992 financial statements was
not material.
In the third quarter of 1993, Grace recorded the effects of the Omnibus Budget
Reconciliation Act of 1993 (OBRA), which was enacted in August 1993. Among
other things, OBRA increased the highest U.S. Federal corporate tax rate to 35%,
effective January 1, 1993. However, neither this increase in the U.S. Federal
corporate tax rate (from 34%), nor the other provisions of OBRA, had a material
effect on Grace's results of operations.
The components of income/(loss) from continuing operations before income taxes
are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1993 1992 1991
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic . . . . . . . . . . . . . . . . . . $125.4 $206.4 $124.2
Foreign. . . . . . . . . . . . . . . . . . . 95.8 (13.9) 210.0
------ ------ ------
$221.2 $192.5 $334.2
------ ------ ------
------ ------ ------
- -------------------------------------------------------------------------------
</TABLE>
The provision/(benefit) for income taxes allocated to continuing operations
consisted of:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1993 1992 1991
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal income taxes:
Current. . . . . . . . . . . . . . . . . . $ 53.6 $ 75.6 $ 41.3
Deferred . . . . . . . . . . . . . . . . . (28.7) (20.2) (5.0)
State and local income taxes - current. . . 19.1 16.5 15.3
Foreign income taxes:
Current . . . . . . . . . . . . . . . . . 44.4 57.6 68.4
Deferred . . . . . . . . . . . . . . . . . (1.6) 5.3 12.5
-------- ------ ------
$ 86.8 $134.8 $132.5
-------- ------ ------
-------- ------ ------
- -------------------------------------------------------------------------------
</TABLE>
At December 31, 1993 and 1992, the deferred tax assets and liabilities
consisted of the following items:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C>
Research and development expenses . . . . . . . . . . . . . $112.2 $106.7
Provision relating to asbestos-related expenses. . . . . . . 7.8 --
Postretirement benefits other than pensions. . . . . . . . . 92.1 94.1
Net operating loss carryforwards . . . . . . . . . . . . . . 42.6 52.2
Reserves not yet deductible for tax purposes . . . . . . . . 113.6 26.8
Tax credit carryforwards . . . . . . . . . . . . . . . . . . 84.9 95.8
Pension and insurance reserves . . . . . . . . . . . . . . . 26.2 23.0
Capitalized inventory costs and inventory reserve. . . . . . 19.4 17.7
State deferred taxes . . . . . . . . . . . . . . . . . . . . 25.2 21.4
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . 46.6 62.3
------ ------
Total deferred tax assets . . . . . . . . . . . . . . . . . 570.6 500.0
------ ------
Depreciation and amortization. . . . . . . . . . . . . . . . 141.5 141.6
Prepaid pension cost . . . . . . . . . . . . . . . . . . . . 87.7 71.4
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.0 6.4
------ ------
Total deferred tax liabilities. . . . . . . . . . . . . . . 233.2 219.4
------ ------
Deferred tax assets valuation allowance. . . . . . . . . . . 125.7 143.1
------ ------
Net deferred tax assets . . . . . . . . . . . . . . . . . . $211.7 $137.5
------ ------
------ ------
- -------------------------------------------------------------------------------
</TABLE>
F-12
<PAGE>
In connection with the adoption of SFAS No. 109 effective January 1, 1992,
Grace recognized a valuation allowance of $88.4, which was adjusted in 1992 and
1993. The valuation allowance relates to the uncertainty as to the realization
of certain deferred tax assets, including U.S. tax credit carryforwards, state
and local net operating loss carryforwards and net deferred tax assets, and net
operating loss carryforwards in certain foreign jurisdictions. Based upon
anticipated future results, Grace has concluded, after consideration of the
valuation allowance, that it is more likely than not that the net deferred tax
asset balance will be realized.
The items giving rise to deferred tax assets and liabilities at December 31,
1991 included depreciation, research and development costs that have been
capitalized for tax purposes, and other items the tax treatment of which does
not conform to their treatment for financial statement purposes.
At December 31, 1993, there are $59.9 of tax credit carryforwards with
expiration periods through 1998 and $25.0 of tax credit carryforwards with no
expiration period. Additionally, there are state and local and foreign net
operating loss carryforwards with a tax effect of $47.1 and various expiration
periods.
The U.S. Federal corporate tax rate reconciles to the effective tax rate for
continuing operations as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1993 1992 1991
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Federal corporate tax rate. . . . . . . . . . . . 35.0% 34.0% 34.0%
Increase/(decrease) in tax rate resulting from:
U.S. and foreign taxes on foreign operations. . . . . 7.3 10.8 6.6
Utilization of general business credits . . . . . . . (2.9) -- (2.7)
State and local income taxes, net of
Federal income tax benefit. . . . . . . . . . . . . 5.6 5.6 3.0
Valuation allowance for deferred tax assets . . . . . -- 26.3 --
Impact of U.S. and foreign tax rate changes
on deferred taxes . . . . . . . . . . . . . . . . . (3.3) -- --
Other, net. . . . . . . . . . . . . . . . . . . . . . (2.5) (6.7) (1.3)
---- ---- ----
Effective tax rate . . . . . . . . . . . . . . . . . . 39.2% 70.0% 39.6%
---- ---- ----
---- ---- ----
- -------------------------------------------------------------------------------
</TABLE>
U.S. and foreign taxes have not been provided on approximately $444.0 of
undistributed earnings of certain foreign subsidiaries, as such earnings are
being retained indefinitely by such subsidiaries for reinvestment. The
distribution of these earnings would result in additional foreign withholding
taxes of approximately $26.3 and additional U.S. Federal income taxes to the
extent they are not offset by foreign tax credits, but it is not practicable to
estimate the total tax liability that would be incurred upon such a
distribution.
- -------------------------------------------------------------------------------
6. DISCONTINUED OPERATIONS
- -------------------------------------------------------------------------------
COCOA, BATTERY SEPARATORS AND ENGINEERED MATERIALS AND SYSTEMS
In the second quarter of 1993, Grace classified as discontinued operations its
cocoa and battery separators businesses; certain engineered materials
businesses, principally its printing products, electromagnetic radiation control
and material technology businesses (collectively EMS); and other non-core
businesses pending their divestment. A provision of $105.0 (net of an applicable
tax benefit of $22.3) was recorded in the second quarter of 1993, which includes
the loss expected on the divestment of these businesses, their anticipated net
operating results and a $15.7 provision for interest expense allocated to the
discontinued operations through their expected dates of divestment.
GRACE ENERGY
During the first and second quarters of 1993, Grace sold substantially all the
oil and gas operations of Grace Energy, which was classified as a discontinued
operation in 1992, for net cash proceeds of $386.0, which was consistent with
prior estimates. The loss from discontinued operations in 1992 included a
provision of $155.0 (net of an applicable tax benefit of $81.8) relating to the
losses expected on the divestment of Grace Energy's operations. Grace is
pursuing the divestment of Colowyo, a partnership wholly owned by Grace Energy,
and expects to conclude such a transaction in 1994. Grace is in the process of
liquidating the remaining miscellaneous assets and liabilities of Grace Energy's
oil and gas operations.
GRACE DISTRIBUTION AND OTHER
As mentioned above, in the second quarter of 1993, Grace classified as
discontinued operations certain non-core businesses, which include its animal
genetics and Caribbean fertilizer operations, the operating results and net
assets of which are included under "Other" in the following tables. In 1992,
Grace classified as discontinued operations certain corporate investments,
including Grace's minority interests in Canonie Environmental Services Corp. and
Grace-Sierra Horticultural Products Company. In December 1993, Grace completed
the sale of these minority interests for total proceeds of $41.3. Grace is
pursuing the sale of the remaining non-core businesses and corporate investments
and expects to conclude such transactions in 1994.
The loss from discontinued operations in 1992 included an after-tax provision
of $12.1 relating to the loss associated with the sale of Grace's remaining
Mexican- style restaurant operation. In March 1992, Grace completed the sale of
Grace Distribution for $97.8 in cash and notes.
F-13
<PAGE>
Operating results of Grace's discontinued operations subsequent to their
classification as such have been consistent with amounts originally estimated
and are recorded against established reserves. Operating results prior to
classification as discontinued operations and sales and revenues for the three
years ended December 31, 1993, 1992 and 1991 were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
1993 1992 1991
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
COCOA
Sales and revenues . . . . . . . . . . . . . . . . . . . $ 635.8 $ 683.5 $ 705.0
------- ------- -------
(Loss)/income from operations before taxes (1) . . . . . $ (5.6) $ 1.8 $ 28.6
Income tax benefit/(provision) . . . . . . . . . . . . . 1.0 .4 (11.8)
------- ------- -------
(Loss)/income from discontinued operations . . . . . . . $ (4.6) $ 2.2 $ 16.8
------- ------- -------
- -----------------------------------------------------------------------------------------
BATTERY SEPARATORS AND EMS
Sales and revenues . . . . . . . . . . . . . . . . . . . $ 387.9 $ 413.6 $ 401.7
------- ------- -------
Income from operations before taxes (1). . . . . . . . . $ 4.7 $ 29.1 $ 23.7
Income tax (provision) . . . . . . . . . . . . . . . . . (2.1) (10.1) (8.0)
------- ------- -------
Income from discontinued operations. . . . . . . . . . . $ 2.6 $ 19.0 $ 15.7
------- ------- -------
- -----------------------------------------------------------------------------------------
GRACE ENERGY
Sales and revenues . . . . . . . . . . . . . . . . . . . $ 234.8 $ 515.0 $ 479.2
------- ------- -------
(Loss) from operations before taxes (1). . . . . . . . . -- $ (11.1) $ (25.6)
Income tax benefit . . . . . . . . . . . . . . . . . . . -- 6.6 9.7
------- ------- -------
(Loss) from discontinued operations. . . . . . . . . . . -- $ (4.5) $ (15.9)
------- ------- -------
- -----------------------------------------------------------------------------------------
GRACE DISTRIBUTION
Sales and revenues . . . . . . . . . . . . . . . . . . . -- $ 178.0 $ 780.4
------- ------- -------
(Loss) from operations before taxes (1). . . . . . . . . -- $ (2.8) (.1)
Income tax benefit . . . . . . . . . . . . . . . . . . . -- .9 .1
------- ------- -------
(Loss) from discontinued operations. . . . . . . . . . . -- $ (1.9) $ --
------- ------- -------
- -----------------------------------------------------------------------------------------
OTHER
Sales and revenues . . . . . . . . . . . . . . . . . . . $ 69.7 $ 96.5 $ 102.4
------- ------- -------
(Loss) from operations before taxes (1). . . . . . . . . $ (1.7) $ (13.4) $ (2.7)
Income tax benefit . . . . . . . . . . . . . . . . . . . .3 3.5 3.0
------- ------- -------
(Loss)/income from discontinued operations . . . . . . . $ (1.4) $ (9.9) $ .3
------- ------- -------
Total operating results of discontinued operations . . . $ (3.4) $ 4.9 $ 16.9
Net pretax (loss) on disposals of operations . . . . . . (127.3) (255.1) --
Income tax benefit on disposals of operations. . . . . . 22.3 88.0 --
------- ------- -------
Total (loss)/income from discontinued operations . . . . . $(108.4) $(162.2) $ 16.9
------- ------- -------
------- ------- -------
- -------------------------------------------------------------------------------
<FN>
(1) REFLECTS AN ALLOCATION OF INTEREST EXPENSE BASED ON (A) A RATIO OF THE NET
ASSETS OF THE BUSINESSES CLASSIFIED AS DISCONTINUED OPERATIONS IN THE SECOND
QUARTER OF 1993 AS COMPARED TO GRACE'S TOTAL CAPITAL AND (B) GRACE'S INCREMENTAL
BORROWING RATE APPLIED TO BOTH THE EXPECTED PROCEEDS FROM THE DIVESTMENT OF
GRACE ENERGY AND TO THE NET ASSETS OF GRACE DISTRIBUTION THROUGH THE DATES OF
THEIR RESPECTIVE SALES, ASSUMING THAT AMOUNTS RECEIVED FROM THE DIVESTMENT OF
THESE BUSINESSES ARE USED TO REDUCE DEBT. THE ABOVE OPERATING RESULTS FOR THE
PERIODS PRIOR TO CLASSIFICATION AS DISCONTINUED OPERATIONS INCLUDE INTEREST
EXPENSE ALLOCATIONS OF $2.5, $38.6 AND $67.6 FOR 1993, 1992 AND 1991,
RESPECTIVELY.
</TABLE>
For financial reporting purposes, the assets, liabilities, results of
operations and cash flows of Grace Cocoa Associates, L.P. (LP) are included in
Grace's consolidated financial statements as a component of discontinued
operations, and the outside investors' interest in LP is reflected as a minority
interest in the Consolidated Balance Sheet. See Note 12 for a further discussion
of LP.
F-14
<PAGE>
Net assets of Grace's discontinued operations (excluding intercompany assets) at
December 31, 1993 were as follows:
<TABLE>
<CAPTION>
Battery
Separators Grace
Cocoa and EMS Energy Other Total
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Current assets . . . . . . . . . . $ 218.6 $ 114.3 $ 14.8 $ 54.4 $ 402.1
Properties and equipment, net. . . 170.3 157.2 134.0 38.8 500.3
Investments in and advances to
affiliated companies . . . . . . -- 4.8 4.1 40.2 49.1
Other noncurrent assets. . . . . . 41.8 25.4 11.4 47.0 125.6
-------- -------- -------- -------- --------
Total assets. . . . . . . . . . . $ 430.7 $ 301.7 $ 164.3 $ 180.4 $1,077.1
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Current liabilities. . . . . . . . $ 127.4 $ 38.9 $ 14.9 $ 23.1 204.3
Other noncurrent liabilities . . . 63.7 28.7 19.7 (.6) 111.5
-------- -------- -------- -------- --------
Total liabilities . . . . . . . . $ 191.1 $ 67.6 $ 34.6 $ 22.5 $ 315.8
-------- -------- -------- -------- --------
Net assets. . . . . . . . . . . . $ 239.6 $ 234.1 $ 129.7 $ 157.9 $ 761.3
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
- ----------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
7. OTHER BALANCE SHEET ITEMS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C>
NOTES AND ACCOUNTS RECEIVABLE
Trade receivables, less allowances of $49.7 (1992 - $38.3) . $ 545.7 $ 598.3
Other receivables, less allowances of $.6 (1992 -- $1.0) . . 111.7 92.1
------- -------
$ 657.4 $ 690.4
------- -------
------- -------
- -------------------------------------------------------------------------------
INVENTORIES
Raw and packaging materials. . . . . . . . . . . . . . . . . $ 111.4 $ 179.3
In process . . . . . . . . . . . . . . . . . . . . . . . . . 59.9 76.2
Finished products. . . . . . . . . . . . . . . . . . . . . . 243.3 324.7
General merchandise. . . . . . . . . . . . . . . . . . . . . 67.0 59.8
Less: Adjustment of certain inventories to a last-in/first
- -out (LIFO) basis. . . . . . . . . . . . . . . . . . . . . . (40.6) (47.1)
------- -------
$ 441.0 $ 592.9
------- -------
------- -------
- -------------------------------------------------------------------------------
OTHER ASSETS
Deferred income taxes. . . . . . . . . . . . . . . . . . . . $ 277.3 $ 137.1
Prepaid pension costs. . . . . . . . . . . . . . . . . . . . 224.2 229.2
Patient relationships, less accumulated amortization of
$96.5 (1992 -- $78.5). . . . . . . . . . . . . . . . . . . 196.4 184.8
Long-term receivables, less allowances of $13.4
(1992 -- $8.4) . . . . . . . . . . . . . . . . . . . . . . . 177.0 103.5
Deferred charges . . . . . . . . . . . . . . . . . . . . . . 110.4 108.1
Long-term investments. . . . . . . . . . . . . . . . . . . . 104.4 68.2
Investments in and advances to affiliated companies. . . . . 51.4 115.8
Patents and licenses . . . . . . . . . . . . . . . . . . . . 33.9 25.7
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . 60.3 61.5
------- -------
$1,235.3 $1,033.9
------- -------
------- -------
- -------------------------------------------------------------------------------
</TABLE>
During 1993 and 1992, Grace entered into agreements to sell up to $270.0 and
$345.0, respectively, of interests in designated pools of trade receivables. At
December 31, 1993 and 1992, $263.8 and $307.9, respectively, had been received
pursuant to such sales, which amounts are reflected as reductions to trade
accounts receivable. Included in the trade receivables sold at December 31, 1992
are $50.0 of trade receivables the sale of which has been reflected as a
reduction in net assets of discontinued operations.
Under the terms of these agreements, new interests in trade receivables are
sold as collections reduce previously sold trade receivables. There is no
recourse to Grace, nor is Grace required to repurchase any of the trade
receivables in the pools; if certain trade receivables in the pools prove to be
uncollectible, other trade receivables are substituted (to the extent
available). Costs related to these sales are expensed as incurred. There were
no gains or losses on these transactions.
Inventories valued at LIFO cost comprised 29.0% and 22.9% of inventories at
December 31, 1993 and 1992, respectively. Liquidation of prior years' LIFO
inventory layers in 1993, 1992 and 1991 did not materially affect cost of goods
sold in any of these years.
F-15
<PAGE>
- -------------------------------------------------------------------------------
8. PROPERTIES AND EQUIPMENT
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C>
Land . . . . . . . . . . . . . . . . . . . . . . . . . $ 51.3 $ 59.2
Buildings . . . . . . . . . . . . . . . . . . . . . . 636.1 801.3
Machinery, equipment and other . . . . . . . . . . . . 1,842.5 2,199.1
Projects under construction. . . . . . . . . . . . . . 247.9 231.4
--------- ---------
Properties and equipment, gross . . . . . . . . . . 2,777.8 3,291.0
Accumulated depreciation and amortization. . . . . . . (1,323.7) (1,583.1)
--------- ---------
Properties and equipment, net . . . . . . . . . . . $ 1,454.1 $ 1,707.9
--------- ---------
--------- ---------
- -------------------------------------------------------------------------------
</TABLE>
Interest costs have been incurred in connection with the financing of certain
assets prior to placing them in service. Interest costs capitalized in 1993,
1992 and 1991 were $7.4, $20.4 and $21.4, respectively.
Depreciation and amortization expense relating to properties and equipment
amounted to $189.2, $194.9 and $203.4 in 1993, 1992 and 1991, respectively.
Grace's rental expense for operating leases amounted to $63.8, $80.0 and $67.7
in 1993, 1992 and 1991, respectively. See Note 11 for information regarding
contingent rentals.
At December 31, 1993, minimum future payments for operating leases were:
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
1994 . . . . . . . . . . . . . . . . . . . . $ 59.4
1995 . . . . . . . . . . . . . . . . . . . . 50.2
1996 . . . . . . . . . . . . . . . . . . . . 41.9
1997 . . . . . . . . . . . . . . . . . . . . 35.4
1998 . . . . . . . . . . . . . . . . . . . . 28.9
Later years. . . . . . . . . . . . . . . . . 75.5
--------
Total minimum lease payments . . . . . . . . $ 291.3
--------
--------
- -------------------------------------------------------------------------------
</TABLE>
The above minimum lease payments include sublease income of $12.1 per year for
1994 through 1998 and a total of $53.6 in later years.
In 1992, a critical raw material supplier to Grace's fumed silica plant in
Belgium was effectively denied a previously promised permit for by-product
disposal, resulting in the shutdown of the supplier's plant. As a result, the
continued operation of Grace's plant would have required Grace to obtain other
suppliers and/or take other actions requiring significant additional investment.
Consequently, Grace closed its plant and in the third quarter of 1992 recorded a
one-time provision of $140.0, reflecting the entire net book value of the
facility and certain additional expenses. This provision could be offset in
part by recoveries from litigation, the renegotiation of certain contracts
relating to the plant and/or the sale of the plant. As of December 31, 1993,
Grace substantially completed the shutdown of this facility and believes the
amounts recorded are adequate to cover remaining contingencies.
F-16
<PAGE>
- -------------------------------------------------------------------------------
9. DEBT
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT - TERM DEBT
Commercial paper (3.6% and 4.1% weighted average interest
rate at year-end 1993 and 1992, respectively)(1) . . . . . $ 167.4 $ 25.0
Bank borrowings (4.3% weighted average interest rate at
year-end 1992) (1) . . . . . . . . . . . . . . . . . . . . -- 170.6
Current maturities of long-term debt . . . . . . . . . . . 9.1 50.7
Other short-term borrowings(2) . . . . . . . . . . . . . . 356.1 218.4
-------- --------
$ 532.6 $ 464.7
-------- --------
-------- --------
Long - Term Debt
Commercial paper (3.6% weighted average interest rate at
year-end 1993) (1) . . . . . . . . . . . . . . . . . . . . $ 30.8 --
Bank borrowings (3.6% and 4.3% weighted average interest
rate at year-end 1993 and 1992, respectively)(1) . . . . . 479.6 $ 510.0
7.4% Notes Due 2000(3) . . . . . . . . . . . . . . . . . . 300.0 --
7.75% Notes Due 2002(4). . . . . . . . . . . . . . . . . . 150.0 150.0
6.5% Notes Due 1995(5) . . . . . . . . . . . . . . . . . . 150.0 150.0
Sundry indebtedness with various maturities through 2003 . 72.2 87.4
Liquid Yield Option Notes (LYONs)(6) . . . . . . . . . . . -- 351.2
6.25% Convertible Subordinate Debentures Due 2002(7) . . . -- 150.0
Industrial revenue bonds with various maturities through
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . -- 6.6
-------- --------
1,182.6 1,405.2
Less amounts due within one year included in short-term debt 9.1 50.7
-------- --------
$1,173.5 $1,354.5
-------- --------
-------- --------
Full-year weighted average interest rate on total debt 5.5% 6.7%
- -------------------------------------------------------------------------------
<FN>
(1) UNDER ITS BANK REVOLVING CREDIT AGREEMENT, GRACE MAY BORROW UP TO $1,225.0
AT INTEREST RATES BASED UPON THE PREVAILING PRIME, FEDERAL FUNDS AND/OR
EURODOLLAR RATE. OF THE $1,225.0, APPROXIMATELY $715.0 IS AVAILABLE UNDER
A 364-DAY FACILITY EXPIRING SEPTEMBER 1, 1994, AND THE REMAINDER IS
AVAILABLE UNDER A THREE-YEAR FACILITY EXPIRING SEPTEMBER 1, 1995. AT
DECEMBER 31, 1993 AND 1992, BORROWINGS OF $63.9 AND $250.0, RESPECTIVELY,
WERE OUTSTANDING UNDER THE REVOLVING CREDIT AGREEMENT AND ARE INCLUDED IN
LONG-TERM BANK BORROWINGS ABOVE. AT DECEMBER 31, 1993, $613.9 WAS RESERVED
TO SUPPORT COMMERCIAL PAPER AND OTHER BANK BORROWINGS OUTSTANDING, LEAVING
NET UNUSED CREDIT FACILITIES OF $547.2. GRACE'S ABILITY TO BORROW THE
MAXIMUM AMOUNTS AVAILABLE UNDER THESE FACILITIES IS SUBJECT TO COMPLIANCE
WITH CERTAIN COVENANTS, WHICH INCLUDE MINIMUM NET WORTH REQUIREMENTS AND AN
INTEREST COVERAGE RATIO.
(2) REPRESENTS VARIOUS LINES OF CREDIT AND MISCELLANEOUS BORROWINGS, PRIMARILY
OF NON-U.S. SUBSIDIARIES.
(3) DURING THE FIRST QUARTER OF 1993, GRACE SOLD AT PAR $300.0 OF 7.4% NOTES
DUE 2000. INTEREST IS PAYABLE SEMIANNUALLY AND THE NOTES MAY NOT BE
REDEEMED PRIOR TO MATURITY.
(4) DURING THE THIRD QUARTER OF 1992, GRACE SOLD AT PAR $150.0 OF 7.75% NOTES
DUE 2002. INTEREST IS PAYABLE SEMIANNUALLY AND THE NOTES MAY NOT BE
REDEEMED PRIOR TO MATURITY.
(5) DURING THE FOURTH QUARTER OF 1992, GRACE SOLD $150.0 OF 6.5% NOTES DUE
1995 AT AN INITIAL PUBLIC OFFERING PRICE OF 99.758% OF PAR, TO YIELD 6.59%.
INTEREST IS PAYABLE SEMIANNUALLY AND THE NOTES MAY NOT BE REDEEMED PRIOR TO
MATURITY.
(6) GRACE REDEEMED IN FULL ALL OF ITS OUTSTANDING LIQUID YIELD OPTION NOTES
(LYONS) ($1,012.5 PRINCIPAL AMOUNT AT MATURITY; $371.1 CARRYING VALUE) ON
JULY 30, 1993. IN CONNECTION WITH THE REDEMPTION, APPROXIMATELY 31% OF
THE LYONS (APPROXIMATELY $309.6 PRINCIPAL AMOUNT, $113.5 CARRYING VALUE)
WERE CONVERTED INTO 2.8 MILLION SHARES OF W. R. GRACE & CO. COMMON STOCK.
THE REMAINDER OF THE LYONS WERE REDEEMED FOR $257.6 IN CASH.
(7) GRACE REDEEMED IN FULL ALL OF ITS OUTSTANDING 6.25% CONVERTIBLE SUBORDINATE
DEBENTURES DUE 2002 (6.25% DEBENTURES) ON SEPTEMBER 15, 1993. THE 6.25%
DEBENTURES WERE CONVERTIBLE INTO COMMON STOCK OF W. R. GRACE & CO. AT a
CONVERSION PRICE OF $42.125 PER SHARE. SUBSTANTIALLY ALL OF THE $150.0
PRINCIPAL AMOUNT OF THE 6.25% DEBENTURES OUTSTANDING IMMEDIATELY PRIOR TO
THE REDEMPTION DATE WAS REDEEMED FOR CASH (EQUAL TO THE PRINCIPAL AMOUNT
OUTSTANDING).
</TABLE>
Payment of substantially all of Grace's borrowings may be accelerated, and its
principal borrowing agreements terminated, upon the occurrence of a default
under certain other Grace borrowings.
Scheduled maturities of debt outstanding at December 31, 1993 are: 1994--$9.1;
1995--$166.3; 1996--$13.9; 1997--$6.1, and 1998--$4.4.
Interest expense for 1993, 1992 and 1991 amounted to $81.5, $90.0 and $115.4,
respectively. Interest payments made in 1993, 1992 and 1991 amounted to $102.5,
$166.8 and $263.9, respectively. By managing its interest rate exposure through
interest rate derivative agreements, Grace reduced interest expense for the
years ended December 31, 1993 and 1992 by $20.3 and $4.7, respectively. See
Note 10 for a further discussion of interest rate hedge agreements.
During the fourth quarter of 1993, Grace filed a registration statement with
the Securities and Exchange Commission covering $750.0 of debt and/or equity
securities that may be sold from time to time; the registration statement became
effective in January 1994.
F-17
<PAGE>
- -------------------------------------------------------------------------------
10. FINANCIAL INSTRUMENTS
- -------------------------------------------------------------------------------
INTEREST RATE SWAPS
Grace enters into interest rate hedge agreements to manage interest costs and
risks associated with changing interest rates; most of these agreements
effectively convert underlying fixed-rate debt into variable-rate debt based on
LIBOR. At December 31, 1993 and 1992, the notional principal amount of these
agreements totalled $1,250.0 and $1,035.0, respectively. At December 31, 1993,
Grace would have been required to pay $25.8 to settle these agreements,
representing the excess of carrying value over fair value, based on estimates
received from financial institutions. The fair value at December 31, 1992 was
not material. Due to previously settled agreements, Grace has unamortized gains
of $56.3 and $4.9 as of December 31, 1993 and 1992, respectively, which are
reflected as adjustments to interest expense over appropriate periods relevant
to the respective financial instruments.
FOREIGN CURRENCY CONTRACTS
Grace enters into a variety of short-term currency swaps, foreign exchange
contracts and options to manage its exposure to fluctuations in foreign currency
exchange rates. These contracts generally involve the exchange of one currency
for another at a future date. At December 31, 1993, Grace had a notional
principal amount of approximately $34.9 in contracts to buy or sell foreign
currency in the future. The carrying value at December 31, 1993 and 1992, which
approximated fair value based on exchange rates at December 31, 1993 and 1992,
was not significant.
OTHER FINANCIAL INSTRUMENTS
At December 31, 1993 and 1992, the carrying value of financial instruments such
as cash, short-term investments, trade receivables and payables and short- term
debt approximated their fair values, based on the short-term maturities of these
instruments. Additionally, the carrying value of both long-term investments and
receivables approximated fair values. Fair value is determined based on expected
future cash flows, discounted at market interest rates, and other appropriate
valuation methodologies. At December 31, 1993 and 1992, the fair value of
long-term debt was $1,216.4 and $1,400.9, respectively. Both periods include
approximately $510.0 of borrowings supported by the revolver agreement, for
which the carrying value approximated fair value. The fair value of debt is
determined by obtaining quotes from financial institutions.
