- - -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 1996
Commission File Number 1-3720
W. R. GRACE & CO.
New York 13-3461988
----------------------- -------------------
(State of Incorporation) (I.R.S. Employer
Identification No.)
One Town Center Road
Boca Raton, Florida 33486-1010
(407) 362-2000
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
--- ---
98,224,200 shares of Common Stock, $1.00 par value, were outstanding
at May 1, 1996.
- - -------------------------------------------------------------------------------
<PAGE>
W. R. GRACE & CO. AND SUBSIDIARIES
Table of Contents
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statement of Operations I-1
Consolidated Statement of Cash Flows I-2
Consolidated Balance Sheet I-3
Notes to Consolidated Financial Statements I-4 to I-7
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition I-8 to I-14
Part II. Other Information
Item 1. Legal Proceedings II-1
Item 6. Exhibits and Reports on Form 8-K II-2
</TABLE>
As used in this Report, the term "Company" refers to W. R. Grace & Co., and the
term "Grace" refers to the Company and/or one or more of its subsidiaries.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
W. R. Grace & Co. and Subsidiaries Three Months Ended
Consolidated Statement of Operations (Unaudited) March 31,
----------------------------------------------------------------------------------------- -----------------------------
Dollars in millions, except per share 1996 1995
----------------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
Sales and revenues........................................................................ $886.0 $853.4
Other income.............................................................................. 3.8 4.3
--------- ---------
Total .................................................................................. 889.8 857.7
--------- ---------
Cost of goods sold and operating expenses................................................. 531.8 500.9
Selling, general and administrative expenses.............................................. 199.3 230.8
Depreciation and amortization............................................................. 45.5 38.2
Interest expense and related financing costs.............................................. 18.4 15.8
Research and development expenses......................................................... 28.8 30.5
Corporate expenses previously allocated to health care operations......................... - 10.1
--------- ---------
Total................................................................................... 823.8 826.3
--------- ---------
Income from continuing operations before income taxes..................................... 66.0 31.4
Provision for income taxes................................................................ 24.4 8.5
--------- ---------
Income from continuing operations......................................................... 41.6 22.9
Income from discontinued operations....................................................... 22.0 24.6
--------- ---------
Net income................................................................................ $ 63.6 $ 47.5
========== =========
Earnings per share:
Continuing Operations................................................................... $ .42 $ .24
Net income.............................................................................. $ .65 $ .50
Fully diluted earnings per share:
Continuing Operations................................................................... $ .41 $ .24
Net income.............................................................................. $ .63 $ .49
Dividends declared per common share....................................................... $ .125 $ .35
</TABLE>
The Notes to Consolidated Financial Statements
are integral parts of these statements.
I-1
<PAGE>
<TABLE>
<CAPTION>
W. R. Grace & Co. and Subsidiaries Three Months Ended
Consolidated Statement of Cash Flows (Unaudited) March 31,
- - ----------------------------------------------------------------------------------------------------- --------------------------
Dollars in millions 1996 1995
- - ----------------------------------------------------------------------------------------------------- ------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Income from continuing operations before income taxes........................................... $ 66.0 $ 31.4
Reconciliation to cash used for operating activities:
Depreciation and amortization............................................................. 45.5 38.2
Changes in assets and liabilities, excluding effect of businesses
acquired/divested and foreign exchange:
Increase in notes and accounts receivable, net....................................... (34.4) (.1)
Decrease/(increase) in inventories................................................... 9.0 (41.6)
Proceeds from asbestos-related insurance settlements................................. 23.7 100.0
Payments made for asbestos-related litigation settlements
and defense costs................................................................. (31.2) (30.9)
Decrease in accounts payable......................................................... (11.5) (70.4)
Other................................................................................ (114.8) (95.1)
--------- ---------
Net pretax cash used for operating activities of continuing operations.......................... (47.7) (68.5)
Net pretax cash (used for)/provided by operating activities
of discontinued operations................................................................ (32.1) 65.6
--------- ---------
Net pretax cash used for operating activities................................................... (79.8) (2.9)
Income taxes paid............................................................................... (11.5) (59.6)
--------- ---------
Net cash used for operating activities.......................................................... (91.3) (62.5)
--------- ---------
INVESTING ACTIVITIES
Capital expenditures............................................................................ (112.5) (110.4)
Businesses acquired in purchase transactions, net of
cash acquired and debt assumed............................................................ - (31.3)
Increase in net assets of discontinued operations............................................... (33.8) (3.3)
Net proceeds from divestments................................................................... 10.9 7.1
Other........................................................................................... (4.4) .7
--------- ---------
Net cash used for investing activities.......................................................... (139.8) (137.2)
--------- ---------
FINANCING ACTIVITIES
Dividends paid.................................................................................. (12.4) (33.1)
Repayments of borrowings having original maturities in excess of three months................... (33.8) (10.5)
Increase in borrowings having original maturities in excess of three months..................... - 9.3
Net increase in borrowings having original maturities of less than three months................. 264.9 209.6
Stock options exercised......................................................................... 44.8 16.1
Decrease in net financing activities of discontinued operations................................. (16.2) -
Other........................................................................................... (.5) (12.0)
--------- ---------
Net cash provided by financing activities....................................................... 246.8 179.4
--------- ---------
Effect of exchange rate changes on cash and cash equivalents......................................... .2 3.2
------------ ----------
Increase/(decrease) in cash and cash equivalents..................................................... $ 15.9 $ (17.1)
============ ==========
</TABLE>
The Notes to Consolidated Financial Statements
are integral parts of these statements.
I-2
<PAGE>
<TABLE>
<CAPTION>
W. R. Grace & Co. and Subsidiaries
Consolidated Balance Sheet (Unaudited)
----------------------------------------------------------------------- March 31, December 31,
Dollars in millions, except par value 1996 1995
----------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents........................................... $ 56.5 $ 40.6
Notes and accounts receivable, net.................................. 666.8 596.8
Inventories......................................................... 481.1 491.9
Net assets of discontinued operations............................... 314.4 323.7
Deferred income taxes............................................... 193.5 206.1
Other current assets................................................ 35.6 22.2
----------- -----------
Total Current Assets............................................. 1,747.9 1,681.3
Properties and equipment, net of accumulated
depreciation and amortization of $1,446.7
and $1,418.8, respectively.................................... 1,810.0 1,736.1
Goodwill, less accumulated amortization of $20.9
and $20.6, respectively........................................ 112.5 111.8
Net assets of discontinued operations - health care.................... 1,540.5 1,435.3
Asbestos-related insurance receivable.................................. 281.5 321.2
Deferred income taxes ................................................. 381.6 386.6
Other assets........................................................... 611.5 625.3
---------- ----------
TOTAL............................................................ $6,485.5 $6,297.6
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt..................................................... $ 895.2 $ 638.3
Accounts payable.................................................... 278.0 339.2
Income taxes........................................................ 102.5 103.3
Other current liabilities........................................... 816.5 836.4
Minority interest................................................... 297.0 297.0
---------- ----------
Total Current Liabilities........................................ 2,389.2 2,214.2
Long-term debt......................................................... 1,265.4 1,295.5
Other liabilities...................................................... 769.9 789.0
Deferred income taxes ................................................. 37.7 44.8
Noncurrent liability for asbestos-related litigation................... 692.4 722.3
---------- ----------
Total Liabilities................................................ 5,154.6 5,065.8
---------- ----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stocks, $100 par value.................................... 7.4 7.4
Common stock, $1 par value.......................................... 98.5 97.4
Paid in capital..................................................... 503.1 459.8
Retained earnings................................................... 760.2 709.0
Cumulative translation adjustments.................................. (35.9) (39.4)
Treasury stock, 53,000 common shares, at cost....................... (2.4) (2.4)
---------- ----------
Total Shareholders' Equity....................................... 1,330.9 1,231.8
---------- ----------
TOTAL............................................................ $6,485.5 $6,297.6
========== ==========
</TABLE>
The Notes to Consolidated Financial Statements
are integral parts of these statements.
I-3
<PAGE>
W. R. Grace & Co. and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars in millions)
(a) The financial statements in this Report are unaudited and should be
read in conjunction with the consolidated financial statements in the
Company's 1995 Annual Report on Form 10-K. Such interim financial
statements reflect all adjustments that, in the opinion of
management, are necessary for a fair presentation of the results of
the interim periods presented; all such adjustments are of a normal
recurring nature. Certain amounts in the prior period's consolidated
financial statements have been reclassified to conform to the current
basis of presentation.
The results of operations for the three-month interim period ended
March 31, 1996 are not necessarily indicative of the results of
operations for the fiscal year ending December 31, 1996.
(b) As previously reported, 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. Grace was a defendant in approximately 42,900
asbestos-related lawsuits at March 31, 1996 (44 involving claims for
property damage and the remainder involving approximately 100,200
claims for personal injury), as compared to approximately 40,800
lawsuits at December 31, 1995 (47 involving claims for property
damage and the remainder involving approximately 92,400 claims for
personal injury). During the first quarter of 1996, Grace settled one
property damage lawsuit for a total of $4.0 and two property damage
lawsuits were dismissed; in addition, approximately 200 personal
injury claims against Grace were dismissed without payment and $7.1
was recorded to reflect settlements in approximately 2,100 personal
injury claims.
Based upon and subject to the factors discussed in Note 2 to Grace's
consolidated financial statements for the year ended December 31,
1995, Grace estimates that its probable liability with respect to the
defense and disposition of asbestos property damage and personal
injury lawsuits and claims pending at March 31, 1996 and December 31,
1995, and personal injury lawsuits and claims expected to be filed
through 1998, is as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
- - ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current liability for asbestos-related litigation (1).................................... $100.0 $100.0
Noncurrent liability for asbestos-related litigation..................................... 692.4 (2) 722.3
------- -------
Total asbestos-related liability......................................................... $792.4 $822.3
====== ======
- - ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Included in "Other current liabilities" in the Consolidated Balance
Sheet.
(2) The decrease from December 31, 1995 reflects payments made by
Grace for settlements and defense costs in connection with asbestos-related
lawsuits and claims during the first quarter of 1996.
I-4
<PAGE>
W. R. Grace & Co. and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars in millions)
The following table shows Grace's total estimated insurance
recoveries in reimbursement for past and estimated future payments to
defend against and dispose of asbestos-related lawsuits and claims:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
- - ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Notes receivable from insurance carriers - current, net of discounts of
$5.7 (1995 - $4.3) (1) $ 99.3 $ 62.0
Notes receivable from insurance carriers - noncurrent, net of discounts
of $4.8 (1995 - $7.3) (2) 37.5 56.4
Asbestos-related insurance receivable.................................................... 281.5 (3) 321.2
------- -------
Total amounts due from insurance carriers................................................ $418.3 $439.6
======= =======
- - ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Included in "Notes and accounts receivable, net" in the
Consolidated Balance Sheet.
(2) Included in "Other assets" in the Consolidated Balance Sheet.
(3) The decrease from December 31, 1995 reflects the receipt of net
insurance proceeds of $12.6 and the reclassification of $27.1
from "Asbestos-related insurance receivable" to "Notes receivable
from insurance carriers - current and noncurrent" as the result
of a first quarter 1996 settlement of a dispute with an insurance
carrier.
At March 31, 1996, settlements with certain insurance carriers
provided for the future receipt by Grace of $147.3, which Grace has
recorded as notes receivable (both current and noncurrent) of $136.8,
net of discounts. In the first quarter of 1996, Grace received net
proceeds of $23.7 pursuant to settlements with insurance carriers in
reimbursement for monies previously expended by Grace in connection
with asbestos-related lawsuits and claims; of this amount, $9.7 was
received pursuant to settlements entered into in 1995, which had
previously been classified as notes receivable. Pursuant to
settlements with two groups of carriers in 1995, Grace will continue
to receive payments based on future cash outflows for
asbestos-related lawsuits and claims; such payments are estimated to
represent approximately $223.3 of the asbestos-related receivable of
$281.5 at March 31, 1996.
Grace continues to seek to recover from its excess insurers the
balance of the payments it has made with respect to asbestos-related
lawsuits and claims. As part of this effort, Grace continues to be
involved in litigation with certain of its excess insurance carriers
(having previously settled with its primary and certain of its excess
carriers). However, 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 March 31, 1996, as well as personal injury
lawsuits and claims expected to be filed through 1998. Consequently,
Grace believes that the resolution of its asbestos-related litigation
will not have a material adverse effect on its consolidated results
of operations or financial position.
For additional information, see Note 2 to the consolidated financial
statements in the Company's 1995 Annual Report on Form 10-K.
I-5
<PAGE>
W. R. Grace & Co. and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars in millions)
(c) As previously reported, in February 1996 Grace and Fresenius AG
(Fresenius) entered into a definitive agreement to combine National
Medical Care, Inc. (NMC), Grace's principal health care subsidiary,
with Fresenius' worldwide dialysis business (FWD) to create Fresenius
Medical Care AG (FMC). The combination would follow the borrowing
and/or assumption of debt aggregating approximately $2.3 billion by
NMC, a tax-free distribution of the net cash proceeds by NMC to Grace,
and a tax-free distribution by the Company, with respect to each share
of its Common Stock, of one share of a newly formed corporation holding
all of Grace's businesses (principally its packaging and specialty
chemicals businesses) other than NMC. As a result of these
transactions, the holders of the Company's Common Stock would own 100%
of the packaging and specialty chemicals company and would be allocated
an aggregate of approximately 44.8% of FMC's ordinary shares, and
Fresenius and other shareholders would be allocated 55.2% of such
shares. The holders of the Company's Common Stock would also own
preferred stock, the value of which would be linked to the performance
of FMC. It is expected that the various transactions will be completed
by the third quarter of 1996. See Note 7 to the consolidated
financial statements in the Company's 1995 Annual Report on Form 10-K
for additional information.
Grace classified its health care business as a discontinued operation
in the second quarter of 1995. Summary results of operations for the
health care business are as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1996 1995
---- ----
<S> <C> <C>
Sales and revenues $539.7 $491.8
======== ========
Income from discontinued operations - health care $ 38.2 $ 44.0
before income taxes
Provision for income taxes 16.2 19.4
-------- --------
Income from discontinued operations - health care $ 22.0 $ 24.6
======== ========
</TABLE>
The operating results of Grace's cocoa business and other
discontinued operations have been charged against previously
established reserves and are therefore not reflected in the above
results.
The net operating income of the health care business reflects an
allocation of Grace's interest expense ($26.8 and $20.1 for the first
quarters of 1996 and 1995, respectively) based on a ratio of the net
assets of the health care business as compared to Grace's total
capital. Taxes have been allocated to the health care business as if
it were a stand-alone taxpayer; however, these allocations are not
necessarily indicative of the taxes attributable to the health care
business in the future. For the 1995 period, net operating income of
the health care business also reflects an allocation of Grace's
health care-related research expenses (Grace management initiated the
phase-out of certain of its health care research programs in the third
quarter of 1995).
I-6
<PAGE>
W. R. Grace & Co. and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars in millions)
Minority interest consists of a limited partnership interest in Grace
Cocoa Associates, L.P. (LP). 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 the Company
and its principal operating subsidiary, and cash. 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 components of discontinued operations and the
outside investors' interest in LP is reflected as a minority
interest. The intercompany notes held by LP are eliminated in
preparing the consolidated financial statements and, therefore, have
not been classified as pertaining to discontinued operations.
The net assets, excluding intercompany assets, of Grace's cocoa
business and other discontinued operations (classified as current
assets) and Grace's health care business (classified as noncurrent
assets) included in the consolidated balance sheet at March 31, 1996,
are as follows:
<TABLE>
<CAPTION>
Sub- Health
Cocoa Other Total Care Total
-------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Current assets $327.5 $ 10.3 $337.8 $ 667.2 $1,005.0
Properties and equipment, net 187.0 21.1 208.1 412.3 620.4
Investments in and advances to
affiliated companies - 30.6 30.6 - 30.6
Other assets 61.7 10.5 72.2 1,002.0 1,074.2
-------- -------- -------- --------- ---------
Total assets $576.2 $ 72.5 $648.7 $2,081.5 $2,730.2
-------- -------- -------- --------- ---------
Current liabilities $234.6 $ 10.9 $245.5 $ 454.2 $ 699.7
Other liabilities 84.3 4.5 88.8 86.8 175.6
-------- -------- -------- ----------- ----------
Total liabilities $318.9 $ 15.4 $334.3 $ 541.0 $ 875.3
-------- -------- -------- --------- ---------
Net assets $257.3 $ 57.1 $314.4 $1,540.5 $1,854.9
======== ======== ======== ========= =========
</TABLE>
(d) Inventories consist of:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------- -------
<S> <C> <C>
Raw and packaging materials $137.4 $137.1
In process 89.0 78.0
Finished products 304.2 325.2
------- -------
$530.6 $540.3
Less: Adjustment of certain inventories
to a last-in/first-out (LIFO) basis (49.5) (48.4)
-------- --------
Total Inventories $481.1 $491.9
======== ========
</TABLE>
(e) Earnings per share are calculated on the basis of the following
weighted average number of common shares outstanding:
Three Months Ended March 31:
1996 - 97,888,000
1995 - 94,137,000
I-7
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
(a) Review of Operations
(1) Overview:
Sales and revenues increased 4% in the first quarter of 1996 over the
first quarter of 1995. Net income for the first quarter of 1996 was
$63.6 million, a 34% increase as compared to the 1995 first quarter.
The first quarter of 1995 includes an after-tax charge of $12.5
million ($20.0 million pretax) for costs associated with the
termination of the employment agreement of the Company's former
President and Chief Executive Officer, pension costs resulting from
the retirement of certain directors, legal and other expenses related
to the foregoing and other corporate governance activities. Excluding
the above charge, net income for the first quarter of 1996 would have
increased 6% as compared to the 1995 first quarter.
(2) Operating Results:
The following table compares results for the specialty chemicals
segment for the 1996 first quarter to those for the first quarter of
1995:
<TABLE>
<CAPTION>
W. R. Grace & Co. and Subsidiaries Three Months Ended
Specialty Chemicals Operating Results March 31,
------------------------------------------------------------------- ------------------------------
Percentage
Dollars in millions 1996 1995 Increase
------------------------------------------------------------------ ----------- ----------- -----------
<S> <C> <C> <C>
Sales and revenues $886.0 $853.4 4%
====== ======
Operating income before taxes (i) $ 83.9 $ 68.4 23%
======= =======
</TABLE>
(i) Reflects the allocation of general corporate overhead, general
corporate research expenses and certain other income and
expense items that can be identified with the specialty
chemicals operations; corporate interest and financing costs
and nonallocable expenses are not reflected in the specialty
chemicals results.
Specialty Chemicals
As noted above, sales and revenues increased 4% in the first quarter
of 1996 as compared to the 1995 first quarter, reflecting favorable
volume, price/product mix and currency translation variances
estimated at 2%, 1% and 1%, respectively. Catalysts and other
silica-based products, packaging and water treatment product lines
experienced improved volumes, offset by volume declines in the
construction and container product lines. Volume increases in
catalysts and other silica-based products reflected higher sales in
all regions, especially refinery catalysts in Asia Pacific (due to
market share gains), polyolefin catalysts in North America and
silica/adsorbent products in Europe, Asia Pacific and Latin America,
as a result of new product introductions. Packaging volume increases
reflected higher sales of bags in North America and Europe, and
laminates in all regions, particularly Europe; 1996
I-8
<PAGE>
Management's Discussion and Analysis of Results of
Operations and Financial Condition (Continued)
first quarter sales of films were flat versus the first quarter of
1995. Volume increases in water treatment reflected higher paper
industry process chemicals sales in Europe caused by market share
gains, as well as higher water treatment chemicals sales in Latin
America. Construction products experienced volume decreases,
primarily due to the 1995 divestment of the composite material
business and decreases in sales of fire protection products in North
America (due to a declining market) and waterproofing products in
North America (compared to a strong 1995 first quarter that benefited
from a mild winter) and Europe (due to weak economic conditions in
the United Kingdom). These decreases were offset by higher sales of
concrete products in Asia Pacific (caused by a strong construction
market). Container volume decreases were due to decreased sales of
can sealing products in Asia Pacific and closure compounds in Europe,
partially offset by improved sales of can coating products in Latin
America (as a result of continuing market share penetration).
Operating income before taxes increased by 23% in the first quarter
of 1996 as compared to the 1995 first quarter, as cost management
programs initiated in 1995 are beginning to favorably impact
operating income within all regions and product lines. North American
results in the first quarter of 1996 increased, primarily reflecting
improved operating margins and the volume increases in packaging,
offset by the volume decreases in construction products noted above.
