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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, 1994 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
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.
---
The aggregate market value of W. R. Grace & Co. voting stock held by
nonaffiliates was approximately $3.6 billion at February 1, 1995.
At March 1, 1995, 94,250,680 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, 1995 (specified portions) Part III
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TABLE OF CONTENTS
PAGE
PART I
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Strategic Restructuring . . . . . . . . . . . . . . . . . . . . . 1
Industry Segments . . . . . . . . . . . . . . . . . . . . . . . . 4
Specialty Chemicals . . . . . . . . . . . . . . . . . . . . . . 4
Health Care . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Other Operations. . . . . . . . . . . . . . . . . . . . . . . . . 12
Research Activities . . . . . . . . . . . . . . . . . . . . . . . 12
Environmental, Health and Safety Matters. . . . . . . . . . . . . 13
Materials and Energy. . . . . . . . . . . . . . . . . . . . . . . 14
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 4. Submission of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters . . . . . . . . . . . . . . . . . . . 23
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . 24
Item 7. Management's Discussion and Analysis of Finan-
cial Condition and Results of Operations. . . . . . . . . . . . . 24
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . 25
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure. . . . . . . . . . . . . . 25
PART III
Item 10. Directors and Executive Officers of the
Registrant. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Item 11. Executive Compensation. . . . . . . . . . . . . . . . . . . . . . . 25
Item 12. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . . . . . . . . . . 25
Item 13. Certain Relationships and Related Transactions. . . . . . . . . . . 25
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . 26
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
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 services; in providing
home infusion, home respiratory therapy and home health services; and in the
manufacture and sale of products and equipment used to provide dialysis and
other medical services.
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 1994, Grace had approximately 38,000 full-time
employees worldwide in its continuing operations (approximately 2,400 in
discontinued operations).
Grace's Consolidated Financial Statements for the three years in the period
ended December 31, 1994 ("Consolidated Financial Statements") and certain other
financial information included in the Company's 1994 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 profitable growth; (b)
upgrading financial performance, principally by selling or monetizing noncore
businesses, managing debt levels consistent with profitable growth opportuni-
ties, and reducing overhead; and (c) integrating corporate and operating unit
functions through global product line management.
The core businesses referred to above are health care, packaging, catalysts
and other silica-based products, construction products, water treatment and
process chemicals, and container products. As part of its corporate strategy,
Grace has reorganized the management of these core businesses on the basis of
global product lines. Grace also has organized task forces that have developed
and are implementing "best practices" relating to financial systems and
processes, information systems, human resources,
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logistics and other management functions; has implemented processes to better
allocate capital among its businesses; and has retired or refinanced
substantially all of its higher-cost debt.
SALE AND MONETIZATION OF NONCORE BUSINESSES. Pursuant to its strategy,
Grace has substantially completed the sale or monetization of its noncore
businesses. 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 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 1993, Grace sold a number of noncore businesses and corporate
investments, including substantially all of its oil and gas and energy services
businesses, a 50% interest in a Japanese chemical business, a food hygiene
services business and minority investments in Grace-Sierra Horticultural
Products Company and Canonie Environmental Services Corp.
In 1994, Grace continued its strategic restructuring by disposing of
noncore businesses for gross proceeds of approximately $646 million, including
substantially all of its interest in Colowyo Coal Company; its printing products
business and a related unit; its battery separators business; its interest in
The Restaurant Enterprises Group, Inc.; its electromagnetic interference
shielding materials and thermal interface products businesses; its American
Breeders Service and Caribbean fertilizer businesses; and its specialty paper
and structural ceramics parts businesses.
Grace is actively pursuing the disposition of its remaining noncore
businesses and expects to complete their disposition in 1995.
STRATEGIC ACQUISITIONS AND OTHER INITIATIVES. 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, including
acquisitions intended to expand its core businesses outside the United States.
In 1992, Grace acquired the North American food service packaging business of Du
Pont Canada. 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 opera-
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tions in Portugal and the United States; and (b) the Katalistics fluid cracking
catalyst additive business previously owned by a joint venture between Union
Carbide Corporation and AlliedSignal Inc.
In the 1992-93 period, Grace acquired Home Intensive Care, Inc., a United
States provider of alternate site infusion therapy and dialysis health care
services, for approximately $136 million in cash (inclusive of expenses and
assumed debt); regional United States providers of home infusion therapy
services and home support nursing services, as well as additional dialysis
centers located primarily in the United States, for a total of approximately
$128 million; Riggers Medizintechnik GmbH, a German manufacturer and distributor
of dialysis products, for approximately $30 million (inclusive of expenses and
assumed debt); the Renacare unit of Lloyds Chemists plc, the leading United
Kingdom producer of dialysis concentrate and a distributor of associated
products, for approximately $10 million in cash; and 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. In 1993, Grace also formed a 51%-owned joint venture with
a large chemical and industrial concern headquartered in Volgograd, Russia, to
produce flexible packaging for sale throughout the Commonwealth of Independent
States; the joint venture began production in the third quarter of 1994.
In 1994, Grace made acquisitions totaling $351.7 million (inclusive of cash
acquired and debt assumed), primarily in its health care, construction products
and packaging product lines. These acquisitions included Home Nutritional
Services, Inc., a United States provider of home infusion therapy services, for
approximately $132 million (inclusive of expenses and assumed debt); 56 United
States dialysis clinics and 34 dialysis clinics and 8 laboratories located in
Europe, Latin America and the Asia Pacific area for a total of approximately
$146 million; the Schur Multiflex group of European flexible packaging
businesses; construction chemicals businesses; and ADTEC AB, a worldwide market-
er of pollution control equipment headquartered in Goteberg, Sweden. In
addition, during 1994 Grace and a family-owned company based in Singapore agreed
to form a joint venture in Malaysia; Grace would hold a 51% interest in the
joint venture, which would produce rigid plastic packaging products for sale
throughout Southeast Asia. In 1994, Grace also formed a 51%-owned joint venture
with an Indian company to supply water treatment products and services in India.
See Notes 3, 6, 11 and 12 to the Consolidated Financial Statements and
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" in the Financial Supplement for additional information.
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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 1994, 1993 and 1992 is contained in Note 17 to the
Consolidated Financial Statements in the Financial Supplement.
SPECIALTY CHEMICALS
Grace's specialty chemical operations consist principally 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 based primarily on technological
capability, customer service and product quality. Grace's specialty 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 plastic packaging systems (including material, equipment and services)
for a broad range of perishable foods such as 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 nonfood products.
Grace Packaging competes through three product groups: flexible
packaging (marketed extensively under the Cryovac[Registered Trademark]
registered trademark), Formpac-TM- foam trays, and Omicron-TM- rigid plastic
containers.
Cryovac 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 superior protection against decay-inducing bacteria and moisture loss.
The market for Cryovac products has since shifted from industrial food
applications toward the retail food market, and Cryovac packaging
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technology has also been introduced in nonfood applications such as flexible
packaging for consumer merchandising and electronic and medical products.
The flexible packaging products group differentiates itself from its
competitors by offering a combination of the following core competencies: (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, providing a single source of supply for customer needs; (5) a
talented employee base that strives to anticipate, meet and exceed customer
expectations; and (6) an effective sales and distribution network.
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 two-thirds of the United States. Formpac proprietary technology has
also been successfully used in certain packaging applications outside the United
States.
Grace Packaging's Omicron business group produces rigid plastic packaging
applications, primarily for dairy products in Australia. Omicron products use
proprietary thermoforming technology, involving the controlled thinning and
shaping of hot plastic sheets to increase strength and rigidity while minimizing
weight. As described above under "Strategic Restructuring - Strategic Acquisi-
tions and Other Initiatives," Grace plans to expand the Omicron business into
Southeast Asia through a recently formed joint venture.
Grace Packaging's sales and revenues were $1.4 billion in 1994, $1.3
billion in 1993 and $1.2 billion in 1992. Approximately 52% of Grace
Packaging's 1994 sales and revenues were generated in North America, 28% in
Europe, 12% in Asia Pacific and the remainder in Latin America. At year-end
1994, Grace Packaging employed approximately 9,400 people in 24 production
facilities (9 in North America, 6 in Europe, 5 in Latin America and 4 in Asia
Pacific) and 80 sales offices, serving approximately 18,000 customers.
Resins are the principal raw materials used by Grace Packaging. Although
prices for ethylene-based resins were volatile in the second half of 1994 due to
unscheduled supplier plant closings and increased demand, there is currently an
adequate worldwide supply of resins at generally stable prices. Grace Packaging
has typically increased the sales prices of its products in response to
increases in the prices of resins and other raw materials. In most cases,
multiple sources of resins and other raw materials exist, with at least one
source located in each global region.
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Although sales and revenues tend to be slightly higher in the fourth
quarter, seasonality is generally not significant to the business. As a result
of product introductions, marketing programs and improvements in global economic
conditions, worldwide demand for Grace Packaging products grew at a rapid pace
in 1994, placing pressure on existing capacity. To address this matter,
capacity additions in all regions (including a shrink films manufacturing plant
in Kuantan, Malaysia) are currently underway.
CATALYSTS 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 compa-
nies.
Fluid cracking catalysts are used by petroleum 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
polyethylene resins, which are used in products such as plastic film and pipe.
The polyolefin 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 evolving technologies, particularly the use of
metallocenes.
Silica and zeolite adsorbents are used in plastics, toothpastes, paints,
insulated glass and other products, as well as in the refining of edible oils.
Silicas are used in coatings as flatting agents, in plastics to improve
handling, in toothpastes as thickeners and cleaners, in food to carry flavors
and prevent caking, and in the purification of edible oils.
Grace Davison's sales and revenues were $610 million in 1994, $572 million
in 1993, and $519 million in 1992; approximately 55% of Grace Davison's 1994
sales and revenues were generated in North America, 35% in Europe, 8% in Asia
Pacific and 2% in Latin America. At year-end 1994, Grace Davison employed ap-
proximately 2,700 persons worldwide in nine facilities (six in the United States
and one each in Canada, Germany and Brazil).
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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 using 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 worldwide 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 prestressed concrete producers,
specialty subcontractors and applicators, masonry block manufacturers, building
materials distributors and other industrial manufacturers.
GCP competes 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 1994 sales and revenues totaled $387 million (69% in North America,
17% in Europe, 14% in Asia Pacific and less than 1% in Latin America). Sales
and revenues were $333 million in each of 1993 and 1992. At year-end 1994, GCP
employed approximately 2,100 persons at approximately 62 production facilities
(35 in North America, 9 in Southeast Asia, 7 in Australia, 6 in Europe, 4 in
Latin America and 1 in Japan) and 79 sales offices worldwide.
The 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 instances, there are at least two alternative
suppliers for the raw materials used 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 continues to increase its presence in European and Southeast
Asian markets.
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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 related equipment and services to prevent corrosion, scale and
microbiological growth in industrial utility 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 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 sys-
tems.
Grace Dearborn sales and revenues for 1994 totaled $363 million (40% in
Europe, 39% in North America, 18% in Latin America and 3% in Asia Pacific).
Sales and revenues for 1993 and 1992 were $330 million and $302 million,
respectively. At year-end 1994, Grace Dearborn employed approximately 2,700
persons at 20 plants (6 in Latin America, 5 in Europe, 4 in each of North Amer-
ica and Asia Pacific and 1 in South Africa) and 107 sales offices.
The raw materials used in Grace Dearborn's 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 served by Grace Dearborn.
CONTAINER PRODUCTS. Grace's container business ("Grace Container")
consists primarily of four product lines: container sealants, closure sealants,
coatings for metal packaging, and specialty polymers. 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 for the metal crown, aluminum roll-on and plastic closure
segments of the glass/plastic container packaging markets; adhesive lacquers and
associated protective and decorative coatings for metal closures; protective and
decorative coatings and lacquers for rigid food and beverage containers; lubri-
cants used primarily in two-piece can manufacturing; and formulated engineered
polymers for printed circuit board and component assembly in the electronics,
electrical, automotive and defense industries, including surface mount and
conductive adhesives, capacitor coatings, light emitting diode encapsulants and
conformal coatings.
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Grace Container sales and revenues were $325 million, $306 million and $322
million in 1994, 1993 and 1992, respectively. Its products are marketed
internationally, with 33% of 1994 sales and revenues in Europe, 32% in North
America, 26% in Asia Pacific and 9% in Latin America. At year-end 1994, Grace
Container employed approximately 1,700 persons at 30 plants and 59 sales offices
worldwide. Competition is based on providing high-quality customer service, as
well as on price and product quality and reliability. The raw materials used in
Grace Container's operations are generally available from multiple sources. Al-
though 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
it serves.
HEALTH CARE
Grace's health care business ("Grace Health Care") is primarily engaged in
supplying kidney dialysis services; in providing home infusion, home respiratory
therapy and home health services; and in the manufacture and sale of products
and equipment 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, 1994, Grace Health Care
operated 590 centers providing dialysis and related services (526 in North
America, 42 in Europe, 15 in Latin America, and 7 in Asia Pacific); these
centers, substantially all of which are leased, average approximately 5,600
square feet in size. Grace Health Care also provides inpatient acute dialysis
services under contracts with hospitals in the United States (488 at December
31, 1994) and furnishes dialysis equipment and supplies to patients who elect
home treatment. At December 31, 1994, Grace Health Care was treating
approximately 40,000 patients in the United States and 5,000 patients in other
countries. Revenues from kidney dialysis services were $1.3 billion in 1994, $1
billion in 1993 and $860 million in 1992.
Grace Health Care also manufactures disposable bloodlines, dialysis
solutions, artificial kidneys (dialyzers) and dialysis machines for use in its
dialysis centers and for sale to unaffiliated dialysis providers and home
patients; distributes dialysis supplies and equipment and other medical products
and supplies manufactured by others; and provides laboratory services (including
hepatitis testing) in the United States and Portugal. Approximately 60% 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
to patients in their homes through a network of
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108 United States locations (107 leased and 1 owned) in 36 states. Infusion
therapy consists of the 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 consists of the delivery of oxygen and aerosolized drugs and the use of
monitors, nebulizers and ventilators. In addition, Grace Health Care provides
home health services through nine locations in California.
Grace Health Care's United States 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 a non-Medicare insurance carrier.
Because in most cases the prices of dialysis services and products in the
United States 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.
Further, the rapid growth of managed care (a combination of financial incentives
and management controls intended to direct patients to efficient providers in
cost-effective settings) has placed greater emphasis on service costs for
patients insured by third parties; therefore, cost efficiency 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 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 and respiratory therapies.
In most countries other than the United States where Grace Health Care
provides dialysis services, prices and the opening of new facilities are
directly or indirectly regulated by governments, and competition is based
primarily on the quality and availability of service.
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Except as noted in the following paragraph, Grace Health Care believes
there are adequate sources of supply for the raw materials and products used in
its health care services and medical products businesses. At year-end 1994,
Grace Health Care employed approximately 17,000 persons full-time at its
facilities worldwide. Grace Health Care's businesses generally are not seasonal
or cyclical in nature.
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. The consent decree also requires NMC to
certify and maintain compliance with applicable FDA manufacturing requirements
at all of its United States manufacturing facilities. NMC submitted all
required certifications for its United States and non-United States facilities
in accordance with the timetable specified in the consent decree, and the
bloodline import alert was lifted in March 1994. The Dublin hemodialyzer
manufacturing facility was inspected by the FDA in December 1994, and NMC
anticipates completion of all remaining corrective actions in the second quarter
of 1995. No fines or penalties have been imposed on NMC as a result of any of
the FDA's actions or in connection with the consent decree. Neither the import
alerts nor previously reported recalls of certain NMC products have had, or are
expected to have, a material effect on Grace's results of operations or
financial condition.
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 options to acquire an additional 51% common equity interest in
the company; options covering a 39% common equity interest are currently exer-
cisable and expire in 2001, and options covering the remaining 12% become
exercisable in 1996 and expire in 2001.
See "Strategic Restructuring" above for information concerning 1993 and
1994 transactions involving Grace's health care business.
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<PAGE>
OTHER OPERATIONS
THERMAL AND EMISSION CONTROL SYSTEMS. Grace's thermal and emission control
systems business (which is included in the Specialty Chemicals segment in the
Consolidated Financial Statements) consists of four principal product groups:
web processing products, industrial emission control products, mobile emission
control products, and specialty catalysts. These products are designed to
customer specifications and sold to a variety of industrial customers.
Web processing products, consisting primarily of air flotation dryers and
auxiliary equipment, are sold principally to the graphic arts, coating and
converting markets. Competition is based upon system design, service and
product performance.
The industrial emission control products group manufactures volatile
organic compound control equipment, including thermal, catalytic, and
regenerative oxidation systems. Demand for this equipment is driven principally
by government regulations, and competition is based upon technology, product
performance and price.
The mobile emission control products group sells washcoat materials and
specialty substrates. Washcoat materials are used by catalyst manufacturers to
enhance the performance of catalytic converters sold to automotive original
equipment manufacturers. Competition is based primarily on technology and
product performance. In February 1995, Grace and Engelhard Corporation an-
nounced the formation of a 50/50 joint venture to manufacture and market metal-
based catalytic converters to the automotive industry.
Specialty catalysts are used to control volatile organic compounds,
nitrogen oxides and carbon monoxide from a variety of sources.
DISCONTINUED OPERATIONS. In 1993, Grace classified its remaining noncore
businesses as discontinued operations. As described above under "Strategic
Restructuring - Sale and Monetization of Noncore Businesses," in 1993 and 1994
Grace completed the sale and monetization of a substantial portion of these
businesses. Grace is actively pursuing the disposition of its remaining
discontinued operations and expects to complete their disposition in 1995. See
Notes 3, 6 and 12 to the Consolidated Financial Statements in the Financial
Supplement and "Strategic Restructuring" above for additional information.
RESEARCH ACTIVITIES
Grace engages in active research and development programs directed toward
the development of new products and processes and
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<PAGE>
the improvement of, and development of new uses for, existing products and
processes. Research is carried out by product line laboratories in North
America, Europe, Asia and Latin America and by the Corporate Research Division,
which has facilities in Columbia, Maryland, Lexington, Massachusetts, and
Atsugi, Japan. The Research Division's activities focus on Grace's core product
lines and include research in specialty polymers; medical products; water
treatment; catalysis; construction materials; photopolymers; specialty
packaging; and process engineering, principally involving the development of
technologies to manufacture chemical specialties and biomedical products.
Research and development expenses relating to continuing operations
amounted to $132 million in 1994, $135 million in 1993 and $130 million in 1992
(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.
See "Management's Discussion and Analysis of Results of Operations and
Financial Condition" in the Financial Supplement for additional information.
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 properties. The following table sets forth Grace's
expenditures in the past three years, and its estimated expenditures in 1995 and
1996, for (a) the operation and maintenance of environmental facilities and the
disposal of hazardous and nonhazardous wastes with respect to continuing
operations; (b) capital improvements to environmental control facilities
relating to continuing operations; and (c) the remediation of sites:
<TABLE>
<CAPTION>
(a) (b) (c)
Operation of
Facilities and Capital
Waste Disposal Improvements Remediation
-------------- ------------ -----------
(in millions)
<S> <C> <C>
1992 $56 $18 $35
1993 45 20 44
1994 41 22 31
1995 (est.) 42 26 45
1996 (est.) 45 23 39
</TABLE>
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<PAGE>
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 the Consolidated Financial Statements and "Management's
Discussion and Analysis of Results of Operations and Financial Condition" in the
Financial Supplement.
Grace's corporate environment, health and safety ("EHS") policy was
reviewed and revised in 1994 to reflect organizational and other changes. The
revised policy affirms the Company's commitment to continuous improvement in
environment, health and safety performance. The policy is supported through
programs including specialized safety training for employees, monitoring of the
workplace environment, and training and guidance for employees with respect to
EHS regulatory compliance.
In 1994, Grace announced the creation of its Commitment to Care-SM-
program, modeled on the Responsible Care[Registered Trademark] program of the
Chemical Manufacturers Association. The Commitment to Care program extends the
basic elements of the Responsible Care program to all Grace locations worldwide,
to the extent applicable. The program embraces specific objectives in six key
areas of environment, health and safety: product stewardship, employee health
and safety, community awareness and emergency response, process safety,
distribution, and pollution prevention. The effort is coordinated worldwide to
encourage the sharing of best practices among Grace's business units.
Certain EHS management resources were consolidated into a central EHS
department in 1993. The EHS department provides environmental assistance,
training, and medical/toxicology, industrial hygiene and safety services to
support EHS programs in Grace facilities worldwide. The department also audits
operating facilities and oversees the remediation of environmentally impaired
sites for which Grace has responsibility; in 1994, the department audited Grace
facilities in all world regions.
See Item 3 of this Report for information concerning environmental
proceedings to which Grace is a party and "Management's Discussion and Analysis
of Results of Operations and Financial Condition" in the Financial Supplement
for additional information concerning environmental matters.
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 1995
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<PAGE>
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. See "Industry Segments" above for additional information.
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 its plants and other facilities, taking into account planned
expansion, is generally 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-27 of the Financial
Supplement). Accordingly, Grace does not anticipate that its operations or
income will be materially affected by the absence of available capacity.
Additional information regarding Grace's properties is set forth in Item 1
above and in Notes 1, 8 and 11 to the 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 1994, Grace was a defendant in approximately 38,700 asbestos-related
lawsuits representing approximately 68,000 claims (as compared to approximately
38,100 lawsuits and 56,700 claims at year-end 1993). In most of these lawsuits,
Grace is one of many defendants. Of the lawsuits pending at year-end 1994, 65
(92 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 involved claims for personal injury.
Through year-end 1994, 126 asbestos property damage cases had been
dismissed with respect to Grace without payment of any damages or settlement
amounts; judgments had been entered in favor of Grace
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<PAGE>
in 10 cases (excluding one case that was settled following appeal of a judgment
in favor of Grace and another case in which the plaintiff was granted a new
trial on appeal, limited to statute of limitations issues); Grace had been held
liable for a total of $74.6 million in 7 cases (3 of which are on appeal); and
159 property damage suits and claims had been settled by Grace for a total of
$341.8 million.
Included in the asbestos property damage lawsuits pending against Grace and
others at year-end 1994 were 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), certified in 1992, 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 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.); and (3) 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. In July 1994, the claims of most
class members in ANDERSON MEMORIAL HOSPITAL, ET AL., V. W. R. GRACE & CO., ET
AL. were dismissed due to a ruling that a South Carolina statute prohibits
nonresidents from pursuing claims in the South Carolina state courts with
respect to buildings located outside the state. The plaintiffs have requested
that the Court reconsider its decision. In August 1994, Grace entered into an
agreement to settle IN RE: ASBESTOS SCHOOL LITIGATION, a nationwide class action
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 that contain friable asbestos materials (other than
schools that "opted out" of the class). The terms of the settlement agreement
(which is subject to judicial review and approval after class members have an
opportunity to be heard) are not expected to have a significant effect on
Grace's consolidated results of operations or financial position.
The remaining asbestos lawsuits pending at year-end 1994 involved claims
for personal injury. Through year-end 1994, approximately 8,400 personal injury
lawsuits involving 22,200 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 17,000 such suits
involving 20,000 claims had been disposed of for a total of $77.1
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<PAGE>
million (see "Insurance Litigation" below). However, as a result of various
trends (including the insolvency of other former asbestos producers and cross-
claims by co-defendants in asbestos personal injury lawsuits), the costs
incurred in disposing of such lawsuits in the past may not be indicative of the
costs of disposing of such lawsuits in the future.
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 then pending against Grace; 3,200
new cases involving 6,500 claims against Grace have subsequently been added to
the consolidated cases. 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 insur-
ance will cover a substantial portion of any damages, settlement amounts and
litigation costs related to its asbestos litigation and 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 the 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. At year-end
1994, proceedings were pending with respect to approximately 40 sites as to
which Grace has been designated a PRP. Federal law provides that all PRPs may
be held jointly and severally liable for the costs of investigating and
remediating a site. Grace is also conducting investigatory and remediation
activities at sites under the jurisdiction of state and/or local authorities.
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<PAGE>
In addition, 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. These decisions are currently under
review by the United States Court of Appeals for the Third Circuit. In an
earlier decision, the District 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. Remediation 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 1995. As a result of the above factors, the amount that
Grace may be required to pay to Hatco (which Grace expects will be partially
offset by recoveries from insurance carriers) cannot be reliably estimated at
this time.
Grace is also a party to other proceedings involving federal, state and/or
local government agencies and private parties regarding compliance with
environmental laws and regulations by its continuing operations. These
proceedings are not expected to result in significant sanctions or in any
material liability. 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 EPA alleges 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
penalties may be assessed against Grace in connection therewith; the amount of
such penalties cannot be determined at this time.
In addition, in 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. In May 1994, Grace signed a consent decree in which it agreed to
pay penalties of $510,000 and to implement certain procedures under the Clean
Air Act at 28 facilities. The consent decree was approved by the United States
District Court for the District of Montana, Great
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<PAGE>
Falls Division, in December 1994, and the penalties were paid in January 1995.
Grace believes that the amount recorded in the Consolidated Financial
Statements for environmental remediation costs is adequate. 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 such costs. The outcome of such litigation, as well as the amount of
any recoveries that Grace may receive in connection therewith, is presently
uncertain. For further information, see Note 11 to the Consolidated Financial
Statements and "Management's Discussion and Analysis of Results of Operations
and Financial Condition" in the Financial Supplement.
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 a case styled
MARYLAND CASUALTY CO. V. W. R. GRACE & CO., 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
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; and AMERICAN EMPLOYERS' INSURANCE CO., AMERICAN
RE-INSURANCE 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; 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 to partially
offset Grace's estimated exposure with respect to the actions' subject matter,
including amounts previously expended by Grace to defend claims and satisfy
judgments and settlements (see Note 2 to the 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.
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<PAGE>
In 1991 (in an asbestos-related case involving Maryland Casualty Co.), the
United States District Court for the Southern District of New York determined
that coverage for property damage is triggered by the "discovery of damage"
during the period covered by the relevant policy. In September 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, ruled
that coverage for these claims is triggered 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 1993 decision, and on May 16, 1994, the Court issued a
new decision confirming its September 1993 decision. As a result, Grace
recorded a noncash charge of $200 million after taxes in the second quarter of
1994 to reflect the reduction in asbestos property damage insurance coverage.
Subsequently, the Second Circuit refused to rehear its decision, and the United
States Supreme Court denied Grace's petition for a writ of certiorari with
respect to the Second Circuit decision.
In 1991 and 1994, the Mississippi Court referred to above held that certain
of Grace's 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 (referred to as a "continuous trigger"); the 1994 ruling is being
appealed. In 1992, the Minnesota court referred to above reached a similar
decision in interpreting Grace's insurance policies. In January 1994, the
Minnesota court entered judgment against certain of Grace's carriers in the
amount of $14.2 million, but that judgment was reversed by the Minnesota Court
of Appeals in January 1995. Further review of that decision will be sought.
Prior to 1993, Grace received payments totaling $97.7 million from
insurance carriers ($66.2 million prior to 1992 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. 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 million. In
1994, Grace settled with three additional insurance carriers and received $111.6
million under such settlements, and in early 1995, Grace settled with a primary-
level insurer for $100 million. As a result of these payments, 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 excess-level carriers.
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<PAGE>
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 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 appealed this ruling to the United States Court
of Appeals for the Fifth Circuit and has sought to attack it in a collateral
action in the United States District Court for the Southern District of New
York; however, Grace successfully stayed this attack.
See Note 2 to the Consolidated Financial Statements and "Management's
Discussion and Analysis of Results of Operations and Financial Condition" in the
Financial Supplement for additional information.
FUMED SILICA PLANT LITIGATION. In 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 the Consolidated Financial Statements in the Financial Supplement for
additional information.) Grace is seeking damages in excess of four billion
Belgian francs (approximately $123 million at the December 31, 1994 exchange
rate), plus interest and lost profits. This claim was dismissed at the trial
court level and is now being appealed by Grace. The trial court also determined
that Grace should repay approximately 239 million Belgian francs (approximately
$7.4 million at the December 31, 1994 exchange rate) plus interest to the
Flemish government for previously received investment grants; this decision is
also being appealed by Grace. Also pending is an arbitration involving the
engineering company that was responsible for the design and construction of the
fumed silica plant. The outcome of this proceeding may affect the action filed
against the Flemish government. During 1994, a claim by the company from which
Grace had agreed to purchase hydrogen for use in the plant under a long-term
contract was settled.
SHAREHOLDER LITIGATION. In March 1995, a lawsuit was brought against the
Company and all of the members of its Board of Directors (as well as J. P.
Bolduc, who resigned as President, Chief Executive Officer and a director of the
Company in March 1995) in New York State Supreme Court, New York County (WEISER
V. GRACE, ET AL., Index No. 95-106285). The lawsuit, which purports to be a
derivative action (I.E., an action brought on behalf of the Company), alleges
that the individual defendants breached their fiduciary duties to the Company
(a) by providing J. Peter Grace (who is currently the Chairman and a director of
the Company, but
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<PAGE>
who has agreed not to stand for re-election to those positions) with certain
compensation arrangements upon his retirement as the Company's Chief Executive
Officer in 1992 and (b) by approving Mr. Bolduc's severance arrangements, and
that Messrs. Grace and Bolduc breached their fiduciary duties by accepting such
benefits and payments. The lawsuit seeks unspecified damages, attorneys' fees
and costs, and such other relief as the Court deems proper. Similar claims are
made, and similar relief is sought, in a second purported derivative action
(JACOBSEN V. GRACE, ET AL., New York Supreme Court, New York County, Index No.
95-107355) brought in March 1995 against the Company, all of its directors, Mr.
Bolduc and J. Peter Grace III, a son of Mr. Grace. In addition, the second
lawsuit alleges that the defendants breached their fiduciary duties to the
Company in other respects and seeks equitable relief, including the cancellation
of Mr. Grace's consulting agreement with the Company and the repayment of
various amounts to the Company.
OTHER. The Company has been notified that the Securities and Exchange
Commission is conducting an infomral inquiry into the Company's prior
disclsoures, including disclosures regarding benefits and arrangements
provided to Mr. J. Peter Grace, Jr., and certain matters relating to
J. Peter Grace III, the son of Mr. Grace, Jr.
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 1994.
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, 1995.
<TABLE>
<CAPTION>
Name and Age Office First Elected
--------------------- ------------- -------------
<S> <C> <C>
R. H. Beber (61) Executive Vice President 05/10/93
and General Counsel 09/01/91
Robert J. Bettacchi (52) Vice President 02/01/90
F. Peter Boer (54) Executive Vice President 01/05/89
Jean-Louis Greze (63) Executive Vice President 05/10/93
Constantine L. Hampers (62) Executive Vice President 06/06/91
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<PAGE>
Thomas A. Holmes (71) Acting President and 03/02/95
Chief Executive Officer
James R. Hyde (56) Vice President 07/01/87
Donald H. Kohnken (60) Executive Vice President 12/07/89
Fred Lempereur (57) Senior Vice President 02/06/92
Ian Priestnell (51) Vice President 02/06/92
Brian J. Smith (50) Executive Vice President 07/06/89
and Chief Financial Officer
</TABLE>
All the above executive officers have been actively engaged in Grace's
business for the past five years, other than Mr. Holmes, who retired as
chairman, president and chief executive officer of Ingersoll-Rand Company in
1988. Mr. Holmes has been a director of the Company since 1989.
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-28); under
the heading "Quarterly Summary and Statistical Information" opposite the
captions "Dividends declared per common share" and "Market price of common
stock" (page F-25); and in Note 13 to the Consolidated Financial Statements
(page F-20).
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.
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<PAGE>
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 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-28 of the Financial Supplement) and in Notes 5, 6, 9
and 16 to the 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-35
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
1990-1994.
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-29 to F-32 of
the Financial Supplement.
- 24 -
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See the Index to Consolidated Financial Statements and Financial Statement
Schedule 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
pages 22 and 23), the information called for by this Item is incorporated in
this Report by reference to the definitive Proxy Statement for the Company's
1995 Annual Meeting of Shareholders, except for information not deemed to be
"soliciting material" or "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 1995
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.
- 25 -
<PAGE>
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 Schedule and Exhibits on page F-1
of the Financial Supplement.
REPORTS ON FORM 8-K. The Company filed one Report on Form 8-K during the
fourth quarter of 1994. The Report, which was filed on October 27, 1994,
reported the Company's results of operations for the three-month and nine-month
periods ended September 30, 1994.
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 Filed herewith
amended
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.
364-Day Credit Agreement, dated Exhibit 4.1 to Form 10-Q
as of September 1, 1994, among (filed 11/10/94)
W. R. Grace & Co.-Conn., W. R.
Grace & Co., the several banks
parties thereto and Chemical
Bank, as agent for such banks
- 26 -
<PAGE>
Credit Agreement, dated as of Exhibit 4.2 to Form 10-Q
September 1, 1994, among W. R. (filed 11/10/94)
Grace & Co.-Conn., W. R. Grace
& Co., the several banks parties
thereto and Chemical Bank, as
agent for such banks
First Amendment, dated as of Filed herewith
December 28, 1994, to the 364-
Day Credit Agreement, dated
as of September 1, 1994
First Amendment, dated as of Filed herewith
December 28, 1994, to the
Credit Agreement, dated
as of September 1, 1994
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)*
W. R. Grace & Co. 1994 Stock Filed herewith*
Incentive Plan
W. R. Grace & Co. 1994 Stock Filed herewith*
Retainer Plan for Nonemployee
Directors
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 10-K
Agreements (filed 3/28/92)*
- 27 -
<PAGE>
Information Concerning W. R. Pages 8-13 and 27-30 of
Grace & Co. Incentive Compen- Proxy Statement
sation Program, Deferred (filed 4/11/94)*
Compensation Program and
Long-Term Incentive 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
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 Exhibit 10.13 to Form
August 1, 1993 between J. P. 10-K (filed 3/28/94)*
Bolduc and W. R. Grace & Co.
Stock Option Agreement dated Exhibit 10.14 to Form
June 30, 1993 between David L. 10-K (filed 3/28/94)*
Yunich and W. R. Grace & Co.
Stock Option Agreement dated Exhibit 10.15 to Form
June 30, 1993 between David L. 10-K (filed 3/28/94)*
Yunich and W. R. Grace & Co.
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
- 28 -
<PAGE>
Form of Executive Severance Exhibit 10.28 to Form 10-K
Agreement between W. R. Grace (filed 3/26/93)*
& Co. and others
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*
December 1993 between National
Medical Care, Inc. and Virginia
A. Kamsky
Consulting Agreement dated as of Exhibit 10.23 to Form 10-K
June 16, 1993 by and between (filed 3/28/94)*
National Medical Care, Inc., The
Humphrey Group, Inc. and Gordon
J. Humphrey
Employment Termination Agreement Exhibit 10.24 to Form 10-K
dated June 30, 1993 between (filed 3/28/94)*
J. R. Wright, Jr. and W. R.
Grace & Co.
W. R. Grace & Co. Supplemental Exhibit 10.25 to Form 10-K
Executive Retirement Plan, as (filed 3/28/94)*
amended
Agreement dated March 1, 1995 Filed herewith*
between W. R. Grace & Co. and
Jean-Louis Greze
Agreements dated March 2 and Filed herewith*
March 7, 1995 between J. P.
Bolduc and W. R. Grace & Co.
Letter Agreement dated Filed herewith*
April 1, 1991 between National
Medical Care, Inc. and
Constantine L. Hampers
Weighted Average Number of Filed herewith
Shares and Earnings Used in (in Financial Supplement
Per Share Computations to 10-K)
- 29 -
<PAGE>
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 1994 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
Letter of Intent dated Filed herewith
November 5, 1993 between
W. R. Grace & Co. and J.
Peter Grace III, as amended
Agency Agreement dated Filed herewith
June 13, 1994 between HSC
Holding Co., Inc. and Grace
Hotel Services Corporation
Letter Agreement dated Filed herewith
December 14, 1994 among HSC
Holding Co., Inc., Grace Hotel
Services Corporation and W. R.
Grace & Co.
Services Agreement dated Filed herewith
November 10, 1994 between HSC
Holding Co., Inc. and Grace
Hotel Services Corporation
- 30 -
<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, thereunto duly authorized.
W. R. GRACE & CO.
By /s/ B. J. Smith
------------------------
B. J. Smith
(Executive Vice President)
Date: March 29, 1995
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 29, 1995.
SIGNATURE TITLE
T. A. Holmes* Director and Acting President
(Acting Principal Executive Officer)
G. C. Dacey* R. C. Macauley* }
E. W. Duffy* J. E. Phipps* }
C. H. Erhart, Jr.* J. A. Puelicher* }
J. W. Frick* D. W. Robbins, Jr.*} Directors
J. P. Grace* E. J. Sullivan* }
G. P. Jenkins* D. L. Yunich* }
/s/ B. J. Smith Executive Vice President
-----------------------
(B. J. Smith) (Principal Financial Officer)
/s/ R. N. Sukenik Vice President and Controller
-----------------------
(R. N. Sukenik) (Principal Accounting Officer)
____________
* By signing his name hereto, Robert B. Lamm is signing this document 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)
- 31 -
<PAGE>
FINANCIAL SUPPLEMENT
to
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1994
W. R. GRACE & CO. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE AND EXHIBITS
----------------------------------------------
PAGE
Report of Independent Accountants on Financial Statement Schedule 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, 1994 . . . . . . . . . . . . . . . . . F-4
Consolidated Statement of Cash Flows for the three years in the
period ended December 31, 1994 . . . . . . . . . . . . . . . . . F-5
Consolidated Balance Sheet as at December 31, 1994 and 1993. . . . F-6
Consolidated Statement of Shareholders' Equity for the three
years in the period ended December 31, 1994. . . . . . . . . . . F-7
Notes to Consolidated Financial Statements . . . . . . . . . . . . F-8-F-24
Quarterly Summary and Statistical Information - Unaudited. . . . . F-25
Worldwide Operations . . . . . . . . . . . . . . . . . . . . . . . F-26
Capital Expenditures, Net Fixed Assets and Depreciation and
Lease Amortization . . . . . . . . . . . . . . . . . . . . . . . F-27
Financial Summary. . . . . . . . . . . . . . . . . . . . . . . . . F-28
Management's Discussion and Analysis of Results of Operations
and Financial Condition. . . . . . . . . . . . . . . . . . . . . F-29
Financial Statement Schedule
Schedule VIII - Valuation and Qualifying Account and
Reserves. . . . . . . . . . . . . . . . . F-33
Exhibit 11: Weighted Average Number of Shares and Earnings Used in
Per Share Computations. . . . . . . . . . . . . . . . . . . . F-34
Exhibit 12: Computation of Ratio of Earnings to Fixed Charges and
Combined Fixed Charges and Preferred Stock Dividends. . . . . F-35
THE FINANCIAL DATA LISTED ABOVE APPEARING IN THIS FINANCIAL SUPPLEMENT ARE
INCORPORATED BY REFERENCE HEREIN. THE FINANCIAL STATEMENT SCHEDULE 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 SCHEDULE
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 1, 1995 appearing on page 29 of the 1994 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 Schedule listed on page F-1 in the Index to
Consolidated Financial Statements and Financial Statement Schedule and Exhibits
of this Form 10-K. In our opinion, this Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
New York, New York
February 1, 1995
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
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, 33-27960, 33-54201
and 33-54203) of W. R. Grace & Co. of our report dated February 1, 1995
appearing on page 29 of the 1994 Annual Report to Shareholders, which report is
included at page F-3 of this Report on Form 10-K. We also consent to the
incorporation by reference of our report on the Financial Statement Schedule,
which appears above.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
New York, New York
March 27, 1995
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 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 LLP February 1, 1995
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, 1994
and 1993, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1994, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of Grace'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, Grace adopted new accounting standards for
income taxes and postretirement benefits in 1992.