Exposure to market risk on interest rate and foreign currency contracts
results from fluctuations in floating rate indices and currency rates,
respectively, during the periods in which the contracts are outstanding. The
counterparties to Grace's interest rate hedge agreements and currency exchange
contracts consist of a diversified group of major financial institutions. Grace
is exposed to credit risk to the extent of nonperformance by these
counterparties; however, management believes the risk of incurring losses due to
credit risk is remote. The notional amount of the instruments discussed above
reflected the extent of involvement in the instruments, but did not represent
its exposure to market risk. Considerable judgment is required to develop the
estimates of fair value; thus, the estimates provided above are not necessarily
indicative of the amounts that could be realized in a current market exchange.
- -------------------------------------------------------------------------------
11. COMMITMENTS AND CONTINGENT LIABILITIES
- -------------------------------------------------------------------------------
Grace is the named tenant or guarantor with respect to certain lease obligations
of previously divested businesses. The leases, some of which extend to 2015,
have future minimum lease payments aggregating $68.4. Grace is also the named
tenant or guarantor with respect to lease obligations having future minimum
lease payments of $43.7, as to which Channel Home Centers, Inc., a previously
divested business, has been released in bankruptcy; offsetting this is $39.7 of
future minimum rental income from subtenants. Grace continues to attempt to
sublease the remaining properties and believes its ultimate exposure is not
material.
Grace is the named tenant with respect to lease obligations with future
minimum lease payments of $19.5 that have been assigned to Hermans, a previously
divested business currently operating under Chapter 11 of the Federal Bankruptcy
Code. Hermans has advised Grace that it intends to continue to occupy premises
under leases with future minimum payments of $17.9 and is negotiating
termination agreements as to the remainder. Grace believes its ultimate exposure
under these leases is not material, as Hermans is performing on its current
lease obligations and expects to emerge from bankruptcy as a viable company.
Additionally, Grace is fully indemnified by other parties for any losses it may
incur under these leases.
In 1992 and 1993, Grace provided The Restaurant Enterprises Group, Inc. (REG)
with various forms of financial support, including a letter of credit support
facility to assist REG in meeting certain liquidity and other financial
requirements. During 1993, REG was reorganized, and in January 1994 the letter
of credit was canceled and Grace received $42.8 in exchange for all of the REG
securities held by Grace. The reorganized REG (now named Family Restaurants,
Inc.) has agreed to indemnify Grace with respect to leases entered into by REG's
subsidiaries under which Grace remains contingently liable. At December 31,
1993, these leases have future minimum lease payments of $72.4. Grace believes
any risk of loss from these contingent liabilities is remote.
F-18
<PAGE>
Grace is subject to loss contingencies resulting from environmental laws and
regulations, which include obligations to remove or mitigate the effects on the
environment of the disposal or release of certain wastes and other substances at
various sites. Grace accrues for anticipated costs associated with investigatory
and remediation efforts where an assessment has indicated that a loss is
probable and can be reasonably estimated. At December 31, 1993, Grace's accrued
liability for environmental remediation totalled approximately $160.0.
The measurement of the liability is evaluated quarterly based on currently
available information, including the progress of remedial investigation at each
site, the current status of discussions with regulatory authorities regarding
the method and extent of remediation at each site, and the extent of
apportionment of costs among other potentially responsible parties. As some of
these matters are decided (the outcome of which is subject to various
uncertainties) and/or new sites are assessed and costs can be reasonably
estimated, Grace will review and analyze the need for additional accruals.
- -------------------------------------------------------------------------------
12. Minority Interests
- -------------------------------------------------------------------------------
In December 1992, LP, formerly a general partnership named Grace Cocoa that was
wholly owned by two Grace entities, admitted two additional Grace entities as
general partners and also admitted one new limited partner. As a result of the
admission of these new partners, the total capital of LP increased to $1,430.5,
which included a $300.0 cash contribution made by the new limited partner,
$297.0 of which was funded by outside investors. LP's assets consist of Grace
Cocoa's worldwide cocoa and chocolate business, long-term notes and demand loans
due from various Grace entities, which are guaranteed by W. R. Grace & Co. and
its principal operating subsidiary, and cash. The cash contribution from the new
limited partner was initially lent by LP to the principal operating subsidiary
of W. R. Grace & Co. and was used to retire certain domestic borrowings and for
general corporate purposes. Four Grace entities serve as general partners of LP
and own general partnership interests totalling 79.03% in LP; the new limited
partner owns a 20.97% limited partner interest in LP. LP is a separate and
distinct legal entity from each of the Grace entities and has separate assets,
liabilities, business functions and operations. For financial reporting
purposes, the assets, liabilities, results of operations and cash flows of LP
are included in Grace's consolidated financial statements as a component of
discontinued operations and the outside investors' interest in LP is reflected
as a minority interest.
- -------------------------------------------------------------------------------
13. Shareholders' Equity
- -------------------------------------------------------------------------------
The weighted average number of shares of common stock outstanding during 1993
was 91,461,000 (1992 -- 89,543,000; 1991 -- 87,236,000).
W. R. Grace & Co. is authorized to issue 300,000,000 shares of common stock.
Of the common stock unissued at December 31, 1993, approximately 8,767,000
shares may be issued or delivered upon the exercise of stock options or grant of
share awards in connection with stock incentives such as stock options. In
addition, at December 31, 1993, 102,232,000 shares were reserved in connection
with Common Stock Purchase Rights (Rights). A Right is issued for each
outstanding share of common stock; the Rights are not and will not become
exercisable unless and until certain events occur, and at no time will the
Rights have any voting power.
Preferred stocks authorized, issued and outstanding are:
<TABLE>
<CAPTION>
Par Value of
Shares as of December 31,1993 Shares Outstanding
----------------------------- -------------------
Authorized In Out-
and Issued Treasury standing 1993 1992 1991
----------------------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
6% Cumulative(1) 40,000 3,536 36,464 $3.6 $3.6 $3.6
8% Cumulative Class A(2) 50,000 33,644 16,356 1.6 1.7 1.7
8% Noncumulative Class B(2) 40,000 18,415 21,585 2.2 2.2 2.2
---- ---- ----
$7.4 $7.5 $7.5
---- ---- ----
---- ---- ----
- -------------------------------------------------------------------------------
<FN>
(1) 160 votes per share.
(2) 16 votes per share.
</TABLE>
Dividends paid on the preferred stocks amounted to $.5 in each of 1993, 1992
and 1991.
The Certificate of Incorporation also authorizes 5,000,000 shares of Class C
Preferred Stock, $1 par value, none of which has been issued.
F-19
<PAGE>
- -------------------------------------------------------------------------------
14. Stock Incentive Plans
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Changes in outstanding common stock options are summarized below:
- ----------------------------------------------------------------------------------------------------------
1993 1992 1991
-------------------- -------------------- ---------------------
Average Average Average
Number Exercise Number Exercise Number Exercise
of Shares Price of Shares Price of Shares Price
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of year . . . 6,365,187 $35.09 6,112,248 $32.01 7,172,775 $24.91
Options granted. . . . . . . . . . 1,461,425 38.00 1,445,300 37.77 2,901,793 39.27
--------- --------- ---------
7,826,612 7,557,548 10,074,568
Options exercised. . . . . . . . . (683,255) 25.89 (1,132,863) 25.29 (2,052,421) 23.48
Options terminated or canceled . . (178,053) 40.13 (59,498) 27.97 (1,909,899) 25.54
--------- --------- ---------
Balance at end of year . . . . . . 6,965,304 36.48 6,365,187 35.09 6,112,248 32.01
--------- --------- ---------
--------- --------- ---------
</TABLE>
- -------------------------------------------------------------------------------
At December 31, 1993, options covering 5,056,256 shares (1992 -- 4,025,840,
1991 -- 3,690,088) were exercisable and 1,804,122 shares (1992 -- 3,087,994,
1991 -- 4,637,368) were available for additional grants.
In 1991, certain executive officers surrendered all or a portion of their
outstanding stock options in exchange for shares of common stock equal in value
to the excess of (1) the market value of the option shares at the date of
surrender over (2) the purchase price of the option shares. The shares received
upon surrender were subject to restrictions on transfer. The officers
surrendering options generally were granted new options covering an
equal number of shares with a purchase price equal to 110% of the fair market
value of the common stock on the date of grant. Subject to certain exceptions,
such options may not be exercised until 1996, at which time they become
exercisable in five annual installments.
- -------------------------------------------------------------------------------
15. PENSION PLANS
- -------------------------------------------------------------------------------
Grace maintains defined benefit pension plans covering employees of certain
units who meet age and service requirements. Benefits are generally based on
final average salary and years of service. Grace funds its U.S. pension plans
in accordance with federal laws and regulations. Non-U.S. pension plans are
funded under a variety of methods because of differing local laws and customs
and therefore cannot be summarized. Approximately 55% of U.S. and non-U.S. plan
assets at December 31, 1993 were common stocks, with the remainder primarily
fixed income securities.
Pension (benefit)/cost is comprised of the following components:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1993 1992 1991
----------------- ------------------- ---------------
U.S. Non-U.S. U.S. Non-U .S. U.S. Non-U.S.
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost on benefits earned during the year. . . .$ 17.6 $ 9.5 $ 11.1 $ 9.4 $ 13.6 $ 13.4
Interest cost on benefits earned in prior years. . . . 36.3 17.1 31.7 16.5 30.9 16.3
Actual return on plan assets . . . . . . . . . . . . . (108.2) (56.7) (20.9) (30.6) (83.6) (34.3)
Deferred gain/(loss) on plan assets. . . . . . . . . . 58.1 36.0 (30.5) 9.5 33.2 12.9
Amortization of net gains and prior service costs. . . (5.3) (1.7) (8.4) (5.5) (7.7) (2.9)
------- ------- ------- ------ ------- -------
Net pension (benefit)/cost . . . . . . . . . . . . . . $ (1.5) $ 4.2 $ (17.0) $ (.7) $ (13.6) $ 5.4
-------- ------- ------- ------ ------- -------
-------- ------- ------- ------ ------- -------
</TABLE>
- -------------------------------------------------------------------------------
F-20
<PAGE>
The funded status of these plans was as follows:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1993 1992
------------------ -----------------
U.S. Non-U.S. U.S. Non-U.S.
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligation:
Vested . . . . . . . . . . . . . . . . . . . . . . .$ 614.2 $172.6 $ 522.3 $163.6
-------- ------ ------- ------
------- ------ ------- ------
Accumulated benefit obligation . . . . . . . . . . . .$ 620.0 $182.2 $ 527.7 $176.1
-------- ------ ------- ------
-------- ------ ------- ------
Total projected benefit obligation . . . . . . . . . .$ 691.4 $263.4 $ 596.4 $240.4
Plan assets at fair value. . . . . . . . . . . . . . . 836.4 270.1 767.9 288.5
------- ------ ------- ------
Plan assets in excess of projected benefit obligation. 145.0 6.7 171.5 48.1
Unamortized net gain at initial adoption . . . . . . . (96.1) (6.4) (108.6) (14.3)
Unamortized prior service cost . . . . . . . . . . . . 34.8 4.2 19.4 4.2
Unrecognized net gain/(loss) . . . . . . . . . . . . . 47.6 .9 54.2 (21.0)
------- ------ ------- ------
Prepaid pension cost . . . . . . . . . . . . . . . . .$131.3 $ 5.4(1) $ 136.5 $ 17.0(1)
------- ------ ------- -------
------- ------ ------- -------
- --------------------------------------------------------------------------------------------
<FN>
(1) Includes $71.4 in 1993 and $80.7 in 1992 of prepaid pension costs.
</TABLE>
The following significant assumptions were used in 1993, 1992 and 1991:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1993 1992 1991
--------------- ---------------- ---------------
U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S.
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Discount rate at December 31,. . . . . . . . . . . . . 7.5% 4.5 - 8.0% 8.0% 6.0 - 12.0% 9.0% 6.0 - 13.0%
Expected long-term rate of return. . . . . . . . . . . 9.0 6.0 - 10.5 9.0 6.0 - 11.0 9.0 6.0 - 11.0
Rate of compensation increase. . . . . . . . . . . . . 5.5 3.5 - 7.5 6.0 3.5 - 7.5 6.0 3.5 - 7.5
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
As a result of classifying certain operations as discontinued and divesting
other operations, Grace recognized an increase in the net prepaid pension
benefit of $6.2 and $10.9 in 1992 and 1991, respectively. In addition, Grace
settled certain pension obligations of one of its non-U.S. plans, resulting in
gains of $.6, $.7 and $11.8 in 1993, 1992 and 1991, respectively.
Grace's Retirement Plan for Salaried Employees (Plan) contains provisions
under which the Plan would automatically terminate in the event of a change in
control of W. R. Grace & Co. and Plan benefits would be secured through the
purchase of annuity contracts. Upon such termination, a portion of the Plan's
excess assets would be placed in an irrevocable trust to fund various employee
benefit plans and arrangements of Grace, and any balance would be returned to
Grace.
- -------------------------------------------------------------------------------
F-21
<PAGE>
- -------------------------------------------------------------------------------
16. Other Postretirement Benefit Plans
- -------------------------------------------------------------------------------
Grace provides certain other postretirement health care and life insurance
benefits for retired employees of specified U.S. units. These retiree medical
and life insurance plans provide various levels of benefits to employees
(depending on their date of hire) who retire from Grace after age 55 with at
least 10 years of service. The plans are currently unfunded.
Effective January 1, 1992, Grace adopted SFAS No. 106, which requires the
accrual method of accounting for the future costs of postretirement health care
and life insurance benefits over the employees' years of service. The "pay as
you go" method of accounting, used prior to 1992, recognized these costs on a
cash basis. The adoption of SFAS No. 106 on the immediate recognition basis,
concurrent with the adoption of SFAS No. 109, resulted in a charge to 1992
earnings of $190.0, net of $98.0 of deferred income taxes. In addition, the
application of SFAS No. 106 resulted in a decrease of $5.1 in 1992 after-tax
earnings from continuing operations. Grace's cash flow, however, is unaffected
by implementation of SFAS No. 106, as Grace continues to pay the costs of
postretirement benefits as they are incurred.
Included in noncurrent liabilities as of December 31, 1993 and 1992 are the
following:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees............................................... $168.9 $151.0
Fully eligible participants............................ 36.9 21.5
Active ineligible participants......................... 38.3 45.1
------ ------
Accumulated postretirement benefit obligation............... 244.1 217.6
Unrecognized net loss.................................. (40.7) (17.6)
Unrecognized prior service benefit..................... 52.9 75.2
------ ------
Accrued postretirement benefit obligation................... $256.3 $275.2
------ ------
------ ------
</TABLE>
Net periodic postretirement benefit cost for the years ended December 31, 1993
and 1992 is comprised of the following components:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Service cost................................................. $ 2.2 $ 3.8
Interest cost on accumulated postretirement
benefit obligation........................................... 13.2 15.6
Amortization of net loss..................................... .2 --
Amortization of prior service benefit........................ (4.5) (1.9)
----- ------
Net periodic postretirement benefit cost..................... $11.1 $17.5
----- ------
----- ------
</TABLE>
The cost of these benefits (cash basis) to Grace's continuing operations was
approximately $5.6 for 1991. As a result of classifying certain operations as
discontinued, Grace recognized reductions in the accrued postretirement benefit
obligation of approximately $16.6 and $23.5 in 1993 and 1992, respectively,
which are reflected in the reserve for discontinued operations.
During 1992, Grace's retiree medical plans were amended to increase cost
sharing by employees retiring after January 1, 1993. This amendment decreased
the accumulated postretirement benefit obligation by $52.9 at December 31, 1993
and will be amortized over an average remaining future service life of
approximately 13 years.
Medical care cost trend rates were projected at 11.7% in 1993, declining to
5.0% through 2003 and remaining level thereafter. The effect of a one percentage
point increase in each year's assumed medical care cost trend rate, holding all
other assumptions constant, would be to increase the annual net periodic
postretirement benefit cost by $1.6 and the accumulated postretirement benefit
obligation by $16.5. The discount rates at December 31, 1993 and 1992 were 7.5%
and 8.0%, respectively.
In November 1992, the Financial Accounting Standards Board issued SFAS No.
112, "Employers' Accounting for Postemployment Benefits," which requires accrual
accounting for non-accumulating postemployment benefits. Grace's primary
postemployment obligation is for disabled workers' medical benefits. These are
currently included in accrued postretirement costs under SFAS No. 106. The
adoption of SFAS No. 112 is not expected to have a material effect on Grace's
results of operations or financial position.
F-22
<PAGE>
- --------------------------------------------------------------------------------
17. Industry and Geographic Segments
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Specialty Health
Industry Segment Information(1) Chemicals Care Other(2) Total
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales and Revenues.............. 1993 $2,895 $1,513 $ -- $4,408
1992 3,062 1,275 -- 4,337
1991 3,078 1,060 249 4,387
Pretax Operating Profit......... 1993 392 247 (418)(4) 221
1992 259(3) 176 (242)(4) 193
1991 409 143 (218)(4) 334
Identifiable Assets............. 1993 2,115 1,442 1,791 5,348(5)
1992 2,012 1,095 927 4,034(5)
1991 2,260 1,016 750 4,026(5)
Capital Expenditures............ 1993 209 80 21 310(5)
1992 224 52 34 310(5)
1991 216 46 52 314(5)
Depreciation
and Amortization................ 1993 138 78 12 228
1992 151 65 9 225
1991 154 61 18 233
- ---------------------------------------------------------------------------------------------------------
</TABLE>
F-23
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Unallocated
United Corporate
Geographic Segment Information(1) States Canada Europe Other Items (2) Total
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales and Revenues............. 1993 $2,855 $124 $ 932 $497 $ -- $4,408
1992 2,721 131 1,081 404 -- 4,337
1991 2,455 136 1,186 361 249 4,387
Pretax Operating Profit........ 1993 460 7 93 79 (418)(4) 221
1992 387 1 (32)(3) 79 (242)(4) 193
1991 313 10 152 77 (218)(4) 334
Identifiable Assets............ 1993 2,327 82 753 395 1,791 5,348(5)
1992 1,977 75 772 283 927 4,034(5)
1991 1,915 86 969 306 750 4,026(5)
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Certain amounts have been restated to conform to the 1993 presentation.
(2) Includes divested specialty businesses and unallocated corporate items.
(3) Includes a provision of $140 relating to a fumed silica plant in Belgium.
(4) Unallocated corporate items include:
1993 1992 1991
---- ---- ----
Interest expense......................... $ (82) $ (90) $ (115)
General corporate overhead expenses...... (63) (64) (63)
General corporate research expenses...... (64) (62) (56)
Provision relating to asbestos-related
insurance coverage..................... (159) -- --
Net gain on strategic restructuring...... -- -- 6
Other (expenses)/income, net............. (50) (26) 10
----- ----- -----
Total $(418) $(242) $(218)
----- ----- -----
----- ----- -----
(5) Excludes assets and capital expenditures of discontinued operations as
follows:
1993 1992 1991
---- ---- ----
Identifiable assets................... $5,348 $4,034 $4,026
Discontinued operations............... 761 1,565 1,981
------ ------ ------
Total Assets........................ $6,109 $5,599 $6,007
------ ------ ------
------ ------ ------
Capital expenditures.................. $ 310 $ 310 $ 314
Discontinued operations............... -- 88 133
------ ------ ------
Total Capital Expenditures.......... $ 310 $ 398 $ 447
------ ------ ------
------ ------ ------
</TABLE>
F-24
<PAGE>
- --------------------------------------------------------------------------------
QUARTERLY SUMMARY
UNAUDITED--DOLLARS IN MILLIONS, EXCEPT PER SHARE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1993(1)
Sales and revenues................................ $986.2 $1,094.1 $1,136.1 $1,192.0
Cost of goods sold and operating expenses......... (593.8) (648.5) (664.3) (690.2)
Income/(loss) from continuing operations.......... 31.7 53.9 (236.4)(4) 285.2(5)
Loss from discontinued operations................. (3.4) (105.0) -- --
Net income/(loss)................................. 28.3 (51.1) (236.4) 285.2
Earnings/(loss) per share:(2)
Continuing operations........................ $ .35 $.60 $(2.56) $3.05
Net earnings/(loss).......................... .31 (.57) (2.56) 3.05
Fully diluted earnings per share:
Continuing operations........................ $.34 $.56 $--(6) $3.03
Net earnings................................. .30 --(6) --(6) 3.03
Dividends declared per common share............... $.35 $.35 $.35 $.35
Market price of common stock:(3)
High......................................... $40 1/8 $40 5/8 $41 1/4 $40 5/8
Low.......................................... 36 3/4 38 1/2 34 5/8 34 3/4
Close........................................ 38 1/2 40 1/2 34 5/8 40 5/8
- -----------------------------------------------------------------------------------------------------------------
1992(1)
Sales and revenues................................ $940.3 $1,061.6 $ 1,114.2 $1,220.9
Cost of goods sold and operating expenses......... (566.1) (609.2) (649.2) (777.0)
Income/(loss) from continuing operations.......... 17.0 51.1 (84.5)(7) 74.1
(Loss)/income from discontinued operations........ (14.1) (152.3) 2.4 1.8
Cumulative effect of accounting changes........... (190.0) -- -- --
Net (loss)/income................................. (187.1) (101.2) (82.1) 75.9
Earnings/(loss) per share:(2)
Continuing operations........................ $ .19 $ .57 $ (.94) $ .82
Cumulative effect of accounting changes...... (2.12) -- -- --
Net (loss)/earnings.......................... (2.10) (1.13) (.92) .84
Fully diluted earnings per share:
Continuing operations........................ $ .18 $ .54 $ --(6) $ .75
Net earnings................................. --(6) --(6) --(6) .77
Dividends declared per common share............... $ .35 $ .35 $ .35 $ .35
Market price of common stock:(3)
High......................................... $ 45 $ 38 1/2 $ 38 1/2 $ 40 3/4
Low.......................................... 37 3/4 33 3/8 32 34
Close........................................ 40 3/4 34 37 5/8 40 1/4
- ----------------------------------------------------------------------------------------------------------------
<FN>
(1) AMOUNTS HAVE BEEN RESTATED TO CONFORM TO THE YEAR-END 1993 PRESENTATION.
(2) PER SHARE RESULTS FOR THE FOUR QUARTERS DIFFER FROM FULL-YEAR PER SHARE
RESULTS AS A SEPARATE COMPUTATION OF EARNINGS PER SHARE IS MADE FOR EACH
QUARTER PRESENTED. THE DIFFERENCE IN 1993 IS PRINCIPALLY DUE TO THE
CONVERSION IN THE THIRD QUARTER OF OUTSTANDING LYONS INTO APPROXIMATELY 2.8
MILLION SHARES OF COMMON STOCK; SEE NOTE 9 TO THE CONSOLIDATED FINANCIAL
STATEMENTS.
(3) PRINCIPAL MARKET: NEW YORK STOCK EXCHANGE.
(4) INCLUDES A PROVISION OF $300.0 RELATING TO ASBESTOS-RELATED INSURANCE
COVERAGE.
(5) INCLUDES A $200.0 REVERSAL OF THE $300.0 PROVISION RELATING TO
ASBESTOS-RELATED INSURANCE COVERAGE.
(6) NOT PRESENTED AS THE EFFECT IS ANTI-DILUTIVE.
(7) INCLUDES A PROVISION OF $140.0 RELATING TO A FUMED SILICA PLANT IN BELGIUM.
</TABLE>
F-25
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
QUARTERLY STATISTICS UNAUDITED--DOLLARS IN MILLIONS
- ----------------------------------------------------------------------------------------------------------------
QUARTER ENDED MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
<S> <C> <C> <C> <C>
1993(1)
SALES AND REVENUES
Specialty Chemicals............................. $648.1 $ 729.9 $ 734.7 $ 782.9
Health Care..................................... 338.1 364.2 401.4 409.1
------ -------- -------- --------
Total........................................... $986.2 $1,094.1 $1,136.1 $1,192.0
------ -------- -------- --------
------ -------- -------- --------
OPERATING INCOME AFTER TAXES(2)
Specialty Chemicals............................. $ 39.6 $ 58.8 $ 60.5 $ 80.6
Health Care..................................... 27.9 35.1 36.9 42.3
------ -------- -------- --------
Total........................................... $ 67.5 $ 93.9 $ 97.4 $ 122.9
------ -------- -------- --------
------ -------- -------- --------
- ----------------------------------------------------------------------------------------------------------------
1992(1)
SALES AND REVENUES(3)
Specialty Chemicals.............................. $599.7 $ 687.9 $ 723.2 $ 809.0
Health Care...................................... 289.0 309.0 332.3 344.9
------ -------- -------- --------
Total............................................ $888.7 $ 996.9 $1,055.5 $1,153.9
------ -------- -------- --------
------ -------- -------- --------
OPERATING INCOME AFTER TAXES(2)
Specialty Chemicals.............................. $ 33.9 $ 59.7 $ 62.0(4) $ 83.6
Health Care...................................... 20.6 25.6 27.8 31.7
------ -------- -------- --------
Total............................................ $ 54.5 $ 85.3 $ 89.8 $ 115.3
------ -------- -------- --------
------ -------- -------- --------
<FN>
(1) AMOUNTS HAVE BEEN RESTATED TO CONFORM TO THE YEAR-END 1993 PRESENTATION.
(2) EXCLUDES DIVESTED BUSINESSES AND, IN 1993, A $100.0 PROVISION FOR
ASBESTOS-RELATED INSURANCE COVERAGE. AMOUNTS ARE COMPUTED BEFORE THE
ALLOCATION OF CORPORATE RESEARCH, CORPORATE OVERHEAD AND CORPORATE
INTEREST. FOR THIS TABLE, TAXES ARE COMPUTED SUBSTANTIALLY ON A SEPARATE
RETURN BASIS FOR EACH UNIT.
(3) EXCLUDES SALES OF DIVESTED BUSINESSES; THEREFORE, THE TOTAL DOES NOT AGREE
WITH SALES AND REVENUES IN THE CONSOLIDATED STATEMENT OF OPERATIONS.
(4) EXCLUDES A PROVISION OF $140.0 RELATING TO A FUMED SILICA PLANT IN BELGIUM.
</TABLE>
F-26
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
WORLDWIDE OPERATIONS DOLLARS IN MILLIONS
- --------------------------------------------------------------------------------
SALES AND REVENUES(1) OPERATING INCOME
AFTER TAXES(1)(2)
- -------------------------------------------------------------------------------------------------------------------------------
1993 1992 1991 1993(3) 1992 1991
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
UNITED STATES/CANADA
Specialty Chemicals......................... $1,555 $1,455 $1,407 $141 $124 $120
Health Care................................. 1,424 1,211 1,029 128 92 78
------ ------ ------ ---- ---- ----
Total....................................... 2,979 2,666 2,436 269 216 198
------ ------ ------ ---- ---- ----
- ------------------------------------------------------------------------------------------------------------------------------
EUROPE
Specialty Chemicals......................... 852 967 915 46 65(4) 87
Health Care................................. 80 58 31 14 14 5
------ ------ ------ ---- ---- ----
Total....................................... 932 1,025 946 60 79 92
------ ------ ------ ---- ---- ----
- ------------------------------------------------------------------------------------------------------------------------------
ASIA PACIFIC
Specialty Chemicals......................... 307 278 265 40 36 37
Health Care ................................ 8 6 -- -- -- --
------ ------ ------ ---- ---- ----
Total....................................... 315 284 265 40 36 37
------ ------ ------ ---- ---- ----
- ------------------------------------------------------------------------------------------------------------------------------
LATIN AMERICA/OTHER
Specialty Chemicals......................... 181 120 95 13 14 9
Health Care................................. 1 -- -- -- -- --
------ ------ ------ ---- ---- ----
Total....................................... 182 120 95 13 14 9
------ ------ ------ ---- ---- ----
- ------------------------------------------------------------------------------------------------------------------------------
Subtotal 4,408 4,095 3,742 382 345 336
Divested Businesses......................... -- 242 645 -- 16 10
------ ------ ------ ---- ---- ----
Total Continuing Operations ................ $4,408 $4,337 $4,387 $382 $361 $346
------ ------ ------ ---- ---- ----
- ------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) CERTAIN 1992 AND 1991 AMOUNTS HAVE BEEN RESTATED TO CONFORM TO THE 1993
PRESENTATION.
(2) COMPUTED BEFORE THE ALLOCATION OF CORPORATE RESEARCH, CORPORATE OVERHEAD
AND CORPORATE INTEREST. FOR THIS TABLE, TAXES ARE COMPUTED SUBSTANTIALLY ON
A SEPARATE RETURN BASIS FOR EACH SUBSIDIARY AND DIVISION. IN THE CASE OF
EACH U.S. SUBSIDIARY AND DIVISION, TAX BENEFITS FOR OPERATING LOSSES, IF
ANY, ARE RECOGNIZED CURRENTLY.
(3) EXCLUDES A $100 PROVISION FOR ASBESTOS-RELATED INSURANCE COVERAGE.
(4) EXCLUDES A PROVISION OF $140 RELATING TO A FUMED SILICA PLANT IN BELGIUM.