European results improved versus the 1995 first quarter, primarily
due to higher sales of silica/adsorbents products (attributable to
strong sales of catalyst carriers which are used by customers to
convert ethylene to ethanol) and in paper industry process chemicals,
as noted above. These favorable results were offset by lower results
in packaging, as lower margins and higher operating expenses offset
the volume increases discussed above. In Asia Pacific, 1996 first
quarter results were flat versus the first quarter of 1995, as the
volume increases in refinery catalysts noted above were offset by
unfavorable results in can sealing products (due to a shortage of
products to be canned as a result of last year's floods in Southeast
Asia). Latin American 1996 first quarter results improved versus the
first quarter of 1995, primarily due to the improved water treatment
chemical sales noted above, improved volumes in packaging and market
share gains within container's coating products.
(2) Statement of Operations:
Other Income
Other income includes interest income, dividends, royalties from
licensing agreements and equity in earnings of affiliated companies.
Interest Expense and Related Financing Costs
Excluding amounts allocated to discontinued operations (as discussed
in Note (c) to the consolidated financial statements in this Report),
interest expense and related financing costs of $18.4 million in the
first quarter of 1996 increased 16% versus the comparable period of
1995. Including amounts allocated to discontinued operations,
interest expense and related financing costs increased 26% in the
first quarter of 1996 over the comparable period of 1995, to $45.2
million, primarily due to higher debt levels.
I-9
<PAGE>
Management's Discussion and Analysis of Results of
Operations and Financial Condition (Continued)
See "Financial Condition: Liquidity and Capital Resources" below for
information on borrowings.
Research and Development Expenses
Research and development spending decreased 6% in the first quarter
of 1996 versus the 1995 first quarter, reflecting the cost management
programs discussed above. Research and development spending continues
to be directed toward Grace's core specialty chemicals businesses.
Income Taxes
The effective tax rate was 37.0% in the first quarter of 1996 versus
31.1% in the 1995 first quarter, excluding the 1995 first quarter
charge of $20.0 million pretax ($12.5 million after-tax) for corporate
governance, as discussed above. The higher effective tax rate in the
first quarter of 1996 was primarily due to a reduction in the overall
foreign tax rate in the first quarter of 1995, as the result of a
reassessment of the valuation allowance for certain deferred tax
assets.
Income from Discontinued Operations - Health Care
The following table compares the results for the health care business
for the 1996 first quarter to results for the comparable period of
1995:
<TABLE>
<CAPTION>
W. R. Grace & Co. and Subsidiaries Three Months Ended
Health Care Operating Results March 31,
------------------------------------------------------------------- ------------------------------
Percentage
Dollars in millions 1996 1995 Increase
------------------------------------------------------------------ ----------- ----------- ----------
<S> <C> <C> <C>
Sales and revenues $539.7 $491.8 10%
====== ======
Operating income before taxes (i) $ 65.0 $ 64.1 1%
======= =======
</TABLE>
(i) The above operating results do not include interest expense
allocated to the discontinued health care business of $26.8
million and $20.1 million for the first quarters of 1996 and
1995, respectively.
Sales and revenues for the first quarter of 1996 increased by 10%
over the comparable period of 1995. These improvements were due to
increases of 12% and 16% in kidney dialysis services and medical
products operations, respectively. The increase in kidney dialysis
services and medical products operations is largely due to the effect
of acquisitions subsequent to the first quarter of 1995, partially
offset by the decision, effective July 1, 1995, to discontinue
recognizing incremental revenue that had previously been recorded
relating to certain dual eligible end stage renal disease patients;
see the discussion below relating to the Omnibus Budget
Reconciliation Act of 1993 (OBRA 93). The number of centers providing
dialysis and related services increased 14%, from 610 at March 31,
1995 to 693 at March 31, 1996 (581 in North America, 61 in Europe, 36
in Latin America and 15 in Asia
I-10
<PAGE>
Management's Discussion and Analysis of Results of
Operations and Financial Condition (Continued)
Pacific). The improvements in dialysis services and medical products
operations were partially offset by a 5% decrease in home health care
revenues resulting from a decrease in infusion therapy revenues due
to continued managed care pricing pressure.
Operating income before taxes in the first quarter of 1996 increased
by 1% over the 1995 first quarter. Operating income benefited from
the favorable refinancing of a note payable by Grace's health care
personnel services company, and the phase-out of certain of Grace's
health care-related research programs. Also, operating income of
medical products operations improved due to increased revenues, as
discussed above. These benefits were offset by the effects of OBRA 93
(which reduced revenues without a commensurate decrease in costs) on
kidney dialysis services results, as discussed above, and the
reduction in home health care revenues. Also negatively impacting
operating income were costs incurred in connection with the
investigation by the Office of the Inspector General of the U.S.
Department of Health and Human Services (OIG), as discussed below.
See below for a discussion concerning certain items relating to NMC's
operations and the possible material adverse effects of these items.
OIG Investigative Subpoenas
In October 1995, NMC received five investigative subpoenas from the
OIG. The results of the investigation and its impact, if any, cannot
be predicted at this time. In the event that a U.S. government agency
believes that any wrongdoing has occurred, civil and/or criminal
proceedings could be instituted, and if any such proceedings were to
be instituted and the outcome were unfavorable, NMC could be subject
to fines, penalties and damages or could become excluded from
government reimbursement programs. Any such result could have a
material adverse effect on NMC's financial position or the results of
operations of NMC and Grace. See Note 7 to the consolidated financial
statements in the Company's 1995 Annual Report on Form 10-K for
additional information.
Intradialytic Parenteral Nutrition (IDPN) Therapy
NMC administers IDPN therapy to chronic dialysis patients who suffer
from severe gastrointestinal malfunctions. Since late 1993, Medicare
claims processors have sharply reduced the number of IDPN claims
approved for payment as compared to prior periods. NMC believes that
the reduction in IDPN claims currently being paid by Medicare
represents an unauthorized policy coverage change. Accordingly, NMC
and other IDPN providers are pursuing various administrative and
legal remedies, including administrative appeals, to address this
reduction. In November 1995, NMC filed a complaint in the U.S.
District Court for the Middle District of Pennsylvania seeking a
declaratory judgment and injunctive relief to prevent the
implementation of this policy coverage change.
NMC management believes that its IDPN claims are consistent with
published Medicare coverage guidelines and ultimately will be
approved for payment. Such claims represent substantial accounts
receivable of NMC, amounting to approximately $113.0 million and
$93.0 million as of March 31, 1996 and December 31, 1995,
respectively, and currently increasing at the rate of approximately
$6.0 million per month. If NMC is unable to collect its
I-11
<PAGE>
Management's Discussion and Analysis of Results of
Operations and Financial Condition (Continued)
IDPN receivable or if IDPN coverage is reduced or eliminated, depending
on the amount of the receivable that is not collected and/or the nature
of the coverage change, NMC's business, financial position and
results of operations could be materially adversely affected.
In May 1995 the Medicare claims processors circulated a draft
coverage policy which, if implemented in the form proposed, would
have limited or precluded continued coverage of parenteral and
enteral nutrition (PEN) therapies, including IDPN therapy. In April
1996, the Medicare claims processors issued a revised final version
of the new coverage policy, which is expected to become effective for
services billed on and after July 1, 1996. While the new policy
permits continued coverage of IDPN and other PEN therapies, and while
the potential impact of the new policy is subject to further
analysis, NMC believes that the new policy would make it
substantially more difficult to qualify patients for future coverage
by, among other things, requiring certain patients to undergo onerous
and/or invasive tests in order to qualify for coverage. The new
policy would also eliminate all reimbursement for infusion pumps used
to administer IDPN therapy. NMC, together with other interested
parties, plans to seek to effect certain changes in the new policy,
other than with respect to elimination of reimbursement for revenues
from infusion pumps, and NMC is developing changes to its patient
qualification procedures in order to comply with the policy. However,
if NMC is unable to achieve changes in the new policy, if physicians
and patients fail to accept the new qualification procedures and/or
if patients fail to qualify under such procedures, the policy could
significantly reduce the number of patients eligible for Medicare
coverage of IDPN and other PEN therapies which would have a material
adverse effect on NMC's financial position and its results of
operations.
OBRA 93
NMC's business, financial position and results of operations could
also be materially adversely affected by an adverse outcome in the
pending litigation concerning the implementation of certain
provisions of the OBRA 93 relating to the coordination of benefits
between Medicare and employer health plans in the case of certain
dialysis patients. See Note 7 to the consolidated financial
statements in the Company's 1995 Annual Report on Form 10-K for
additional information.
(b) Financial Condition; Liquidity and Capital Resources
During the first quarter of 1996, the net pretax cash used for
Grace's continuing operating activities was $47.7 million, versus
$68.5 million in the 1995 first quarter. The reduction was primarily
due to improved operating results, offset by net cash outflows of
$7.5 million in the first quarter of 1996, reflecting amounts paid
for the defense and disposition of asbestos-related litigation (net
of amounts received from settlements with certain insurance carriers
for asbestos-related litigation, as discussed below), as compared to
a net cash inflow of $69.1 million in the first quarter of 1995. After
giving effect to the net pretax cash (used for)/provided by
operating activities of discontinued operations (including an
increase in the use of operating working capital by NMC in the
first quarter of 1996) and payments of income taxes, the net cash
used for operating activities was $91.3 million in the first quarter
of 1996 versus $62.5 million in the first quarter of 1995.
I-12
<PAGE>
Management's Discussion and Analysis of Results of
Operations and Financial Condition (Continued)
Investing activities used $139.8 million of cash in the first quarter
of 1996, largely reflecting capital expenditures of $112.5 million
(more than 70% of which relates to Grace's packaging and catalyst and
other silica-based businesses). Also, investing activities of
discontinued operations for the first quarter of 1996 used $33.8
million (compared to $3.3 million used in the 1995 first quarter),
primarily reflecting the classification of the health care business
as a discontinued operation in the 1995 second quarter. Management
anticipates that the level of capital expenditures in 1996 will
approximate that of 1995.
Net cash provided by financing activities in the first quarter of
1996 was $246.8 million, primarily reflecting an increase in total
debt from December 31, 1995 and proceeds from the exercise of
employee stock options, offset by the payment of $12.4 million of
dividends. Total debt was $2,160.6 million at March 31, 1996, an
increase of $226.8 million from December 31, 1995. Grace's total debt
as a percentage of total capital (debt ratio) increased from 61.1% at
December 31, 1995 to 61.9% at March 31, 1996, primarily due to the
increase in total debt. At March 31, 1996 and December 31, 1995, the
net assets of the discontinued health care business included $210.6
million and $226.7 million of debt, respectively.
Grace expects to receive a substantial amount of cash in 1996 from
the expected distribution from NMC (as discussed in Note (c) to the
consolidated financial statements in this Report), the previously
announced pending sale of the Grace Dearborn water treatment and
process chemicals business, the pending sale of Grace's transgenic
plant business (see discussion below), and, to a lesser extent, funds
generated by operations. Grace expects to apply the cash proceeds
generated by these transactions to the reduction of borrowings, the
repurchase of stock and investments in core businesses. The Company
initiated its previously announced share repurchase program in April
1996.
Also in April 1996, Grace announced that it had entered into a
definitive agreement to sell the transgenic plant business of its
Agracetus subsidiary to the Monsanto Company for $150.0 million in
cash.
Asbestos-Related Matters
As reported in Note (b) to the consolidated financial statements in
this Report, 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 the first
quarter of 1996, Grace paid $7.5 million for the defense and
disposition of asbestos-related property damage and personal injury
litigation, net of amounts received under settlements with certain
insurance carriers. The balance sheet at March 31, 1996 includes a
receivable due from insurance carriers, a portion of which is subject
to litigation, of $281.5 million. Grace has also recorded notes
receivable of $147.3 million ($136.8 million net of discounts) for
amounts to be received in 1996 to 2001 pursuant to settlement
agreements with certain insurance carriers.
I-13
<PAGE>
Management's Discussion and Analysis of Results of
Operations and Financial Condition (Continued)
Although the amounts to be paid in 1996 in respect of
asbestos-related lawsuits and claims cannot be precisely estimated,
Grace expects that it will be required to expend approximately $40.0
million (pretax) in 1996 to defend against 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 (b)
to the consolidated financial statements in this Report). As
indicated therein, the amounts reflected in the consolidated
financial statements with respect to the probable cost of defending
against and disposing of asbestos-related 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.
Environmental Matters
There were no significant developments relating to environmental
liabilities in the first quarter of 1996.
For additional information relating to environmental liabilities, see
Note 12 to the consolidated financial statements in the Company's
1995 Annual Report on Form 10-K.
I-14
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
(a) Note (b) to the Consolidated Financial Statements in Part I
of this Report is incorporated herein by reference.
(b) In April 1996, the Company received a formal order of
investigation issued by the Securities and Exchange Commission ("Commission")
directing an investigation into, among other things, whether the Company
violated the federal securities laws by filing periodic reports with the
Commission that contained false and misleading financial information. Pursuant
to this formal order of investigation, the Company has received a subpoena from
the Southeast Regional Office of the Commission requiring the Company to produce
documents relating to reserves (net of applicable taxes) established by the
Company and National Medical Care, Inc., the Company's principal health care
subsidiary ("NMC"), during the period from January 1, 1990 to the date of the
subpoena (the "Covered Period"). The Company believes that all financial
statements filed by the Company with the Commission during the Covered Period,
including the financial statements of NMC included in the NMC Form 10 filed with
the Commission on September 25, 1995, and the consolidated financial statements
of the Company filed in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 (all of which financial statements, other than unaudited
quarterly financial statements, were covered by unqualified opinions issued by
Price Waterhouse LLP, Grace's independent certified public accountants), have
been fairly
II-1
<PAGE>
stated, in all material respects, in conformity with generally accepted
accounting principles. The Company is cooperating with the Commission. The
outcome of this investigation and its impact, if any, on the Company or NMC
cannot be predicted at this time.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. The following are being filed as exhibits to this Report:
-- By-laws of W. R. Grace & Co., as amended;
-- Credit Agreement, dated as of March 27, 1996, among W. R.
Grace & Co.-Conn., W. R. Grace & Co., the several banks parties
thereto and NationsBank, N.A. (South), as agent for such banks;
-- Letter Agreement dated March 29, 1996 between W. R. Grace &
Co. and Constantine L. Hampers;
-- Option Agreement, dated as of May 1, 1995, between W. R. Grace
& Co. and Albert J. Costello, as amended;
-- weighted average number of shares and earnings used in per
share computations;
-- computation of ratio of earnings to fixed charges and combined
fixed charges and preferred stock dividends; and
-- financial data schedule.
(b) Reports on Form 8-K. On February 6, 1996, the Company filed a
Report on Form 8-K relating to an agreement to combine NMC with Fresenius AG's
dialysis business. The Company filed a Report on Form 8-K on February 13, 1996,
relating to
II-2
<PAGE>
(a) the announcement of 1995 fourth quarter and full year results and (b) the
Company's receipt of a letter indicating that NMC is a target of a federal grand
jury investigation. On March 6, 1996, the Company filed a Report on Form 8-K
relating to the resignation of Thomas L. Gossage from its Board of Directors. On
March 27, 1996, the Company filed a Report on Form 8-K relating to an agreement
to sell Grace's water treatment and process chemicals business to Betz
Laboratories, Inc. The Company filed a Report on Form 8-K on April 15, 1996,
relating to an agreement to sell the transgenic plant business of its Agracetus
subsidiary to the Monsanto Company for $150 million. The Company also filed a
Report on Form 8-K on May 6, 1996, relating to the announcement of 1996 first
quarter results.
II-3
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
W. R. GRACE & CO.
---------------------
(Registrant)
Date: May 15, 1996 By /s/ Peter D. Houchin
--------------------
Peter D. Houchin
Senior Vice President and
Chief Financial Officer
(Acting Principal Accounting Officer)
II-4
<PAGE>
W. R. Grace & Co.
Quarterly Report on Form 10-Q
for the quarter ended March 31, 1996
EXHIBIT INDEX
Exhibit No. Description
- - ---------- -----------
3.1 By-laws of W. R. Grace & Co., as amended
4.1 Credit Agreement, dated as of March 27, 1996, among W. R.
Grace & Co.-Conn., W. R. Grace & Co., the several banks parties
thereto and NationsBank, N.A. (South), as agent for such banks
10.1 Letter Agreement dated March 29, 1996 between W. R. Grace &
Co. and Constantine L. Hampers
10.2 Option Agreement, dated as of May 1, 1995, between W. R. Grace
& Co. and Albert J. Costello, as amended
11 Weighted average number of shares and earnings used in per
share computations
12 Computation of ratio of earnings to fixed charges and combined
fixed charges and preferred stock dividends
27 Financial Data Schedule
BY-LAWS
of
W. R. GRACE & CO.
A New York Corporation
(As Amended Through May 10, 1996)
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
<PAGE>
to a special meeting, it shall state the purpose or purposes for which such
meeting 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
<PAGE>
shareholders, except as may be (a) specified in the notice of the meeting
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 Bylaws, 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). A shareholder's notice to the Secretary shall set forth,
as to each matter the shareholder proposes to bring before the annual meet-
ing, (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 representation 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 meet ing of the shareholders (a) except as specified
in this Section
<PAGE>
1.7 or (b) unless, 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 de clare 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 more than 90 days prior to the date of the meeting,
- - --------
* This sentence shall be effective immediately after the 1995 Annual Meeting of
Shareholders of the Corporation.
<PAGE>
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 nomi-
nated, 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 en-
titled 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
<PAGE>
such 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 the director or his
<PAGE>
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 min utes 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 author ized 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.
<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 in-
clude 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.
<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, In-
centive 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 Corporation 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 Corporation, 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 other wise
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 similar communications
equipment allowing all persons participat-
<PAGE>
ing 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.
<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.
<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 se curities of the
Corporation and shall deposit all such funds in the name of the Corporation in
such depositaries as shall be se lected 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 prepare or cause to be prepared the
financial statements of the Corporation.
<PAGE>
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 em-
ployees 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 Secretary 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 as-
sistant 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 of-
ficer 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 received no notice that the certificate
has been acquired by a bona fide purchaser, the Corporation shall issue a new
certificate if
<PAGE>
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 requir-
ing 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 shall 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.
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.
<PAGE>
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.