/S/ PRICE WATERHOUSE LLP
F-3
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------------------------------------------------------------------------------------------------
W. R. Grace & Co. and Subsidiaries
CONSOLIDATED STATEMENT OF OPERATIONS
---------------------------------------------------------------------------------------------------------------------------
DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS 1994 1993 1992
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales and revenues . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,093.3 $ 4,408.4 $ 4,337.0
Other income (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . 50.5 63.2 58.8
---------- ---------- ----------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,143.8 4,471.6 4,395.8
---------- ---------- ----------
Cost of goods sold and operating expenses. . . . . . . . . . . . . . . 2,954.9 2,615.7 2,581.7
Selling, general and administrative expenses . . . . . . . . . . . . . 1,230.8 1,021.7 1,019.7
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . 260.7 234.6 232.1
Interest expense and related financing costs (Note 9). . . . . . . . . 109.9 84.4 99.8
Research and development expenses. . . . . . . . . . . . . . . . . . . 132.4 135.0 130.0
Provision relating to asbestos-related insurance coverage (Note 2) . . 316.0 159.0 --
Provision relating to a fumed silica plant (Note 8). . . . . . . . . . -- -- 140.0
---------- ---------- ----------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,004.7 4,250.4 4,203.3
---------- ---------- ----------
Income from continuing operations before income taxes. . . . . . . . . 139.1 221.2 192.5
Provision for income taxes (Note 5). . . . . . . . . . . . . . . . . . 55.8 86.8 134.8
---------- ---------- ----------
Income from continuing operations. . . . . . . . . . . . . . . . . . . 83.3 134.4 57.7
Loss from discontinued operations (Note 6) . . . . . . . . . . . . . . -- (108.4) (162.2)
---------- ---------- ----------
Income/(loss) before cumulative effect of accounting changes . . . . . 83.3 26.0 (104.5)
Cumulative effect of accounting changes (Notes 5 and 16) . . . . . . . -- -- (190.0)
---------- ---------- ----------
Net income/(loss). . . . . . . . . . . . . . . . . . . . . . . . . . . $ 83.3 $ 26.0 $ (294.5)
---------- ---------- ----------
---------- ---------- ----------
Earnings/(loss) per share:
Continuing operations. . . . . . . . . . . . . . . . . . . . . . . . $ .88 $ 1.46 $ .64
Cumulative effect of accounting changes. . . . . . . . . . . . . . . $ -- $ -- $ (2.12)
Net earnings/(loss). . . . . . . . . . . . . . . . . . . . . . . . . $ .88 $ .28 $ (3.29)
Fully diluted earnings per share:
Continuing operations. . . . . . . . . . . . . . . . . . . . . . . . $ .88 $ 1.45 $ .62
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .88 $ .28 $ -- (1)
---------------------------------------------------------------------------------------------------------------------------
<FN>
THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, PAGES F-8 TO F-24, ARE INTEGRAL
PARTS OF THESE STATEMENTS.
(1) NOT PRESENTED AS THE EFFECT IS ANTI-DILUTIVE.
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
----------------------------------------------------------------------------------------------------------------------------------
DOLLARS IN MILLIONS 1994 1993 1992
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Income from continuing operations before income taxes. . . . . . . . . . . . . . . $ 139.1 $ 221.2 $ 192.5
Reconciliation to cash provided by operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . . . 260.7 234.6 232.1
Provision relating to asbestos-related insurance coverage. . . . . . . . . . . . 316.0 159.0 --
Provision relating to a fumed silica plant . . . . . . . . . . . . . . . . . . . -- -- 140.0
Changes in assets and liabilities, excluding effect of businesses
acquired/divested and foreign exchange:
(Increase)/decrease in notes and accounts receivable, net. . . . . . . . . . . (159.5) (103.2) 48.4
Increase in inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . (43.4) (50.5) (2.3)
Net (payments for)/proceeds from settlements of interest rate agreements . . . (4.0) 67.9 3.2
Proceeds from asbestos-related insurance settlements . . . . . . . . . . . . . 138.6 74.6 31.5
Payments made for asbestos-related litigation settlements, judgments and
defense costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (198.6) (177.7) (101.8)
Increase in accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . 10.3 50.1 29.5
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73.8 (174.4) (214.2)
-------- -------- --------
Net pretax cash provided by operating activities of continuing operations. . . . . 533.0 301.6 358.9
Net pretax cash provided by operating activities of discontinued operations. . . . 6.5 44.2 178.3
-------- -------- --------
Net pretax cash provided by operating activities . . . . . . . . . . . . . . . . . 539.5 345.8 537.2
Income taxes paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (86.0) (102.7) (98.9)
-------- -------- --------
Net cash provided by operating activities. . . . . . . . . . . . . . . . . . . . . 453.5 243.1 438.3
-------- -------- --------
INVESTING ACTIVITIES (1)
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (444.6) (309.6) (398.4)
Businesses acquired in purchase transactions, net of cash acquired and debt assumed (276.9) (306.6) (61.2)
Increase in net assets of discontinued operations. . . . . . . . . . . . . . . . . (32.9) (43.1) (101.5)
Net proceeds from divestments. . . . . . . . . . . . . . . . . . . . . . . . . . . 583.9 464.8 221.2
Net proceeds from sale/leaseback transactions. . . . . . . . . . . . . . . . . . . -- 27.2 --
Proceeds from disposals of assets. . . . . . . . . . . . . . . . . . . . . . . . . 34.0 15.4 38.7
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34.9 -- (36.5)
-------- -------- --------
Net cash used for investing activities . . . . . . . . . . . . . . . . . . . . . . (101.6) (151.9) (337.7)
-------- -------- --------
FINANCING ACTIVITIES (2)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (132.0) (128.4) (125.9)
Repayments of borrowings having original maturities in excess of three months. . . (141.2) (512.6) (274.0)
Increase in borrowings having original maturities in excess of three months. . . . 535.1 373.0 355.7
Net (repayments of)/increase in borrowings having original maturities
of less than three months.. . . . . . . . . . . . . . . . . . . . . . . . . . . (605.8) 155.7 (508.0)
Sale of limited partner interest . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 297.0
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.1 6.4 13.8
-------- -------- --------
Net cash used for financing activities . . . . . . . . . . . . . . . . . . . . . . (322.8) (105.9) (241.4)
-------- -------- --------
Effect of exchange rate changes on cash and cash equivalents . . . . . . . . . . . 1.6 (.5) (3.5)
-------- -------- --------
Increase/(decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . 30.7 (15.2) (144.3)
-------- -------- --------
Cash and cash equivalents, beginning of year . . . . . . . . . . . . . . . . . . . 47.6 62.8 207.1
-------- -------- --------
Cash and cash equivalents, end of year . . . . . . . . . . . . . . . . . . . . . . $ 78.3 $ 47.6 $ 62.8
-------- -------- --------
-------- -------- --------
-----------------------------------------------------------------------------------------------------------------------------
<FN>
THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, PAGES F-8 TO F-24, ARE INTEGRAL
PARTS OF THESE STATEMENTS.
(1) SEE NOTE 3 TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR SUPPLEMENTAL
INFORMATION RELATING TO NON-CASH INVESTING ACTIVITIES.
(2) SEE NOTES 3 AND 9 TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR SUPPLEMENTAL
INFORMATION RELATING TO NON-CASH FINANCING ACTIVITIES.
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
--------------------------------------------------------------------------------------------------------------
DOLLARS IN MILLIONS, EXCEPT PAR VALUE December 31, 1994 1993
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . $ 78.3 $ 47.6
Notes and accounts receivable, net (Note 7). . . . . . . . . . . . . . . . 975.7 657.4
Inventories (Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . 514.2 441.0
Net assets of discontinued operations (Note 6) . . . . . . . . . . . . . . 335.6 761.3
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . 295.4 134.1
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.7 36.2
----------- ----------
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . 2,228.9 2,077.6
Properties and equipment, net (Note 8) . . . . . . . . . . . . . . . . . . 1,730.1 1,454.1
Goodwill, less accumulated amortization of $71.8 (1993 - $53.2). . . . . . 672.5 481.6
Asbestos-related insurance receivable (Note 2) . . . . . . . . . . . . . . 512.6 962.3
Other assets (Note 7). . . . . . . . . . . . . . . . . . . . . . . . . . . 1,086.5 1,133.0
----------- ----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,230.6 $ 6,108.6
----------- ----------
----------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt (Note 9) . . . . . . . . . . . . . . . . . . . . . . . . . $ 430.9 $ 532.6
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 433.7 414.6
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197.0 126.5
Other current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . 872.9 621.9
Minority interest (Note 12). . . . . . . . . . . . . . . . . . . . . . . . 297.0 297.0
----------- ----------
TOTAL CURRENT LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . 2,231.5 1,992.6
Long-term debt (Note 9). . . . . . . . . . . . . . . . . . . . . . . . . . 1,098.8 1,173.5
Other noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . 690.9 613.8
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . 92.5 97.4
Noncurrent liability for asbestos-related litigation (Note 2). . . . . . . 612.4 713.7
----------- ----------
TOTAL LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,726.1 4,591.0
----------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 2, 9 and 11)
SHAREHOLDERS' EQUITY (Note 13)
Preferred stocks, $100 par value . . . . . . . . . . . . . . . . . . . . . 7.4 7.4
Common stock, $1.00 par value; 300,000,000 shares authorized;
outstanding at December 31: 1994 - 94,083,000; 1993 - 93,465,000 . . . . 94.1 93.5
Paid in capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 308.8 287.8
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,147.5 1,196.2
Cumulative translation adjustments . . . . . . . . . . . . . . . . . . . . (53.3) (67.3)
----------- ----------
TOTAL SHAREHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . . . . . 1,504.5 1,517.6
----------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY . . . . . . . . . . . . . . . $ 6,230.6 $ 6,108.6
----------- ----------
----------- ----------
--------------------------------------------------------------------------------------------------------------
</TABLE>
THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, PAGES F-8 TO F-24, ARE INTEGRAL
PARTS OF THESE STATEMENTS.
F-6
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
--------------------------------------------------------------------------------------------------------------
DOLLARS IN MILLIONS 1994 1993 1992
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PREFERRED STOCKS
Balance, beginning of year . . . . . . . . . . . . . . . . . . . $ 7.4 $ 7.5 $ 7.5
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (.1) --
-------- -------- --------
Balance, end of year . . . . . . . . . . . . . . . . . . . . . . 7.4 7.4 7.5
-------- -------- --------
COMMON STOCK
Balance, beginning of year . . . . . . . . . . . . . . . . . . . 93.5 89.9 88.6
Conversion of notes and debentures . . . . . . . . . . . . . . . -- 2.8 --
Stock options and awards . . . . . . . . . . . . . . . . . . . . .6 .7 1.3
Acquisition. . . . . . . . . . . . . . . . . . . . . . . . . . . -- .1 --
-------- -------- --------
Balance, end of year . . . . . . . . . . . . . . . . . . . . . . 94.1 93.5 89.9
-------- -------- --------
PAID IN CAPITAL
Balance, beginning of year . . . . . . . . . . . . . . . . . . . 287.8 151.4 120.1
Conversion of notes and debentures . . . . . . . . . . . . . . . -- 109.7 --
Stock options and awards . . . . . . . . . . . . . . . . . . . . 20.5 22.9 31.1
Acquisition. . . . . . . . . . . . . . . . . . . . . . . . . . . -- 3.7 --
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 .1 .2
-------- -------- --------
Balance, end of year . . . . . . . . . . . . . . . . . . . . . . 308.8 287.8 151.4
-------- -------- --------
RETAINED EARNINGS
Balance, beginning of year . . . . . . . . . . . . . . . . . . . 1,196.2 1,298.6 1,719.0
Net income/(loss). . . . . . . . . . . . . . . . . . . . . . . . 83.3 26.0 (294.5)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . (132.0) (128.4) (125.9)
-------- -------- --------
Balance, end of year . . . . . . . . . . . . . . . . . . . . . . 1,147.5 1,196.2 1,298.6
-------- -------- --------
CUMULATIVE TRANSLATION ADJUSTMENTS
Balance, beginning of year . . . . . . . . . . . . . . . . . . . (67.3) (2.4) 90.0
Translation adjustments. . . . . . . . . . . . . . . . . . . . . 14.0 (64.9) (92.4)
-------- -------- --------
Balance, end of year . . . . . . . . . . . . . . . . . . . . . . (53.3) (67.3) (2.4)
-------- -------- --------
TOTAL SHAREHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . $1,504.5 $1,517.6 $1,545.0
-------- -------- --------
-------- -------- --------
--------------------------------------------------------------------------------------------------------------
</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 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 and related notes 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 amounts
approximate fair value because of the short maturities of these investments.
INVENTORIES Inventories are stated at the lower of cost or market. 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. Allocations for income taxes
included in the translation adjustments account in shareholders' equity were 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 debt (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 agreements and foreign
exchange forward and option contracts to manage exposure to fluctuations in
interest and foreign currency exchange rates.
The cash 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 (recorded as other noncurrent
liabilities or other assets, respectively) are deferred and either amortized to
interest expense over a period relevant to the agreement if the underlying
hedged instrument remains outstanding, or recognized immediately if the
underlying hedged instrument is settled. Premiums paid on caps are amortized to
interest expense over the term of the cap. Cash flows related to the agreements
are classified as operating activities in the Consolidated Statement of Cash
Flows, consistent with the interest payments on the underlying debt.
Gains and losses on foreign currency forward and option contracts offset
gains and losses resulting from the underlying transactions. Gains and losses
on contracts that hedge specific foreign currency commitments are deferred and
recorded 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 recorded in the cumulative translation adjustments account in shareholders'
equity. See Note 10 for additional information on financial instruments.
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, 1994, Grace was a
defendant in approximately 38,700 asbestos-related lawsuits representing
approximately 68,000 claims (versus approximately 38,100 lawsuits and 56,700
claims at December 31, 1993). In most of these lawsuits, Grace is one of many
defendants. Of the lawsuits pending at December 31, 1994, 65 (92 at December
31, 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
involved claims for personal injury.
PROPERTY DAMAGE LITIGATION
Through December 31, 1994, 126 asbestos property damage cases had been dismissed
with respect to Grace without payment of any damages or settlement amounts;
judgments had been entered in favor of Grace in 10 cases (excluding one case
that was settled following appeal of a judgment in favor of Grace and another
case in which the plaintiff was granted a new trial on appeal, limited to
statute of limitations issues); Grace had been held liable for a total of $74.6
in 7 cases (3 of which are on appeal); and 159 property damage suits and claims
had been settled by Grace for a total of $341.8.
Included in the asbestos property damage lawsuits pending against Grace and
others at year-end 1994 were the following 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
and (2) an action, conditionally certified by the U.S. Court of Appeals for the
Fourth Circuit in 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.
In July 1994, a South Carolina state court judge dismissed the claims of
most class members from a purported nationwide class action asbestos property
damage lawsuit. In his ruling, the judge determined that a South Carolina
statute prohibits non-residents from pursuing claims in the South Carolina state
courts with respect to buildings located outside the state. The plaintiffs have
requested that the court reconsider its decision.
In August 1994, Grace entered into an agreement to settle a nationwide
class action pending in the U.S. District Court for the Eastern District of
Pennsylvania on behalf of all public and private elementary and secondary
schools that contain friable asbestos materials (other than schools that "opted
out" of the class). The terms of the settlement agreement (which is subject to
judicial review and approval after class members have an opportunity to be
heard) are not expected to have a significant effect on Grace's consolidated
results of operations or financial position.
PERSONAL INJURY LITIGATION
Through December 31, 1994, approximately 8,400 asbestos personal injury lawsuits
involving 22,200 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 17,000 such suits involving 20,000 claims
had been disposed of for a total of $77.1. However, as a result of various
trends (including the insolvency of other former asbestos producers and cross-
claims by co-defendants in asbestos personal injury lawsuits), the costs
incurred in disposing of such lawsuits in the past may not be indicative of the
costs of disposing of such lawsuits in the future.
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 age, 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, uncertainty with
respect to the class actions described in "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 estimate 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, 1994 can be disposed of for a
total of $712.4, inclusive of legal fees and expenses, of which Grace has
recorded $612.4 as a noncurrent liability and $100.0 as a current liability.
This compares to the estimated liability (current and noncurrent) of $813.7 at
December 31, 1993, reflecting payments made and the recording in the fourth
quarter of 1994 of an additional provision of $50.0 for future costs.
INSURANCE COVERAGE AND 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. Grace has
recorded a receivable of $512.6 at December 31, 1994 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 a total
receivable of $962.3 at December 31, 1993, reflecting net insurance proceeds
received, the recognition in the fourth quarter of 1994 of $50.0 in additional
insurance proceeds expected to be received, the reclassification of $100.0
received in January 1995 in settlement of a coverage dispute, and the non-cash
charge of $316.0 described below.
In September 1993, the U.S. Court of Appeals for the Second Circuit issued
a decision that had the effect of reducing the amount of insurance coverage
available to Grace with respect to asbestos property damage litigation and
claims. The Court of Appeals reversed an earlier District Court ruling that
coverage for asbestos property damage claims is triggered by the "discovery of
damage" and instead ruled that, under New York law (which governs a significant
portion of the policies that provide asbestos-related insurance coverage), such
coverage is triggered based on the date of installation of asbestos-containing
materials. As a result of this decision, Grace recorded a non-cash charge of
$475.0 ($300.0 after-taxes) in the 1993 third quarter, but reversed $316.0
($200.0 after-taxes) of the charge in the 1993 fourth quarter, after the court
withdrew its September 1993 decision and agreed to rehear the case. On May 16,
1994, the court issued a new decision confirming its September 1993 decision.
As a result, Grace reinstated a non-cash charge of $316.0 ($200.0 after-taxes)
in the second quarter of 1994 to reflect the reduction in asbestos property
damage insurance coverage.
Grace has settled coverage disputes with certain insurance carriers. At
December 31, 1994, these settlements provided for the future receipt by Grace of
$187.0, including $100.0 received in January 1995. These amounts have been
recorded as current and noncurrent notes receivable. In 1994, Grace received a
total of $138.6 pursuant to settlements with certain insurance carriers in
reimbursement for monies previously expended by Grace in connection with
asbestos-related litigation; of this amount, $27.0 was received pursuant to
settlements entered into in 1993, which had been separately classified as notes
receivable. A portion of the $138.6 has been paid to plaintiffs in previously
settled asbestos-related lawsuits. Additionally, $100.0 was received in January
1995 in settlement of a coverage dispute. Prior to 1994, Grace received
payments totalling $172.3 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 seek to recover from its excess insurers the balance of
the payments it has made with respect to asbestos-related litigation. As part
of this effort, 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 1993 U.S. Court
of Appeals decision discussed above. Grace believes that the settlement
agreement (which involves approximately $240.0 of the asbestos-related
receivable of $512.6 at December 31, 1994) 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 has appealed this ruling to the U.S. Court of
Appeals for the Fifth Circuit and sought to attack it in a collateral action in
the U.S. District Court for the Southern District of New York; however, Grace
successfully stayed this collateral attack.
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 the insurance
companies that Grace believes to be solvent (based primarily upon reports from a
leading independent insurance rating service) provide coverage of approximately
$1,400.0 (which includes the amounts reflected in the receivable discussed
above). As mentioned previously, the May 1994 decision from the U.S. Court of
Appeals for the Second Circuit has limited the amount of insurance coverage
available for property damage claims. However, if the amount available in the
first six levels should prove to be insufficient for personal injury lawsuits
and claims, 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 insurance carriers (including amounts reflected in the
receivable discussed above), along with other funds, will be available to
satisfy the personal injury and property damage lawsuits and claims pending at
December 31, 1994. Consequently, Grace believes that the resolution of its
asbestos-related litigation will not have a material effect on its consolidated
results of operations or financial position.
F-10
<PAGE>
--------------------------------------------------------------------------------
3. ACQUISITIONS AND DIVESTMENTS
--------------------------------------------------------------------------------
ACQUISITIONS
During 1994, Grace made acquisitions totalling $351.7 (inclusive of cash
acquired and debt assumed), primarily in its health care, construction products
and packaging product lines. Grace acquired Home Nutritional Services, Inc. in
the first quarter of 1994 for approximately $131.8 (inclusive of cash and
assumed debt totalling $30.4) and acquired kidney dialysis centers and other
health care businesses during 1994 for an aggregate of approximately $145.3 in
cash. In the first quarter of 1994, Grace acquired construction chemicals
businesses, and in the fourth quarter of 1994, Grace acquired a European
flexible packaging business.
In 1993, Grace acquired Home Intensive Care, Inc. for approximately $129.0
in cash and other health care businesses for an aggregate of $115.0 in cash and
$3.8 in common stock. Additionally, during 1993 Grace acquired Latin America's
largest water treatment business for approximately $57.6 in cash.
In 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 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.
DIVESTMENTS
During 1994, Grace realized gross proceeds of $646.2 (inclusive of debt assumed
by the buyers) from divestments, including payments made under financing
arrangements entered into in connection with divestments in prior years.
Substantially all businesses divested during 1994 were previously classified as
discontinued operations. Divestment proceeds received in 1994 include $42.8 for
Grace's remaining interest in The Restaurant Enterprises Group, Inc. (REG).
In 1993, Grace completed the sale of substantially all of the oil and gas
operations of Grace Energy and certain corporate investments, all of which were
previously classified as discontinued operations. Other non-core businesses
divested during 1993 included a 50% interest in a Japanese chemical operation
and a food industry hygiene services business for approximately $31.4 and $11.2,
respectively.
In 1992, Grace sold its book, video and software distribution business,
which was previously classified as a discontinued operation, and its organic
chemicals business and related assets.
See Note 6 for a discussion of divestment activity related to discontinued
operations.
--------------------------------------------------------------------------------
4. OTHER INCOME
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income. . . . . . . . . . . . . . . $ 1.7 $ 21.7 $ 3.9
Equity in earnings of affiliated companies . 2.9 1.0 3.4
Gains on sales of investments. . . . . . . . 27.4 22.9 12.6
Other, net . . . . . . . . . . . . . . . . . 18.5 17.6 38.9
------ ------ ------
$ 50.5 $ 63.2 $ 58.8
------ ------ ------
------ ------ ------
--------------------------------------------------------------------------------
</TABLE>
Gains on sales of investments include a 1994 gain of $27.0 on the sale of
Grace's remaining interest in REG and a 1993 gain of $21.7 on the sale of a 50%
interest in a Japanese chemical operation (see Note 3). Interest income in 1993
includes $20.0 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 maximum U.S. Federal corporate tax rate
to 35% (from 34%), effective January 1, 1993. However, neither this rate
increase 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>
---------------------------------------------------------------------------
1994 1993 1992
---------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic . . . . . . . . . . . . . . . . . . $ 44.3 $ 125.4 $ 206.4
Foreign. . . . . . . . . . . . . . . . . . . 94.8 95.8 (13.9)
------- ------- -------
$ 139.1 $ 221.2 $ 192.5
------- ------- -------
------- ------- -------
---------------------------------------------------------------------------
</TABLE>
The provision/(benefit) for income taxes allocated to continuing operations
consisted of:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
1994 1993 1992
---------------------------------------------------------------------------
<S> <C> <C> <C>
Federal income taxes:
Current . . . . . . . . . . . . . . . . . $ 25.3 $ 53.6 $ 75.6
Deferred. . . . . . . . . . . . . . . . . (34.8) (28.7) (20.2)
State and local income taxes - current . . . 21.8 19.1 16.5
Foreign income taxes:
Current . . . . . . . . . . . . . . . . . 49.1 44.4 57.6
Deferred. . . . . . . . . . . . . . . . . (5.6) (1.6) 5.3
------- ------- -------
$ 55.8 $ 86.8 $134.8
------- ------- -------
------- ------- -------
---------------------------------------------------------------------------
</TABLE>
At December 31, 1994 and 1993, deferred tax assets and liabilities
consisted of the following items:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
1994 1993
---------------------------------------------------------------------------
<S> <C> <C>
Reserves not yet deductible for tax purposes . . . . . $254.4 $ 96.9
Research and development expenses. . . . . . . . . . . 107.3 112.2
Postretirement benefits other than pensions. . . . . . 93.3 92.1
Net operating loss carryforwards . . . . . . . . . . . 54.4 47.1
Tax credit carryforwards . . . . . . . . . . . . . . . 49.0 84.9
State deferred taxes . . . . . . . . . . . . . . . . . 37.5 29.2
Provision relating to asbestos-related expenses. . . . 36.2 7.8
Capitalized inventory costs and inventory reserves . . 15.3 19.4
Pension and insurance reserves . . . . . . . . . . . . 14.8 26.2
Other. . . . . . . . . . . . . . . . . . . . . . . . . 54.4 42.1
------ ------
Total deferred tax assets . . . . . . . . . . . . . 716.6 557.9
------ ------
Depreciation and amortization. . . . . . . . . . . . . 167.4 141.5
Prepaid pension cost . . . . . . . . . . . . . . . . . 72.3 71.0
Other. . . . . . . . . . . . . . . . . . . . . . . . . 21.3 4.0
------ ------
Total deferred tax liabilities. . . . . . . . . . . 261.0 216.5
------ ------
Valuation allowance for deferred tax assets. . . . . . 137.0 129.7
------ ------
Net deferred tax assets . . . . . . . . . . . . . . $318.6 $211.7
------ ------
------ ------
</TABLE>
F-12
<PAGE>
In connection with the adoption of SFAS No. 109, Grace recognized a valuation
allowance of $88.4, which has been adjusted to reflect subsequent events. 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.
At December 31, 1994, there were $45.0 of tax credit carryforwards with
expiration periods through 1998 and $4.0 of tax credit carryforwards with no
expiration period. Additionally, there were state and local and foreign net
operating loss carryforwards with a tax effect of $54.4 and various expiration
periods.
The U.S. Federal corporate tax rate reconciles to the effective tax rate for
continuing operations as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
1994 1993 1992
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Federal corporate tax rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35.0% 35.0% 34.0%
Increase/(decrease) in tax rate resulting from:
U.S. and foreign taxes on foreign operations . . . . . . . . . . . . . . . . . . . . . . . 3.8 7.3 10.8
Utilization of general business credits. . . . . . . . . . . . . . . . . . . . . . . . . . (1.5) (2.9) --
State and local income taxes, net of U.S. Federal income tax benefit . . . . . . . . . . . 6.3 4.6 5.6
Valuation allowance for deferred tax assets. . . . . . . . . . . . . . . . . . . . . . . . -- -- 26.3
Impact of U.S. and foreign tax rate changes on deferred taxes. . . . . . . . . . . . . . . -- (3.3) --
Basis difference on sale of investment . . . . . . . . . . . . . . . . . . . . . . . . . . (6.8) -- --
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3 (1.5) (6.7)
---- ---- ----
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40.1% 39.2% 70.0%
---- ---- ----
---- ---- ----
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
U.S. and foreign taxes have not been provided on approximately $301.3 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 $27.2 and additional U.S. Federal income taxes to the
extent they are not offset by foreign tax credits. 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
Grace's battery separators business; certain engineered materials businesses,
principally its printing products, material technology, and electromagnetic
radiation control businesses (collectively, EMS); and its cocoa business and
other non-core businesses were classified as discontinued operations in the
second quarter of 1993. At that time, a provision of $105.0 (net of an
applicable tax benefit of $22.3) was recorded to reflect the losses expected on
the divestment of these businesses. During 1994, Grace sold its battery
separators business and substantially all of EMS for gross proceeds of $316.2.
In February 1995, Grace sold its composite materials business, leaving its
microwave business as the remaining EMS business to divest. Total proceeds
received from the divestment of these businesses approximated prior estimates.
GRACE ENERGY
Grace Energy was classified as a discontinued operation in 1992. The loss from
discontinued operations in 1992 included a provision of $155.0 (net of an
applicable tax benefit of $81.8) to reflect the losses expected on the
divestment of Grace Energy's operations. In 1994, Grace sold substantially all
of its interest in Colowyo Coal Company (Colowyo), Grace Energy's only remaining
significant operation, for proceeds of $218.3, including $192.8 of proceeds from
a non-recourse financing secured by a portion of the revenues from certain long-
term coal contracts. Grace retained a limited partnership interest in Colowyo,
entitling it to share in the revenues from these coal contracts. In 1993, Grace
sold substantially all of the oil and gas operations of Grace Energy for net
cash proceeds of $386.0. Total proceeds received from the divestment of these
businesses approximated prior estimates.
GRACE DISTRIBUTION AND OTHER
In 1994, Grace sold its animal genetics and Caribbean fertilizer operations for
proceeds of $44.1. These and other businesses were classified as discontinued
operations in 1993. In 1993, Grace completed the sale of its minority interests
in Canonie Environmental Services Corporation and Grace-Sierra Horticultural
Products Company for total proceeds of $41.3.
F-13
<PAGE>
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.
Operating losses of Grace's discontinued operations subsequent to their
classification as such were $14.2, $54.6, and $7.2 in 1994, 1993, and 1992,
respectively; these amounts are consistent with amounts originally estimated and
have been charged against established reserves. Operating results and sales and
revenues prior to classification as discontinued operations were as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
1993 1992
-------------------------------------------------------------------------------
<S> <C> <C>
COCOA
Sales and revenues . . . . . . . . . . . . . . . . . . . $ 142.1 $ 683.5
------- -------
(Loss)/income from operations before taxes (1) . . . . . $ (5.6) $ 1.8
Income tax benefit . . . . . . . . . . . . . . . . . . . 1.0 .4
------- -------
(Loss)/income from discontinued operations . . . . . . . $ (4.6) $ 2.2
------- -------
-------------------------------------------------------------------------------
BATTERY SEPARATORS AND EMS
Sales and revenues . . . . . . . . . . . . . . . . . . . $ 93.8 $ 413.6
------- -------
Income from operations before taxes (1). . . . . . . . . $ 4.7 $ 29.1
Income tax provision . . . . . . . . . . . . . . . . . . (2.1) (10.1)
------- -------
Income from discontinued operations. . . . . . . . . . . $ 2.6 $ 19.0
------- -------
-------------------------------------------------------------------------------
GRACE ENERGY
Sales and revenues . . . . . . . . . . . . . . . . . . . $ -- $ 266.3
------- -------
Loss from operations before taxes (1). . . . . . . . . . $ -- $ (11.1)
Income tax benefit . . . . . . . . . . . . . . . . . . . -- 6.6
------- -------
Loss from discontinued operations. . . . . . . . . . . . $ -- $ (4.5)
------- -------
-------------------------------------------------------------------------------
GRACE DISTRIBUTION AND OTHER
Sales and revenues . . . . . . . . . . . . . . . . . . . $ 14.4 $ 96.5
------- -------
Loss from operations before taxes (1). . . . . . . . . . $ (1.7) $ (16.2)
Income tax benefit . . . . . . . . . . . . . . . . . . . .3 4.4
------- -------
Loss from discontinued operations. . . . . . . . . . . . $ (1.4) $ (11.8)
------- -------
Total operating results of discontinued operations . . . . $ (3.4) $ 4.9
Net pretax loss on disposals of operations . . . . . . . . (127.3) (255.1)
Income tax benefit on disposals of operations. . . . . . . 22.3 88.0
------- -------
Total loss from discontinued operations. . . . . . . . . . $(108.4) $(162.2)
------- -------
------- -------
-------------------------------------------------------------------------------
<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 WERE USED TO REDUCE DEBT. THE
ABOVE OPERATING RESULTS FOR THE PERIODS PRIOR TO CLASSIFICATION AS
DISCONTINUED OPERATIONS INCLUDE INTEREST EXPENSE ALLOCATIONS OF $2.5 AND
$38.6 FOR 1993 AND 1992, 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>
Grace is pursuing the divestment of its cocoa business, its remaining EMS
business and other investments, and expects to conclude such transactions in
1995. Net assets of Grace's remaining discontinued operations (excluding
intercompany assets) at December 31, 1994 are as follows:
<TABLE>
<CAPTION>
COCOA OTHER TOTAL
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current assets . . . . . . . . . . . . . . . . . . . . . . . . $ 276.3 $ 21.5 $ 297.8
Properties and equipment, net. . . . . . . . . . . . . . . . . 185.4 38.2 223.6
Investments in and advances to affiliated companies. . . . . . -- 38.7 38.7
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . 42.6 16.7 59.3
-------- ------- --------
Total assets. . . . . . . . . . . . . . . . . . . . . . . $ 504.3 $ 115.1 $ 619.4
-------- ------- --------
Current liabilities. . . . . . . . . . . . . . . . . . . . . . $ 185.6 $ 15.8 $ 201.4
Other noncurrent liabilities . . . . . . . . . . . . . . . . . 78.9 3.5 82.4
-------- ------- --------
Total liabilities . . . . . . . . . . . . . . . . . . . . $ 264.5 $ 19.3 $ 283.8
-------- ------- --------
Net assets. . . . . . . . . . . . . . . . . . . . . . . . $ 239.8 $ 95.8 $ 335.6
-------- ------- --------
-------- ------- --------
-------------------------------------------------------------------------------------------------------------
<CAPTION>
7. OTHER BALANCE SHEET ITEMS
-------------------------------------------------------------------------------------------------------------
1994 1993
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NOTES AND ACCOUNTS RECEIVABLE
Trade receivables, less allowances of $95.1 (1993 - $49.7) . . . . . . . . . . . $ 742.0 $ 545.7
Settlements due from insurance carriers - current. . . . . . . . . . . . . . . . 127.0 27.0
Other receivables, less allowances of $.1 (1993 - $.6) . . . . . . . . . . . . . 106.7 84.7
--------- --------
$ 975.7 $ 657.4
--------- --------
--------- --------
-------------------------------------------------------------------------------------------------------------
INVENTORIES
Raw and packaging materials. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 129.8 $ 111.4
In process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75.3 59.9
Finished products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289.5 243.3
General merchandise. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62.7 67.0
Less: Adjustment of certain inventories to a last-in/first-out (LIFO) basis. . . (43.1) (40.6)
--------- --------
$ 514.2 $ 441.0
--------- --------
--------- --------
-------------------------------------------------------------------------------------------------------------
OTHER ASSETS
Prepaid pension costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 218.2 $ 224.2
Patient relationships, less accumulated amortization of $117.2 (1993 - $96.5). . 214.9 196.4
Long-term receivables, less allowances of $20.6 (1993 - $13.4) . . . . . . . . . 152.3 177.0
Deferred charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133.3 110.4
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115.7 175.0
Long-term investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79.3 104.4
Investments in and advances to affiliated companies. . . . . . . . . . . . . . . 56.0 51.4
Patents and licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39.9 33.9
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76.9 60.3
--------- --------
$ 1,086.5 $1,133.0
--------- --------
--------- --------
-------------------------------------------------------------------------------------------------------------
</TABLE>
During 1994 and 1993, Grace entered into agreements to sell up to $320.0 and
$270.0, respectively, of interests in designated pools of trade receivables. At
December 31, 1994 and 1993, $296.8 and $263.8, respectively, had been received
pursuant to such sales; these amounts are reflected as reductions to trade
accounts receivable.
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). The costs related to such sales are expensed as incurred and
recorded as interest expense and related financing costs. There were no gains
or losses on these transactions.
Inventories valued at LIFO cost comprised 25.2% and 29.0% of inventories at
December 31, 1994 and 1993, respectively. The liquidation of prior years' LIFO
inventory layers in 1994, 1993, and 1992 did not materially affect cost of goods
sold in any of these years.
F-15
<PAGE>
-------------------------------------------------------------------------------
8. PROPERTIES AND EQUIPMENT
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993
-------------------------------------------------------------------------------
<S> <C> <C>
Land . . . . . . . . . . . . . . . . . . . . . . . . $ 52.4 $ 51.3
Buildings. . . . . . . . . . . . . . . . . . . . . . 698.3 636.1
Machinery, equipment and other . . . . . . . . . . . 2,080.2 1,842.5
Projects under construction. . . . . . . . . . . . . 397.4 247.9
--------- ---------
Properties and equipment, gross . . . . . . . . 3,228.3 2,777.8
Accumulated depreciation and amortization. . . . . . (1,498.2) (1,323.7)
--------- ---------
Properties and equipment, net . . . . . . . . . $ 1,730.1 $ 1,454.1
--------- ---------
--------- ---------
-------------------------------------------------------------------------------
</TABLE>
Interest costs have been incurred in connection with the financing of certain
assets prior to placing them in service. Interest costs capitalized in 1994,
1993, and 1992 were $9.4, $7.4, and $20.4, respectively.
Depreciation and lease amortization expense relating to properties and
equipment amounted to $215.1, $196.1, and $202.1 in 1994, 1993, and 1992,
respectively.
Grace's rental expense for operating leases amounted to $65.8, $63.8, and
$80.0 in 1994, 1993, and 1992, respectively. See Note 11 for information
regarding contingent rentals.
At December 31, 1994, minimum future payments for operating leases
were:
<TABLE>
-------------------------------------------------------------------------------
<S> <C>
1995 . . . . . . . . . . . . . . . . . . . $ 65.3
1996 . . . . . . . . . . . . . . . . . . . 55.0
1997 . . . . . . . . . . . . . . . . . . . 46.2
1998 . . . . . . . . . . . . . . . . . . . 36.0
1999 . . . . . . . . . . . . . . . . . . . 28.5
Later years. . . . . . . . . . . . . . . . 66.9
--------
Total minimum lease payments . . . . . . . $ 297.9
--------
--------
-------------------------------------------------------------------------------
</TABLE>
The above minimum lease payments reflect sublease income of $11.3 per year
for 1995 through 1999 and a total of $38.6 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, 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. Grace is continuing to seek recovery, through litigation,
for certain losses incurred as a result of the shutdown of the plant and is
actively pursuing the sale of the plant's land and buildings.
F-16
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
9. DEBT
-----------------------------------------------------------------------------------------
1994 1993
-----------------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM DEBT
Commercial paper (3.6% weighted average interest rate
at year-end 1993) (1). . . . . . . . . . . . . . . . . . . . . $ -- $ 167.4
Current maturities of long-term debt . . . . . . . . . . . . . . 166.6 9.1
Other short-term borrowings (2). . . . . . . . . . . . . . . . . 264.3 356.1
-------- --------
$ 430.9 $ 532.6
-------- --------
-------- --------
LONG-TERM DEBT
Commercial paper (6.0% and 3.6% weighted average interest
rates at year-end 1994 and 1993, respectively) (1) . . . . . . $ 5.5 $ 30.8
Bank borrowings (5.8% and 3.6% weighted average interest
rates at year-end 1994 and 1993, respectively) (1) . . . . . . 103.5 479.6
8.0% Notes Due 2004 (3). . . . . . . . . . . . . . . . . . . . . 300.0 --
7.4% Notes Due 2000 (4). . . . . . . . . . . . . . . . . . . . . 300.0 300.0
7.75% Notes Due 2002 (5) . . . . . . . . . . . . . . . . . . . . 150.0 150.0
6.5% Notes Due 1995 (6). . . . . . . . . . . . . . . . . . . . . 150.0 150.0
Medium-Term Notes, Series A (6.9% weighted average
interest rate at year-end 1994) (7). . . . . . . . . . . . . . 128.5 --
Sundry indebtedness with various maturities through 2006 . . . . 127.9 72.2
-------- --------
1,265.4 1,182.6
Less current maturities of long-term debt. . . . . . . . . . . . 166.6 9.1
-------- --------
$1,098.8 $1,173.5
-------- --------
-------- --------
Full-year weighted average interest rate on total debt . . . . . 5.8% 5.5%
-----------------------------------------------------------------------------------------
<FN>
(1) UNDER BANK REVOLVING CREDIT AGREEMENTS IN EFFECT AT YEAR-END 1994, GRACE
MAY BORROW UP TO $700.0 AT INTEREST RATES BASED UPON THE PREVAILING PRIME,
FEDERAL FUNDS AND/OR EURODOLLAR RATES. OF THAT AMOUNT, $350.0 IS AVAILABLE
UNDER A 364-DAY CREDIT AGREEMENT EXPIRING AUGUST 31, 1995, AND $350.0 IS
AVAILABLE UNDER A LONG-TERM FACILITY EXPIRING SEPTEMBER 1, 1999. AT
DECEMBER 31, 1994, NO BORROWINGS WERE OUTSTANDING UNDER THESE CREDIT
AGREEMENTS. THESE AGREEMENTS ALSO SUPPORT THE ISSUANCE OF COMMERCIAL PAPER
AND BANK BORROWINGS, $109.0 OF WHICH WAS OUTSTANDING AT DECEMBER 31, 1994
(INCLUDED IN LONG-TERM DEBT ABOVE). AT DECEMBER 31, 1994, THE AGGREGATE
AMOUNT OF NET UNUSED AND UNRESERVED BORROWINGS UNDER THE LONG-TERM AND
364-DAY FACILITIES WAS $591.0. THESE AGREEMENTS REPLACED A CREDIT
AGREEMENT UNDER WHICH $714.6 OF 364-DAY FACILITIES AND $510.4 OF LONG-TERM
FACILITIES HAD BEEN AVAILABLE. GRACE'S ABILITY TO BORROW UNDER THE CURRENT
FACILITIES IS SUBJECT TO COMPLIANCE WITH VARIOUS COVENANTS, INCLUDING
MAINTENANCE OF TOTAL DEBT TO TOTAL CAPITALIZATION AND INTEREST COVERAGE
RATIOS.