</TABLE>
F-27
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES, NET FIXED ASSETS AND DEPRECIATION AND LEASE AMORTIZATION (1) DOLLARS IN MILLIONS
- --------------------------------------------------------------------------------------------------------------------------------
Depreciation and
Capital Expenditures Net Fixed Assets Lease Amortization
- --------------------------------------------------------------------------------------------------------------------------------
1993 1992 1991 1993 1992 1991 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING GROUP
Specialty Chemicals........... $209 $200 $179 $1,049 $ 975 $ 941 $135 $131 $126
Health Care................... 80 52 46 277 221 205 46 38 36
---- ---- ---- ------ ------ ------ ----- ---- ----
Subtotal...................... 289 252 225 1,326 1,196 1,146 181 169 162
General Corporate............. 21 34 45 128 102 92 8 8 7
---- ---- ---- ------ ------ ------ ----- ---- ----
Total Continuing Operations... 310 286 270 1,454 1,298 1,238 189 177 169
Divested Businesses........... -- 24 44 -- 4 213 -- 18 34
Discontinued Operations....... -- 88 133 -- 406 1,107 -- -- --
---- ---- ---- ------ ------ ------ ----- ---- ----
Total......................... $310 $398 $447 $1,454 $1,708 $2,558 $189 $195 $203
---- ---- ---- ------ ------ ------ ----- ---- ----
---- ---- ---- ------ ------ ------ ----- ---- ----
- --------------------------------------------------------------------------------------------------------------------------------
GEOGRAPHIC LOCATION
United States and Canada...... $195 $156 $153 $ 854 $ 757 $ 696 $117 $108 $107
Europe........................ 68 80 56 351 342 346 49 49 45
Other Areas................... 26 16 16 121 97 104 15 12 10
---- ---- ---- ------ ------ ------ ----- ---- ----
Subtotal...................... 289 252 225 1,326 1,196 1,146 181 169 162
General Corporate............. 21 34 45 128 102 92 8 8 7
---- ---- ---- ------ ------ ------ ----- ---- ----
Total Continuing Operations... 310 286 270 1,454 1,298 1,238 189 177 169
Divested Businesses........... -- 24 44 -- 4 213 -- 18 34
Discontinued Operations....... -- 88 133 -- 406 1,107 -- -- --
---- ---- ---- ------ ------ ------ ----- ---- ----
Total......................... $310 $398 $447 $1,454 $1,708 $2,558 $189 $195 $203
---- ---- ---- ------ ------ ------ ----- ---- ----
---- ---- ---- ------ ------ ------ ----- ---- ----
<FN>
(1) 1992 AND 1991 AMOUNTS HAVE BEEN RESTATED TO CONFORM TO THE 1993
PRESENTATION.
</TABLE>
F-28
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
FINANCIAL SUMMARY DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
- ------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
Sales and revenues............................... $4,408.4 $4,337.0 $4,386.6 $4,309.7 $3,820.3
Cost of goods sold and operating expenses........ 2,596.8 2,601.5 2,649.2 2,693.5 2,430.7
Depreciation and amortization.................... 227.7 224.9 232.9 227.2 199.4
Interest expense................................. 81.5 90.0 115.4 137.0 121.0
Research and development expenses................ 135.0 130.0 128.1 125.4 105.0
Income from continuing operations
before income taxes......................... 221.2(1) 192.5(2) 334.2 272.1 207.8
Provision for income taxes....................... 86.8 134.8 132.5 97.5 61.3
Income from continuing operations................ 134.4 57.7 201.7 174.6 145.9
(Loss)/income from discontinued operations....... (108.4) (162.2) 16.9 28.2 107.3
Cumulative effect of accounting changes.......... -- (190.0) -- -- --
Net income/(loss)................................ 26.0 (294.5) 218.6 202.8 253.2
- ------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Current assets................................... $1,975.3 $2,091.4 $1,990.0 $2,380.1 $2,166.3
Current liabilities.............................. 1,992.6 1,639.6 1,622.1 1,680.1 1,589.1
Properties and equipment, net.................... 1,454.1 1,707.9 2,558.2 2,462.1 2,220.0
Total assets..................................... 6,108.6 5,598.6 6,007.1 6,226.5 5,619.1
Total debt....................................... 1,706.1 1,819.2 2,259.4 2,285.9 2,016.7
Shareholders' equity -- common stock............. 1,510.2 1,537.5 2,017.7 1,905.0 1,722.9
- ------------------------------------------------------------------------------------------------------------
DATA PER COMMON SHARE
Earnings from continuing operations.............. $ 1.46 $ .64 $ 2.31 $ 2.03 $ 1.71
Cumulative effect of accounting changes.......... -- (2.12) -- -- --
Earnings/(loss).................................. .28 (3.29) 2.50 2.36 2.97
Dividends........................................ 1.40 1.40 1.40 1.40 1.40
Book value....................................... 16.16 17.10 22.77 22.14 20.16
Average common shares outstanding (thousands).... 91,461 89,543 87,236 85,879 85,193
- ------------------------------------------------------------------------------------------------------------
OTHER STATISTICS
Dividends paid on common stock................... $ 127.9 $ 125.4 $ 122.0 $ 120.2 $ 119.2
Capital expenditures............................. 309.6 398.4 447.0 513.7 484.6
% Total debt to total capital.................... 52.9% 54.1% 52.7% 54.4% 53.8%
Common shareholders of record.................... 19,358 20,869 21,949 23,327 26,457
Common stock price range.......................... 41 1/4-34 5/8 45-32 40 3/4-23 3/8 33 5/8-17 39 1/8-25 1/8
Number of employees -- continuing
operations (thousands)...................... 34.0 32.8 32.9 34.2 33.2
<FN>
(1) Includes a provision of $159.0 relating to asbestos-related insurance
coverage.
(2) Includes a provision of $140.0 relating to a fumed silica plant in Belgium.
</TABLE>
F-29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
REVIEW OF OPERATIONS
OVERVIEW
Sales and revenues increased 8% in 1993 over 1992, excluding businesses divested
in 1992; including the divested businesses, 1993 sales and revenues increased by
2% as compared to 1992. Sales and revenues increased 9% in 1992 over 1991,
excluding businesses sold in both years.
In the third quarter of 1993, Grace recorded a special noncash after-tax
charge of $300 million ($475 million pretax) to reflect a September 1, 1993
decision of the U.S. Court of Appeals for the Second Circuit, which had the
effect of reducing Grace's insurance coverage for asbestos property damage
lawsuits and claims. In the fourth quarter of 1993, Grace reversed $200 million
of the after-tax provision ($316 million pretax) following the Court's decision
to grant Grace's petition for a re-hearing concerning the September 1, 1993
decision; the remaining after-tax provision of $100 million ($159 million
pretax) reflects anticipated additional legal expenses and other uncertainties
related to Grace's asbestos lawsuits and claims. In the third quarter of 1992,
Grace closed its Belgian fumed silica plant and recorded a one-time provision of
$140 million, representing the entire net book value of the facility and certain
additional expenses. Excluding the 1993 asbestos and 1992 fumed silica charges,
income from continuing operations for 1993 increased 19%, to $234.4 million,
over 1992 (including businesses divested in 1992). Income from continuing
operations decreased by 2% in 1992 as compared to 1991 (excluding the provision
relating to the fumed silica plant, but including businesses divested in both
years).
For all periods presented, the statement of operations has been restated to
reflect the classification of certain businesses as discontinued operations, as
discussed in Note 6 to the Consolidated Financial Statements.
SPECIALTY CHEMICALS
Including the results of chemical businesses divested in 1992, sales and
revenues decreased by 5% in 1993 as compared to 1992, and operating income after
taxes (operating income) decreased by 6% for 1993 versus 1992 (excluding the
1992 provision related to the fumed silica plant).
The following discussion excludes sales and revenues and operating income
of divested businesses and the fumed silica provision referred to above.
Sales and revenues increased 3% in 1993 as compared to 1992, reflecting
favorable volume and price/product mix variances estimated at 6% and 2%,
respectively, offset by an unfavorable currency exchange variance estimated at
5%. Volume increases occurred in 1993 in packaging (due to improved sales of
films and laminates), water treatment (reflecting the acquisition of Latin
America's largest water treatment business in the first quarter of 1993), fluid
cracking catalysts and silica products (reflecting improvements in market share
and pricing) and construction products (reflecting the introduction of new
concrete admixtures and stronger sales in waterproofing systems).
Operating income was flat in 1993 compared to 1992. North American results
significantly improved in 1993, as strong growth occurred in packaging, fluid
cracking catalysts and silica products and construction products, due mainly to
the volume increases noted above. European results for most product lines were
adversely affected by continuing recessionary conditions, leading to reduced
profitability; however, results for European fluid cracking catalysts and silica
products improved, primarily due to increased volumes achieved following the
withdrawal of certain competitors from this market in 1992. In Asia Pacific,
favorable results were achieved, primarily in packaging and fluid cracking
catalysts and silica products. In Latin America, results were down, primarily
due to the costs of integrating the operations of the new water treatment
business, partially offset by favorable results in packaging.
Sales increased by 5% in 1992 compared to 1991, excluding from both periods
the sales of chemical businesses divested in both years; sales were essentially
flat including those businesses. The increase was primarily due to favorable
volume, price/product mix and foreign currency exchange variances estimated at
3%, 1% and 1%, respectively. Volume increases occurred in most product lines,
particularly packaging and fluid cracking catalysts and silica products.
Operating income for 1992 decreased 5% over 1991, excluding the divested
chemical businesses; operating income increased 3% including those businesses.
North American results for most product lines improved in 1992, as strong growth
was exhibited in packaging and fluid cracking catalysts and silica products,
mainly due to strong volume increases. European results were adversely affected
by recessionary conditions, leading to reduced profitability. However, favorable
results were achieved in both Asia Pacific and Latin America for most product
lines.
HEALTH CARE
Sales and revenues for 1993 increased by 19% over 1992, due to increases of 18%,
36% and 11%, respectively, in kidney dialysis services, home health care and
medical products operations (including laboratory services). 1993 results for
dialysis services and home health care include the results of Home Intensive
Care, Inc., acquired in June 1993, as well as a number of smaller acquisitions
during the year. The number of centers providing dialysis and related services
increased 20%, from 419 at year-end 1992 to 501 at year-end 1993 (471 in the
U.S. and Puerto Rico, 23 in Portugal, 4 in Spain, 2 in the Czech Republic and 1
in Argentina).
F-30
<PAGE>
Operating income in 1993 increased by 35% over 1992. The 1993 results for
all health care businesses benefited from improvements in cost controls,
operating efficiencies and/or capacity utilization, partially offset by the
costs of improving and expanding quality assurance systems for medical products
manufacturing (see below for further discussion). In addition, results for 1992
included costs related to previously reported long-term incentive arrangements
with certain health care executives. It is unclear at this time whether and to
what extent any of the currently proposed reforms in U.S. health care will
affect Grace's health care operations. However, based on its knowledge and
understanding of the health care industry in general and of other providers of
kidney dialysis and infusion therapy, as well as on publicly available
information, Grace believes that its health care operations are among the most
cost-efficient in the industry.
Sales and revenues of health care operations increased by 20%, to $1.3
billion, in 1992 as compared to 1991, reflecting improvements of 19%, 16% and
26%, respectively, in kidney dialysis services, home health care and medical
products operations. Operating income for 1992 increased by 27% over 1991,
reflecting the continued growth of all health care businesses, as well as
improvements in operating efficiencies and capacity utilization.
In 1993, the U.S. Food and Drug Administration (FDA) issued import alerts
with respect to (1) hemodialysis bloodlines manufactured at the plant of
National Medical Care, Inc. (NMC), Grace's principal health care subsidiary,
located in Reynosa, Mexico and (2) hemodialyzers manufactured in NMC's Dublin,
Ireland facility. Products subject to FDA import alerts may not enter the U.S.
until the FDA approves the quality assurance systems of the facility at which
such products are manufactured. In January 1994, NMC entered into a consent
decree providing for the resumption of importation of bloodlines and
hemodialyzers following certification by NMC that the relevant facility complies
with FDA regulations and successful completion of an FDA inspection to verify
such compliance. In accordance with the consent decree, NMC certified compliance
to the FDA with respect to the Reynosa, Mexico facility in January 1994, and the
FDA lifted the bloodline import alert in March 1994 following a thorough
reinspection by the FDA and a commitment by NMC to finish certain studies by May
1994 and, in the interim, to perform additional product testing. Certification
of compliance at the Dublin, Ireland facility is anticipated in the second
quarter of 1994. The consent decree also requires NMC to certify and maintain
compliance with applicable FDA device manufacturing laws and regulations at all
of its U.S. manufacturing facilities. NMC has conducted a full review of its
facilities and upgraded, as necessary, all of its quality assurance systems. No
fines or penalties were imposed on NMC as a result of any of the FDA's actions
relating to the import alerts or in connection with the consent decree. Neither
the import alerts nor previously reported recalls of certain NMC products are
expected to have a material effect on Grace's results of operations or financial
position.
STATEMENT OF OPERATIONS
OTHER INCOME
See Note 4 to the Consolidated Financial Statements for information relating to
other income.
INTEREST EXPENSE
Interest expense decreased by 9% in 1993 versus 1992, primarily due to lower
debt levels and lower interest rates, the use of financial instruments (see Note
10 to the Consolidated Financial Statements) and the replacement of certain
fixed-rate debt with lower-cost floating-rate borrowings, partially offset by a
reduction in interest allocated to discontinued operations and interest
capitalized.
See "Financial Condition: Liquidity and Capital Resources" below for
information on borrowings.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development (R&D) spending increased by 4% in 1993 versus 1992. R&D
spending is now primarily directed toward Grace's core specialty chemicals and
health care businesses.
INCOME TAXES
The effective tax rate was 39.2% in 1993 versus 43.1% in 1992, before giving
effect to the 1992 provision of $51.9 million for a valuation allowance for
deferred tax assets. The lower effective tax rate in 1993 resulted primarily
from reductions in certain foreign tax rates and higher utilization of research
and development and foreign tax credits, partially offset by tax costs
associated with repatriating to the U.S. earnings of foreign subsidiaries. The
valuation allowance for 1993 and 1992 relates to the uncertainty as to the
realization of certain deferred tax assets, including U.S. tax credit
carryforwards, state and local net operating loss carryforwards and net deferred
tax assets, and net operating loss carryforwards in certain foreign
jurisdictions. Based upon anticipated future results, the Company has concluded,
after consideration of the valuation allowance, that it is more likely than not
that the net deferred tax asset balance will be realized.
In the third quarter of 1993, Grace recorded the effects of the Omnibus
Budget Reconciliation Act of 1993 (OBRA), which was enacted in August 1993.
Among other things, OBRA increased the highest U.S. Federal corporate tax rate
to 35%, effective January 1, 1993. However, neither this increase in the U.S.
Federal corporate tax rate (from 34%), nor the other provisions of OBRA, had a
material effect on Grace's results of operations.
F-31
<PAGE>
The 1992 effective tax rate increased to 43.1% (before the above provision
for the valuation allowance) as compared with 39.6% in 1991, largely due to the
additional costs of repatriating to the U.S. a higher level of earnings of
foreign subsidiaries and an increase in state income taxes.
See Note 5 to the Consolidated Financial Statements for further information
on income taxes.
LOSS FROM DISCONTINUED OPERATIONS
In 1993, Grace restated its financial statements to reflect the classification
of certain businesses as discontinued operations. See Note 6 to the Consolidated
Financial Statements for further information.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
During 1993, the net pretax cash flow provided by Grace's continuing operating
activities was $301.6 million versus $358.9 million in 1992, primarily due to
the use of $44.1 million of net cash to repurchase accounts receivable in 1993,
as compared to the receipt of $96.8 million of net proceeds from the sale of
accounts receivable in 1992, and a net cash outflow of $103.1 million relating
to asbestos in 1993 (see below for further discussion), compared with a net cash
outflow of $70.3 million in 1992. Also, in 1993 cash flow provided by operating
activities includes $67.9 million in proceeds from the settlement of interest
rate hedge agreements. After giving effect to discontinued operations and
payments of income taxes, the net cash provided by operating activities was
$243.1 million in 1993.
Investing activities used $151.9 million of cash in 1993, largely
reflecting capital expenditures and business acquisitions and investments,
primarily in the health care and water treatment businesses. During 1993, Grace
acquired 100% of the outstanding stock of Home Intensive Care, Inc. for
approximately $129 million (inclusive of related costs). These investing
activities were offset by net proceeds of $464.8 million from divestments
(mainly those of Grace Energy's oil and gas operations). Management anticipates
that the level of capital expenditures in 1994 will increase to approximately
$350 million as compared to the $309.6 million of capital spending in 1993.
Capital spending is expected to be concentrated on Grace's core businesses.
Net cash used for financing activities in 1993 was $105.9 million,
primarily reflecting the payment of $128.4 million of dividends. Total debt was
approximately $1.7 billion at year-end 1993, a decrease of $113.1 million from
year-end 1992. Grace's total debt as a percentage of total capital (debt ratio)
decreased from 54.1% at year-end 1992 to 52.9% at year-end 1993, primarily as a
result of the reduction in total debt.
In January 1993, Grace sold $300 million principal amount of 7.4% Notes Due
2000. The net proceeds from the sale of these Notes were used to repay
commercial paper and bank borrowings.
In the third quarter of 1993, Grace completed the redemption in full of its
outstanding Liquid Yield Option Notes due 2006 (LYONs) and 6 1/4% Convertible
Subordinate Debentures Due 2002. Of the $1,012.5 million principal amount at
maturity of LYONs outstanding, approximately 31% ($309.6 million) was converted
into 2.8 million shares of common stock; the remaining LYONs ($702.9 million)
were redeemed for approximately $258 million in cash. Substantially all of the
$150 million principal amount of the 6 1/4% Convertible Debentures due 2002
outstanding immediately prior to redemption was redeemed for cash (equal to the
principal amount outstanding).
Grace expects to satisfy its 1994 cash requirements from the following
sources: (1) funds generated by operations, (2) proceeds from the sales of
businesses and (3) financings. Such financings could include new borrowings, the
availability and cost of which will depend upon general economic and market
conditions.
ASBESTOS-RELATED MATTERS
As reported in Note 2 to the Consolidated Financial Statements, Grace is a
defendant in lawsuits relating to previously sold asbestos-containing products.
In 1993, Grace paid $103.1 million in connection with the defense and
disposition of property damage and personal injury litigation related to
asbestos, net of amounts received in 1993 from settlements with certain of
Grace's insurance carriers. As more fully discussed above in "Review of
Operations: Overview," Grace recorded a net noncash charge of $159 million
(pretax) in 1993 to reflect anticipated additional legal expenses and other
uncertainties related to Grace's asbestos lawsuits and claims. The balance sheet
at year-end 1993 includes a receivable due from insurance carriers, subject to
litigation, of $962.3 million. Grace has also recorded a receivable of
approximately $114 million for amounts to be received pursuant to settlement
agreements previously entered into with certain insurance carriers. While Grace
cannot precisely estimate the amounts to be paid in 1994 in respect of
asbestos-related lawsuits and claims, Grace expects that it will be required to
expend approximately $50 million in 1994 to defend and dispose of such lawsuits
and claims (after giving effect to payments to be received from certain
insurance carriers, as discussed above and in Note 2 to the Consolidated
Financial Statements). As indicated therein, the amounts reflected in the
Consolidated Financial Statements with respect to the probable cost of disposing
of pending asbestos lawsuits and claims and probable recoveries from insurance
carriers represent estimates; neither the outcomes of such lawsuits and claims
nor the outcomes of Grace's continuing litigations with certain of its insurance
carriers can be predicted with certainty.
F-32
<PAGE>
ENVIRONMENTAL MATTERS
Grace incurs costs related to environmental protection due to laws and
regulations, Grace's commitment to industry initiatives such as Responsible
Care -R- (the Chemical Manufacturers Association program) and its own internal
standards. Worldwide expenses of continuing operations related to the operation
and maintenance of environmental facilities and disposal of hazardous and
nonhazardous wastes totalled $45 million, $56 million and $38 million in 1993,
1992 and 1991, respectively.In addition, worldwide capital expenditures for
continuing operations relating to environmental protection in 1993 totalled
$20 million, compared with $18 million and $17 million in 1992 and 1991,
respectively.
Grace has also incurred costs to remediate previously contaminated sites.
These costs were $44 million, $35 million and $18 million in 1993, 1992 and
1991, respectively. These amounts were charged against previously established
reserves for estimated expenses for environmental spending, which were
identified and charged to income in prior years.
Grace accrues for anticipated costs associated with investigatory and
remediation efforts in accordance with Statement of Financial Accounting
Standards No. 5, "Accounting for Contingencies," which governs probability and
the ability to reasonably estimate future costs. During 1993, 1992 and 1991,
there were periodic provisions recorded for environmental and plant closure
expenses, which include the costs of future investigatory and remediation
activities. At year-end 1993, Grace's accruals for environmental remediation
totalled approximately $160 million. These reserves do not take into account any
discounting for future expenditures or possible future insurance recoveries. The
liabilities are reassessed whenever environmental circumstances become better
defined and/or remediation efforts and their costs can be better estimated.
Annual environmental-related cash outlays are expected to total $44 million in
1994 and $35 million in 1995. Expenditures have been funded from internal
sources of cash and are not expected to have a significant effect on liquidity.
F-33
<PAGE>
SCHEDULE II
W. R. GRACE & CO. AND SUBSIDIARIES
AMOUNTS RECEIVABLE FROM OFFICERS AND EMPLOYEES EXCEEDING $100,000*
(dollar amounts in thousands)
<TABLE>
<CAPTION>
For the Year 1993
Balance at
Deductions end of period**
Balance at -------------------------- ------------------------
beginning Amounts Amounts Not
of period Additions collected written off Current Current***
----------- ----------- ----------- ------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Amount . . . . . . . . . $2,959 $132 $256 - $ 15 $2,820
Number of employees. . . 9 1 8
<CAPTION>
For the Year 1992
Balance at
Deductions end of period**
Balance at -------------------------- ------------------------
beginning Amounts Amounts Not
of period Additions collected written off Current Current***
----------- ----------- ----------- ------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Amount . . . . . . . . . $2,813 $808 $212 $450 $509 $2,450
Number of employees. . . 11 4 7
<CAPTION>
For the Year 1991
Balance at
Deductions end of period**
Balance at -------------------------- ------------------------
beginning Amounts Amounts Not
of period Additions collected written off Current Current***
----------- ----------- ----------- ------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Amount . . . . . . . . . $4,022 - $759 $450 $777 $2,036
Number of employees. . . 12 7 7
<FN>
* The majority of the receivables represent relocation loans to
employees. Additional information concerning certain of these loans
is contained in the Proxy Statement for the Company's 1994 Annual
Meeting.
** The balances may include both current and non-current portions due
from an individual employee. Therefore, the total number of employees
owing balances at the end of a period may reflect different portions
of the same employee's indebtedness.
*** Represents amounts due more than one year after the end of the period.
</TABLE>
F-34
<PAGE>
SCHEDULE V
W. R. GRACE & CO. AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT
(in millions)
For the Year 1993
<TABLE>
<CAPTION>
Other changes - add(deduct)
--------------------------------------------------
Applicable Applicable
Balance at Additions to to Currency Balance
beginning at Retire- businesses discontinued Reclassifi- adjust- at end
Classification of period cost ments acquired(a) operations(b) cations (c) ments of period
-------------- ---------- ---------- -------- ----------- ------------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Land . . . . . . . . . . . . . . $ 59.2 $ .2 $ (.1) $ 3.2 $ (15.5) $ 5.2 $ (.9) $ 51.3
Buildings. . . . . . . . . . . . 801.3 27.2 (8.6) 3.4 (191.5) 12.9 (8.6) 636.1
Machinery, equipment and other . 2,199.1 107.8 (84.2) 13.9 (561.5) 203.7 (36.3) 1,842.5
Projects under construction. . . 231.4 174.4 (.5) 18.7 (36.2) (133.9) (6.0) 247.9
--------- ------- ------- ------ -------- ------- ------ --------
$ 3,291.0 $ 309.6 $ (93.4) $ 39.2 $ (804.7) $ 87.9 $(51.8) $2,777.8
--------- ------- ------- ------ -------- ------- ------ --------
--------- ------- ------- ------ -------- ------- ------ --------
For the Year 1992
Other changes - add(deduct)
--------------------------------------------------
Applicable Applicable
Balance at Additions to disposals to Currency Balance
beginning at Retire- businesses discontinued Reclassifi- adjust- at end
Classification of period cost ments (a) operations(b) cations (d) ments of period
-------------- ---------- ---------- ------- ------------ ------------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Land . . . . . . . . . . . . . . $ 65.4 $ 1.0 $ (1.6) $ (1.1) $ (8.0) $ 5.4 $ (1.9) $ 59.2
Natural resource properties. . . 823.1 5.0 - - (822.0) (5.5) (.6) -
Buildings. . . . . . . . . . . . 822.0 37.6 (9.9) (29.5) (53.0) 59.1 (25.0) 801.3
Machinery, equipment and other . 2,965.2 90.8 (92.2) (140.7) (642.0) 107.8 (89.8) 2,199.1
Projects under construction. . . 332.6 264.0 - (22.8) (2.8) (333.7) (5.9) 231.4
-------- ------ ------- ------- --------- ------- ------- --------
$5,008.3 $398.4 $(103.7) $(194.1) $(1,527.8) $(166.9) $(123.2) $3,291.0
-------- ------ ------- ------- --------- ------- ------- --------
-------- ------ ------- ------- --------- ------- ------- --------
For the Year 1991
Other changes - add(deduct)
--------------------------------------------------
Applicable Applicable
Balance at Additions to disposals to Currency Balance
beginning at Retire- of busi- businesses Reclassifi- adjust- at end
Classification of period cost ments nesses (a) acquired (a) cations (e) ments of period
-------------- --------- --------- -------- ------------ ------------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Land . . . . . . . . . . . . . . $ 72.0 $ 1.9 $ (1.4) $ (6.4) - $ .2 $ (.9) $ 65.4
Natural resource properties. . . 652.5 23.9 (20.4) - $ 90.6 76.5 - 823.1
Buildings. . . . . . . . . . . . 858.0 30.7 (17.3) (62.6) .4 16.8 (4.0) 822.0
Machinery, equipment and other . 3,011.2 123.6 (91.1) (252.7) 3.1 182.4 (11.3) 2,965.2
Projects under construction. . . 312.5 266.9 (.1) (4.2) 1.4 (244.6) .7 332.6
-------- ------ ------- -------- ------ ------- ------- --------
$4,906.2 $447.0 $(130.3) $(325.9) $ 95.5 $ 31.3 $ (15.5) $5,008.3
-------- ------ ------- -------- ------ ------- ------- --------
-------- ------ ------- -------- ------ ------- ------- --------
<FN>
- -----------------------------
(a) See Note 3 to Grace's Consolidated Financial Statements in the Financial
Supplement to this Report.
(b) See Note 6 to Grace's Consolidated Financial Statements in the Financial
Supplement to this Report.
(c) Includes the repurchase of certain assets included in a prior year
sale-leaseback transaction.
(d) Includes a provision relating to Grace's Belgian fumed silica plant; see
Note 8 to Grace's Consolidated Financial Statements in the Financial
Supplement to this Report.
(e) Primarily reflects the deconsolidation of previously consolidated
subsidiaries that are now being accounted for as discontinued operations,
and the consolidation of subsidiaries previously accounted for by the
equity method.