CREDIT AGREEMENT
AMONG
W. R. GRACE & CO. - CONN.,
W. R. GRACE & CO.,
THE SEVERAL BANKS
PARTIES HERETO
and
NATIONSBANK, N.A. (SOUTH),
AS AGENT
DATED AS OF MARCH 27, 1996
<PAGE>
PAGE
TABLE OF CONTENTS
PAGE
SECTION
1. DEFINITIONS................................................1
1.1 Defined Terms .....................................1
1.2 Other Definitional Provisions............................14
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS..................................14
2.1 Commitments ....................................14
2.2 Obligations of Borrowers; Revolving Credit Notes.........14
2.3 Procedure for Revolving Credit Borrowing.................15
SECTION 3. BILATERAL OPTION LOANS...........................................16
3.1 Requests for Offers .....................................16
3.2 Reports to Agent; Determination of Dollar Equivalents
....................................17
3.3 Judgment Currency .....................................17
3.4 Repayments .....................................18
SECTION 4. BID LOANS........................................................18
4.1 The Bid Loans ....................................18
4.2 Procedure for Bid Loans..................................18
4.3 Repayments ....................................20
4.4 Interest on Bid Loans....................................20
4.5 Obligations of Borrowers; Bid Loan Notes.................20
SECTION 5. LOAN FACILITY COMMON PROVISIONS..................................22
5.1 Interest Rates and Payment Dates.........................22
5.2 Facility Fee ....................................22
5.3 Termination or Reduction of Commitments; Change of
Control Date........................23
5.4 Prepayments ....................................24
5.5 Conversion and Continuation Options......................25
5.6 Minimum Amounts of Eurodollar Tranches...................26
5.7 Computation of Interest and Fees.........................26
5.8 Inability to Determine Interest Rate.....................26
5.9 Pro Rata Treatment and Payments..........................27
5.10 Illegality ....................................28
5.11 Requirements of Law ....................................29
5.12 Taxes ....................................30
5.13 Indemnity ....................................31
SECTION 6. REPRESENTATIONS AND WARRANTIES...................................32
6.1 Corporate Existence; Compliance with Law..................32
6.2 Corporate Power, Authorization; Enforceable Obligations.. 32
6.3 No Legal Bar .....................................32
6.4 No Material Litigation....................................33
6.5 Ownership of Properties...................................33
i
<PAGE>
PAGE
6.6 Financial Condition .......................................33
6.7 Disclosure of Contingent Liabilities........................34
6.8 ERISA .......................................34
6.9 Certain Federal Regulations.................................34
6.10 No Default .......................................34
6.11 Taxes .......................................34
6.12 Investment Company Act; Other Regulations..................35
6.13 Purpose of Loans .......................................35
6.14 Environmental Matters......................................35
6.15 Principal Subsidiaries.....................................35
SECTION 7. CONDITIONS PRECEDENT.............................................35
7.1 Conditions to Effectiveness.................................35
7.2 Conditions to Each Loan.....................................36
SECTION 8. AFFIRMATIVE COVENANTS............................................37
8.1 Financial Statements .......................................37
8.2 Certificates; Other Information.............................38
8.3 Payment of Obligations......................................39
8.4 Conduct of Business and Maintenance of Existence............39
8.5 Insurance .......................................39
8.6 Inspection of Property, Books and Records; Discussions
......................................39
8.7 Notices .......................................39
8.8 Environmental Laws. .......................................40
SECTION 9. NEGATIVE COVENANTS...............................................41
9.1 Financial Condition Covenants...............................41
9.2 Limitation on Liens .......................................41
9.3 Limitation on Fundamental Changes...........................43
9.4 Limitation on Asset Transfers to Foreign Subsidiaries
......................................43
9.5 Limitation on Subordinated Debt.............................44
SECTION 10. EVENTS OF DEFAULT...............................................44
SECTION 11. THE AGENT.......................................................47
11.1 Appointment ......................................47
11.2 Delegation of Duties......................................47
11.3 Exculpatory Provisions....................................47
11.4 Reliance by Agent ......................................48
11.5 Notice of Default ......................................48
11.6 Non-Reliance on Agent and Other Banks.....................48
11.7 Indemnification ......................................49
11.8 Agent in Its Individual Capacity..........................49
11.9 Successor Agent ......................................49
SECTION 12. GUARANTEES......................................................50
12.1 Grace New York Guarantee..................................50
12.2 Company Guarantee ......................................50
ii
<PAGE>
PAGE
12.3 No Subrogation, Contribution, Reimbursement or
Indemnity..............................51
12.4 Amendments, etc., with respect to the Obligations..........51
12.5 Guarantee Absolute and Unconditional.......................52
12.6 Reinstatement .......................................53
12.7 Payments .......................................53
SECTION 13. MISCELLANEOUS...................................................53
13.1 Amendments and Waivers; Replacement of Banks...............53
13.2 Notices .......................................55
13.3 No Waiver; Cumulative Remedies.............................55
13.4 Survival of Representations and Warranties.................55
13.5 Payment of Expenses and Taxes..............................56
13.6 Successors and Assigns; Participations; Purchasing
Banks..................................56
13.7 Adjustments; Set-off.......................................59
13.8 Counterparts .......................................60
13.9 Severability .......................................60
13.10 Integration .......................................60
13.11 GOVERNING LAW .......................................61
13.12 Submission to Jurisdiction; Waivers.......................61
13.13 Acknowledgments .......................................62
13.14 WAIVERS OF JURY TRIAL.....................................62
13.15 Additional Borrowers......................................62
iii
<PAGE>
PAGE
Schedules
Schedule I Commitments; Lending Offices and Addresses for
Notices
Schedule II Principal Subsidiaries
Exhibits
Exhibit A Form of Revolving Credit Note
Exhibit B Form of Bid Loan Note
Exhibit C Form of Bid Loan Confirmation
Exhibit D Form of Bid Loan Offer
Exhibit E Form of Bid Loan Request
Exhibit F-1 Form of Opinion of Counsel to the Company and Grace
New York
Exhibit F-2 Form of Opinion of Counsel to NationsBank
Exhibit G Form of Officer's Certificate
Exhibit H Form of Commitment Transfer Supplement
Exhibit I Form of Notice of Additional
iv
<PAGE>
1
CREDIT AGREEMENT, dated as of March 27, 1996, among W. R. GRACE &
CO.-CONN., a Connecticut corporation (the "COMPANY"), W. R. GRACE & CO., a New
York corporation and sole shareholder of the Company ("GRACE NEW YORK"), the
several banks from time to time parties to this Agreement (the "BANKS") and
NationsBank, N.A. (South), as agent for the Banks hereunder (in such capacity,
the "AGENT").
The parties hereto hereby agree as follows:
SECTION
1. DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following terms shall
have the following meanings:
"ABR LOANS": Loans the rate of interest applicable to which is based upon
the Alternate Base Rate.
"AFFILIATE": as to any Person, (a) any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with, such Person or (b) any Person who is a
director, officer, shareholder or partner (i) of such Person, (ii) of any
Subsidiary of such Person or (iii) of any Person described in the preceding
clause (a). For purposes of this definition, "control" of a Person means the
power, directly or indirectly, either to (i) vote 10% or more of the
securities having ordinary voting power for the election of directors of such
Person or (ii) direct or cause the direction of the management and policies of
such Person whether by contract or otherwise.
"AGREEMENT": this Credit Agreement, as amended, supplemented or otherwise
modified from time to time.
"AGGREGATE OUTSTANDING BILATERAL OPTION LOANS": at any time, (i) the
aggregate outstanding principal amount of all Dollar Bilateral Loans and (ii)
the aggregate Dollar Equivalents at such time with respect to all outstanding
Alternative Currency Bilateral Loans.
"ALTERNATE BASE RATE": for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greater of (a) the Prime Rate
in effect on such day and (b) the Federal Funds Effective Rate in effect on
such day plus 1/2 of 1%. "PRIME RATE" shall mean the rate of interest per
annum publicly announced from time to time by the Agent as its prime rate in
effect at its principal office in New York City. "FEDERAL FUNDS EFFECTIVE
RATE" shall mean, for any day, the weighted average of the rates on overnight
federal funds transactions with members of the Federal Reserve System arranged
by federal funds brokers, as published on the next succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day which is a Business Day, the average
<PAGE>
2
of the quotations for the day of such transactions received by the Agent
from three federal funds brokers of recognized standing selected by it. If for
any reason the Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain the Federal
Funds Effective Rate, for any reason, including, the inability or failure of
the Agent to obtain sufficient quotations in accordance with the terms hereof,
the Alternate Base Rate shall be determined without regard to clause (b) of
the first sentence of this definition until the circumstances giving rise to
such inability no longer exist. Any change in the Alternate Base Rate due to a
change in the Prime Rate or the Federal Funds Effective Rate shall be
effective on the effective date of such change in the Prime Rate or the
Federal Funds Effective Rate, respectively.
"ALTERNATIVE CURRENCY": any currency other than Dollars which is freely
transferable and convertible into Dollars.
"ALTERNATIVE CURRENCY BILATERAL LOAN": a Loan made by a Bank to any
Borrower in an Alternative Currency pursuant to Section 3.
"APPLICABLE MARGIN": for any day on which the long term senior unsecured
debt of the Company is rated by both S&P and Moody's, the rate per annum under
the caption "Margin" (a "Margin Rate") set forth below opposite the S&P and
Moody's ratings applicable to such debt on such day (or, if such ratings are
set opposite two different Margin Rates, then the Applicable Margin shall be
the lower of said two Margin Rates):
MARGIN S&P MOODY'S
------ --- -------
.450% BB+ or lower Ba1 or lower
.325% BBB- Baa3
.300% BBB Baa2
.270% BBB+ Baa1
.240% A- or higher A3 or higher
PROVIDED that if on any day the long term senior unsecured debt of the
Company is rated by only one of either S&P or Moody's, the Applicable Margin
will be determined based on the rating by such rating agency, and PROVIDED,
FURTHER, that if on any day the long term senior unsecured debt of the Company
is rated by neither S&P nor Moody's, the Applicable Margin will be determined
based on the rating of such debt by Duff & Phelps, Fitch or another nationally
recognized statistical rating organization agreed to by and among the Company,
the Agent and the Majority Banks (each, a
<PAGE>
3
"SUBSTITUTE RATING AGENCY") and will be the Margin Rate set forth above
opposite the S&P and Moody's ratings comparable to such Substitute Rating
Agency's rating of such debt on such date, and PROVIDED, FURTHER, that if on
any day the long term senior unsecured debt of the Company is rated by none of
S&P, Moody's or any Substitute Rating Agency, the Company, the Agent and the
Banks will negotiate in good faith to determine an alternative basis for
calculating the Applicable Margin consistent with the table set forth above
and, if agreement on such alternative basis is not reached within 30 days, the
Applicable Margin will be calculated on an alternative basis determined by the
Agent and the Banks in their reasonable discretion consistent with the table
above, and until such alternative basis is determined the Applicable Margin
will be the Applicable Margin last determined as provided in the table above.
"AVAILABLE COMMITMENT": as to any Bank at any time, an amount equal to
the excess, if any, of (a) the amount of such Bank's Commitment over (b) the
Loan Outstandings of such Bank at such time.
"BID LOAN": each Bid Loan made pursuant to Section 4.
"BID LOAN BANKS": Banks which have outstanding Bid Loans or which are
making Bid Loans.
"BID LOAN CONFIRMATION": each confirmation by the Borrower of its
acceptance of Bid Loan Offers, which Bid Loan Confirmation shall be
substantially in the form of Exhibit C.
"BID LOAN NOTE": as defined in subsection 4.5; collectively, the "BID
LOAN NOTES".
"BID LOAN OFFER": each offer by a Bank to make Bid Loans pursuant to a
Bid Loan Request, which Bid Loan Offer shall contain the information specified
in Exhibit D.
"BID LOAN REQUEST": each request by a Borrower for Banks to submit bids
to make Bid Loans at a fixed rate, which shall contain the information in
respect of such requested Bid Loans specified in Exhibit E and shall be
delivered to the Agent.
"BILATERAL OPTION LOAN": a Loan made by a Bank to a Borrower pursuant to
Section 3. Bilateral Option Loans may be either Dollar Bilateral Loans or
Alternative Currency Bilateral Loans.
"BILATERAL OPTION LOAN REPORT": as defined in subsection 3.2.
"BOARD": The Board of Governors of the Federal Reserve System or any
successor thereto.
<PAGE>
4
"BORROWER": the Company and any Subsidiary of the Company with respect to
which a Notice of Additional Borrower has been given and all conditions
precedent to the effectiveness thereof have been satisfied.
"BORROWING DATE": any Business Day specified in a notice pursuant to
subsection 2.3 and 4.2, as a date on which a Borrower requests the Banks to
make Loans hereunder, or any date that a Bilateral Option Loan is made in
accordance with subsection 3.1.
"BUSINESS DAY": a day other than a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to close.
"CAPITALIZED LEASE": any lease of property, real or personal, the
obligations of the lessee in respect of which are required to be capitalized
in accordance with GAAP.
"CHANGE OF CONTROL DATE": (i) the first day on which the Company
determines that any Person or group of related Persons has direct or indirect
beneficial ownership of 30% or more of the outstanding capital stock of Grace
New York having ordinary voting power (other than stock having such power only
by reason of the happening of a contingency) for the election of a majority of
the board of directors of Grace New York or (ii) the first day on which any
Person or group of related Persons shall acquire all or substantially all of
the assets of Grace New York.
"CLOSING DATE": the first date on which the conditions set forth in
subsection 7.1 have been satisfied or waived.
"CODE": the Internal Revenue Code of 1986, as amended from time to time.
"COMMITMENT": as to any Bank, the obligation of such Bank to make
Revolving Credit Loans hereunder to the Borrowers in an aggregate principal
amount at any one time outstanding not to exceed the amount set forth opposite
such Bank's name on Schedule I under the heading "Commitment".
"COMMITMENT PERCENTAGE": as to any Bank at any time, the percentage of
the aggregate Commitments then constituted by such Bank's Commitment.
"COMMITMENT PERIOD": the period from and including the date hereof to but
not including the Termination Date or such earlier date on which the
Commitments shall terminate as provided herein.
"COMMONLY CONTROLLED ENTITY": an entity, whether or not incorporated,
which is under common control with the Company within the meaning of Section
4001(a)(14) of ERISA or is part of a group which includes the Company and
which
<PAGE>
5
is treated as a single employer under subsection (b) or (c) of Section
414 of the Code.
"CONSOLIDATED ADJUSTED NET WORTH": at a particular date, with respect to
Grace New York and its Subsidiaries, and without duplication, the sum of all
amounts which would, in accordance with GAAP, be set forth opposite the
captions "Total Shareholders' Equity", "Minority interests, current" and
"Minority interests, noncurrent" (or the equivalent captions) on a
consolidated balance sheet of Grace New York and its Subsidiaries prepared as
of such date, PLUS (a) non-cash after-tax charges arising from: (1) asset
disposals (excluding the retirement of property, plant and equipment in the
ordinary course of business) by Grace New York and its Subsidiaries, (2) the
implementation or modified application of financial accounting standards
applicable to Grace New York and its Subsidiaries, and (3) other special
non-recurring transactions (including charges relating to Restructuring
Activities, discontinued operations and asbestos related litigation and
claims), in each case referred to in this clause (a) occurring after June 30,
1994, plus (b) any payments received in respect of non-cash after-tax gains
referred to in clause (c) of this definition, MINUS (c) non-cash after-tax
gains arising from: (1) asset disposals (excluding the retirement of property,
plant and equipment in the ordinary course of business) by Grace New York and
its Subsidiaries, (2) the implementation or modified application of financial
accounting standards applicable to Grace New York and its Subsidiaries, and
(3) other special non-recurring transactions (including gains relating to
Restructuring Activities, discontinued operations and asbestos related
litigation and claims), in each case referred to in this clause (c) occurring
after June 30, 1994, MINUS (d) any payments made in respect of non-cash
after-tax charges referred to in clause (a) of this definition.
"CONSOLIDATED INTEREST EXPENSE": for any period, with respect to Grace
New York and its Subsidiaries, the amount which, in conformity with GAAP,
would be set forth opposite the caption "Interest expense and related
financing costs" (or the equivalent caption) on a consolidated statement of
operations of Grace New York and its Subsidiaries for such period.
"CONSOLIDATED DEBT": at a particular date, with respect to Grace New York
and its Subsidiaries, and without duplication, the sum of the amounts set
forth on a consolidated balance sheet of Grace New York and its Subsidiaries
prepared as of such date in accordance with GAAP opposite the captions (1)
"Long-term debt" (or the equivalent caption) and (2) "Short-term debt" (or the
equivalent caption) but always to include all indebtedness for borrowed money
of Grace New York and its Subsidiaries in accordance with GAAP.
<PAGE>
6
"CONTRACTUAL OBLIGATION": as to any Person, any provision of any security
issued by such Person or of any agreement, instrument or other undertaking to
which such Person is a party or by which it or any of its property is bound.
"DEFAULT": any of the events specified in Section 10, whether or not any
requirement for the giving of notice, the lapse of time, or both, has been
satisfied.
"DOLLAR BILATERAL LOAN": a Bilateral Option Loan denominated in Dollars.
"DOLLAR EQUIVALENT": on any date of determination by the Agent pursuant
to subsection 3.2(b) or 3.2(c), as applicable, in respect of any Alternative
Currency Bilateral Loan the amount of Dollars obtained by converting the
outstanding amount of currency of such Alterative Currency Bilateral Loan, as
specified in the then most recent Bilateral Option Loan Report, into Dollars
at the spot rate for the purchase of Dollars with such currency as quoted by
the Agent at its principal foreign exchange trading operations office in New
York City on such date.
"DOLLARS" and "$": dollars in lawful currency of the United States of
America.
"DOMESTIC SUBSIDIARY": any Subsidiary of Grace New York other than a
Foreign Subsidiary.
"DOMESTIC INDEBTEDNESS": any Indebtedness of Grace New York and any
Domestic Subsidiary.
"DUFF & PHELPS": Duff & Phelps, Inc.
"EBIT": for any period, with respect to Grace New York and its
Subsidiaries, (a) all amounts which would be set forth opposite the caption
"Income from continuing operations before income taxes" (or the equivalent
caption) on a consolidated statement of income of Grace New York and its
Subsidiaries prepared in accordance with GAAP for such period PLUS (b)
non-cash pre-tax charges arising from: (1) asset disposals (excluding the
retirement of property, plant and equipment in the ordinary course of
business) by Grace New York and its Subsidiaries, (2) the implementation or
modified application of financial accounting standards applicable to Grace New
York and its Subsidiaries, and (3) other special non-recurring transactions
(including charges relating to Restructuring Activities, discontinued
operations and asbestos related litigation and claims) (to the extent that
such amounts have been deducted in determining the amount set forth opposite
the caption "Income from continuing operations" (or the equivalent caption)
for such period), PLUS (c) Consolidated Interest Expense for such period, PLUS
(d) any payments received in such period in respect of non-cash pre-tax gains
referred to
<PAGE>
7
in clause (e) of this definition, MINUS (e) non-cash pre-tax gains
arising from: (1) asset disposals (excluding the retirement of property, plant
and equipment in the ordinary course of business) by Grace New York and its
Subsidiaries, (2) the implementation or modified application of financial
accounting standards applicable to Grace New York and its Subsidiaries, and
(3) other special non-recurring transactions (including charges relating to
Restructuring Activities, discontinued operations and asbestos related
litigation and claims) (to the extent that such amounts have been added in
determining the amount set forth opposite the caption "Income from continuing
operations" (or the equivalent caption) for such period), MINUS (f) any
payments made in such period in respect of non-cash pre-tax charges referred
to in clause (b) of this definition.
"ENVIRONMENTAL LAWS": any and all federal, state, local or municipal
laws, rules, orders, regulations, statutes, ordinances, codes, decrees or
requirements of any Governmental Authority regulating, relating to or imposing
liability or standards of conduct concerning environmental protection matters,
including without limitation, Hazardous Materials, as now or may at any time
hereafter be in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as amended
from time to time.
"EUROCURRENCY RESERVE REQUIREMENTS": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates (expressed
as a decimal fraction) of any reserve requirements in effect on such day
(including, without limitation, basic, supplemental, marginal and emergency
reserves under any regulations of the Board of Governors of the Federal
Reserve System or other Governmental Authority having jurisdiction with
respect thereto) dealing with reserve requirements prescribed for eurocurrency
funding (currently referred to as "Eurocurrency Liabilities" in Regulation D
of such Board) maintained by a member bank of such System.
"EURODOLLAR LOANS": Loans the rate of interest applicable to which is
based upon the Eurodollar Rate.
"EURODOLLAR RATE": with respect to each day during each Interest Period
pertaining to a Eurodollar Loan, the rate per annum equal to the rate at which
NationsBank is offered Dollar deposits at or about 10:00 A.M., New York City
time, two Business Days prior to the beginning of such Interest Period in the
interbank eurodollar market where the eurodollar and foreign currency and
exchange operations in respect of its Eurodollar Loans are then being
conducted for delivery on the first day of such Interest Period for the number
of days comprised therein and in an amount comparable to the amount of its
Eurodollar Loan to be outstanding during such Interest Period.
<PAGE>
8
"EURODOLLAR TRANCHE": the collective reference to Eurodollar Loans, the
Interest Periods with respect to all of which begin on the same date and end
on the same later date (whether or not such Loans shall originally have been
made on the same day).
"EVENT OF DEFAULT": any of the events specified in Section 10, PROVIDED
that any requirement for the giving of notice, the lapse of time, or both, has
been satisfied.
"EXISTING AGREEMENTS": the 364-Day Credit Agreement dated as of September
1, 1994 among the Company, Grace New York, the several banks party thereto and
Chemical Bank, as agent, and the Credit Agreement dated as of September 1,
1994 among the Company, Grace New York, the several banks party thereto and
Chemical Bank, as agent, as each such agreement has been or may be amended,
modified or supplemented from time to time.
"FASB 5": Statement of Financial Accounting Standards No. 5, Accounting
for Contingencies, of the Financial Accounting Standards Board, as the same
may be from time to time supplemented, amended or interpreted by such Board.
"FITCH": Fitch Investors Service Inc.
"FOREIGN SUBSIDIARY": any Subsidiary of Grace New York (i) that is
organized under the laws of any jurisdiction other than any state (including
the District of Columbia), territory or possession of the United States of
America (a "foreign jurisdiction"), or (ii) more than 50 percent of the book
value of the assets of which (as of the end of the most recent fiscal period
for which financial statements are required to have been provided pursuant to
subsection 8.1(a) or (b)) are located in one or more foreign jurisdictions, or
(iii) more than 50 percent of the Net Sales and Revenues of which (for the
most recent fiscal year for which financial statements are required to have
been provided pursuant to subsection 8.1(a)) were from sales made and/or
services provided in one or more foreign jurisdictions, or (iv) more than 50
percent of the book value of the assets of which (as of the end of the most
recent fiscal period for which financial statements are required to have been
provided pursuant to subsection 8.1(a) or (b)) consists of equity interests in
and/or Indebtedness of one or more Subsidiaries that are "Foreign
Subsidiaries" within clauses (i), (ii), (iii) or (iv) of this definition.