(2) REPRESENTS BORROWINGS UNDER VARIOUS LINES OF CREDIT AND OTHER MISCELLANEOUS
BORROWINGS, PRIMARILY OF NON-U.S. SUBSIDIARIES.
(3) DURING THE THIRD QUARTER OF 1994, GRACE SOLD $300.0 OF 8.0% NOTES DUE 2004
AT AN INITIAL PUBLIC OFFERING PRICE OF 99.794% OF PAR, TO YIELD 8.03%.
INTEREST IS PAYABLE SEMIANNUALLY, AND THE NOTES MAY NOT BE REDEEMED PRIOR
TO MATURITY.
(4) 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.
(5) 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.
(6) 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.
(7) DURING THE SECOND QUARTER OF 1994, GRACE ENTERED INTO AN AGREEMENT
PROVIDING FOR THE ISSUANCE AND SALE FROM TIME TO TIME OF ITS MEDIUM-TERM
NOTES, SERIES A (MTNS), WITH AN AGGREGATE ISSUE PRICE OF UP TO $300.0. THE
MTNS MAY BEAR INTEREST AT EITHER FIXED OR FLOATING RATES AND HAVE MATURITY
DATES MORE THAN NINE MONTHS FROM THEIR RESPECTIVE DATES OF ISSUANCE.
INTEREST ON EACH FIXED RATE MTN IS PAYABLE SEMIANNUALLY, AND INTEREST ON
EACH FLOATING RATE MTN IS PAYABLE AS ESTABLISHED AT THE TIME OF ISSUANCE.
</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, 1994 are:
1995 - $166.6; 1996 - $88.1; 1997 - $111.6; 1998 - $5.1; and 1999 - $13.4.
Interest expense, excluding related financing costs, for 1994, 1993, and
1992 amounted to $86.9, $81.5, and $90.0, respectively. Interest payments made
in 1994, 1993, and 1992 amounted to $106.1, $102.5, and $166.8, respectively.
A registration statement that became effective in January 1994 covers
$750.0 of debt and/or equity securities that may be sold from time to time. At
December 31, 1994, $321.5 (including up to $171.5 of MTNs) remains available
under the registration statement.
F-17
<PAGE>
-------------------------------------------------------------------------------
10. FINANCIAL INSTRUMENTS
-------------------------------------------------------------------------------
LONG-TERM DEBT/INTEREST RATE AGREEMENTS
To manage its exposure to changes in interest rates, Grace enters into interest
rate agreements, most of which effectively convert fixed-rate debt into
variable-rate debt based on the London Interbank Offered Rate. At December 31,
1994 and 1993, the notional amounts of outstanding interest rate swaps related
to long-term debt were $1,010.0 and $970.0, respectively. Notional amounts do
not quantify risk or represent assets or liabilities of Grace, but are used in
the calculation of cash settlements under the agreements. Management does not
currently intend to settle any of the agreements prior to maturity.
Grace's debt and interest rate management objective is to reduce its cost
of funding over the long term, considering economic conditions and their
potential impact on Grace. The strategy emphasizes improving liquidity by
developing and maintaining access to a variety of long-term and short-term
capital markets. Grace enters into standard interest rate swaps that have
readily identifiable impacts on interest cost and are characterized by broad
market liquidity.
During 1994 and 1993, Grace realized positive cash flows of $10.0 and
$87.0, respectively, from interest rate agreements. Realized gains and losses
on interest rate agreements are amortized to interest expense over a period
relevant to the agreement (1 - 10 years); at December 31, 1994 and 1993,
unamortized net gains were $43.0 and $56.0, respectively. At December 31, 1994
and 1993, Grace would have been required to pay $121.0 and $23.0, respectively,
to retire these agreements. The maturities and notional amounts of the swaps
closely match underlying debt instruments. This will result in the changes in
the fair value of swaps being substantially offset by changes in the fair value
of the debt. At December 31, 1994 and 1993, the fair value of long-term debt
was $1,070.0 and $1,210.0, respectively. The fair value of long-term debt is
determined by obtaining quotes from financial institutions.
FOREIGN CURRENCY CONTRACTS
Grace enters into a variety of foreign exchange forward and option contracts 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, 1994 and 1993, Grace had notional principal amounts of
approximately $10.0 and $34.9, respectively, in contracts to buy or sell foreign
currency in the future. The recorded values at December 31, 1994 and 1993,
which approximated fair value based on exchange rates at December 31, 1994 and
1993, were not significant.
OTHER FINANCIAL INSTRUMENTS
At December 31, 1994 and 1993, the recorded 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 recorded 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.
MARKET AND CREDIT RISKS
Exposure to market risk on interest rate and foreign currency contracts results
from fluctuations in interest and currency rates, respectively, during the
periods in which the contracts are outstanding. The counterparties to Grace's
interest rate swap agreements and currency exchange contracts consist of a
diversified group of major financial institutions, each of which is rated
investment grade. Grace is exposed to credit risk to the extent of potential
nonperformance by counterparties on financial instruments. Any potential credit
exposure does not exceed the fair value as stated above; Grace believes the risk
of incurring losses due to credit risk is remote.
F-18
<PAGE>
--------------------------------------------------------------------------------
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 2014,
have future minimum lease payments aggregating $67.3. Grace is also the named
tenant or guarantor with respect to lease obligations having future minimum
lease payments of $35.8, as to which a previously divested home center business
had been released in bankruptcy; offsetting this is $35.1 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 $15.2, that have been assigned to Hermans, a
previously divested business. Grace believes its ultimate exposure under these
leases is not material and that it is fully indemnified by other parties for any
losses it may incur under these leases.
Grace is contingently liable with respect to leases entered into by REG's
subsidiaries. After undergoing a reorganization in 1993, REG (now named Family
Restaurants, Inc.) has agreed to indemnify Grace with respect to these leases.
At December 31, 1994, these leases have future minimum lease payments of $68.3.
Grace believes any risk of loss from these contingent liabilities is remote.
Grace is subject to loss contingencies resulting from environmental laws
and regulations, which, among other things, impose obligations to remove or
mitigate the effects on the environment of the disposal or release of 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, 1994, Grace's
liability for environmental investigatory and remediation costs related to
continuing and discontinued operations totalled approximately $216.0, as
compared to $160.0 at December 31, 1993. The principal reason for this increase
is due to a change in the estimated costs of remediation at a former
manufacturing site due to additional required remediation activities.
Additionally, a change in the estimated liability for remediation costs related
to a previously divested business, as a result of a court ruling that Grace is
responsible for a substantial portion of the costs, contributed to an increase
in the liability; Grace has separately recorded a receivable for the amount
expected to be received from its insurance carriers with respect to this
liability.
In 1994, periodic provisions were recorded for environmental and plant
closure expenses, which include the costs of future environmental investigatory
and remediation activities. Additionally, in the first quarter of 1994, Grace
recorded a provision of approximately $40.0, principally to provide for future
environmental costs. These provisions are included in the Consolidated
Statement of Operations as part of cost of goods sold and operating expenses.
Grace's current balance sheet reserves are considered adequate to cover the
aforementioned liabilities.
Grace's environmental liabilities are reassessed whenever environmental
circumstances become better defined and/or remediation efforts and their costs
can be better estimated. 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 apportionment of costs among potentially responsible parties. As
some of the previously mentioned issues 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 continue to review and analyze the need for
additional accruals.
--------------------------------------------------------------------------------
12. MINORITY INTEREST
--------------------------------------------------------------------------------
Minority interest consists of a limited partner interest in LP. The total
capital of LP at December 31, 1994 was $1,473.2. LP's assets consist of Grace
Cocoa's worldwide cocoa and chocolate business, long-term notes and demand loans
due from various Grace entities and guaranteed by W. R. Grace & Co. and its
principal operating subsidiary, and cash. Grace had $368.1 of borrowings from
LP at December 31, 1994. Four Grace entities serve as general partners of LP
and own general partner interests totalling 79.03% in LP; the sole limited
partner of LP, which initially acquired its interest in LP in exchange for a
$300.0 cash capital contribution ($297.0 of which was funded by outside
investors), 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.
F-19
<PAGE>
--------------------------------------------------------------------------------
13. SHAREHOLDERS' EQUITY
--------------------------------------------------------------------------------
The weighted average number of shares of common stock outstanding during 1994
was 93,936,000 (1993 - 91,461,000; 1992 - 89,543,000).
W. R. Grace & Co. is authorized to issue 300,000,000 shares of common
stock. Of the common stock unissued at December 31, 1994, approximately
11,214,000 shares are reserved for issuance pursuant to stock options and other
stock incentives. In addition, at December 31, 1994, approximately 105,297,000
shares were reserved for issuance under 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, 1994 Shares Outstanding
----------------------------------------- ----------------------------------
Authorized In Out-
and Issued Treasury standing 1994 1993 1992
----------------------------------------- ----------------------------------
<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 1.6 1.7
8% Noncumulative Class B (2) 40,000 18,415 21,585 2.2 2.2 2.2
---- ---- ----
$7.4 $7.4 $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 1994,
1993, and 1992.
The Certificate of Incorporation also authorizes 5,000,000 shares of Class
C Preferred Stock, $1 par value, none of which has been issued.
--------------------------------------------------------------------------------
14. STOCK INCENTIVE PLANS
--------------------------------------------------------------------------------
Changes in outstanding common stock options are summarized below:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
1994 1993 1992
------------------------ ------------------------ ------------------------
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 . . . 6,965,304 $36.48 6,365,187 $35.09 6,112,248 $32.01
Options granted. . . . . . . . . . 1,358,900 42.27 1,461,425 38.00 1,445,300 37.77
--------- --------- ----------
8,324,204 7,826,612 7,557,548
Options exercised. . . . . . . . . (606,444) 29.21 (683,255) 25.89 (1,132,863) 25.29
Options terminated or canceled . . (104,872) 37.33 (178,053) 40.13 (59,498) 27.97
--------- --------- ----------
Balance at end of year . . . . . . 7,612,888 38.08 6,965,304 36.48 6,365,187 35.09
--------- --------- ----------
--------- --------- ----------
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1994, options covering 5,633,761 shares (1993 - 5,056,256;
1992 - 4,025,840) were exercisable and 3,547,094 shares (1993 - 1,804,122; 1992
- 3,087,994) were available for additional grants.
F-20
<PAGE>
--------------------------------------------------------------------------------
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 60% of U.S. and non-U.S. plan
assets at December 31, 1994 were common stocks, with the remainder primarily
fixed income securities.
Pension (benefit)/cost is comprised of the following components:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
1994 1993 1992
---------------- ---------------- -----------------
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. . . . . . . . . $ 25.6 $ 13.4 $ 17.6 $ 9.5 $ 11.1 $ 9.4
Interest cost on benefits earned in prior years. . . . . . . . . 49.8 19.3 36.3 17.1 31.7 16.5
Actual loss/(return) on plan assets. . . . . . . . . . . . . . . 17.9 10.6 (108.2) (56.7) (20.9) (30.6)
Deferred (loss)/gain on plan assets. . . . . . . . . . . . . . . (89.5) (37.4) 58.1 36.0 (30.5) 9.5
Amortization of net gains and prior service costs. . . . . . . . (7.7) (1.6) (5.3) (1.7) (8.4) (5.5)
------- ------- ------- ------- ------- -------
Net pension (benefit)/cost . . . . . . . . . . . . . . . . . . . $ (3.9) $ 4.3 $ (1.5) $ 4.2 $ (17.0) $ (.7)
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The funded status of these plans was as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
1994 1993
--------------------- ----------------------
U.S. NON-U.S. U.S. Non-U.S.
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligation:
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 575.2 $ 171.4 $ 614.2 $ 172.6
------- ------- ------- -------
------- ------- ------- -------
Accumulated benefit obligation . . . . . . . . . . . . . . . . . $ 579.8 $ 179.7 $ 620.0 $ 182.2
------- ------- ------- -------
------- ------- ------- -------
Total projected benefit obligation . . . . . . . . . . . . . . . $ 636.7 $ 240.3 $ 691.4 $ 263.4
Plan assets at fair value. . . . . . . . . . . . . . . . . . . . 751.6 268.3 836.4 270.1
------- ------- ------- -------
Plan assets in excess of projected benefit obligation. . . . . . 114.9 28.0 145.0 6.7
Unamortized net gain at initial adoption . . . . . . . . . . . . (83.9) (3.8) (96.1) (6.4)
Unamortized prior service cost . . . . . . . . . . . . . . . . . 31.3 4.0 34.8 4.2
Unrecognized net loss/(gain) . . . . . . . . . . . . . . . . . . 63.4 (13.0) 47.6 .9
------- -------- ------- ------
Prepaid pension cost . . . . . . . . . . . . . . . . . . . . . . $ 125.7 $ 15.2 (1) $ 131.3 $ 5.4 (1)
------- -------- ------- ------
------- -------- ------- ------
-----------------------------------------------------------------------------------------------------------------------------
<FN>
(1) INCLUDES $70.3 IN 1994 AND $66.0 IN 1993 OF DEFERRED PENSION COSTS.
</TABLE>
The following significant assumptions were used in 1994, 1993, and 1992:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
1994 1993 1992
------------------- ------------------- -------------------
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,. . . . . . . . . . . 8.5% 5.0 - 12.0% 7.5% 4.5 - 9.2% 8.0% 6.0 - 12.0%
Expected long-term rate of return. . . . . . . . . 9.0 6.0 - 10.5 9.0 6.0 - 10.5 9.0 6.0 - 11.0
Rate of compensation increase. . . . . . . . . . . 5.5 4.0 - 7.5 5.5 3.5 - 7.5 6.0 3.5 - 7.5
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
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, 1994 and 1993 are the
following:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
1994 1993
---------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees. . . . . . . . . . . . . . . . . . . . . $192.6 $168.9
Fully eligible participants . . . . . . . . . . . 12.1 36.9
Active ineligible participants. . . . . . . . . . 26.3 38.3
------ ------
Accumulated postretirement benefit obligation. . . . . 231.0 244.1
Unrecognized net loss . . . . . . . . . . . . . . (28.5) (40.7)
Unrecognized prior service benefit. . . . . . . . 48.6 52.9
------ ------
Accrued postretirement benefit obligation. . . . . . . $251.1 $256.3
------ ------
------ ------
---------------------------------------------------------------------------
</TABLE>
Net periodic postretirement benefit cost for the years ended December 31,
1994, 1993, and 1992 is comprised of the following components:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
1994 1993 1992
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.1 $ 2.2 $ 3.8
Interest cost on accumulated postretirement benefit obligation . . . . . . . . . 16.2 13.2 15.6
Amortization of net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2 .2 --
Amortization of prior service benefit. . . . . . . . . . . . . . . . . . . . . . (4.3) (4.5) (1.9)
------ ------ -----
Net periodic postretirement benefit cost . . . . . . . . . . . . . . . . . . . . $ 15.2 $ 11.1 $ 17.5
------ ------ -----
------ ------ -----
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
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 $48.6 at December 31, 1994
and will be amortized over an average remaining future service life of
approximately 12 years.
Medical care cost trend rates were projected at 10.9% in 1994, declining to
6.0% through 2002 and remaining level thereafter. A one percentage point
increase in each year's assumed medical care cost trend rate, holding all other
assumptions constant, would increase the annual net periodic postretirement
benefit cost by $3.0 and the accumulated postretirement benefit obligation by
$18.7. The discount rates at December 31, 1994, 1993, and 1992 were 8.5%, 7.5%,
and 8.0%, respectively.
Effective January 1, 1994, Grace adopted 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 did not have a material effect on Grace's results of operations or
financial position.
F-22
<PAGE>
--------------------------------------------------------------------------------
17. INDUSTRY SEGMENTS AND INFORMATION ABOUT FOREIGN OPERATIONS
--------------------------------------------------------------------------------
INDUSTRY SEGMENT INFORMATION
Grace is a global producer of specialty chemicals and holds a leadership
position in specialized health care services and products. The tables below
present information related to Grace's two industry segments for the years 1994
-1992. Intersegment sales, eliminated in consolidation, are nominal and are not
disclosed separately.
<TABLE>
<CAPTION>
Specialty Health
Chemicals Care Total
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales and Revenues . . . . . . . . 1994 $3,218 $1,875 $5,093
1993 2,895 1,513 4,408
1992 3,062 1,275 4,337
Pretax Operating Income (1). . . . 1994 338 249 587
1993 284 194 478
1992 299 126 425
Identifiable Assets. . . . . . . . 1994 2,364 1,735 4,099
1993 1,996 1,297 3,293
1992 1,893 906 2,799
Capital Expenditures . . . . . . . 1994 329 86 415
1993 209 80 289
1992 224 52 276
Depreciation and Amortization. . . 1994 148 94 242
1993 138 78 216
1992 151 65 216
---------------------------------------------------------------------------
</TABLE>
F-23
<PAGE>
INFORMATION ABOUT FOREIGN OPERATIONS
The table below provides information pertaining to Grace's operations by
geographic area. Asia Pacific and Latin America are included in Other.
<TABLE>
<CAPTION>
United
States Canada Europe Other Total
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales and Revenues . . . . . . . . 1994 $3,309 $122 $1,058 $604 $5,093
1993 2,855 124 932 497 4,408
1992 2,721 131 1,081 404 4,337
Pretax Operating Income (1). . . . 1994 423 9 74 81 587
1993 365 7 47 59 478
1992 291 -- 75 59 425
Identifiable Assets. . . . . . . . 1994 2,468 82 1,026 523 4,099
1993 2,063 82 753 395 3,293
1992 1,669 75 772 283 2,799
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Pretax operating income and total identifiable assets for both segment and
geographic results are reconciled below to income from continuing operations
before income taxes and consolidated total assets, respectively, as presented in
the Consolidated Statement of Operations and Consolidated Balance Sheet.
Capital expenditures and depreciation and amortization expense are reconciled
below to the respective amounts presented in the Consolidated Statement of Cash
Flows. Grace allocates to its industry segments general corporate overhead
expenses, general corporate research expenses and certain other income and
expense items that can be identified with segment operations.
<TABLE>
<CAPTION>
1994 1993 1992
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pretax operating income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 587 $ 478 $ 425
Interest expense and related financing costs . . . . . . . . . . . . . . . . . . (110) (84) (100)
Provision relating to asbestos-related insurance coverage. . . . . . . . . . . . (316) (159) --
Provision relating to a fumed silica plant . . . . . . . . . . . . . . . . . . . -- -- (140)
Other (expenses)/income, net . . . . . . . . . . . . . . . . . . . . . . . . . . (22) (14) 8
------ ------ ------
Income from continuing operations before income taxes. . . . . . . . . . . . . . $ 139 $ 221 $ 193
------ ------ ------
------ ------ ------
-----------------------------------------------------------------------------------------------------------------------------
Identifiable assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,099 $3,293 $2,799
Asbestos-related insurance receivable. . . . . . . . . . . . . . . . . . . . . . 513 962 --
General corporate assets (2) . . . . . . . . . . . . . . . . . . . . . . . . . . 1,283 1,093 1,235
Discontinued operations' net assets. . . . . . . . . . . . . . . . . . . . . . . 336 761 1,565
------ ------ ------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,231 $6,109 $5,599
------ ------ ------
------ ------ ------
-----------------------------------------------------------------------------------------------------------------------------
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 415 $ 289 $ 276
General corporate expenditures . . . . . . . . . . . . . . . . . . . . . . . . . 30 21 34
Discontinued operations' expenditures. . . . . . . . . . . . . . . . . . . . . . -- -- 88
------ ------ ------
Total capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 445 $ 310 $ 398
------ ------ ------
------ ------ ------
-----------------------------------------------------------------------------------------------------------------------------
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . . . $ 242 $ 216 $ 216
General corporate depreciation and amortization . . . . . . . . . . . . . . . . 19 19 16
------ ------ ------
Total depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . $ 261 $ 235 $ 232
------ ------ ------
------ ------ ------
-----------------------------------------------------------------------------------------------------------------------------
<FN>
(1) 1993 AND 1992 AMOUNTS HAVE BEEN RESTATED TO INCLUDE THE ALLOCATION TO
INDUSTRY SEGMENTS OF GENERAL CORPORATE OVERHEAD EXPENSES, GENERAL CORPORATE
RESEARCH EXPENSES AND CERTAIN OTHER INCOME AND EXPENSE ITEMS TO CONFORM TO
THE 1994 PRESENTATION.
(2) GENERAL CORPORATE ASSETS PRINCIPALLY INCLUDE DEFERRED TAX ASSETS, DEFERRED
PENSION ASSETS AND CORPORATE RECEIVABLES AND INVESTMENTS.
</TABLE>
F-24
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
QUARTERLY SUMMARY AND STATISTICAL INFORMATION UNAUDITED-DOLLARS IN MILLIONS, EXCEPT PER SHARE
-----------------------------------------------------------------------------------------------------------------------------
QUARTER ENDED 1Q 2Q 3Q 4Q
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994
Specialty Chemicals. . . . . . . . . . . . . . . . $ 675.4 $ 782.9 $ 815.5 $ 944.4
Health Care. . . . . . . . . . . . . . . . . . . . 401.4 454.0 491.2 528.5
-------- -------- -------- --------
Total sales and revenues. . . . . . . . . . . $ 1,076.8 $ 1,236.9 $ 1,306.7 $ 1,472.9
Cost of goods sold and operating expenses. . . . . 680.6 721.5 755.4 797.4
Net income/(loss). . . . . . . . . . . . . . . . . 38.2 (134.3) (3) 76.0 103.4
Earnings/(loss) per share: (1)
Net earnings/(loss) . . . . . . . . . . . . . $ .41 $ (1.43) $ .81 $ 1.10
Fully diluted earnings per share:
Net earnings. . . . . . . . . . . . . . . . . $ .40 $ -- (4) $ .80 $ 1.09
Dividends declared per common share. . . . . . . . $ .35 $ .35 $ .35 $ .35
Market price of common stock: (2)
High. . . . . . . . . . . . . . . . . . . . . $ 46 1/2 $ 43 $ 42 3/8 $ 41 1/8
Low . . . . . . . . . . . . . . . . . . . . . 40 3/8 39 38 1/4 36
Close . . . . . . . . . . . . . . . . . . . . 41 1/4 39 7/8 41 1/2 38 5/8
-----------------------------------------------------------------------------------------------------------------------------
1993 (5)
Specialty Chemicals. . . . . . . . . . . . . . . . $ 648.1 $ 729.9 $ 734.7 $ 782.9
Health Care. . . . . . . . . . . . . . . . . . . . 338.1 364.2 401.4 409.1
--------- --------- --------- ---------
Total sales and revenues. . . . . . . . . . . $ 986.2 $ 1,094.1 $ 1,136.1 $ 1,192.0
Cost of goods sold and operating expenses. . . . . 592.4 644.1 660.1 719.1
Income/(loss) from continuing operations . . . . . 31.7 53.9 (236.4) (6) 285.2 (7)
Loss from discontinued operations. . . . . . . . . (3.4) (105.0) -- --
Net income/(loss). . . . . . . . . . . . . . . . . 28.3 (51.1) (236.4) 285.2
Earnings/(loss) per share: (1)
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 $ -- (4) $ 3.03
Net earnings. . . . . . . . . . . . . . . . . .30 -- (4) -- (4) 3.03
Dividends declared per common share. . . . . . . . $ .35 $ .35 $ .35 $ .35
Market price of common stock: (2)
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
-----------------------------------------------------------------------------------------------------------------------------
<FN>
(1) 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 DEBT INTO APPROXIMATELY 2.8
MILLION SHARES OF COMMON STOCK.
(2) PRINCIPAL MARKET: NEW YORK STOCK EXCHANGE.
(3) INCLUDES A $200.0 REINSTATEMENT OF THE PROVISION RELATING TO ASBESTOS-
RELATED INSURANCE COVERAGE.
(4) NOT PRESENTED AS THE EFFECT IS ANTI-DILUTIVE.
(5) CERTAIN AMOUNTS HAVE BEEN RECLASSIFIED TO CONFORM TO THE 1994 PRESENTATION.
(6) INCLUDES A $300.0 PROVISION RELATING TO ASBESTOS-RELATED INSURANCE
COVERAGE.
(7) INCLUDES A $200.0 REVERSAL OF THE $300.0 PROVISION RELATING TO ASBESTOS-
RELATED INSURANCE COVERAGE.
</TABLE>
F-25
<PAGE>
--------------------------------------------------------------------------------
WORLDWIDE OPERATIONS DOLLARS IN MILLIONS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Sales and Revenues Pretax Operating Income (1)
---------------------------------------------------------------------------------------------------------------------------------
1994 1993 1992 1994 (2) 1993 (3) 1992
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
UNITED STATES/CANADA
Specialty Chemicals. . . . . . . . $1,679 $1,555 $1,455 $192 $189 $148
Health Care. . . . . . . . . . . . 1,752 1,424 1,211 240 183 109
------ ------ ------ ---- ---- ----
Total. . . . . . . . . . . . . . . 3,431 2,979 2,666 432 372 257
------ ------ ------ ---- ---- ----
---------------------------------------------------------------------------------------------------------------------------------
EUROPE
Specialty Chemicals. . . . . . . . 956 852 967 69 38 67 (4)
Health Care. . . . . . . . . . . . 102 80 58 5 9 17
------ ------ ------ ---- ---- ----
Total. . . . . . . . . . . . . . . 1,058 932 1,025 74 47 84
------ ------ ------ ---- ---- ----
---------------------------------------------------------------------------------------------------------------------------------
ASIA PACIFIC
Specialty Chemicals. . . . . . . . 366 307 278 56 44 41
Health Care. . . . . . . . . . . . 12 8 6 2 2 --
------ ------ ------ ---- ---- ----
Total. . . . . . . . . . . . . . . 378 315 284 58 46 41
------ ------ ------ ---- ---- ----
---------------------------------------------------------------------------------------------------------------------------------
LATIN AMERICA
Specialty Chemicals. . . . . . . . 217 181 120 21 13 18
Health Care. . . . . . . . . . . . 9 1 -- 2 -- --
------ ------ ------ ---- ---- ----
Total. . . . . . . . . . . . . . . 226 182 120 23 13 18
------ ------ ------ ---- ---- ----
---------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL . . . . . . . . . . . . . 5,093 4,408 4,095 587 478 400
Divested Businesses. . . . . . . . -- -- 242 -- -- 25
------ ------ ------ ---- ---- ----
TOTAL CONTINUING OPERATIONS. . . . $5,093 $4,408 $4,337 $587 $478 $425
------ ------ ------ ---- ---- ----
---------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) AMOUNTS HAVE BEEN RESTATED TO CONFORM TO THE 1994 PRESENTATION ON A PRETAX
BASIS AND INCLUDE THE ALLOCATION TO INDUSTRY SEGMENTS OF GENERAL CORPORATE
OVERHEAD EXPENSES, GENERAL CORPORATE RESEARCH EXPENSES AND CERTAIN OTHER
INCOME AND EXPENSE ITEMS.
(2) EXCLUDES A $316 PROVISION FOR ASBESTOS-RELATED INSURANCE COVERAGE.
(3) EXCLUDES A $159 PROVISION FOR ASBESTOS-RELATED INSURANCE COVERAGE.
(4) EXCLUDES A $140 PROVISION RELATING TO A FUMED SILICA PLANT IN BELGIUM.
</TABLE>
F-26
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES, NET FIXED ASSETS AND DEPRECIATION AND LEASE AMORTIZATION DOLLARS IN MILLIONS
-----------------------------------------------------------------------------------------------------------------------------
Depreciation and
Capital Expenditures Net Fixed Assets Lease Amortization (1)
------------------------ ------------------------ ------------------------
1994 1993 1992 1994 1993 1992 1994 1993 1992
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING GROUP
Specialty Chemicals. . . . . $329 $209 $200 $1,262 $1,049 $ 975 $144 $135 $131
Health Care. . . . . . . . . 86 80 52 324 277 221 56 46 38
---- ---- ---- ------ ------ ------ ---- ---- ----
Subtotal . . . . . . . . . . 415 289 252 1,586 1,326 1,196 200 181 169
General Corporate. . . . . . 30 21 34 144 128 102 15 15 15
---- ---- ---- ------ ------ ------ ---- ---- ----
Total Continuing Operations. 445 310 286 1,730 1,454 1,298 215 196 184
Divested Businesses. . . . . -- -- 24 -- -- 4 -- -- 18
Discontinued Operations. . . -- -- 88 -- -- 406 -- -- --
---- ---- ---- ------ ------ ------ ---- ---- ----
Total. . . . . . . . . . . . $445 $310 $398 $1,730 $1,454 $1,708 $215 $196 $202
---- ---- ---- ------ ------ ------ ---- ---- ----
---- ---- ---- ------ ------ ------ ---- ---- ----
-----------------------------------------------------------------------------------------------------------------------------
GEOGRAPHIC LOCATION
United States and Canada . . $272 $194 $156 $ 994 $ 854 $ 757 $129 $117 $108
Europe . . . . . . . . . . . 86 68 80 421 351 342 55 49 49
Other Areas. . . . . . . . . 57 27 16 171 121 97 16 15 12
---- ---- ---- ------ ------ ------ ---- ---- ----
Subtotal . . . . . . . . . . 415 289 252 1,586 1,326 1,196 200 181 169
General Corporate. . . . . . 30 21 34 144 128 102 15 15 15
---- ---- ---- ------ ------ ------ ---- ---- ----
Total Continuing Operations. 445 310 286 1,730 1,454 1,298 215 196 184
Divested Businesses. . . . . -- -- 24 -- -- 4 -- -- 18
Discontinued Operations. . . -- -- 88 -- -- 406 -- -- --
---- ---- ---- ------ ------ ------ ---- ---- ----
Total. . . . . . . . . . . . $445 $310 $398 $1,730 $1,454 $1,708 $215 $196 $202
---- ---- ---- ------ ------ ------ ---- ---- ----
---- ---- ---- ------ ------ ------ ---- ---- ----
-----------------------------------------------------------------------------------------------------------------------------
<FN>
(1) CERTAIN 1993 AND 1992 AMOUNTS HAVE BEEN RECLASSIFIED TO CONFORM TO THE 1994
PRESENTATION.
</TABLE>
F-27
<PAGE>
--------------------------------------------------------------------------------
FINANCIAL SUMMARY (1) DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
Sales and revenues . . . . . . . . . . . . . . . . . . . . . $5,093.3 $4,408.4 $4,337.0 $4,386.6 $4,309.7
Cost of goods sold and operating expenses. . . . . . . . . . 2,954.9 2,615.7 2,581.7 2,629.0 2,684.4
Depreciation and amortization. . . . . . . . . . . . . . . . 260.7 234.6 232.1 241.5 227.2
Interest expense and related financing costs . . . . . . . . 109.9 84.4 99.8 126.6 138.6
Research and development expenses. . . . . . . . . . . . . . 132.4 135.0 130.0 128.1 125.4
Income from continuing operations
before income taxes . . . . . . . . . . . . . . . . . . 139.1 (3) 221.2 (4) 192.5 (5) 334.2 272.1
Provision for income taxes . . . . . . . . . . . . . . . . . 55.8 86.8 134.8 132.5 97.5
Income from continuing operations before special items (2) . 283.3 234.4 202.8 198.2 174.6
Income from continuing operations. . . . . . . . . . . . . . 83.3 134.4 57.7 201.7 174.6
(Loss)/income from discontinued operations . . . . . . . . . -- (108.4) (162.2) 16.9 28.2
Cumulative effect of accounting changes. . . . . . . . . . . -- -- (190.0) -- --
Net income/(loss). . . . . . . . . . . . . . . . . . . . . . 83.3 26.0 (294.5) 218.6 202.8
-----------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Current assets . . . . . . . . . . . . . . . . . . . . . . . $2,228.9 $2,077.6 $2,091.4 $1,990.0 $2,380.1
Current liabilities. . . . . . . . . . . . . . . . . . . . . 2,231.5 1,992.6 1,639.6 1,622.1 1,680.1
Properties and equipment, net. . . . . . . . . . . . . . . . 1,730.1 1,454.1 1,707.9 2,558.2 2,462.1
Total assets . . . . . . . . . . . . . . . . . . . . . . . . 6,230.6 6,108.6 5,598.6 6,007.1 6,226.5
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . 1,529.7 1,706.1 1,819.2 2,259.4 2,285.9
Shareholders' equity - common stock. . . . . . . . . . . . . 1,497.1 1,510.2 1,537.5 2,017.7 1,905.0
-----------------------------------------------------------------------------------------------------------------------------
DATA PER COMMON SHARE
Earnings from continuing operations before special items (2) $ 3.01 $ 2.56 $ 2.26 $ 2.27 $ 2.03
Earnings from continuing operations. . . . . . . . . . . . . .88 1.46 .64 2.31 2.03
Cumulative effect of accounting changes. . . . . . . . . . . -- -- (2.12) -- --
Earnings/(loss). . . . . . . . . . . . . . . . . . . . . . . .88 .28 (3.29) 2.50 2.36
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . 1.40 1.40 1.40 1.40 1.40
Book value . . . . . . . . . . . . . . . . . . . . . . . . . 15.91 16.16 17.10 22.77 22.14
Average common shares outstanding (THOUSANDS). . . . . . . . 93,936 91,461 89,543 87,236 85,879
-----------------------------------------------------------------------------------------------------------------------------
OTHER STATISTICS
Dividends paid on common stock . . . . . . . . . . . . . . . $ 131.5 $ 127.9 $ 125.4 $ 122.0 $ 120.2
Capital expenditures . . . . . . . . . . . . . . . . . . . . 444.6 309.6 398.4 447.0 513.7
% Total debt to total capital. . . . . . . . . . . . . . . . 50.4% 52.9% 54.1% 52.7% 54.4%
Common shareholders of record. . . . . . . . . . . . . . . . 18,501 19,358 20,869 21,949 23,327
Common stock price range . . . . . . . . . . . . . . . . . . 46 1/2-36 41 1/4-34 5/8 45-32 40 3/4-23 3/8 33 5/8-17
Number of employees - continuing
operations (THOUSANDS). . . . . . . . . . . . . . . . . . 37.9 34.0 32.8 32.9 34.2
-----------------------------------------------------------------------------------------------------------------------------
<FN>
(1) CERTAIN PRIOR YEAR AMOUNTS HAVE BEEN RECLASSIFIED TO CONFORM TO THE 1994
PRESENTATION.
(2) EXCLUDES PROVISIONS OF $200.0 AND $100.0 IN 1994 AND 1993, RESPECTIVELY,
RELATING TO ASBESTOS-RELATED INSURANCE COVERAGE, AND IN 1992 A $140.0
PROVISION RELATING TO A FUMED SILICA PLANT IN BELGIUM AND AN INCREMENTAL
CHARGE OF $5.1 FOR POSTRETIREMENT BENEFITS PRIOR TO PLAN AMENDMENTS, AND A
STRATEGIC RESTRUCTURING GAIN OF $3.5 IN 1991.
(3) INCLUDES A $316.0 PROVISION RELATING TO ASBESTOS-RELATED INSURANCE
COVERAGE.
(4) INCLUDES A $159.0 PROVISION RELATING TO ASBESTOS-RELATED INSURANCE
COVERAGE.
(5) INCLUDES A $140.0 PROVISION RELATING TO A FUMED SILICA PLANT IN BELGIUM.
</TABLE>
F-28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
REVIEW OF OPERATIONS
OVERVIEW
Sales and revenues increased 16% in 1994 over 1993, as compared to an increase
of 2% in 1993 over 1992. Excluding businesses divested in 1992, 1993 sales and
revenues increased 8% as compared to 1992.
Income from continuing operations in 1994 increased 21%, to $283.3 million,
as compared to 1993, excluding non-cash charges of $200 million and $100 million
after taxes ($316 million and $159 million pretax) recorded in 1994 and 1993,
respectively, to reflect a reduction in insurance coverage for asbestos property
damage lawsuits and claims. In 1992, Grace closed its fumed silica plant in
Belgium and recorded a one-time provision of $140 million, representing the
entire net book value of the facility and certain additional expenses.
Excluding the asbestos and fumed silica charges, income from continuing
operations for 1993 increased 19%, to $234.4 million, over 1992 (including
businesses divested in 1992).
For all periods presented, the Consolidated 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
Sales and revenues increased 11% in 1994 as compared to 1993, reflecting
favorable volume, price/product mix and currency translation variances estimated
at 9%, 1% and 1%, respectively. Volume increases were experienced by all core
product lines. Packaging volume increases were due to higher sales volumes of
bags, films and laminates in all regions. The volume increases in construction
products were due to the acquisition of construction chemicals businesses in the
first quarter of 1994, improved construction markets in North America and
Europe, and improved sales of waterproofing materials in North America. Water
treatment volume increases were due to market share gains in Latin America and
North America in the water treatment chemicals business and improving conditions
in the paper industry process chemicals business in Europe. The volume
increases in container were due to increased sales of can sealing products in
Asia Pacific. Catalyst and other silica-based products volume increases were
due to strong sales of dentifrice silica in North America and market share gains
in Europe, improved polyolefin catalyst sales as a result of improved market
conditions in Europe and Asia Pacific, and improved volumes in fluid cracking
catalysts in Europe and Asia Pacific, partially offset by a decrease in fluid
cracking catalyst volume in North America as a result of customers cracking
better quality crude (requiring fewer catalysts) and an increase in customer
maintenance shutdowns in 1994.
Operating income before taxes increased by 19% in 1994 compared to 1993.
North American results in 1994 were positively affected by strong growth in
construction and packaging, mainly due to the volume increases noted above,
partially offset by reduced profitability in fluid cracking catalysts due to the
volume decreases noted above. European results improved significantly versus
1993, primarily due to improvements in fluid cracking and polyolefin catalysts
and construction products (due to the volume increases noted above), partially
offset by costs associated with streamlining European packaging, water treatment
and container operations. In Asia Pacific, favorable results were achieved
versus 1993, primarily in fluid cracking and polyolefin catalysts and container
(due to the volume increases noted above). Latin American 1994 results improved
versus 1993, primarily due to increased profitability in packaging (due to
increased volumes in bags, films and laminates). Latin American results also
benefited from improved economic conditions in Brazil; however, this was
partially offset by the devaluation of the Mexican peso in late 1994.
Excluding sales and revenues and operating income before taxes of
businesses divested in 1992 and the fumed silica provision referred to above,
sales and revenues increased by 3%, and operating income before taxes increased
by 4%, in 1993 as compared to 1992. The increase in sales and revenues
reflected favorable volume and price/product mix variances estimated at 6% and
2%, respectively, offset by an unfavorable currency translation variance
estimated at 5%. Volume increases occurred in 1993 in packaging, water
treatment, fluid cracking catalysts and silica products, and construction
products. 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 strong volume increases. European results
for most product lines were adversely affected by 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 a new
water treatment business, partially offset by favorable results in packaging.
HEALTH CARE
Sales and revenues for 1994 increased by 24% over 1993, due to increases of 28%
and 47%, respectively, in kidney dialysis services and home health care
operations, partially offset by a decrease of 7% in medical products revenues.
The decrease in medical products operations reflects a decline in bloodline
sales resulting from import alerts issued in the 1993 second quarter (see
discussion below). 1994 results for kidney dialysis services reflect
acquisitions during 1994, and home health care operations include the results of
Home Nutritional Services, Inc. (HNS), a national provider of home infusion
therapy services acquired in April 1994. The number of centers providing
dialysis and related services increased 18%, from 501 at year-end 1993 to 590 at
year-end 1994 (526 in North America, 42 in Europe, 15 in Latin America and 7 in
Asia Pacific).
F-29
<PAGE>
Operating income before taxes increased by 28% in 1994 over 1993. All
health care businesses benefited from acquisitions made in 1993 and 1994,
continued expansion inside and outside the U.S., and continued improvements in
cost controls, operating efficiencies and/or capacity utilization. These
favorable results were partially offset by the costs of improving and expanding
quality assurance systems for medical products manufacturing operations (see
discussion below).