</TABLE>
Depreciation and Lease Amortization Rates
- -----------------------------------------
In view of the variety of properties and depreciation and lease amortization
rates, it is not practicable to set forth detailed rates. The average
depreciation and lease amortization rates on a consolidated basis for 1993, 1992
and 1991 were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Buildings................................... 5.2% 4.8% 4.9%
Machinery, equipment and other............. 9.0 9.0 7.5
</TABLE>
F-35
<PAGE>
SCHEDULE VI
W. R. GRACE & CO. AND SUBSIDIARIES
ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
(in millions)
For the Year 1993
<TABLE>
<CAPTION>
Other changes - add(deduct)
-------------------------------------
Applicable
Balance at Additions to Currency Balance
beginning charged to Retire- discontinued Reclassifi- adjust- at end
Classification of period costs and ments operations(a) cations (b) ments of period
expenses
-------------- --------- -------- ----- ------------ ----------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Land . . . . . . . . . . . . . . . $ 1.3 $ .1 - $ (.6) $ (.1) - $ .7
Buildings. . . . . . . . . . . . . 306.6 32.2 $ (8.5) (73.1) 1.2 $ (4.3) 254.1
Machinery, equipment and other . . 1,275.2 156.9 (69.5) (321.2) 50.1 (22.6) 1,068.9
--------- ------- ------- ------- -------- ------- --------
$ 1,583.1 $ 189.2 $ (78.0) $(394.9) $ 51.2 $ (26.9) $1,323.7
--------- ------- ------- ------- -------- ------- --------
--------- ------- ------- ------- -------- ------- --------
For the Year 1992
Other changes - add (deduct)
-----------------------------------------------
Appli-
Additions cable to Applicable
Balance at charged to disposals to Currency Balance
beginning costs and Retire- of busi- discontinued Reclassifi- adjust- at end
Classification of period expenses ments nesses(c) operations(a) cations(d) ments of period
-------------- --------- ---------- -------- --------- ------------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Land . . . . . . . . . . . . . . . $ .9 $ .1 $ (.1) - - $ .4 - $ 1.3
Natural resource properties. . . . 475.6 - - - $ (475.6) .3 $ (.3) -
Buildings. . . . . . . . . . . . . 312.8 37.9 (6.5) $ (9.8) (22.1) 3.8 (9.5) 306.6
Machinery, equipment and other . . 1,660.8 203.4 (58.4) (97.1) (334.4) (46.6) (52.5) 1,275.2
--------- ------- ------- ----- -------- ------- ------- --------
$ 2,450.1 $ 241.4 $ (65.0) $ (106.9) $ (832.1) $ (42.1) $ (62.3) $1,583.1
--------- ------- ------- ----- -------- ------- ------- --------
--------- ------- ------- ----- -------- ------- ------- --------
For the Year 1991
Other changes - add (deduct)
-----------------------------------
Appli-
Additions able to
Balance at charged to disposals Currency Balance
beginning costs and Retire- of busi- Reclassifi- adjust- at end
Classification of period expenses ments nesses(c) cations(e) ments of period
-------------- --------- --------- -------- ---------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Land . . . . . . . . . . . . . . . $ 1.1 $ .1 - $ (.3) - - $ .9
Natural resource properties. . . . 425.6 36.9 $ (20.2) - $ 33.3 - 475.6
Buildings. . . . . . . . . . . . . 326.3 40.9 (11.6) (34.7) (6.1) $ (2.0) 312.8
Machinery, equipment and other . . 1,691.1 222.3 (74.3) (155.2) (18.9) (4.2) 1,660.8
--------- ------- ------- ------- -------- ------- ---------
$ 2,444.1 $ 300.2 $(106.1) $(190.2) $ 8.3 $ (6.2) $2,450.1
--------- ------- ------- ------- -------- ------- ---------
--------- ------- ------- ------- -------- ------- ---------
<FN>
- --------------------------------------
(a) See Note 6 to Grace's Consolidated Financial Statements in the Financial
Supplement to this Report.
(b) Includes the repurchase of certain assets included in a prior year
sale-leaseback transaction.
(c) See Note 3 to Grace's Consolidated Financial Statements in the Financial
Supplement to this Report.
(d) Includes a provision relating to Grace's Belgian fumed silica plant; see
Note 8 to Grace's Consolidated Financial Statements in the Financial
Supplement to this Report.
(e) Primarily reflects the deconsolidation of previously consolidated
subsidiaries that are now being accounted for as discontinued
operations, and the consolidation of subsidiaries previously accounted for
by the equity method.
</TABLE>
F-36
<PAGE>
SCHEDULE VIII
W. R. GRACE & CO. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(in millions)
For the Year 1993
<TABLE>
<CAPTION>
Additions (deductions)
------------------------------
Charged
Balance (credited) to Balance
beginning costs and Other at end
Description of period expenses net*** of period
----------- ---------- ------------- ------ ----------
<S> <C> <C> <C> <C>
Valuation and qualifying accounts deducted from assets:
Allowances for notes and accounts receivable . . . . . . . . . . $ 39.3 $ 67.4 $(56.4) $ 50.3
------- ------ ------ -------
Securities of divested businesses. . . .. . . . . . . . . . . . . $ 152.9 $ 8.3 $ -- $ 161.2
------- ------ ------ -------
Deferred tax assets valuation allowance. . . . . . . . . . . . . $ 143.1 $ -- $(17.4) $ 125.7
------- ------ ------ -------
Reserves:
Foreign employee benefit obligations*. . . . . . . . . . . . . . $ 83.4 $ 12.2 $(31.2) $ 64.4
------- ------ ------ -------
Discontinued operations. . . .. . . . . . . . . . . . . . . . . . $ 144.7 $(12.6) $ -- $ 132.1
------- ------ ------ -------
</TABLE>
For the Year 1992
<TABLE>
<CAPTION>
Additions (deductions)
------------------------------
Charged
Balance (credited) to Balance
beginning costs and Other at end
Description of period expenses net*** of period
----------- ---------- ------------- ------ ----------
<S> <C> <C> <C> <C>
Valuation and qualifying accounts deducted from assets:
Allowances for notes and accounts receivable . . . . . . . . . . $41.0 $48.0 $(49.7) $39.3
------- ------ ------ -------
Securities of divested businesses . . . . . . . . .. . . . . . . $201.0 $(64.9) $16.8 $152.9
------- ------ ------ -------
Deferred tax assets valuation allowance**. . . . . . . . . . . . $88.4 $51.9 $2.8 $143.1
------- ------ ------ -------
Reserves:
Foreign employee benefit obligations*. . . . . . . .. . . . . . . $82.3 $15.6 $(14.5) $83.4
------- ------ ------ -------
Discontinued operations. . . . . . . . . . . . . . . . . . . . . $74.7 $70.0 $-- $144.7
------- ------ ------ -------
</TABLE>
For the Year 1991
<TABLE>
<CAPTION>
Additions (deductions)
------------------------------
Charged
Balance (credited) to Balance
beginning costs and Other at end
Description of period expenses net*** of period
----------- ---------- ------------- ------ ----------
<S> <C> <C> <C> <C>
Valuation and qualifying accounts deducted from assets:
Allowances for notes and accounts receivable .. . . . . . . . . . $54.8 $42.7 $(56.5) $41.0
------- ------ ------ -------
Securities of divested businesses. . .. . . . . . . . . . . . . . $180.7 $-- $20.3 $201.0
------- ------ ------ -------
Reserves:
Foreign employee benefit obligations* . . . . . . . . . . . . . $110.7 $11.5 $(39.9) $82.3
------- ------ ------ -------
Discontinued operations. . . . . . . . . . . . . . . . . . . . . $93.8 $(19.1) $-- $74.7
------- ------ ------ -------
<FN>
- -----------------------------------------
* Represents legally mandated employee benefit obligations, primarily pension
benefits, relating to Grace's operations in Europe.
** Effective January 1, 1992, Grace adopted Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes.
Prior years were not restated for this adoption.
*** Consists of additions and deductions applicable to businesses acquired,
disposals of businesses, bad debt write-offs, foreign
currency translation, reclassifications (including the deconsolidation of
amounts relating to discontinued operations) and miscellaneous other
adjustments.
</TABLE>
F-37
<PAGE>
SCHEDULE IX
W. R. GRACE & CO. AND SUBSIDIARIES
SHORT-TERM BORROWINGS
(dollar amounts in millions)
<TABLE>
<CAPTION>
Weighted Maximum Average Weighted
average amount amount average
Balance at interest rate outstanding outstanding interest rate
end of at end of during during during
period period period(c) period(d) period(e)
---------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
For the year 1993
Commercial paper and bank borrowings (a). . . . . . . $ 677.8 3.6% $ 779.3 $ 631.7 4.1%
Other short-term borrowings (b) . . . . . . . . . . . 356.1 7.3 356.1 273.8 7.6
For the year 1992
Commercial paper and bank borrowings (a). . . . . . . $ 705.6 4.3% $ 1,194.6 $ 1,034.4 5.2%
Other short-term borrowings (b) . . . . . . . . . . . 218.4 8.1 467.2 337.3 10.2
For the year 1991
Commercial paper and bank borrowings (a). . . . . . . $ 1,159.3 5.9% $ 1,244.4 $ 1,152.4 7.2%
Other short-term borrowings (b) . . . . . . . . . . . 306.0 9.5 370.5 340.8 11.2
<FN>
(a) Represents commercial paper and bank borrowings. Prior to September
1992, all amounts, although short-term in nature, were classified as
long-term borrowings because of the availability of long-term
financing under a prior revolving credit agreement and Grace's intent
to refinance these borrowings on a long-term basis. In accordance
with a 1992 revolving credit agreement, only a portion of these
borrowings may be classified as long-term; see Note 9 to Grace's
Consolidated Financial Statements in the Financial Supplement to this
Report.
(b) Represents various lines of credit and miscellaneous borrowings,
primarily of non-U.S. subsidiaries.
(c) Represents the maximum outstanding at any quarter-end during the year.
(d) Average amount outstanding is computed by dividing by four the total
of the principal balances outstanding at the end of each quarter.
(e) Weighted average interest rate is computed by dividing the interest
expense on short-term borrowings incurred during the year by average
short-term borrowings outstanding.
</TABLE>
F-38
<PAGE>
SCHEDULE X
W. R. GRACE & CO. AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
(in millions)
<TABLE>
<CAPTION>
Charged to
costs and expenses
-------------------------
Years ended December 31,
Item 1993 1992 1991
---- ------- ------- -------
<S> <C> <C> <C>
Maintenance and repairs............. $ 135.8 $ 153.1 $ 151.1
</TABLE>
F-39
<PAGE>
Exhibit 11
W. R. GRACE & CO. AND SUBSIDIARIES
WEIGHTED AVERAGE NUMBER OF SHARES AND EARNINGS USED IN PER SHARE COMPUTATIONS
The weighted average number of shares of Common Stock outstanding were as
follows:
<TABLE>
<CAPTION>
(in thousands)
----------------------------------------
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Weighted average number of shares of Common
Stock Outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . . 91,461 89,543 87,236
Conversion of convertible debt obligations . . . . . . . . . . . . . . . . 46 - * 8,456
Additional dilutive effect of outstanding options
(as determined by the application of the treasury
stock method). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 680 - * 1,159
---------- ---------- ----------
Weighted average number of shares of Common
Stock outstanding assuming full dilution . . . . . . . . . . . . . . . 92,187 89,543 96,851
---------- ---------- ----------
---------- ---------- ----------
Income/(loss) used in the computation of earnings per share were as follows:
<CAPTION>
(in millions, except per share)
----------------------------------------
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Net Income/(loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26.0 $ (294.5) $ 218.6
Dividends paid on preferred stocks . . . . . . . . . . . . . . . . . . . . (.5) (.5) (.5)
---------- ---------- ----------
Income/(loss) used in per share computation of earnings . . . . . . . . . 25.5 (295.0) 218.1
Interest, net of tax, on convertible debt obligations. . . . . . . . . . . - - 14.4
---------- ---------- ----------
Income/(loss) used in per share computation of
earnings assuming full dilution. . . . . . . . . . . . . . . . . . . . $ 25.5 $ (295.0) $ 232.5
---------- ---------- ----------
---------- ---------- ----------
Earnings/(loss) per share. . . . . . . . . . . . . . . . . . . . . . . . . $ 0.28 $ (3.29) $ 2.50
Earnings per share assuming full dilution. . . . . . . . . . . . . . . . . $ 0.28 - * $ 2.40
<FN>
* The effect of the convertible securities and outstanding options would be
anti-dilutive. Therefore, they are not shown.
</TABLE>
F-40
<PAGE>
Exhibit 12
W. R. GRACE & CO. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(in millions except ratios)
(Unaudited)
<TABLE>
<CAPTION>
Years Ended December 31, (b)
-------------------------------------------------------------------
1993 (c) 1992 (d) 1991 1990 1989
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net income from continuing operations. . . . . . . . . $134.4 $ 57.7 $201.7 $174.6 $145.9
Add (deduct):
Provision for income taxes. . . . . . . . . . . . . 86.8 134.8 132.5 97.5 61.3
Income taxes of 50%-owned companies . . . . . . . . .1 2.1 1.5 1.9 1.2
Minority interest in income of
majority-owned subsidiaries. . . . . . . . . . . . - - - 1.2 .6
Equity in unremitted earnings of
less than 50%-owned companies. . . . . . . . . . . (1.3) (1.8) (2.5) (2.1) (.3)
Interest expense, including amortization
of capitalized interest. . . . . . . . . . . . . . 119.8 152.9 198.4 235.7 224.8
Amortization of debt discount and expense . . . . . 4.3 1.5 2.1 1.9 1.9
Estimated amount of rental expense
deemed to represent the interest factor. . . . . . 21.3 26.6 21.7 21.0 19.1
------ ------ ------ ------ ------
Income as adjusted . . . . . . . . . . . . . . . . . . $365.4 $373.8 $555.4 $531.7 $454.5
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Combined fixed charges and preferred stock dividends:
Interest expense, including capitalized
interest . . . . . . . . . . . . . . . . . . . . . $119.9 $166.5 $213.3 $244.7 $229.3
Amortization of debt discount and expense . . . . . 4.3 1.5 2.1 1.9 1.9
Estimated amount of rental expense
deemed to represent the interest factor. . . . . . 21.3 26.6 21.7 21.0 19.1
------ ------ ------ ------ ------
Fixed charges. . . . . . . . . . . . . . . . . . . . . 145.5 194.6 237.1 267.6 250.3
Preferred stock dividend requirements (a). . . . . . . .9 .9 .9 .8 .7
------ ------ ------ ------ ------
Combined fixed charges and preferred
stock dividends . . . . . . . . . . . . . . . . . . $146.4 $195.5 $238.0 $268.4 $251.0
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Ratio of earnings to fixed charges . . . . . . . . . . 2.51 1.92 2.34 1.99 1.82
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Ratio of earnings to combined fixed charges
and preferred stock dividends . . . . . . . . . . . 2.50 1.91 2.33 1.98 1.81
------ ------ ------ ------ ------
------ ------ ------ ------ ------
<FN>
(a) Preferred stock dividend requirements, increased to an amount
representing the pretax earnings that would be required to cover such
dividend requirements based on the effective tax rates for the periods
presented.
(b) Restated to conform to the 1993 presentation.
(c) Includes a provision of $159.0 relating to asbestos-related insurance
coverage.
(d) Includes a provision of $140.0 relating to a fumed silica plant in
Belgium.
</TABLE>
F-41
<PAGE>
Exhibit Index
<PAGE>
W. R. GRACE & CO.
Annual Report on Form 10-K
for the Fiscal Year Ended December 31, 1993
-------------------------------------------
EXHIBIT INDEX
EXHIBIT
NO. EXHIBIT WHERE LOCATED
- ------- ------- -------------
3.01 Certificate of Incorporation of Exhibit 3 to Form 8-K
W. R. Grace & Co., as amended (filed 6/9/88)
3.02 By-laws of W. R. Grace & Co., as Exhibit 3.2 to Form 10-K
amended (filed 3/26/93)
4.01 Indenture dated as of September Exhibit 4.2 to Form 10-K
29, 1992 among W. R. Grace (filed 3/26/93)
& Co.-Conn., W. R. Grace & Co.
and Bankers Trust Company
4.02 Indenture dated as of January Exhibit 4.4 to Form 10-K
28, 1993 among W. R. Grace (filed 3/26/93)
& Co.-Conn., W. R. Grace & Co.
and NationsBank of Georgia, N.A.
4.03 Credit Agreement dated as of Exhibit 4.2 to Form 8-K
September 1, 1992 among W. R. (filed 9/26/92)
Grace & Co., W. R. Grace & Co.-
Conn. and the Several Banks Parties
thereto and Chemical Bank, as Agent
4.04 Amended and Restated Rights Exhibit to Amendment on
Agreement dated as of June 7, Form 8 to Application for
1990 between W. R. Grace & Co. Registration on Form 8-B
and Manufacturers Hanover Trust (filed 6/19/90)
Company
____________________________
Other than exhibits that are filed herewith, all exhibits listed in this Exhibit
Index are incorporated herein by reference. Exhibits indicated by an asterisk
(*) are the management contracts and compensatory plans, contracts or
arrangements required to be filed as exhibits to this Report. In accordance
with paragraph (b) (4) (iii) of Item 601 of Regulation S-K, certain instruments
relating to long-term debt are not being filed; W. R. Grace & Co. agrees to
furnish a copy of any such instrument to the Securities and Exchange Commission
upon request.
<PAGE>
EXHIBIT
NO. EXHIBIT WHERE LOCATED
- ------- ------- -------------
10.01 W. R. Grace & Co. Executive Exhibit 19(f) to Form
Salary Protection Plan, as 8-K (filed 6/9/88)*
amended
10.02 W. R. Grace & Co. 1981 Stock Exhibit 28(a) to Form
Incentive Plan, as amended 10-Q (filed 8/13/91)*
10.03 W. R. Grace & Co. 1986 Stock Exhibit 28(b) to Form
Incentive Plan, as amended 10-Q (filed 8/13/91)*
10.04 W. R. Grace & Co. 1989 Stock Exhibit 28(c) to Form
Incentive Plan, as amended 10-Q (filed 8/13/91)*
10.05 Forms of Stock Option Agreements Exhibit 10(h) to Form
10-K (filed 3/28/92)*
10.06 Forms of Restricted Share Award Exhibit 10(i) to Form
Agreements 10-K (filed 3/28/92)*
10.07 Information Concerning W. R. Grace Pages 10 and 11 of
& Co. Incentive Compensation Proxy Statement
Program and Deferred Compensation (filed 4/10/93)*
Program
10.08 W. R. Grace & Co. Long-Term Exhibit 10(l) to Form
Incentive Plan 10-K (filed 3/29/91)*
10.09 W. R. Grace & Co. Retirement Exhibit 10(o) to Form
Plan for Outside Directors, as 10-K (filed 3/28/92)*
amended
10.10 Employment Agreement dated August Exhibit 10(r) to Form
7, 1989 between W. R. Grace & Co. 10-K (filed 3/29/91)*
and Joseph R. Wright, Jr.
10.11 Employment Agreement dated Exhibit 10(x) to Form
as of April 1, 1991 between 10-K (filed 3/28/92)*
W. R. Grace & Co.-Conn. and
Constantine L. Hampers, as
amended
- 2 -
<PAGE>
EXHIBIT
NO. EXHIBIT WHERE LOCATED
- ------- ------- -------------
10.12 Housing Loan Agreement dated Exhibit 10(q) to Form
as of August 1, 1987 between 10-K (filed 3/29/88);
W. R. Grace & Co. and J. P. Exhibit 19(i) to Form
Bolduc, related Amendment and 8-K (filed 6/9/88)*
Assignment dated May 10, 1988
10.13 Employment Agreement dated Filed herewith*
August 1, 1993 between J. P.
Bolduc and W. R. Grace & Co.
10.14 Stock Option Agreement dated Filed herewith*
June 30, 1993 between David L.
Yunich and W. R. Grace & Co.
10.15 Stock Option Agreement dated Filed herewith*
June 30, 1993 between David L.
Yunich and W. R. Grace & Co.
10.16 National Medical Care, Inc. and Exhibit 10 (aa) to Form
Subsidiaries Executive Bonus 10-K (filed 3/28/92)*
Plans
10.17 Retirement Agreement between Exhibit 10.23 to Form
W. R. Grace & Co. and J. Peter 10-K (filed 3/26/93)*
Grace dated December 21, 1992
10.18 Executive Severance Agreement Exhibit 10.24 to Form
dated as of September 1, 1992 10-K (filed 3/26/93)*
between W. R. Grace & Co. and
J. P. Bolduc
10.19 Executive Severance Agreement Exhibit 10.26 to Form
dated September 1, 1992 10-K (filed 3/26/93)*
between W. R. Grace & Co. and
Constantine L. Hampers
10.20 Form of Executive Severance Exhibit 10.28 to Form
Agreement between W. R. Grace 10-K (filed 3/26/93)*
& Co. and others
- 3 -
<PAGE>
EXHIBIT
NO. EXHIBIT WHERE LOCATED
- ------- ------- -------------
10.21 Consulting Agreement Exhibit 10.29 to Form
dated June 1, 1992 between 10-K (filed 3/26/93)*
W. R. Grace & Co. and
Kamsky Associates, Inc.
10.22 Incentive Compensation Agreement Exhibit 10.30 to Form
dated June 1, 1992 between 10-K (filed 3/26/93)*
National Medical Care, Inc.
and Kamsky Associates, Inc.
10.23 Consulting Agreement dated as of Filed herewith*
June 16, 1993 by and between
National Medical Care, Inc., The
Humphrey Group, Inc. and Gordon
J. Humphrey
10.24 Employment Termination Agreement Filed herewith*
dated June 30, 1993 between
J. R. Wright, Jr. and W. R.
Grace & Co.
10.25 W. R. Grace & Co. Supplemental Filed herewith*
Executive Retirement Plan, as
amended
11 Weighted Average Number of Filed herewith
Shares and Earnings Used in (in Financial
Per Share Computations Supplement to 10-K)
12 Computation of Ratio of Earnings Filed herewith
to Fixed Charges and Combined (in Financial
Fixed Charges and Preferred Supplement to 10-K)
Stock Dividends
13 Selected Portions of the 1993 Filed herewith
Annual Report to Shareholders (in Financial
of W. R. Grace & Co. Supplement to 10-K)
22 List of Subsidiaries of Filed herewith
W. R. Grace & Co.
- 4 -
<PAGE>
EXHIBIT
NO. EXHIBIT WHERE LOCATED
- ------- ------- -------------
24 Consent of Independent Accoun- Filed herewith
tants (in Financial
Supplement to 10-K)
25 Powers of Attorney Filed herewith
- 5 -
<PAGE>
Exhibit 10.13
<PAGE>
EMPLOYMENT AGREEMENT Exhibit 10.13
AGREEMENT made as of the 1st day of August, 1993 by and between J. P.
BOLDUC, residing at 3000 South Ocean Boulevard, Boca Raton, Florida
("Employee"), and W. R. GRACE & CO., a New York corporation (the "Company").
WHEREAS, the Company has employed Employee and desires to continue to
employ Employee as Chief Executive Officer, and Employee desires to work for the
Company in such capacity on the terms and conditions hereinafter provided;
WHEREAS, Employee is a key senior executive of the Company with major
responsibilities for planning, directing, coordinating and controlling overall
corporate operations;
WHEREAS, in such capacity Employee will develop or have access to all
of the business methods and confidential information relating to the Company,
including, but not limited to, its financial performance and results, its
manufacturing organization and methods, its research and development of
products, its service techniques, its purchasing organization and methods, its
sales organization and methods, its inventories, its market development and
expansion plans, its personnel training and development programs, and its
customer and supplier relationships;
WHEREAS, a subsidiary of the Company and Employee heretofore entered
in an Employment Agreement dated as of August 1, 1987, which Employment
Agreement was subsequently
<PAGE>
-2-
assigned to the Company and amended (such Employment Agreement, as so assigned
and amended, being hereinafter referred to as the "1987 Employment Agreement");
WHEREAS, the Company and Employee now desire to further amend and to
restate the 1987 Employment Agreement to take the form of this Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
I. EMPLOYMENT
SECTION 1.1 POSITIONS AND DUTIES.
(a) The Company shall employ Employee, and Employee shall work for
the Company, as Chief Executive Officer, and he shall report directly to the
Board of Directors of the Company. Employee shall have such duties and authority
as are specified in the Company's By-laws and otherwise normally associated with
his office. While employed hereunder, Employee shall devote his full time,
effort, skill and attention to the affairs of the Company. During the term of
his employment hereunder, Employee shall not render any services to any other
person that might be in competition with the Company or any of its subsidiaries
or affiliates or in conflict with his position as a senior executive of the
Company or his duty of undivided loyalty to the Company.
<PAGE>
-3-
(b) While employed hereunder, Employee will be nominated as a
management nominee for election as a director of the Company and will continue
to be nominated after his current term expires.
SECTION 1.2 TERM. Unless sooner terminated in accordance with the
provisions hereof, (a) the initial term of employment hereunder shall continue
until July 31, 1998; (b) on July 31 of each year, commencing with 1998, the term
of employment shall be extended for an additional period of one year unless,
prior to such July 31, either party shall have given notice to the other that
the term of employment shall not be so extended; and (c) if any such notice of
non-extension shall be so given, the term of employment shall end without any
further extensions except those occurring prior to the giving of such notice.
II. COMPENSATION
SECTION 2.1 BASE SALARY. While Employee is employed hereunder, the
Company shall pay Employee a base salary of $800,000 per annum or such higher
amount or amounts as the Board of Directors of the Company may from time to time
approve. The base salary shall be due and payable at the same times and
intervals at which salary payments are made to other senior executives.
SECTION 2.2 INCENTIVE COMPENSATION. Employee will be entitled to
participate in all incentive compensation and bonus
<PAGE>
-4-
plans maintained by the Company for its senior executives generally, including,
without limitation, the annual incentive compensation program, the Long-Term
Performance Incentive Plan, any Restricted Stock Award Program or their
successors. During the term of his employment hereunder, the Employee's annual
incentive compensation will be at least 50% of his base salary for each year,
payable, with respect to each year, as promptly as practicable in the following
year.
SECTION 2.3 EXECUTIVE SALARY PROTECTION PLAN. The Company agrees that
the Employee will continue to be an "Eligible Executive" for purposes of its
Executive Salary Protection Plan. The Company and the Employee have entered
into an agreement pursuant to SECTION 4(b) of the Executive Salary Protection
Plan, as now in effect, providing for the maximum benefits permitted by said
SECTION 4(b) on the basis that the "Recognized Compensation" of the Employee
will not be less than $20,833.34. Notwithstanding any provision of such
agreement, the Company agrees that, while Employee is employed hereunder, the
benefits provided under such agreement at the time of its execution will not be
reduced.
SECTION 2.4 STOCK OPTIONS. Subject to the provisions of Article III,
Employee will be granted stock options covering at least 30,000 shares under the
Company's 1986 Stock Incentive Plan, or any successor Plan, in the month of
December in each year during the term of this Agreement, such options to vest
<PAGE>
-5-
and become exercisable as to 33 1/3% on each anniversary date of the date of
grant.
SECTION 2.5 PENSIONS.
(a) Employee will continue to participate in the Company's Retirement
Plan for Salaried Employees ("Retirement Plan") and in the Company's
Supplemental Executive Retirement Plan ("SERP") in accordance with and subject
to their respective provisions. In addition, Employee shall be paid a
supplementary pension ("Supplementary Pension") equal to such amounts as may be
payable under the Retirement Plan and SERP as a result of Employee's service
with the Company during the term of this Agreement and thereafter. The
Supplementary Pension (payable by the Company from its general assets) shall be
a "mirror image" of his Retirement Plan and SERP pensions, and all rights,
obligations, elections and limitations of the Retirement Plan and SERP shall
apply to his Supplementary Pension except as otherwise provided in paragraphs
(b) and (c) below. Employee may not, however, exercise his rights under the
Supplementary Pension independently of his rights under his Retirement Plan
pension; rights in respect of the Supplementary Pension may be exercised by, and
only by, the exercise of the corresponding rights under his Retirement Plan
pension.
(b) Notwithstanding any provisions of the Retirement Plan or SERP
with respect to vesting, the Company hereby guarantees that the aggregate annual
amount payable to Employee
<PAGE>
-6-
pursuant to paragraph (a) above, upon retirement, plus any other amounts payable
to Employee pursuant to any plan, provision or arrangement (including an
amendment to any existing plan) hereafter adopted or installed by the Company
for the purpose of replacing or supplementing, in whole or in part, the pension
benefits to be provided by the Retirement Plan or SERP (excluding any such
amount directly attributable to contributions by Employee), shall not be less
than the greater of (i) 50% of the Employee's average annual Pensionable
Compensation (as hereinafter defined) for the 60 consecutive calendar months in
which the Employee's Pensionable Compensation is highest during the final 180
calendar months of continuous employment ending prior to, or coincident with,
the date of the Employee's retirement, or (if earlier) other separation of
service, from the Company (the "Employee's Retirement Date") or (ii) 50% of the
Employee's Pensionable Compensation during the final 12 calendar month period
ending prior to, or coincident with, the Employee's Retirement Date, computed on
the basis of a straight life annuity commencing at age 62. "Pensionable
Compensation" means the sum of annual base salary and annual incentive
compensation payable to Employee from the Company that is regarded as includable
"compensation" under the Retirement Plan or SERP (whether or not any portion of
such salary or compensation is deferred under any Company plan or program).
Notwithstanding the foregoing, for purposes of this SECTION 2.5(b), if more than
five annual incentive compensation awards become payable
<PAGE>
-7-
to Employee during the 60 consecutive calendar month period referred to in
clause (i) of the first sentence of this SECTION 2.5(b), then only the largest
five such awards shall be considered annual incentive compensation during such
60 consecutive calendar month period; and if more than one annual incentive
compensation award becomes payable during the 12 calendar month period referred
to in clause (ii) of the first sentence of this SECTION 2.5(b), then only the
largest such award shall be considered annual incentive compensation during such
12 calendar month period.
(c) In the event the aggregate amount payable under paragraph (a) is
less than the amount guaranteed under paragraph (b), the Supplementary Pension
otherwise payable pursuant to paragraph (a) shall be increased by such
difference (after adjusting the increase actuarially to reflect the mode and
starting date of payment selected by Employee under the Retirement Plan as in
effect at that time of his retirement, if such mode and starting date is
different than a straight life annuity commencing at age 62).