"FOREIGN SUBSIDIARY INDEBTEDNESS": any Indebtedness of any Foreign
Subsidiary.
"GAAP": generally accepted accounting principles in the United States of
America in effect from time to time.
"GOVERNMENTAL AUTHORITY": any nation or government, any state or other
political subdivision thereof and any
<PAGE>
9
entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"HAZARDOUS MATERIALS": any hazardous materials, hazardous wastes,
hazardous constituents, hazardous or toxic substances, petroleum products
(including crude oil or any fraction thereof), defined or regulated as such in
or under any Environmental Law.
"INDEBTEDNESS": of any Person at any date, (a) all indebtedness of such
Person for borrowed money or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary course
of business and payable in accordance with customary practices) or which is
evidenced by a note, bond, debenture or similar instrument, (b) all
obligations of such Person under Capitalized Leases, and (c) without
duplication, all "loss contingencies" of such Person of the types described in
paragraph 12 of FASB 5, whether or not disclosed or required to be disclosed
on the financial statements or footnotes thereto of such Person pursuant to
GAAP.
"INSOLVENCY": with respect to any Multiemployer Plan, the condition that
such Plan is insolvent within the meaning of Section 4245 of ERISA.
"INSOLVENT": pertaining to a condition of Insolvency.
"INTEREST PAYMENT DATE": (a) as to any ABR Loan, the fifteenth day of
each March, June, September and December to occur while such Loan is
outstanding and, if different, the Termination Date, and (b) as to any
Eurodollar Loan having an Interest Period of three months or less, the last
day of such Interest Period, and (c) as to any Eurodollar Loan having an
Interest Period longer than three months, if any, as agreed by the Borrower of
such Loan and the Banks.
"INTEREST PERIOD": with respect to any Eurodollar Loan:
(i) initially, the period commencing on the borrowing or conversion
date, as the case may be, with respect to such Eurodollar Loan and ending
one, two, three or six months thereafter, or such other period as may be
requested by the Borrower and agreed to by the Banks making such Loan, as
selected by the Borrower of such Loan in its notice of borrowing or
notice of conversion, as the case may be, given with respect thereto; and
(ii) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Eurodollar Loan and ending
one, two, three or six months thereafter, or such other period as may be
requested by the Borrower and agreed to by the
<PAGE>
10
Banks making such Loan, as selected by such Borrower by irrevocable
notice to the Agent and the Banks which made such Eurodollar Loan not
less than two Business Days prior to the last day of the then current
Interest Period with respect thereto;
PROVIDED that, all of the foregoing provisions relating to Interest Periods
are subject to the following:
(1) if any Interest Period pertaining to a Eurodollar Loan
would otherwise end on a day that is not a Business Day, such
Interest Period shall be extended to the next succeeding Business
Day unless the result of such extension would be to carry such
Interest Period into another calendar month in which event such
Interest Period shall end on the immediately preceding Business Day;
(2) any Interest Period that would otherwise extend beyond the
Termination Date shall end on the Termination Date; and
(3) any Interest Period pertaining to a Eurodollar Loan that
begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end on the last
Business Day of a calendar month.
"LIEN": any mortgage, pledge, hypothecation, assignment as
security, security deposit arrangement, encumbrance, lien (statutory
or other), conditional sale or other title retention agreement or
other similar arrangement.
"LOAN": any loan made by any Bank pursuant to this Agreement.
"LOAN DOCUMENTS": this Agreement, the Notes and the Notices of
Additional Borrower.
"LOAN OUTSTANDINGS": as to any Bank at any time, the sum of (a)
the aggregate principal amount of all Revolving Credit Loans made by
such Bank then outstanding, and (b) such Bank's Commitment
Percentage multiplied by the aggregate principal amount of all Bid
Loans then outstanding.
"LOAN PARTIES": the collective reference to the Company, the
other Borrowers, and Grace New York.
"MAJORITY BANKS": at any time, Banks the Commitment Percentages
of which aggregate (or, if at such time all of the Commitments shall
have been terminated, Banks the Commitment Percentages of which
immediately prior to such termination aggregated) at least 51%.
<PAGE>
11
"MATERIAL ADVERSE EFFECT": a material adverse effect on (a) the
business, operations, properties, or condition (financial or
otherwise) of Grace New York and its Subsidiaries taken as a whole,
(b) the ability of the Company, or any Borrower or Grace New York to
perform their respective obligations hereunder and under the other
Loan Documents to which such Person is a party, or (c) the validity
or enforceability of the Loan Documents or the rights or remedies of
the Agent or the Banks hereunder or thereunder.
"MOODY'S": Moody's Investors Services, Inc.
"MULTIEMPLOYER PLAN": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"NATIONSBANK": NationsBank, N.A. (South)
"NET SALES AND REVENUES": with respect to any Person for any
period, all sales and operating revenues of such Person during such
period computed in accordance with GAAP after deducting therefrom
sales returns, discounts and allowances.
"NOTES": the collective reference to the Revolving Credit Notes
and the Bid Loan Notes, if any.
"NOTICE OF ADDITIONAL BORROWER": as defined in subsection
13.15(a).
"OBLIGATIONS": the unpaid principal of and interest on
(including, without limitation, interest accruing after the maturity
of the Loans and interest accruing after the filing of any petition
in bankruptcy, or the commencement of any insolvency, reorganization
or like proceeding, relating to Grace New York or any of the
Borrowers, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding) the Loans and the Notes, if
any, and all other obligations and liabilities of Grace New York or
the Borrowers to the Agent or to the Banks, whether direct or
indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or in
connection with, this Agreement, the Notes, any other Loan Document
and any other document made, delivered or given in connection
herewith or therewith, whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses
(including, without limitation, all fees and disbursements of
counsel to the Agent or to the Banks that are required to be paid by
Grace New York and/or the Borrowers pursuant to the terms of this
Agreement) or any other obligation hereunder or thereunder.
"PARTICIPANT": as defined in subsection 13.6(b).
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12
"PAYMENT SHARING NOTICE": a written notice from the Company or
any Bank informing the Agent that an Event of Default has occurred
and is continuing and directing the Agent to allocate payments
thereafter received from the Borrower in accordance with subsection
5.9(c).
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"PERSON": an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture, Governmental Authority or other entity of whatever nature.
"PLAN": at a particular time, any employee benefit plan which
is covered by ERISA and in respect of which the Company or a
Commonly Controlled Entity is (or, if such plan were terminated at
such time, would under Section 4069 of ERISA be deemed to be) an
"employer" as defined in Section 3(5) of ERISA.
"PREPAYMENT DATE": as defined in subsection 5.3(b).
"PRINCIPAL SUBSIDIARY": (a) any Borrower and (b) any other
Subsidiary if it shall have Total Assets at the end of the most
recent fiscal year for which financial statements are required to
have been furnished pursuant to subsection 8.1(a) in excess of
$75,000,000 or have had during such year Net Sales and Revenues in
excess of $75,000,000.
"PURCHASING BANKS": as defined in subsection 13.6(c).
"REGISTER": as defined in subsection 13.6(d).
"REGULATION U": Regulation U of the Board of Governors of the
Federal Reserve System.
"REGULATION X": Regulation X of the Board of Governors of the
Federal Reserve System.
"REORGANIZATION": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.
"REPORTABLE EVENT": any of the events set forth in Section
4043(b) of ERISA, other than those events as to which the thirty day
notice period is waived under subsection .13, .14, .16, .18, .19 or
.20 of PBGC Reg. ss.2615.
"REQUESTED BANK": as defined in subsection 3.1(a).
"REQUIREMENT OF LAW": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an
<PAGE>
13
arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or
to which such Person or any of its property is subject.
"RESPONSIBLE OFFICER": the chief executive officer, the
president, the chief financial officer or the treasurer, assistant
treasurer or controller of Grace New York.
"RESTRUCTURING ACTIVITIES": all reductions in carrying value of
assets or investments and provisions for the termination and/or
relocation of operations and employees.
"REVOLVING CREDIT LOANS": as defined in subsection 2.1(a).
"REVOLVING CREDIT NOTES": as defined in subsection 2.2.
"SEC": the Securities and Exchange Commission, and any
successor or analogous federal Governmental Authority.
"SINGLE EMPLOYER PLAN": any Plan which is covered by Title IV
of ERISA, but which is not a Multiemployer Plan.
"S&P": Standard & Poor's Ratings Group.
"SUBSIDIARY": as to any Person, a corporation, partnership or
other entity which is required to be consolidated with such Person
in accordance with GAAP; PROVIDED, that any such corporation,
partnership or other entity which is controlled by a receiver or
trustee under any bankruptcy, insolvency or similar law shall
continue to be a "Subsidiary" of such Person for purposes of this
Agreement. Unless otherwise qualified, all references to a
"Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a
Subsidiary or Subsidiaries of Grace New York.
"SUBSTITUTE RATING AGENCY": as defined in the definition of
"Applicable Margin".
"TERMINATION DATE": September 30, 1996.
"TOTAL ASSETS": with respect to any Person at any time, the
total of all assets appearing on the asset side of the balance sheet
of such Person prepared in accordance with GAAP as of such time.
"TOTAL CAPITALIZATION": at a particular date, the sum of
Consolidated Debt and Consolidated Adjusted Net Worth.
"TRANSFEREE": as defined in subsection 13.6(f).
"TYPE": as to any Loan, its nature as an ABR Loan or a
Eurodollar Loan.
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14
1.2 OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined
meanings when used in the Notes, if any, or any certificate or other
document made or delivered pursuant hereto.
(b) As used herein and in the Notes, if any, and any certificate or
other document made or delivered pursuant hereto, accounting terms
relating to Grace New York and its Subsidiaries not defined in subsection
1.1, to the extent not defined, shall have the respective meanings given
to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement
as a whole and not to any particular provision of this Agreement, and
Section, subsection, Schedule and Exhibit references are to this
Agreement, unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 COMMITMENTS. (a) Subject to the terms and conditions hereof,
each Bank severally agrees to make revolving credit loans ("REVOLVING
CREDIT LOANS") to any Borrower from time to time during the Commitment
Period in an aggregate principal amount at any one time outstanding not
to exceed the amount of such Bank's Commitment, PROVIDED that no Bank
shall make any Revolving Credit Loan if, (i) after giving effect to such
Loan, the aggregate Loan Outstandings of all of the Banks plus the
Aggregate Outstanding Bilateral Option Loans would exceed the aggregate
Commitments or (ii) the commitments under the Existing Agreements are not
fully utilized.
(b) The Revolving Credit Loans may from time to time be (i)
Eurodollar Loans, (ii) ABR Loans or (iii) a combination thereof, as
determined by the Borrower thereof and notified to the Agent in
accordance with subsections 2.3 and 5.5, PROVIDED that no Revolving
Credit Loan shall be made as a Eurodollar Loan maturing after the
Termination Date.
2.2 OBLIGATIONS OF BORROWERS; REVOLVING CREDIT NOTES. (a) Each
Borrower agrees that each Revolving Credit Loan made by each Bank to such
Borrower pursuant hereto shall constitute the promise and obligation of
such Borrower to pay to the Agent, on behalf of such Bank, at the office
of the Agent specified in subsection 13.2, in lawful money of the United
States of America and in immediately available funds the aggregate unpaid
principal amount of all Revolving Credit Loans made by such Bank to such
Borrower pursuant to subsection 2.1, which amounts shall be due and
payable (whether at maturity or by acceleration) as set forth in this
Agreement and, in any event, on the Termination Date.
<PAGE>
15
(b) Each Borrower agrees that each Bank and the Agent are authorized
to record (i) the date, amount and Type of each Revolving Credit Loan
made by such Bank to such Borrower pursuant to subsection 2.1, (ii) the
date of each continuation thereof pursuant to subsection 5.5(b), (iii)
the date of each conversion of all or a portion thereof to another Type
pursuant to subsection 5.5(a), (iv) the date and amount of each payment
or prepayment of principal of each such Revolving Credit Loan and (v) in
the case of each such Revolving Credit Loan which is a Eurodollar Loan,
the length of each Interest Period and the Eurodollar Rate with respect
thereto, in the books and records of such Bank or the Agent, as the case
may be, and in such manner as is reasonable and customary for such Bank
or the Agent, as the case may be, and a certificate of an officer of such
Bank or the Agent, as the case may be, setting forth in reasonable detail
the information so recorded, shall constitute PRIMA FACIE evidence of the
accuracy of the information so recorded; PROVIDED that the failure to
make any such recording shall not in any way affect the obligations of
such Borrower hereunder.
(c) Each Borrower agrees that, upon the request to the Agent by any
Bank at any time, the Revolving Credit Loans made by such Bank to such
Borrower shall be evidenced by a promissory note of such Borrower,
substantially in the form of Exhibit A with appropriate insertions as to
Borrower, payee, date and principal amount (a "REVOLVING CREDIT NOTE"),
payable to the order of such Bank and in a principal amount equal to the
lesser of (a) the amount of the initial Commitment of such Bank and (b)
the aggregate unpaid principal amount of all Revolving Credit Loans made
by such Bank to such Borrower. Upon the request to the Agent by any such
Bank at any time, such Borrower shall execute and deliver to such Bank a
Revolving Credit Note conforming to the requirements hereof and executed
by a duly authorized officer of such Borrower. Each Bank is hereby
authorized to record the date, Type and amount of each Revolving Credit
Loan made by such Bank to such Borrower, each continuation thereof, each
conversion of all or a portion thereof to another Type, the date and
amount of each payment or prepayment of principal thereof and, in the
case of Eurodollar Loans, the length of each Interest Period and the
Eurodollar Rate with respect thereto, on the schedule annexed to and
constituting a part of its Revolving Credit Note and any such recordation
shall constitute PRIMA FACIE evidence of the accuracy of the information
so recorded; PROVIDED that the failure to make any such recording shall
not in any way affect the obligations of such Borrower hereunder or
thereunder. Each Revolving Credit Note shall (x) be dated the Closing
Date, (y) be stated to mature on the Termination Date and (z) provide for
the payment of interest in accordance with subsection 5.1.
2.3 PROCEDURE FOR REVOLVING CREDIT BORROWING. Any Borrower may
borrow under the Commitments from all Banks during the Commitment Period
on any Business Day, PROVIDED that such Borrower shall give the Agent
irrevocable notice (which notice must be received by the Agent (a) prior
to 4:00 P.M., New York City time, three Business Days prior to the
requested Borrowing
<PAGE>
16
Date, if all or any part of the requested Revolving Credit Loans are to
be initially Eurodollar Loans, or (b) prior to 10:00 A.M., New York City
time, on the requested Borrowing Date, otherwise), specifying (i) the
amount to be borrowed, (ii) the requested Borrowing Date, (iii) whether
the borrowing is to be of Eurodollar Loans, ABR Loans or a combination
thereof and (iv) if the borrowing is to be entirely or partly of
Eurodollar Loans, the respective amounts of each such Type of Loan and
the respective lengths of the initial Interest Periods therefor. Each
borrowing under the Commitments shall be in an amount equal to $5,000,000
or a whole multiple of $1,000,000 in excess thereof (or, in the case of
ABR Loans, if the amount of the Available Commitments minus the Aggregate
Outstanding Bilateral Option Loans is less than $5,000,000, such lesser
amount). Upon receipt of such notice from such Borrower, the Agent shall
promptly notify each Bank thereof. Each Bank will make the amount of its
pro rata share of each such borrowing available to the Borrower at the
office of the Agent specified in subsection 13.2 prior to 12:00 noon, New
York City time, on the Borrowing Date requested by such Borrower in funds
immediately available to the Agent. Such borrowing will then be made
available to such Borrower on the books of such office with the aggregate
of the amounts made available to the Agent by the Banks and in like funds
as received by the Agent.
SECTION 3. BILATERAL OPTION LOANS
3.1 REQUESTS FOR OFFERS. (a) From time to time during the period
from the Closing Date until the Termination Date, any Borrower may
request any or all of the Banks (each such Bank to which such a request
is made, a "REQUESTED BANK") to make offers to make Bilateral Option
Loans, PROVIDED that immediately after making any such Bilateral Option
Loan, the aggregate Loan Outstandings of all the Banks plus the Aggregate
Outstanding Bilateral Option Loans will not exceed the aggregate
Commitments. Any such request shall specify the principal amount and
maturity date of the Bilateral Option Loans for which such Borrower is
requesting offers, whether such Bilateral Option Loans are requested to
be Dollar Bilateral Loans or Alternative Currency Bilateral Loans, the
time by which offers to make such Bilateral Option Loans must be made by
such Requested Bank and by which such offers shall be accepted or
rejected by such Borrower, and if all or any part of the requested
Bilateral Option Loans are requested to be made as Alternative Currency
Bilateral Loans, the Alternative Currency to be applicable thereto. Each
Requested Bank may, but shall have no obligation to, make such offers on
such terms and conditions as are satisfactory to such Requested Bank, and
such Borrower may, but shall have no obligation to, accept any such
offers. No Bilateral Option Loan may mature after the Termination Date.
(b) Each Borrower and Requested Bank shall separately agree as to
the procedures, documentation, lending office and other matters relating
to any Bilateral Option Loan.
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17
3.2 REPORTS TO AGENT; DETERMINATION OF DOLLAR EQUIVALENTS. (a) The
Borrower shall deliver to the Agent a report in respect of each Bilateral
Option Loan (a "BILATERAL OPTION LOAN REPORT") by 2:00 P.M. (New York
City time) on the date on which the applicable Borrower accepts any
Bilateral Option Loan, on the date on which any principal amount thereof
is repaid prior to the scheduled maturity date, or on the scheduled
maturity date if payment thereof is not made on such scheduled maturity
date, specifying for such Bilateral Option Loan the date on which such
Bilateral Option Loan was or will be made, such amount of principal is or
will be repaid or such payment was not made as the case may be; in the
case of Alternative Currency Bilateral Loans, the Alternative Currency
thereof; and the principal amount of such Bilateral Option Loan or
principal prepayment or repayment or the amount paid (in the case of any
Alternative Currency Bilateral Loan, expressed in the Alternative
Currency therefor).
(b) Upon receipt of a Bilateral Option Loan Report with respect to
the acceptance of a Bilateral Option Loan, the Agent shall determine the
Dollar Equivalent thereof.
(c) If on any Borrowing Date on which after giving effect to the
Loans made on such date, the sum of the aggregate Loan Outstandings of
all the Banks plus the Aggregate Outstanding Bilateral Option Loans
exceeds 85% of the aggregate Commitments, then the Agent shall
redetermine as of such Borrowing Date, on the basis of the most recently
delivered Bilateral Option Loan Report for each Bilateral Option Loan,
the Dollar Equivalent of each Alternative Currency Bilateral Loan then
outstanding. In addition, for so long as the condition specified in the
preceding sentence remains in effect, the Agent shall determine, at the
end of each fiscal quarter of the Company, on the basis of the most
recently delivered Bilateral Option Loan Report for each Bilateral Option
Loan, the Dollar Equivalent of each Alternative Currency Bilateral Loan
then outstanding.
(d) The Agent shall promptly notify the Company of each Dollar
Equivalent under this subsection 3.2.
3.3 JUDGMENT CURRENCY. If for the purpose of obtaining judgment in
any court, it is necessary to convert a sum due from any Borrower
hereunder or under any of the Notes in the currency expressed to be
payable herein or under the Notes (the "SPECIFIED CURRENCY") into another
currency, the parties hereto agree, to the fullest extent that they may
effectively do so, that the rate of exchange used shall be that at which
in accordance with normal banking procedures the Agent could purchase the
specified currency with such other currency at the Agent's New York
office on the Business Day preceding that on which final judgment is
given. The obligations of each Borrower in respect of any sum due to any
Bank or the Agent hereunder or under any Note shall, notwithstanding any
judgment in a currency other than the specified currency, be discharged
only to the extent that on the Business Day following receipt by such
Bank or the Agent (as the case may be) of any sum adjudged to be so due
<PAGE>
18
in such other currency such Bank or the Agent (as the case may be) may in
accordance with normal banking procedures purchase the specified currency
with such other currency; if the amount of the specified currency so
purchased is less than the sum originally due to such Bank or the Agent,
as the case may be, in the specified currency, each Borrower agrees, to
the fullest extent that it may effectively do so, as a separate
obligation and notwithstanding any such judgment, to indemnify such Bank
or the Agent, as the case may be, against such difference, and if the
amount of the specified currency so purchased exceeds:
(a) the sum originally due to any Bank or the Agent, as the
case may be, and
(b) any amounts shared with other Banks as a result of
allocations of such excess as a disproportionate payment to such
Bank under subsection 13.7,
such Bank or the Agent, as the case may be, agrees to remit such excess
to the applicable Borrower.