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. Operating income before taxes in 1993
increased by 55% over 1992, reflecting the continued growth of all health care
businesses, as well as improvements in cost controls, operating efficiencies and
capacity utilization. In addition, results for 1992 included costs related to
previously reported long-term incentive agreements with certain health care
executives.
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. The consent decree also requires NMC to certify and maintain
compliance with applicable FDA manufacturing requirements at all of its U.S.
manufacturing facilities. NMC submitted all required certifications for its
U.S. and non-U.S. facilities in accordance with the timetable specified in the
consent decree, and the bloodline import alert was lifted in March 1994. The
Dublin hemodialyzer manufacturing facility was inspected by the FDA in December
1994, and NMC anticipates completion of all remaining corrective actions in the
second quarter of 1995. No fines or penalties have been imposed on NMC as a
result of any of the FDA's actions or in connection with the consent decree.
Neither the import alerts nor previously reported recalls of certain NMC
products have had, or 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 AND RELATED FINANCING COSTS
Interest expense and related financing costs increased by 30% in 1994 versus
1993, primarily due to higher average short-term interest rates, coupled with an
increase in related financing costs.
Grace's debt and interest rate management objective is to reduce its cost
of funding over the long term, considering economic conditions and their
potential impact on Grace. The strategy emphasizes improving liquidity by
developing and maintaining access to a variety of long-term and short-term
capital markets. To manage its exposure to changes in interest rates, Grace
enters into interest rate agreements, most of which effectively convert fixed-
rate debt into variable-rate debt; these agreements have readily identifiable
impacts on interest cost and are characterized by broad market liquidity. See
Note 10 to the Consolidated Financial Statements for further information on
interest rate agreements.
See "Financial Condition: Liquidity and Capital Resources" below and Note
9 to the Consolidated Financial Statements for information on borrowings.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development spending decreased by 2% in 1994 versus 1993. In 1994
and 1993, approximately 82% and 78%, respectively, of research and development
spending was directed toward Grace's core specialty chemicals and health care
businesses.
INCOME TAXES
The effective tax rate was 40.1% in 1994 versus 39.2% in 1993. The higher
effective tax rate in 1994 was due to certain foreign exchange losses that
provided no tax benefit and to increased state and local income taxes, partially
offset by lower taxes on foreign operations. Grace recognized a valuation
allowance for deferred taxes in 1992 which has been adjusted to reflect
subsequent events. The valuation allowance relates to 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.
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 maximum U.S. Federal corporate tax rate
to 35% (from 34%), effective January 1, 1993. However, neither this rate
increase nor the other provisions of OBRA had a material effect on Grace's
results of operations.
The 1993 effective tax rate decreased to 39.2% as compared with 43.1% in
1992, before giving effect to the 1992 provision of $51.9 million for a
valuation allowance for deferred taxes. The decrease was largely due to
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.
See Note 5 to the Consolidated Financial Statements for further information
on income taxes.
F-30
<PAGE>
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 1994, the net pretax cash provided by Grace's continuing operating
activities was $533 million, versus $301.6 million in 1993, with the increase
primarily due to improved operating results and the receipt of $33 million in
net proceeds from the sale of accounts receivable in 1994 (as compared to the
use of $44.1 million of net cash to repurchase accounts receivable in 1993).
Net pretax cash provided by operating activities in 1994 and 1993 also included
net cash outflows of $60 million and $103.1 million, respectively, reflecting
amounts paid for the defense and disposition of asbestos-related property damage
and personal injury litigation, net of settlements with certain insurance
carriers (see discussion below). After giving effect to discontinued operations
and payments of income taxes, the net cash provided by operating activities was
$453.5 million in 1994 versus $243.1 million in 1993.
Investing activities used $101.6 million of cash in 1994, largely
reflecting capital expenditures and business acquisitions and investments,
primarily the acquisitions of HNS (for approximately $102 million, exclusive of
cash acquired and assumed debt of approximately $30 million), kidney dialysis
centers, a European flexible packaging business and construction chemicals
businesses. These investing activities were offset by net proceeds of $583.9
million from divestments of non-core businesses. Management anticipates that
the level of capital expenditures in 1995 will increase to approximately $500
million as compared to $444.6 million of capital spending in 1994.
Net cash used for financing activities in 1994 was $322.8 million,
primarily reflecting a decrease in total debt from December 31, 1993 and the
payment of $132 million of dividends. Total debt was approximately $1.5 billion
at December 31, 1994, a decrease of $176.4 million from December 31, 1993.
Grace's total debt as a percentage of total capital (debt ratio) decreased from
52.9% at December 31, 1993 to 50.4% at December 31, 1994, primarily as the
result of the reduction in total debt.
Effective September 1, 1994, Grace replaced its $1,225 million bank
revolving credit agreement with new credit agreements under which it may borrow
up to $700 million at interest rates based upon the prevailing prime, federal
funds and/or Eurodollar rates. Of that amount, $350 million is available under
a 364-Day Credit Agreement expiring August 31, 1995, and $350 million is
available under a long-term facility expiring September 1, 1999. See Note 9 to
the Consolidated Financial Statements for further information on borrowings.
Grace expects to satisfy its 1995 cash requirements primarily from funds
generated by operations and, to a lesser extent, from proceeds from divestments.
Any net excess or deficit will be applied to or satisfied by financings.
Although Grace expects that any net new borrowings would be short-term debt, the
maturities and other terms of any financings will depend on market conditions
prevailing at the time. Grace has access to a variety of capital resources,
including the commercial paper and bank funding markets, in addition to its
credit agreements. Consequently, management believes that new borrowings will
be available to meet Grace's needs.
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
and is involved in related litigation with certain of its insurance carriers.
In 1994, Grace paid $60 million in connection with the defense and disposition
of asbestos-related property damage and personal injury litigation, net of
amounts received under settlements with certain insurance carriers. During the
second quarter of 1994, Grace recorded a non-cash charge of $200 million after
taxes to reflect a court decision that had the effect of reducing Grace's
insurance coverage for asbestos property damage lawsuits and claims. The
balance sheet at December 31, 1994 includes a receivable due from insurance
carriers, subject to litigation, of $512.6 million. Grace has also recorded
notes receivable of approximately $187 million for amounts to be received in
1995 to 1999 pursuant to settlement agreements previously entered into with
certain insurance carriers. In January 1995, Grace received $100 million under
one of these settlement agreements.
Although Grace cannot precisely estimate the amounts to be paid in 1995 in
respect of asbestos-related lawsuits and claims, Grace expects that it will be
required to expend approximately $30 million (pretax) in 1995 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-31
<PAGE>
ENVIRONMENTAL MATTERS
Grace incurs costs related to environmental protection as required by laws and
regulations, Grace's commitment to industry initiatives such as Responsible
Care[REGISTRATED TRADEMARK] (the Chemical Manufacturers Association program) and
internal Grace standards. Worldwide expenses of continuing operations related
to the operation and maintenance of environmental facilities and the disposal of
hazardous and nonhazardous wastes totalled $41 million, $45 million and $56
million in 1994, 1993 and 1992, respectively. Such costs are estimated to be
approximately $42 million and $45 million in 1995 and 1996, respectively. In
addition, worldwide capital expenditures for continuing operations relating to
environmental protection totalled $22 million in 1994, compared to $20 million
and $18 million in 1993 and 1992, respectively. Capital expenditures to comply
with environmental initiatives in future years are estimated to be $26 million
and $23 million in 1995 and 1996, respectively. Grace has also incurred costs
to remediate environmentally impaired sites. These costs were $31 million, $44
million and $35 million in 1994, 1993 and 1992, respectively. These amounts
have been charged against previously established reserves. Future cash outlays
for remediation costs are expected to total $45 million in 1995 and $39 million
in 1996. Expenditures have been funded from internal sources of cash and are
not expected to have a significant effect on liquidity.
Grace accrues for anticipated costs associated with investigatory and
remediation efforts relating to the environment in accordance with Statement of
Financial Accounting Standards No. 5, "Accounting for Contingencies," which
governs probability and the ability to reasonably estimate future costs. At
December 31, 1994, Grace's liability for environmental investigatory and
remediation costs related to continuing and discontinued operations totalled
approximately $216 million, which amount does not take into account any
discounting for future expenditures or possible future insurance recoveries.
The measurement of the liability is evaluated quarterly based on currently
available information. In 1994, periodic provisions were recorded for
environmental and plant closure expenses, which include the costs of future
environmental investigatory and remediation activities. Additionally, in the
first quarter of 1994, Grace recorded a provision of approximately $40 million,
principally to provide for future environmental costs.
F-32
<PAGE>
SCHEDULE VIII
W. R. GRACE & CO. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(in millions)
<TABLE>
<CAPTION>
For the Year 1994
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. . . . . . . . $ 50.3 $ 102.2 $ (57.3) $ 95.2
-------- -------- --------- --------
Securities of divested businesses . . . . . . . . . . . . . $ 161.2 $ -- $ (156.3) $ 4.9
-------- -------- --------- --------
Deferred tax assets valuation allowance.. . . . . . . . . . $ 129.7 $ -- $ 7.3 $ 137.0
-------- -------- --------- --------
Reserves:
Foreign employee benefit obligations* . . . . . . . . . . . $ 64.4 $ 11.6 $ 6.5 $ 82.5
-------- -------- --------- --------
Discontinued operations . . . . . . . . . . . . . . . . . . $ 132.1 $ 107.2 $ -- $ 239.3
-------- -------- --------- --------
<CAPTION>
For the Year 1993
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 $ -- $ (13.4) $ 129.7
-------- -------- --------- --------
Reserves:
Foreign employee benefit obligations* . . . . . . . . . . . $ 83.4 $ 12.2 $ (31.2) $ 64.4
-------- -------- --------- --------
Discontinued operations . . . . . . . . . . . . . . . . . . $ 144.7 $ (12.6) $ -- $ 132.1
-------- -------- --------- --------
<CAPTION>
For the Year 1992
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
-------- -------- --------- --------
<FN>
* Represents legally mandated employee benefit obligations, primarily
pension benefits, relating to Grace's operations in Europe.
** 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-33
<PAGE>
Exhibit 11
W. R. GRACE & CO. AND SUBSIDIARIES
WEIGHTED AVERAGE NUMBER OF SHARES AND EARNINGS USED IN PER SHARE COMPUTATIONS
<TABLE>
<CAPTION>
The weighted average number of shares of Common Stock outstanding were as follows:
(in thousands)
--------------------------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Weighted average number of shares of Common
Stock outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93,936 91,461 89,543
Conversion of convertible debt obligations . . . . . . . . . . . . . . . . . . . -- 46 -- *
Additional dilutive effect of outstanding options
(as determined by the application of the treasury
stock method) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 659 680 -- *
------ ------ ------
Weighted average number of shares of Common
Stock outstanding assuming full dilution. . . . . . . . . . . . . . . . . . 94,595 92,187 89,543
------ ------ ------
------ ------ ------
<CAPTION>
Income/(loss) used in the computation of earnings per share were as follows:
(in millions, except per share)
--------------------------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Net Income/(loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 83.3 $ 26.0 $ (294.5)
Dividends paid on preferred stocks . . . . . . . . . . . . . . . . . . . . . . . (.5) (.5) (.5)
------ ------ ------
Income/(loss) used in per share computation of earnings and in
per share computation of earnings assuming full dilution. . . . . . . . . . $ 82.8 $ 25.5 $ (295.0)
------ ------ ------
------ ------ ------
Earnings/(loss) per share. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .88 $ .28 $ (3.29)
Earnings per share assuming full dilution . . . . . . . . . . . . . . . . . . . $ .88 $ .28 -- *
<FN>
* The effect of the converson of convertible securities and the exercise
of outstanding options would be anti-dilutive. Therefore, they are not shown.
</TABLE>
F-34
<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)
-------------------------------------------------------------------
1994 (c) 1993 (d) 1992 (e) 1991 1990
-------- -------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
Net income from continuing operations. . . . . . . . . $ 83.3 $134.4 $ 57.7 $201.7 $174.6
Add (deduct):
Provision for income taxes. . . . . . . . . . . . . 55.8 86.8 134.8 132.5 97.5
Income taxes of 50%-owned companies . . . . . . . . -- .1 2.1 1.5 1.9
Minority interest in income of
majority-owned subsidiaries . . . . . . . . . . . . -- -- -- -- 1.2
Equity in unremitted earnings of
less than 50%-owned companies . . . . . . . . . . . (2.9) (1.3) (1.8) (2.5) (2.1)
Interest expense and related financing costs,
including amortization of capitalized interest. . . 138.5 122.7 162.7 209.6 237.3
Estimated amount of rental expense
deemed to represent the interest factor . . . . . . 22.3 21.3 26.6 21.7 21.0
------ ------ ------ ------ ------
Income as adjusted . . . . . . . . . . . . . . . . . . $297.0 $364.0 $382.1 $564.5 $531.4
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Combined fixed charges and preferred stock dividends:
Interest expense and related financing costs,
including capitalized interest. . . . . . . . . . . $143.2 $122.8 $176.3 $224.5 $246.3
Estimated amount of rental expense
deemed to represent the interest factor . . . . . . 22.3 21.3 26.6 21.7 21.0
------ ------ ------ ------ ------
Fixed charges. . . . . . . . . . . . . . . . . . . . . 165.5 144.1 202.9 246.2 267.3
Preferred stock dividend requirements (a). . . . . . . .9 .9 .9 .9 .8
------ ------ ------ ------ ------
Combined fixed charges and preferred
stock dividends . . . . . . . . . . . . . . . . . . $166.4 $145.0 $203.8 $247.1 $268.1
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Ratio of earnings to fixed charges . . . . . . . . . . 1.79 2.53 1.88 2.29 1.99
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Ratio of earnings to combined fixed charges and
preferred stock dividends . . . . . . . . . . . . . 1.78 2.51 1.87 2.28 1.98
------ ------ ------ ------ ------
------ ------ ------ ------ ------
<FN>
(a) Increased to an amount representing the pretax earnings required to
cover such requirements based on Grace's effective tax rate for each
period presented.
(b) Certain 1990 - 1993 amounts have been restated to conform to the 1994
presentation.
(c) Includes a provision of $316.0 relating to asbestos-related insurance
coverage.
(d) Includes a provision of $159.0 relating to asbestos-related insurance
coverage.
(e) Includes a provision of $140.0 relating to a fumed silica plant in
Belgium.
</TABLE>
F-35
<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 Filed herewith*
amended
4.01 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
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.
4.03 364-Day Credit Agreement, dated Exhibit 4.1 to Form 10-Q
as of September 1, 1994, among (filed 11/10/94)
W. R. Grace & Co.-Conn., W. R.
Grace & Co., the several banks
parties thereto and Chemical
Bank, as agent for such banks
4.04 Credit Agreement, dated as of Exhibit 4.2 to Form 10-Q
September 1, 1994, among W. R. (filed 11/10/94)
Grace & Co.-Conn., W. R. Grace
& Co., the several banks parties
thereto and Chemical Bank, as
agent for such banks
__________
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>
4.05 First Amendment, dated as of Filed herewith
December 28, 1994, to the 364-
Day Credit Agreement, dated
as of September 1, 1994
4.06 First Amendment, dated as of Filed herewith
December 28, 1994, to the
Credit Agreement, dated as of
September 1, 1994
4.07 Amended and Restated Rights Exhibit to Amendment on
Agreement dated as of June 7, Form 8 to Application
1990 between W. R. Grace & Co. for Registration on
and Manufacturers Hanover Trust Form 8-B (filed 6/19/90)
Company
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 W. R. Grace & Co. 1994 Stock Filed herewith*
Incentive Plan
10.06 W. R. Grace & Co. 1994 Stock Filed herewith*
Retainer Plan for Nonemployee
Directors
10.07 Forms of Stock Option Exhibit 10(h) to Form
Agreements 10-K (filed 3/28/92)*
10.08 Forms of Restricted Share Exhibit 10(i) to Form
Award Agreements 10-K (filed 3/28/92)*
10.09 Information Concerning W. R. Pages 8-13 and 27-30 of
Grace & Co. Incentive Compen- Proxy Statement
sation Program, Deferred (filed 4/11/94)*
Compensation Program and
Long-Term Incentive Program
10.10 W. R. Grace & Co. Long-Term Exhibit 10(l) to Form
Incentive Plan 10-K (filed 3/29/91)*
10.11 W. R. Grace & Co. Retirement Exhibit 10(o) to Form
Plan for Outside Directors, as 10-K (filed 3/28/92)*
amended
<PAGE>
10.12 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
10.13 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
10.14 Employment Agreement dated Exhibit 10.13 to Form
August 1, 1993 between J. P. 10-K (filed 3/28/94)*
Bolduc and W. R. Grace & Co.
10.15 Stock Option Agreement dated Exhibit 10.14 to Form
June 30, 1993 between David L. 10-K (filed 3/28/94)*
Yunich and W. R. Grace & Co.
10.16 Stock Option Agreement dated Exhibit 10.15 to Form
June 30, 1993 between David L. 10-K (filed 3/28/94)*
Yunich and W. R. Grace & Co.
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
10.21 Consulting Agreement dated Exhibit 10.29 to Form
June 1, 1992 between W. R. 10-K (filed 3/26/93)*
Grace & Co. and Kamsky
Associates, Inc.
10.22 Incentive Compensation Agree- Exhibit 10.30 to Form
ment dated June 1, 1992 10-K (filed 3/26/93)*
between National Medical
Care, Inc. and Kamsky
Associates, Inc.
<PAGE>
10.23 Consulting Agreement dated as Filed herewith*
of December 1993 between
National Medical Care, Inc. and
Virginia A. Kamsky
10.24 Consulting Agreement dated as Exhibit 10.23 to Form
of June 16, 1993 by and between 10-K (filed 3/28/94)*
National Medical Care, Inc.,
The Humphrey Group, Inc. and
Gordon J. Humphrey
10.25 Employment Termination Agreement Exhibit 10.24 to Form
dated June 30, 1993 between 10-K (filed 3/28/94)*
J. R. Wright, Jr. and W. R.
Grace & Co.
10.26 W. R. Grace & Co. Supplemental Exhibit 10.25 to Form
Executive Retirement Plan, as 10-K (filed 3/28/94)*
amended
10.27 Agreement dated March 1, 1995 Filed herewith*
between W. R. Grace & Co. and
Jean-Louis Greze
10.28 Agreements dated March 2 and Filed herewith*
March 7, 1995 between J. P.
Bolduc and W. R. Grace & Co.
10.29 Letter Agreement dated April 1, Filed herewith*
1991 between National Medical
Care, Inc. and Constantine L.
Hampers
11 Weighted Average Number of Filed herewith
Shares and Earnings Used in (in Financial Supplement
Per Share Computations to 10-K)
12 Computation of Ratio of Earn- Filed herewith
ings to Fixed Charges and (in Financial Supplement
Combined Fixed Charges and to 10-K)
Preferred Stock Dividends
13 Selected Portions of the 1994 Filed herewith
Annual Report to Shareholders (in Financial Supplement
of W. R. Grace & Co. to 10-K)
21 List of Subsidiaries of Filed herewith
W. R. Grace & Co.
23 Consent of Independent Accoun- Filed herewith
tants (in Financial Supplement
to 10-K)
<PAGE>
24 Powers of Attorney Filed herewith
99.01 Letter of Intent dated Filed herewith
November 5, 1993 between
W.R. Grace & Co. and J. Peter
Grace III, as amended
99.02 Agency Agreement dated Filed herewith
June 13, 1994 between HSC
Holding Co., Inc. and Grace
Hotel Services Corporation
99.03 Letter Agreement dated Filed herewith
December 14, 1994 among
HSC Holding Co., Inc.,
Grace Hotel Services
Corporation and
W.R. Grace & Co.
99.04 Services Agreement dated Filed herewith
November 10, 1994 between
HSC Holding Co., Inc. and
Grace Hotel Services
Corporation
<PAGE>
Exhibit 3.02
BY-LAWS
of
W. R. GRACE & CO.
A New York Corporation
(As Amended Through March 17, 1995)
ARTICLE I
Meetings of Shareholders
Section 1.1. ANNUAL MEETINGS. An annual meeting of the shareholders of
the Corporation, for the election of directors and the transaction of other
business, shall be held annually (a) on the tenth day of May, or (b) if such day
be a Saturday, Sunday or a holiday at the place where the meeting is to be held,
on the last business day preceding or on the first business day after such tenth
day of May, as may be fixed by the Board of Directors, or (c) on such other date
as may be fixed by the Board of Directors.
Section 1.2. SPECIAL MEETINGS. Except as otherwise expressly provided by
law, a special meeting of the shareholders may be called only by the Board of
Directors, by the Chairman or by the President at any time for such purpose or
purposes and held on such date as may be specified in the notice thereof.
Section 1.3. PLACE AND HOUR OF MEETING. All meetings of shareholders
shall be held at such place within or without the State of New York and at such
hour as may be fixed by the Board of Directors or the officer calling the
meeting.
Section 1.4. NOTICE OF MEETING. Except as otherwise expressly provided by
law, a notice in writing of each meeting of shareholders shall be given by or at
the direction of the Board of Directors or the officer calling the meeting to
each shareholder of record, personally or by first class mail, directed to him
at his address as it appears on the record of shareholders, not fewer than ten
nor more than fifty days before the date of the meeting. Each notice shall
state the place, date and hour of the meeting and, unless it is an annual
meeting, shall indicate that it is being issued by or at the direction of the
Board of Directors or the officer calling the meeting. If such notice relates
to an annual meeting it need not state the purposes thereof unless otherwise
required by law, the Certificate of Incorporation of the Corporation or these
By-laws. If such notice relates to a special meeting, it shall state the
purpose or purposes for which such meeting
<PAGE>
has been called, and no other business shall be transacted at such special
meeting.
No notice of an adjourned meeting of shareholders need be given unless
otherwise expressly required by law. At any adjourned meeting at which a quorum
is present, any business may be transacted which might have been transacted at
the meeting as originally noticed.
Notice of meeting need not be given to any shareholder who submits a signed
waiver of notice, in person or by proxy, whether before or after the meeting.
The attendance of any shareholder at a meeting, in person or by proxy, without
protesting prior to the conclusion of the meeting the lack of notice of such
meeting, shall constitute a waiver of notice by him.
Section 1.5. QUORUM. The holders of the shares constituting a majority in
voting power entitled to vote, present in person or by proxy, shall constitute a
quorum at any meeting of shareholders, but no action required by law, by the
Certificate of Incorporation of the Corporation or by these By-laws to be
authorized or taken by the holders of a designated proportion of the voting
power of shares, of the shares of any particular class or series or of each
class or series may be authorized or taken by a lesser proportion.
Whether or not there is a quorum at any meeting of the shareholders, the
shareholders present in person or by proxy entitled to cast a majority of the
votes thereat may adjourn the meeting.
Section 1.6. VOTING. Except as otherwise expressly provided by law, every
shareholder of record present in person or by proxy shall be entitled at every
meeting of shareholders to vote, in accordance with and subject to the
provisions of the Certificate of Incorporation of the Corporation, each and
every share of stock of the Corporation standing in his name on the record of
shareholders at the record date fixed as provided in Section 6.3 of these By-
laws or, if no such record date shall have been fixed, then at the time provided
by law.
Except as otherwise expressly provided by law or by the Certificate of
Incorporation of the Corporation, the vote, at a meeting of the shareholders
duly held and at which a quorum is present, of a majority of the votes cast at
such meeting by the holders of shares entitled to vote shall be the act of the
shareholders.
Section 1.7. BUSINESS TO BE TRANSACTED AT ANNUAL MEETINGS. No business
shall be transacted at any annual meeting of the shareholders, except as may be
(a) specified in the notice of the meet-
- 2 -
<PAGE>
ing given by or at the direction of the Board of Directors (including, if so
specified, any shareholder proposal submitted pursuant to the rules and
regulations of the Securities and Exchange Commission), (b) otherwise brought
before the meeting by or at the direction of the Board of Directors or (c)
otherwise brought before the meeting, in accordance with the procedure set forth
in the following paragraph, by a shareholder of record of the Corporation
entitled to vote at such meeting.
For business to be brought before an annual meeting by a shareholder
pursuant to clause (c) above, the shareholder must have given written notice
thereof to the Secretary of the Corporation, such notice to be delivered or
mailed to, and received at, the principal executive offices of the Corporation
not less than 60 days nor more than 90 days prior to the date of the meeting,
unless the meeting is to take place on a date other than that specified in
clause (a) or (b) of Section 1.1 of these By-laws, in which event such notice
must be received at the principal executive offices of the Corporation not later
than the close of business on the tenth day following the day on which the Cor-
poration's notice of the date of the meeting is first given or made to the
shareholders or disclosed to the general public (which disclosure may be
effected by means of a publicly available filing with the Securities and
Exchange Commission). A shareholder's notice to the Secretary shall set forth,
as to each matter the shareholder proposes to bring before the annual meeting,
(a) a brief description of the business proposed to be brought before the annual
meeting and of the reasons for bringing such business before the annual meeting
(including, but not limited to, the reasons why the shareholder deems such
business to be beneficial to the Corporation) and, if such business includes a
proposal to amend either the Certificate of Incorporation of the Corporation or
these By-laws, the text of the proposed amendment; (b) the name and address of
the shareholder proposing such business, of any beneficial owners of shares of
stock of the Corporation which are held of record by such shareholder and of any
other shareholders (including beneficial owners) known by such shareholder to
support such proposal; (c) the number of shares of each class of stock of the
Corporation that are held of record and beneficially owned by the shareholder,
any beneficial owners of its shares and any such other shareholders; (d) a rep-
resentation that the shareholder is or will be a holder of record of stock of
the Corporation entitled to vote at such meeting and intends to appear in person
or by proxy at such meeting to propose such business; and (e) any material
interest of the shareholder, any beneficial owner of its shares or any such
other shareholders in such business (other than any interest as shareholders of
the Corporation). No business shall be conducted at any annual meeting of the
shareholders (a) except as specified in this Section 1.7 or (b) unless,
- 3 -
<PAGE>
pursuant to the law of the State of New York or any rule or regulation of the
Securities and Exchange Commission, such business may properly be brought before
the meeting.
If it is determined that any business brought before an annual meeting of
the shareholders is not properly brought before the meeting, the presiding
officer at such meeting shall so declare to the meeting, in which event such
business shall not be acted upon.
ARTICLE II
Directors
Section 2.1. MANAGEMENT OF BUSINESS; QUALIFICATIONS. Except as otherwise
provided by law or the Certificate of Incorporation of the Corporation, the
business, property and affairs of the Corporation shall be managed by or under
the direction of the Board of Directors. Each director shall be a shareholder
of the Corporation.
Section 2.2. NUMBER, ELECTION AND TERM OF OFFICE. The number of directors
constituting the entire Board of Directors shall be such number, not less than
nine nor more than fifty, as may be fixed by a majority of the entire Board of
Directors. No person shall be nominated for election as a director if such
person will have attained the age of 70 prior to the expiration of his or her
term of office.* The directorships shall be divided into three classes,
designated Class I, Class II and Class III, and directors shall be elected and
serve in the manner provided in the Certificate of Incorporation and in these
By-laws.
No person shall be nominated for election as a director, except as may be
(a) approved by the Board of Directors or (b) nominated by a shareholder of
record of the Corporation entitled to vote at the meeting at which such person
is to be nominated in accordance with the procedure set forth in the following
paragraph.
A shareholder may nominate a person or persons for election as directors
only if the shareholder has given written notice of its intent to make such
nomination to the Secretary of the Corporation, such notice to be delivered or
mailed to, and received at, the principal executive offices of the Corporation
(a) with respect to an annual meeting of the shareholders, not less than 60 days
nor
-------------
*This sentence shall be effective immediately after the 1995 Annual
Meeting of Shareholders of the Corporation.
- 4 -
<PAGE>
more than 90 days prior to the date of the meeting, unless the meeting is to
take place on a date other than that specified in clause (a) or (b) of Section
1.1 of these By-laws, in which event such notice must be received at the
principal executive offices of the Corporation not later than the close of
business on the tenth day following the day on which the Corporation's notice of
the date of the meeting is first given or made to the shareholders or disclosed
to the general public (which disclosure may be effected by means of a publicly
available filing with the Securities and Exchange Commission); or (b) with
respect to an election to be held at a special meeting of the shareholders, not
later than the close of business on the tenth day following the day on which the
Corporation's notice of the date of the meeting is first given or made to the
shareholders or disclosed to the general public (which disclosure may be
effected by means of a publicly available filing with the Securities and
Exchange Commission). A shareholder's notice to the Secretary shall set forth
(a) the name and address of the shareholder who intends to make such nomination,
of any beneficial owners of shares of stock of the Corporation which are held of
record by such shareholder and of any other shareholders (including beneficial
owners) known by such shareholder to support such nomination; (b) the name, age,
business and residence addresses and principal occupation of each person to be
nominated, the class of directorship to which each such person is to be
nominated and the nominee, if any, against whom each such person is to run; (c)
the number of shares of each class of stock of the Corporation that are held of
record and beneficially owned by the shareholder, any beneficial owners of its
shares and any such other shareholders; (d) a representation that the
shareholder is or will be a holder of record of stock of the Corporation
entitled to vote with respect to the election of directors at such meeting and
intends to appear in person or by proxy at such meeting to nominate such
proposed nominee(s); (e) a description of all material arrangements,
relationships and understandings between the shareholder, any beneficial owners
of its shares or any such other shareholders and each proposed nominee and
between proposed nominees; (f) such other information regarding each proposed
nominee as the Corporation would be required to include in a proxy statement
filed pursuant to the rules and regulations of the Securities and Exchange
Commission; and (g) the written consent of each proposed nominee to serve as a
director of the Corporation if elected, together with an undertaking, signed by
each proposed nominee, to furnish to the Corporation any information it may
request upon the advice of counsel for the purpose of determining such proposed
nominee's eligibility to serve as a director. No person may be nominated by a
shareholder for election as a director of the Corporation (a) if, pursuant to
applicable law or any provision of these By-laws, such person would be
ineligible to serve as a director or (b) if the election of such
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<PAGE>
person would violate, or subject the Corporation to liability under, any
applicable law.
If it is determined that the nomination of any person at any meeting of the
shareholders is not in compliance with this Section 2.2, the presiding officer
at such meeting shall so declare to the meeting, in which event such nomination
shall not be acted upon.
Section 2.3. MEETINGS. The Board of Directors shall hold an annual
organization meeting immediately after each annual meeting of shareholders, at
the place where such meeting of shareholders was held (or at such other place as
the Board of Directors shall have designated), for the purpose of electing
officers and for the transaction of such other business as may properly come
before such meeting.
The Board of Directors may provide for the holding of regular meetings and
may fix the time and place of such meetings. Special meetings may be called by
the Chairman, by the President or by a majority of the directors then in office.
Except as hereinabove provided with respect to the annual organization
meeting, the Board of Directors shall hold its meetings at the principal
executive offices of the Corporation in New York, New York, or at such other
place, within or without the State of New York, as the Board of Directors from
time to time may determine, or as may be designated by waivers of notice thereof
signed by all the directors.
Section 2.4. NOTICE OF MEETING. Notice need not be given with respect to
the annual organization meeting of the Board of Directors (unless such meeting
is to be held at a place other than where the annual meeting of shareholders is
to be held) or with respect to any adjourned meeting of the Board of Directors.
Notice of any regular meeting of the Board of Directors need not be given unless
there is a change in the time or place of such meeting. Notice of any change in
the place of the annual organization meeting or in the time or place of any
regular meeting, and notice of the time and place of any special meeting of the
Board of Directors (a) shall be sent to each director by first class mail at
least three days before the date on which the meeting is to be held, or (b)
shall be sent to each director by telegram, cablegram, telex or other written
form of telecommunication, or delivered or telephoned to him, at least 24 hours
before the time at which such meeting is to be held. Any notice in writing
shall be addressed to the director at his residence or usual place of business,
or at such other address as he may have designated in a written request filed
with the Secretary. Any notice by telephone shall be communicated to
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<PAGE>
the director or his representative or answering machine at the telephone number
of his residence or his usual place of business or at such other telephone
number as he may have so designated. Notice of a meeting of the Board of
Directors need not state the purpose thereof, except as otherwise expressly
provided by law.
Notice of meeting need not be given to any director who submits a signed
waiver of notice, whether before or after the meeting, or who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to him.
Section 2.5. QUORUM AND MANNER OF ACTING. A majority of the entire Board
of Directors shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, except that one-third of the entire Board of
Directors shall constitute a quorum for the transaction of any business relating
to any recommendation made by, or other action of, the Salary, Incentive
Compensation and Employee Benefits Committee of the Board of Directors or the
Stock Incentive Committee of the Board of Directors or any successor to either
of such Committees. Except as otherwise expressly provided by law or by these
By-laws, the act of the majority of the directors present at the time of a vote,
if a quorum is present at such time, shall be the act of the Board of Directors.
Any one or more members of the Board of Directors may participate in a
meeting of the Board of Directors by means of a conference telephone or similar
communications equipment allowing all persons participating in the meeting to
hear each other at the same time. Participation by such means shall constitute
presence in person at a meeting.
Whether or not there is a quorum at any meeting, a majority of the
directors who are present may adjourn the meeting to another time or place. At
any such adjourned meeting at which a quorum is present, any business may be
transacted which might have been transacted at the meeting as originally called.
On any question, the names of those directors voting each way and those
directors abstaining shall be entered in the minutes if any director shall so
request.
Section 2.6. ACTION IN LIEU OF MEETING. If all the directors consent in
writing to the adoption of a resolution authorizing any action to be taken by
the Corporation, such action shall be as valid corporate action as though it had
been authorized at a meeting of the Board of Directors. Such resolution and the
written consents thereto by the directors shall be filed with the minutes of the
proceedings of the Board of Directors.
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<PAGE>
Section 2.7. RESIGNATION AND REMOVAL. A director may resign at any time
by giving written notice to the Board of Directors, the Chairman, the President
or the Secretary. Such resignation shall take effect at the time specified
therein or, if no time is specified, immediately upon its receipt by the
Corporation. The acceptance of such resignation shall not be necessary to make
it effective unless otherwise specified therein. A director may be removed as
provided in the Certificate of Incorporation of the Corporation.
Section 2.8. VACANCIES. Any vacancy in the Board of Directors that
results from an increase in the number of directorships may be filled by the
vote of directors constituting a majority of the entire Board of Directors prior
to such increase, and any other vacancy in the Board of Directors may be filled
by the vote of a majority of the directors then in office, even though the
number of directors is less than a quorum, or by the sole remaining director.
Any director elected by the Board of Directors shall hold office until the next
annual meeting of shareholders.
ARTICLE III
Executive Committee and Other Committees
Section 3.1. APPOINTMENT AND POWERS OF COMMITTEE. The Board of Directors,
by resolution adopted by a majority of the entire Board of Directors, may
designate from its members one or more committees, each consisting of three or
more members. Subject to any limitations imposed by law or by the Certificate
of Incorporation of the Corporation, each committee shall have such authority as
the Board of Directors shall confer, which may include all the authority of the
Board of Directors (including, but not limited to, that provided for in the
Certificate of Incorporation of the Corporation or these By-laws); provided,
however, that no committee shall have authority as to (a) the submission to
shareholders of any action that needs shareholders' approval under applicable
law, (b) the filling of vacancies in the Board of Directors or any committee or
the designation of a committee, (c) the fixing of compensation of the directors
for serving on the Board of Directors or any committee, (d) the amendment or
repeal of these By-laws or the adoption of new by-laws or (e) the amendment or
repeal of any resolution of the Board of Directors which by its terms shall not
be so amendable or repealable.
Any reference in these By-laws to action taken or authorized by the Board
of Directors shall include action taken or authorized by a committee duly
designated by the Board of Directors and authorized to act pursuant to such
designation and this Section 3.l.
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<PAGE>
Section 3.2. COMMITTEE ON OFFICERS' COMPENSATION. Pursuant to Section 3.1
of these By-laws, the Board of Directors shall designate a committee to evaluate
the performance of, and to recommend the appropriate level of compensation for,
officers of the Corporation. Such committee shall have access to an advisor not
otherwise serving the Corporation. Each member of such committee (other than
any person who was a member of the Salary, Incentive Compensation and Employee
Benefits Committee of the Board of Directors on March 7, 1991) shall be an
"independent director", as that term is defined in the following sentence. For
purposes of this Section 3.2, an "independent director" shall mean a person who
(a) has not been employed by the Corporation within the past five years; (b) is
not, and is not affiliated with, a firm that is an advisor or consultant to the
Corporation; (c) is not affiliated with any customer or supplier of the Corpo-
ration whose purchases from and/or sales to the Corporation exceed 3% of the
sales and revenues of such customer or supplier for its most recently completed
fiscal year; (d) has no personal services contract with the Corporation; (e) is
not affiliated with a tax-exempt entity, not otherwise affiliated with the Cor-
poration, that receives contributions from the Corporation that exceed 3% of
such entity's gross contributions for its most recently completed fiscal year;
and (f) is not a member of the "immediate family" (as defined in Item 404(a) of
Securities and Exchange Commission Regulation S-K) of any person described in
clauses (a) through (e).
Section 3.3. MEETINGS. Except as otherwise provided in these By-laws or
by resolution of the Board of Directors, each committee may adopt its own rules
governing the time and place of holding and the method of calling its meetings
and the conduct of its proceedings. Unless otherwise provided by such rules or
by resolution of the Board of Directors, notice of the time and place of each
meeting of a committee shall be mailed, sent or given to each member of such
committee when, and in the same manner as, required in Section 2.4 of these By-
laws with respect to notices of meetings of the Board of Directors.
Section 3.4. QUORUM AND MANNER OF ACTING. Except as otherwise specified
by the Board of Directors, a majority of the members of each committee shall
constitute a quorum for the transaction of business at any meeting of such
committee, and the act of a majority of the members present at the time of a
vote, if a quorum is present at such time, shall be the act of such committee.
The members of each committee shall act only as a committee, and the individual
members shall have no power as such.
Any one or more members of a committee may participate in a meeting of such
committee by means of a conference telephone or
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<PAGE>
similar communications equipment allowing all persons participating in the
meeting to hear each other at the same time. Participation by such means shall
constitute presence in person at a meeting.
If all the members of a committee consent in writing to the adoption of a
resolution authorizing any action to be taken by the Corporation, such action
shall be as valid as though it had been authorized at a meeting of such
committee. Such resolution and the written consents thereto by the members of
such committee shall be filed with the proceedings of such committee.
Section 3.5. TERM OF OFFICE, RESIGNATIONS, REMOVALS AND VACANCIES. The
term of office of a committee member shall be as provided in the resolution of
the Board of Directors designating him but shall not exceed his term as a
director. If prior to the end of his term, a committee member should cease to
be a director, he shall cease to be a committee member. Any member of a
committee may resign at any time by giving written notice to the Board of
Directors, the Chairman, the President or the Secretary. Such resignation shall
take effect as provided in Section 2.7 of these By-laws in the case of
resignations by directors. Any member of a committee may be removed from such
committee, either with or without cause, at any time, by resolution adopted by a
majority of the entire Board of Directors. Any vacancy in a committee shall be
filled by the Board of Directors in the manner prescribed by these By-laws for
the original designation of the members of such committee.
ARTICLE IV
Officers
Section 4.1. ELECTION, TERM OF OFFICE AND QUALIFICATIONS. The officers of
the Corporation shall consist of a Chairman, a Chairman of the Executive
Committee, one or more Vice Chairmen, a President, one or more Executive Vice
Presidents, one or more Senior Vice Presidents, one or more Vice Presidents, a
Secretary, a Treasurer and a Controller. The foregoing officers shall be
elected, and one or more assistant officers may also be elected, by the Board of
Directors at its annual organization meeting. Each of such officers and
assistant officers shall hold office until the next annual election and until
his successor is elected and qualified, or until his earlier death, resignation,
disqualification or removal. Assistant officers may also be appointed by the
President, the Chairman of the Executive Committee or any Vice Chairman and
shall hold office for such term, which may be indefinite, as the person
appointing them shall determine.
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<PAGE>
The Chairman and the President shall be chosen from among the Board of
Directors, but the other officers need not be directors. One person may hold
and perform the duties of any two, but not more than two, offices, except that
neither the Chairman nor the President may hold the office of Secretary.
Section 4.2. POWERS AND DUTIES. In addition to any powers and duties
prescribed by other provisions of these By-laws, the officers and assistant
officers shall have such powers and duties as are usually incident to their
respective offices, with such additions and limitations thereto as may from time
to time be prescribed by the Board of Directors or by their respective superior
officers.