SECTION 2.6 EMPLOYEE BENEFITS. Employee shall be entitled to
participate in and receive rights and benefits under any "fringe" benefit plans
which the Company provides for its executives generally, which at the present
time include:
W. R. Grace & Co. Salaried Employees Savings & Investment Plan
<PAGE>
-8-
- The W. R. Grace & Co. Long Term Disability Income Plan
- The W. R. Grace & Co. Voluntary Group Accident Insurance Plan
- The W. R. Grace & Co. Business Travel Accident Insurance Plan
- The W. R. Grace & Co. Group Life, AD&D, Medical and Disability Plan
- The W. R. Grace & Co. Dental Assistance Plan
Employee's participation in such plans will be in accordance with and subject to
the terms and provisions thereof.
SECTION 2.7 MISCELLANEOUS.
(a) Company will pay or reimburse Employee for his reasonable
business expenses in accordance with Company policies.
(b) Employee will be entitled to paid vacation aggregating not less
than four weeks during each twelve-month period. Employee will be entitled to
payment for unused vacation time in accordance with Company policy.
(c) The principal place of employment of Employee will be in Boca
Raton, Florida, or such other location as may be mutually agreed upon by the
Employee and the Company, subject to the travel requirements inherent in the
duties and responsibilities of his position. The Employee will be provided with
office and secretarial services commensurate with his position.
<PAGE>
-9-
(d) Subject to SECTION 1.1(a) of this Agreement, compliance with
applicable laws relating to interlocking directorships, the Company's policies
on conflicts of interest and improper payments and accounting records contained
in a statement entitled "Policies on Business Ethics" and to any other
applicable Company policy, during the term of Employee's employment hereunder,
Employee will be permitted to accept election, and to serve as, a director of
other entities. Employee will be permitted to retain all fees and other
benefits resulting from his service as a director of any such entity.
(e) The Company shall promptly pay upon demand any reasonable legal
fees incurred by Employee in connection with any enforcement of his rights under
this Agreement.
III. TERMINATION
SECTION 3.1 TERMINATION OF EMPLOYMENT. The employment of Employee
shall terminate prior to the expiration of the term specified in SECTION 1.2
upon the occurrence of any of the following prior to such time:
(a) The death of Employee;
(b) The termination of Employee's employment due to Employee's disability
pursuant to SECTION 3.2; or
<PAGE>
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(c) The termination by the Company of Employee's employment
for Cause pursuant to SECTION 3.3.
The termination by the Company of Employee's employment hereunder for
any reason other than those specified in paragraphs (a), (b) and (c) above shall
hereinafter be referred to as a termination "Without Cause".
SECTION 3.2 DISABILITY. If, by reason of physical or mental
disability, Employee is unable to carry out the duties he has assumed pursuant
to this Agreement for four (4) consecutive months, his services hereunder may be
terminated by the Company upon two (2) months' written notice to be given to
Employee at any time after the period of four (4) continuous months of
disability and while such disability continues. If, prior to the expiration of
the two (2) months after the giving of such notice, Employee shall recover from
such disability and return to the active discharge of his duties, then such
notice shall be of no further force and effect and Employee's employment shall
continue as if the same had been uninterrupted. If Employee shall not so
recover from his disability and return to his duties, then his services shall
terminate at the expiration date of such two (2) months' notice. During the
period of Employee's disability and until the expiration date of such two (2)
months' notice, Employee shall continue to receive all compensation and other
benefits provided herein as if he had not been disabled, at the time, in the
amounts and in the
<PAGE>
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manner provided herein. In the event a dispute arises between Employee and the
Company concerning Employee's physical or mental ability to continue or return
to the performance of his duties as aforesaid, Employee shall submit to
examination by a competent physician mutually agreeable to both parties, and
such physician's opinion as to Employee's ability to so perform will be final
and binding.
Upon termination of Employee's employment hereunder due to Employee's
disability, Employee shall receive annual compensation in an amount equal to the
amount which would have been payable to Employee pursuant to SECTION 2.5 hereof
based on his years of service at the date of such termination but unreduced for
early commencement of such payments. If the termination of Employee's
employment hereunder due to Employee's disability occurs prior to age 62,
Employee may elect at any time after age 55 and prior to age 62 to receive in
lieu of the payments pursuant to the preceding sentence of this SECTION 3.2 the
amount payable under SECTION 2.5 hereof computed by giving credit for years of
service for the period during which Employee received payments hereunder (but
not beyond age 62) but reduced for early commencement as provided in the
Retirement Plan and SERP.
Any amounts paid to Employee under this SECTION 3.2 shall be reduced
by amounts paid to him under SECTION 2.5 hereof.
SECTION 3.3 FOR CAUSE. The Company may, at any time by written notice
to the Employee, terminate his services here-
<PAGE>
-12-
under for Cause. Such notice shall specify the event or events and the actions
or failure to act constituting Cause. The term "Cause", as used herein, shall
mean and be limited to the occurrence of one or more of the following events:
(a) His conviction, by a court of competent jurisdiction,
of a felony, which through lapse of time or otherwise
is not subject to appeal;
(b) His commission of an act of fraud upon, or an act evidencing material
dishonesty toward, the Company; or
(c) Any willful failure by him to observe or perform his
material agreements herein contained.
If the basis for discharge is pursuant to paragraph (c) above,
Employee shall have thirty (30) days from his receipt of the notice of
termination for Cause to cure the actions or failure to act specified in such
notice and, in the event of any such cure within such period, such conduct shall
not constitute Cause hereunder.
SECTION 3.4 CONSEQUENCES OF TERMINATION.
(a) If Employee's employment hereunder shall terminate pursuant to
any of the provisions of this Article III, (i) his base salary and incentive
compensation referred to in SECTIONSECTION 2.1 and 2.2 shall cease to accrue
forthwith; and (ii) no
<PAGE>
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stock options shall thereafter be granted to Employee pursuant to SECTION 2.4.
(b) If the Company shall terminate Employee's employment hereunder
Without Cause, the Company shall pay Employee monthly severance payments at an
annual rate equal to 150% of the Employee's base salary in effect at the time of
such termination. Such monthly severance payments shall be made for a period
equal to the balance of the term of employment provided for in SECTION 1.2
(without any further extensions of such term of employment except those
occurring prior to such termination); provided, however, that the severance
payments shall be reduced by one-half the amount of any Earned Income (as
hereinafter defined) received by the Employee from other sources for any period
such severance payments are payable, and, provided further, that such severance
payments shall not thereby be reduced to less than a rate of $60,000 per annum.
For the purposes of the foregoing, "Earned Income" shall mean income
attributable to the rendition of personal services including salary, bonuses and
incentive or other supplementary compensation, whether payable currently or
deferred, and whether payable in cash or in property. Benefits attributable to
executive or employee stock options, benefit plans or other arrangements of the
type referred to in SECTION 2.3 through SECTION 2.7 shall not constitute Earned
Income. Incidental honorariums or consulting fees received on an infrequent
basis while working full-time for another employer shall not be included in
Earned
<PAGE>
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Income. However, consulting fees, finders' fees and other income for personal
services (other than directors' fees) received in lieu of employment by others,
or received on a regular and continuing basis even if employed by another
employer, shall be included in Earned Income. Directors' fees shall not be
included in Earned Income.
(c) In the event that Employee's employment hereunder shall terminate
pursuant to any of the provisions of this Article III, the rights of Employee
under any incentive compensation plan referred to in SECTION 2.2, under the
executive or employee benefit plans or arrangements referred to in
SECTIONSECTION 2.3, 2.5 and 2.6, and under any stock options to Employee granted
pursuant to SECTION 2.4, or otherwise, shall be determined in accordance with
the terms and provisions of such plans, arrangements and options applicable to
an employee whose employment has terminated in the manner that occurred, except
that a termination Without Cause shall be treated as a retirement under a
retirement plan of the Company for the purposes of SECTION 6(c) of the Company's
1986 Stock Incentive Plan or any comparable provision of any successor plan or
other stock option plan of the Company.
<PAGE>
-15-
IV. OTHER COVENANTS OF EMPLOYEE
SECTION 4.1 Employee shall have no right, title or interest in any
reports, studies, memoranda, correspondence, manuals, records, plans, or other
written, printed or otherwise recorded materials of any kind belonging to or in
the possession of the Company or its subsidiaries, or in any copies, pictures,
duplicates, facsimiles or other reproductions, recordings, abstracts or
summaries thereof and Employee will promptly surrender to the Company any such
materials (other than materials which have been published or otherwise have
lawfully been made available to the public generally) in his possession upon the
termination of his employment or any time prior thereto upon request of the
Company.
SECTION 4.2 Without the prior written consent of the Company, Employee
shall not at any time (whether during or after his employment with the Company)
use for his own benefit or purposes or for the benefit or purposes of any other
person, firm, partnership, association, corporation or business organization,
entity or enterprise, or disclose (except in the performance of his duties
hereunder) in any manner to any person, firm, partnership, association,
corporation or business organization, entity or enterprise, any trade secret, or
other confidential or proprietary information, data, know-how or knowledge
(including, but not limited to, that relating to manufacturing organization and
methods, research and development of products,
<PAGE>
-16-
service techniques, purchasing organization and methods, sales organization and
methods, inventories, market development and expansion plans, personnel training
and development programs, customer and supplier relationships, and franchising
plans and franchisee relationships) belonging to, or relating to the affairs of,
the Company or its subsidiaries.
SECTION 4.3 Employee shall promptly disclose to the Company (and to no
one else) all improvements, discoveries and inventions that may be of
significance to the Company or its subsidiaries made or conceived alone or in
conjunction with others (whether or not patentable, whether or not made or
conceived at the request of or upon the suggestion of the Company during or out
of his usual hours of work or in or about the premises of the Company or
elsewhere) while in the employ of the Company, or made or conceived within six
months after the termination of his employment by the Company, if resulting
from, suggested by or relating to such employment. All such improvements,
discoveries and inventions shall, to the extent that they are patentable, be the
sole and exclusive property of the Company and are hereby assigned to the
Company. At the request of the Company and at its cost and without liability to
Employee, Employee shall assist the Company, or any person or persons from time
to time designated by it, in obtaining the grant of patents in the United States
and/or in such other country or countries as may be designated by the Company
covering such improvements, discoveries and inventions and shall in connection
therewith
<PAGE>
-17-
execute such applications, statements or other documents, furnish such
information and data and take all such other action (including, but not limited
to, the giving of testimony) as the Company may from time to time request.
SECTION 4.4 The obligations of Employee set forth in this Article IV
are in addition to and not in limitation of any obligations which would
otherwise exist as a matter of law. The provisions of this Article IV shall
survive the termination of Employee's employment hereunder.
V. CERTAIN REMEDIES
SECTION 5.1 BREACH BY THE COMPANY. In the event that the Company shall
fail, in any material respect, to observe and perform its obligations hereunder,
the Employee may give written notice to the Company specifying the nature of
such failure. If within thirty (30) days after its receipt of such notice the
Company shall not have remedied such failure, the Employee shall have the right
and option to treat such failure as termination of his employment by the Company
Without Cause, to cease rendering services hereunder and thereafter to receive
the severance benefits and have the other rights and obligations provided for in
Article III hereof in the case of a termination by the Company Without Cause.
The parties agree that a material breach by the Company for purposes of this
SECTION 5.1 shall include, but not be limited to, a material reduction in
Employee's authority or responsibilities from those he
<PAGE>
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was exercising on the date of execution of this Agreement. The remedy provided
for in this SECTION 5.1 shall be in addition to and not in limitation of any
other remedies which would otherwise exist as a matter of law.
SECTION 5.2 BREACH BY THE EMPLOYEE. Employee acknowledges and agrees
that the Company's remedy at law for any breach of any of Employee's obligations
under SECTIONS 1.1(a), 4.1, 4.2 and 4.3 would be inadequate, and agrees and
consents that temporary and permanent injunctive relief may be granted in
any proceeding that may be brought to enforce any provision of any such
sections, without the necessity of proof of actual damage.
VI. GENERAL PROVISIONS
SECTION 6.1 REPRESENTATIONS AND WARRANTIES. Employee represents and
warrants to the Company that he is free to enter into the agreement and that he
has no prior or other obligations or commitments of any kind to anyone that
would in any way hinder or interfere with his acceptance of, or the full,
uninhibited and faithful performance of, his employment hereunder or the
exercise of his best efforts as an employee of the Company.
SECTION 6.2 UNDERSTANDINGS; AMENDMENTS. Except as otherwise provided
herein, or as set forth in Annex A hereto, this Agreement sets forth the entire
agreement and understanding of the parties concerning the subject matter hereof
and supersedes all prior agreements, arrangements and understandings between
<PAGE>
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Employee and the Company concerning such subject matter. No representation,
promise, inducement or statement of intention has been made by or on behalf of
either party hereto that is not set forth in this Agreement or the documents
referred to herein. This Agreement may not be amended or modified except by a
written instrument specifically referring to this Agreement executed by the
parties hereto.
SECTION 6.3 NOTICES.
(a) Any notice or other communication required or permitted to be
given hereunder shall be in writing and may either be delivered personally to
the addressee or be mailed, registered mail, postage prepaid, as follows:
If to the Company:
W. R. Grace & Co.
One Town Center Road
Boca Raton, FL 33486-1010
with a copy to:
Secretary
W. R. Grace & Co.
One Town Center Road
Boca Raton, FL 33486-1010
If to the Employee:
J. P. Bolduc
3000 South Ocean Boulevard
Boca Raton, Florida 33432
(b) Either party may change the address to which any such notices or
communications are to be directed to it by
<PAGE>
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giving written notice to the other party in the manner provided in the preceding
paragraph (a).
SECTION 6.4 ASSIGNMENTS; BINDING EFFECT.
(a) Employee acknowledges that the services to be rendered by him are
unique and personal. Accordingly, Employee may not assign any of his rights or
delegate any of his duties or obligations under this Agreement. This Agreement
shall be binding upon, and to the extent herein permitted shall inure to the
benefit of, Employee's heirs, legatees and legal representatives.
(b) The Company may not assign this Agreement or its rights hereunder
without the written consent of Employee. This Agreement shall be binding upon,
and shall inure to the benefit of, the Company's successors and permitted
assigns.
<PAGE>
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SECTION 6.5 WAIVERS. The failure of either party hereto at any time or
from time to time to require performance of any of the other party's obligations
under this Agreement shall in no manner affect the right to enforce any
provision of this Agreement at a subsequent time, and the waiver of any rights
arising out of any breach shall not be construed as a waiver of any rights
arising out of any subsequent breach.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written hereinabove.
W. R. GRACE & CO.
/s/ J. P. Bolduc By: /s/ Eben W. Pyne
J. P. Bolduc Eben W. Pyne, Chairman,
Compensation, Employee
Benefits and Stock
Incentive Committee
<PAGE>
Exhibit 10.14
<PAGE>
STOCK OPTION AGREEMENT
Exhibit 10.14
June 30, 1993
Mr. David L. Yunich
1114 Avenue of the Americas
New York, NY 10036
Dear Mr. Yunich:
As you know, W. R. Grace & Co.-Conn. ("Grace"), a Connecticut corporation,
currently holds 600 shares of the common stock of Caswell-Massey Holdings
Corporation ("Caswell-Massey"), a Delaware corporation.
In consideration of your services in connection with Grace's investment in
Caswell-Massey and your services to be rendered to Grace in undertaking to
enhance the value of such investment, you are hereby granted an option to
purchase 60 shares of the common stock of Caswell-Massey ("Common Stock") held
by Grace upon the following terms and conditions:
1. This option ("Option") may be exercised at any time prior to its
expiration or termination, in whole but not in part. The purchase price for the
Common Stock subject to this Option shall be $450,000.
<PAGE>
2. Notwithstanding any other provision hereof, this Option, if it does
not earlier terminate in accordance with the provisions hereof, shall expire and
cease to be exercisable as of the close of business on June 30, 1996.
3. This Option, if not theretofore exercised, shall terminate one year
after any one of the following events (but in no event after June 30, 1996):
(a) The date of your death;
(b) The date on which you become incapacitated;
(c) The date on which you cease to serve as a consultant to Grace.
4. This Option shall be exercised by serving written notice on the
Treasurer of Grace. The purchase price shall be paid in cash. Grace may make
such provisions as it may deem appropriate for the withholding of any taxes
which Grace determines it is required to withhold in connection with this
Option.
5. This Option and any right hereunder is non-assignable and non-trans-
ferable except by will or the laws of intestate succession. This Option may be
exercised during your lifetime only by you, except that in the event of your
incapacity, this Option may be exercised by your personal representative. After
your death, this Option may be exercised only by your estate or by a person who
acquires the right to exercise this Option by will or the laws of intestate
succession.
6. In the event that any recapitalization, or reclassification, split-up
or consolidation of shares of Common Stock shall be effected, or the outstanding
shares of Common Stock are, in connection with a merger or consolidation of
Caswell-Massey or a transfer by Caswell-Massey of all or a part of its assets,
exchanged for a
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<PAGE>
different number or class of shares of stock or other securities of
Caswell-Massey or for shares of the stock or other securities of any other
corporation, or a record date for determination of holders of Common Stock
entitled to receive a dividend payable in Common Stock shall occur, (a) the
number and class of shares or other securities that may be purchased pursuant to
this Option and the purchase price to be paid per share or other unit shall be
equitably adjusted, and (b) all references in this Option to Common Stock or to
a specified number of shares of Common Stock shall be deemed amended
accordingly.
7. (a) In the event Grace plans to sell or otherwise dispose of shares of
Common Stock held by it and the effect of such sale or disposition would be to
reduce the number of shares of Common Stock held by Grace to less than 60
shares, Grace shall give you notice of such sale or other disposition not less
than 30 days nor more than 180 days prior to the time such sale or disposition
is to be effected.
(i) If such sale or other disposition is to be effected by means of a
Public Offering (as defined below), your right to exercise this Option shall
continue for 15 days after the date of such notice. (If you so desire, any such
exercise may be made subject to the consummation of the Public Offering.) If
you do not exercise this Option during such period of 15 days, this Option shall
terminate and no longer be exercisable.
(ii) If such sale or disposition is to be a Private Sale (as defined
below), such sale shall be made subject to the provisions of this Option and
Grace shall
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<PAGE>
obtain the agreement of the buyer to carry out and perform this Option in
accordance with its terms and provisions.
(b) In the event that Grace shall effect a Private Sale of 60 or more
shares of Common Stock, Grace may, but shall not be obligated to (except as
otherwise provided in subparagraph (a)(ii) above), obtain the agreement of the
buyer to assume and carry out the terms and provisions of this Option to the
same extent as Grace is obligated. In such event, Grace shall have no further
obligation under this Option.
(c) For the purposes of this paragraph 7:
(i) a "Public Offering" shall mean a distribution of Common Stock
effected through underwriters or brokers, any sale of Common Stock effected
pursuant to Rule 144 or a similar rule under the Securities Act of 1933, as
amended (the "Securities Act"), or any other sale of Common Stock lawfully
effected on a national securities exchange or in a recognized over-the-counter
market; and
(ii) a "Private Sale" shall mean any sale or disposition of Common Stock
other than a Public Offering.
(d) In the event (i) a tender offer is made for Common Stock or (ii)
Grace receives a notice of a meeting of the shareholders of Caswell-Massey at
which action will be taken on a proposal:
(A) to merge or consolidate Caswell-Massey with one or more other
corporations and Caswell-Massey is not to be the surviving corporation,
(B) to sell all or substantially all of Caswell-Massey's assets, or
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---
<PAGE>
(C) to dissolve or liquidate Caswell-Massey, Grace may, by written
notice to you, declare that such event constitutes a Public Offering within the
meaning of this paragraph 7. Such notice shall be deemed in compliance with
subparagraph (a) above if it is given on or before the date halfway between the
date the tender offer or notice of meeting is received by Grace and the date of
expiration of the tender offer or the date of the shareholders' meeting, as the
case may be. You shall be deemed to have complied with subparagraph (a)(i)
above if you exercise this Option within the period specified in such
subparagraph or prior to the date halfway between the date you receive the
notice from Grace and the date the tender offer expires or the date of the
shareholders' meeting (as the case may be), whichever is earlier.
8. (a) You hereby acknowledge that neither this Option nor the Common
Stock subject hereto (the "Shares") has been registered under the Securities
Act, and that Grace and Caswell-Massey are relying on the exemptions from the
registration requirements of the Securities Act afforded by Sections 4(1) and
4(2) thereof. You acknowledge that neither Grace nor Caswell-Massey is under
any obligation to register or qualify this Option or the shares under the
Securities Act or any state securities or blue sky law, except that, if and to
the extent permitted by any applicable agreements, Grace shall make available to
you any registration rights it may have with respect to the Shares.
(b) You represent and warrant that you have reviewed and are familiar
with the business and affairs of Caswell-Massey, its principal obligations and
liabilities, the results of its operations and its financial condition. You
further represent and warrant
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---
<PAGE>
that you intend to take, and will hold and take, this Option and any Shares you
acquire upon the exercise of this Option, for investment for your own account
and not with a view to the resale or distribution thereof. You shall not, at
any time or times, directly or indirectly, offer, sell, pledge, transfer or
otherwise dispose of all or any portion of this Option or the Shares or any
interest therein or solicit any offer to buy, purchase or otherwise acquire all
or any portion of this Option or the Shares or any interest therein, otherwise
than in conformity with (i) the Securities Act, (ii) any other applicable
securities laws, and (iii) the terms of any available registration statement
covering the Shares.
(c) Any Shares issued pursuant to this Option shall bear a legend, in
form and substance satisfactory to counsel for Grace, reflecting the provisions
of this Option.
9. No Shares shall be transferred pursuant to this Option unless and
until all legal requirements applicable to the transfer of such Shares have, in
the opinion of counsel to Grace, been complied with. In connection with any
such transfer, the person acquiring the Shares shall, if requested by Grace,
give assurances satisfactory to Grace's counsel in respect of such matters as
Grace may deem desirable to assure compliance with all applicable legal
requirements.
10. You understand and acknowledge that your right to exercise this
Option and Grace's obligation to transfer shares of Common Stock upon any
purported exercise of this Option may be subject to restrictions and limitations
imposed upon
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<PAGE>
Grace by the terms of certain agreements entered into by Grace in connection
with Grace's initial investment in Caswell-Massey (including, but not limited
to, the
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<PAGE>
restrictions imposed upon Grace under Article 2 of the Stockholders' Agreement
dated April 26, 1991 among Grace, Caswell-Massey, Sally Aw Sian, Peter Hsu and
Mere Holdings Ltd.) and by the terms of loan agreements and arrangements by
which Grace and subsidiaries of Grace are bound, and that such exercise and
transfer may, among other things, require consents of third parties. Grace
shall endeavor to obtain any consents so required and to obtain waivers of any
such restrictions and limitations, but you agree that if Grace is unsuccessful
in such endeavors, Grace shall have no liability in the event that such
restriction or limitation, or the lack of any such consent, (a) impairs Grace's
ability to transfer shares of Common Stock upon any purported exercise of this
Option, (b) reduces the value of the shares of Common Stock so transferred to
you or (c) otherwise deprives you of the full benefit of this Option or full
enjoyment of the rights of a holder of Common Stock.
Please indicate your acceptance of this Option and your agreement with the
terms and conditions hereof by signing and returning the enclosed copy of this
Option.
Very truly yours,
W. R. GRACE & CO.
By: /s/ J. P. BOLDUC
----------------------
J. P. Bolduc, President and
Chief Executive Officer
Accepted and Agreed to:
/s/ DAVID L. YUNICH
- -----------------------
David L. Yunich
<PAGE>
Exhibit 10.15
<PAGE>
STOCK OPTION AGREEMENT
Exhibit 10.15
June 30, 1993
Mr. David L. Yunich
W. R. Grace & Co.
1114 Avenue of the Americas
New York, New York 10036
Dear Mr. Yunich:
As you know, W. R. Grace & Co. ("Grace"), a New York corporation, currently
holds (a) 480,000 shares of the common stock ("Common Stock") of Dean & DeLuca
Brands, Inc. ("Dean & DeLuca"), a Delaware corporation, and (b) an option to
purchase 100,000 shares of Common Stock at an exercise price of $3.00 per share.
In consideration of your services in connection with Grace's investment in
Dean & DeLuca and your services to be rendered to Grace in undertaking to
enhance the value of such investment, you are hereby granted an option to
purchase 58,000 shares of Common Stock held by Grace upon the following terms
and conditions:
1. This option ("Option") may be exercised at any time prior to its
expiration or termination, in whole but not in part. The purchase price for the
Common Stock subject to this Option shall be $280,000.
<PAGE>
2. Notwithstanding any other provision hereof, this Option, if it does
not earlier terminate in accordance with the provisions hereof, shall expire and
cease to be exercisable as of the close of business on June 30, 1996.
3. This Option, if not theretofore exercised, shall terminate one year
after any one of the following events (but in no event after June 30, 1996):
(a) The date of your death;
(b) The date on which you become incapacitated;
(c) The date on which you cease to serve as a consultant to Grace.
4. This Option shall be exercised by serving written notice on the
Treasurer of Grace. The purchase price shall be paid in cash. Grace may make
such provisions as it may deem appropriate for the withholding of any taxes
which Grace determines it is required to withhold in connection with this
Option.
5. This Option and any right hereunder is non-assignable and
non-transferable except by will or the laws of intestate succession. This
Option may be exercised during your lifetime only by you, except that in the
event of your incapacity, this Option may be exercised by your personal
representative. After your death, this Option may be exercised only by your
estate or by a person who acquires the right to exercise this Option by will or
the laws of intestate succession.
6. In the event that any recapitalization, or reclassification, split-up
or consolidation of shares of Common Stock shall be effected, or the outstanding
shares of Common Stock are, in connection with a merger or consolidation of Dean
& DeLuca or a transfer by Dean & DeLuca of all or a part of its assets,
exchanged for a different
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<PAGE>
number or class of shares of stock or other securities of Dean & DeLuca or for
shares of the stock or other securities of any other corporation, or a record
date for determination of holders of Common Stock entitled to receive a dividend
payable in Common Stock shall occur, (a) the number and class of shares or other
securities that may be purchased pursuant to this Option and the purchase price
to be paid per share or other unit shall be equitably adjusted, and (b) all
references in this Option to Common Stock or to a specified number of shares of
Common Stock shall be deemed amended accordingly.
7. (a) In the event Grace plans to sell or otherwise dispose of shares of
Common Stock held by it and the effect of such sale or disposition would be to
reduce the number of shares of Common Stock held by Grace to less than 58,000
shares, Grace shall give you notice of such sale or other disposition not less
than 30 days nor more than 180 days prior to the time such sale or disposition
is to be effected.
(i) If such sale or other disposition is to be effected by means of a
Public Offering (as defined below), your right to exercise this Option shall
continue for 15 days after the date of such notice. (If you so desire, any such
exercise may be made subject to the consummation of the Public Offering.) If
you do not exercise this Option during such period of 15 days, this Option shall
terminate and no longer be exercisable.
(ii) If such sale or disposition is to be a Private Sale (as defined
below), such sale shall be made subject to the provisions of this Option and
Grace shall
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<PAGE>
obtain the agreement of the buyer to carry out and perform this Option in
accordance with its terms and provisions.
(b) In the event that Grace shall effect a Private Sale of 58,000 or
more shares of Common Stock, Grace may, but shall not be obligated to (except as
other wise provided in subparagraph (a)(ii) above), obtain the agreement of the
buyer to assume and carry out the terms and provisions of this Option to the
same extent as Grace is obligated. In such event, Grace shall have no further
obligation under this Option.
(c) For the purposes of this paragraph 7:
(i) a "Public Offering" shall mean a distribution of Common Stock
effected through underwriters or brokers, any sale of Common Stock effected
pursuant to Rule 144 or a similar rule under the Securities Act of 1933, as
amended (the "Securities Act"), or any other sale of Common Stock lawfully
effected on a national securities exchange or in a recognized over-the-counter
market; and
(ii) a "Private Sale" shall mean any sale or disposition of Common Stock
other than a Public Offering.
(d) In the event (i) a tender offer is made for Common Stock or (ii)
Grace receives a notice of a meeting of the shareholders of Dean & DeLuca at
which action will be taken on a proposal:
(A) to merge or consolidate Dean & DeLuca with one or more other
corporations and Dean & DeLuca is not to be the surviving corporation,
(B) to sell all or substantially all of Dean & DeLuca's assets, or
-4-
---
<PAGE>
(C) to dissolve or liquidate Dean & DeLuca, Grace may, by written notice
to you, declare that such event constitutes a Public Offering within the meaning
of this paragraph 7. Such notice shall be deemed in compliance with
subparagraph (a) above if it is given on or before the date halfway between the
date the tender offer or notice of meeting is received by Grace and the date of
expiration of the tender offer or the date of the shareholders' meeting, as the
case may be. You shall be deemed to have complied with subparagraph (a)(i)
above if you exercise this Option within the period specified in such
subparagraph or prior to the date halfway between the date you receive the
notice from Grace and the date the tender offer expires or the date of the
shareholders' meeting (as the case may be), whichever is earlier.