3.4 REPAYMENTS. Each Borrower shall repay to each Bank which has
made a Bilateral Option Loan on the maturity date of each Bilateral
Option Loan (such maturity date being that specified in the documentation
referred to in subsection 3.1(a)) the then unpaid principal amount of
such Bilateral Option Loan.
SECTION 4. BID LOANS
4.1 THE BID LOANS. Any Borrower may borrow Bid Loans from time to
time on any Business Day during the period from the Closing Date until
the Termination Date, in the manner set forth in this Section 4 and in
amounts such that the aggregate Loan Outstandings of all the Banks at any
time plus the Aggregate Outstanding Bilateral Option Loans at such time
will not exceed the aggregate Commitments at such time, and PROVIDED,
FURTHER, that no such Bid Loan shall be made if, after giving effect
thereto, any Bid Loans would mature after the Termination Date.
4.2 PROCEDURE FOR BID LOANS. (a) A Borrower shall request Bid Loans
by delivering a Bid Loan Request to the Agent, in writing, by telex or
facsimile transmission, or by telephone, confirmed by telex or facsimile
transmission, not later than 1:00 P.M. (New York City time) one Business
Day prior to the proposed Borrowing Date. Each Bid Loan Request may
solicit bids for Bid Loans in an aggregate principal amount of $5,000,000
or a whole multiple of $1,000,000 in excess thereof and for not more than
three alternative maturity dates for such Bid Loans. The Agent shall
promptly notify each Bank by telex or facsimile transmission of the
contents of each Bid Loan Request received by it.
(b) Upon receipt of notice from the Agent of the contents of a Bid
Loan Request, any Bank that elects, in its sole discretion, to do so,
shall irrevocably offer to make one or more
<PAGE>
19
Bid Loans at a rate of interest determined by such Bank in its sole
discretion for each such Bid Loan. Any such irrevocable offer shall be
made by delivering a Bid Loan Offer to the Agent, by telephone,
immediately confirmed by telex or facsimile transmission, before 9:30
A.M. (New York City time) on the proposed Borrowing Date, setting forth
the maximum amount of Bid Loans for each maturity date, and the aggregate
maximum amount for all maturity dates, which such Bank would be willing
to make (which amounts may, subject to subsection 4.1, exceed such Bank's
Commitments) and the rate of interest at which such Bank is willing to
make each such Bid Loan; the Agent shall advise the Borrower before 10:00
A.M. (New York City time) on the proposed Borrowing Date of the contents
of each such Bid Loan Offer received by it. If the Agent in its capacity
as a Bank shall, in its sole discretion, elect to make any such offer, it
shall advise the Borrower of the contents of its Bid Loan Offer before
9:15 A.M. (New York City time) on the proposed Borrowing Date.
(c) The Borrower shall before 10:30 A.M. (New York City time) on the
proposed Borrowing Date, in its absolute discretion, either:
(i) cancel such Bid Loan Request by giving the Agent telephone
notice to that effect, and the Agent shall give prompt telephone
notice thereof to the Banks and the Bid Loans requested thereby
shall not be made; or
(ii) accept one or more of the offers made by any Bank or Banks
by giving telephone notice to the Agent (confirmed as soon as
practicable thereafter by delivery to the Agent of a Bid Loan
Confirmation in writing, by telex or by facsimile transmission) of
the amount of Bid Loans for each relevant maturity date to be made
by each Bank (which amount for each such maturity date shall be
equal to or less than the maximum amount for such maturity date
specified in the Bid Loan Offer of such Bid Loan Bank, and for all
maturity dates included in such Bid Loan Offer shall be equal to or
less than the aggregate maximum amount specified in such Bid Loan
Offer for all such maturity dates) and reject any remaining offers
made by Banks; PROVIDED, HOWEVER, that (x) the Borrower may not
accept offers for Bid Loans for any maturity date in an aggregate
principal amount in excess of the maximum principal amount requested
in the related Bid Loan Request, (y) if the Borrower accepts any of
such offers, it must accept offers strictly based upon pricing for
such relevant maturity date and no other criteria whatsoever and (z)
if two or more Banks submit offers for any maturity date at
identical pricing and the Borrower accepts any of such offers but
does not wish to (or by reason of the limitations set forth in
subsection 4.1 or in clause (x) of
<PAGE>
20
this proviso, cannot) borrow the total amount offered by such Banks
with such identical pricing, the Borrower shall accept offers from
all of such Banks in amounts allocated among them PRO RATA according
to the amounts offered by such Banks.
(d) If the Borrower accepts pursuant to clause (c) (ii) above one or
more of the offers made by any Bid Loan Bank or Bid Loan Banks, the Agent
shall notify before 11:00 A.M. (New York City time) each Bid Loan Bank
which has made such an offer, of the aggregate amount of such Bid Loans
to be made on such Borrowing Date for each maturity date and of the
acceptance or rejection of any offers to make such Bid Loans made by such
Bid Loan Bank. Each Bid Loan Bank which is to make a Bid Loan shall,
before 12:00 Noon (New York City time) on the Borrowing Date specified in
the Bid Loan Request applicable thereto, make available to the Agent at
its office set forth in subsection 13.2 the amount of Bid Loans to be
made by such Bid Loan Bank, in immediately available funds. The Agent
will make such funds available to the Borrower at or before 2:00 P.M.
(New York City time) on such date at the Agent's aforesaid address. As
soon as practicable after each Borrowing Date, the Agent shall notify
each Bank of the aggregate amount of Bid Loans advanced on such Borrowing
Date and the respective maturity dates thereof.
4.3 REPAYMENTS. Each Borrower shall repay to the Agent for the
account of each Bid Loan Bank which has made a Bid Loan on the maturity
date of each Bid Loan (such maturity date being that specified by the
Borrower for repayment of such Bid Loan in the related Bid Loan Request)
the then unpaid principal amount of such Bid Loan. The Borrowers shall
not have the right to prepay any principal amount of any Bid Loan without
the prior written consent of the Bid Loan Bank which made such Bid Loan.
4.4 INTEREST ON BID LOANS. Each Borrower which shall have borrowed a
Bid Loan shall pay interest on the unpaid principal amount of such Bid
Loan from the Borrowing Date to the stated maturity date thereof, at the
rate of interest determined pursuant to subsection 4.2 above (calculated
on the basis of a 360 day year for actual days elapsed), payable on the
interest payment date or dates specified by such Borrower for such Bid
Loan in the related Bid Loan Request. If all or a portion of the
principal amount of any Bid Loan shall not be paid when due (whether at
the stated maturity, by acceleration or otherwise), such overdue
principal amount shall, without limiting any rights of any Bank under
this Agreement, bear interest from the date on which such payment was due
at a rate per annum which is 2% above the rate which would otherwise be
applicable to such Bid Loan until the scheduled maturity date with
respect thereto, and for each day thereafter at a rate per annum which is
2% above the Alternate Base Rate until paid in full (as well after as
before judgment).
4.5 OBLIGATIONS OF BORROWERS; BID LOAN NOTES. (a) Each Borrower
agrees that each Bid Loan made by each Bid Loan Bank to such Borrower
pursuant hereto shall constitute the
<PAGE>
21
promise and obligation of such Borrower to pay to the Agent, on behalf of
such Bid Loan Bank, at the office of the Agent specified in subsection
13.2, in lawful money of the United States of America and in immediately
available funds the aggregate unpaid principal amount of each Bid Loan
made by such Bid Loan Bank to such Borrower pursuant to subsection 4.2,
which amounts shall be due and payable (whether at maturity or by
acceleration) as set forth in the Bid Loan Request related to such Bid
Loan and in this Agreement.
(b) Each Borrower agrees that each Bid Loan Bank and the Agent are
authorized to record (i) the date and amount of each Bid Loan made by
such Bid Loan Bank to such Borrower pursuant to subsection 4.2, and (ii)
the date and amount of each payment or prepayment of principal of each
such Bid Loan, in the books and records of such Bid Loan Bank or the
Agent, as the case may be, and in such manner as is reasonable and
customary for such Bank or the Agent, as the case may be, and a
certificate of an officer of such Bid Loan Bank or the Agent, as the case
may be, setting forth in reasonable detail the information so recorded,
shall constitute PRIMA FACIE evidence of the accuracy of the information
so recorded; PROVIDED that the failure to make any such recording shall
not in any way affect the obligations of such Borrower hereunder.
(c) Each Borrower agrees that, upon the request to the Agent by any
Bid Loan Bank at any time, the Bid Loans made by such Bid Loan Bank to
any Borrower shall be evidenced by a promissory note of such Borrower,
substantially in the form of Exhibit B with appropriate insertions (a
"BID LOAN NOTE"), payable to the order of such Bid Loan Bank and
representing the obligation of such Borrower to pay the unpaid principal
amount of all Bid Loans made by such Bid Loan Bank, with interest on the
unpaid principal amount from time to time outstanding of each Bid Loan
evidenced thereby as prescribed in subsection 4.4. Upon the request to
the Agent by any such Bid Loan Bank at any time, such Borrower shall
execute and deliver to such Bid Loan Bank a Bid Loan Note conforming to
the requirements hereof and executed by a duly authorized officer of such
Borrower. Each Bid Loan Bank is hereby authorized to record the date and
amount of each Bid Loan made by such Bank, the maturity date thereof, the
date and amount of each payment of principal thereof and the interest
rate with respect thereto on the schedule annexed to and constituting
part of its Bid Loan Note, and any such recordation shall constitute
PRIMA FACIE evidence of the accuracy of the information so recorded;
PROVIDED, HOWEVER, that the failure to make any such recordation shall
not affect the obligations of such Borrower hereunder or under any Bid
Loan Note. Each Bid Loan Note shall be dated the Closing Date and each
Bid Loan evidenced thereby shall bear interest for the period from and
including the Borrowing Date thereof on the unpaid principal amount
thereof from time to time outstanding at the applicable rate per annum
determined as provided in, and such interest shall be payable as
specified in, subsection 4.4.
<PAGE>
22
SECTION 5. LOAN FACILITY COMMON PROVISIONS
5.1 INTEREST RATES AND PAYMENT DATES. (a) Each Eurodollar Loan shall
bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for
such Interest Period plus the Applicable Margin.
(b) Each ABR Loan shall bear interest at a fluctuating rate per
annum equal to the Alternate Base Rate.
(c) Except as otherwise provided in subsection 4.4, if all or a
portion of (i) the principal amount of any Loan or (ii) any interest
payable thereon shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), such overdue amount shall bear
interest at a rate per annum which is (x) in the case of overdue
principal, the rate that would otherwise be applicable thereto pursuant
to the foregoing provisions of this subsection plus 2% or (y) in the case
of overdue interest, the rate described in paragraph (b) of this
subsection plus 2%, in each case from the date of such non-payment until
such amount is paid in full (as well after as before judgment).
(d) Interest shall be payable in arrears on each Interest Payment
Date, PROVIDED that interest accruing pursuant to paragraph (c) of this
subsection shall be payable on demand.
(e) Subject to the limitations set forth herein, each Borrower may
use the Loans by borrowing, prepaying and reborrowing the Loans, all in
accordance with the terms and conditions hereof.
5.2 FACILITY FEE. (a) The Company agrees to pay to the Agent for the
account of each Bank a facility fee for the period from and including the
date hereof to the Termination Date, computed at the rate per annum
determined as set forth in paragraph (b) of this subsection on the
average daily amount of the Commitment of such Bank during the period for
which payment is made, payable quarterly in arrears on the fifteenth day
of each March, June, September and December and on the Termination Date
or such earlier date as the Commitments shall terminate as provided
herein, commencing on the first of such dates to occur after the date
hereof.
(b) The rate per annum at which such facility fee under paragraph
(a) above shall be computed (the "APPLICABLE FACILITY FEE RATE"), for any
day on which the long term senior unsecured debt of the Company is rated
by both S&P and Moody's, shall be the rate per annum under the caption
"Facility Fee Rate" (a "FACILITY FEE RATE") set forth below opposite the
S&P and Moody's ratings applicable to such debt on such day (or, if such
ratings are set opposite two different rates under said caption, then the
Applicable Facility Fee Rate shall be the lower of said two Facility Fee
Rates):
<PAGE>
23
FACILITY FEE
RATE S&P MOODY'S
---- --- -------
.1500% BB+ or lower Ba1 or lower
.1250% BBB- Baa3
.1000% BBB Baa2
.0800% BBB+ Baa1
.0600% A- or higher A3 or higher
PROVIDED that if on any day the long term senior unsecured debt of the
Company is rated by only one of S&P or Moody's, such rate will be
determined based on the rating by such rating agency, and PROVIDED,
FURTHER, that if on any day the long term senior unsecured debt of the
Company is rated by neither S&P nor Moody's, the Applicable Facility Fee
Rate will be determined based on the rating of such debt by a Substitute
Rating Agency and will be the Facility Fee Rate set forth above opposite
the S&P and Moody's ratings comparable to the Substitute Rating Agency's
rating of such debt on such date, and PROVIDED, FURTHER, that if on any
day the long term senior unsecured debt of the Company is rated by none
of S&P, Moody's or any Substitute Rating Agency, the Company, the Agent
and the Banks will negotiate in good faith to determine an alternative
basis for calculating such rate consistent with the table set forth above
and, if agreement on such alternative basis is not reached with 30 days,
such rate will be calculated on an alternative basis determined by the
Agent and the Banks in their reasonable discretion consistent with the
table above, and until such alternative basis is determined such rate
will be the rate last determined as provided in the table above.
5.3 TERMINATION OR REDUCTION OF COMMITMENTS; CHANGE OF CONTROL DATE.
(a) The Company shall have the right, upon not less than five Business
Days' notice to the Agent, to terminate the Commitments or, from time to
time, to reduce the amount of the Commitments, PROVIDED that no such
termination or reduction shall be permitted to the extent that, after
giving effect thereto and to any prepayments of Loans made on the
effective date thereof, the sum of the aggregate Loan Outstandings of all
the Banks, plus the Aggregate Outstanding Bilateral Option Loans would
exceed the Commitments then in effect. Any such partial reduction shall
be in an amount equal to $5,000,000 or a whole multiple of $1,000,000 in
excess thereof and shall reduce permanently the Commitments then in
effect.
(b) (i) In the event that a Change of Control Date shall occur, (A)
the Company shall, within 10 days after such Change of Control Date, give
each Bank notice thereof in writing describing in reasonable detail the
facts and circumstances giving rise thereto, and (B) such Bank, by
written notice given to the Company not later than 30 days after the
Change of Control
<PAGE>
24
Date, may declare the Commitments of such Bank to be terminated in full
or reduced as of the date of (or as of a later date specified in) such
notice to the Company, and may require that the Borrowers prepay as
provided in this subsection 5.3 any Loans payable to such Bank and
outstanding on such date to the extent the principal amount thereof
exceeds such Bank's Commitment, if any, remaining after such termination
or reduction. To the extent such Bank so requires, the Borrowers shall
prepay such Loans on the 75th day after the date of the Company's notice
or, in the event such 75th day is not a Business Day, the Business Day
next succeeding such 75th day ("PREPAYMENT DATE").
(ii) On the Prepayment Date, the Borrowers shall prepay the unpaid
principal amount of the Loans payable to such Bank, without premium or
penalty, together with accrued interest on the amount prepaid to the
Prepayment Date.
(iii) Subsections 5.9(a), (b) and (c) shall not apply to prepayments
under this subsection 5.3(b).
(iv) Paragraph (a) of this subsection 5.3 hereof shall not apply to
any Commitment reductions pursuant to this paragraph (b).
(v)In the event that a Change of Control Date shall occur, the
Company shall not thereafter, without the prior written consent of the
Majority Banks, borrow any additional Loan (other than a Bilateral Option
Loan) in order to make, directly or indirectly, any payment or prepayment
on any Indebtedness subordinated as to the payment of principal and
interest or on liquidation to the prior payment of any of the
Obligations.
(c) If all or a substantial part of the property, assets, business
or capital stock of any of National Medical Care, Inc., NMC Holding, Inc.
or Bio-Medical Application Management Company is directly or indirectly
conveyed, sold, leased, assigned or otherwise disposed of (including by
merger, consolidation, dividend, distribution, sale of stock, liquidation
or dissolution) by Grace New York or any of its Subsidiaries (other than
to Grace New York or any of its Subsidiaries) (a "Disposition"), the
Commitments shall automatically terminate on the earliest effective date
of any such Dispositions and the Borrowers shall immediately prepay the
Loans on such date without premium or penalty, together with accrued
interest on the amount prepaid to the date of such prepayment.
(d) The Commitments shall automatically terminate on the date any of
the commitments under the Existing Agreements are reduced, cancelled or
terminated.
5.4 PREPAYMENTS. (a) Any Borrower may at any time and from time to
time upon at least four Business Days' irrevocable notice to the Agent,
in the case of Eurodollar Loans, or upon at least one Business Day's
irrevocable notice to the Agent, in the case of ABR Loans, prepay the
Loans (other than Bid Loans), in whole or in part, without premium or
penalty (subject
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25
to subsection 5.13), specifying the date and amount of prepayment and
whether the prepayment is of Eurodollar Loans, ABR Loans or a combination
thereof, and, if of a combination thereof, the amount allocable to each.
Upon receipt of any such notice the Agent shall promptly notify each Bank
thereof. If any such notice is given, the amount specified in such notice
shall be due and payable on the date specified therein. Partial
prepayments shall be in an aggregate principal amount of $5,000,000 or a
whole multiple of $1,000,000 in excess thereof.
(b) If at any time, the Agent shall determine (which determination
shall be conclusive in the absence of manifest error) that the sum of the
aggregate Loan Outstandings of all the Banks plus the Aggregate
Outstanding Bilateral Option Loans exceeds the aggregate Commitments, the
Borrowers shall immediately prepay the Loans in an aggregate principal
amount equal to such excess.
(c) All Loans shall be immediately prepaid in full upon the payment
of any of the principal amount of any loans under the Existing Agreements
unless the amounts paid under the Existing Agreements are immediately
reborrowed under the Existing Agreements.
5.5 CONVERSION AND CONTINUATION OPTIONS. (a) Any Borrower may elect
at any time and from time to time (subject to subsection 5.13) to convert
its Eurodollar Loans to ABR Loans by giving the Agent at least two
Business Days' prior irrevocable notice of such election. Any Borrower
may elect at any time and from time to time to convert its ABR Loans to
Eurodollar Loans by giving the Agent irrevocable notice of such election
(which notice must be received by the Agent prior to 4:00 P.M., New York
City time, three Business Days prior to the requested conversion date).
Any such notice of conversion to Eurodollar Loans shall specify the
length of the initial Interest Period or Interest Periods therefor. Upon
receipt of any such notice the Agent shall promptly notify each Bank
thereof. All or any part of outstanding Eurodollar Loans and ABR Loans
may be converted as provided herein, PROVIDED that (i) no Loan may be
converted into a Eurodollar Loan when any Event of Default has occurred
and is continuing and the Agent or the Majority Banks have determined
that such a conversion is not appropriate, and (ii) any such conversion
may only be made if, after giving effect thereto, subsection 5.6 shall
not have been contravened.
(b) Any Eurodollar Loans may be continued as such upon the
expiration of the then current Interest Period with respect thereto by
the Borrower thereof giving notice to the Agent, in accordance with the
applicable provisions of the term "Interest Period" set forth in
subsection 1.1, of the length of the next Interest Period to be
applicable to such Loans, PROVIDED that no Eurodollar Loan may be
continued as such (i) when any Event of Default has occurred and is
continuing and the Agent or the Majority Banks have determined that such
a continuation is not appropriate, or (ii) if, after giving effect
thereto, subsection 5.6 would be contravened and PROVIDED, FURTHER, that
if any
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26
Borrower shall fail to give any required notice as described above in
this paragraph or if such continuation is not permitted pursuant to the
preceding proviso such Loans shall be automatically converted to ABR
Loans on the last day of such then expiring Interest Period.
5.6 MINIMUM AMOUNTS OF EURODOLLAR TRANCHES. All borrowings,
conversions and continuations of Loans hereunder and all selections of
Interest Periods hereunder shall be in such amounts and be made pursuant
to such elections so that, after giving effect thereto, the aggregate
principal amount of the Loans comprising each Eurodollar Tranche shall be
equal to $5,000,000 or a whole multiple of $1,000,000 in excess thereof.
5.7 COMPUTATION OF INTEREST AND FEES. (a) Interest on ABR Loans, and
facility fees shall be calculated on the basis of a 365- (or 366-, as the
case may be) day year for the actual days elapsed. Interest on Eurodollar
Loans shall be calculated on the basis of a 360-day year for the actual
days elapsed. The Agent shall as soon as practicable notify the Borrowers
and the Banks of each determination of a Eurodollar Rate. Any change in
the interest rate on a Loan resulting from a change in the Prime Rate
shall become effective as of the opening of business on the day on which
such change in the Prime Rate is announced. The Agent shall as soon as
practicable notify the Borrowers and the Banks of the effective date and
the amount of each such change in interest rate.