Section 4.3. RESIGNATIONS, REMOVALS AND VACANCIES. Any officer or
assistant officer may resign at any time by giving written notice to the Board
of Directors, the Chairman, the President or the Secretary. Such resignation
shall take effect at the time specified therein or, if no time is specified,
immediately upon its receipt by the Corporation. The acceptance of such
resignation shall not be necessary to make it effective unless otherwise
specified therein. Any officer or assistant officer may be removed at any time,
with or without cause, by the Board of Directors or by the person or persons who
appointed him to his office or position, but without prejudice to any applicable
contract rights. A vacancy in any office or position arising from any cause may
be filled for the unexpired portion of the term by the Board of Directors or by
the person or persons authorized to appoint such officer or assistant officer.
Section 4.4. COMPENSATION. Subject to Section 3.2 of these By-laws, the
compensation of officers and, to the extent the Board of Directors shall deem
advisable, the compensation of all other employees, agents and representatives
of the Corporation, shall be determined by the Board of Directors or in
accordance with regulations or procedures adopted by it. Compensation may be
contingent or measured in whole or in part upon the profits of the Corporation
or a segment thereof. Provision may also be made for bonuses and other extra
compensation, for the deferment of compensation in whole or in part and for
pension and other retirement benefits. Subject to Section 3.2 of these By-laws,
the Board of Directors may delegate the authority contained in this Section 4.4
to such officers, employees or agents of the Corporation as the Board of
Directors deems advisable, except that any profit sharing, extra or deferred
compensation, pension and other similar plans or arrangements of general
application shall be approved by the Board of Directors.
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<PAGE>
Section 4.5. THE CHAIRMAN. The Chairman shall preside at all meetings of
the shareholders and the Board of Directors at which he shall be present.
Section 4.6. THE PRESIDENT. The President shall be the chief executive
officer of the Corporation and shall have general charge and supervision of the
business of the Corporation and over its several officers, subject, however, to
the control of the Board of Directors. In the absence of the Chairman, the
President shall preside at all meetings of the shareholders and the Board of
Directors at which he shall be present.
Section 4.7. THE CHAIRMAN OF THE EXECUTIVE COMMITTEE. The Chairman of the
Executive Committee shall preside at all meetings of the Executive Committee at
which he shall be present and shall perform such other duties as from time to
time may be assigned to him by the President or by the Board of Directors.
Section 4.8. VICE CHAIRMEN. A Vice Chairman shall perform such duties as
from time to time may be assigned to him by the President or by the Board of
Directors.
Section 4.9. VICE PRESIDENTS. An Executive Vice President, Senior Vice
President or Vice President shall perform such duties as from time to time may
be assigned to him by the President or by the Board of Directors.
Section 4.10. THE SECRETARY. The Secretary shall keep or cause to be kept
a record in books provided for that purpose of all the meetings and proceedings
of the Board of Directors and the shareholders. He shall notify the directors
and shareholders of their respective meetings and shall have charge and custody
of the Corporation's seal.
Section 4.11. THE TREASURER. The Treasurer shall have charge and custody
of, and be responsible for, all funds and securities of the Corporation and
shall deposit all such funds in the name of the Corporation in such depositaries
as shall be selected in accordance with the provisions of Section 5.1 of these
By-laws. He shall, subject to the direction of the Board of Directors or of a
superior officer, pay out or cause to be paid out, and shall supervise the
disbursement of, moneys of the Corporation.
Section 4.12. THE CONTROLLER. The Controller shall have general control,
charge and supervision of the accounts of the Corporation. He shall see that
proper accounts are maintained and that all accounts are properly audited from
time to time. He shall
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<PAGE>
prepare or cause to be prepared the financial statements
of the Corporation.
ARTICLE V
Deposits, Checks, etc.
Section 5.1. DEPOSITS. Funds of the Corporation may be deposited from
time to time to the credit of the Corporation with such depositaries as may be
selected by the Board of Directors or by any officer or officers or agent or
agents of the Corporation to whom such power may be delegated from time to time
by the Board of Directors.
Section 5.2. CHECKS, ETC. All checks and other orders for the payment of
money and promissory notes and other evidences of indebtedness are to be signed
by such officer or officers, employee or employees or agent or agents of the
Corporation, and in such manner, as are authorized by the Board of Directors, or
as are authorized by any officer or officers or employee or employees of the
Corporation to whom such power is delegated from time to time by the Board of
Directors. To the extent authorized by the Board of Directors, such signature
or signatures may be facsimiles.
ARTICLE VI
Stock and Stock Records
Section 6.1. CERTIFICATES REPRESENTING SHARES. Subject to any applicable
law, the shares of the Corporation shall be represented by certificates in such
form as the Board of Directors may from time to time approve, shall be signed by
the Chairman, a Vice Chairman, the President or a Vice President and by the Sec-
retary or an Assistant Secretary and shall be sealed with the seal or facsimile
seal of the Corporation. Subject to applicable law, the signature of any of the
abovementioned officers or assistant officers may be a facsimile. If any
officer or assistant officer who has signed or whose facsimile signature has
been placed on any certificate ceases to serve the Corporation in the capacity
as to which his signature was so used before such certificate is issued, the
certificate may nevertheless be issued with the same effect as if he were such
officer or assistant officer at the date of issue.
Section 6.2. LOST CERTIFICATES. Subject to any applicable law, when any
certificate of stock is alleged to have been lost, destroyed or wrongfully
taken, and when the Corporation has re-
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<PAGE>
ceived no notice that the certificate has been acquired by a bona fide
purchaser, the Corporation shall issue a new certificate if the owner so
requests and gives the Corporation sufficient indemnity bond and satisfies any
other reasonable requirements imposed by the Corporation. The Board of
Directors may waive the requirement of any such indemnity bond.
Section 6.3. FIXING RECORD DATE. For the purpose of determining the
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or entitled to receive payment of any distribution, or
for any other proper purpose, the Board of Directors may fix, in advance, a date
as the record date for any such determination of shareholders, such date to be
not more than fifty days, and, in case of a meeting of shareholders, not less
than ten days, prior to the action requiring such determination of shareholders.
When a record date is so fixed and except as otherwise expressly provided by
law, such shareholders and only such shareholders as shall be shareholders of
record on the date so fixed shall be entitled to notice of or to vote at such
meeting and any adjournment thereof, or to receive the distribution or otherwise
participate in respect of the action to which the date relates.
ARTICLE VII
Indemnification
Section 7.1. INDEMNIFICATION. The Corporation may indemnify to the
fullest extent permitted, and in the manner provided, in the indemnification
provisions of the Business Corporation Law of the State of New York, as the same
may be amended from time to time, such persons as are described therein.
Section 7.2. INSURANCE. The Corporation may procure and maintain
insurance for the indemnification of such persons providing greater
indemnification than that authorized hereinabove.
Section 7.3. NONEXCLUSIVITY. The rights of indemnification under this
Article shall not be exclusive of other rights to which such persons may be
entitled as a matter of law.
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<PAGE>
ARTICLE VIII
Amendment and Repeal of By-laws
Section 8.1. BY SHAREHOLDERS. These By-laws may be amended or repealed by
the affirmative vote of the holders of a majority of the voting power of shares
entitled to vote in the election of directors.
Section 8.2. BY THE BOARD OF DIRECTORS. These By-laws may be amended or
repealed by (a) the Board of Directors, at any meeting, by a majority of the
directors present at the time of a vote, if a quorum is present at that time, or
(b) the unanimous written consent of the directors.
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<PAGE>
Exhibit 4.05
FIRST AMENDMENT
FIRST AMENDMENT, dated as of December 28, 1994 (this "AMENDMENT"), to
the 364-Day Credit Agreement, dated as of September 1, 1994 (as amended,
supplemented or otherwise modified prior to the date hereof, the "CREDIT
AGREEMENT"), among W. R. GRACE & CO.-CONN., a Connecticut corporation (the
"COMPANY"), W. R. GRACE & CO., a New York corporation ("GRACE NEW YORK"), the
banks parties thereto (the "BANKS") and CHEMICAL BANK, a New York banking
corporation, as agent (in such capacity the "AGENT") for the Banks.
W I T N E S S E T H :
WHEREAS, the Company, Grace New York and Citibank, N.A. have requested
the Agent and the Banks to agree to amend the Credit Agreement to terminate the
commitment of Citibank, N.A. thereunder; and
WHEREAS, the Agent and the Banks are willing to agree to such
amendment, but only on the terms and subject to the conditions set forth in this
Amendment;
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company, Grace New York, Citibank, N.A., the other Banks and
the Agent hereby agree as follows:
1. DEFINITIONS. Unless otherwise defined herein, terms defined in
the Credit Agreement are used herein as therein defined.
2. AMENDMENT TO SCHEDULE I. The first page of Schedule I to the
Credit Agreement is hereby deleted and Schedule I to this Amendment is hereby
substituted in lieu thereof.
3. CONSENT. The Agent and each of the Banks parties hereto consent
to the prepayment of the Loans in the manner contemplated by Section 4(b) of
this Amendment.
4. EFFECTIVENESS. This Amendment shall become effective upon (a)
receipt by the Agent of evidence satisfactory to the Agent that this Amendment
has been executed and delivered by the Company, Grace New York, Citibank, N.A.
and the Majority Banks and (b) if any Loans are outstanding, the prepayment by
the Borrower of Loans to the extent (if any) necessary so that (i) the aggregate
Loan Outstandings plus the Aggregate Outstanding Bilateral Option Loans shall
not exceed the aggregate Commitments of the Banks as amended by this Amendment,
(ii) the outstanding principal amount of the Revolving Credit Loans of the Banks
are
<PAGE>
2
outstanding pro rata according to the respective Commitment Percentages of
the Banks as amended by this Amendment and (iii) no Bid Loans or Bilateral
Option Loans made by Citibank, N.A. are outstanding.
5. NO OTHER AMENDMENTS. Except as expressly amended hereby, the
Credit Agreement and the other Loan Documents (if any) shall remain in full
force and effect in accordance with their respective terms.
6. COUNTERPARTS. This Amendment may be executed by one or more of
the parties hereto on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
7. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
<PAGE>
3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered as of the day and year first above written.
W. R. GRACE & CO.-CONN.
By:__________________________
Title:
W. R. GRACE & CO.
By:__________________________
Title:
CHEMICAL BANK, as Agent
By:_______________________________
Title:
<PAGE>
4
The undersigned Banks hereby consent and agree to the foregoing
Amendment:
CHEMICAL BANK
By:____________________________
Title:
ABN AMRO BANK N.V.
By:____________________________
Title:
By:____________________________
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:____________________________
Title:
THE BANK OF NOVA SCOTIA
By:____________________________
Title:
BARCLAYS BANK PLC
By:____________________________
Title:
<PAGE>
5
THE CHASE MANHATTAN BANK, N.A.
By:____________________________
Title:
CITIBANK, N.A.
By:____________________________
Title:
COMMERZBANK AG, ATLANTA AGENCY
By:____________________________
Title:
By:____________________________
Title:
CREDIT LYONNAIS ATLANTA AGENCY
By:____________________________
Title:
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES
By:____________________________
Title:
By:____________________________
Title:
<PAGE>
6
THE HONGKONG AND SHANGHAI
BANKING CORPORATION LIMITED
By:____________________________
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By:____________________________
Title:
NATIONSBANK OF FLORIDA, N.A.
By:____________________________
Title:
SWISS BANK CORPORATION-NEW
YORK BRANCH
By:____________________________
Title:
By:____________________________
Title:
UNION BANK OF SWITZERLAND
By:____________________________
Title:
By:____________________________
Title:
<PAGE>
SCHEDULE I
BANK COMMITMENT
---- -----------
Chemical Bank $25,000,000
ABN AMRO Bank $25,000,000
Bank of America National
Trust and Savings Assoc. $25,000,000
The Bank of Nova Scotia $25,000,000
Barclays Bank PLC $25,000,000
The Chase Manhattan Bank, N.A. $25,000,000
Commerzbank AG, Atlanta Agency $25,000,000
Credity Lyonnais,
Atlanta Agency $25,000,000
Dresdner Bank AG $25,000,000
The Hongkong and Shanghai
Banking Corporation Limited $25,000,000
Morgan Guaranty Trust Company
of New York $25,000,000
NationsBank of Florida, N.A. $25,000,000
Swiss Bank Corporation
New York Branch $25,000,000
Union Bank of Switzerland $25,000,000
----------------
$350,000,000,000
----------------
----------------
<PAGE>
Exhibit 4.06
FIRST AMENDMENT
FIRST AMENDMENT, dated as of December 28, 1994 (this "AMENDMENT"), to
the Credit Agreement, dated as of September 1, 1994 (as amended, supplemented or
otherwise modified prior to the date hereof, the "CREDIT AGREEMENT"), among W.
R. GRACE & CO.-CONN., a Connecticut corporation (the "COMPANY"), W. R. GRACE &
CO., a New York corporation ("GRACE NEW YORK"), the banks parties thereto (the
"BANKS") and CHEMICAL BANK, a New York banking corporation, as agent (in such
capacity the "AGENT") for the Banks.
W I T N E S S E T H :
WHEREAS, the Company, Grace New York and Citibank, N.A. have requested
the Agent and the Banks to agree to amend the Credit Agreement to terminate the
commitment of Citibank, N.A. thereunder; and
WHEREAS, the Agent and the Banks are willing to agree to such
amendment, but only on the terms and subject to the conditions set forth in this
Amendment;
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company, Grace New York, Citibank, N.A., the other Banks and
the Agent hereby agree as follows:
1. DEFINITIONS. Unless otherwise defined herein, terms defined in
the Credit Agreement are used herein as therein defined.
2. AMENDMENT TO SCHEDULE I. The first page of Schedule I to the
Credit Agreement is hereby deleted and Schedule I to this Amendment is hereby
substituted in lieu thereof.
3. CONSENT. The Agent and each of the Banks parties hereto consent
to the prepayment of the Loans in the manner contemplated by Section 4(b) of
this Amendment.
4. EFFECTIVENESS. This Amendment shall become effective upon (a)
receipt by the Agent of evidence satisfactory to the Agent that this Amendment
has been executed and delivered by the Company, Grace New York, Citibank, N.A.
and the Majority Banks and (b) if any Loans are outstanding, the prepayment by
the Borrower of Loans to the extent (if any) necessary so that (i) the aggregate
Loan Outstandings plus the Aggregate Outstanding Bilateral Option Loans shall
not exceed the aggregate Commitments of the Banks as amended by this Amendment,
(ii) the outstanding principal amount of the Revolving Credit Loans of the Banks
are
<PAGE>
2
outstanding pro rata according to the respective Commitment Percentages of
the Banks as amended by this Amendment and (iii) no Bid Loans or Bilateral
Option Loans made by Citibank, N.A. are outstanding.
5. NO OTHER AMENDMENTS. Except as expressly amended hereby, the
Credit Agreement and the other Loan Documents (if any) shall remain in full
force and effect in accordance with their respective terms.
6. COUNTERPARTS. This Amendment may be executed by one or more of
the parties hereto on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
7. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
<PAGE>
3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered as of the day and year first above written.
W. R. GRACE & CO.-CONN.
By:__________________________
Title:
W. R. GRACE & CO.
By:__________________________
Title:
CHEMICAL BANK, as Agent
By:_______________________________
Title:
<PAGE>
4
The undersigned Banks hereby consent and agree to the foregoing
Amendment:
CHEMICAL BANK
By:____________________________
Title:
ABN AMRO BANK N.V.
By:____________________________
Title:
By:____________________________
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:____________________________
Title:
THE BANK OF NOVA SCOTIA
By:____________________________
Title:
BARCLAYS BANK PLC
By:____________________________
Title:
<PAGE>
5
THE CHASE MANHATTAN BANK, N.A.
By:____________________________
Title:
CITIBANK, N.A.
By:____________________________
Title:
COMMERZBANK AG, ATLANTA AGENCY
By:____________________________
Title:
By:____________________________
Title:
CREDIT LYONNAIS ATLANTA AGENCY
By:____________________________
Title:
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES
By:____________________________
Title:
By:____________________________
Title:
<PAGE>
6
THE HONGKONG AND SHANGHAI
BANKING CORPORATION LIMITED
By:____________________________
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By:____________________________
Title:
NATIONSBANK OF FLORIDA, N.A.
By:____________________________
Title:
SWISS BANK CORPORATION-NEW
YORK BRANCH
By:____________________________
Title:
By:____________________________
Title:
UNION BANK OF SWITZERLAND
By:____________________________
Title:
By:____________________________
Title:
<PAGE>
SCHEDULE I
BANK COMMITMENT
---- ------------
Chemical Bank $25,000,000
ABN AMRO Bank $25,000,000
Bank of America National
Trust and Savings Assoc. $25,000,000
The Bank of Nova Scotia $25,000,000
Barclays Bank PLC $25,000,000
The Chase Manhattan Bank, N.A. $25,000,000
Commerzbank AG, Atlanta Agency $25,000,000
Credity Lyonnais,
Atlanta Agency $25,000,000
Dresdner Bank AG $25,000,000
The Hongkong and Shanghai
Banking Corporation Limited $25,000,000
Morgan Guaranty Trust Company
of New York $25,000,000
NationsBank of Florida, N.A. $25,000,000
Swiss Bank Corporation
New York Branch $25,000,000
Union Bank of Switzerland $25,000,000
----------------
$350,000,000,000
----------------
----------------
<PAGE>
Exhibit 10.05
W. R. GRACE & CO.
____________
1994 STOCK INCENTIVE PLAN
<PAGE>
W. R. GRACE & CO.
_____________
1994 STOCK INCENTIVE PLAN
1. PURPOSES: The purposes of this Plan are (a) to enable Key
Persons to have incentives related to Common Stock, (b) to encourage Key
Persons to increase their interest in the growth and prosperity of the
Company and to stimulate and sustain constructive and imaginative thinking
by Key Persons, (c) to further the identity of interests of Key Persons
with the interests of the Company's shareholders, and (d) to induce the
service or continued service of Key Persons and to enable the Company to
compete with other organizations offering similar or other incentives in
obtaining and retaining the services of the most highly qualified
individuals.
2. DEFINITIONS: When used in this Plan, the following terms
shall have the meanings set forth in this section 2.
BOARD OF DIRECTORS: The Board of Directors of the Company.
CESSATION OF SERVICE (OR WORDS OF SIMILAR IMPORT): When a person
ceases to be an employee of, or consultant to, the Company or a Subsidiary;
provided, however, in the case of an Incentive Stock Option, "cessation of
service" (or words of similar import) shall mean when a person ceases to be an
employee of the Company or a Subsidiary.
CODE: The Internal Revenue Code of 1986, as amended.
COMMITTEE: The Compensation, Employee Benefits and Stock Incentive
Committee of the Board of Directors of the Company or any other committee
designated by such Board of Directors to administer stock incentive and stock
option plans of the Company and its subsidiaries generally or this Plan
specifically.
COMMON STOCK: The common stock of the Company, par value $1.00 per
share, or such other class of shares or other securities or property as may be
applicable pursuant to the provisions of section 8.
COMPANY: W. R. Grace & Co., a New York corporation.
FAIR MARKET VALUE: (a) The mean between the high and low sales
prices of a share of Common Stock in New York Stock Exchange
<PAGE>
Composite Transactions on the applicable date, as reported in THE WALL STREET
JOURNAL or another newspaper of general circulation, or, if no sales of shares
of Common Stock were reported for such date, for the next preceding date for
which such sales were so reported, or (b) the fair market value of a share of
Common Stock determined in accordance with any other reasonable method
approved by the Committee.
INCENTIVE STOCK OPTION: A stock option that states that it is an
incentive stock option and that is intended to meet the requirements of Section
422A of the Code and the regulations thereunder applicable to incentive stock
options, as in effect from time to time.
ISSUANCE (OR WORDS OF SIMILAR IMPORT): The issuance of authorized
but unissued Common Stock or the transfer of issued Common Stock held by the
Company or a Subsidiary.
KEY EMPLOYEE: An employee of the Company or a Subsidiary who is
a Key Person.
KEY PERSON: An employee of, or consultant to, the Company or a
Subsidiary who, in the opinion of the Committee, has contributed or can
contribute significantly to the growth and successful operations of the Company
or one or more Subsidiaries. The grant of a Stock Incentive to an employee or
consultant shall be deemed a determination by the Committee that such person is
a Key Person.
NON-STATUTORY STOCK OPTION: An Option that is not an Incentive
Stock Option or another form of statutory stock option (within the meanings
of sections 422, 423 and 424 of the Code and the regulations thereunder, as
in effect from time to time).
OPTION: An option granted under this Plan to purchase shares of
Common Stock.
PLAN: The 1994 Stock Incentive Plan of the Company herein set
forth, as the same may from time to time be amended.
RULE 16b-3: Rule 16b-3 of the Securities and Exchange Commission
(or any successor provision in effect at the applicable time).
SERVICE: Service to the Company or a Subsidiary as an employee or
consultant. "To serve" has a correlative meaning.
STOCK AWARD: An issuance of shares of Common Stock or an
undertaking (other than an Option) to issue such shares in the future.
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<PAGE>
STOCK INCENTIVE: A stock incentive granted under this Plan in
one of the forms provided for in section 3.
SUBSIDIARY: A corporation (or other form of business association)
of which shares (or other ownership interests) having 50% or more of the
voting power regularly entitled to vote for directors (or equivalent management
rights) are owned, directly or indirectly, by the Company; provided, however,
that in the case of an Incentive Stock Option, the term "Subsidiary" shall
mean a Subsidiary (as defined by the preceding clause) that is also a
"subsidiary corporation" as defined in section 425(f) of the Code and the
regulations thereunder, as in effect from time to time.
3. GRANTS OF STOCK INCENTIVES:
(a) Subject to the provisions of this Plan, the Committee may at
any time and from time to time grant Stock Incentives under this Plan to, and
only to, Key Persons; provided, however, that Incentive Stock Options may be
granted to, and only to, Key Employees.
(b) The Committee may grant a Stock Incentive to be effective at a
specified future date or upon the future occurrence of a specified event. For
the purposes of this Plan, any such Stock Incentive shall be deemed granted on
the date it becomes effective. An agreement or other commitment to grant a
Stock Incentive that is to be effective in the future shall not be deemed the
grant of a Stock Incentive until the date on which such Stock Incentive becomes
effective.
(c) Stock Incentives may be granted in the form of:
(i) a Stock Award, or
(ii) an Option, or
(iii) a combination of a Stock Award and an Option.
4. STOCK SUBJECT TO THIS PLAN:
(a) Subject to the provisions of paragraph (c) of this section 4
and the provisions of section 8, the maximum number of shares of Common Stock
that may be issued pursuant to Stock Incentives granted under this Plan shall
not exceed 3,000,000 shares of Common Stock.
-3-
<PAGE>
(b) Authorized but unissued shares of Common Stock and issued
shares of Common Stock held by the Company or a Subsidiary, whether acquired
specifically for use under this Plan or otherwise, may be used for purposes
of this Plan.
(c) If any shares of Common Stock subject to a Stock Incentive
shall not be issued and shall cease to be issuable because of the termination,
in whole or in part, of such Stock Incentive or for any other reason, or if any
such shares shall, after issuance, be reacquired by the Company or a Subsidiary
for any reason, such shares shall no longer be charged against the limitation
provided for in paragraph (a) of this section 4 and may again be made subject to
Stock Incentives.
(d) Of the total number of shares specified in paragraph (a) of
this section 4 (subject to adjustment as specified therein), during the term
of this Plan as defined in section 9, (i) no more than 10% may be subject to
Options granted to any one Key Person, (ii) no more than 15% may be subject
to Stock Incentives granted to any one Key Person, and (iii) no more than 3%
in the aggregate may be subject to Stock Incentives granted to all Key Persons
who are consultants to the Company and/or one or more Subsidiaries at the date
the relevant Stock Incentive is granted
5. STOCK AWARDS:
Except as otherwise provided in section 12, Stock Incentives in the
form of Stock Awards shall be subject to the following provisions:
(a) For purposes of this Plan, all shares of Common Stock
subject to a Stock Award shall be valued at not less than 100% of the Fair
Market Value of such shares on the date such Stock Award is granted,
regardless of whether or when such shares are issued pursuant to such
Stock Award and whether or not such shares are subject to restrictions
affecting their value.
(b) Shares of Common Stock subject to a Stock Award may be
issued to a Key Person at the time the Stock Award is granted, or at any
time subsequent thereto, or in installments from time to time. In the
event that any such issuance shall not be made at the time the Stock Award
is granted, the Stock Award may provide for the payment to such Key Person,
either in cash or shares of Common Stock, of amounts not exceeding the
dividends that would have been payable to such Key Person in respect of
the number of shares of Common Stock subject to such Stock Award (as adjusted
under section 8) if such shares had been issued to such Key Person at the
time such Stock Award was granted. Any Stock Award may provide that the
value of any shares of Common Stock subject to such
-4-
<PAGE>
Stock Award may be paid in cash, on each date on which shares would
otherwise have been issued, in an amount equal to the Fair Market
Value on such date of the shares that would otherwise have been issued.
(c) The material terms of each Stock Award shall be determined
by the Committee. Each Stock Award may be evidenced by a written instrument
consistent with this Plan. It is intended that a Stock Award would be (i)
made contingent upon the attainment of one or more specified performance
objectives and/or (ii) subject to restrictions on the sale or other disposition
for a period of three or more years of the Stock Award or the shares subject
thereto; provided that (x) a Stock Award may include restrictions and
limitations in addition to those provided for herein and (y) of the total
number of shares specified in paragraph (a) of section 4 (subject to adjustment
as specified therein), up to 3% may be subject to Stock Awards not subject to
clause (i) or clause (ii) of this sentence.
(d) A Stock Award shall be granted for such lawful consideration
as may be provided for therein.
6. OPTIONS: Except as otherwise provided in section 12, Stock
Incentives in the form of Options shall be subject to the following provisions:
(a) Subject to the provisions of paragraph (f) of this section 6,
the purchase price per share of Common Stock shall be not less than 100% of the
Fair Market Value of a share of Common Stock on the date the Option is granted.
The Option may provide for the purchase price to be paid (i) in cash, or (ii) in
shares of Common Stock (including shares issued pursuant to a Stock Award
granted subject to restrictions as provided for in paragraph (c) of section 5),
or (iii) in a combination of cash and such shares. Any shares of Common Stock
delivered to the Company in payment of the purchase price shall be valued at
their Fair Market Value on the date of exercise. No certificate for shares of
Common Stock shall be issued upon the exercise of an Option until the purchase
price for such shares has been paid in full.
(b) If so provided in the Option, the Company shall, upon
the request of the holder of the Option and at any time and from time to
time, cancel all or a portion of the Option then subject to exercise and
either (i) pay the holder an amount of money equal to the excess, if any,
of the Fair Market Value, at such time or times, of the shares subject to
the portion of the Option so canceled over the purchase price for such shares,
or (ii) issue shares of Common Stock to the holder with a Fair Market Value, at
-5-
<PAGE>
such time or times, equal to such excess, or (iii) pay such excess by a
combination of money and shares.
(c) Each Option may be exercisable in full at the time of grant,
or may become exercisable in one or more installments and at such time or times
or upon the occurrence of such events, as may be specified in the Option, as
determined by the Committee. Unless otherwise provided in the written
instrument provided in paragraph (g) of this section 6, an Option, to the extent
it is or becomes exercisable, may be exercised at any time in whole or in part
until the expiration or termination of such Option.
(d) Each Option shall be exercisable during the life of the holder
only by him and, after his death, only by his estate or by a person who acquires
the right to exercise the Option by will or the laws of descent and
distribution. An Option, to the extent that it shall not have been exercised or
canceled, shall terminate as follows after the holder ceases to serve: (i) if
the holder shall voluntarily cease to serve without the consent of the Committee
or shall have his service terminated for cause, the Option shall terminate
immediately upon cessation of service; (ii) if the holder shall cease to serve
by reason of death, incapacity or retirement under a retirement plan of the
Company or a Subsidiary, the Option shall terminate three years after the date
on which he ceased to serve; and (iii) except as provided in the next sentence,
in all other cases the Option shall terminate three months after the date on
which the holder ceased to serve unless the Committee shall approve a longer
period (which approval may be given before or after cessation of service) not to
exceed three years. If the holder shall die or become incapacitated during the
three-month period (or such longer period as the Committee may approve) referred
to in the preceding clause (iii), the Option shall terminate three years after
the date on which he ceased to serve. A leave of absence for military or
governmental service or other purposes shall not, if approved by the Committee
(which approval may be given before or after the leave of absence commences), be
deemed a cessation of service within the meaning of this paragraph (d).
Notwithstanding the foregoing provisions of this paragraph (d) or any other
provision of this Plan, no Option shall be exercisable after expiration of a
period of ten years and one month from the date the Option is granted. Where a
Non-Statutory Stock Option is granted for a term of less than ten years and one
month, the Committee may, at any time prior to the expiration of the Option,
extend its term for a period ending not later than ten years and one month from
the date the Option was granted. Such an extension shall not be deemed the
grant of a new Option under this Plan.
-6-
<PAGE>
(e) No Option nor any right thereunder may be assigned or
transferred except by will or the laws of descent and distribution, unless
otherwise provided in the Option.
(f) An Option may, but need not, be an Incentive Stock Option.
All shares of Common Stock that may be made subject to Stock Incentives under
this Plan may be made subject to Incentive Stock Options; provided that (i) no
Incentive Stock Option may be granted more than ten years after the effective
date of this Plan, as provided in section 9, (ii) the purchase price per share
of Common Stock subject to an Incentive Stock Option shall be not less than 100%
of the Fair Market Value of a share of Common Stock on the date such Incentive
Stock Option is granted, and (iii) the aggregate Fair Market Value (determined
as of the time an Incentive Stock Option is granted) of the shares subject to
each installment becoming exercisable for the first time in any calendar year
under Incentive Stock Options granted, on or after January 1, 1987 (under all
plans, including this Plan, of his employer corporation and its parent and
subsidiary corporations), to the Key Employee to whom such Incentive Stock
Option is granted, shall not exceed $100,000.
(g) The material terms of each Option shall be determined by the
Committee. Each Option shall be evidenced by a written instrument consistent
with this Plan. An Option may include restrictions and limitations in addition
to those provided for in this Plan.
(h) Options shall be granted for such lawful consideration as may
be provided for in the Option.
7. COMBINATION OF STOCK AWARDS AND OPTIONS: Stock Incentives
authorized by paragraph (c)(iii) of section 3 in the form of combinations of
Stock Awards and Options shall be subject to the following provisions:
(a) A Stock Incentive may be a combination of any form of Stock
Award and any form of Option, provided, however, that the terms and conditions
of such Stock Incentive pertaining to a Stock Award are consistent with
section 5 and the terms and conditions of such Stock Incentive pertaining to
an Option are consistent with section 6.
(b) Such combination Stock Incentive shall be subject to such
other terms and conditions as may be specified therein including, without
limitation, a provision terminating in whole or in part a portion thereof
upon the exercise in whole or in part of another portion thereof.
-7-
<PAGE>
(c) The material terms of each combination Stock Incentive
shall be determined by the Committee. Each combination Stock Incentive
shall be evidenced by a written instrument consistent with this Plan.
8. ADJUSTMENT PROVISIONS:
(a) In the event that any reclassification, split-up or
consolidation of the Common Stock shall be effected, or the outstanding
shares of Common Stock are, in connection with a merger or consolidation
of the Company or a sale by the Company of all or a part of its assets,
exchanged for a different number or class of shares of stock or other
securities or property of the Company or for shares of the stock or other
securities or property of any other corporation or person, or a record date
for determination of holders of Common Stock entitled to receive a dividend
payable in Common Stock shall occur, (i) the number and class of shares or
other securities or property that may be issued pursuant to Stock Incentives
thereafter granted, (ii) the number and class of shares or other securities
or property that have not been issued under outstanding Stock Incentives,
(iii) the purchase price to be paid per share or other unit under outstanding
Stock Incentives, and (iv) the price to be paid per share or other unit by
the Company or a Subsidiary for shares or other securities or property
issued pursuant to Stock Incentives that are subject to a right of the
Company or a Subsidiary to re-acquire such shares or other securities
or property, shall in each case be equitably adjusted as determined by
the Committee.
(b) In the event that any spin-off or other distribution of
assets of the Company to its shareholders shall occur, (i) the number and
class of shares or other securities or property that may be issued pursuant
to Stock Incentives thereafter granted, (ii) the number and class of shares
or other securities or property that have not been issued under outstanding
Stock Incentives, (iii) the purchase price to be paid per share or other unit
under outstanding Stock Incentives, and (iv) the price to be paid per share
or other unit by the Company or a Subsidiary for shares or other securities
or property issued pursuant to Stock Incentives that are subject to a right
of the Company or a Subsidiary to re-acquire such shares or other securities
or property, may in each case be equitably adjusted as may be determined by
the Committee.
(c) In the event of a merger or consolidation of the Company
in which the Common Stock is converted into the right to receive a specified
amount of cash per share (the "merger price"), then each Option outstanding
immediately prior to the effective time of such merger or consolidation
(the "effective time") shall be treated as follows: (i) each such Option
having a per share purchase price equal to or greater than
-8-
<PAGE>
the merger price shall terminate at the effective time and be of no further
force and effect, without the making of any payment to the holder of such
Option; and (ii) each such Option having a per share purchase price less
than the merger price shall terminate at the effective time and be of no
further force and effect, and the holder of such Option shall be paid in
cash, as promptly as practicable following the effective time, an amount
equal to the product of (A) the excess of the merger price over the per
share purchase price of such Option times (B) the number of shares covered
by such Option immediately prior to the effective time.
9. TERM:
This Plan shall be deemed adopted and shall become effective on the
date it is approved by the shareholders of the Company. No Stock Incentives
shall be granted under this Plan after April 30, 2004.
10. ADMINISTRATION:
(a) This Plan shall be administered by the Committee. No director
shall be designated as or continue to be a member of the Committee unless he
shall at the time of designation and at all times during service as a member of
the Committee be a "disinterested person" within the meaning of Rule 16b-3. The
Committee shall have full authority to act in the matter of selection of Key
Persons and in granting Stock Incentives to them and such other authority as is
granted to the Committee by this Plan.
(b) The Committee may establish such rules and regulations, not
inconsistent with the provisions of this Plan, as it deems necessary to
determine eligibility to be granted Stock Incentives under this Plan and for the
proper administration of this Plan, and may amend or revoke any rule or
regulation so established. The Committee may make such determinations and
interpretations under or in connection with this Plan as it deems necessary or
advisable. All such rules, regulations, determinations and interpretations
shall be binding and conclusive upon the Company, the Subsidiaries, its
shareholders and its directors, officers, consultants and employees, and upon
their respective legal representatives, beneficiaries, successors and assigns,
and upon all other persons claiming under or through any of them.
(c) Members of the Board of Directors and members of the Committee
acting under this Plan shall be fully protected in relying in good faith upon
the advice of counsel and shall incur no liability in the performance of their
duties except as otherwise provided by applicable law.
-9-
<PAGE>
11. GENERAL PROVISIONS:
(a) Nothing in this Plan or in any instrument executed pursuant
hereto shall confer upon any person any right to continue in the service of the
Company or a Subsidiary, or shall affect the right of the Company or of a
Subsidiary to terminate the service of any person with or without cause.
(b) No shares of Common Stock shall be issued pursuant to a Stock
Incentive unless and until all legal requirements applicable to the issuance of
such shares have, in the opinion of counsel to the Company, been complied with.
In connection with any such issuance the person acquiring the shares shall, if
requested by the Company, give assurances, satisfactory to counsel to the
Company, in respect of such matters as the Company or a Subsidiary may deem
desirable to assure compliance with all applicable legal requirements.
(c) No person (individually or as a member of a group), and no
beneficiary or other person claiming under or through him, shall have any
right, title or interest in or to any shares of Common Stock allocated or
reserved for the purposes of this Plan or subject to any Stock Incentive
except as to such shares of Common Stock, if any, as shall have been
issued to him.
(d) In the case of a grant of a Stock Incentive to a Key Person
of a Subsidiary, such grant may provide for the issuance of the shares covered
by the Stock Incentive to the Subsidiary, for such consideration as may be
provided, upon the condition or understanding that the Subsidiary will
transfer the shares to the Key Person in accordance with the terms of the
Stock Incentive.
(e) In the event the laws of a country in which the Company or a
Subsidiary has employees prescribe certain requirements for stock incentives to
qualify for advantageous tax treatment under the laws of that country
(including, without limitation, laws establishing options analogous to
Incentive Stock Options), the Committee, may, for the benefit of such employees,
amend, in whole or in part, this Plan and may include in such amendment
additional provisions for the purposes of qualifying the amended plan and Stock
Incentives granted thereunder under such laws; provided, however, that (i) the
terms and conditions of a Stock Incentive granted under such amended plan may
not be more favorable to the recipient than would be permitted if such Stock
Incentive had been granted under this Plan as herein set forth, (ii) all shares
allocated to or utilized for the purposes of such amended plan shall be
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<PAGE>
subject to the limitations of section 4, and (iii) the provisions of the
amended plan may restrict but may not extend or amplify the provisions
of sections 9 and 13.
(f) The Company or a Subsidiary may make such provisions as it
may deem appropriate for the withholding of any taxes that the Company or a
Subsidiary determines it is required to withhold in connection with any Stock
Incentive.
(g) Nothing in this Plan is intended to be a substitute for, or
shall preclude or limit the establishment or continuation of, any other plan,
practice or arrangement for the payment of compensation or benefits to
directors, officers, employees or consultants generally, or to any class or
group of such persons, that the Company or any Subsidiary now has or may
hereafter put into effect, including, without limitation, any incentive
compensation, retirement, pension, group insurance, stock purchase,
stock bonus or stock option plan.
12. ACQUISITIONS: If the Company or any Subsidiary should merge
or consolidate with, or purchase stock or assets or otherwise acquire the whole
or part of the business of, another entity, the Company, upon the approval of
the Committee, (a) may assume, in whole or in part and with or without
modifications or conditions, any stock incentives granted by the acquired
entity to its directors, officers, employees or consultants in their capacities
as such, or (b) may grant new Stock Incentives in substitution therefor.
Such assumed or substitute stock incentives may contain terms and conditions
inconsistent with the provisions of this Plan (including the limitations set
forth in paragraph (d) of section 4), including additional benefits for the
recipient, provided that, if such assumed or substitute stock incentives
are Incentive Stock Options, such terms and conditions are permitted under
the plan of the acquired entity. For the purposes of any applicable plan
provision involving time or a date, a substitute stock incentive shall be
deemed granted as of the date of grant of the original stock incentive
by the acquired entity.
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<PAGE>
13. AMENDMENTS AND TERMINATION:
(a) This Plan may be amended or terminated by the Board of
Directors upon the recommendation of the Committee; provided that, without
the approval of the shareholders of the Company, no amendment shall be made
which (i) causes this Plan to cease to comply with Rule 16b-3 or applicable
law, (ii) permits any person who is not a Key Person to be granted a Stock
Incentive (except as otherwise provided in section 12), (iii) amends the
provisions of paragraph (d) of section 4, paragraph (a) of section 5 or
paragraph (a) or paragraph (f) of section 6 to permit shares to be valued
at, or to have a purchase price of, respectively, less than the percentage
of Fair Market Value specified therein, (iv) amends section 9 to extend the
date set forth therein, or (v) amends this section 13.
(b) No amendment or termination of this Plan shall adversely
affect any Stock Incentive theretofore granted, and no amendment of any
Stock Incentive granted pursuant to this Plan shall adversely affect such
Stock Incentive, without the consent of the holder thereof.
-12-
<PAGE>
Exhibit 10.06
W. R. GRACE & CO.
_______________
1994 STOCK RETAINER PLAN FOR NONEMPLOYEE DIRECTORS
_______________
<PAGE>
W. R. GRACE & CO.
_______________
1994 STOCK RETAINER PLAN FOR NONEMPLOYEE DIRECTORS
_______________
1. PURPOSES: The purposes of this Plan are (a) to further the
identity of interests of nonemployee directors of the Company with the interests
of the Company's shareholders, (b) to stimulate and sustain constructive and
imaginative thinking by such nonemployee directors, and (c) to induce the
service or continued service of the most highly qualified individuals to serve
as nonemployee directors of the company.