8. (a) You hereby acknowledge that neither this Option nor the Common
Stock subject hereto (the "Shares") has been registered under the Securities
Act, and that Grace and Dean & DeLuca are relying on the exemptions from the
registration requirements of the Securities Act afforded by Sections 4(1) and
4(2) thereof. You acknowledge that neither Grace nor Dean & DeLuca is under any
obligation to register or qualify this Option or the shares under the Securities
Act or any state securities or blue sky law, except that, if and to the extent
permitted by any applicable agreements, Grace shall make available to you any
registration rights it may have with respect to the Shares.
(b) You represent and warrant that you have reviewed and are familiar
with the business and affairs of Dean & DeLuca, its principal obligations and
liabilities, the results of its operations and its financial condition. You
further represent and warrant
-5-
---
<PAGE>
that you intend to take, and will hold and take, this Option and any Shares you
acquire upon the exercise of this Option, for investment for your own account
and not with a view to the resale or distribution thereof. You shall not, at
any time or times, directly or indirectly, offer, sell, pledge, transfer or
otherwise dispose of all or any portion of this Option or the Shares or any
interest therein or solicit any offer to buy, purchase or otherwise acquire all
or any portion of this Option or the Shares or any interest therein, otherwise
than in conformity with (i) the Securities Act, (ii) any other applicable
securities laws, and (iii) the terms of any available registration statement
covering the Shares.
(c) Any Shares issued pursuant to this Option shall bear a legend, in
form and substance satisfactory to counsel for Grace, reflecting the provisions
of this Option.
9. No Shares shall be transferred pursuant to this Option unless and
until all legal requirements applicable to the transfer of such Shares have, in
the opinion of counsel to Grace, been complied with. In connection with any
such transfer, the person acquiring the Shares shall, if requested by Grace,
give assurances satisfactory to Grace's counsel in respect of such matters as
Grace may deem desirable to assure compliance with all applicable legal
requirements.
10. You understand and acknowledge that your right to exercise this
Option and Grace's obligation to transfer shares of Common Stock upon any
purported exercise of this Option may be subject to restrictions and limitations
imposed upon
-6-
---
<PAGE>
Grace by the terms of certain agreements entered into by Grace in connection
with Grace's initial investment in Dean & DeLuca (including, but not limited to,
the
-7-
---
<PAGE>
restrictions imposed upon Grace under Article 9 of the Stockholders' and Stock
Purchase Agreement dated December 8, 1989 among Grace, Dean & DeLuca, Joel Dean
and Giorgio DeLuca) and by the terms of loan agreements and arrangements by
which Grace and subsidiaries of Grace are bound, and that such exercise and
transfer may, among other things, require consents of third parties. Grace
shall endeavor to obtain any consents so required and to obtain waivers of any
such restrictions and limitations, but you agree that if Grace is unsuccessful
in such endeavors, Grace shall have no liability in the event that such
restriction or limitation, or the lack of any such consent, (a) impairs Grace's
ability to transfer shares of Common Stock upon any purported exercise of this
Option, (b) reduces the value of the shares of Common Stock so transferred to
you or (c) otherwise deprives you of the full benefit of this Option or full
enjoyment of the rights of a holder of Common Stock.
Please indicate your acceptance of this Option and your agreement with the
terms and conditions hereof by signing and returning the enclosed copy of this
Option.
Very truly yours,
W. R. GRACE & CO.
By: /s/ J. P. BOLDUC
-----------------------
J. P. Bolduc, President and
Chief Executive Officer
Accepted and Agreed to:
/s/ DAVID L. YUNICH
- ---------------------
David L. Yunich
<PAGE>
Exhibit 10.23
<PAGE>
CONSULTING AGREEMENT
EXHIBIT 10.23
This Agreement is made as of the 16th day of June 1993 by and between
National Medical Care, Inc., a Delaware corporation with offices located at 1601
Trapelo Road, Waltham, Massachusetts 02154 (the "Company"), The Humphrey Group,
Inc., with offices located at 26 South Main Street, Concord, New Hampshire 03301
(the "Consultant"), and Gordon J. Humphrey ("Humphrey").
WHEREAS, the Company desires to establish two model hemodialysis treatment
centers (the "Model Clinics") in The Republic of the Russian Federation
("Russia"); and
WHEREAS, Consultant desires to provide consulting services to assist the
Company in establishing the Model Clinics under the terms and conditions set
forth below.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties to this Agreement agree as follows:
1. ENGAGEMENT. The Company engages Consultant to provide the services
described in Section 2 below (which shall be provided by Humphrey) for a period
of three (3) months following the execution of this Agreement, and Consultant
agrees to provide such services for the compensation set forth in Section 3
below.
If the parties agree that the services provided by Consultant during the
three months following the execution of this Agreement have been satisfactory
and if the Company continues to be interested in proceeding with the
establishment of the Model Clinics, the parties will discuss the extension of
Consultant's engagement in order to provide continuing consulting services
relating to the establishment of Model Clinics.
If the parties agree to extend the engagement of Consultant beyond the
initial three (3) month period, it is contemplated that the parties will enter
into an agreement with a term of two (2) years pursuant to which for a period of
five (5) years after the establishment of each hemodialysis treatment center
established by the Company in Russia during the term of such agreement or within
six (6) months after its termination, Consultant shall be entitled to
compensation in an amount equal to seven (7%) percent of the net pre-tax
earnings of such hemodialysis treatment center(s).
If Consultant is engaged to provide consulting services to assist with the
development of the Model Clinics for an additional period of two (2) years
beyond the three month term of this Agreement, and if the parties agree that the
services provided by Consultant continue to be satisfactory and support the
Company's goals in Russia, the parties will discuss the extension of the
consulting arrangements for an additional term of three (3) years.
<PAGE>
-2-
Consultant is being engaged as an independent contractor. Consultant is
not a partner, employee, agent, or joint venturer with the Company or any of its
affiliates. Nothing in this Agreement shall be construed to grant any party the
authority to enter into a contract in the name of any other party or any of its
affiliates, or to bind any other party or any of its affiliates in any manner.
2. THE SERVICES. Consultant shall make available to the Company the
services of Humphrey for purposes of investigating conditions in Russia relating
to the provision of dialysis services and the establishment by the company or
one of its affiliates of the Model Clinics in Moscow or such other location or
locations as the Company determines.
The services to be provided by Consultant will include the activities and
the development of information regarding the matters listed below, and/or such
other activities as the Company and Consultant agree:
a. development of relationships with appropriate parties in Russia
relating to the establishment and operation of the Model Clinics, and the
discussion and negotiation of arrangements relating to the Model Clinics with
appropriate parties;
b. potential management structures for the entity which will establish
and operate the Model Clinics; and
c. payment mechanisms for the services and products provided at the Model
Clinics.
3. COMPENSATION. The Company shall pay to Consultant, as compensation
for services rendered pursuant to this Agreement, Twenty Thousand ($20,000)
Dollars per month for a period of three (3) months.
The Company shall pay to Consultant the initial monthly payment of Twenty
Thousand ($20,000) Dollars upon the execution of this Agreement. The payments
of Twenty Thousand ($20,000) Dollars for services rendered during the second and
third months shall be paid on the thirty-first (31st) and the sixty-first (61st)
days after the execution of this Agreement.
In addition to the compensation referred to in the preceding paragraph, the
Company shall pay to Consultant reasonable business expenses incurred by
Consultant and/or Humphrey in connection with the consulting services provided
by Consultant pursuant to this Agreement and for which Consultant provides
documentation to the company within thirty days after incurring such expenses.
Consultant is responsible for the payment of all local, state and federal
income, self-employment, payroll or other applicable taxes on the compensation
paid to Consultant pursuant to this Agreement.
<PAGE>
-3-
4. RESTRICTIONS. Consultant and Humphrey shall use their best efforts in
the performance of Consultant's duties hereunder; however, they shall be
permitted to engage in any business and perform services for their own account
provided that such business and services do not interfere with their duties
hereunder, and are not in competition with, or for a person or company that is
in competition with the Company or its affiliates.
Consultant and Humphrey acknowledge that in the course of performing the
Consultant's duties pursuant to this Agreement, they will become privy to
various confidential information and trade secrets of the Company and/or its
affiliates. Neither Consultant nor Humphrey shall use or disclose to any
person, firm or corporation any confidential information or trade secret of the
Company or any affiliate of the Company.
Upon the termination of this Agreement, Consultant and Humphrey shall
return to the Company and/or to its affiliates, as appropriate, all documents
and all copies or reproductions of such documents which the Company or such
affiliates have informed Consultant or Humphrey contain confidential information
or trade secrets.
For a period of two (2) years after the delivery of the final Report,
neither Consultant nor Humphrey shall enter into any consulting agreement or
provide consulting services to any entity that provides dialysis services or
dialysis related medical products or proposes to provide dialysis services or
dialysis related medical products in the United States or Russia.
Consultant and Humphrey acknowledge that the restrictions contained in this
Agreement are necessary for the protection of the Company and its affiliates,
and that any breach thereof may cause the Company or its affiliates irreparable
damage. The Company and its affiliates shall be entitled to injunctive relief
to enjoin the breach or threatened breach of such restrictions. The foregoing
shall not be treated as a waiver of any other remedies the Company or its
affiliates may have in law or in equity.
5. SEVERABILITY. If any provision of this Agreement or its application
to any person or circumstance shall be invalid or unenforceable to any extent,
the remainder of this Agreement or its application to other persons or
circumstances shall not be affected. Each term and provision of this Agreement
shall be valid and enforceable to the fullest extent permitted by law.
6. NOTICES. Any notice given pursuant to this Agreement shall be in
writing and delivered by hand or mailed by certified or registered mail/return
receipt requested to the parties at the following address:
<PAGE>
-4-
TO THE COMPANY:
National Medical Care, Inc.
1601 Trapelo Road
Waltham, MA 02154
Attn: Christopher T. Ford
TO CONSULTANT OR HUMPHREY:
The Humphrey Group, Inc.
26 South Main Street
Concord, NH 03301 2100
Attn: Gordon J. Humphrey
7. COMPLETE AGREEMENT. This Agreement contains the entire agreement of
the parties as to its subject matter, and supersedes all previous and
contemporaneous agreements and understandings, inducements or conditions,
expressed or implied, oral or written, between the parties as to the subject
matter of this Agreement
.
8. WAIVERS. No waiver, modification or change of any of the provisions
of this Agreement shall be valid unless in writing and signed by the parties
against whom such claimed waiver, modification or change is to be enforced.
9. ASSIGNMENT. Consultant shall not have the right without the Company's
prior written consent, to assign its rights or obligations under this Agreement
to any other party.
10. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties or their authorized representatives have
signed this Agreement as of the date first written above.
NATIONAL MEDICAL CARE, INC.
By:/s/C.L.HAMPERS
---------------------------
Its Chief Executive Officer
THE HUMPHREY GROUP, INC.
By:/s/ GORDON J. HUMPHREY
---------------------------
Its President
/s/ GORDON J. HUMPHREY
---------------------------
Gordon J. Humphrey, individually
<PAGE>
Exhibit 10.24
<PAGE>
Exhibit 10.24
June 30, 1993
MEMORANDUM TO MR. J. R. WRIGHT. JR.
This will confirm our mutual understanding that the Employment
Agreement ("Agreement") dated August 7, 1989 between you and W. R. Grace & Co.
("Company") is hereby terminated, effective immediately. You understand and
agree that such termination renders null, void and of no further force or effect
each and every provision of the Agreement, except for Section 3.4 (dealing with
severance payments) and Article IV (covering other employee covenants) thereof,
which shall remain in full force and effect in accordance with their terms, and
except for Section 2.7 (relating to your housing loan), as modified by item 3
below.
Notwithstanding the termination of the Agreement, you hereby agree as
follows:
1. You agree to remain in the Company's employ through not later than
December 31, 1993; provided, however, that you may terminate your employment at
any time prior to December 31, 1993 upon 30 days' prior written notice.
2. During the period of your employment under paragraph 1, (a) you
shall remain an Executive Vice President of the Company; (b) you shall continue
to receive your salary at your current annual rate, as well as all other
benefits presently provided to
<PAGE>
-2-
you other than those that were provided to you solely under the Agreement; and
(c) you shall continue to devote your attention to the matters for which you are
currently responsible (including the responsibilities listed on Schedule A
hereto), as well as any other matters that I may reasonably assign to you;
provided, however, that your responsibilities as to the Company's container
business shall be assigned to another executive during July 1993.
3. Notwithstanding the termination of the Agreement, you understand and
agree that the housing loan in the amount of $1,000,000, previously made to you
by W. R. Grace & Co.-Conn., a subsidiary of the Company ("Grace Connecticut"),
shall remain outstanding and shall be due and payable on August 7, 1999 or, if
earlier, the date on which you sell or otherwise dispose of your residence
located at Two Ocean Lane, Manalapan, Florida, which loan shall be secured by a
mortgage on such residence. You agree to provide Grace Connecticut with such
documentation as may be necessary to confirm the foregoing, including a new
promissory note representing such loan and a mortgage or similar instrument
providing for such security.
4. Following the termination of your employment under paragraph 1
above, you shall be entitled to, and only to, the compensation and benefits set
forth below in accordance with and subject to the following terms:
A. INCENTIVE COMPENSATION
You shall be considered for annual incentive
<PAGE>
-3-
compensation for 1993 based on the financial performance of the Company and your
individual performance, receiving consideration for a prorated portion of such
incentive compensation should you leave the Company prior to December 31, 1993;
provided, however, that your incentive compensation award for 1993 shall not be
less than $192,500 (which amount would be prorated if your employment terminates
prior to December 31, 1993).
B. EXECUTIVE SALARY PROTECTION PLAN AND SPLIT-DOLLAR LIFE
INSURANCE PLAN
Your participation in the Executive Salary Protection Plan shall
cease 30 days following the date of termination of your employment with the
Company in accordance with the terms of such Plan. In accordance with the terms
of the Split-Dollar Life Insurance Plan, your participation in such Plan will
cease upon your termination of employment, although you may purchase the policy
from the Company by reimbursing the Company for the premiums paid by the Company
in your behalf through the date of termination of your employment. Estimated
premiums paid by the Company through December 31, 1993 are expected to total
approximately $232,000 for two policy years.
C. CONTINUATION OF MEDICAL BENEFIT PLAN COVERAGE
Your participation in the medical plan as an active employee shall
continue through the end of the month in which your employment terminates, and
thereafter, you may continue
<PAGE>
-4-
participation in such plan for up to 18 months by paying to the Company the then
applicable employee contribution rate or rates. Such coverage shall continue for
18 months following termination of your employment or, if earlier, the date on
which you become eligible to participate in another employer's medical plan.
D. LONG-TERM INCENTIVE PLAN
The installment payments you are scheduled to receive in March 1994
and March 1995 will be paid to you at the times such scheduled payments are made
to other executives (who participated in the 1990-92 Performance Period) in
accordance with the terms of the Plan. You will not be recommended for
participation in the Long-Term Incentive Plan for any future performance
periods.
E. STOCK OPTIONS
Your December 5, 1991 stock option grant covering 40,000 shares and
your December 3, 1992 stock option grant covering 35,000 shares are fully
vested. You will have 36 months from the date your employment terminates to
exercise such options. The option covering 140,000 shares granted on August 1,
1991 as part of the "Stock Swap Arrangement" will terminate on the date your em-
ployment terminates. You will not be recommended for a stock option grant in
1993.
F. RESTRICTED STOCK
<PAGE>
-5-
The two remaining installments of 1,925 shares each (granted under
your February 6,1992 grant totaling 7,700 shares), scheduled to vest on April
15,1994 and April 15,1995, respectively, will vest upon your termination of
employment. In addition, the 38,336 shares of restricted stock granted under the
August 1, 1991 "Stock Swap Arrangement" will vest in five equal installments
during the five-year period beginning January 31,1997 and ending with the last
installment vesting on January 31, 2001. Following is a schedule showing the
status, as of June 30,1993, of all restricted shares granted to you from your
date of employment without regard to whether such shares are restricted or not
restricted:
<TABLE>
<CAPTION>
(1) (2) (3)
SHARES SHARES SHARES
DATE OF GRANT TOTAL RESTRICTED NOT RESTRICTED
<S> <C> <C> <C> <C>
(1) 8/7/89 10,000 -0- 10,000
(2) 8/1/91 38,336 38,336 (1) -0-
(3) 2/6/92 7,700 3,850 (2) 3,850
------ ---------- ------
(4) Total 56,036 42,186 13,850
<FN>
(1 ) Restrictions lapse in five annual installments January 31, 1997 through
January 31, 2001.
(2) Restrictions lapse on date of termination.
</TABLE>
G. DEFERRED COMPENSATION
Your deferred compensation balances, estimated at
<PAGE>
-6-
$95,187 (relating to your base salary deferral) and $20,110 (relating to your
Savings and Investment Plan Replacement Payment deferral) as of May 30,1993,
will be paid in separate lump sums at the end of the month following the month
of your termination.
H. SAVINGS AND INVESTMENT PLAN
Following your termination of employment, you may elect to take a
lump sum distribution under the Savings and Investment Plan, defer your
distribution out to age 70 1/2 or elect to begin receiving installment payments
over a period of up to 10 years, any such election being in accordance with the
Plan. Your balance as of June 28, 1993 totals $95,471.
I. PENSIONS
In lieu of Section 2.5 of the Agreement, which Section is null and
void and of no further force or effect, you shall continue to participate in the
Company's Retirement Plan for Salaried Employees and in the Supplemental
Retirement Plan in accordance with and subject to their respective provisions.
As such, you shall continue to accrue credited service for each month you remain
employed during the period July 1, 1993 through December 31, 1993, and all
compensation (as defined in such Plans) paid to you during such period shall be
recognized in your Final Average Compensation for the purpose of determining
your retirement benefit under such plans.
Under such plans your estimated accrued annual benefit
<PAGE>
-7-
as of June 30, 1993 is $21,610. Assuming continuous service through December 31,
1993 and continuation of your base salary through such date, your estimated
accrued benefit would be $24,661. Such accrued benefits would be reduced for
early commencement prior to age 62; i.e., by 17% if your benefit were to begin
October 1, 1993 (the first date on which you could begin receiving such benefit;
i.e., the first of the month following the month in which you reach age 55) or
by 16% if you elect to start your benefit on January 1, 1994
J. TERMINATION/SEVERANCE BENEFITS
In accordance with and subject to Section 3.4 of the Agreement,
Grace will pay you monthly severance payments at the rate of $48,125 ($577,500
per annum) during the period beginning on the first of the month following the
month in which your employment terminates (during the period July 1, 1993
through December 31, 1993), and ending July 31,1997. You understand that these
amounts are subject to reduction by other "Earned Income" as set forth in
such Section 3.4.
Section 3.4 provides, in general, that the amount of such monthly
severance payments shall be reduced by one-half of the amount of any Earned
Income that you receive from other sources for any period that such severance
payments are payable to you. In no event, however, shall such severance payments
be reduced to less than a rate of $60,000 in per year. For this purpose "Earned
Income" shall mean income attributable to the rendering of personal
<PAGE>
-8-
services, including salary, bonuses and incentive or other supplemental
compensation, whether payable currently or deferred, or whether payable in cash
or in property. Benefits attributable to executive or employee stock options,
benefit plans or other arrangements of the types referred to in Sections 2.3
through 2.8 of the Agreement shall not constitute Earned Income. Incidental
honorariums or consulting fees received on an infrequent basis while working
full-time for another employer shall not be included in Earned Income. However,
consulting fees, finders' fees and other income for personal services (other
than directors' fees) received in lieu of employment by others, or received on a
regular and continuing basis even if employed by another employer, shall be
included in Earned Income. Directors' fees shall not be included in Earned
Income
K. UNUSED VACATION PAYMENT
You shall be entitled to paid vacation aggregating not less than
four weeks during 1993. You shall be entitled to payment for any unused
vacation time in accordance with Company policy at the time your employment
terminates.
L. LEGAL FEES
The Company shall promptly pay upon demand any reasonable legal
fees incurred by you in connection with any enforcement of your rights under
this Memorandum of Understanding.
<PAGE>
-9-
Please confirm your agreement with the foregoing by signing a copy of
this memorandum where indicated below and returning it to me.
/s/J. P. Bolduc
Accepted and agreed to
this 30th day of June, 1993:
/s/ JOSEPH R. WRIGHT
- ---------------------------
Joseph R. Wright, Jr.
<PAGE>
Exhibit 10.25
<PAGE>
Exhibit 10.25
W. R. GRACE & CO.
SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN
AS ADOPTED BY
W. R. GRACE & CO.,
A CONNECTICUT CORPORATION,
EFFECTIVE OCTOBER 4, l984
AND AMENDED
EFFECTIVE MAY 25, l988
-------------------------------------------------
AS ADOPTED AND CONTINUED BY
W. R. GRACE & CO.,
A NEW YORK CORPORATION,
EFFECTIVE MAY 25, l988
AND AMENDED
EFFECTIVE JANUARY l, l993
<PAGE>
W. R. GRACE & CO. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
INTRODUCTION
Effective October 4, l984, W. R. Grace & Co., a Connecticut corporation
("Grace Connecticut"), adopted a supplemental executive retirement plan which
constitutes in part an "excess benefit plan" under section 3(36) of the Employee
Retirement Income Security Act of l974, as amended ("ERISA"), and which
constitutes in part an unfunded deferred compensation arrangement for a select
group of highly compensated or management employees under section 20l(2) of
ERISA, for the Eligible Persons described in the Plan.
The W. R. Grace & Co. Supplemental Executive Retirement Plan (the "Plan")
was amended effective May l, l988 for all Eligible Persons who terminate service
on or after such date.
As a result of a corporate reorganization whereby Grace Connecticut became
a subsidiary of W. R. Grace & Co., a New York corporation ("Grace New York")
(and was renamed "W. R. Grace & Co.-Conn."), Grace Connecticut amended the Plan
(as set forth herein), effective May 25, l988, and Grace New York adopted and
assumed the sponsorship of the Plan, as amended, as of such date, for the
benefit of all Eligible Persons and other persons who, on the immediately
preceding date, were participants in the Plan (as maintained by Grace
Connecticut) and all other employees of Grace New York or its subsidiaries who
on or after May 25, l988 become Eligible Persons or otherwise covered under the
Plan.
Grace New York last amended the Plan, effective as of January l, l989, with
respect to all Eligible Persons who terminate service on or after such date.
<PAGE>
Grace New York now desires to amend the Plan, effective as of January 1,
1993, with respect to all Eligible Persons who terminate service on or after
such date, to provide for vesting of benefits that is consistent with vesting
under the Salaried Retirement Plan.
* * *
<PAGE>
SECTION 1
DEFINITIONS
When used herein, the words and phrases defined hereinafter shall have the
following meanings unless a different meaning is clearly required by the context
of the Plan.
1.01 Affiliate:
Any corporation or trade or business (other than the
Company) that is treated under the first sentence of
section 4l4(b) or under section 4l4(c) of the Code as
constituting the same "employer" as the Company,
during the period of controlled status thereunder.
1.02 Board of Directors:
The Board of Directors of the Company.
1.03 Code:
The Internal Revenue Code of l986, as amended.
1.04 Committee:
The Salary, Incentive Compensation and Employee
Benefits Committee of the Board of Directors.
1.05 Company:
W. R. Grace & Co., a New York corporation. Prior to
May 25, l988, the term "Company" meant W. R. Grace &
Co., a Connecticut corporation.
<PAGE>
-2-
1.06 Effective Date:
October 4, l984.
1.07 Eligible Person:
A person who is described in Section 2 as eligible to
receive benefits under the Plan.
1.08 Employee:
An Employee of the Company or an Affiliate under the
Plan.
1.09 Employing Unit:
Any employing unit described in Section l.l4 of the
Grace Salaried Plan.
1.10 Grace Salaried Plan:
W. R. Grace & Co. Retirement Plan for Salaried
Employees (including the "old plans" and "predecessor
plans" defined therein and the plans merged therein).
Any reference to a section of the Grace Salaried Plan
shall include the corresponding section of any future
text thereof.
1.11 Plan:
W. R. Grace & Co. Supplemental Executive Retirement
Plan.
<PAGE>
-3-
1.12 Masculine pronouns used herein shall refer to men or women or both
and nouns and pronouns when stated in the singular shall include
the plural and when stated in the plural shall include the
singular, wherever appropriate.
1.13 Any reference in the Plan to a "Section" shall refer to a Section
of the Plan unless otherwise specified.
<PAGE>
-4-
SECTION 2
ELIGIBILITY AND VESTING
2.01 Any Employee who (i) is accruing credited service (as defined in
section 4.0l of the Grace Salaried Plan) under the Grace Salaried
Plan on or after the Effective Date of the Plan, (ii) has an
annual base salary of at least $75,000 at any time during the
period that he is accruing such credited service under the Grace
Salaried Plan, and (iii) satisfies the provisions of Section 2.04
shall be eligible to receive benefits under this Plan in
accordance with Section 3 of the Plan.
2.02 If so designated by the Board of Directors, (A) an Employee who
(i) accrued credited service (as defined in Section 2.0l above)
under the Grace Salaried Plan prior to (but not on or after) the
Effective Date of the Plan (and whose benefits under the Grace
Salaried Plan have not commenced prior to such designation), (ii)
has an annual base salary of at least $75,000 on or after the
Effective Date of the Plan while still employed by the Company or
an Affiliate, and (iii) satisfies the provisions of Section 2.04,
or (B) an Employee who (i) is accruing credited service (as
defined in Section 2.0l above) under the Grace Salaried Plan on or
after the Effective Date of the Plan, (ii) has an annual base
salary of at least $75,000 at any time after (but not during) the
period that he is accruing credited service (as defined in Section
2.0l above) under the Grace Salaried Plan, and (iii) satisfies the
provisions of Sec tion 2.04 shall be eligible to receive benefits
under the Plan in accordance with Section 3 of the Plan.
<PAGE>
-5-
2.03 If so designated by the Board of Directors, an Employee who (i) is
not accruing and never has accrued credited service (as defined in
Section 2.0l above) under the Grace Salaried Plan, (ii) is an
Employee of the Company or an Affiliate on or after the Effective
Date of the Plan, (iii) has an annual base salary of at least
$75,000 at any time while employed by the Company or an Affiliate,
and (iv) satisfies the provisions of Section 2.04 shall be
eligible to receive benefits under the Plan in accordance with
Section 3 of the Plan.
2.04 An Eligible Person must terminate service with the Company and its
Affiliates on or after the earliest of (i) the date he attains age
55, (ii) the date he completes at least ten (l0) years of vesting
service, effective January 1, 1988 (or, effective January l, l989,
the date he completes at least five (5) years of vesting service)
(as defined in Section l.38 of the Grace Salaried Plan) or (iii)
the date as of which he otherwise becomes vested under the Grace
Salaried Plan, in order to be eligible to receive benefits, if
any, under the Plan. The benefits, if any, provided under the
Plan to an Eligible Person shall vest upon the earliest of (i) his
attainment of age 55, (ii) his completion of at least ten (l0)
years of vesting service (effective January l, l989, five (5)
years of vesting service) (as defined in Section l.38 of the Grace
Salaried Plan) or (iii) the date as of which he otherwise becomes
vested under the Grace Salaried Plan. In the event that an
Eligible Person terminates service with the Company and its
Affiliates prior to the date his benefits become vested in
accordance with this Section 2.04, he shall be entitled to no
benefits under the Plan. Notwithstanding the foregoing, in the
event that an
<PAGE>
-6-
Eligible Person terminates service with the Company and its Affiliates by reason
of death prior to the date his benefits become vested in accordance with this
Section 2.04, benefits under the Plan will be payable in respect of him to the
extent provided in Section 3.05 or Section 3.09.