(b) Each determination of an interest rate by the Agent pursuant to
any provision of this Agreement shall be conclusive and binding on the
Borrowers and the Banks in the absence of manifest error. The Agent
shall, at the request of the Company, deliver to the Company a statement
showing in reasonable detail the quotations and calculations used by the
Agent in determining any interest rate pursuant to subsections 5.1 and
5.7(a).
5.8 INABILITY TO DETERMINE INTEREST RATE. In the event that prior to
the first day of any Interest Period:
(a) the Agent shall have determined (which determination shall
be conclusive and binding upon the Borrowers) that, by reason of
circumstances affecting the relevant market, adequate and reasonable
means do not exist for ascertaining the Eurodollar Rate for such
Interest Period, or
(b) the Agent shall have received notice from the Majority
Banks that the Eurodollar Rate determined or to be determined for
such Interest Period will not adequately and fairly reflect the cost
to such Banks (as conclusively certified by such Banks) of making or
maintaining their affected Loans during such Interest Period,
the Agent shall give telecopy or telephonic notice thereof to the
Borrowers and the Banks as soon as practicable thereafter. If
<PAGE>
27
such notice is given (x) any Eurodollar Loans requested to be made on the
first day of such Interest Period shall be made as ABR Loans, (y) any
Loans that were to have been converted on the first day of such Interest
Period to Eurodollar Loans shall be continued as ABR Loans and (z) any
outstanding Eurodollar Loans shall be converted, on the first day of such
Interest Period, to ABR Loans. Until such notice has been withdrawn by
the Agent, no further Eurodollar Loans shall be made or continued as
such, nor shall any Borrower have the right to convert Loans to
Eurodollar Loans.
5.9 PRO RATA TREATMENT AND PAYMENTS. (a) Each borrowing by any
Borrower of Revolving Credit Loans from the Banks hereunder, each payment
by the Company on account of any facility fee or utilization fee
hereunder, and any reduction of the Commitments of the Banks shall be
made pro rata according to the respective Commitment Percentages of the
Banks.
(b) Whenever any payment received by the Agent or any Bank under
this Agreement or any Note is insufficient to pay in full all amounts
then due and payable to the Agent and the Banks under this Agreement and
the Notes, and the Agent has not received a Payment Sharing Notice (or if
the Agent has received a Payment Sharing Notice but the Event of Default
specified in such Payment Sharing Notice has been cured or waived), such
payment shall be distributed and applied by the Agent and the Banks in
the following order: FIRST, to the payment of fees and expenses due and
payable to the Agent in its capacity as Agent under and in connection
with this Agreement; SECOND, to the payment of all expenses due and
payable under subsection 13.5, ratably among the Banks in accordance with
the aggregate amount of such payments owed to each such Bank; THIRD, to
the payment of fees due and payable under subsections 5.2(a) and (b),
ratably among the Banks in accordance with their Commitment Percentages;
FOURTH, to the payment of interest then due and payable on the Loans,
ratably among the Banks in accordance with the aggregate amount of
interest owed to each such Bank; and FIFTH, to the payment of the
principal amount of the Loans which is then due and payable, ratably
among the Banks in accordance with the aggregate principal amount owed to
each such Bank.
(c) After the Agent has received a Payment Sharing Notice which
remains in effect, all payments received by the Agent under this
Agreement or any Note shall be distributed and applied by the Agent and
the Banks in the following order: FIRST, to the payment of all amounts
described in clauses FIRST through THIRD of the foregoing paragraph (b),
in the order set forth therein; and SECOND, to the payment of the
interest accrued on and the principal amount of all of the Loans,
regardless of whether any such amount is then due and payable, ratably
among the Banks in accordance with the aggregate accrued interest plus
the aggregate principal amount owed to such Bank.
(d) All payments (including prepayments) to be made by any Borrower
hereunder and under the Notes, whether on account of principal, interest,
fees or otherwise, shall be made without
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28
set-off or counterclaim and shall be made prior to 3:00 P.M., New York
City time, on the due date thereof (i) in the case of fees and Loans
other than Bilateral Option Loans, to the Agent, for the account of the
Banks, at the Agent's office specified in subsection 13.2, and (ii) in
the case of Bilateral Option Loans made by any Bank, to such Bank, at the
Bank's office specified in Schedule I (or, with respect to Alternative
Currency Bilateral Loans, if different, at such other office of the Bank
that it shall designate), in each case in Dollars (or, with respect to
Alternative Currency Bilateral Loans, in the relevant Alternative
Currency) and in immediately available funds. If any payment hereunder
becomes due and payable on a day other than a Business Day, such payment
shall be extended to the next succeeding Business Day (unless, with
respect to any payment on a Eurodollar Loan, the result of such extension
would be to extend such payment into another calendar month, in which
event such payment shall be made on the immediately preceding Business
Day), and, with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.
(e) Unless the Agent shall have been notified in writing by the Bank
prior to a Borrowing Date that such Bank will not make the amount of any
Loan it has committed to make on such date available to the Agent, the
Agent may assume that such Bank has made such amount available to the
Agent on such Borrowing Date, and the Agent may, in reliance upon such
assumption, make available to the applicable Borrower a corresponding
amount. If such amount is made available to the Agent on a date after
such Borrowing Date, such Bank shall pay to the Agent on demand an amount
equal to the product of (i) the daily average Federal Funds Effective
Rate during such period, times (ii) the amount of the Loan such Bank was
committed to make, times (iii) a fraction the numerator of which is the
number of days that elapse from and including such Borrowing Date to the
date on which such Bank's Loan shall have become immediately available to
the Agent and the denominator of which is 360. A certificate of the Agent
submitted to any Bank with respect to any amounts owing under this
subsection shall be conclusive in the absence of manifest error. If such
Bank's Commitment Percentage of such borrowing is not in fact made
available to the Agent by such Bank within three Business Days of such
Borrowing Date, the Agent shall be entitled to recover such amount with
interest thereon at the rate per annum applicable to ABR Loans hereunder,
on demand, from such Borrower.
5.10 ILLEGALITY. Notwithstanding any other provision herein, if any
change after the date hereof in any Requirement of Law or in the
interpretation or application thereof shall make it unlawful for any Bank
to make or maintain Eurodollar Loans as contemplated by this Agreement,
(a) the commitment of such Bank hereunder to make Eurodollar Loans,
continue Eurodollar Loans as such and convert ABR Loans to Eurodollar
Loans shall forthwith be cancelled and (b) such Bank's Loans then
outstanding as Eurodollar Loans, if any, shall be converted automatically
to ABR Loans on the respective last days of the then current Interest
Periods with respect to such Loans or within such earlier period
<PAGE>
29
as required by law. If any such conversion of a Eurodollar Loan occurs on
a day which is not the last day of the then current Interest Period with
respect thereto, the Borrower of such Loan shall pay to such Bank such
amounts, if any, as may be required pursuant to subsection 5.13.
5.11 REQUIREMENTS OF LAW. (a) In the event that any change after the
date hereof in any Requirement of Law or in the interpretation or
application thereof or compliance by any Bank with any request or
directive (whether or not having the force of law) from any central bank
or other Governmental Authority made subsequent to the date hereof:
(i) shall subject any Bank to any tax of any kind whatsoever
with respect to this Agreement, any Note or any Eurodollar Loan made
by it, or change the basis of taxation of payments to such Bank in
respect thereof (except for taxes covered by subsection 5.12 and
changes in taxes based upon or measured by income of such Bank);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against
assets held by, deposits or other liabilities in or for the account
of, advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Bank which is not
otherwise included in the determination of the Eurodollar Rate
hereunder; or
(iii) shall impose on such Bank any other condition;
and the result of any of the foregoing is to increase the cost to such
Bank, by an amount which such Bank deems in its reasonable judgment to be
material, of making, converting into, continuing or maintaining
Eurodollar Loans or to reduce any amount receivable hereunder in respect
thereof then, in any such case, the Company shall promptly pay such Bank,
upon its demand, any additional amounts necessary to compensate such Bank
for such increased cost or reduced amount receivable. If any Bank becomes
entitled to claim any additional amounts pursuant to this subsection, it
shall promptly notify the Company, through the Agent, of the event by
reason of which it has become so entitled. A certificate as to any
additional amounts payable pursuant to this subsection setting forth the
calculation thereof in reasonable detail (as determined by such Bank in
its reasonable discretion) submitted by such Bank, through the Agent, to
the Company shall be conclusive in the absence of manifest error. This
covenant shall survive the termination of this Agreement and the payment
of the Notes and all other amounts payable hereunder.
(b) In the event that any Bank shall have determined that any change
in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Bank or any
corporation controlling such Bank with any request or directive regarding
capital adequacy (whether or not having the force of law) from any
Governmental Authority
<PAGE>
30
made subsequent to the date hereof does or shall have the effect of
reducing the rate of return on such Bank's or such corporation's capital
as a consequence of its obligations hereunder to a level below that which
such Bank or such corporation could have achieved but for such change or
compliance (taking into consideration such Bank's or such corporation's
policies with respect to capital adequacy) by an amount deemed by such
Bank to be material, then from time to time, after submission by such
Bank to the Company (with a copy to the Agent) of a written request
therefor, the Company shall pay to such Bank such additional amount or
amounts as will compensate such Bank for such reduction. A certificate as
to any additional amount payable pursuant to this subsection setting
forth the calculation thereof in reasonable detail (as determined by such
Bank in its reasonable discretion) through the Agent, to the Company
shall be conclusive in the absence of manifest error.
(c) Upon request by any Bank, through the Agent, from time to time,
the Borrowers shall pay the cost of all Eurocurrency Reserve Requirements
applicable to the Eurodollar Loans made by such Bank. If a Bank is or
becomes entitled to receive payments in respect of Eurocurrency Reserve
Requirements, pursuant to this subsection 5.11(c), it shall promptly
notify the Borrowers thereof through the Agent. A certificate as to the
amount of such Eurocurrency Reserve Requirements setting forth the
calculation thereof in reasonable detail (as determined by such Bank in
its reasonable discretion) submitted by such Bank, through the Agent, to
the Borrowers shall be conclusive in the absence of manifest error. This
covenant shall survive the termination of this Agreement and the payment
of the Loans and all other amounts payable hereunder.
5.12 TAXES. (a) All payments made by any Borrower under this
Agreement and any Notes shall be made free and clear of, and without
deduction or withholding for or on account of, any present or future
income, stamp or other taxes, levies, imposts, duties, charges, fees,
deductions or withholdings, now or hereafter imposed, levied, collected,
withheld or assessed by any Governmental Authority, excluding, in the
case of the Agent and each Bank, net income taxes and franchise taxes
(imposed in lieu of net income taxes) that would not have been imposed on
the Agent or such Bank, as the case may be, in the absence of a present
or former connection between the jurisdiction of the government or taxing
authority imposing such tax and the Agent or such Bank (other than a
connection arising solely from the Agent or such Bank having executed,
delivered or performed its obligations or received a payment under, or
enforced, this Agreement or any Notes) or any political subdivision or
taxing authority thereof or therein (all such non-excluded taxes, levies,
imposts, duties, charges, fees, deductions and withholdings being
hereinafter called "TAXES"). If any Taxes are required to be withheld
from any amounts payable to the Agent or any Bank hereunder or under any
Notes, the amounts so payable to the Agent or such Bank shall be
increased to the extent necessary to yield to the Agent or such Bank
(after payment of all Taxes) interest or any such other amounts payable
hereunder at the rates
<PAGE>
31
or in the amounts specified in this Agreement and the Notes. Whenever any
Taxes are payable by any Borrower in respect of any payment made
hereunder, as promptly as possible thereafter any Borrower shall send to
the Agent for its own account or for the account of such Bank, as the
case may be, a certified copy of an original official receipt received by
such Borrower showing payment thereof. If such Borrower fails to pay any
Taxes when due to the appropriate taxing authority or fails to remit to
the Agent the required receipts or other required documentary evidence,
such Borrower shall indemnify the Agent and the Banks for any incremental
taxes, interest or penalties that may become payable by the Agent or any
Bank as a result of any such failure. The agreements in this subsection
shall survive the termination of this Agreement and the payment of the
Notes and all other amounts payable hereunder.
(b) Each Bank that is not incorporated under the laws of the United
States of America or a state thereof agrees that it will deliver to the
Company and the Agent (i) two duly completed copies of United States
Internal Revenue Service Form 1001 or 4224 or successor applicable form,
as the case may be, and (ii) an Internal Revenue Service Form W-8 or W-9
or successor applicable form. Each such Bank also agrees to deliver to
the Company and the Agent two further copies of the said Form 1001 or
4224 and Form W-8 or W-9, or successor applicable forms or other manner
of certification, as the case may be, on or before the date that any such
form expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent form previously delivered by it to
the Company, and such extensions or renewals thereof as may reasonably be
requested by the Company or the Agent, unless in any such case an event
(including, without limitation, any change in treaty, law or regulation)
has occurred prior to the date on which any such delivery would otherwise
be required which renders all such forms inapplicable or which would
prevent such Bank from duly completing and delivering any such form with
respect to it and such Bank so advises the Company and the Agent. Such
Bank shall certify (i) in the case of a Form 1001 or 4224, that it is
entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes and (ii) in the
case of a Form W-8 or W-9, that it is entitled to an exemption from
United States backup withholding tax.
5.13 INDEMNITY. Each Borrower agrees to indemnify each Bank and to
hold each Bank harmless from any loss or expense which such Bank may
sustain or incur as a consequence of (a) default by any Borrower in
payment when due of the principal amount of or interest on any Eurodollar
Loan, (b) default by any Borrower in making a borrowing of, conversion
into or continuation of Eurodollar Loans after such Borrower has given a
notice requesting the same in accordance with the provisions of this
Agreement, (c) default by any Borrower in making any prepayment after
such Borrower has given a notice thereof in accordance with the
provisions of this Agreement or (d) the making of a payment or prepayment
of Eurodollar Loans on a day
<PAGE>
32
which is not the last day of an Interest Period with respect thereto,
including, without limitation, in each case, any such loss or expense
arising from the reemployment of funds obtained by it or from fees
payable to terminate the deposits from which such funds were obtained.
This covenant shall survive the termination of this Agreement and the
payment of the Loans or Notes, if any, and all other amounts payable
hereunder.
SECTION 6. REPRESENTATIONS AND WARRANTIES
To induce the Banks to enter into this Agreement, each of the
Company and Grace New York represents and warrants to the Agent and each
Bank that:
6.1 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each Loan Party (a) is
a corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation, (b) is duly qualified and
in good standing in each jurisdiction wherein, in the opinion of the
Company and Grace New York, the conduct of its business or the ownership
of its properties requires such qualification and (c) is in compliance
with all Requirements of Law, except to the extent that the failure to
comply with paragraph (a), (b) or (c) of this subsection would not, in
the aggregate, reasonably be expected to have a Material Adverse Effect.
6.2 CORPORATE POWER, AUTHORIZATION; ENFORCEABLE OBLIGATIONS. Each
Loan Party has the corporate power and authority to make, deliver and
perform its obligations under the Loan Documents to which it is or will
be a party, and has taken all necessary corporate action to authorize (i)
in the case of the Borrowers, the borrowings under this Agreement and any
Notes to which it is or will be a party on the terms and conditions
hereof and thereof and (ii) the execution, delivery and performance of
this Agreement and the Loan Documents to which it is or will be a party.
This Agreement has been, and any Note and the other Loan Documents to
which it is or will be a party will be, duly executed and delivered on
behalf of each relevant Loan Party. This Agreement constitutes, and each
of the Notes, if any, and the other Loan Documents when executed and
delivered will constitute, a legal, valid and binding obligation of the
Loan Party thereto, and enforceable against such Loan Party in accordance
with its terms, such enforceability subject to limitations under any
applicable bankruptcy, insolvency, moratorium or other laws affecting
creditors' rights and by general equitable principles (whether applied in
a proceeding in equity or at law). No consent of any other party
(including stockholders of Grace New York) and no consent, license,
approval or authorization of, or registration or declaration with, any
Governmental Authority is required to be obtained by any Loan Party in
connection with the execution, delivery, performance, validity or
enforceability of this Agreement and any Notes.
6.3 NO LEGAL BAR. The execution, delivery and performance of this
Agreement, the Notes and the other Loan
<PAGE>
33
Documents, the borrowings hereunder and the use of the proceeds thereof,
will not violate or contravene any material provision of any Requirement
of Law or material Contractual Obligation of Grace New York, the Company
or any of its Subsidiaries and will not result in, or require, the
creation or imposition of any material Lien (other than Liens permitted
under subsection 9.2) on any of its or their respective properties or
revenues pursuant to any such Requirement of Law or Contractual
Obligation.
6.4 NO MATERIAL LITIGATION. There is no legal action, administrative
proceeding or arbitration (whether or not purportedly on behalf of Grace
New York or the Company or any of its Subsidiaries) presently pending, or
to the knowledge of Grace New York or the Company threatened, against or
affecting Grace New York or the Company or any of its Subsidiaries which
would reasonably be expected to have a Material Adverse Effect, except
that the foregoing is subject to the fact that, as discussed in footnote
(c) to the financial statements included in Grace New York's Quarterly
Report on Form 10-Q for the period ended September 30, 1995 referred to
in subsection 6.6, the Company and Grace New York cannot predict at this
time the results and impact, if any, of the governmental investigation of
Grace New York's Subsidiary, National Medical Care, Inc., referred to in
that footnote, and related claims and litigation.
6.5 OWNERSHIP OF PROPERTIES. Each of Grace New York, the Company and
its Subsidiaries is the tenant under valid leases or has good title to
substantially all its properties and assets, real and personal (except
defects in title and other matters that would not reasonably be expected
to have a Material Adverse Effect), subject to no Lien except as
permitted to exist under subsection 9.2.
6.6 FINANCIAL CONDITION. The consolidated balance sheets of Grace
New York and its Subsidiaries as at December 31, 1994 and December 31,
1993 and the related consolidated statements of operations, shareholders'
equity and of cash flows (together with the related notes), included or
incorporated in Grace New York's Annual Report on Form 10-K filed with
the SEC for the fiscal year ended December 31, 1994, present fairly in
all material respects the financial position of Grace New York and its
Subsidiaries as at such dates and the results of their operations and
their cash flows for the fiscal years then ended. The unaudited
consolidated balance sheet of Grace New York and its Subsidiaries as at
September 30, 1995 and the related unaudited consolidated statement of
operations for the threeand nine-month interim periods, and the related
unaudited consolidated statement of cash flows for the nine-month interim
period, ended on such date, included in Grace New York's Quarterly Report
on Form 10-Q filed with the SEC for such period, present fairly in all
material respects the financial position of Grace New York and its
Subsidiaries as at such date and the results of their operations and
their cash flows for the threeand nine-month periods, respectively, then
ended. All of such financial statements, including the notes to such
financial statements, have been prepared in conformity with GAAP
(subject,
<PAGE>
34
in the case of interim statements, to normal year-end adjustments and to
the fact that such financial statements may be abbreviated and may omit
footnotes or contain incomplete footnotes) consistently applied
throughout the periods involved except as stated therein.
6.7 DISCLOSURE OF CONTINGENT LIABILITIES. To the best of the
knowledge and belief of Grace New York, neither Grace New York nor any of
its Subsidiaries has any contingent obligation, liability for taxes,
long-term leases, unusual forward or other liabilities, which are
material in amount in relation to the consolidated financial condition of
Grace New York and its Subsidiaries taken as a whole and which are not
disclosed in the financial statements (including the related notes)
described in subsection 6.6 above.
6.8 ERISA. Each Plan that is intended to qualify under Section
401(a) of the Code satisfies in all material respects the applicable
requirements for qualification under that Code Section. No Reportable
Event has occurred and is continuing with respect to any such Plan, and
neither Grace New York nor any of its Subsidiaries has incurred any
liability to the PBGC under Section 4062 of ERISA with respect to any
such Plan that would reasonably be expected to have a Material Adverse
Effect.
6.9 CERTAIN FEDERAL REGULATIONS. Neither the Company nor any of its
Subsidiaries is engaged in or will engage in the business of extending
credit for the purposes of "purchasing" or "carrying" any "margin stock"
within the respective meanings of each of the quoted terms under
Regulation U of the Board, and no part of the proceeds of any Loan will
be used for any purpose which violates, or which would be inconsistent
with, the provisions of Regulation U or X of the Board.
6.10 NO DEFAULT. Neither Grace New York nor any of its Subsidiaries
is in default under or with respect to any of its Contractual Obligations
in any respect which would reasonably be expected to have a Material
Adverse Effect. No Default or Event of Default has occurred and is
continuing.