2. DEFINITIONS: When used in this Plan, the following terms shall
have the meanings set forth in this section 2.
Board of Directors: The Board of Directors of the Company.
Code: The Internal Revenue Code of 1986, as amended.
Common Stock: The common stock of the Company, par value $1.00 per
share, or such other class of shares or other securities or property as may be
applicable pursuant to the provisions of section 6.
Company: W. R. Grace & Co., a New York corporation.
Fair Market Value: (a) The mean between the high and low sales
prices of a share of Common Stock in New York Stock Exchange Composite
Transactions for the applicable date, as reported in THE WALL STREET JOURNAL
or another newspaper of general circulation, or, if no sales of shares of
Common Stock were reported for such date, for the next preceding date for
which such sales were so reported, or (b) the fair market value of a share of
Common Stock determined in accordance with any other reasonable method.
issuance (or words of similar import): The issuance of
authorized but unissued Common Stock or the transfer of issued Common Stock
held by the Company or a Subsidiary.
2
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nonemployee director: An individual, not employed by the Company
or a Subsidiary, who is serving as a director of the Company.
Plan: The 1994 Stock Retainer Plan for Nonemployee Directors herein
set forth, as the same may from time to time be amended.
Rule 16b-3: Rule 16b-3 of the Securities and Exchange Commission
(or any successor provision in effect at the applicable time).
service: Service to the Company as a nonemployee director. "To
serve" has a correlative meaning.
Stock Retainer: An issuance of shares of Common Stock in payment of
an annual retainer for service as a nonemployee director.
Subsidiary: A corporation (or other form of business
association) of which shares (or other ownership interests) having 50% or
more of the voting power regularly entitled to vote for directors (or
equivalent management rights) are owned, directly or indirectly, by the
Company.
3. ELIGIBILITY AND PARTICIPATION: All nonemployee directors are
eligible to participate in the Plan and each such director will participate as
described in section 5.
4. STOCK SUBJECT TO THIS PLAN:
(a) Subject to the provisions of paragraph (c) of this section
4 and the provisions of section 6, the maximum number of shares of Common
Stock that may be issued pursuant to Stock Retainers under this Plan shall
not exceed 66,000 shares of Common Stock.
(b) Authorized but unissued shares of Common Stock and issued
shares of Common Stock held by the Company or a Subsidiary, whether acquired
specifically for use under this Plan or otherwise, may be used for purposes
of this Plan.
(c) If any shares of Common Stock issued pursuant to a Stock
Retainer shall, after issuance, be reacquired by the Company for any reason,
such shares shall no longer be charged against the
3
<PAGE>
limitation provided for in paragraph (a) of this section 4 and may again be
issued pursuant to Stock Retainers.
5. STOCK RETAINERS: Stock Retainers shall be subject to the
following provisions:
(a) For the purposes of this Plan, all shares of Common Stock
issued pursuant to a Stock Retainer shall be valued at not less than 100% of
the Fair Market Value of such shares on the effective date as of which such
Stock Retainer is paid, regardless of when such shares are actually issued
to the nonemployee director and whether or not such shares are subject to
restrictions that affect their value.
(b) Except as provided in paragraph (c) of this section 5,
effective as of July 1, 1994, and on each following July 1 through July 1,
1999, each person serving as a nonemployee director on such July 1 will, for
service as such, be paid a Stock Retainer consisting of a whole number of
shares of Common Stock equal to the quotient obtained by dividing (i) $24,000
(the "Retainer Amount") by (ii) the Fair Market Value of a share of Common
Stock on such July 1. To the extent that such calculation does not result in
a whole number of shares, the fractional share shall be rounded upwards to
the next whole number so that no fractional shares shall be issued.
(c) (i) In the event that a Stock Retainer is to be paid,
effective July 1 of any calendar year, to a person who shall have commenced
service as a nonemployee director subsequent to January 1 of such calendar
year, the Retainer Amount shall be proportionately reduced to reflect the
percentage of such calendar year prior to such commencement of service.
(ii) In the event that a Stock Retainer is to be paid,
effective July 1 of any calendar year, to a person who shall have commenced
service as a nonemployee director subsequent to July 1 of the prior calendar
year, the Retainer Amount shall be proportionately increased to reflect the
percentage of the prior calendar year during which such nonemployee director
served as such.
(d) The shares referred to in paragraph (b) of this section 5
shall be delivered to each nonemployee director as soon as practicable
following each July 1 during the term of this plan. After the delivery of
the shares, each nonemployee director shall have all the rights of a
shareholder with respect to such shares (including
4
<PAGE>
the right to vote such shares and the right to receive all dividends paid
with respect to such shares).
(e) No shares will be issued in a calendar year to a nonemployee
director who, prior to July 1 of such calendar year, is removed for cause, as
specified in the Company's Certificate of Incorporation, as the same may be
amended, or who voluntarily terminates service prior to retirement under the
Company's Retirement Plan for Outside Directors, as the same may be amended.
6. ADJUSTMENT PROVISIONS:
(a) In the event that any reclassification, split-up or
consolidation of the Common Stock shall be effected, or the outstanding
shares of Common Stock are, in connection with a merger or consolidation of
the Company or a sale by the Company of all or a part of its assets,
exchanged for a different number or class of shares of stock or other
securities or property of the Company or for shares of the stock or other
securities or property of any other corporation or person, or a record date
for determination of holders of Common Stock entitled to receive a dividend
payable in Common Stock shall occur, (i) the number and class of shares that
may be issued pursuant to Stock Retainers thereafter paid, and (ii) the
number and class of shares that have not been issued under effective Stock
Retainers, shall in each case be equitably adjusted.
(b) In the event that any spin-off or other distribution of
assets of the Company to its shareholders shall occur, the number and class
of shares that may be issued pursuant to Stock Retainers thereafter paid
shall be equitably adjusted as determined by the Board of Directors.
7. TERM: This Plan shall be deemed adopted and shall become
effective on the date it is approved by the shareholders of the Company. No
Stock Retainers shall be paid under this Plan with respect to any period
beginning after July 1, 1999.
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<PAGE>
8 GENERAL PROVISIONS:
(a) Nothing in this Plan or in any instrument executed pursuant
hereto shall confer upon any person any right to continue to serve as a
nonemployee director of the Company.
(b) No shares of Common Stock shall be issued pursuant to a Stock
Retainer unless and until all legal requirements applicable to the issuance of
such shares have, in the opinion of counsel to the Company, been complied with.
In connection with any such issuance, the person acquiring the shares shall, if
requested by the Company, give assurances, satisfactory to counsel to the
Company, in respect of such matters as the Company or a Subsidiary may deem
desirable to assure compliance with all applicable legal requirements.
(c) No person (individually or as a member of a group), and no
beneficiary or other person claiming under or through him, shall have any right,
title or interest in or to any shares of Common Stock allocated or reserved for
the purposes of this Plan or subject to any Stock Retainer except as to such
shares of Common Stock, if any, as shall have been issued to him.
(d) Nothing in this Plan is intended to be a substitute for, or
shall preclude or limit the establishment or continuation of, any other plan,
practice or arrangement for the payment of compensation or benefits to
nonemployee directors that the Company now has or may hereafter put into
effect.
9. AMENDMENTS AND TERMINATION:
(a) This Plan may be terminated, suspended or amended at any
time by the Board of Directors upon the recommendation of its Compensation,
Employee Benefits and Stock Incentive Committee; provided, however, that (i)
no amendment shall become effective without the approval of the shareholders
of the Company to the extent shareholder approval is required in order to
comply with Rule 16b-3, and (ii) neither the Retainer Amount, nor any other
provision of this Plan affecting the number of shares of Common Stock
receivable pursuant to a Stock Retainer or the frequency with which Stock
Retainers are paid, shall be amended or otherwise modified more than once
every six months, except as may be necessary or appropriate to comport with
the Code or the Employee Retirement Income Security Act, as either of the
6
<PAGE>
same may be amended, or the rules and regulations promulgated thereunder.
(b) No termination, suspension or amendment of this Plan shall
adversely affect any Stock Retainer theretofore paid.
7
<PAGE>
CONSULTING AGREEMENT - SOUTHEAST ASIA Exhibit 10.23
THIS AGREEMENT is made as of the day of December, 1993 by and between
NATIONAL MEDICAL CARE, INC., a Delaware corporation with offices located at 1601
Trapelo Road, Waltham, Massachusetts 02154 (hereinafter referred to as the
"Company"), and VIRGINIA A. KAMSKY, with offices located at 563 Park Avenue, New
York, New York 10021 ("Consultant").
WHEREAS, Consultant has experience in the establishment and implementation
of business relationships in Southeast Asia; and
WHEREAS, the Company desires to engage the services of Consultant to
provide consulting services to the Company and its subsidiaries as they attempt
to establish and implement business relationships in Southeast Asia.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and further good and valuable consideration, the parties hereto agree as
follows:
1. ENGAGEMENT
The Company hereby engages Consultant to provide advice and services as
outlined below to the Company and its direct and indirect subsidiaries (the
"affiliates") as to matters involving the establishment and implementation
of business relationships in Southeast Asia, consisting for purposes of
this agreement of the following countries: Malaysia, Hong Kong, Singapore,
Vietnam, Thailand, the Philippines, Indonesia, Brunei, and Korea
(collectively, the "Territory"). Consultant agrees to provide such advice
and services to the Company and its affiliates upon the terms and
conditions set forth below.
2. STATUS OF THE PARTIES
Consultant is 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 either
party the authority to enter into a contract in the name of the other
party, or to bind the other party in any manner.
Consultant is responsible for the payment of all local, state and federal
income, self-employment, payroll or other applicable taxes on the fees paid
to Consultant by the Company.
3. TERM AND TERMINATION
The term of this Agreement is for the period commencing on July 1, 1993 and
ending on May 31, 1997, unless terminated sooner in accordance with this
Agreement.
<PAGE>
- 2 -
This Agreement may be terminated as follows:
(i) If the Company fails to pay Consultant's compensation without
good cause, Consultant may terminate this Agreement at any time,
after giving the Company notice and an opportunity for cure as
described in (iii) below;
(ii) If Consultant breaches any of her obligations under this
Agreement (including her failure to provide the services set
forth below and requested by the Company), or if Consultant
breaches the non-competition or non-disclosure provisions of this
Agreement, the Company may terminate this Agreement at any time,
after giving Consultant notice and an opportunity for cure as
described in (iii) below;
(iii) Before terminating this Agreement, the non-breaching party shall
give the breaching party written notice of the breach of the
Agreement, as well as an opportunity to cure the breach. Written
notice of the breach will be given within 30 days of its
discovery by the non-breaching party. The breach must be cured
within 30 days of the date of such notice. If the breach is
cured, the non-breaching party shall not terminate this Agreement
for such breach. If a party repeats that breach, however, no
cure period is required, and written notice of immediate
termination may be given.
(iv) If Consultant is unable, for any reason, to perform her duties
hereunder for a period of thirty (30) days or more, the Company
may terminate this Agreement without penalty by written notice to
the Consultant.
4. SERVICES TO BE PROVIDED BY CONSULTANT
During the term of this Agreement, Consultant shall assist the Company and
its affiliates with such matters within the scope of this Agreement as
shall be designated by the Chief Executive Officer of the Company (or such
other person as the Chief Executive Officer shall name), or the Company's
Vice President -International. Further, at the request of the Chief
Executive Officer (or his designee) or the Vice President - International,
Consultant will provide the following advice and services to the Company
and its affiliates:
(i) Conduct market research relating to the establishment and
operation of (a) dialysis centers and (b) distribution
arrangements for dialysis products in the Territory.
<PAGE>
- 3 -
(ii) Assist in identifying opportunities and negotiating contracts
relating to the establishment of (a) relationships with existing
dialysis centers, (b) new dialysis centers (by the Company or one
of its affiliates, directly or indirectly, and (c) dialysis
product distribution arrangements within the Territory.
(iii) Meet with or arrange introductions to appropriate governmental
officials who have authority to establish business relationships
with the Company and/or its affiliates.
(iv) Participate in negotiations and consummation of transactions
establishing business relations on behalf of the Company and its
affiliates.
(v) Monitor governmental activities in the Territory relating to
dialysis services and dialysis product distribution arrangements
in the Territory.
Consultant may engage in any business and perform services for others, as
long as such business and services do not interfere with Consultant's
duties under this Agreement, or with her non-competition and non-disclosure
obligations set forth below.
5. BASE COMPENSATION FOR CONSULTING SERVICES
For services provided by Consultant, the Company shall pay to Consultant
the following amounts: (i) for the months of July, August, and September,
1993, Five Thousand ($5,000) Dollars per month, and (ii) for the remainder
of the term of this Agreement, commencing with the month of October 1993,
Ten Thousand ($10,000) Dollars per month, payable monthly, in advance, on
the first day of each month.
The compensation for the period through December, 1993 has been previously
paid to Consultant.
6. INCENTIVE COMPENSATION
In addition to the compensation for consulting services set forth in
Section 5 above, Consultant shall be entitled to the additional incentive
compensation set forth below for each Business Relationship established as
a result of the services provided by Consultant in accordance with this
Agreement.
The term "Business Relationship" means the establishment of any business
relationship relating to a dialysis center in a country within the
Territory, through or with the assistance of the Consultant's services
requested by the Company, by which the
<PAGE>
- 4 -
Company or one of its affiliates directly or indirectly, either (a)
establishes, maintains, or acquires a business interest in an entity
authorized to conduct business in such country; or (b) conducts business
in such country pursuant to an arrangement with another entity in which
the Company or one of its affiliates, directly or indirectly, has a
business interest.
Consultant shall be entitled to compensation in the amount of Seven and
One-Half Percent (7.5%) of the Net Pre-Tax Earnings, as defined below, of
each dialysis center in the Territory with which the Company or one of its
affiliates establishes a Business Relationship during the term of this
Agreement. Such compensation shall be paid annually for ten (10) years
following the first treatment of patients at each such dialysis center.
For purpose of this Section 6, the term "Net Pre-Tax Earnings" means the
net income (or net loss) before taxes on the earnings of each of the
relevant dialysis centers for the current fiscal year, determined in
accordance with applicable generally accepted accounting principles,
consistently applied, subject to the following provisions:
a. The accrual method of accounting shall be used.
b. All reasonable and ordinary operating expenses shall be deducted from
the income of the dialysis centers. No charges shall be permitted for
any kind of expense not reasonable and ordinarily related to
management and operation of the dialysis centers.
c. Depreciation shall be figured on the straight-line method using the
Company's cost and remaining life on assets.
d. Extraordinary income and losses shall be eliminated.
e. Attorney fees and other expenses associated with uninsured litigation
are not extraordinary expenses and shall be deducted from the dialysis
center's income.
f. Net losses in a current year shall be deducted from the net income of
previous years and shall be carried forward to succeeding years.
g. Deductions shall be permitted for the management fee charge which
shall be computed on a per-dialysis-treatment basis for each year
based on actual costs incurred during the immediately preceding year.
This computation will be made by the Company's chief financial officer
applying generally accepted accounting principles and will be the
same, actual, cost-based management fee that the Company charges to
other dialysis treatment centers within the Territory.
<PAGE>
- 5 -
Consultant may conduct an annual audit of the financial records of a
dialysis center that is subject to this Section 6(i), at her own expense.
Consultant's incentive compensation under this Section 6 shall be paid
annually by the Company or one of its affiliates, within ninety (90) days
after the end of the fiscal year of the Company or the affiliate that has a
Business Relationship relating to such dialysis center.
As long as Consultant is not in breach of any of her obligations under this
Agreement, the payment obligations in this Section 6 shall continue for the
periods indicated above, notwithstanding the termination of this Agreement
or any portion of this Agreement. If Consultant breaches any of her
obligations hereunder and has not cured such breach, the Company will no
longer be obliged to pay to Consultant any compensation provided for in
this Agreement.
The incentive compensation due to Consultant under this Section 6 for
Consultant's services in Korea shall be reduced by the amount of any
compensation paid to EWON Corporation which is substantially similar to
that set forth in this Section 6.
The incentive compensation provisions of this Section 6 shall terminate
effective June 30, 1995, with respect to each country in the Territory in
which no Successful Business Relationship has been established by June 30,
1995.
A "Successful Business Relationship" is a Business Relationship, as defined
above, that results in the generation of revenue for the Company or one of
its affiliates.
7. ASSUMPTION OF CERTAIN PAYMENT OBLIGATIONS
If the Company or one of its affiliates sells, assigns, transfers or
otherwise conveys its interest in a dialysis center or manufacturing plant
in the Territory with respect to which Consultant is entitled to
compensation under this Agreement to a person or entity other than the
Company or one of its affiliates, the Company or the affiliate shall
require that person or entity to assume the payment obligations to
Consultant under this Agreement for the remainder of the relevant periods.
8. EXPENSES
The Company shall reimburse Consultant for her reasonable business expenses
related to her services under this Agreement, as follows.
<PAGE>
- 6 -
The Company, after discussion with Consultant, shall establish a monthly
limit for business expenses other than travel; expenses in excess of that
limit must be approved by the Company's Chief Executive Officer (or his
designee) prior to Consultant's incurring such expenses. As for travel,
the Company shall reimburse Consultant for reasonable travel expenses
incurred in the performance of Consultant's duties, provided that such
travel is pre-approved by the Company.
The Company shall reimburse Consultant for the above expenses within thirty
days of Consultant's submission to the Company of a claim for such
expenses, together with appropriate supporting documentation.
9. NON-COMPETITION
During the term of this Agreement and for five (5) years after Consultant
receives the last compensation payment under this Agreement, Consultant
shall not engage in any activities that compete with: (a) any business
conducted by the Company or any of its affiliates in the Territory; or (b)
any business development activities involving the Company or its affiliates
in the Territory on which Consultant's advice and/or services are provided
pursuant to this Agreement.
During the term of this Agreement and for five (5) years after Consultant
receives the last payment under this Agreement, Consultant shall not enter
into any consulting agreement with or provide advice or services to any
entity that competes with the Company or any of its affiliates if the
agreement, advice and/or services contemplated are the same as, or
substantially similar to, those that are provided by Consultant pursuant to
this Agreement.
10. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION
During the term of this Agreement and at any time thereafter, Consultant
shall not divulge, use, furnish, disclose or make accessible to anyone
other than the appropriate personnel of Company or its affiliates, any
Confidential Information, defined below, without the written permission of
Company or its appropriate affiliate(s).
For purposes of this Agreement, "Confidential Information" means any and
all information, data and knowledge that has been created, discovered,
developed or has otherwise become known to Company or any of its
affiliates. This includes all information, data and knowledge created,
discovered, developed or made known to Consultant during the period of or
arising out of Consultant's engagement, or in which property rights have
been assigned or otherwise conveyed to Company, its affiliates,
<PAGE>
- 7 -
or any business in which Company or any of its affiliates has an interest.
The meaning of "Confidential Information" also encompasses information,
data or knowledge as described above that has commercial value in the
businesses in which the Company, its affiliates, or an entity in which
Company or its affiliates has an interest is engaged, unless such
information, data or knowledge is known or becomes known to the public
without violation of the terms of this Agreement. By way of illustration,
but not limitation, "Confidential Information" includes trade secrets,
processes, formulas, know-how, improvements, discoveries, developments,
designs, inventions, techniques, marketing plans, strategies, forecasts,
new products, unpublished financial statements or parts thereof, budgets,
projections, licenses, prices, costs and employee, customer and supplier
lists.
Upon the expiration of this Agreement, Consultant shall deliver to the
Company or its appropriate affiliate(s), all documents, reports, notes,
drawings, specifications, programs, and data and other materials of any
nature related to the services and advice provided by Consultant to Company
and/or its affiliates, as well as any business referred to in this Section.
Consultant shall not retain any original or copies of that material or any
other Confidential Information in whatever form.
11. INJUNCTIVE RELIEF
Consultant acknowledges that the non-competition and non-disclosure
obligations in Sections 9 and 10 are necessary for the protection of the
Company and its affiliates, and that any breach of those provisions will
cause the Company and its affiliates irreparable damage. Therefore,
Consultant agrees that the Company is entitled to an injunction enjoining
the breach or threatened breach of those non-competition and non-disclosure
obligations. Consultant also acknowledges that this Section is not a
waiver of any other remedies the Company may have in law or in equity.
12. INDEMNIFICATION
Consultant shall indemnify and hold the Company and its affiliates harmless
against all liabilities, claims, suits, losses, and expenses that arise out
of the negligence or willful misconduct of the Consultant or her employees
or agents either (a) pursuant to this Agreement, or (b) as the purported
agent of the Company or any of its affiliates.
<PAGE>
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13. 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.
14. NOTICE
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:
TO THE COMPANY:
National Medical Care, Inc.
1601 Trapelo Road
Waltham, MA 02154
TO CONSULTANT:
Virginia A. Kamsky
563 Park Avenue
New York, NY 10021
15. ASSIGNMENT
Consultant shall not be permitted to assign her rights or delegate her
obligations under this Agreement without the Company's prior written
consent.
16. ENTIRE AGREEMENT
This Agreement contains the entire agreement of the parties as to its
subject matter, and it supersedes all previous and contemporaneous
agreements and understandings, inducements or conditions, expressed or
implied, oral or written, between the parties as to that subject matter.
No waiver, modification or change of any of the provisions of this
Agreement shall be valid unless done in writing and signed by the parties
against whom such claimed waiver, modification or change is to be enforced.
16. GOVERNING LAW
This Agreement shall be construed in accordance with and governed by the
laws of the State of New York.
<PAGE>
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In witness to this Agreement, the parties' authorized representatives have
signed this Agreement as of the date first above written.
NATIONAL MEDICAL CARE, INC.
By:____________________________
____________________________
Virginia A. Kamsky
<PAGE>
Exhibit 10.27
March 1, 1995
Mr. Jean-Louis Greze
Executive Vice President
W. R. Grace & Co.
One Town Center Road
Boca Raton, FL 33486-1010
Dear Jean-Louis:
This letter describes certain arrangements that will apply to you during
and after your current assignment as Executive Vice President, W. R. Grace & Co.
and President, Grace Packaging. During that assignment, you will be an employee
of W. R. Grace & Co. or one of its subsidiaries or affiliates (collectively
referred to herein as the "Company") and be based at Grace Headquarters in Boca
Raton, Florida.
I. ALLOWANCES. During your assignment, the Company will provide you
with the following allowances:
SCHOOL FEES. The Company will continue to pay tuition and related
fees associated with the education of your son, up to but not
inclusive of college.
HOME LEAVE. The Company will reimburse you for the cost of one
roundtrip Business Class flight per calendar year between Florida
and Switzerland for your wife and son.
COMPANY CAR. You will be provided with a Company-leased car in
accordance with the policy applicable to Grace Headquarters
executives.
HOUSING LOAN. The Company has provided you with a $400,000 non-
interest-bearing loan to assist you in the purchase of a house in
Florida that will be your principal residence during the assignment,
such loan to
<PAGE>
Mr. Jean-Louis Greze
Page 2
March 1, 1995
be secured by a mortgage on the house. You have agreed
to repay that loan upon your retirement or other termination of
service with the Company.
II. REPATRIATION. At the end of your current assignment, which is
targeted to be on or about August 1, 1996, the Company will provide you with the
following relocation assistance should you and your family wish to be
repatriated to Switzerland at that time:
COST OF MOVE. The Company will reimburse you for the cost of
Business Class air fare and incidental expenses related to the
relocation of you and your immediate family back to Switzerland.
The Company will pay for the packing, transporting, unpacking and
insurance of all your household effects from Florida to Switzerland,
provided that moving your household effects is coordinated through
the Grace International Human Resources Department, using a moving
company designated by that Department.
SALE OF RESIDENCE. Grace will offer to purchase your Florida
residence for its Fair Market Value ("FMV"), established as
described in this paragraph. The FMV of your Florida residence will
be established by securing and averaging two appraisals made by
professional appraisers selected by the International Human
Resources Department. If the appraisals vary by five (5) percent or
more, a third appraisal will be obtained, and the average of the two
closer appraisals will be the FMV of your Florida residence.
From the date the Company notifies you in writing of the FMV of your
Florida residence, you will have sixty (60) days to accept, in
writing to the International Human Resources Department, the
Company's offer to purchase your residence at the FMV. You may,
instead, elect to reject that offer and sell your residence without
assistance from the Company, in which case the Company will be under
no obligation to reimburse you for a sale price below the FMV or for
maintenance or carrying expenses.
<PAGE>
Mr. Jean-Louis Greze
Page 3
March 1, 1995
Failure to accept, in writing, the established FMV within the 60-day
period described above will be deemed a rejection of the Company's
offer to purchase the residence at FMV.
Should you sell your Florida residence without the assistance of the
Company, the Company will nevertheless reimburse you for reasonable
and documented expenses that are incidental to the sale, such as any
real estate commission, attorney's fees (or bank service fees if in
lieu of attorney's fees), penalties for mortgage prepayment, revenue
stamps, recording or discharge of mortgage, transfer taxes, title
evidence based on local practice, and advertising expenses if no
real estate commission is involved.
III. PENSION.
During your current assignment, you will continue to participate in
the Company's Swiss Pension Plan until July 31, 1996 or your
termination of service, if earlier. Your final average salary for
purposes of determining your benefits under that plan will be based
on the following notional salary schedule:
AMOUNT EFFECTIVE
SFr. 555,000 January 1, 1990
SFr. 600,000 July 1, 1991
SFr. 645,000 January 1, 1993
SFr. 695,000 July 1, 1994
SFr. 745,000 January 1, 1996
Additionally, all continuous service rendered to the Company
(including service during your current assignment) will be counted
in calculating the amount of the benefits payable to you from the
Company's Swiss Pension Plan.
<PAGE>
Mr. Jean-Louis Greze
Page 4
March 1, 1995
The Company will, of course, be responsible for, and make, any
payments to the Swiss Pension Plan that are necessary as a result of
your continued participation in that Plan in accordance with this
Section III.
In the event your employment is involuntarily terminated (not for
cause) by the Company prior to August 1, 1996, you will commence to
receive, as of the date of your termination, a lifetime annuity from
the Company's Swiss Pension Plan based on (i) the amount of
continuous service that you would have had with the Company if you
had remained an employee and continued to participate in the
Company's Swiss Pension Plan until August 1, 1996 and (ii) your
final average salary as of the date of your termination of
employment, based on the notional salary schedule specified above.
Any benefits payable to you from the French Repartition and Social
Security Systems will be offset against the amount of benefits due
to you from the Company's Swiss Pension Plan in accordance with this
Section III.
The agreement regarding your pension coverage described in this
Section III is in lieu of, and replaces, all coverages previously
provided to you under the Company's Third Country National Plan (TCN
Plan), and you will, therefore, not receive any benefits under the
TCN Plan.
IV. MISCELLANEOUS.
This letter is not intended to be a guarantee of employment, and you and
the Company each have the right to terminate your employment at any time and for
any reason.
<PAGE>
Mr. Jean-Louis Greze
Page 5
March 1, 1995
Please acknowledge your agreement to the arrangements described in this
letter by signing where indicated below and returning one fully executed copy to
me. An additional copy of this letter is enclosed for your records.
Very truly yours,
W. R. Grace & Co.
By: ___________________
Donald H. Kohnken
Executive Vice President
Agreed to:
___________________
Jean-Louis Greze
___________________
Date
<PAGE>
[GRACE Logo]
Eben W. Pyne
W. R. Grace & Co.
One Town Center Road
Boca Raton, FL 33486-1010
Exhibit 10.28
March 7, 1995
Mr. J. P. Bolduc
3000 South Ocean Boulevard
Boca Raton, FL 33432
Dear JP,
This will confirm the arrangements relating to your retirement as
President and Chief Executive Officer of W. R. Grace & Co. ("Company"), which
have previously been approved by you and by the Board of Directors of the
Company on the recommendation of its Compensation, Employee Benefits and Stock
Incentive Committee, as well as the three-person special Committee of the Board
appointed to negotiate these arrangements with you. These arrangements follow:
1. You have resigned your positions as President and Chief Executive
Officer of the Company effective March 3, 1995. You will remain an employee and
be paid through and be retired on March 31, 1995.
2. You agree that your Employment Agreement with the Company, as
amended, will terminate and be of no further force and effect effective March 3,
1995. In consideration of the termination of your Employment Agreement, the
Company agrees to pay you $5,062,208, less applicable tax withholding, promptly
following the execution of this letter (see Exhibit I). This payment is in lieu
of monthly severance payments for the balance of the term of your Employment
Agreement and renders inoperable the provision dealing with reducing monthly
severance payments by outside "Earned Income".
3. In addition, effective immediately following your retirement on
March 31, 1995:
- You are entitled to receive a gross pension benefit, before
adjustments and tax withholding, of $1,081,000 per year. (This
pension benefit is calculated in accordance with the terms of your
<PAGE>
-2-
Employment Agreement. It will not be reduced because of age (62 vs.
55 years).
- It will include full pension benefits to be paid to you as though you
were 62 years of age and, based on your plan to elect a 100% joint and
survivor benefit, it will be adjusted for such election. Therefore,
after adjusting for joint and survivor, your annual pension benefit
will be $848,584.92, less applicable tax withholding.
Full post-retirement medical -- family medical plan -- will be
provided to you and your spouse for life, as it may be continued or amended from
time to time, with your cost share monthly payment equal to the amount paid by
other retirees, currently at $276.36 and such amount as it may be adjusted from
time to time for similarly situated retirees.
4. You will continue to receive your current split dollar life
insurance coverage (Confederation Life Policy Nos. 5-181-624 and 5-181-625 or
their successors) with a total face value of $4.5 million. Annual premiums will
continue to be shared by you and the Company as scheduled according to your age.
These terms, as well as all other terms and conditions of the policies, will
continue in full force and effect under the same terms and conditions as similar
policies are maintained for other executives of the Company. At age 68, when
these policies are transferred to you, they are expected to have an estimated
total face value of $5,420,000 and estimated aggregate cash surrender values of
$2,068,000, although it is understood these figures will depend on the
performance of the policies (and the insurance carrier's dividends) and are not
guaranteed by the Company.
5. In total, you currently own 268,348 common shares.
Notwithstanding any restrictions in effect as to any such shares of Company
Common Stock awarded to you under a restricted stock award program or any other
form of restriction, these 268,348 shares will be purchased promptly, following
the execution of this letter, by the Company at $45 per share for total proceeds
due you of $12,075,660, less applicable tax withholdings with respect to 5,725
shares which were previously not vested (see Exhibit II).
6. Your participation in the Company's Long-Term Incentive Program for
the 1993-94-95 and the 1994-95-96 periods will be paid to you, less applicable
tax withholding, on the execution of this letter (see Exhibit III) as follows:
1993-1995 Performance Period $ 812,500
1994-1996 Performance Period 437,500
----------
TOTAL $1,250,000
<PAGE>
-3-
7. You previously have been granted 655,000 stock options under a
stock incentive plan of the Company. Of these 655,000, 290,000 are not fully
exercisable. In consideration of your retirement from the Company, options on
those 290,000 shares will be immediately fully vested. Therefore, options on
all 655,000 shares are immediately exercisable and may be exercised at any time
during the 36-month grace period following your retirement through March 31,
1998.
8. Your total Deferred Compensation balance of $1,529,604, as of
February 28, 1995, consists of the following balances:
- $290,295 plus interest to date of payment, less applicable taxes,
payable in lump sum on April 30, 1995,
- $1,180,502 payable in quarterly installments over 10 years beginning
6/30/95, and
- $58,807 payable quarterly over ten years beginning at the end of the
quarter following the date on which you notify the Company of your
permanent retirement from any employer.
You agreed that in consideration of your retirement from the Company, these
balances would be consolidated into one single balance which will be payable in
quarterly installments over ten years beginning June 30, 1995, in accordance
with all terms and conditions of the Company's Deferred Compensation Program.
9. Your Savings and Investment balance of $582,343 does not include
the February 1995 second pay period savings/contributions or Fixed Income Fund
earnings for February. These amounts will be posted and adjusted accordingly.
You may elect to receive these monies at any time in either of the following
ways:
Lump Sum
Installments
Deferred payment until you attain the age of 70-1/2
You will be paid a Savings and Investment Plan Replacement payment of
$40,110 for 1995, less applicable tax withholding (see Exhibit IV).
10. Your outstanding interest-free loan in the amount of $400,000
will be repaid by you by offsetting this $400,000 from any amount due you from
the Company on execution of this letter.
<PAGE>
-4-
11. You will also receive, in consideration of your retirement:
- Your 1995 Mercedes Benz 500S -- serial number WDBGA51E8SA230142
- Your desk, credenza and three chairs
- Reasonable legal fees associated with your negotiated retirement --
estimated at about $25,000
If this letter correctly sets forth our understanding, please sign the
accompanying copy and return it to Robert B. Lamm, Secretary of the Company, One
Town Center Road, Boca Raton, FL 33486-1010.
Very truly yours,
/S/ EBEN W. PYNE
Eben W. Pyne, Chairman
Compensation, Employee
Benefits and Stock
Incentive Committee
Accepted and Agreed to:
/S/ J. P. BOLDUC
-----------------------------------
J. P. Bolduc
<PAGE>
J.P. BOLDUC
Exhibit I
Employment Agreement Resolution $5,062,208.00
Less: FIT @ 28% 1,417,418.24
HI @ 1.45% 73,402.02
Net $3,571,387.74
<PAGE>
J.P. BOLDUC
Exhibit II
Company Stock Repurchase $12,075,660.00
(reportable income IRS Form 1099 B)
Repayment of Housing Loan (400,000.00)
SEC "Short Swing" profit regulation compliance
return of profit of $6.125 per share for 800 shares (4,900.00)
Taxes due on transfer of automobile (23,715.01)
($80,526.36 W-2 income - market value)
FIT @ 28% 22,547.38
HI @ 1.45% 1,167.63
Tax on vesting fourth installment 1992 (74,184.55)
restricted share award
$251,900.00 W-2 income 5725 shares @ $45.00
per share less $5,275.00
FIT @ 28% 70,532.00
HI @ 1.45% 3,652.55
Net $11,572,860.44
<PAGE>
J.P. BOLDUC
Exhibit III
a) 1993 - 1995 LTIP $812,500.00
Less: FIT @ 28% 227,500.00
HI @ 1.45% 11,781.25
Net $573,218.75
b) 1994 - 1996 LTIP $437,500.00
Less: FIT @ 28% 122,500.00
HI @ 1.45% 6,343.75
Net $308,656.25
<PAGE>
J.P. BOLDUC
Exhibit IV
Savings & Investment Plan
Replacement Payment 1995 $40,110.00
Less: FIT @ 28% 11,230.80
HI @ 1.45% 581.60
Net $28,297.60
<PAGE>
AGREEMENT
Agreement made this 2nd day of March, 1995 between W. R. Grace & Company
(the "Company") and J. P. Bolduc ("Mr. Bolduc"):
A. The parties agree to make no disclosure to any third person with
respect to Mr. Bolduc's resignation except as may be required by law or pursuant
to an order from a Court or Administrative Agency of competent Jurisdiction or
in response to relevant questions posed in testimony or in response to relevant
discovery requests in any proceedings commenced by a third party to the extent
necessary for defense, and except as follows:
1. The parties may make any statement concerning the business and
financial operations of the Company during Mr. Bolduc's tenure as an officer of
the Company and concerning his management of the Company;
2. If any inquiry is made relating to Mr. Bolduc, other than concerning
the operations and financial results of the Company, and his management of the
Company, and if the Company determines that a public statement is required to be
made or if Mr. Bolduc determines that the Company should make such a statement
and communicates that determination to the Company, then the Company will state
only that no complaint of misconduct has ever been filed against Mr. Bolduc.
The parties also agree that any violation of Paragraph A of this Agreement
by any officer, director and/or employee of the Company shall be grounds for
dismissal from his/her position as officer, director and/or employee.
B. The parties shall enter into an Agreement providing to Mr. Bolduc the
monetary compensation, severance and other benefits
<PAGE>
set forth in the letter and schedule attached hereto.
C. The Company shall pay all reasonable legal fees incurred by Mr. Bolduc
in connection with his resignation and negotiation of this Agreement.
D. Mr. Bolduc agrees that, until he reaches the age of 62, he will not
engage in any business which is in substantial competition with the Company in
any of the Company's current six core businesses.
E. In consideration of the mutual undertakings of the parties and for
other good and valuable consideration, receipt of which is hereby acknowledged,
Mr. Bolduc agrees to release the Company, its subsidiaries and affiliates, and
their respective directors, officers, employees, agents and representatives in
their corporate capacity, as well as any individual who consulted with or
provided information to the Board of Directors and any committee thereof in
connection with Mr. Bolduc's resignation as an employee of the Company, and the
Company agrees to release Mr. Bolduc, from any and all claims, causes of action
or demands against each other, including without limitation any such matters
arising out of, or related to, Mr. Bolduc's employment by the Company and his
resignation from such employment with the exception of any claims by Mr. Bolduc
or the Company with respect to his or its rights under this Agreement.
Notwithstanding the foregoing, the Company agrees that Mr. Bolduc shall continue
to be indemnified by the Company to the full extent permitted under the
Company's By-Laws
<PAGE>
and Charter as now in effect for all actions taken by Mr. Bolduc on behalf of
the Company during his period of employment.
W. R. GRACE & COMPANY
By: /s/ T. A. Holmes
--------------------
/s/ J. P. Bolduc
-------------------------
J. P. Bolduc
<PAGE>
Exhibit 10.29
April 1, 1991
National Medical Care, Inc.
Reservoir Place
1601 Trapelo Road
Waltham, MA 02154
Gentlemen:
Reference is made to (a) the Employment Agreement between National
Medical Care, Inc. ("NMC") and the undersigned, Constantine L. Hampers, M.D.
("Employee"), dated March 17, 1989, as amended December 22, 1989 (the "Old
Employment Agreement"), and (b) the Employment Agreement, dated as of April 1,
1991, with W. R. Grace & Co. ("Grace")(the "Grace Agreement").
The purpose of this letter is to terminate, effective April 1, 1991, the
Old Employment Agreement, except as expressly provided herein.
1. USE OF AUTOMOBILE. NMC will provide Employee, at NMC's sole expense,
so long as employee is employed by Grace, or as a consultant to Grace,
pursuant to the provisions of the Grace Agreement, an automobile
(including all costs of maintenance and repair thereof) and a driver for use
by Employee. Such automobile shall be of a manufacture and model similar to
the automobile presently being furnished by NMC to employee pursuant to
Article III(C) of the Old Employment Agreement. Such automobile shall be made
available for the exclusive use of Employee and shall be upgraded at such time
or times as NMC and Employee shall mutually agree. Upon termination of
Employee's employment with Grace or upon termination of his consulting
relationship with Grace, Employee may elect at his option to require NMC (a)
if the automobile is leased by NMC, to assign to Employee the leasing
agreements (or subleasing agreements, as the case may be) covering the
automobile, including the right to purchase, if any, under such leasing or
subleasing agreements, or (b) if such automobile is owned by NMC, to sell to
Employee such automobile at the then net book value as of the end of the month
preceding such termination. Employee shall make such election within 30 days
following termination of his employment or consultancy, or if later, 30
days after Employee receives written notice from NMC specifying the net book
value of the automobile.
2. MEDICAL COVERAGE. During Employee's employment with Grace and/or
continuation of his consulting relationship with Grace pursuant to the
provisions of the Grace Agreement, NMC will provide Employee, his spouse and
children, comprehensive medical and dental coverage, at no cost to Employee,
provided,
<PAGE>
however, that such medical coverage may be terminated as to any
child of Employee when such child ceases to be a student (graduate as well
as undergraduate) and changes his principal residential address to one that is
not the Employee's residential address.
If you are in agreement with the foregoing, would you please sign the
duplicate copy of this letter and return it to the Employee, whereupon this
letter shall constitute a binding agreement between NMC and Employee, the Old
Employment Agreement will terminate and be of no further force and effect,
except as may otherwise be provided in the Grace Agreement.
Very truly yours,
Constantine L. Hampers, M.D.
ACCEPTED AND APPROVED
This 29th day of July, 1991
NATIONAL MEDICAL CARE, INC.
By: ________________________
President
-2-
<PAGE>
Exhibit 21
March 21, 1995
W. R. GRACE & CO.
SUBSIDIARY LIST
-----------------
Attached is a list of subsidiaries of W. R. Grace & Co. at March 21, 1995.