<PAGE>
-7-
SECTION 3
BENEFITS
3.01 The monthly benefit payable to an Eligible Person under the Plan
shall be equal to the excess, if any, of
(a) The amount of the monthly benefit which would be
payable to such Eligible Person under the Grace
Salaried Plan if the provisions set forth in the Grace
Salaried Plan to comply with the benefit limitations
of section 4l5 of the Code, the compensation
limitations of section 40l(a)(l7) of the Code and any
other Code provisions that become effective after
December 3l, l988 which similarly limit the amount of
retirement benefit that may be accrued under the Grace
Salaried Plan were inapplicable, and determined in
accordance with the following additional principles:
(i) credited service (as defined in section
4.0l of the Grace Salaried Plan) shall
include any period of employment, or
period of disability which satisfies the
provisions of section 6 of the Grace
Salaried Plan, not otherwise credited
under the Grace Salaried Plan, prior to
the date he attains age 70 in the case of
an Eligible Person who terminates service
with the Company and its affiliates prior
to January l, l988 and any period of
employment after the date he attains age
70, in the case of an Eligible Person who
terminates service with the Company and
its Affiliates after
<PAGE>
-8-
December 3l, l987, with a division of the
Company or an Affiliate, which does not
participate in the Grace Salaried Plan
(other than (A) any period during which
the Eligible Person was satisfying the
eligibility requirements of the Grace
Salaried Plan, (B) any period that an
Eligible Person declined to contribute to
the Grace Salaried Plan (while eligible to
do so), (C) any period that an Eligible
Person waived participation in the Grace
Salaried Plan, or (D) any period that
service was interrupted in the case of
authorized leave of absence for a reason
other than for disability). Subject to the
foregoing, an Eligible Person will be
credited with a month of credited service
for any calendar month during any part of
which he was employed or disabled as
described above; provided, however, that
in the event that an Eligible Person
terminates service with the Company and
all Affiliates during or after such period
of employment and is subsequently
re-employed by the Company or an
Affiliate, any period of such employment
or disability prior to such re-employment
shall be restored as credited service
hereunder, but if an Eligible Person so
terminates service (whether or not prior
to January l, l976) and is not vested to
any extent in an employer-derived accrued
benefit under the Grace Salaried Plan at
the time of such termination and his
number of one-year breaks in service (as
defined in section l.22 of the Grace
Salaried Plan)
<PAGE>
-9-
following such termination equal or exceed
his years of vesting service (as defined
in section l.38 of the Grace Salaried
Plan) rendered prior to re-employment,
such period shall not be restored as
credited service hereunder, and provided
further that any credited service
hereunder in respect of a period of
employment during which the Grace Salaried
Plan was contributory shall be reduced by
30% thereof;
(ii) compensation (as defined in section l.07
of the Grace Salaried Plan) shall include
any amount of (A) incentive compensation
(not otherwise included thereunder) which
an Eligible Person elected to defer (and
hence did not receive on a current basis)
at any time after the effective date of
the Grace Salaried Plan, (B) "regular" or
base salary (not otherwise included
thereunder) which an Eligible Person
elected to defer (and hence did not
receive on a current basis) with respect
to periods after December 3l, l987 and (C)
annual compensation in excess of $200,000
that would otherwise be recognized under
the Grace Salaried Plan but for the
limitations of Section 40l(a)(l7) of the
Code with respect to periods after
December 3l, l988; provided, however, that
in the event that an Eligible Person
terminates service with the Company and
all Affiliates and is subsequently
re-employed by the Company or an
Affiliate, any such incentive compensation
and "regular" or base
<PAGE>
-10-
salary which an Eligible Person elected,
prior to such re-employment, to defer and
any such annual compensation in excess of
$200,000 shall be credited hereunder only
to the extent that the month in which such
incentive compensation and "regular" or
base salary would otherwise have been paid
and the month in which such excess
compensation was paid would be restored as
credited service under the re-employment
rules set forth in Section 3.0l(a)(i);
(iii) in the case of an Eligible Person
described in Section 2.03, the provisions
of Section 3.0l(a) shall be applied as if
a monthly benefit were payable to the
Eligible Person under the Grace Salaried
Plan (even though he was never employed by
the Company or an Employing Unit) and as
if such Eligible Person were required to
satisfy the eligibility provisions of the
Grace Salaried Plan.
over
(b) (i) in the case of an Eligible Person
described in Section 2.0l or 2.02, the
amount of the monthly benefit actually
payable to such Eligible Person under the
Grace Salaried Plan (including any
increase provided for in section 5.03(6)
of the Grace Salaried Plan), and
<PAGE>
-11-
(ii) in the case of an Eligible Person
described in Section 2.0l, 2.02, or 2.03,
the amount deemed payable for purposes of
the Plan under any other defined benefit
plan (as defined in section 3(35) of
ERISA) or defined contribution plan (as
defined in section 3(34) of ERISA)
maintained by the Company or an Affiliate
(except the W. R. Grace & Co. Salaried
Employees Savings and Investment Plan and
the Dearborn Chemical Company Salaried
Employees Savings and Investment Plan), or
any deferred compensation agreement or
arrangement entered into by such Eligible
Person and the Company or an Affiliate, or
maintained by the Company or an Affiliate
(other than (A) the deferral of incentive
compensation referred to in Section
3.0l(a)(ii), (B) the Incentive
Compensation Plan for Key Employees of El
Torito-La Fiesta Restaurants, Inc., (C)
the Natural Resources Group Long Term
Incentive Plan, (D) the W. R. Grace & Co.
Performance Incentive Plan, (E) the Teal
Incentive Compensation Plan, (F) any other
plan, program, arrangement or contract
which by its terms provides that
compensation thereunder should not be an
offset under the Plan, and (G) any other
agreement or arrangement which the Board
of Directors or the Committee determines
should not be an offset under the Plan in
whole or in part).
3.02 In the case of an Eligible Person described in Section 2.0l or
2.02, the calculation of the monthly benefit
<PAGE>
-12-
described in Section 3.0l(a) above shall be based upon the same
form of benefit, benefit commencement date, and other factors and
assumptions actually used to calculate the monthly benefit
described in Section 3.0l(b)(i) above. If the benefit payable
under any other defined benefit plan is aggregated with the
benefit payable under the Grace Salaried Plan for purposes of
applying the limitations of section 4l5 of the Code, then the
benefit payable under any such defined benefit plan shall be
aggregated with the benefit payable under the Grace Salaried Plan
in the calculation of Section 3.0l(a) and Section 3.0l(b)(i)
above.
3.03 In the case of an Eligible Person described in Section 2.0l, 2.02,
or 2.03, the amount deemed payable for purposes of the Plan under
any defined benefit plan described in Section 3.0l(b)(ii) shall be
the amount that would be payable thereunder in respect of years of
credited service taken into account under Section 3.0l(a) in the
form of benefit applicable to the Eligible Person under Section
3.0l(a) commencing at the age that the benefit under Section
3.0l(a) commences. The amount deemed payable under any defined
contribution plan described in Section 3.0l(b)(ii) shall be the
amount that would be payable thereunder at the date that the
benefit under Section 3.0l(a) commences, multiplied by a fraction
whose numerator is the number of years that the Eligible Person
participated in such defined contribution plan and that are
credited under Section 3.0l(a) concurrently, and whose denominator
is the number of years that the Eligible Person participated in
such defined contribution plan, converted to the form of benefit
applicable to the Eligible Person under Section 3.0l(a) commencing
at the
<PAGE>
-13-
age that the benefit under Section 3.0l(a) commences using the
UP-84 mortality table and an interest rate equal to the rate, as
of the first day of the calendar quarter in which the benefit
under Section 3.0l(a) commences, used by the Pension Benefit
Guaranty Corporation to value immediate annuities under trusteed
pension plans which terminate as of such date. The amount deemed
payable under any deferred compensation agreement or arrangement
described in Section 3.0l(b)(ii) shall be the amount that would be
payable thereunder at the date that the benefit under Section
3.0l(a) commences, converted to the form of benefit applicable to
the Eligible Person under Section 3.0l(a) commencing at the age
that the benefit under Section 3.0l(a) commences using the
actuarial assumptions set forth in section 5.06(a) and (b) of the
Grace Salaried Plan if the amount payable under such agreement or
arrangement is in the form of periodic payments or using the
actuarial assumptions applicable in the case of a defined
contribution plan if the amount payable under such agreement or
arrangement is in the form of a lump sum.
3.04 In the case of an Eligible Person described in Section 2.0l or
2.02, the monthly benefit under the Plan shall be payable
coincident with the payment of a monthly benefit under the Grace
Salaried Plan, provided that no monthly benefit under the Plan
shall be payable in respect of any period prior to the Effective
Date of the Plan.
3.05 In the case of an Eligible Person described in Section 2.0l or
2.02, such Eligible Person's joint annuitant, beneficiary, or
surviving spouse referred to in section 7.02 of the Grace Salaried
Plan shall become entitled to benefits as provided under Section 3
if such joint
<PAGE>
-14-
annuitant, beneficiary, or surviving spouse shall become entitled
to benefits (in such capacity) under the Grace Salaried Plan.
Notwithstanding any provision of the Plan, in the event that an
Eligible Person's joint annuitant, beneficiary, or surviving
spouse referred to above shall become entitled to benefits (in
such capacity) under the Grace Salaried Plan, and the provisions
of the Grace Salaried Plan do not preclude such joint annuitant,
beneficiary, or surviving spouse from receiving all or part of the
benefit provided thereunder for such person, then the Grace
Salaried Plan shall pay such benefit to the extent permitted under
the Grace Salaried Plan (and no amount duplicating such benefit
shall be payable under the Plan).
3.06 In the case of an Eligible Person described in Section 2.0l or
2.02, in the event that such an Eligible Person (or his joint
annuitant, beneficiary, or surviving spouse referred to in section
7.02 of the Grace Salaried Plan) ceases to receive benefits under
the Grace Salaried Plan for any reason, he (or she) shall cease to
be eligible to receive benefits under the Plan.
3.07 In the case of an Eligible Person described in Section 2.03, the
monthly benefit under the Plan shall be based upon the form of
benefit, benefit commencement date, and other factors and
assumptions which would have been applicable to him under the
Grace Salaried Plan if he were a participant in the Grace Salaried
Plan (as defined in section l.24 of the Grace Salaried Plan).
3.08 In the case of an Eligible Person described in Section 2.03, the
monthly benefit under the Plan shall be payable
<PAGE>
-15-
coincident with the payment of a monthly benefit which would have
been made under the Grace Salaried Plan if he were a participant
in the Grace Salaried Plan (as defined in section l.24 of the
Grace Salaried Plan).
3.09 In the case of an Eligible Person described in Section 2.03, such
Eligible Person's joint annuitant, beneficiary, or surviving
spouse referred to in section 7.02 of the Grace Salaried Plan
shall become entitled to benefits as provided under Section 3 if
such joint annuitant, beneficiary, or surviving spouse would have
become entitled to benefits (in such capacity) under the Grace
Salaried Plan if such Eligible Person had been a participant in
the Grace Salaried Plan (as defined in section l.24 of the Grace
Salaried Plan).
3.10 In the case of an Eligible Person described in Section 2.03, in
the event that such an Eligible Person (or his joint annuitant,
beneficiary, or surviving spouse referred to in section 7.02 of
the Grace Salaried Plan) would cease to receive benefits under the
Grace Salaried Plan if he were a participant in the Grace Salaried
Plan (as defined in section l.24 of the Grace Salaried Plan), he
(or she) shall cease to be eligible to receive benefits under the
Plan.
3.11 The monthly benefits described in Sections 3.01(a) and 3.01(b)(i)
are payable in the form of a straight life annuity commencing as
of or after the first day of the month after an Eligible Person
attains age 65 (except to the extent that a different form of
benefit, or benefit commencement date, or both, is applicable, or
would be
<PAGE>
-16-
applicable, to the Eligible Person under the Grace Salaried Plan).
3.12 The benefits payable under the Plan shall be paid by the Company
or a subsidiary of the Company, as the case may be, out of its
general assets and shall not be funded in any manner.
3.13 In the event that an Eligible Person who has terminated service
with the Company and its Affiliates elects to defer the
commencement of his benefits under the Grace Salaried Plan, he may
apply to the Committee for a deferral of his benefits under the
Plan in order to prevent constructive receipt of such benefits,
provided that the Committee shall in its sole discretion decide
whether to grant such application. The grant or denial of any
such application shall not alter or limit the provisions of
Sections 3.04 and 3.08 of the Plan.
3.l4 Notwithstanding any other provision of the Plan, in the event that
the service of a "participant" in the Grace Salaried Plan (or an
employee described in section 2.0l(2) of the Grace Salaried Plan
who has not yet completed a "year of service" under the Grace
Salaried Plan) is terminated at Company request on account of
layoff during the period from October 3l, l986 to January 3l, l987
(or up to April 30, l987 in case of business necessity), and, as
of the date of his Termination of Service, such participant (or
such employee) (i) has attained age 50, (ii) earns a base salary
of $75,000 or more, and (iii) is employed on the corporate staff
at the main office of W. R. Grace & Co., each such participant or
employee shall receive the following monthly benefits, commencing
as of
<PAGE>
-17-
the date that his benefits under the Grace Salaried Plan commence
(or would commence, if no such benefit is payable, or if section
5.l4 of the Grace Salaried Plan applied to him),
(A) a benefit determined with respect to the participant (or
employee) under section 5.02(l)(a) of the Grace Salaried Plan
based on five years of "credited service" under the Grace Salaried
Plan (or the period until his attainment of age 70, if less)
payable in the form applicable to such participant or employee in
accordance with the terms of the Grace Salaried Plan (without
reduction for early commencement);
(B) in the case of such a participant in the Grace Salaried
Plan who has attained age 50 (but not age 55) and has less than l0
years of "vesting service" under the Grace Salaried Plan, a
benefit equal to the benefit accrued by such participant under
section 5.02 of the Grace Salaried Plan which was forfeited by him
upon termination of service payable in the form which would have
been applicable to such participant in accordance with the terms
of the Grace Salaried Plan (without reduction for early
commencement); and
(C) a benefit equal to the amount, if any, by which the
benefit payable to such participant under the Grace Salaried Plan
(without reduction for early commencement) exceeds the benefit
actually payable to such participant under the Grace Salaried
Plan.
<PAGE>
-18-
SECTION 4
ADMINISTRATION
4.01 The Plan shall be administered by the Salary, Incentive
Compensation and Employee Benefits Committee (or its designee) in
accordance with its terms and purposes. The Committee (or its
designee) shall determine the amount and manner of payment of the
benefits under the Plan.
4.02 The decisions made and the actions taken by the Committee (and its
designee) in the administration of the Plan shall be final and
conclusive on all persons, and the Committee, its members, and its
designees shall not be subject to liability with respect to the
Plan.
4.03 The Committee shall have the sole responsibility for the
administration of the Plan and shall have the exclusive right to
interpret the provisions of the Plan and to determine any question
arising thereunder or in connection with the administration of the
Plan, including the remedying of any omissions, inconsistency, or
ambiguity, and its decision or action in respect thereof shall be
conclusive and binding on all persons.
<PAGE>
-19-
SECTION 5
AMENDMENT AND TERMINATION
5.01 The Board of Directors may amend or terminate the Plan with
respect to future periods at any time for whatever reason it may
deem appropriate. In the event of termination of the Plan, no
person shall be entitled to accrue additional benefits under the
Plan with respect to any period after the effective date of
termination determined by the Board of Directors; provided,
however, that any benefits under the Plan accrued prior to the
effective date of the termination determined by the Board of
Directors shall not be reduced on account of such termination.
Notwithstanding the foregoing, the provisions of Section 2.04
shall continue to be applicable to an Eligible Person, unless the
Board of Directors elects to waive such provisions in order to
vest all Eligible Persons in any such benefits provided under the
Plan even if such an Eligible Person terminates service with the
Company and its Affiliates prior to the date he attains age 55 or,
effective January l, l988, prior to the date he completes at least
ten (l0) years of vesting service (effective January l, l989,
prior to the date he completes at least five (5) years of vesting
service) (as defined in Section l.38 of the Grace Salaried Plan).
<PAGE>
-20-
SECTION 6
MISCELLANEOUS
6.01 Nothing contained in the Plan shall be construed as a contract of
employment between the Company and an Eligible Person, or as a
right of any Eligible Person to continue in the employ of the
Company or as a limitation of the right of the Company to
discharge any Eligible Person, with or without cause.
6.02 The benefits payable under the Plan may not be assigned or
alienated.
6.03 The Plan shall be governed, to the extent provided thereunder, by
the Employee Retirement Income Security Act of l974 and to the
extent not preempted, by the laws of the State of New York.
<PAGE>
January 18, 1994
Exhibit 22
W. R. GRACE & CO.
___________________
SUBSIDIARY LIST
_______________
Attached is a list of subsidiaries of W. R. Grace & Co. Each of
the companies is organized under the laws of the jurisdiction under which it is
listed and in the case of each United States company, under the laws of the
state following its name. The percentage given for each company represents the
percentage of voting securities of such company owned.
W. R. Grace & Co.-Conn. is a wholly owned subsidiary of W. R.
Grace & Co. Unless otherwise indicated, W. R. Grace & Co.-Conn. is the owner of
the stock of each subsidiary listed. The indicated percentage of the voting
securities of each company marked "(A)" is owned either (a) jointly by W. R.
Grace & Co.-Conn. and one or more of its domestic or foreign wholly owned
subsidiaries, or (b) solely by one or more of such wholly owned subsidiaries
and/or wholly-owned subsidiaries thereof. The indicated percentage of the
voting securities of each company marked "(B)" is owned directly by one or more
wholly-owned subsidiaries of W. R. Grace & Co. and/or wholly-owned subsidiaries
thereof, they are NOT owned through W. R. Grace & Co.-Conn.
Also attached is a list of partnerships in which W. R. Grace & Co.
Conn., or one of its subsidiaries, is a partner and a list of investments (at
least 20% but not more than 50%) held by W.R. Grace & Co. or W.R. Grace &
Co.-Conn. and/or one or more of its subsidiaries.
<PAGE>
SUBSIDIARIES
------------
United States
-------------
(A) A-1 Bit & Tool Co., Inc.
(Delaware 100%)
ABS International, Inc.
(Delaware 100%)
AG CHEM International, Inc.
(Delaware 100%)
Agracetus, Inc.
(Delaware 100%)
(A) Alewife Boston Ltd.
(Massachusetts 100%)
(A) Alewife Land Corporation
(Massachusetts 100%)
(A) Amasi Medical Group, Inc.
(California 100%)
(B) Ambulatory Care Associates, Inc.
(Delaware 100%)
(B) American Home Therapies, Inc.
(Maryland 100%)
American Homecare Equipment, Inc.
(Virginia 100%)+
(A) Amicon, Inc.
(Delaware 100%)
Antilles Chemical Company
(Delaware 100%)
(A) Babcock Artificial Kidney Center, Inc.
(Massachusetts 100%)
Berisford Cocoa Sales, Inc.
(New Jersey 100%)***
(A) Bio-Medical Applications Home Dialysis Services, Inc.
(Delaware 100%)
(A) Bio-Medical Applications Management Company, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Aguadilla, Inc.
(Delaware 100%)
- ------------------
*** Inactive.
+ Owned directly by W. R. Grace & Co.
- 2 -
<PAGE>
(A) Bio-Medical Applications of Alabama, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Alameda County, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Anacostia, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Arecibo, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Arizona, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Arkansas, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Bakersfield, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Bayamon, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Blue Springs, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Boston, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Brockton, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Caguas, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of California, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Camarillo, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Cape Cod, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Capitol Hill, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Carolina, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Carson, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Central Baltimore, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Chicopee, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Chula Vista, Inc.
- 3 -
<PAGE>
(Delaware 100%)***
(A) Bio-Medical Applications of Clinton, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Colorado, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Columbia Heights, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Delaware, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Dover, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Dublin, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of East Orange, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Essex, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Eureka, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Fajardo, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Fayetteville, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Florida, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Framingham, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Fremont, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Fresno, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Georgia, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Glendora, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Guayama, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Hayward, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Hillside, Inc.
(Delaware 100%)
- ------------------
*** Inactive.
- 4 -
<PAGE>
(A) Bio-Medical Applications of Hoboken, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Humacao, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Illinois, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Indiana, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Irvington, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Jersey City, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Kentucky, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of La Mesa, Inc.
(Delaware 100%)***
(A) Bio-Medical Applications of Las Americas, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Long Beach, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Los Angeles, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Los Gatos, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Louisiana, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Maine, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Manchester, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Maryland, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Massachusetts, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Mayaguez, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Medford, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Michigan, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Mission Hills, Inc.
(Delaware 100%)
- ------------------
*** Inactive.
- 5 -
<PAGE>
(A) Bio-Medical Applications of Mississippi, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Missouri, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of MLK, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of National City, Inc.
(Delaware 100%)***
(A) Bio-Medical Applications New Hampshire, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of New Jersey, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of New Mexico, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of New York, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Newington, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of North Carolina, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of North City, Inc.
(Delaware 100%)***
(A) Bio-Medical Applications of Northeast D.C., Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Oakland, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Ohio, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Oklahoma, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Pennsylvania, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Pine Brook, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Ponce, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Port Orange, Inc.
(Delaware 100%)***
(A) Bio-Medical Applications of Puerto Rico, Inc.
(Delaware 100%)
- ------------------
*** Inactive.
- 6 -
<PAGE>
(A) Bio-Medical Applications of Quincy, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Rhode Island, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Rio Piedras, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of San Diego, Inc.
(Delaware 100%)***
(A) Bio-Medical Applications of San German, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of San Juan, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Sarasota, Inc.
(Delaware 100%)***
(A) Bio-Medical Applications of South Carolina, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of South Queens, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Southeast San Diego, Inc.
(Delaware 100%)***
(A) Bio-Medical Applications of Southeast Washington, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Southeastern
Massachusetts, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Springfield, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Tarpon Springs, Inc.
(Delaware 100%)***
(A) Bio-Medical Applications of Tennessee, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Texas, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of The District of
Columbia, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Torrance, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Trenton, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Ukiah, Inc.
- ------------------
*** Inactive.
- 7 -
<PAGE>
(Delaware 100%)
(A) Bio-Medical Applications of Union City, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Virginia, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of West Virginia, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Westwood, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Whittier, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Wisconsin, Inc.
(Delaware 100%)
(A) Bio-Medical Applications of Woonsocket, Inc.
(Delaware 100%)
(A) Blue Ridge Medical Supply, Inc.
(Tennessee 100%)
Caribe Nitrogen Corporation
(Puerto Rico 100%)
Chomerics, Inc.
(Delaware 100%)
(A) Coalgrace, Inc.
(Delaware 100%)
(A) Coalgrace II, Inc.
(Delaware 100%)
(A) Conejo Valley Dialysis, Inc.
(California 100%)***
Construction Products Dubai, Inc.
(Delaware 100%)
(A) Creative Food 'N Fun Company
(Delaware 100%)
Darex Puerto Rico, Inc.
(Delaware 100%)
Daylin-Summit, Inc.
(New York 100%)
32092 Delaware, Ltd.
(Delaware 100%)
De Zaan, Incorporated
(New York 100%)**
- ------------------
*** Inactive.
** Owned by a partnership, Grace Cocoa Associates, L.P. or subsidiary thereof.
- 8 -
<PAGE>
Del Taco Restaurants, Inc.
(Delaware 100%)
Devcoa Incorporated
(Florida 100%)
Dewey and Almy Company
(Massachusetts 100%)
(A) Dialysis Assistance, Inc.
(New Jersey 100%)
(A) Dialysis Services, Inc.
(Texas 100%)
Ecarg, Inc.
(New Jersey 100%)
E L Liquidating Corp.
(Ohio 100%)
Emerson & Cuming, Inc.
(Delaware 100%)
(A) Erika International Sales Corporation
(Delaware 100%)***
(A) Erika of Texas, Inc.
(Delaware 100%)
(A) Five Alewife Boston Ltd.
(Massachusetts 100%)
G/B Cocoa Holding Inc.
(Delaware 100%)**
GC Holding Inc.
(Delaware 100%)
(A) GEC Management Corporation
(Delaware 100%)
(A) GPC Divestment Corp. II
(Delaware 100%)
(A) GPC Thomasville Corp.
(Delaware 100%)
(A) GRC Property, Inc.
(Delaware 100%)
(A) Gloucester New Communities Company, Inc.
(New Jersey 100%)
(A) Grace A-B Inc.
(Delaware 100%)
- ------------------
*** Inactive.
** Owned by a partnership, Grace Cocoa Associates, L.P. or subsidiary thereof.
- 9 -
<PAGE>
(A) Grace A-B II Inc.
(Delaware 100%)
Grace Asia Pacific, Inc.
(Delaware 100%)
Grace Chemicals, Inc.
(Delaware 100%)
Grace Chemical Company of Cuba
(Illinois 100%)***
Grace Cocoa, Inc.
(Delaware 100%)**
Grace Cocoa Limited Partners I, Inc.
(Delaware 100%)
Grace Cocoa Limited Partners II, Inc.
(Delaware 100%)
Grace Cocoa Management, Inc.
(Delaware 100%)
Grace Cocoa Ventures, Inc.
(Delaware 100%)
Grace Collections, Inc.
(Delaware 100%)
Grace Communications, Inc.
(Delaware 100%)
Grace Culinary Systems, Inc.
(Maryland 100%)
Grace Culinary Systems (China) Ltd.
(Delaware 100%)
(A) Grace Drilling Company
(Delaware 100%)
(A) Grace-Drilling International-Venezuela, Inc.
(Delaware 100%)
Grace Energy Corporation
(Delaware 100%)
(A) Grace Energy-Saudi Arabia, Inc.
(Delaware 100%)
Grace Environmental, Inc.
(Delaware 100%)+
Grace Europe, Inc.
(Delaware 100%)
- ------------------
*** Assets and business expropriated by Cuban Governments.
** Owned by a partnership, Grace Cocoa Associates, L.P. or subsidiary thereof.
+ Owned directly by W. R. Grace & Co.
- 10 -
<PAGE>
(A) Grace H-G Inc.
(Delaware 100%)
(A) Grace H-G II Inc.
(Delaware 100%)
Grace Hotel Services Corporation
(Delaware 100%)+
Grace (Middle East) Inc.
(Delaware 100%)
Grace Logistics Services, Inc.
(Delaware 100%)
Grace Management Services, Inc.
(Delaware 100%)
(A) Grace Offshore Company
(Louisiana 100%)
Grace PAR Corporation
(Delaware 100%)
(A) Grace Petroleum Libya Incorporated
(Delaware 100%)
Grace Tarpon Investors, Inc.
(Delaware 100%)
Grace Technology Marketing Services, Inc.
(Delaware 100%)
Grace Ventures Corp.
(Delaware 100%)
Grace Washington, Inc.
(Delaware 100%)+
(A) W. R. Grace Capital Corporation
(New York 100%)
W. R. Grace Credit Corp.
(Delaware 100%)
W. R. Grace Land Corporation
(New York 100%)
(A) W. R. Grace Properties, Inc.
(New York 100%)
W. R. Grace Sales Corp.
(Virgin Islands 100%)
W. R. Grace & Co.-Conn.
(Connecticut 100%)+
(A) Gracoal, Inc.
(Delaware 100%)
- ------------------
+ Owned directly by W. R. Grace & Co.
- 11 -
<PAGE>
(A) Gracoal II, Inc.
(Delaware 100%)
(A) Greater Southeast Community Center for Renal Disease, Inc.
(District of Columbia 100%)
(A) Gulf Region Mobile Dialysis, Inc.
(Delaware 100%)
(B) Gynesis Healthcare, Inc.
(Delaware 100%)
(B) Gynesis Healthcare of Connecticut, Inc.
(Connecticut 100%)
(B) Gynesis Healthcare for Women of Florida, Inc.
(Florida 100%)
(B) Gynesis Healthcare of Maryland, Inc.
(Maryland 100%)
(B) Gynesis Healthcare of New Jersey, Inc.
(New Jersey 100%)
(B) Gynesis Healthcare of New York, Inc.
(New York 100%)
(B) Gynesis Healthcare of Oklahoma, Inc.
(Oklahoma 100%)
(B) Gynesis Healthcare of Pennsylvania, Inc.
(Pennsylvania 100%)
(B) Gynesis Healthcare of South Carolina, Inc.
(South Carolina 100%)
(B) Gynesis Resources, Inc.
(Delaware 100%)
Hanover Square Corporation
(Delaware 100%)
(A) Homco International, Inc.
(Delaware 100%)
(B) Home Dialysis Care, Inc.
(Texas 100%)
Home Intensive Care, Inc.
(Delaware 100%)+
(B) Home Intensive Care of Arizona, Inc.
(Arizona 100%)
(B) Home Intensive Care of California, Inc.
(California 100%)
(B) Home Intensive Care of Colorado, Inc.
(Colorado 100%)
- ------------------
+ Owned directly by W. R. Grace & Co.
- 12 -
<PAGE>
(B) Home Intensive Care of Connecticut, Inc.
(Connecticut 100%)
(B) Home Intensive Care of Florida, Inc.
(Florida 100%)
(B) Home Intensive Care of Georgia, Inc.
(Georgia 100%)
(B) Home Intensive Care of Illinois, Inc.
(Illinois 100%)
(B) Home Intensive Care of Jacksonville, Inc.
(Florida 100%)
(B) Home Intensive Care of Kansas, Inc.
(Kansas 100%)
(B) Home Intensive Care of Las Vegas, Inc.
(Nevada 100%)
(B) Home Intensive Care of Louisiana, Inc.
(Louisiana 100%)
(B) Home Intensive Care of Maryland, Inc.
(Maryland 100%)
(B) Home Intensive Care of Massachusetts, Inc.
(Massachusetts 100%)
(B) Home Intensive Care of Michigan, Inc.
(Michigan 100%)
(B) Home Intensive Care of Missouri, Inc.
(Missouri 100%)
(B) Home Intensive Care of Nevada, Inc.
(Nevada 100%)
(B) Home Intensive Care of New Jersey, Inc.
(New Jersey 100%)
(B) Home Intensive Care of New York, Inc.
(New York 100%)
(B) Home Intensive Care of Northern Ohio, Inc.
(Ohio 100%)
(B) Home Intensive Care of North Miami, Inc.
(Florida 100%)
(B) Home Intensive Care of Ohio, Inc.
(Ohio 100%)
(B) Home Intensive Care of Pennsylvania, Inc.
(Pennsylvania 100%)
(B) Home Intensive Care Pharmacy Services Limited
(Michigan 100%)*
- ------------------
* 25% Owned by Michigan resident pharmacist.