6.11 TAXES. (a) Each of Grace New York and its Subsidiaries has
filed or caused to be filed all tax returns which, to the knowledge of
Grace New York, are required to be filed and has paid all taxes shown to
be due and payable on said returns or on any assessments made against it
or any of its property and all other taxes, fees or other charges imposed
on it or any of its property by any Governmental Authority (other than
any the amount or validity of which are currently being contested in good
faith by appropriate proceedings and with respect to which adequate
reserves to the extent required in conformity with GAAP, have been
provided on the books of Grace New York or its Subsidiaries, as the case
may be) except insofar as the failure to make such filings or payments
would not reasonably be expected to have a Material Adverse Effect; and
(b) no tax Lien (other than a Lien permitted under subsection 9.2(a)) has
been filed, and, to the knowledge of Grace New York, no claim is being
<PAGE>
35
asserted, with respect to any such tax, fee or other charge which would
reasonably be expected to have a Material Adverse Effect.
6.12 INVESTMENT COMPANY ACT; OTHER REGULATIONS. None of Grace New
York, the Company or any of its Subsidiaries is an "investment company",
or a company "controlled" by an "investment company", within the meaning
of the Investment Company Act of 1940, as amended. None of Grace New
York, the Company or any other Borrower is subject to regulation under
any Federal or State statute or regulation which limits its ability to
incur Indebtedness.
6.13 PURPOSE OF LOANS. The proceeds of the Loans shall be used by
the Borrowers for general corporate purposes.
6.14 ENVIRONMENTAL MATTERS. To the best of the knowledge of Grace
New York, the operations of Grace New York and its Subsidiaries and all
parcels of real estate owned or operated by Grace New York or its
Subsidiaries are in compliance with all Environmental Laws, except where
the failure to so comply would not reasonably be expected to have a
Material Adverse Effect.
6.15 PRINCIPAL SUBSIDIARIES. Set forth on Schedule III are all of
the Principal Subsidiaries as of the date hereof.
SECTION 7. CONDITIONS PRECEDENT
7.1 CONDITIONS TO EFFECTIVENESS. The parties hereto acknowledge that
the effectiveness of this Agreement is subject to the satisfaction of the
following conditions precedent on or prior to March 29, 1996:
(a) LOAN DOCUMENTS. The Agent shall have received (i) this
Agreement, executed and delivered by a duly authorized officer of
each of the Loan Parties, with a counterpart for each Bank, (ii) for
the account of each Bank so requesting, a Revolving Credit Note and
a Bid Loan Note conforming to the requirements hereof and executed
by a duly authorized officer of the Borrowers and (iii) an
incumbency certificate of each of the Loan Parties which covers such
officers.
(b) CORPORATE PROCEEDINGS. The Agent shall have received, with
a counterpart for each Bank, a copy of the resolutions, in form and
substance satisfactory to the Agent, of the Board of Directors of
each of the Loan Parties authorizing (i) the execution, delivery and
performance of the Loan Documents to which it is or will be a party
and (ii) the borrowings contemplated hereunder (in the case of each
Borrower), certified by the Secretary or an Assistant Secretary of
such Loan Party as of the Closing Date, which certificate shall
state that the resolutions thereby certified have not been amended,
modified, revoked or rescinded and shall be in form and substance
satisfactory to the Agent.
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36
(c) FEES. The Agent shall have received the fees to be received
on the Closing Date referred to in subsection 5.2.
(d) LEGAL OPINIONS. The Agent shall have received, with a
counterpart for each Bank, the following executed legal opinions:
(i) the executed legal opinion of counsel to the Company
and Grace New York, who may be the General Counsel of the
Company, substantially in the form of Exhibit F-1;
(ii) to the extent required pursuant to subsection
13.15(a)(ii), the executed legal opinion of counsel to any
other Borrower, in form and substance reasonably satisfactory
to the Agent; and
(iii) the executed legal opinion of legal counsel to the
Agent, substantially in the form of Exhibit F-2.
Each such legal opinion shall cover such other matters incident to
the transactions contemplated by this Agreement as the Agent may
reasonably require.
(e) OFFICER'S CERTIFICATE. The Agent shall have received, with
a counterpart for each Bank, a certificate respecting accuracy of
representations and warranties, the absence of events having a
Material Adverse Effect and the absence of Defaults and Events of
Default, substantially in the form of Exhibit G hereto, signed by a
Responsible Officer on behalf of the Company and Grace New York.
(f) ADDITIONAL MATTERS. All corporate and other proceedings,
and all documents, instruments and other legal matters in connection
with the transactions contemplated by this Agreement shall be
satisfactory in form and substance to the Agent, and the Agent shall
have received such other documents and legal opinions in respect of
any aspect or consequence of the transactions contemplated hereby or
thereby as it shall reasonably request.
7.2 CONDITIONS TO EACH LOAN. The agreement of each Bank to make any
Loan requested to be made by it on any date is subject to the
satisfaction of the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations
and warranties made by each of the Loan Parties in or pursuant to
subsections 6.1, 6.2, 6.3, 6.5, 6.9, 6.10, 6.11, 6.12 and 6.13 of
this Agreement and in or pursuant to any other Loan Document to
which it is or will be a party, shall be true and correct in all
material
<PAGE>
37
respects on and as of such date as if made on and as of such date,
and the representation and warranty made pursuant to subsection 6.6
shall be true and correct in all material respects with respect to
the financial statements most recently delivered pursuant to
subsection 8.1, MUTATIS MUTANDIS, as if such financial statements
delivered pursuant to subsection 8.1 were the financial statements
referred to in subsection 6.6.
(b) NO DEFAULT. No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to
the Loans requested to be made on such date.
Each borrowing by the Borrowers hereunder shall constitute a
representation and warranty by the Loan Parties as of the date of such
Loan that the conditions contained in this subsection 7.2 have been
satisfied.
SECTION 8. AFFIRMATIVE COVENANTS
Each of the Company and Grace New York hereby agrees that, so long
as the Commitments remain in effect, any Note remains outstanding and
unpaid or any other amount is owing to any Bank or the Agent hereunder,
each of the Company and Grace New York shall and the Company (except in
the case of delivery of financial information, reports and notices) shall
cause each of its Principal Subsidiaries to:
8.1 FINANCIAL STATEMENTS. Furnish to each Bank:
(a) as soon as available, but in any event within 120 days
after the end of each fiscal year of Grace New York, a copy of the
consolidated balance sheet of Grace New York and its Subsidiaries as
at the end of such year and the related consolidated statements of
operations, shareholders' equity and cash flows for such year (as
included or incorporated by reference in Grace New York's Annual
Report on Form 10-K or successor form filed with the SEC for each
such fiscal year), setting forth in each case in comparative form
the figures for the previous year, reported on without a "going
concern" or like qualification or exception, or qualification
arising out of the scope of the audit, by Price Waterhouse or other
independent certified public accountants of nationally recognized
standing not unacceptable to the Majority Banks; and
(b) as soon as available, but in any event not later than 75
days after the end of each of the first three quarterly periods of
each fiscal year of Grace New York, the unaudited consolidated
balance sheet of Grace New York and its Subsidiaries as at the end
of such quarter and the related unaudited consolidated statements of
operations for such quarter and the related unaudited consolidated
statements of operations and cash flows for the portion of the
fiscal year through the end of such quarter (as included
<PAGE>
38
in Grace New York's Quarterly Report on Form 10-Q or successor form
filed with the SEC for each such period), setting forth in each case
in comparative form the figures for the previous year, certified by
a Responsible Officer as being fairly stated in all material
respects when considered in relation to the consolidated financial
statements of Grace New York and its Subsidiaries.
All such financial statements shall be prepared in conformity with GAAP
(subject, in the case of interim statements, to normal year-end
adjustments and to the fact that such financial statements may be
abbreviated and may omit footnotes or contain incomplete footnotes)
applied consistently throughout the periods reflected therein and with
prior periods (except as disclosed therein).
8.2 CERTIFICATES; OTHER INFORMATION. Furnish to each Bank:
(a) concurrently with the delivery of the financial statements
referred to in subsection 8.1(a), a certificate of the independent
certified public accountants reporting on such financial statements
stating that in making the examination necessary therefor no
knowledge was obtained of any Default or Event of Default, except as
specified in such certificate.
(b) concurrently with the delivery of the financial statements
referred to in subsections 8.1(a) and 8.1(b), a certificate of a
Responsible Officer of Grace New York in his capacity as such
officer stating that, to the best of such Officer's knowledge, each
of the Borrowers and Grace New York during such period has observed
or performed all of its covenants and other agreements, and
satisfied every condition, contained in this Agreement and in the
Notes and the other Loan Documents to which it is a party to be
observed, performed or satisfied by it, and that such Officer has
obtained no knowledge of any Default or Event of Default except as
specified in such certificate and showing in detail the calculation
of compliance with subsections 9.1 and 9.2;
(c) concurrently with the delivery of the financial statements
referred to in subsection 8.1(a), a list of the Principal
Subsidiaries as of the corresponding fiscal year end, certified by a
Responsible Officer in his capacity as such officer;
(d) within ten Business Days after the same are sent, copies of
all financial statements and reports which Grace New York sends to
its shareholders generally relating to the business of Grace New
York and its Subsidiaries, and within ten Business Days after the
same are filed, copies of all reports on Forms 10-K, 10-Q, 8-K, 8
and 10, and Schedules 13D, 13E-3, 13E-4, 13-G, 14D-1 and 14D-9, or
successor forms or schedules, and the final prospectus in each
effective
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39
registration statement (other than registration statements on Form
S-8) and each post-effective amendment to such registration
statement which Grace New York may make to, or file with, the SEC;
and
(e) promptly, subject to reasonable confidentiality
requirements agreed to by the Company and such Bank, such additional
financial and other information as any Bank may from time to time
reasonably request.
8.3 PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise satisfy at
or before maturity or before they become delinquent, as the case may be,
all its obligations of whatever nature, except where the amount or
validity thereof is currently being contested in good faith by
appropriate proceedings and reserves, to the extent required in
conformity with GAAP with respect thereto, have been provided on the
books of Grace New York or its Subsidiaries, as the case may be, and
except to the extent that the failure to so pay, discharge or otherwise
satisfy such obligations would not result in a Default or Event of
Default under Section 10(e)(i).
8.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. Preserve,
renew and keep in full force and effect its corporate existence and take
all reasonable action to maintain all corporate rights, privileges and
franchises necessary or desirable in the normal conduct of its business,
except as otherwise permitted pursuant to subsection 9.3; comply with all
Contractual Obligations and Requirements of Law except to the extent that
failure to comply therewith would not, in the aggregate, reasonably be
expected to have a Material Adverse Effect.
8.5 INSURANCE. Maintain with financially sound and reputable
insurance companies (which may include, without limitation, captive
insurers), such insurance coverage as is reasonable for the business
activities of Grace New York and its Subsidiaries; and furnish to the
Agent, upon written request, such information as the Agent may reasonably
request as to its insurance program.
8.6 INSPECTION OF PROPERTY, BOOKS AND RECORDS; DISCUSSIONS. Permit
representatives of any Bank (subject to reasonable safety and
confidentiality requirements) to visit and inspect any of its properties
and examine and make abstracts from any of its books and records at any
reasonable time and as often as may reasonably be desired and to discuss
the business, operations, properties and financial and other condition of
Grace New York and its Subsidiaries with officers and employees of Grace
New York and its Subsidiaries and, provided representatives of Grace New
York are given an opportunity to participate, with its independent
certified public accountants.
8.7 NOTICES. Promptly give notice to the Agent and each Bank of:
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40
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of Grace New York or any of its Subsidiaries or (ii)
litigation, investigation or proceeding which may exist at any time
between Grace New York or any of its Subsidiaries and any Governmental
Authority, which in either case, would reasonably be expected to have a
Material Adverse Effect;
(c) any litigation or proceeding affecting Grace New York or any of
its Subsidiaries in which the then reasonably anticipated exposure of
Grace New York and its Subsidiaries is $10,000,000 or more and not
covered by insurance, or in which injunctive or similar relief is sought
which is then reasonably anticipated to have an adverse economic effect
on Grace New York and its Subsidiaries of $10,000,000 or more;
(d) the following events, as soon as possible and in any event
within 30 days after the Company or Grace New York knows or has reason to
know thereof: (i) the occurrence or expected occurrence of any Reportable
Event with respect to any Plan, or any withdrawal from, or the
termination, Reorganization or Insolvency of any Multiemployer Plan or
(ii) the institution of proceedings or the taking of any other action by
the PBGC or the Company or Grace New York or any Commonly Controlled
Entity or any Multiemployer Plan with respect to the withdrawal from, or
the terminating, Reorganization or Insolvency of, any Plan, where in
connection with any of the events described in (i) or (ii) above the
liability to the Company or a Commonly Controlled Entity would reasonably
be expected to be $10,000,000 or more;
(e) any upgrading, downgrading or cessation in the rating of the
long term senior unsecured debt of the Company by the rating agency or
agencies whose rating on such debt is then being used to determine the
Applicable Margin and the Facility Fee Rate; and
(f) a development or event which would reasonably be expected to
have a Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of
a Responsible Officer setting forth details of the occurrence referred to
therein and stating what action each of the Company and Grace New York
proposes to take with respect thereto.
8.8 ENVIRONMENTAL LAWS.
(a) Comply with all Environmental Laws and obtain and comply with
and maintain any and all licenses, approvals, registrations or permits
required by Environmental Laws, except to the extent that failure to do
so would not be reasonably expected to have a Material Adverse Effect;
and
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41
(b) Defend, indemnify and hold harmless the Agent and the Banks, and
their respective employees, agents, officers and directors, from and
against any claims, demands, penalties, fines, liabilities, settlements,
damages, costs and expenses of whatever kind or nature known or unknown,
contingent or otherwise, arising out of, or in any way relating to the
violation of or noncompliance with any Environmental Laws applicable to
the real property owned or operated by the Company, Grace New York or any
of the Company's Subsidiaries, or any orders, requirements or demands of
Governmental Authorities related thereto, including, without limitation,
attorney's and consultant's fees, investigation and laboratory fees,
court costs and litigation expenses, except to the extent that any of the
foregoing arise out of the gross negligence or willful misconduct of the
party seeking indemnification therefor.
SECTION 9. NEGATIVE COVENANTS
Grace New York hereby agrees that, so long as the Commitments remain
in effect, any Note remains outstanding and unpaid or any other amount is
owing to any Bank or the Agent hereunder, it shall not, and (except with
respect to subsections 9.1 and 9.5(b)) shall not permit any of its
Subsidiaries to, directly or indirectly:
9.1 FINANCIAL CONDITION COVENANTS.
(a) CONSOLIDATED DEBT TO TOTAL CAPITALIZATION. Permit the ratio of
Consolidated Debt to Total Capitalization at the end of any fiscal
quarter after the Closing Date to be greater than 60%.
(b) INTEREST COVERAGE. Permit for any period of four consecutive
fiscal quarters ending on the last day of any fiscal quarter of the
Company commencing with September 30, 1994 the ratio of EBIT to
Consolidated Interest Expense to be less than 2.0 to 1.0.
9.2 LIMITATION ON LIENS. Create, incur, assume or suffer to exist
any Lien upon any of its property, assets or revenues (which property,
assets or revenues are or would be reflected from time to time on the
consolidated financial statements of Grace New York and its Subsidiaries
in accordance with GAAP), whether now owned or hereafter acquired, except
for:
(a) Liens for taxes or other governmental charges not yet due
or which are being contested in good faith by appropriate
proceedings, PROVIDED that adequate reserves with respect thereto
are maintained on the books of Grace New York or its Subsidiaries,
as the case may be, to the extent required in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, vendors', landlords', brokers', bankers' and other like
Liens arising in the ordinary course
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42
of business relating to obligations which are not overdue for a
period of more than 60 days or which are being contested in good
faith and Liens arising out of judgments or awards that are either
discharged within 60 days after entry or execution of which has been
stayed pending the outcome of appeal or review proceedings;
(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation and deposits securing liability to insurance carriers
under insurance or self-insurance arrangements;
(d) pledges, deposits and similar arrangements in connection
with or to secure performance of bids, tenders, leases and other
deposits to secure the performance of bids, trade contracts (other
than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business and contractual
rights of other Persons to make set-offs and to require security in
connection with letters of credit, currency, commodity and interest
rate contracts, surety bonds, leases, banking and brokerage
agreements and other transactions in the ordinary course of
business;
(e) leases, easements, rights-of-way, restrictions and other
similar encumbrances incurred in the ordinary course of business
which would not reasonably be expected to have a Material Adverse
Effect;
(f) Liens on the property, assets or revenues of a Person which
becomes a Subsidiary after the date hereof, to the extent that (i)
such Liens existed at the time such Person became a Subsidiary and
were not created in anticipation thereof, (ii) any such Lien is not
extended to cover any property, assets or revenues of such Person
after the time such Person becomes a Subsidiary, and (iii) the
amount of Indebtedness secured thereby is not thereafter increased;
(g) Liens arising in connection with (i) industrial
development, pollution control or other tax exempt financing
transactions, PROVIDED that such Liens do not at any time encumber
any property other than the property financed by such transaction
and other property, assets or revenues related to the property so
financed on which Liens are customarily granted in connection with
such transactions, or (ii) conveyances of any production payment or
other obligation to make a production payment (A) which is to be
made solely from production from oil, gas or other underground
mineral properties dedicated thereto or (B) as to which production
payment amount the obligee's sole recourse is to such properties;
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43
(h) Liens (including, without limitation, Liens incurred in
connection with Capitalized Leases, operating leases and
sale-leaseback transactions) securing Indebtedness of Grace New York
and its Subsidiaries incurred to finance the acquisition of fixed or
capital assets, and refinancings thereof, PROVIDED that (i) such
Liens do not at any time encumber any property other than the
property financed by such Indebtedness and other property, assets or
revenues related to the property so financed on which Liens are
customarily granted in connection with such financings or
refinancings, and (ii) the principal amount of Indebtedness secured
by any such Lien shall at no time exceed 100% of the greater of the
original purchase price of such property at the time it was acquired
and the fair market value of such property as reasonably determined
by a Responsible Officer of the Company in good faith thereafter,
PLUS fees and other costs related to the financing or refinancing
thereof which have been agreed upon in an arm's length manner;
(i) Liens incurred in connection with accounts receivable sale
transactions entered into by Grace New York or its Subsidiaries;
(j) Liens securing Contractual Obligations of any Subsidiary to
Grace New York, the Company or any Domestic Subsidiary;
(k) Liens on the property, assets or revenues of any Foreign
Subsidiary; and
(l) Liens (not otherwise permitted hereunder) which secure
obligations in an aggregate amount at any time outstanding not
exceeding an amount equal to 5% of the amount recorded opposite the
caption "Properties and equipment, net" (or the equivalent caption)
on the consolidated balance sheet of Grace New York and its
Subsidiaries most recently delivered to the Agent pursuant to
subsection 8.1.
9.3 LIMITATION ON FUNDAMENTAL CHANGES. Convey, sell, lease, assign,
transfer or otherwise dispose of (including by merger, consolidation,
sale of stock, liquidation or dissolution) all or substantially all of
the property, assets or business of Grace New York and its Subsidiaries
taken as a whole.
9.4 LIMITATION ON ASSET TRANSFERS TO FOREIGN SUBSIDIARIES. With
respect to Grace New York or any Domestic Subsidiary, convey, sell,
lease, assign, transfer or otherwise dispose of (collectively, a
"transfer") any of its property, business or assets (including, without
limitation leasehold interests), whether now owned or hereafter acquired,
to any Foreign Subsidiary, except such transfers which, individually or
in the aggregate, would not reasonably be expected to have a Material
Adverse Effect.
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44
9.5 LIMITATION ON SUBORDINATED DEBT. Permit any Subsidiary of Grace
New York (other than the Company) to create, incur, assume or suffer to
exist any subordinated indebtedness other than (a) subordinated
indebtedness of a Person which becomes a Subsidiary after the date hereof
to the extent such indebtedness existed at the time such Person became a
Subsidiary and was not incurred in anticipation thereof and any
refinancings of such indebtedness after such time so long as the
principal amount thereof is not increased or (b) subordinated
indebtedness of such Subsidiary held by Grace New York or any other
Subsidiary of Grace New York.