United States subsidiaries (including those in Puerto Rico and the Virgin
Islands) are listed alphabetically indicating the state of incorporation,
ownership (by whom) and any notes that may pertain to the subsidiary. W. R.
Grace & Co.-Conn. ("Grace-Conn.") is the sole owner of the stock of each
subsidiary listed unless otherwise noted OR indicated by an "A", which means
that the subsidiary is owned either (1) jointly by Grace-Conn. and one or more
of its United States or non-United States wholly owned subsidiaries OR (2)
solely by one or more of those subsidiaries.
Non-United States subsidiaries are listed alphabetically by country and
also indicate the ownership (percentage and by whom) and any notes that may
pertain to the subsidiary.
Also attached is a list of partnerships in which Grace-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 Grace-Conn. and/or one or more of its
subsidiaries.
<PAGE>
UNITED STATES SUBSIDIARIES
<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY NAME INCORP. OWNERSHIP NOTES
--------------- --------- --------- -----
<S> <C> <C> <C>
A-1 Bit & Tool Co., Inc. . . . . . . . . . . . . . . . . . . . . DE A
Advanced Integrated Medical Services, Inc. . . . . . . . . . . . NJ A
Agracetus, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . DE
Alewife Boston Ltd. . . . . . . . . . . . . . . . . . . . . . . MA A
Alewife Land Corporation . . . . . . . . . . . . . . . . . . . . MA A
Amasi Medical Group, Inc.. . . . . . . . . . . . . . . . . . . . CA A 2
Ambulatory Care Associates, Inc. . . . . . . . . . . . . . . . . DE A
American Home Therapies, Inc.. . . . . . . . . . . . . . . . . . MD A
American Homecare Equipment, Inc.. . . . . . . . . . . . . . . . VA 4
Amicon, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . DE A
Babcock Artificial Kidney Center, Inc. . . . . . . . . . . . . . MA A
Berisford Cocoa Sales, Inc.. . . . . . . . . . . . . . . . . . . NJ 2
Bio-Medical Applications Home Dialysis Services, Inc.. . . . . . DE A
Bio-Medical Applications Management Company, Inc.. . . . . . . . DE A
Bio-Medical Applications of Aguadilla, Inc.. . . . . . . . . . . DE A
Bio-Medical Applications of Alabama, Inc.. . . . . . . . . . . . DE A
Bio-Medical Applications of Alameda County, Inc. . . . . . . . . DE A
Bio-Medical Applications of Anacostia, Inc.. . . . . . . . . . . DE A
Bio-Medical Applications of Arecibo, Inc.. . . . . . . . . . . . DE A
Bio-Medical Applications of Arizona, Inc.. . . . . . . . . . . . DE A
Bio-Medical Applications of Arkansas, Inc. . . . . . . . . . . . DE A
Bio-Medical Applications of Bakersfield, Inc.. . . . . . . . . . DE A
Bio-Medical Applications of Bayamon, Inc.. . . . . . . . . . . . DE A
Bio-Medical Applications of Blue Springs, Inc. . . . . . . . . . DE A
Bio-Medical Applications of Boston, Inc. . . . . . . . . . . . . DE A
Bio-Medical Applications of Brockton, Inc. . . . . . . . . . . . DE A
Bio-Medical Applications of Caguas, Inc. . . . . . . . . . . . . DE A
Bio-Medical Applications of California, Inc. . . . . . . . . . . DE A
Bio-Medical Applications of Camarillo, Inc.. . . . . . . . . . . DE A
Bio-Medical Applications of Cape Cod, Inc. . . . . . . . . . . . DE A
Bio-Medical Applications of Capitol Hill, Inc. . . . . . . . . . DE A
Bio-Medical Applications of Carolina, Inc. . . . . . . . . . . . DE A
Bio-Medical Applications of Carson, Inc. . . . . . . . . . . . . DE A
</TABLE>
- 2 -
<PAGE>
<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY NAME INCORP. OWNERSHIP NOTES
--------------- --------- --------- -----
<S> <C> <C> <C>
Bio-Medical Applications of Central Baltimore, Inc.. . . . . . . DE A
Bio-Medical Applications of Chicopee, Inc. . . . . . . . . . . . DE A
Bio-Medical Applications of Chula Vista, Inc. . . . . . . . . . DE A 2
Bio-Medical Applications of Clinton, Inc.. . . . . . . . . . . . DE A
Bio-Medical Applications of Colorado, Inc. . . . . . . . . . . . DE A
Bio-Medical Applications of Columbia Heights, Inc. . . . . . . . DE A
Bio-Medical Applications of Delaware, Inc. . . . . . . . . . . . DE A
Bio-Medical Applications of Dover, Inc.. . . . . . . . . . . . . DE A
Bio-Medical Applications of Dublin, Inc. . . . . . . . . . . . . DE A
Bio-Medical Applications of East Orange, Inc. . . . . . . . . . DE A
Bio-Medical Applications of Essex, Inc.. . . . . . . . . . . . . DE A
Bio-Medical Applications of Eureka, Inc. . . . . . . . . . . . . DE A
Bio-Medical Applications of Fajardo, Inc.. . . . . . . . . . . . DE A
Bio-Medical Applications of Fayetteville, Inc. . . . . . . . . . DE A
Bio-Medical Applications of Florida, Inc.. . . . . . . . . . . . DE A
Bio-Medical Applications of Framingham, Inc. . . . . . . . . . . DE A
Bio-Medical Applications of Fremont, Inc.. . . . . . . . . . . . DE A
Bio-Medical Applications of Fresno, Inc. . . . . . . . . . . . . DE A
Bio-Medical Applications of Georgia, Inc.. . . . . . . . . . . . DE A
Bio-Medical Applications of Glendora, Inc. . . . . . . . . . . . DE A
Bio-Medical Applications of Guayama, Inc.. . . . . . . . . . . . DE A
Bio-Medical Applications of Hayward, Inc.. . . . . . . . . . . . DE A
Bio-Medical Applications of Hillside, Inc. . . . . . . . . . . . DE A
Bio-Medical Applications of Hoboken, Inc.. . . . . . . . . . . . DE A
Bio-Medical Applications of Humacao, Inc.. . . . . . . . . . . . DE A
Bio-Medical Applications of Illinois, Inc. . . . . . . . . . . . DE A
Bio-Medical Applications of Indiana, Inc.. . . . . . . . . . . . DE A
Bio-Medical Applications of Irvington, Inc.. . . . . . . . . . . DE A
Bio-Medical Applications of Jersey City, Inc. . . . . . . . . . DE A
Bio-Medical Applications of Kentucky, Inc. . . . . . . . . . . . DE A
Bio-Medical Applications of La Mesa, Inc.. . . . . . . . . . . . DE A 2
Bio-Medical Applications of Las Americas, Inc. . . . . . . . . . DE A
Bio-Medical Applications of Long Beach, Inc. . . . . . . . . . . DE A
Bio-Medical Applications of Los Angeles, Inc. . . . . . . . . . DE A
</TABLE>
- 3 -
<PAGE>
<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY NAME INCORP. OWNERSHIP NOTES
--------------- --------- --------- -----
<S> <C> <C> <C>
Bio-Medical Applications of Los Gatos, Inc.. . . . . . . . . . . DE A
Bio-Medical Applications of Louisiana, Inc.. . . . . . . . . . . DE A
Bio-Medical Applications of Maine, Inc.. . . . . . . . . . . . . DE A
Bio-Medical Applications of Manchester, Inc. . . . . . . . . . . DE A
Bio-Medical Applications of Maryland, Inc. . . . . . . . . . . . DE A
Bio-Medical Applications of Massachusetts, Inc. . . . . . . . . DE A
Bio-Medical Applications of Mayaguez, Inc. . . . . . . . . . . . DE A
Bio-Medical Applications of Medford, Inc.. . . . . . . . . . . . DE A
Bio-Medical Applications of Michigan, Inc. . . . . . . . . . . . DE A
Bio-Medical Applications of Mission Hills, Inc. . . . . . . . . DE A
Bio-Medical Applications of Mississippi, Inc. . . . . . . . . . DE A
Bio-Medical Applications of Missouri, Inc. . . . . . . . . . . . DE A
Bio-Medical Applications of MLK, Inc.. . . . . . . . . . . . . . DE A
Bio-Medical Applications of National City, Inc . . . . . . . . . DE A 2
Bio-Medical Applications New Hampshire, Inc. . . . . . . . . . . DE A
Bio-Medical Applications of New Jersey, Inc. . . . . . . . . . . DE A
Bio-Medical Applications of New Mexico, Inc. . . . . . . . . . . DE A
Bio-Medical Applications of New York, Inc. . . . . . . . . . . . DE A
Bio-Medical Applications of Newington, Inc.. . . . . . . . . . . DE A
Bio-Medical Applications of North Carolina, Inc. . . . . . . . . DE A
Bio-Medical Applications of North City, Inc. . . . . . . . . . . DE A 2
Bio-Medical Applications of Northeast D.C., Inc. . . . . . . . . DE A
Bio-Medical Applications of Oakland, Inc.. . . . . . . . . . . . DE A
Bio-Medical Applications of Ohio, Inc. . . . . . . . . . . . . . DE A
Bio-Medical Applications of Oklahoma, Inc. . . . . . . . . . . . DE A
Bio-Medical Applications of Pennsylvania, Inc. . . . . . . . . . DE A
Bio-Medical Applications of Pine Brook, Inc. . . . . . . . . . . DE A
Bio-Medical Applications of Ponce, Inc.. . . . . . . . . . . . . DE A
Bio-Medical Applications of Port Orange, Inc. . . . . . . . . . DE A 2
Bio-Medical Applications of Puerto Rico, Inc. . . . . . . . . . DE A
Bio-Medical Applications of Quincy, Inc. . . . . . . . . . . . . DE A
Bio-Medical Applications of Rhode Island, Inc. . . . . . . . . . DE A
Bio-Medical Applications of Rio Piedras, Inc. . . . . . . . . . DE A
Bio-Medical Applications of San German, Inc. . . . . . . . . . . DE A
</TABLE>
- 4 -
<PAGE>
<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY NAME INCORP. OWNERSHIP NOTES
--------------- --------- --------- -----
<S> <C> <C> <C>
Bio-Medical Applications of San Juan, Inc. . . . . . . . . . . . DE A
Bio-Medical Applications of Sarasota, Inc. . . . . . . . . . . . DE A 2
Bio-Medical Applications of South Carolina, Inc. . . . . . . . . DE A
Bio-Medical Applications of South Queens, Inc. . . . . . . . . . DE A
Bio-Medical Applications of Southeast San Diego, Inc.. . . . . . DE A 2
Bio-Medical Applications of Southeast Washington, Inc. . . . . . DE A
Bio-Medical Applications of Southeastern Massachusetts, Inc. . . DE A
Bio-Medical Applications of Springfield, Inc.. . . . . . . . . . DE A
Bio-Medical Applications of Tarpon Springs, Inc. . . . . . . . . DE A 2
Bio-Medical Applications of Tennessee, Inc.. . . . . . . . . . . DE A
Bio-Medical Applications of Texas, Inc.. . . . . . . . . . . . . DE A
Bio-Medical Applications of The District of Columbia, Inc. . . . DE A
Bio-Medical Applications of Torrance, Inc. . . . . . . . . . . . DE A
Bio-Medical Applications of Trenton, Inc.. . . . . . . . . . . . DE A
Bio-Medical Applications of Ukiah, Inc.. . . . . . . . . . . . . DE A
Bio-Medical Applications of Union City, Inc. . . . . . . . . . . DE A
Bio-Medical Applications of Virginia, Inc. . . . . . . . . . . . DE A
Bio-Medical Applications of West Virginia, Inc.. . . . . . . . . DE A
Bio-Medical Applications of Westwood, Inc. . . . . . . . . . . . DE A
Bio-Medical Applications of Whittier, Inc. . . . . . . . . . . . DE A
Bio-Medical Applications of Wisconsin, Inc.. . . . . . . . . . . DE A
Bio-Medical Applications of Woonsocket, Inc. . . . . . . . . . . DE A
Bio-Trax International, Inc. . . . . . . . . . . . . . . . . . . DE A
Braddley Dialysis Clinic, Inc. . . . . . . . . . . . . . . . . . TN A
Clinical Diagnostic Systems, Inc.. . . . . . . . . . . . . . . . FL A
Coalgrace, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . DE A
Coalgrace II, Inc. . . . . . . . . . . . . . . . . . . . . . . . DE A
Conejo Valley Dialysis, Inc. . . . . . . . . . . . . . . . . . . CA A 2
Continue Care Pharmaceuticals, Inc.. . . . . . . . . . . . . . . WY A
Continue Care of Wyoming, Inc. . . . . . . . . . . . . . . . . . WY A
Contruction Products Dubai, Inc. . . . . . . . . . . . . . . . . DE
Creative Food 'N Fun Company . . . . . . . . . . . . . . . . . . DE A
D Interim, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . GA A
Darex Puerto Rico, Inc.. . . . . . . . . . . . . . . . . . . . . DE
</TABLE>
- 5 -
<PAGE>
<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY NAME INCORP. OWNERSHIP NOTES
--------------- --------- --------- -----
<S> <C> <C> <C>
De Zaan, Incorporated. . . . . . . . . . . . . . . . . . . . . . NY 6
Del Taco Restaurants, Inc. . . . . . . . . . . . . . . . . . . . DE
Dewey and Almy Company . . . . . . . . . . . . . . . . . . . . . MA
Dialysis Assistance, Inc. . . . . . . . . . . . . . . . . . . . NJ A
Dialysis Associates West, Inc. . . . . . . . . . . . . . . . . . TN A
Dialysis Management Group, Inc.. . . . . . . . . . . . . . . . . TN A
Dialysis Services, Inc. . . . . . . . . . . . . . . . . . . . . TX A
Ecarg, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . NJ
Emerson & Cuming, Inc. . . . . . . . . . . . . . . . . . . . . . DE
Erika International Sales Corporation. . . . . . . . . . . . . . DE A 2
Erika of Texas, Inc. . . . . . . . . . . . . . . . . . . . . . . DE A
Five Alewife Boston Ltd. . . . . . . . . . . . . . . . . . . . . MA A
G/B Cocoa Holding Inc. . . . . . . . . . . . . . . . . . . . . . DE 6
GC Holding Inc.. . . . . . . . . . . . . . . . . . . . . . . . . DE
GEC Management Corporation . . . . . . . . . . . . . . . . . . . DE A
GPC Thomasville Corp.. . . . . . . . . . . . . . . . . . . . . . DE A
Gloucester New Communities Company, Inc. . . . . . . . . . . . . NJ A
Grace A-B Inc. . . . . . . . . . . . . . . . . . . . . . . . . . DE A
Grace- A-B II Inc. . . . . . . . . . . . . . . . . . . . . . . . DE A
Grace Asia Pacific, Inc. . . . . . . . . . . . . . . . . . . . . DE
Grace Chemicals, Inc.. . . . . . . . . . . . . . . . . . . . . . DE
Grace Chemical Company of Cuba . . . . . . . . . . . . . . . . . IL 5
Grace Cocoa, Inc.. . . . . . . . . . . . . . . . . . . . . . . . DE 6
Grace Cocoa Limited Partners I, Inc. . . . . . . . . . . . . . . DE
Grace Cocoa Limited Partners II, Inc.. . . . . . . . . . . . . . DE
Grace Cocoa Management, Inc. . . . . . . . . . . . . . . . . . . DE
Grace Cocoa Ventures, Inc. . . . . . . . . . . . . . . . . . . . DE
Grace Collections, Inc.. . . . . . . . . . . . . . . . . . . . . DE
Grace Communications, Inc. . . . . . . . . . . . . . . . . . . . DE
Grace Culinary Systems, Inc. . . . . . . . . . . . . . . . . . . MD
Grace Drilling Company . . . . . . . . . . . . . . . . . . . . . DE A
Grace Drilling International-Venezuela, Inc. . . . . . . . . . . DE A
Grace Energy Corporation . . . . . . . . . . . . . . . . . . . . DE
Grace Environmental, Inc.. . . . . . . . . . . . . . . . . . . . DE A 4
</TABLE>
- 6 -
<PAGE>
<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY NAME INCORP. OWNERSHIP NOTES
--------------- --------- --------- -----
<S> <C> <C> <C>
Grace Europe, Inc. . . . . . . . . . . . . . . . . . . . . . . . DE
Grace H-G Inc. . . . . . . . . . . . . . . . . . . . . . . . . . DE A
Grace H-G II Inc.. . . . . . . . . . . . . . . . . . . . . . . . DE A
Grace Hotel Services Corporation . . . . . . . . . . . . . . . . DE 4
Grace JVH, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . DE A
Grace (Middle East) Inc. . . . . . . . . . . . . . . . . . . . . DE
Grace Logistics Services, Inc. . . . . . . . . . . . . . . . . . DE
Grace Management Services, Inc.. . . . . . . . . . . . . . . . . DE
Grace Offshore Company . . . . . . . . . . . . . . . . . . . . . LA A
Grace PAR Corporation. . . . . . . . . . . . . . . . . . . . . . DE
Grace Petroleum Libya Incorporated . . . . . . . . . . . . . . . DE A
Grace Tarpon Investors, Inc. . . . . . . . . . . . . . . . . . . DE
Grace Ventures Corp. . . . . . . . . . . . . . . . . . . . . . . DE
Grace Washington, Inc. . . . . . . . . . . . . . . . . . . . . . DE 4
W. R. Grace Capital Corporation. . . . . . . . . . . . . . . . . NY A
W. R. Grace Land Corporation . . . . . . . . . . . . . . . . . . NY
W. R. Grace & Co.-Conn.. . . . . . . . . . . . . . . . . . . . . CT 4
Gracoal, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . DE A
Gracoal II, Inc. . . . . . . . . . . . . . . . . . . . . . . . . DE A
Greater Southeast Community Center for Renal Disease, Inc. . . . DC A
Guanica-Caribe Land Development Corporation. . . . . . . . . . . DE A
Gulf Region Mobile Dialysis, Inc.. . . . . . . . . . . . . . . . DE A
Gynesis Healthcare, Inc. . . . . . . . . . . . . . . . . . . . . DE A
Gynesis Healthcare of Connecticut, Inc.. . . . . . . . . . . . . CT A
Gynesis Healthcare for Women of Florida, Inc. . . . . . . . . . FL A
Gynesis Healthcare of Maryland, Inc. . . . . . . . . . . . . . . MD A
Gynesis Healthcare of New Jersey, Inc. . . . . . . . . . . . . . NJ A
Gynesis Healthcare of New York, Inc. . . . . . . . . . . . . . . NY A
Gynesis Healthcare of Oklahoma, Inc. . . . . . . . . . . . . . . OK A
Gyness Healthcare of Pennsylvania, Inc.. . . . . . . . . . . . . PA A
Gynesis Healthcare of South Carolina, Inc. . . . . . . . . . . . SC A
Gynesis Resources, Inc.. . . . . . . . . . . . . . . . . . . . . DE A
HNS Accucare, Inc. . . . . . . . . . . . . . . . . . . . . . . . GA A
HNS Integrated Care Centers, Inc.. . . . . . . . . . . . . . . . GA A
</TABLE>
- 7 -
<PAGE>
<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY NAME INCORP. OWNERSHIP NOTES
--------------- --------- --------- -----
<S> <C> <C> <C>
HNS Medical Technology Services, Inc.. . . . . . . . . . . . . . GA A
HNS Michigan, Inc. . . . . . . . . . . . . . . . . . . . . . . . GA A
HNS New York, Inc. . . . . . . . . . . . . . . . . . . . . . . . NY A
HNS Quality Home Care, Inc.. . . . . . . . . . . . . . . . . . . GA A
HNS UP Home Care, Inc. . . . . . . . . . . . . . . . . . . . . . GA A
Hanover Square Corporation . . . . . . . . . . . . . . . . . . . DE
Homco International, Inc. . . . . . . . . . . . . . . . . . . . DE A
Home Dialysis Care, Inc. . . . . . . . . . . . . . . . . . . . . TX A
Home Intensive Care, Inc.. . . . . . . . . . . . . . . . . . . . DE A
Home Intensive Care of Arizona, Inc. . . . . . . . . . . . . . . AZ A
Home Intensive Care of California, Inc.. . . . . . . . . . . . . CA A
Home Intensive Care of Colorado, Inc.. . . . . . . . . . . . . . CO A
Home Intensive Care of Connecticut, Inc. . . . . . . . . . . . . CT A
Home Intensive Care of Florida, Inc. . . . . . . . . . . . . . . FL A
Home Intensive Care of Georgia, Inc. . . . . . . . . . . . . . . GA A
Home Intensive Care of Illinois, Inc.. . . . . . . . . . . . . . IL A
Home Intensive Care of Kansas, Inc.. . . . . . . . . . . . . . . KS A
Home Intensive Care of Las Vegas, Inc. . . . . . . . . . . . . . NV A
Home Intensive Care of Louisiana, Inc. . . . . . . . . . . . . . LA A
Home Intensive Care of Maryland, Inc.. . . . . . . . . . . . . . MD A
Home Intensive Care of Massachusetts, Inc. . . . . . . . . . . . MA A
Home Intensive Care of Michigan, Inc.. . . . . . . . . . . . . . MI A
Home Intensive Care of Missouri, Inc.. . . . . . . . . . . . . . MO A
Home Intensive Care of Nevada, Inc.. . . . . . . . . . . . . . . NV A
Home Intensive Care of New Jersey, Inc.. . . . . . . . . . . . . NJ A
Home Intensive Care of New York, Inc.. . . . . . . . . . . . . . NY A
Home Intensive Care of Northern Ohio, Inc. . . . . . . . . . . . OH A
Home Intensive Care of Ohio, Inc.. . . . . . . . . . . . . . . . OH A
Home Intensive Care of Pennsylvania, Inc.. . . . . . . . . . . . PA A
Home Intensive Care of Rhode Island, Inc.. . . . . . . . . . . . RI A
Home Intensive Care of Tampa, Inc. . . . . . . . . . . . . . . . FL A
Home Intensive Care of Virginia, Inc.. . . . . . . . . . . . . . VA A
Home Nutritional Services, Inc.. . . . . . . . . . . . . . . . . CA A
Home Nutritional Services, Inc.. . . . . . . . . . . . . . . . . NJ A
</TABLE>
- 8 -
<PAGE>
<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY NAME INCORP. OWNERSHIP NOTES
--------------- --------- --------- -----
<S> <C> <C> <C>
Home Pharmacy Care of Michigan, Inc. . . . . . . . . . . . . . . MI A
Homestead Artificial Kidney Center, Inc. . . . . . . . . . . . . FL A 2
I. V. Solutions, Ltd.. . . . . . . . . . . . . . . . . . . . . . TX A
Infusions Innovations of Jacksonville, Inc. . . . . . . . . . . FL A
Infusions Innovations of Tampa, Inc. . . . . . . . . . . . . . . FL A
International Medical Care, Inc. . . . . . . . . . . . . . . . . DE A
KDNY, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . DE A
Kidney Disease and Hypertension Center, Ltd. . . . . . . . . . . AZ A
LaFollette Dialysis Center, Inc. . . . . . . . . . . . . . . . . TN A
Life Assist Medical Products Corp. . . . . . . . . . . . . . . . PR A
Lifechem, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . DE A
Lifeline Medical Supplies, Inc.. . . . . . . . . . . . . . . . . FL A
Lifeline Medical Systems, Inc. . . . . . . . . . . . . . . . . . CA A
Lifeline Medical Systems, Inc. . . . . . . . . . . . . . . . . . FL A
The Medical Accountability Group, Inc. . . . . . . . . . . . . . TX A
Medical Supply Company, Inc. . . . . . . . . . . . . . . . . . . VA A
Medi-Sure Testing, Inc.. . . . . . . . . . . . . . . . . . . . . DE A
Med-X-Press, Inc. . . . . . . . . . . . . . . . . . . . . . . . DE A
Metro Dialysis Center - Kirkwood, Inc. . . . . . . . . . . . . . MO A
Metro Dialysis Center - Normandy, Inc. . . . . . . . . . . . . . MO A
Metro Dialysis Center - North, Inc.. . . . . . . . . . . . . . . MO A
Monolith Enterprises, Incorporated . . . . . . . . . . . . . . . DC
Monroe Street, Inc.. . . . . . . . . . . . . . . . . . . . . . . DE
National Medical Care, Inc. . . . . . . . . . . . . . . . . . . DE A
NMC Homecare, Inc. . . . . . . . . . . . . . . . . . . . . . . . DE A
National Medical Care Home Care Service Agency, Inc. . . . . . . NY A
NMC Medical Products, Inc. . . . . . . . . . . . . . . . . . . . DE A
National Medical Care of Taiwan, Inc.. . . . . . . . . . . . . . DE A
Nephrology Applications of Mobile, Inc.. . . . . . . . . . . . . AL A
NMC China, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . DE A
NMC Diabetic Foot Care, Inc. . . . . . . . . . . . . . . . . . . DE A
NMC Diabetic Foot Care Centers Orthotics, Inc. . . . . . . . . . DE A
NMC Diagnostics Services, Inc. . . . . . . . . . . . . . . . . . DE A
NMC Dialysis Services, Inc.. . . . . . . . . . . . . . . . . . . DE A
</TABLE>
- 9 -
<PAGE>
<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY NAME INCORP. OWNERSHIP NOTES
--------------- --------- --------- -----
<S> <C> <C> <C>
NMC Dialysis Services (Romania), Inc.. . . . . . . . . . . . . . DE A
NMC Asia-Pacific, Inc. . . . . . . . . . . . . . . . . . . . . . DE A
NMC Holding, Inc.. . . . . . . . . . . . . . . . . . . . . . . . DE A
NMC Homecare of Michigan, Inc. . . . . . . . . . . . . . . . . . DE A 7
NMC International, Inc.. . . . . . . . . . . . . . . . . . . . . DE A
NMC Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . DE A
NMC Services (Romania), Inc. . . . . . . . . . . . . . . . . . . DE A
NMC Ventures, Inc. . . . . . . . . . . . . . . . . . . . . . . . DE A
North Knoxville Dialysis Center, Inc.. . . . . . . . . . . . . . TN
PD Solutions, Inc. . . . . . . . . . . . . . . . . . . . . . . . DE A
PD Solutions of Arizona, Inc.. . . . . . . . . . . . . . . . . . AZ A
PD Solutions of California, Inc. . . . . . . . . . . . . . . . . CA A
PD Solutions of Florida, Inc.. . . . . . . . . . . . . . . . . . FL A
PD Solutions Georgia, Inc. . . . . . . . . . . . . . . . . . . . GA A
PD Solutions of Illinois, Inc. . . . . . . . . . . . . . . . . . IL A
PD Solutions Kansas, Inc.. . . . . . . . . . . . . . . . . . . . KS A
PD Solutions of Louisiana, Inc.. . . . . . . . . . . . . . . . . LA A
PD Solutions Maryland, Inc.. . . . . . . . . . . . . . . . . . . MD A
PD Solutions Michigan, Inc.. . . . . . . . . . . . . . . . . . . MI A
PD Solutions Missouri, Inc.. . . . . . . . . . . . . . . . . . . MO A
PD Solutions of Nevada, Inc. . . . . . . . . . . . . . . . . . . NV A
PD Solutions New Jersey, Inc.. . . . . . . . . . . . . . . . . . NJ A
PD Solutions of New York, Inc. . . . . . . . . . . . . . . . . . NY A
PD Solutions of Ohio, Inc. . . . . . . . . . . . . . . . . . . . OH A
PD Solutions Pennsylvania, Inc.. . . . . . . . . . . . . . . . . PA A
PD Solutions of Texas, Inc.. . . . . . . . . . . . . . . . . . . TX A
PD Solutions Virginia, Inc.. . . . . . . . . . . . . . . . . . . VA A
Personal Care Health Services, Inc.. . . . . . . . . . . . . . . DE A
Phoenix Consulting Services, Inc.. . . . . . . . . . . . . . . . FL A
Preferred Homecare of Florida, Inc.. . . . . . . . . . . . . . . FL A
Preferred Homecare of New Jersey, Inc. . . . . . . . . . . . . . NJ A
Preferred Pharmacy Services, Inc.. . . . . . . . . . . . . . . . FL A
Prochrom, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . IN A
Quality Care Dialysis Centers, Inc.. . . . . . . . . . . . . . . FL A
</TABLE>
- 10 -
<PAGE>
<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY NAME INCORP. OWNERSHIP NOTES
--------------- --------- --------- -----
<S> <C> <C> <C>
Quality Care Dialysis Center of Baltimore, Inc. . . . . . . . . MD A
Quality Care Dialysis Center of Boston, Inc. . . . . . . . . . . MA A
Quality Care Dialysis Center of Creve Coeur, Inc. . . . . . . . MO A
Quality Care Dialysis Center of Dallas, Inc. . . . . . . . . . . TX A
Quality Care Dialysis Center of Greensburg, Inc. . . . . . . . . LA A
Quality Care Dialysis Center of Hammond, Inc. . . . . . . . . . DE A
Quality Care Dialysis Center of Houston, Inc. . . . . . . . . . TX A
Quality Care Dialysis Center of Las Vegas, Inc. . . . . . . . . NV A
Quality Care Dialysis Center of Margate, Inc. . . . . . . . . . FL A
Quality Care Dialysis Center of Mt. Vernon, Inc. . . . . . . . . VA A
Quality Care Dialysis Center of New Orleans, Inc. . . . . . . . LA A
Quality Care Dialysis Center of North County, Inc. . . . . . . . MO A
Quality Care Dialysis Center of Patapsco, Inc. . . . . . . . . . MD A
Quality Care Dialysis Center of San Antonio, Inc. . . . . . . . TX A
Quality Care Dialysis Center of Southern Maryland, Inc. . . . . MD A
Quality Care Dialysis Center of St. Augustine, Inc. . . . . . . FL A
Quality Care Dialysis Center of St. Clair Shores, Inc. . . . . . MI A
Quality Care Dialysis Center of St. Louis, Inc. . . . . . . . . MO A
Quality Care Dialysis Center of Stoneham, Inc. . . . . . . . . . MA A
Quality Care Dialysis Center of University City . . . . . . . . MO A
Quality Care Dialysis Center of Vega Baja, Inc. . . . . . . . . PR A
Quality Care Dialysis Center of Vista, Inc.. . . . . . . . . . . CA A
Quality Care Dialysis Center of Weymouth, Inc. . . . . . . . . . MA A
Renal Care Centers Corporation . . . . . . . . . . . . . . . . . PA A
Renal Scientific Service, Inc. . . . . . . . . . . . . . . . . . DE A
Renal Scientific Service of Texas, Inc. . . . . . . . . . . . . DE A 2
Renal Supply (Tenn) Corporation . . . . . . . . . . . . . . . . NJ A
Retaw, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . FL A
Rockwood Dialysis Center, Inc. . . . . . . . . . . . . . . . . . VA A
San Diego Dialysis Services, Inc.. . . . . . . . . . . . . . . . DE A
Santa Barbara Community Dialysis Center, Inc. . . . . . . . . . CA A
Security Health Services, Inc. . . . . . . . . . . . . . . . . . NV A
St. Louis Regional Dialysis Center, Inc. . . . . . . . . . . . . MO A
Sourgasco II Corp. . . . . . . . . . . . . . . . . . . . . . . . DE A
</TABLE>
- 11 -
<PAGE>
<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY NAME INCORP. OWNERSHIP NOTES
--------------- --------- --------- -----
<S> <C> <C> <C>
Southern Oil, Resin & Fiberglass, Inc. . . . . . . . . . . . . . FL 3
Sover Corporation. . . . . . . . . . . . . . . . . . . . . . . . DE A
Tappahanock Dialysis Center, Inc.. . . . . . . . . . . . . . . . VA A
UKC-North, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . TX A
University Kidney Center, Inc. . . . . . . . . . . . . . . . . . TX A
Warrenton Dialysis Facility, Inc.. . . . . . . . . . . . . . . . VA A
Water Street Corporation . . . . . . . . . . . . . . . . . . . . DE
West End Dialysis Center, Inc. . . . . . . . . . . . . . . . . . VA A
Woolwich Sewer Company, Inc. . . . . . . . . . . . . . . . . . . NJ A
Woolwich Water Co., Inc. . . . . . . . . . . . . . . . . . . . . NJ A
W. R. C. Technical Ventures, Inc. . . . . . . . . . . . . . . . DE
Zenex Capital Corp.. . . . . . . . . . . . . . . . . . . . . . . FL A
</TABLE>
- 12 -
<PAGE>
NON-UNITED STATES SUBSIDIARIES
<TABLE>
<CAPTION>
OWNERSHIP
COUNTRY SUBSIDIARY NAME % / BY WHOM NOTES
------- --------------- ----------- -----
<S> <C> <C> <C>
ARGENTINA AQT Quimica Argentina, S.A. 100 / A
Grace Argentina, S.A. 100 / A
Grace y Compania Argentina, S.A. C.F.e.I. 100 / A
NMC de Argentina, S.A. 100 / A
AUSTRALIA W. R. Grace Australia Limited 100 / A
W. R. Grace Catalysts Pty. Limited 100 / A
Omicron Proprietary Limited 100 / A
Omipac Pty. Ltd. 51 / A 11
BELGIUM 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 / A 1
BERMUDA Erika, Ltd. 100 / A
NMC Holdings, Ltd. 100 / A
Trans-Meridian Assurance Ltd. 100 / A
BRAZIL Grace Produtos Quimicos e Plasticos Ltda. 100 / A
PEADCO-Engenharia, Comercio Industria Ltda. 100 / A
CANADA Ambrosia Chocolate Ltd. 100 / A 8
Amicon Canada Limited 100 /
Erika Laboratories, Ltd. 100 / A
GEC Divestment Corporations Limited 100 / A
Grace Dearborn Inc. 100 /
W. R. Grace & Co. of Canada Ltd. 100 /
277292 Ontario Limited 100 / 1
W. R. Grace Finance (NRO) Ltd. 100
CAYMAN ISLANDS Grace Cocoa Hong Kong Ltd. 100 / A
CHILE Grace Quimica Compania Limitada 100 / A
COLOMBIA Grace Colombia, S.A. 100 / A
Aquatec de Colombia S.A. 100 / A
COMMONWEALTH OF
INDEPENDENT STATES A/O Grace 100 / A
A/O Grace Kaustik 51 / A 9
</TABLE>
- 13 -
<PAGE>
<TABLE>
<CAPTION>
OWNERSHIP
COUNTRY SUBSIDIARY NAME % / BY WHOM NOTES
------- --------------- ----------- -----
<S> <C> <C> <C>
CUBA Envases Industriales y Comerciales, S.A. 100 / 5
Papelera Camagueyana, S.A. 100 / 5
CZECH REPUBLIC Grace Spol. s r.o. 100 /
National Medical Care, s r.o. 100 / A
DENMARK W. R. Grace A/S 100 /
ECUADOR Grace Cocoa Ecuador S.A. 100 / A
FINLAND W. R. Grace Oy 100 / A
Prochrom Oy 100 / A 1
FRANCE Emerson & Cuming France, S.A.R.L. 100 / A
Grace Cocoa France S.A. 100 / A 6
Grace S.A. 100 / A
Grace Service Chemicals S.A. 100 / A
Prochrom S.A. 100 / A
Prochrom Recherche et Developpement 100 / A
Soboca S.A. 100 / 6
Societe Civile Immobiliere Les Rosiers 100 / A 1
GERMANY Amicon G.m.b.H. 100 /
A-1 Bit & Tool Co. G.m.b.H. 100 / A
Chomerics G.m.b.H. 100 / A
De Zaan B.V.m.b.H. 100 / 6
EAP Akustik GmbH 100 / A 1
Emerson & Cuming G.m.b.H. 100 / A
Grace G.m.b.H. 100 / A
Grace Service Chemicals G.m.b.H. 100 / A 12
Kascho Kakao- und Schokoladenwerke, G.m.b.H. 100 / 6
National Medical Care (Deutschland) G.m.b.H. 100 / A
NMC Dialysebehandlung G.m.b.H. i.g. 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 / A
Schurpack Multiflex GmbH 100 / A
Verwaltungsgesellschaft Kascho 100 / A 6
Import-Export G.m.b.H
GREECE Grace Hellas E.P.E. 100 / A
GUATEMALA Grace Central America, S.A. 100 /
</TABLE>
- 14 -
<PAGE>
<TABLE>
<CAPTION>
OWNERSHIP
COUNTRY SUBSIDIARY NAME % / BY WHOM NOTES
------- --------------- ----------- -----
<S> <C> <C> <C>
HONG KONG Amicon Polymers (H.K.). Limited 100 / A 1
W. R. Grace Southeast Asia Holdings Limited 100 /
W. R. Grace Far East Investment Company Limited 100 / 1
W. R. Grace (Hong Kong) Limited 100 / A
HUNGARY Grace kft. 100 / A
NMC Dialyzis Szolgaltato, kft. 100 / A
NMC Asset Handling Limited Liability Company 100 / A
INDIA Dearborn I.E.I. (India) Private Ltd. 51 / A 10
IRELAND Amicon Ireland Limited 100 /
W.R. Grace (Ireland) Ltd. 100 / A
ITALY Emerson & Cuming Italiana S.r.L. 100 / A 1
Grace Finanziaria S.r.L. 100 /
Grace Italiana S.p.A. 100 / A
JAPAN Grace Japan Kabushiki Kaisha 100 /
KOREA Grace Korea Inc. 100 /
NMC Korea Inc. 100 / A
MALAYSIA W. R. Grace (Malaysia) Sendiran Berhad 100 / A
W. R. Grace Packaging (Malaysia) Sdn. Bhd. 100 /
W. R. Grace Specialty Chemicals 100 /
(Malaysia) Sdn. Bhd.
MEXICO Erika de Reynosa 100 / A
Invertol S.A. de C.V. 100 / A
Especialidades Quimicas Grace de Mexico, 100 / A
S.A. de. C.V.
NETHERLANDS Amicon B.V. 100 /
Berisford Cacao Nederland B.V. 100 / 6
Cacao De Zaan B.V. 100 / 6
Denac B.V. 100 / A
Grace B.V. 100 /
Grace Cocoa B.V. 100 / 6
Grace Dearborn B.V. 100 / A
J. G. van Bruinessen B.V. 100 / A 6
Storm van Bentem & Kluyver B.V. 100 / A
Twincon B.V. 100 / 6
NETHERLANDS ANTILLES W. R. Grace N.V. 100 /
NEW ZEALAND W. R. Grace (N.Z.) Limited 100 / A
NORWAY A-1 Bit & Tool Company Norway A/S 100 / A
</TABLE>
- 15 -
<PAGE>
<TABLE>
<CAPTION>
OWNERSHIP
COUNTRY SUBSIDIARY NAME % / BY WHOM NOTES
------- --------------- ----------- -----
<S> <C> <C> <C>
W. R. Grace A/S 100 / A
PEOPLE'S REPUBLIC
OF CHINA Global Huada (Guangzhou) Confectionery Ltd. 100
Grace China Ltd. 100 /
PHILIPPINES W. R. Grace (Philippines) Inc. 100 / A
POLAND W. R. Grace Sp. z.O.O. 100 /
PORTUGAL Abrandial-Clinica de Doencas Renais, Lda. 100 / A
AQT - Quimica Lda. 100 / A
Clinica de Diagnosticos Dr. Fernando Teixeira 100 / A
Limitada
CNH - Centro Nacional de Hemodialise, Lda. / A
Hemodial, Lda 100 / A
Grace Portuguesa (Produtos Quimicos e 100 / A
Plasticos) Lda.