- 13 -
<PAGE>
(B) Home Intensive Care of Rhode Island, Inc.
(Rhode Island 100%)
(B) Home Intensive Care of Tampa, Inc.
(Florida 100%)
(B) Home Intensive Care of Virginia, Inc.
(Virginia 100%)
(B) Home Pharmacy Care of Michigan, Inc.
(Michigan 100%)
(a) Homestead Artificial Kidney Center, Inc.
(Florida 100%)***
(B) Infusions Innovations of Jacksonville, Inc.
(Florida 100%)
(B) Infusions Innovations of Tampa, Inc.
(Florida 100%)
(A) International Medical Care, Inc.
(Delaware 100%)
(B) KDNY, Inc.
(Delaware 100%)
(A) Kidney Disease and Hypertension Center, Ltd.
(Arizona 100%)
(A) La Posta Recycling Center Inc.
(Delaware 57%)
L B Realty, Inc.
(Delaware 100%)
(A) Life Assist Medical Products Corp.
(Puerto Rico 100%)
(A) Lifechem, Inc.
(Delaware 100%)
(B) Lifeline Medical Supplies, Inc.
(Florida 100%)
(B) Lifeline Medical Systems, Inc.
(California 100%)
(A) The Medical Accountability Group, Inc.
(Texas 100%)
(A) Medical Supply Company, Inc.
(Virginia 100%)
(B) Medi-Sure Testing, Inc.
(Delaware 100%)
(A) Med-X-Press, Inc.
(Delaware 100%)
- ------------------
*** Inactive.
- 14 -
<PAGE>
(A) Metro Dialysis Center - Kirkwood, Inc.
(Missouri 100%)
(A) Metro Dialysis Center - Normandy, Inc.
(Missouri 100%)
(A) Metro Dialysis Center - North, Inc.
(Missouri 100%)
(A) Minico/Asahi Chemical of America, Inc.
(New York 100%)
Monolith Enterprises, Incorporated
(District of Columbia 100%)
Monroe Street, Inc.
(Delaware 100%)
(A) Mountainview Insurance Company
(Colorado 100%)
(A) National Medical Care, Inc.
(Delaware 100%)
(A) National Medical Care Home Care Division, Inc.
(Delaware 100%)
(A) National Medical Care Home Care Service Agency, Inc.
(New York 100%)
(A) National Medical Care Medical Products Division, Inc.
(Delaware 100%)
(A) National Medical Care of Taiwan, Inc.
(Delaware 100%)
(A) Nephrology Applications of Mobile, Inc.
(Alabama 100%)
(A) NMC Diabetic Foot Care, Inc.
(Delaware 100%)
(A) NMC Diabetic Foot Care Centers Orthotics, Inc.
(Delaware 100%)
(a) NMC Diagnostics Services, Inc.
(Delaware 100%)
(A) NMC Dialysis Services, Inc.
(Delaware 100%)
(A) NMC Dialysis Services (Romania), Inc.
(Delaware 100%)
(A) NMC Holding, Inc.
(Delaware 100%)
(A) NMC Homecare of Michigan, Inc.
(Delaware 100%)*
- ------------------
* 25% Owned by Michigan resident pharmacist.
- 15 -
<PAGE>
(A) NMC International, Inc.
(Delaware 100%)
(A) NMC Services, Inc.
(Delaware 100%)
(A) NMC Services (Romania), Inc.
(Delaware 100%)
(A) NMC Ventures, Inc.
(Delaware 100%)
Ochoa Fertilizer Co., Inc.
(Puerto Rico 100%)
Offshore Fisheries, Inc.
(Massachusetts 100%)
Oil Stop, Inc.
(Louisiana 55%)+
(B) PD Solutions, Inc.
(Delaware 100%)
(B) PD Solutions of Arizona, Inc.
(Arizona 100%)
(B) PD Solutions of California, Inc.
(California 100%)
(B) PD Solutions of Florida, Inc.
(Florida 100%)
(B) PD Solutions Georgia, Inc.
(Georgia 100%)
(B) PD Solutions of Illinois, Inc.
(Illinois 100%)
(B) PD Solutions Kansas, Inc.
(Kansas 100%)
(B) PD Solutions of Louisiana, Inc.
(Louisiana 100%)
(B) PD Solutions Maryland, Inc.
(Maryland 100%)
(B) PD Solutions Michigan, Inc.
(Michigan 100%)
(B) PD Solutions Missouri, Inc.
(Missouri 100%)
(B) PD Solutions of Nevada, Inc.
(Nevada 100%)
(B) PD Solutions New Jersey, Inc.
(New Jersey 100%)
- ------------------
+ Owned by Grace Environmental, Inc. 100% owned subsidiary of W. R. Grace &
Co.
- 16 -
<PAGE>
(B) PD Solutions of New York, Inc.
(New York 100%)
(B) PD Solutions of Ohio, Inc.
(Ohio 100%)
(B) PD Solutions Pennsylvania, Inc.
(Pennsylvania 100%)
(B) PD Solutions of Texas, Inc.
(Texas 100%)
(B) PD Solutions Virginia, Inc.
(Virginia 100%)
(A) Personal Health Care Services, Inc.
(Delaware 100%)
(B) Phoenix Consulting Services, Inc.
(Florida 100%)
(B) Preferred Homecare of Florida, Inc.
(Florida 100%)
(B) Preferred Homecare of New Jersey, Inc.
(New Jersey 100%)
(B) Preferred Pharmacy Services, Inc.
(Florida 100%)
(A) Prochrom, Inc.
(Indiana 100%)
(B) Quality Care Dialysis Centers, Inc.
(Florida 100%)
(B) Quality Care Dialysis Center of Baltimore, Inc.
(Maryland 100%)
(B) Quality Care Dialysis Center of Boston, Inc.
(Massachusetts 100%)
(B) Quality Care Dialysis Center of Creve Coeur, Inc.
(Missouri 100%)
(B) Quality Care Dialysis Center of Dallas, Inc.
(Texas 100%)
(B) Quality Care Dialysis Center of Greensburg, Inc.
(Louisiana 100%)
(B) Quality Care Dialysis Center of Hammond, Inc.
(Delaware 100%)
(B) Quality Care Dialysis Center of Houston, Inc.
(Texas 100%)
(B) Quality Care Dialysis Center of Las Vegas, Inc.
(Nevada 100%)
(B) Quality Care Dialysis Center of Margate, Inc.
(Florida 100%)
(B) Quality Care Dialysis Center of Mt. Vernon, Inc.
(Virginia 100%)
- 17 -
<PAGE>
(B) Quality Care Dialysis Center of New Orleans, Inc.
(Louisiana 100%)
(B) Quality Care Dialysis Center of North County, Inc.
(Missouri 100%)
(B) Quality Care Dialysis Center of Parapsco, inc.
(Maryland 100%)
(B) Quality Care Dialysis Center of San Antonio, Inc.
(Texas 100%)
(B) Quality Care Dialysis Center of Southern Maryland, Inc.
(Maryland 100%)
(B) Quality Care Dialysis Center of St. Augustine, Inc.
(Florida 100%)
(B) Quality Care Dialysis Center of St. Clair Shores, Inc.
(Michigan 100%)
(B) Quality Care Dialysis Center of St. Louis, Inc.
(Missouri 100%)
(B) Quality Care Dialysis Center of Stoneham, Inc.
(Massachusetts 100%)
(B) Quality Care Dialysis Center of University City
(Missouri 100%)
(B) Quality Care Dialysis Center of Vega Baja, Inc.
(Puerto Rico 100%)
(B) Quality Care Dialysis Center of Vista, Inc.
(California 100%)
(B) Quality Care Dialysis Center of Weymouth, Inc.
(Massachusetts 100%)
(A) Renal Care Centers Corporation
(Pennsylvania 100%)
(A) Renal Scientific Service, Inc.
(Delaware 100%)
(A) Renal Scientific Service of Texas, Inc.
(Delaware 100%)***
(A) Renal Supply (Tenn) Corporation
(New Jersey 100%)
The Restaurant Enterprises Group, Inc.
(Delaware 51.8%)++
(B) Retaw, Inc.
(Florida 100%)
- ------------------
*** Inactive.
++ Owned by Western Family Restaurants, Inc. 100% owned subsidiary of W.R.
Grace & Co.
- 18 -
<PAGE>
(A) Rockwood Dialysis Center, Inc.
(Virginia 100%)
(A) Santa Barbara Community Dialysis Center, Inc.
(California 100%)
(A) Security Health Services, Inc.
(Nevada 100%)
(A) St. Louis Regional Dialysis Center, Inc.
(Missouri 100%)
Seven Hanover Square Corp.
(New York 100%)
(A) 7911 Braygreen, Inc.
(Delaware 100%)
(A) Sourgasco II Corp.
(Delaware 100%)
Southern Oil, Resin & Fiberglass, Inc.
(Florida 100%)
(B) Sover Corporation
(Delaware 100%)
(A) Tappahanock Dialysis Center, Inc.
(Virginia 100%)
(A) Ten Columbia Corporate Center, Inc.
(Maryland 100%)
(A) 1211 Wisconsin, Inc.
(Delaware 100%)
(B) University Kidney Center, Inc.
(Texas 100%)
(B) University Kidney Center North, Inc.
(Texas 100%)
Ven-Tech One, Inc.
(Delaware 100%)
(A) Warrenton Dialysis Facility, Inc.
(Virginia 100%)
Water Street Corporation
(Delaware 100%)
(A) West End Dialysis Center, Inc.
(Virginia 100%)
Western Family Restaurants, Inc.
(Delaware 100%)+
(A) Woolwich Water Co., Inc.
- ------------------
+ Owned directly by W. R. Grace & Co.
- 19 -
<PAGE>
(New Jersey 100%)
W. R. C. Technical Ventures, Inc.
(Delaware 100%)
(B) Zenex Capital Corp.
(Florida 100%)
- 20 -
<PAGE>
Argentina
(A) AQT Quimica Argentina, S.A. (100%)
(A) Grace Argentina, S.A. (100%)
(A) Grace y Compania (Argentina), Sociedad Anonima
C.F.e.I. (l00%)
(A) NMC de Argentina, S.A. (100%)
Australia
(A) W. R. Grace Australia Limited (100%)
W. R. Grace Catalysts Pty. Limited (100%)
(A) Omicron Proprietary Limited (100%)
Belgium
(A) Alexim N.V. (100%)
(A) Grace Dearborn N.V. (100%)
(A) Finac N.V. (100%)
(A) Grace N.V. (100%)
(A) Grace Silica N.V. (100%)****
Bermuda
(A) Dartmouth Insurance Company, Ltd. (100%)
(A) Erika, Ltd. (100%)
(A) NMC Holdings, Ltd. (100%)
(A) Trans-Meridian Assurance Ltd. (100%)
Brazil
(A) Agra Participacoes S.A. (100%)
(A) Grace Aquatec Quimica Ltda. (100%)
(A) Grace Produtos Quimicos e Plasticos Ltda. (100%)
(A) PEADCO-Engenharia, Comercio Industria Ltda. (100%)
- ------------------
**** In Liquidation.
- 21 -
<PAGE>
Canada
Ambrosia Chocolate Ltd. (100%)**
American Breeders Service of Canada Ltd. (100%)
Amicon Canada Limited (100%)
(A) Erika Laboratories, Ltd. (100%)
Grace Dearborn Inc. (100%)
W. R. Grace & Co. of Canada Ltd. (100%)
W. R. Grace Sales Co. of Canada Ltd. (100%)****
(A) Homco International, Ltd. (100%)
277292 Ontario Limited (100%)
Chile
(A) Aquatec de Chile, S.A. (100%)
(A) Grace Quimica Compania Limitada (100%)
Colombia
(A) Grace Colombia, S.A. (100%)
Commonwealth of Independent States (C.I.S.)
(A) A/O Grace (100%)
(A) A/O Grace Kaustik (51%)*
- ------------------
** 50% owned by partnership, Grace Cocoa Associates, L.P.
50% owned by W. R. Grace & Co. of Canada Ltd.
**** In Liquidation
* Joint Stock Company, 46% owned by Grace Italiana S.p.A., 5% owned by W. R.
Grace Ltd., 49% owned by A/O Kaustik (C.I.S. Company)
- 22 -
<PAGE>
Cuba
Envases Industriales y Comerciales, S.A. (100%)***
Papelera Camagueyana, S.A. (100%)***
Czech Republic
Grace Spol. s.r.o. (100%)
(A) American Breeders Service Spol. s.r.o. (100%)
(A) National Medical Care, s.r.o. (100%)
Denmark
W. R. Grace A/S (100%)
Finland
(A) W. R. Grace Oy (100%)
(A) Prochrom Oy (100%)****
France
(A) Grace Battery Separators S.A. (100%)
(A) Chomerics S.A. (100%)
(A) Emerson & Cuming France, S.A.R.L. (100%)
(A) Godel S.A. (100%)
Grace Cocoa France S.A. (100%)**
Grace S.A. (100%)
(A) Grace Service Chemicals S.A. (100%)
(A) Prochrom S.A. (100%)
(A) Prochrom Recherche et Developpement (100%)
(A) Rollin S.A. (100%)
Soboca S.A. (100%)**
(A) Societe Civile Immobiliere Les Rosiers (100%)****
(A) Techlam S.A. (50%)
- ------------------
*** Assets and business expropriated by Cuban Government.
** Owned by a partnership, Grace Cocoa Associates, L.P. or subsidiary thereof.
**** In Liquidation.
- 23 -
<PAGE>
Germany
Amicon G.m.b.H. (100%)
(A) A-1 Bit & Tool Co. G.m.b.H. (100%)
(A) Chomerics G.m.b.H. (100%)
De Zaan B.V.m.b.H. (100%)**
(A) EAP Akustik GmbH (100%)****
(A) Emerson & Cuming G.m.b.H. (100%)
(A) Grace G.m.b.H. (100%)
(A) Grace Service Chemicals G.m.b.H. (100%)
Kascho Kakao-Und Schokoladenwerke,
G.m.b.H. (100%)**
(A) National Medical Care (Deutschland) G.m.b.H. (100%)
(A) NMC Dialysebehandlung G.m.b.H. i.g. (100%)
(A) National Medical Care (Deutschland) G.m.b.H. (100%)
(A) Riggers Dialysatoren G.m.b.H. (100%)
(A) Riggers Dialysatoren Produktion Thalheim G.m.b.H. (100%)
(A) Riggers Medizintechnik G.m.b.H. (100%)
(A) Riggers Medizintechnik Thalheim G.m.b.H. (100%)
Verwaltungsgesellschaft Kasho Import-Export G.m.b.H. (100%)**
Greece
(A) Grace Hellas E.P.E. (100%)
Guatemala
Grace Central America, S.A. (100%)
Hong Kong
(A) Amicon Polymers (H.K.) Limited (100%)
W. R. Grace Southeast Asia Holdings Limited
(100%)
W. R. Grace Far East Investment Company
Limited(100%)
- ------------------
** Owned by a partnersihp, Grace Cocoa Associates, L.P. or subsidiary thereof.
**** In Liquidation.
- 24 -
<PAGE>
(A) W.R. Grace Merchanding (Hong Kong)
Limited (100%)
Hungary
Grace Kereskedlmi Korlatolt Felelossegu Tarasag
(Grace kft.) (100%)
(English Name: Grace Commercial Trading Limited
Liability Company)
(A) NMC Dialyzis Szolgaltato, kft.
Ireland
Amicon Ireland Limited (100%)
(A) W. R. Grace (Ireland) Ltd. (100%)
Italy
(A) Emerson & Cuming Italiana S.r.L. (100%)
Grace Finanziaria S.r.L. (100%)
(A) Grace Italiana S.p.A. (100%)
Japan
Grace Japan Kabushiki Kaisha (100%)
Korea
Grace Korea Inc. (100%)
Malaysia
W. R. Grace (Malaysia) Sendiran Berhad (100%)
(A) W. R. Grace Specialty Chemicals (Malaysia) Sdn. Bhd.
(100%)
Mexico
(A) Erika de Reynosa (100%)
(A) Invertol S.A. de C.V. (100%)
- 25 -
<PAGE>
(A) Especialidades Quimicas Grace de Mexico,
S.A. de. C.V. (100%)
Netherlands
Amicon B.V. (100%)
Berisford Cacao Nederland B.V. (100%)**
Cacao De Zaan B.V. (100%)**
(A) Denac B.V. (100%)
Grace B.V. (100%)
Grace Cocoa B.V. (100%)**
(A) Grace Dearborn B.V. (100%)
J. G. van Bruinesse B.V. (100%)**
(A) Storm van Bentem & Kluyver B.V. (100%)
Twincon B.V. (100%)**
Netherlands Antilles
W. R. Grace N.V. (100%)
New Zealand
(A) Dewey and Almy (1964) Limited (100%)****
(A) W. R. Grace (N.Z.) Limited (100%)
Norway
(A) A-1 Bit & Tool Company Norway A/S (100%)
(A) W. R. Grace A/S (100%)
People's Republic of China
Grace China Ltd. (100%)
Philippines
(A) W. R. Grace (Philippines) Inc. (100%)
- ------------------
** Owned by a partnership, Grace Cocoa Associates, L.P. or subsidiary thereof.
**** In Liquidation.
- 26 -
<PAGE>
Poland
W. R. Grace Sp. z.O.O. (Grace Poland) (100%)
(Proper Name: Grace Spolka z organiczona
odpowiedzialnoscia)
Portugal
(A) AQT - Quimica Lda. (100%)
(A) CNH - Centro Nacional de Hemodialise, Lda.
(A) Hemodial, Lda (100%)
(A) Grace Portuguesa (Produtos Quimicos e
Plasticos) Lda. (100%)
(A) NMC-Centro Medico Nacional, Lda. (100%)
(A) Ribadial, Lda (100%)
Singapore
(A) A-1 Bit & Tool Company Pte. Ltd. (100%)
De Zaan Far East Pte. Ltd. (100%)**
Grace Cocoa Singapore Pte. Ltd. (100%)**
(A) W. R. Grace (Singapore) Private Limited
(100%)
W. R. Grace Trading (Singapore) Pte. Ltd.
(100%)
Spain
(A) Dialcentro, S.A. (100%)
Grace, S.A. (100%)
(A) Kidney, S.L. (100%)
(A) National Medical Care of Spain, S.A. (100%)
(A) Teroson Espanola, S.L. (100%)***
- ------------------
** Owned by a partnership, Grace Cocoa Associates, L.P. or subsidiary thereof.
*** Dormant, Assets Sold.
- 27 -
<PAGE>
Sweden
Grace AB (100%)
(A) Grace Dearborn AB (100%)
Rexolin Chemicals AB (100%)***
Switzerland
(A) Grace A.G. (100%)
Grace Cocoa Chocolate Mgt. S.A.**
Syncrete S.A. (100%)***
Taiwan
(A) Grace Taiwan Inc. (100%)
Thailand
(A) W. R. Grace (Thailand) Ltd. (100%)***
Turkey
Grace Ic Ve Dis Ticaret Limited Sirketi (100%)
(Grace TLS)
United Kingdom
(A) AA Consultancy and Cleaning Co., Ltd.
Amicon Limited (100%)
(A) Amicon Merger, Ltd.****
(A) Chomerics Europe Ltd. (100%)
(A) Dearborn (U.K.) Limited (100%)
- ------------------
*** Dormant, Assets Sold.
** Owned by a partnership, Grace Cocoa Associates, L.P. or subsidiary thereof.
**** In Liquidation.
- 28 -
<PAGE>
(A) Dearborn Europe Limited (100%)
(A) Detarex Limited (100%)***
(A) EAP Acoustic Ltd. (100%)
(A) Emerson & Cuming (Trading) Limited (100%)
(A) Emerson & Cuming (U.K.) Ltd. (100%)
Grace Agricultural Products Limited (100%)****
(A) Grace Dearborn Ltd. (100%)
(A) Renacare Limited (100%)
(A) Renalyte Services Limited (100%)
(A) Servicised Limited (100%)
(A) Silica Gel Limited (100%)
(A) U.K. Renal Services Limited (100%)
(A) W. R. Grace Ltd. (100%)
Uruguay
(A) Aquatec de Uruguay, S.A. (100%)
Grace Uruguay S.A. (100%)
Venezuela
(A) Aquatec de Venezuela, C.A. (100%)
Grace Venezuela, S.A. (100%)
Inversiones GSC, S.A. (100%)
- ------------------
*** Dormant, Assets Sold.
**** In Liquidation.
- 29 -
<PAGE>
Partnerships
- Axial Basin Ranch Company (a Delaware partnership 50% owned by Grace
A-B Inc., 50% Grace A-B II Inc.)
- Boodin Partnership (50% owned by National Medical Care Home Care Divi-
sion, Inc.)
- Carbon Dioxide Slurry Systems L.P. (a Delaware partnership 50% owned by
W. R. Grace & Co.-Conn.)
- Colowyo Coal Company (a Delaware partnership 50% owned by Gracoal,
Inc., 50% Gracoal II, Inc.)
- Colowyo Coal Company L.P. (a Delaware limited partnership, owned: 50%
by Gracoal, Inc. and 50% by Gracoal II, Inc.)
- Grace Cocoa Associates, L.P. (a Delaware limited partnership, owned:
24.04% by W. R. Grace & Co.-Conn., 6.02% GC Holding Inc., 48.93%
Grace Cocoa Ventures, L.P., .04% Grace Cocoa Management, Inc.,
20.9% Tarpon Investors, L.P.)
- Grace Cocoa Ventures, L.P. (a Delaware limited partnership, .001% owned
by Grace Cocoa Limited Partners I, Inc., 99.999% owned by Grace Co-
coa Ventures, Inc.)
- Grace Offshore Turnkey (a Texas partnership 50% owned by Grace Off-
shore Company)
- Grace Ventures Partnership I (a California partnership 99% owned by
W. R. Grace & Co.-Conn.)
- Grace Ventures Partnership II (a California partnership 16% owned by
W. R. Grace & Co.-Conn.)
- Hayden-Gulch West Coal Company (a Delaware partnership 50% owned by
Grace H-G Inc., 50% owned by Grace H-G II, Inc.)
- Healthtech Medical (a California partnership 50% owned by NMC Ventures,
Inc.)
- H-G Coal Company (a Delaware partnership 50% owned by Coalgrace, Inc.,
50% owned by Coalgrace II, Inc.)
- Immunecare of Hollywood (a Florida partnership 50% owned by NMC Ven-
tures, Inc.)
- ImmuneCare of Key West (a Massachusetts partnership 50% owned by
NMC Ventures, Inc.)
- Infusion Systems (a Nevada partnership 50% owned by NMC Ventures,
Inc.)
- Kascho Import-Export G.m.b.H. & Co. K.G. (a German partnership 80%
owned by G/B Cocoa Holding Inc., 20% owned by
Verwaltungsgesellschaft Kascho Import-Export GmbH)
- 30 -
<PAGE>
- New Bedford Infusioncare (a Massachusetts partnership 50% owned by
NMC Ventures, Inc.)
- Nippon Dearborn Kabushiki Kaisha (a Japanese partnership 50% owned by
Grace Japan Kabushiki Kaisha)
- North Suburban Dialysis (a Massachusetts partnership 50% owned by Bio-
Medical Applications of Essex, Inc.)
- OB One & IV Too (an Indiana partnership 50% owned by NMC Ventures,
Inc.)
- Palm Springs I.V. Care II (50% owned by National Medical Care Home Care
Division, Inc.)
- Paramont Coal Company (a Virginia partnership 50% owned by Grace PAR
Corporation)
- Pharmacy Direct (a Massachusetts partnership 50% owned by NMC Dialysis
Services, Inc.)
- Primecare Home Health Services (50% owned by National Medical Care
Home Care Division, Inc.)
- P. T. Grace Specialty Chemicals Indonesia (an Indonesia joint ven-
ture/partnership 80% owned by Grace Chemcials Inc.)
- Pursue Gas Processing and Petrochemical Company (a Texas partnership
25% owned by Sourgasco II Corp.)
- Quality Homecare Services of Watertown, NY (50% owned by NMC Dialysis
Services, Inc.)
- Riggers Dialysatoren Produktion Thalheim G.m.b.H. & Co. K.G. (a German
partnership 50% owned by Riggers Medizintechnik G.m.b.H., 50% owned
by Riggers Dialysatoren Produktion Thalheim G.m.b.H.)
- Sleep Diagnostic Associates (a Arizona partnership 50% owned by NMC
Ventures, Inc.)
- Sisters of Charity Home Health Care (50% owned by National Medical Care
Home Care Division, Inc.)
- VNA/NMC Homecare Partnership (50% owned by National Medical Care
Home Care Division, Inc.)
- 31 -
<PAGE>
Investments(1)
Arral & Partners (British Virgin Islands 20.8%)
Asian Food Investment Limited (British Virgin Islands 40%)
Caswell-Massey Holdings Corporation (Delaware 40%)
CCHP, Inc. (Delaware 48%)
Dean & DeLuca Brands, Inc. (Delaware 45.3%)(2)
Denka Grace K.K. (Japan 45%)
Elmira ABC, Ltd. (Canada 50%)(2)
FlowDril Corporation (Delaware 21.5%)
General Cocoa Ltd. (British Virgin Islands 20%)(3)
GKA Company Limited (Hong Kong 25%)
GN Holdings, Inc. (Delaware 47%)
Incacao Fabrica Nacional de Elaboradoes de Cacao S.A.
(Equador 20%)(4)
Intercao, S.A. (British Virgin Islands 20%)(4)
PJ Margo Private Limited (India 30%)
Neue Transvac Maschinen A.G. (Switzerland 45%)
Nippon Belt Kogyo Kabushiki Kaisha (Japan 50%)
Productos Derivados de la Sal (Colombia 30.1%)(4)
Productora de Papeles S.A. (PROPAL) (Colombia 38.265%)(2)
Tarpon Investors, L.P. (Delaware 20%)(5)
Unicao B.V. (Netherlands 20%)(6)
Unicao S.A. (Ivory Coast 20%)(7)
- ------------------
1 Holdings of at least 20% but not more than 50%
2 Owned by ABS of Canada, Ltd.
3 Owned by Grace Cocoa, Ltd.
4 Owned by Productora de Papeles S.A.
5 Owned by Gracd Tarpon Investors, Inc.
6. Owned by Twincon B.V.
- 32 -
<PAGE>
Exhibit 25
POWER OF ATTORNEY
The undersigned director of W. R. GRACE & CO.
("Company") hereby appoints BRIAN J. SMITH, RICHARD N. SUKENIK
and ROBERT B. LAMM as his true and lawful attorneys-in-fact for
the purpose of signing the Company's Annual Report on Form 10-K
for the year ended December 31, 1993, and all amendments thereto,
to be filed with the Securities and Exchange Commission. Each of
such attorneys-in-fact is appointed with full power to act
without the other.
/s/ G. C. Dacey /s/ R. C. Macauley
/s/ E. W. Duffy /s/ R. Milliken
/s/ H. A. Eckmann /s/ J. E. Phipps
/s/ C. H. Erhart, Jr. /s/ J. A. Puelicher
/s/J. P. Grace /s/ E. W. Pyne
/s/ R. H. Grierson /s/ D. W. Robbins, Jr.
/s/ C. L. Hampers /s/G. S. Vance
/s/T. A. Holmes /s/D. L. Yunich
/s/G. J. Humphrey
/s/G. P. Jenkins
Dated: March 28, 1994
<PAGE>
POWER OF ATTORNEY
The undersigned, President and Chief Executive Officer
(Principal Executive Officer) and a director of W. R. GRACE & CO.
("Company"), hereby appoints BRIAN J. SMITH, RICHARD N. SUKENIK
and ROBERT B. LAMM as his true and lawful attorneys-in-fact
for the purpose of signing the Company's Annual Report on Form
10-K for the year ended December 31, 1993, and all amendments
thereto, to be filed with the Securities and Exchange Commission.
Each of such attorneys-in-fact is appointed with full power to
act without the other.
/s/ J. P. Bolduc
Dated: March 28, 1994
<PAGE>
POWER OF ATTORNEY
The undersigned, Executive Vice President and Chief
Financial Officer (Principal Financial Officer) of W. R. GRACE &
CO. ("Company"), hereby appoints RICHARD N. SUKENIK and ROBERT B.
LAMM as his true and lawful attorneys-in-fact for the purpose of
signing the Company's Annual Report on Form 10-K for the year
ended December 31, 1993, and all amendments thereto, to be filed
with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the
other.
/s/ B. J. Smith
Dated: March 28, 1994
<PAGE>
POWER OF ATTORNEY
The undersigned, Vice President and Controller
(Principal Accounting Officer) of W. R. GRACE & CO. ("Company"),
hereby appoints BRIAN J. SMITH and ROBERT B. LAMM as his true and
lawful attorneys-in-fact for the purpose of signing the Company's
Annual Report on Form 10-K for the year ended December 31, 1993,
and all amendments thereto, to be filed with the Securities and
Exchange Commission. Each of such attorneys-in-fact is appointed
with full power to act without the other.
/s/ Richard N. Sukenik
Dated: March 28, 1994