NMC-Centro Medico Nacional, Lda. 100 / A
Ribadial, Lda 100 / A
SINGAPORE A-1 Bit & Tool Company Pte. Ltd. 100 / A
De Zaan Far East Pte. Ltd. 100 / 6
Grace Cocoa Singapore Pte. Ltd. 100 / 6
W. R. Grace (Singapore) Private Limited 100 / A
SOUTH AFRICA W. R. Grace Africa (Pty) Limited 100 /
SPAIN Centro De Dialisis Recoletas Albaceto, S.L. 100 / A
Dialcentro, S.A. 100 / A
Grace, S.A. 100 /
Instituto de Ciencias Neurologicas, S.A. 100 / A
Kidney, S.L. 100 / A
National Medical Care of Spain, S.A. 100 / A
Teroson Espanola, S.L. 100 / A 3
SWEDEN Grace AB 100 /
Grace Dearborn AB 100 / A
Rexolin Chemicals AB 100 / 3
SWITZERLAND Grace A.G. 100 / A
Grace Cocoa Chocolate Mgt. S.A. 100 / A 6
Syncrete S.A. 100 / 3
TAIWAN W. R. Grace Taiwan Inc. 100 / A
THAILAND W. R. Grace (Thailand) Ltd. 100 / A 3
TURKEY Grace TLS 100 / A
</TABLE>
- 16 -
<PAGE>
<TABLE>
<CAPTION>
OWNERSHIP
COUNTRY SUBSIDIARY NAME % / BY WHOM NOTES
------- --------------- ----------- -----
<S> <C> <C> <C>
UNITED KINGDOM AA Consultancy and Cleaning Co., Ltd. 100 / A
Amicon Limited 100 /
Amicon Merger, Ltd. 100 / A 1
Cormix Limited 100 / A
Dearborn (U.K.) Limited 100 / A
Dearborn Europe Limited 100 / A
Detarex Limited 100 / A 1
EAP Acoustic Ltd. 100 / A 1
Emerson & Cuming (Trading) Limited 100 / A 7
Emerson & Cuming (U.K.) Ltd. 100 / A 7
Grace Agricultural Products Limited 100 / 1
Grace Dearborn Ltd. 100 / A
Renacare Limited 100 / A
Renalyte Services Limited 100 / A
Servicised Limited 100 / A
Silica Gel Limited 100 / A 1
U.K. Renal Services Limited 100 / A
W. R. Grace Limited 100 / A
URUGUAY Aquatec de Uruguay, S.A. 100 / A
Grace Uruguay S.A. 100 /
VENEZUELA Grace Venezuela, S.A. 100 / A
Inversiones GSC, S.A. 100 /
</TABLE>
- 17 -
<PAGE>
UNITED STATES AND NON-UNITED STATES NOTES
1 In liquidation
2 Inactive
3 Dormant, assets sold
4 Owned directly by W. R. Grace & Co.
5 Assets and business expropriated by Cuban Government
6 Owned by a partnership, Grace Cocoa Associates, L.P., or a subsidiary
thereof
7 To be merged into W. R. Grace Limited
8 Common stock owned 100% by Grace Cocoa Associates, L.P./Preferred stock
owned 100% by W. R. Grace & Co. of Canada Ltd.
9 Joint stock company, 46% owned by Grace Italiana S.p.A., 5% owned by W. R.
Grace Ltd., 49% owned by A/O Kaustik
10 Joint Venture, 51% owned by W. R. Grace & Co.-Conn., 49% owned by Ion
Exchange India
11 Joint Venture, 51% owned by Omicron Proprietary Limited, 49% owned by Parade
Packaging Sdn Bhd
12 To be merged into Grace GmbH
- 18 -
<PAGE>
PARTNERSHIPS
Axial Basin Ranch Company
a Delaware partnership, owned 50% by Grace A-B Inc., 50% Grace A-B II Inc.
Boodin Partnership
Owned 50% by NMC Homecare, Inc.
Carbon Dioxide Slurry Systems L.P.
a Delaware partnership, owned 50% by W. R. Grace & Co.-Conn.
Cormix Middle East LLC
a Dubai LLC, owned 49% Construction Products Dubai, Inc., 51% Sheikh Hasher
Maktoum Juma Al Maktoum
Emirates Chemicals LLC
a Dubai LLC, owned 49% Construction Products Dubai, Inc., 51% Sheikh Hasher
Maktoum Juma Al Maktoum
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, owned .001% by Grace Cocoa Limited Partners
I, Inc., 99.999% owned by Grace Cocoa Ventures, Inc.
Grace Offshore Turnkey
a Texas partnership, owned 50% by Grace Offshore Company
Grace Ventures Partnership I
a California partnership, owned 99% by W. R. Grace & Co.-Conn.
Grace Ventures Partnership II
a Delaware limited partnership, owned 16% by W. R. Grace & Co.-Conn.
Guangzhou Nanfang NMC Hemodialysis Center Company Limited
a China joint venture at least 50% owned by NMC International, Inc.
HIC Pharmacy Services, L.P.
a Michigan Limited Partnership, owned 75% by Home Pharmacy Care of Michigan,
Inc. and 25% by Stuart E. Bas
Hayden-Gulch West Coal Company
a Delaware partnership, owned 50% by Grace H-G Inc., 50% owned by Grace H-G
II, Inc.
Healthtech Medical
a California partnership, owned 50% by NMC Ventures, Inc.
H-G Coal Company
a Delaware partnership, owned 50% by Coalgrace, Inc., 50% owned by Coalgrace
II, Inc.
- 19 -
<PAGE>
Immunecare of Hollywood
a Florida partnership, owned 50% by NMC Ventures, Inc.
ImmuneCare of Key West
a Massachusetts partnership, owned 50% by NMC Ventures, Inc.
Infusion Systems
a Nevada partnership, owned 50% by NMC Ventures, Inc.
Kascho Import-Export G.m.b.H. & Co. K.G.
a German partnership, owned 80% by G/B Cocoa Holding Inc., 20% owned by
Verwaltungsgesellschaft Kascho Import-Export GmbH
Metreon
an Ohio joint venture/partnership, owned 50% by Grace JVH, Inc./50% Englehard
MC, Inc.
New Bedford Infusioncare
a Massachusetts partnership, owned 50% by NMC Ventures, Inc.
Nippon Dearborn Kabushiki Kaisha
a Japanese partnership, owned 50% by Grace Japan Kabushiki Kaisha
North Suburban Dialysis
a Massachusetts partnership, owned 50% by Bio-Medical Applications of Essex,
Inc.
OB One & IV Too
an Indiana partnership, owned 50% by NMC Ventures, Inc.
Palm Springs I.V. Care II
50% owned by NMC Homecare, Inc.
Parade & Omicron Sdn Bhd
a Malaysia Joint Venture, owned 51% by Omicron Proprietary Ltd. and 49% by
Parade Industries Pte. Ltd.
Paramont Coal Company
a Virginia partnership, owned 50% by Grace PAR Corporation
Pharmacy Direct
a Massachusetts partnership, owned 50% by NMC Dialysis Services, Inc.
Primecare Home Health Services
50% owned by NMC Homecare, Inc.
P.T. Grace Specialty Chemicals Indonesia
an Indonesia joint venture/partnership, owned 80% by Grace Chemicals Inc.,
20% by Purwoto Pekih
Pursue Gas Processing and Petrochemical Company
a Texas partnership, owned 25% by Sourgasco II Corp.
Quality Homecare Services of Watertown, NY
Owned 50% by NMC Dialysis Services, Inc.
- 20 -
<PAGE>
Riggers Dialysatoren Produktion Thalheim G.m.b.H. & Co. K.G.
a German partnership, owned 50% by Riggers Medizintechnik G.m.b.H., 50% owned
by Riggers Dialysatoren Produktion Thalheim G.m.b.H.
Sleep Diagnostic Associates
an Arizona partnership, owned 50% by NMC Ventures, Inc.
Sisters of Charity Home Health Care
Owned 50% by NMC Homecare, Inc.
VNA/NMC Homecare Partnership
50% owned by NMC Homecare, Inc.
- 21 -
<PAGE>
INVESTMENTS
(holdings of at least 20% but not more than 50%)
<TABLE>
<CAPTION>
OWNERSHIP
COMPANY NAME JURISDICTION PERCENT NOTES
------------ ------------ --------- -----
<S> <C> <C> <C>
Arral & Partners British Virgin Islands 20.8%
Asian Food Investment Limited British Virgin Islands 40%
Caswell-Massey Holdings Corporation Delaware 40%
Colowyo Coal Company L.P. Delaware 6
Dean & DeLuca Brands, Inc. Delaware 45.3% 1
Denka Grace K.K. Japan 45%
General Cocoa Trading House Inc. British Virgin Islands
GKA Company Limited Hong Kong 25%
GN Holdings, Inc. Delaware 47%
Incacao Fabrica Nacional de Ecuador 10% 2
Elaboradoes de Cacao S.A.
Intercao, S.A. British Virgin Islands 20% 2
PJ Margo Private Limited India 50%
Neue Transvac Maschinen A.G. Switzerland 47.5%
Noxso Corporation Virginia 23.1%
Productos Derivados de la Sal Colombia 30.1% 3
Productora de Papeles S.A. (PROPAL) Colombia 36.16%
Tarpon Investors, L.P. Delaware 20% 4
Unicao B.V. Netherlands 20% 5
Unicao S.A. Ivory Coast 20% 5
</TABLE>
NOTES:
1 Owned by W. R. Grace & Co.
2 Owned by Grace Cocoa, Inc.
3 Owned by Productora de Papeles S.A.
4 Owned by Grace Tarpon Investors, Inc.
5 Owned by Twincon B.V.
6 Limited Partnership interests are owned by Gracoal, Inc. and Gracoal II,
Inc.
- 22 -
<PAGE>
Exhibit 24
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, 1994, 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/ J. E. Phipps
/s/ C. H. Erhart, Jr. /s/ J. A. Puelicher
/s/ J. W. Frick /s/ D. W. Robbins, Jr.
/s/ J. P. Grace /s/ E. J. Sullivan
/s/ G. P. Jenkins /s/ D. L. Yunich
Dated: March 29, 1995
<PAGE>
POWER OF ATTORNEY
The undersigned, Acting 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, 1994, 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/ T. A. Holmes
Dated: March 29, 1995
<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, 1994, 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 29, 1995
<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,
1994, 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 29, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 78,300
<SECURITIES> 0
<RECEIVABLES> 1,070,900
<ALLOWANCES> 95,200
<INVENTORY> 514,200
<CURRENT-ASSETS> 2,228,900
<PP&E> 3,228,300
<DEPRECIATION> 1,498,200
<TOTAL-ASSETS> 6,230,600
<CURRENT-LIABILITIES> 2,231,500
<BONDS> 1,098,800
<COMMON> 94,100
0
7,400
<OTHER-SE> 1,403,000
<TOTAL-LIABILITY-AND-EQUITY> 6,230,600
<SALES> 5,093,300
<TOTAL-REVENUES> 5,143,800
<CGS> 2,954,900
<TOTAL-COSTS> 2,954,900
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 109,900
<INCOME-PRETAX> 139,100<F1>
<INCOME-TAX> 55,800
<INCOME-CONTINUING> 83,300<F1>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 83,300
<EPS-PRIMARY> .88
<EPS-DILUTED> .88
<FN>
<F1>Includes a pretax provision of $316 million ($200 million after tax) relating
to asbestos-related insurance coverage.
</FN>
</TABLE>
<PAGE>
Exhibit 99.1
November 5, 1993
Mr. J. Peter Grace, III
303 Lexington Avenue
New York, New York 10016
PURCHASE OF STOCK OF GRACE HOTEL SERVICES CORPORATION
Dear Peter:
This letter confirms the agreement in principle between W. R. Grace &
Co., a New York corporation ("Grace"), and you concerning the proposed
acquisition ("Acquisition") of all the capital stock of Grace Hotel Services
Corporation, a Delaware corporation (the "Company"), by a company newly formed
by you ("Newco").
1. Prior to the Acquisition, Grace would exchange certain shares of its
common stock in the Company for shares of a new class of preferred stock of the
Company (the "Preferred Stock"). At the closing of the Acquisition, Grace would
sell to Newco all of the capital stock of the Company (i.e. all of its
remaining common stock in the Company and all of the Preferred Stock) in
exchange for a 7.00% Senior Secured Note (the "Note") of Newco. The principal
amount of the Note would be [$1,350,000]. After the Closing, the principal
amount of the Note would be increased or decreased by an amount equal to the
difference between the [$1,350,000] and the net worth of the Company (as
adjusted to eliminate certain intercompany accounts between the Company and
Grace) as at the date of the Closing. The Note would be subject to mandatory
prepayment, commencing on the anniversary of the date of the Closing in the year
1997, in the following amounts:
1997 one-third of the adjusted principal amount of the Note,
1998 one-third of the adjusted principal amount of the Note,
1999 one-third of the adjusted principal amount of the Note,
2000 balance,
Interest on the Note would accrue and be payable along with each principal
payment. The Note would be nonrecourse and would be secured by a pledge of all
of the Preferred Stock. The Preferred Stock would have an aggregate liquidation
preference,
<PAGE>
J. Peter Grace, III
November 5, 1993
Page -2-
redemption terms and accumulate cash dividends in amounts sufficient to fully
secure and to pay all amounts due on the Note. Preferred Stock redeemed in
connection with payments under the Note will not be subject to such pledge.
2. The definitive purchase agreement with respect to the Acquisition
(the "Purchase Agreement") would contain representations and warranties of Grace
concerning the ownership, free and clear of all security interests, of the
capital stock of the Company; the corporate existence, good standing, right to
do business and capital stock of the Company; and other representations to the
knowledge of certain officers and employees of Grace as to litigation, claims
and certain tax matters.
3. The Purchase Agreement would also provide that the conditions to the
parties' obligations to consummate the Acquisition (the "Closing") would
include, without limitation, the following:
(a) With respect to Newco, the successful private placement by Newco
of equity securities ("New Securities") with you and a group of investors (you
together with such investors being the "Investors") and the payment therefor by
the Investors to Newco of no less than $2,500,000.00. With respect to Grace,
the successful private placement by Newco of New Securities with the Investors
and the payment therefor by the Investors to Newco of no less than $1,500,000.
(b) Compliance by Grace and Newco with their respective obligations
under the Purchase Agreement, and the representations and warranties being true
and correct as of the date of the Closing (the "Closing Date").
(c) No material adverse change having occurred in the business,
properties, operations or financial condition of the Company as of the Closing
Date.
(d) The approval of all legal proceedings and matters by counsel for
Grace and Newco.
4. The Purchase Agreement would provide that prior to the Closing, the
Company would be prohibited, among other things, from entering into any
transaction other than in the ordinary course of business or taking any actions
to be specified in the Purchase Agreement, without the written consent of Newco.
All amounts payable by the Company to Grace or amounts receivable by the Company
from Grace shall be cancelled on the Closing Date, except for accounts arising
from the purchase of goods and services in the regular course of business
transactions between the Company and Grace (including transactions with Grace's
subsidiaries). All obligations of the Com-
<PAGE>
J. Peter Grace, III
November 5, 1993
Page -3-
pany to reimburse Grace for checks written by the Company in the ordinary course
of business prior to the Closing Date, and honored by Grace shall be deemed paid
and discharged effective as of the Closing Date. To the extent the New
Securities include securities other than Newco common stock, then the terms of
such New Securities would be subject to the approval of Grace.
5. It is the intention of the parties that the Closing would occur on or
about January 4, 1994. The Purchase Agreement would be subject to termination
prior to the Closing Date (i) by mutual consent, (ii) by any party if the
conditions to the obligations of such party have not been met or waived by
February 28, 1994, (iii) if there is any actual or threatened litigation to
restrain or invalidate the transactions contemplated by the Purchase Agreement,
which in the good faith judgment of Newco or Grace, makes it inadvisable to
proceed with the Closing, or (iv) by Newco if there shall have been any material
adverse change in the condition, business or prospects of the Company.
6. Each of Grace, on the one hand, and Newco and the Investors, on the
other hand, will pay all of their expenses and costs, including counsel fees and
expenses, incurred in connection with the Purchase Agreement and the
consummation of the transactions contemplated thereby. All costs and expenses
relating to the issuance and sale of the New Securities will be paid by Newco
and the Investors. Except as otherwise agreed, none of the expenses and/or
costs of Grace, Newco or the Investors will be paid out of the assets or profits
of the Company. Any stock transfer and similar taxes payable with respect to
the exchange of the common stock of the Company for the Preferred Stock and the
issuance of the New Securities will be paid by the parties designated in the
Purchase Agreement. Any agreement by Grace to pay Newco expenses in the event
the transaction does not proceed will be set forth in a separate letter.
7. Upon reasonable notice and during normal business hours, Newco, the
Investors and their agents shall have reasonable access to the Company and shall
be permitted to contact and make reasonable inquiry of the Company's executive
officers and employees regarding the operations and business of the Company.
Except for the details of trade secrets and sensitive intellectual property (if
any), Grace shall make available to Newco copies of all books, records, relevant
purchasing and other financial data and files of the Company, to the extent
reasonably requested by Newco. All Confidential Information shall be held in
strict confidence by Newco, the Investors and the offerees of the New Securities
and will not be disclosed to any other party except affiliates and persons and
entities assisting Newco in connection with the proposed private placement
(i.e., lenders, attorneys, accountants, investment bankers, etc.), and all of
them shall also hold all Confidential Information in strict confidence. If the
<PAGE>
J. Peter Grace, III
November 5, 1993
Page -4-
transactions contemplated hereby do not close for any reason, all data,
information, files, records, copies of documents, worksheets and other materials
used and/or obtained by such offerees, Newco and/or the Investors in connection
therewith shall be returned to the Company, and all Confidential Information and
such materials shall not be used or disclosed to any other party. As used
herein, "Confidential Information" means information about the Company,
furnished to you pursuant to this agreement by or on behalf of Grace, but in any
event does not include information which (1) was available to the public prior
to the time of disclosure, (2) becomes available to the public through no act or
omission of yours, or (3) becomes available to you from a third party not known
by you to be under any obligation of confidentiality to Grace with respect
thereto.
8. Grace recognizes and acknowledges that you and other officers of the
Company will be acting on behalf of Newco in the private placement of the New
Securities while you are also continuing to perform your duties for the Company.
You agree that you will advise all potential investors and lenders that you are
working in an independent capacity in connection with the private placement of
the New Securities and that you are not acting on behalf of Grace or the
Company. All proposed investors and/or lenders shall additionally be advised
that any business plans and projections prepared with respect to the Company
have been prepared by you or on your behalf and not by Grace or the Company.
9. The existing employment arrangements and/or termination agreements
between Grace and certain of the executive officers of the Company will not in
any manner be affected or impaired as a result of the transactions set forth
herein, except as specifically provided in the Purchase Agreement.
10. During the period between the date hereof and the Closing, the Company
will be operated in the ordinary course of business.
11. Upon receipt of evidence (satisfactory to Grace) of firm commitments
from Investors to purchase not less than $1,500,000 of New Securities, each of
the parties agrees to use its best reasonable efforts to negotiate and execute,
as soon as practicable, definitive agreements (in form and substance
satisfactory to each of the parties) with respect to the transactions
contemplated by this letter of intent.
12. All of the rights and obligations of the parties under this letter of
intent shall be governed by the laws of the State of New York.
<PAGE>
J. Peter Grace, III
November 5, 1993
Page -5-
13. Notwithstanding the foregoing or any past, present or future approvals
by the management, Board of Directors or stockholders of any party to the
proposed transaction (or any related person or entity), or any other past,
present or future written or oral indications of assent or indications of
results of negotiation or agreement to some or all matters then under
negotiation, it is agreed that no party to the proposed transaction (and no
person or entity related to any such party) will be under any legal obligation
with respect to the proposed transaction or any similar transaction (except for
the obligations set forth in paragraphs 6, 7, 8 and 9 above), and no offer,
commitment, estoppel, undertaking or obligation of any nature whatsoever shall
be implied in fact, law or equity, unless and until a formal agreement providing
for the transaction in detailed legal form has been executed and delivered by
all parties intended to be bound. This paragraph sets forth the entire
understanding and agreement of the parties (and all related persons and
entities) with regard to the subject matter of this paragraph and supersedes all
prior and contemporaneous agreements, arrangements and understandings related
thereto. The provisions of this paragraph may be amended, superseded or
canceled only be a written instrument which specifically states that it amends,
supersedes or cancels this paragraph, executed and delivered by an authorized
officer of each entity to be bound by such amendment.
If the foregoing correctly sets forth our agreement in principle,
please confirm by signing this letter in the space provided below.
Very truly yours,
W. R. GRACE & CO.
By:___________________________
Name: James P. Neeves
Title: Executive Vice President
Confirmed:
--------------------------------
J. Peter Grace, III
acting on behalf of Newco
<PAGE>
February 28, 1994
Mr. J. Peter Grace, III
303 Lexington Avenue
New York, New York 10016
PURCHASE OF STOCK OF GRACE HOTEL SERVICES CORPORATION
Dear Peter:
This letter amends the agreement in principle, as set forth in letter
dated November 5, 1993 (the "Letter of Intent"), between W. R. Grace & Co., a
New York corporation ("Grace"), and you concerning the proposed acquisition of
all the capital stock of Grace Hotel Services Corporation, a Delaware
corporation (the "Company"), by a company newly formed by you ("Newco").
Capitalized terms not defined herein shall have the meaning assigned such terms
in the Letter of Intent.
Paragraph 5 of the Letter of Intent is amended to read as follows:
"5. It is the intention of the parties that the Closing would occur
on or about March 31, 1994. The Purchase Agreement would be subject to
termination prior to the Closing Date (i) by mutual consent, (ii) by any
party if the conditions to the obligations of such party have not been met
or waived by April 15, 1994, (iii) if there is any actual or threatened
litigation to restrain or invalidate the transactions contemplated by the
Purchase Agreement, which in the good faith judgment of Newco or Grace,
makes it inadvisable to proceed with the Closing, or (iv) by Newco if there
shall have been any material adverse change in the condition, business or
prospects of the Company."
All of the rights and obligations of the parties under this letter of
intent shall be governed by the laws of the State of New York.
Notwithstanding the foregoing or any past, present or future approvals
by the management, Board of Directors or stockholders of any party to the
proposed transaction (or any related person or entity), or any other past,
present or future written or oral indications of assent or indications of
results of negotiation or agreement to
<PAGE>
J. Peter Grace, III
February 28, 1994
Page -2-
some or all matters then under negotiation, it is agreed that no party to the
proposed transaction (and no person or entity related to any such party) will be
under any legal obligation with respect to the proposed transaction or any
similar transaction (except for the obligations set forth in paragraphs 6, 7, 8
and 9 of the Letter of Intent), and no offer, commitment, estoppel, undertaking
or obligation of any nature whatsoever shall be implied in fact, law or equity,
unless and until a formal agreement providing for the transaction in detailed
legal form has been executed and delivered by all parties intended to be bound.
This paragraph sets forth the entire understanding and agreement of the parties
(and all related persons and entities) with regard to the subject matter of this
paragraph and supersedes all prior and contemporaneous agreements, arrangements
and understandings related thereto. The provisions of this paragraph may be
amended, superseded or canceled only be a written instrument which specifically
states that it amends, supersedes or cancels this paragraph, executed and
delivered by an authorized officer of each entity to be bound by such amendment.
If the foregoing correctly sets forth our agreement in principle,
please confirm by signing this letter in the space provided below.
Very truly yours,
W. R. GRACE & CO.
By:
---------------------------
Name: James P. Neeves
Title: Executive Vice President
Confirmed:
--------------------------------
J. Peter Grace, III
acting on behalf of HSC Holding Co., Inc.
<PAGE>
AGENCY AGREEMENT Exhibit 99.2
THIS AGENCY AGREEMENT, entered into on this the 13th day of June, 1994, by
and between HSC HOLDING CO., INC. ("HSC"), a Delaware corporation, and GRACE
HOTEL SERVICES CORPORATION ("GHSC"), a Delaware corporation;
W I T N E S S E T H:
A. GHSC is a wholly owned subsidiary of W. R. Grace & Co., a New York
corporation having its principal offices in Boca Raton, Florida ("GRACE"). HSC
and Grace have proposed to enter into a certain Stock Purchase Agreement (the
"STOCK PURCHASE AGREEMENT") pursuant to the terms of which, among other things,
HSC will acquire from Grace all of the issued and outstanding capital stock of
GHSC.
B. GHSC is engaged in the business of operating food and beverage
services in hotels through the lease of restaurant and related space in such
hotels. Pending the consummation of the transactions provided in the Stock
Purchase Agreement (such consummation being called the "CLOSING"), GHSC and HSC
deem it to be in their best interest that HSC act as agent and nominee on behalf
of GHSC in connection with any new restaurant leases which GHSC desires to enter
into from and after the date hereof in order to facilitate the transition of
business operations which will occur after the consummation of such
transactions.
NOW, THEREFORE, for and in consideration of the sum of Ten Dollars ($10.00)
and other good and valuable consideration paid by GHSC to HSC, the receipt and
sufficiency of which are hereby acknowledged and confessed, the parties hereto
agree as follows:
1. NOMINEE RELATIONSHIP; INDEMNITY AND EMPLOYEES.
(a) GHSC and HSC agree that all lease agreements which HSC hereafter
enters into with respect to the operation of food and beverage services in
hotels ("RESTAURANT LEASES," whether one or more) shall be entered into by HSC,
as the tenant, but as agent and nominee for GHSC until the Closing. From and
after the Closing, the parties acknowledge and agree that this Agreement will
automatically terminate and that all such Restaurant Leases shall for all
purposes be deemed to have been entered into by HSC strictly for its own
account. In the event, however, that the Closing fails to occur, then GHSC
shall for all purposes be deemed to be the "tenant" under such Restaurant
Leases. Pending the Closing, HSC shall execute no Restaurant Leases, enter into
no related agreements and take no other action whatsoever with respect to any
food and beverage operations in hotels other than those specifically directed by
GHSC.
(b) In accordance with the foregoing provision, HSC and GHSC
acknowledge and agree that all persons who are at any time employed by HSC shall
for all purposes be
<PAGE>
deemed to be, and shall be, employees of GHSC, and GHSC agrees to assume and
discharge all liabilities and obligations with respect such employees. GHSC
further agrees to indemnify, hold harmless and defend HSC from and against any
and all claims, demands and/or causes of action at any time asserted or arising
out of or in connection with the Restaurant Leases.
(c) GHSC and HSC acknowledge that all obligations of HSC under all
Restaurant Leases will, in fact, be performed by employees of GHSC acting on
behalf of HSC. All actual out-of-pocket costs and expenses incurred by GHSC
with respect to such employees, but only to the extent of such services
performed on behalf of HSC hereunder, shall be reimbursed by HSC to GHSC.
2. RATIFICATION OF ACTS. HSC has, prior to the date hereof, negotiated
certain Restaurant Leases as described on EXHIBIT "A" attached hereto. All acts
of HSC with respect to such Restaurant Leases are hereby ratified and confirmed
by GHSC, and GHSC hereby authorizes HSC to hereafter take such action and
execute such instruments and documents as HSC shall deem necessary or
appropriate in order to consummate the transactions contemplated by such
Restaurant Leases.
3. TERMINATION OF RELATIONSHIP. In the event the Closing shall for any
reason fail to occur on or before December, 1994, then at any time thereafter,
(i) HSC shall reimburse GHSC for any outstanding expenses it has incurred and
for which it has not already been reimbursed by HSC in connection with the
Restaurant Leases, (ii) HSC shall be responsible for the costs and expenses
incurred in connection with the Restaurant Leases which it retains, and (iii)
GHSC and HSC shall enter into an agreement of termination and release
terminating for all purposes this Agreement, releasing each party from any
further duties and obligations hereunder AND confirming that HSC is the actual
tenant under the Restaurant Leases retained by HSC subject to this Agreement and
that GHSC has no interest with respect thereto.
4. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of GHSC and HSC and their respective successors and assigns. This
Agreement is for the sole benefit of HSC and GHSC, and their respective
successors and assigns, and shall not be for the benefit of or be enforceable by
any third party.
5. GOVERNING LAW. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of Texas.
6. NO JOINT VENTURE OR PARTNERSHIP. GHSC and HSC hereby renounce the
existence of any form of joint venture or partnership between them, and agree
that nothing contained herein or in any document executed in connection herewith
shall be construed as making GHSC or HSC joint venturers or partners.
7. TOTAL AGREEMENT. This Agreement is a total and complete integration
of any and all undertakings existing between GHSC and HSC with respect to the
subject matter hereof and supersedes any prior oral or written agreements,
promises or representations between them.
<PAGE>
EXECUTED as of the day and year first above written.
"HSC"
HSC HOLDING CO., INC.
By:
----------------------------------
J. Peter Grace, III
Chairman
"GHSC"
GRACE HOTEL SERVICES CORPORATION
By:
----------------------------------
J. William Wendelken
Vice President-Finance and Administration
<PAGE>
J. Peter Grace, III Exhibit 99.3
HSC Holding Co., Inc.
71 Buckram Road
Locust Valley, NY 11560
December 14, 1994
Mr. James P. Neeves
Executive Vice President
Grace Hotel Services Corporation
One Town Center Road
Boca Raton, FL 33486-1010
Dear Jim:
This letter confirms our understanding regarding the resolution of
certain issues between Grace Hotel Services Corporation ("GHSC") and HSC Holding
Co., Inc. ("HSC") as follows:
1. On or before December 14, 1994, HSC will (i) pay to GHSC the sum
of $1,000,000.00 and (ii) deposit the sum of $381,000.00 in an interest bearing
escrow account with the firm of Fleming Zulach & Williamson, acting as escrow
agent, on account of monies owed by HSC to GHSC that have not been repaid to
GHSC, subject to confirmation of the amount of such monies by Arthur Andersen or
another nationally recognized accounting firm to be selected by HSC, pursuant to
the procedure set forth in paragraphs 2 and 3 hereof. GHSC will make the audit
material and other reasonable documentation available for review by HSC's
designated accounting firm.
2. GHSC agrees to complete its determination of the amount of monies
owed by HSC to GHSC as expeditiously as possible, and promptly thereafter to
provide HSC with a final determination in writing of the monies owed (the "final
determination").
3. A. HSC shall have forty-five (45) days from the date of GHSC's
mailing by Federal Express delivery to HSC at the address listed above (the
"date of the final determination") to review the final determination and decide
whether it agrees with and accepts the amount owed as reflected on it. If HSC
does agree with and accept the final determination, it shall so notify
<PAGE>
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GHSC in writing within forty-five (45) days from the date of the final
determination.
B. If HSC wishes to review GHSC's books and records in order to
satisfy itself that the final determination is correct, HSC shall have the right
to have Arthur Andersen or another nationally recognized certified public
accounting firm selected by HSC do so at HSC's sole cost and expense. GHSC
agrees to provide such accounting firm reasonable access during normal business
hours to GHSC's books and records for the sole purpose of conducting such a
review. In the event that HSC does elect to have such a review conducted, such
accounting firm shall prepare a written report ("HSC's CPA's Report") of its
findings and transmit it to both GHSC, Attn: Mr. James P. Neeves, Grace Hotel
Services Corporation, One Town Center Road, Boca Raton, Florida 33486-1010; and
HSC simultaneously by Federal Express delivery by not later than forty-five (45)
days from the date of the final determination.
C. In the event that (i) HSC accepts the final determination
provided to it pursuant to paragraph 3(A), above, or (ii) no HSC's CPA's Report
is prepared and transmitted to both GHSC and HSC simultaneously by Federal
Express delivery by not later than forty-five (45) days from the date of receipt
by HSC of the final determination, then HSC shall be deemed to have accepted and
agreed to the final determination. In such event, Fleming Zulach & Williamson
shall immediately pay over to GHSC that portion of the $381,000 being held in
escrow which represents the difference between the final determination and the
sum of $1,000,000 paid to GHSC on December 14, 1994, together with the interest
earned thereon and shall pay the balance of such escrow, if any, together with
interest to HSC. In the event that the final determination exceeds $1,381,000,
HSC shall pay such additional sum to GHSC within ten (10) days.
D. In the event that (i) the final determination shows that
monies are owed to GHSC in addition to the $1,381,000, and no HSC's CPA's Report
is prepared and transmitted to both GHSC and HSC simultaneously by Federal
Express delivery by not later than forty-five (45) days from the date of receipt
by HSC of the final determination, or (ii) that HSC's CPA's Report shows that
monies are owed to GHSC in addition to the $1,381,000 and GHSC decides to agree
with and accept that Report, then HSC agrees to and shall pay such additional
monies in excess of the $1,381,000 to GHSC within ten (10) days of its receipt
of HSC's CPA's Report.
E. In the event that HSC's CPA's Report shows that monies are
owed to GHSC in addition to the $1,000,000 being paid on December 14, 1994, then
Fleming Zulach & Williamson shall pay such additional monies to GHSC within ten
(10) days of the
<PAGE>
-3-
receipt of HSC's CPA's Report together with the interest earned thereon, and
Fleming Zulach & Williamson shall continue to hold the balance, if any, in
escrow until the expiration of the periods specified in paragraphs 3(F) and
3(G), below.
F. Notwithstanding its receipt of monies in excess of
$1,000,000 pursuant to paragraph 3(E) above, GHSC shall have thirty (30) days
from receipt of HSC's CPA's Report to review it and decide whether it agrees
with that Report. In the event that (i) GHSC does not agree with HSC's CPA's
Report provided pursuant to paragraph 3(B), above, or (ii) HSC does not agree
with the amount of the final determination that exceeds HSC's CPA's Report, any
such dispute shall be resolved by arbitration in the City of New York with a
panel of three arbitrators, each being a certified public accountant, in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association.
G. In the event of a dispute between the parties and an
arbitration as set forth in paragraph 3(F) above, then Fleming Zulach &
Williamson shall continue to hold in escrow the disputed amount until it
receives an arbitration award pursuant to paragraph 3(F) above, directing it as
to how to dispose of the disputed amount, unless both the amount of the final
determination and the amount in HSC's CPA's Report are greater than $1,381,000,
in which case Fleming Zulach & Williamson shall immediately pay to GHSC the
entire balance it is holding in escrow, together with the interest earned
thereon.
4. A. W. R. Grace & Co. agrees to provide to HSC on a non-
exclusive basis for a period of ninety (90) days from the effective date of this
agreement the opportunity to acquire the capital stock of GHSC. To assist HSC
in making that acquisition, GHSC and W. R. Grace & Co. will within said ninety
(90) day period: (1) deliver to HSC any files belonging to HSC that are
currently in GHSC's possession; (2) grant such access to GHSC files as GHSC
deems in its reasonable discretion to be appropriate for the purposes of
completing due diligence with the venture capital firms; (3) confirm the
willingness of W. R. Grace & Co. to complete the transaction outlined in the two
Letters of Intent previously issued, subject to the parties' future agreement on
the price and other definitive items of such transaction and to the approval
thereof by the Board of Directors of W. R. Grace & Co.; and (4) make available
to HSC employees reasonable use of GHSC offices during normal business hours in
Dallas and New York and secretarial staff in New York while the transaction is
pending.
B. During the ninety (90) day non-exclusive period provided for
in paragraph 4(A), above, W. R. Grace & Co. may actively seek other purchasers
of GHSC. At the expiration of
<PAGE>
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the ninety (90) day non-exclusive period provided for in paragraph 4(A), above,
W. R. Grace & Co. may cause the liquidation of GHSC, or take such other action
as it may deem appropriate, without any liability to HSC or any of its
shareholders, officers, directors, employees, agents, or attorneys.
C. If for any reason whatsoever, HSC does not acquire the
capital stock of GHSC, GHSC shall have no liability whatsoever to HSC or any of
its shareholders, officers, directors, employees, agents, or attorneys.
5. When the parties have reached agreement as to the net amount that
should be paid to GHSC, payment thereof will represent a complete settlement,
satisfaction and release of the claims as against HSC, J. Peter Grace, III
and/or any other person or entity relating to the repayment of the amount owed
to GHSC for certain payments or transfers made by GHSC to, for, or in connection
with the business of HSC, but not of any other claims. The parties agree that
the terms of this agreement will be kept confidential and not disclosed to
anyone not a party to this agreement, except as may be required (i) pursuant to
securities laws and SEC rules, as determined in the sole and absolute discretion
of counsel to W. R. Grace & Co., or (ii) by court order. In the event of a
court order requiring disclosure, GHSC agrees to give HSC notice and an
opportunity to request that such court reverse or modify such order. In the
event that the parties do not agree on the net amount, nothing contained herein
shall bar either party from commencing an arbitration to resolve the matter
pursuant to paragraph 3(F) hereof. Notwithstanding anything contained herein,
in the event that a lawsuit is commenced to which both GHSC and HSC are parties,
either of them shall be free to produce and refer to this agreement.
6. GHSC and W. R. Grace & Co. will cooperate with HSC and its
attorneys in performing such legal services as may be necessary to complete the
transaction between GHSC and HSC, as contemplated in paragraph 4(A) above. In
the event that all of the monies owed by HSC to GHSC are repaid in full, W. R.
Grace & Co. and GHSC will discontinue the insurance claim relating to this
matter.
7. In addition, GHSC presently has an amount not presently
determinable in an account in the name of GHSC at Chemical Bank, New York, New
York, with funds on deposit some but not all of which came from HSC's operation
at the Michelangelo Restaurant, and GHSC agrees to determine how much of the
funds on deposit came from HSC's operation at the Michaelangelo Restaurant and
to pay such amount promptly to HSC.
<PAGE>
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Please indicate your agreement to these terms by signing the enclosed
copy and return it to me.
Sincerely,
HSC HOLDING CO., INC.
By:
-------------------
J. Peter Grace, III
Chairman
Accepted and Agreed To:
GRACE HOTEL SERVICES CORPORATION
By:
---------------------------
W. R. GRACE & CO.
By:
---------------------------
<PAGE>
Exhibit 99.4
HSC HOLDING CO., INC.
November 10, 1994
Grace Hotel Services Corporation
303 Lexington Avenue
New York, New York 10016
SERVICES AGREEMENT
Dear Sirs:
HSC Holding Co., Inc., a Delaware corporation ("Holding") hereby requests
that Grace Hotel Services Corporation, a Delaware corporation ("GHSC"), perform
certain services in the name and on behalf and at the expense of Holding.
The parties agree as follow:
1. GHSC shall perform the following services in the name and on behalf of
Holding (the "Services"):
(a) establishment of a general disbursements bank account, whose
signatories shall be J. Peter Grace III, Charles D. Clawson, Jr., and J.
William Wendelken;
(b) establishment of payroll accounts in California and New York,
whose signatory shall be J. Peter Grace III;
(c) entry into such policies of insurance as GHSC shall deem
necessary or advisable in connection with the operation of Holding's
business;
(d) obtaining new check stock for Holding;
(e) establishment of employee benefit plans substantially comparable
to the employee benefit plans of GHSC;
(f) maintenance of Holdings' books and records; and
<PAGE>
(g) such other actions as GHSC may deem necessary or advisable in
connection with Holding's operation as an independent business.
Holding shall furnish GHSC with such data and information as GHSC requests in
order to enable Holding to perform the Services.
2. (a) For performance of the Services, Holding shall pay GHSC a fee of
$3,000 per month per Holding restaurant location.
(b) In addition, Holding shall reimburse GHSC upon receipt of invoice
therefor for any and all out-of-pocket expenses arising out of GHSC's
performance of the Services.
(c) Holding shall indemnify and hold harmless GHSC and its officers,
directors, stockholders, affiliates, employees, attorneys and agents against and
in respect of any and all losses, claims, suits, actions, proceedings (formal or
informal), investigations, judgments, deficiencies, damages, settlements,
liabilities, and attorneys' fees and other legal and other expenses related
thereto, arising out of or based upon any action or inaction of GHSC with
respect to this agreement or the performance of the Services, except for the
Damages arising from the gross negligence or willful misconduct of GHSC.
3. This agreement may be terminated at any time by either party upon
twenty-four hour's written notice to the other party.
4. This agreement is not intended to, and shall not, create any rights
upon anyone other than the parties hereto.
5. This agreement may be signed in counterparts and shall be governed by
and construed in accordance with the laws of the State of New York, excluding
any provisions thereof which would otherwise require the application of the law
of any other jurisdiction.
-2-
<PAGE>
6. By their execution hereof, J. Peter Grace III, Charles D. Clawson,
Jr., and J. William Wendelken, being all of the members of the board of
directors of Holding, in accordance with the provisions of Section 141(f) of the
General Corporation Law of the State of Delaware, hereby authorize and approve
the execution, delivery and performance of this agreement in the name and on
behalf of Holding.
Very truly yours,
HSC HOLDING CO., INC.
By:
-----------------------
J. Peter Grace III
Chairman
----------------------------
J. Peter Grace III
----------------------------
Charles D. Clawson, Jr.
----------------------------
J. William Wendelken
ACCEPTED AND AGREED TO
as of the date hereof.
GRACE HOTEL SERVICES CORPORATION
By:
-----------------------------
J. William Wendelken
Vice President
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