SECTION 10. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) Any Borrower shall fail to pay any principal of any Loan or
Note when due in accordance with the terms thereof or hereof; or any
Borrower shall fail to pay any interest on any Loan or Note, or any
other amount payable hereunder, within five Business Days after any
such interest or other amount becomes due in accordance with the
terms thereof or hereof; or
(b) Any representation or warranty made, or pursuant to
subsection 7.2, deemed made, by any Loan Party herein or in any
other Loan Document or which is contained in any certificate,
document or financial or other statement furnished at any time under
or in connection with this Agreement shall prove to have been
incorrect in any material adverse respect on or as of the date made
or deemed made; or
(c) Grace New York or any Subsidiary shall default in the
observance or performance of any agreement contained in subsection
9.1, 9.3, 9.4 or 9.5; or
(d) Any Loan Party shall default in the observance or
performance of any other agreement contained in this Agreement
(other than as provided in paragraphs (a) through (c) of this
Section), and such default shall continue unremedied for a period of
30 days; or
(e) Grace New York or any of its Subsidiaries shall (i) default
in any payment of principal of or interest on, or any other amount
payable with respect to, any (A) Domestic Indebtedness (other than
the Notes and Loans) in an aggregate principal amount for all such
Domestic Indebtedness of $10,000,000 or more, or (B) Foreign
Subsidiary Indebtedness (other than the Notes and Loans) in an
aggregate principal amount for all such Foreign Subsidiary
Indebtedness of $20,000,000 or more, beyond the period of grace (not
to exceed 30 days), if any, provided in the instrument or agreement
under which such Indebtedness was created; or (ii) default in the
observance or
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45
performance of any other agreement relating to any such Indebtedness
in the amounts specified in clause (i) above or contained in any
instrument or agreement evidencing, securing or relating thereto, or
any other event shall occur or condition exist in any case which
continues uncured or unwaived (and, if waived, without any change in
the material terms of such Indebtedness) after the expiration of all
applicable grace periods, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or
holders) to cause, with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity;
(f) (i) Grace New York or any Principal Subsidiary shall
commence any case, proceeding or other action (A) under any existing
or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking
to have an order for relief entered with respect to it, or seeking
to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its
assets, or Grace New York or any such Principal Subsidiary shall
make a general assignment for the benefit of its creditors; or (ii)
there shall be commenced against Grace New York or any such
Principal Subsidiary any case, proceeding or other action of a
nature referred to in clause (i) above which (A) results in the
entry of an order for relief or any such adjudication or appointment
or (B) remains undismissed, undischarged or unbonded for a period of
60 days; or (iii) there shall be commenced against any Grace New
York or any such Principal Subsidiary any case, proceeding or other
action seeking issuance of a warrant of attachment, execution,
distraint or similar process against all or any substantial part of
its assets which results in the entry of an order for any such
relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within 60 days from the entry thereof; or (iv)
Grace New York or any such Principal Subsidiary shall take any
action in furtherance of, or indicating its consent to, approval of,
or acquiescence in, any of the acts set forth in clause (i), (ii) or
(iii) above; or (v) Grace New York or any such Principal Subsidiary
shall generally not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due; or
(g) (i) Any Person shall engage in any non-exempt "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of
the Code) involving any Plan, (ii) any "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not
waived, shall exist with respect to any Plan, (iii) a Reportable
Event shall occur with
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46
respect to, or judicial proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to
terminate, any Single Employer Plan, which Reportable Event or
commencement of judicial proceedings or appointment of a trustee is,
in the reasonable opinion of the Majority Banks, likely to result in
the termination of such Plan for purposes of Title IV of ERISA, (iv)
any Single Employer Plan shall terminate for purposes of Title IV of
ERISA, (v) the Company or any Commonly Controlled Entity shall, or
in the reasonable opinion of the Majority Banks is likely to, incur
any liability in connection with a withdrawal from, or the
Insolvency or Reorganization of, a Multiemployer Plan or (vi) any
other event or condition shall occur or exist, with respect to a
Plan; and in each case in clauses (i) through (vi) above, such event
or condition, together with all other such events or conditions, if
any, could reasonably be expected to subject the Company or any of
its Subsidiaries to any tax, penalty or other liabilities which in
the aggregate would have a Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against
Grace New York or any of its Subsidiaries in aggregate amounts (not
paid or fully covered by insurance) of $10,000,000 or more and all
such judgments or decrees shall not have been vacated, discharged,
stayed or bonded pending appeal within 60 days from the entry
thereof; or
(i) Grace New York shall cease to own directly or indirectly of
record and beneficially free and clear of Liens at least 75% of the
shares of the issued and outstanding capital stock of the Company;
then, and in any such event, (A) if such event is an Event of Default
specified in clause (i), (ii) or (iii) of paragraph (f) above with
respect to any of the Borrowers, automatically the Commitments to such
Borrower shall immediately terminate and the Loans made to such Borrower
hereunder (with accrued interest thereon) and all other amounts owing
under this Agreement and the Notes of such Borrower shall immediately
become due and payable, and (B) if such event is any other Event of
Default, either or both of the following actions may be taken: (i) with
the consent of the Majority Banks, the Agent may, or upon the request of
the Majority Banks, the Agent shall, by notice to the Company declare the
Commitments of any or all of the Borrowers to be terminated forthwith,
whereupon such Commitments shall immediately terminate; and (ii) with the
consent of the Majority Banks, the Agent may, or upon the request of the
Majority Banks, the Agent shall, by notice of default to the Company and
Grace New York, declare the Loans hereunder made to any or all of the
Borrowers (with accrued interest thereon) and all other amounts owing by
such Borrower under this Agreement and the Notes of such Borrower to be
due and payable forthwith, whereupon the same shall immediately become
due and payable. Except as expressly provided above in this Section,
presentment, demand, protest and all other notices of any kind are hereby
expressly waived.
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47
SECTION 11. THE AGENT
11.1 APPOINTMENT. Each Bank hereby irrevocably designates and
appoints NationsBank as the Agent of such Bank under this Agreement and
the other Loan Documents, and each such Bank irrevocably authorizes
NationsBank, as the Agent for such Bank, to take such action on its
behalf under the provisions of this Agreement and the other Loan
Documents and to exercise such powers and perform such duties as are
expressly delegated to the Agent by the terms of this Agreement and the
other Loan Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Agreement, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any
fiduciary relationship with any Bank, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be
read into this Agreement or any other Loan Document or otherwise exist
against the Agent.
11.2 DELEGATION OF DUTIES. The Agent may execute any of its duties
under this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning
all matters pertaining to such duties. The Agent shall not be responsible
for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care.
11.3 EXCULPATORY PROVISIONS. Neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates
shall be (i) liable for any action lawfully taken or omitted to be taken
by it or such Person under or in connection with this Agreement or any
other Loan Document (except for its or such Person's own gross negligence
or willful misconduct) or (ii) responsible in any manner to any of the
Banks for any recitals, statements, representations or warranties made by
any Loan Party or any officer thereof contained in this Agreement or any
other Loan Document or in any certificate, report, statement or other
document referred to or provided for in, or received by the Agent under
or in connection with, this Agreement or any other Loan Document or for
the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or the Notes or any other Loan Document or
for any failure of any Loan Party to perform its obligations hereunder or
thereunder. The Agent shall not be under any obligation to any Bank to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other
Loan Document, or to inspect the properties, books or records of any Loan
Party.
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48
11.4 RELIANCE BY AGENT. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram,
telecopy, telex or teletype message, statement, order or other document
or conversation believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to
the Company, Grace New York or any other Borrower), independent
accountants and other experts selected by the Agent. The Agent may deem
and treat the payee of any Note as the owner thereof for all purposes
unless a written notice of assignment, negotiation or transfer thereof
shall have been filed with the Agent. The Agent shall be fully justified
in failing or refusing to take any action under this Agreement or any
other Loan Document unless it shall first receive such advice or
concurrence of the Majority Banks as it deems appropriate or it shall
first be indemnified to its satisfaction by the Banks against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement
and the Notes and the other Loan Documents in accordance with a request
of the Majority Banks, and such request and any action taken or failure
to act pursuant thereto shall be binding upon all the Banks and all
future holders of the Notes.
11.5 NOTICE OF DEFAULT. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has received notice from a Bank or any Loan
Party referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the
event that the Agent receives such a notice, the Agent shall give notice
thereof to the Banks. The Agent shall take such action with respect to
such Default or Event of Default as shall be reasonably directed by the
Majority Banks; PROVIDED that unless and until the Agent shall have
received such directions, the Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to
such Default or Event of Default as it shall deem advisable in the best
interests of the Banks.
11.6 NON-RELIANCE ON AGENT AND OTHER BANKS. Each Bank expressly
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any
representations or warranties to it and that no act by the Agent
hereinafter taken, including any review of the affairs of the Loan
Parties, shall be deemed to constitute any representation or warranty by
the Agent to any Bank. Each Bank represents to the Agent that it has,
independently and without reliance upon the Agent or any other Bank, and
based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness
of the Loan Parties and made its own decision to make its Loans hereunder
and enter into this Agreement. Each Bank also represents that it will,
independently and without
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49
reliance upon the Agent or any other Bank, and based on such documents
and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not
taking action under this Agreement and the other Loan Documents, and to
make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of the Loan Parties. Except for notices, reports and
other documents expressly required to be furnished to the Banks by the
Agent hereunder, the Agent shall not have any duty or responsibility to
provide any Bank with any credit or other information concerning the
business, operations, property, condition (financial or otherwise),
prospects or creditworthiness of the Loan Parties which may come into the
possession of the Agent or any of its officers, directors, employees,
agents, attorneys-in-fact or Affiliates.
11.7 INDEMNIFICATION. The Banks agree to indemnify the Agent in its
capacity as such (to the extent not reimbursed by the Loan Parties and
without limiting the obligation of Grace New York, the Company and any
other Borrower to do so), ratably according to the respective amounts of
their Commitments as in effect on the date on which the claim for
indemnity by the Agent is sought, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind whatsoever which may
at any time (including, without limitation, at any time following the
payment of the Notes) be imposed on, incurred by or asserted against the
Agent in any way relating to or arising out of this Agreement, any of the
other Loan Documents or any documents contemplated by or referred to
herein or therein or the transactions contemplated hereby or thereby or
any action taken or omitted by the Agent under or in connection with any
of the foregoing; PROVIDED that no Bank shall be liable for the payment
of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from the Agent's gross negligence or willful misconduct.
The agreements in this subsection shall survive the payment of the Notes
and all other amounts payable hereunder.
11.8 AGENT IN ITS INDIVIDUAL CAPACITY. The Agent and its Affiliates
may make loans to, accept deposits from and generally engage in any kind
of business with Grace New York, the Company or any other Borrower as
though the Agent were not the Agent hereunder and under the other Loan
Documents. With respect to its Loans made or renewed by it and any Note
issued to it, the Agent shall have the same rights and powers under this
Agreement and the other Loan Documents as any Bank and may exercise the
same as though it were not the Agent, and the terms "Bank" and "Banks"
shall include the Agent in its individual capacity.
11.9 SUCCESSOR AGENT. The Agent may resign as Agent upon 10 days'
notice to the Banks. If the Agent shall resign as Agent under this
Agreement and the other Loan Documents, then the Majority Banks shall
appoint from among the Banks a successor
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agent for the Banks, which successor agent shall be approved by the
Company, whereupon such successor agent shall succeed to the rights,
powers and duties of the Agent, and the term "Agent" shall mean such
successor agent effective upon its appointment, and the former Agent's
rights, powers and duties as Agent shall be terminated, without any other
or further act or deed on the part of such former Agent or any of the
parties to this Agreement or any holders of the Notes. After any retiring
Agent's resignation as Agent, the provisions of this subsection shall
inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement and the other Loan Documents.
SECTION 12. GUARANTEES
12.1 GRACE NEW YORK GUARANTEE. Grace New York hereby unconditionally
and irrevocably guarantees to the Agent and the Banks the prompt and
complete payment and performance by each of the Borrowers when due
(whether at the stated maturity, by acceleration or otherwise) of the
Obligations owing to the Agent and the Banks by such Borrowers. This
guarantee (the "GRACE NEW YORK GUARANTEE") shall remain in full force and
effect until the Obligations of each of the Borrowers are indefeasibly
paid in full, notwithstanding that from time to time prior thereto any
Borrower may be free from any Obligations. Grace New York agrees that
whenever, at any time, or from time to time, it shall make any payment to
the Agent or any Bank on account of its liability under this Grace New
York Guarantee, it will notify the Agent and such Bank in writing that
such payment is made under this Grace New York Guarantee for such
purpose. No payment or payments made by any Borrower or any other Person
or received or collected by the Agent or any Bank from any Borrower or
any other Person by virtue of any action or proceeding or any offset or
appropriation or application, at any time or from time to time, in
reduction of or in payment of the Obligations of such Borrower shall be
deemed to modify, reduce, release or otherwise affect the liability of
Grace New York under this Grace New York Guarantee, which shall remain
obligated under this Grace New York Guarantee, notwithstanding any such
payment or payments until the Obligations are paid in full.
12.2 COMPANY GUARANTEE. The Company hereby unconditionally and
irrevocably guarantees to the Agent and the Banks, the prompt and
complete payment and performance by each of the other Borrowers when due
(whether at the stated maturity, by acceleration or otherwise) of the
Obligations owing to the Agent and the Banks by such Borrowers. This
guarantee (the "COMPANY GUARANTEE") shall remain in full force and effect
until the Obligations of each such Borrower are indefeasibly paid in
full, notwithstanding that from time to time prior thereto any such
Borrower may be free from any Obligations. The Company agrees that
whenever, at any time, or from time to time, it shall make any payment to
the Agent or any Bank on account of its liability under this Company
Guarantee, it will notify the Agent and such Bank in writing that such
payment is made under this Company
<PAGE>
51
Guarantee for such purpose. No payment or payments made by any such
Borrower or any other Person or received or collected by the Agent or any
Bank from any such Borrower or any other Person by virtue of any action
or proceeding or any offset or appropriation or application, at any time
or from time to time, in reduction of or in payment of the Obligations of
such Borrowers shall be deemed to modify, reduce, release or otherwise
affect the liability of the Company under this Company Guarantee, which
shall remain obligated under this Company Guarantee, notwithstanding any
such payment or payments until the Obligations of such Borrowers are paid
in full.
12.3 NO SUBROGATION, CONTRIBUTION, REIMBURSEMENT OR INDEMNITY.
Notwithstanding anything to the contrary in the Grace New York Guarantee
and the Company Guarantee (together, the "GUARANTEES", each a
"GUARANTEE"), each of Grace New York and the Company (together, the
"GUARANTEEING PARTIES," each a "GUARANTEEING PARTY") hereby irrevocably
waives all rights which may have arisen in connection with its Guarantee
to be subrogated to any of the rights (whether contractual, under the
Bankruptcy Code, including Section 509 thereof, under common law or
otherwise) of the Agent or any Bank against the Company or any other
Borrowers (together, the "GUARANTEED PARTIES", each a "GUARANTEED PARTY")
for the payment of the Obligations. Each Guaranteeing Party hereby
further irrevocably waives all contractual, common law, statutory or
other rights of reimbursement, contribution, exoneration or indemnity (or
any similar right) from or against any Guaranteed Party or Parties or any
other Person which may have arisen in connection with its Guarantee. So
long as the Obligations remain outstanding, if any amount shall be paid
by or on behalf of any Guaranteed Party to the Guaranteeing Party on
account of any of the rights waived in this subsection, such amount shall
be held by such Guaranteeing Party in trust, segregated from other funds
of such Guaranteeing Party, and shall, forthwith upon receipt by such
Guaranteeing Party, be turned over to the Agent in the exact form
received by such Guaranteeing Party (duly endorsed by such Guaranteeing
Party to the Agent, if required), to be applied against the Obligations
of such Guaranteed Party or Parties, whether matured or unmatured, in
such order as the Agent may determine. The provisions of this subsection
as they apply to each of the Guaranteeing Parties shall survive the
payment in full of the Obligations of its Guaranteed Party or Parties.
12.4 AMENDMENTS, ETC., WITH RESPECT TO THE OBLIGATIONS. Each
Guaranteeing Party shall remain obligated under its Guarantee
notwithstanding that, without any reservation of rights against such
Guaranteeing Party, and without notice to or further assent by such
Guaranteeing Party, any demand for payment of any of the Obligations made
by the Agent or any Bank may be rescinded by the Agent or such Bank, and
any of the Obligations continued, and the Obligations, or the liability
of any other party upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto,
may, from time to time, in whole or in part, be renewed, extended,
amended, modified, accelerated, compromised, waived,
<PAGE>
52
surrendered or released by the Agent or any Bank, and this Agreement, the
Notes and the other Loan Documents may be amended, modified, supplemented
or terminated, in whole or in part, as the Agent or the Banks (or the
Majority Banks, as the case may be) may deem advisable from time to time
in accordance with the provisions of subsection 13.1(a), and any
collateral security, guarantee or right of set-off at any time held by
the Agent or any Bank for the payment of the Obligations may be sold,
exchanged, waived, surrendered or released. Neither the Agent nor any
Bank shall have any obligation to protect, secure, perfect or insure any
Lien at any time held by it as security for the Obligations or for the
obligations of either Guaranteeing Party under its Guarantee or any
property subject thereto.
12.5 GUARANTEE ABSOLUTE AND UNCONDITIONAL. Each Guaranteeing Party
waives any and all notice of the creation, renewal, extension or accrual
of any of the Obligations and notice of or proof of reliance by the Agent
or any Bank upon its Guarantee or acceptance of its Guarantee; the
Obligations, and any of them, shall conclusively be deemed to have been
created, contracted or incurred in reliance upon the Guarantees; and all
dealings between the Borrowers and Grace New York, on the one hand, and
the Agent and the Banks, on the other, shall likewise be conclusively
presumed to have been had or consummated in reliance upon the Guarantees.
Each Guaranteeing Party waives diligence, presentment, protest, notice of
intent to accelerate, notice of acceleration, demand for payment and
notice of default or nonpayment to or upon any Guaranteed Party or such
Guaranteeing Party with respect to the Obligations. The Guarantees shall
be construed as a continuing, absolute and unconditional guarantee of
payment without regard to (a) the validity or enforceability of this
Agreement, any Note, any other Loan Document, any of the Obligations or
any collateral security therefor or guarantee or right of set-off with
respect thereto at any time or from time to time held by the Agent or any
Bank, (b) any defense, offset or counterclaim (other than a defense of
payment or performance) which may at any time be available to or be
asserted by any of the Guaranteed Parties against the Agent or any Bank
or (c) any other circumstance whatsoever (with or without notice to or
knowledge of any of the Guaranteed Parties or such Guaranteeing Party)
which constitutes, or might be construed to constitute, an equitable or
legal discharge of any of the Guaranteed Parties for the Obligations of
such Guaranteed Party, or of such Guaranteeing Party under its Guarantee,
in bankruptcy or in any other instance. When the Agent is pursuing its
rights and remedies hereunder against either Guaranteeing Party, the
Agent or any Bank may, but shall be under no obligation to, pursue such
rights and remedies as it may have against its Guaranteed Party or any
other Person or against any collateral security or guarantee for the
Obligations or any right of offset with respect thereto, and any failure
by the Agent or any Bank to pursue such other rights or remedies or to
collect any payments from such Guaranteed Party or such other Person or
to realize upon any such collateral security or guarantee or to exercise
such right of offset or any release of such Guaranteed Party or such
other Person or of any such collateral security,
<PAGE>
53
guarantee or right of offset, shall not relieve such Guaranteeing Party
of any liability under its Guarantee, and shall not impair or affect the
rights and remedies, whether express, implied or available as a matter of
law, of the Agent and the Banks against such Guaranteeing Party.
12.6 REINSTATEMENT. Each Guarantee shall continue to be effective,
or be reinstated, as the case may be, if at any time payment, or any part
thereof, of any of the Obligations of any Guaranteed Party thereunder is
rescinded or must otherwise be restored or returned by the Agent or any
Bank upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of such Guaranteed Party or upon or as a result of the
appointment of a receiver, intervenor or conservator of, or trustee or
similar officer for, such Guaranteed Party or any substantial part of any
of its property, or otherwise, all as though such payments had not been
made.
12.7 PAYMENTS. Each Guaranteeing Party hereby agrees that the
Obligations will be paid to the Agent for the benefit of the Agent and
the Banks, as the case may be, without set-off or counterclaim in Dollars
or Alternative Currency, as appropriate, in immediately available funds
at the office of the Agent located at 270 Park Avenue, New York, New York
10017.
SECTION 13. MISCELLANEOUS
13.1 AMENDMENTS AND WAIVERS; REPLACEMENT OF BANKS. (a) Neither this
Agreement, any Note, any other Loan Document, nor any terms hereof or
thereof may be amended, supplemented or modified except in accordance
with the provisions of this subsection. With the written consent of the
Majority Banks, the Agent, Grace New York and the Company may, from time
to time, enter into written amendments, supplements or modifications
hereto and to the Notes, if any, and the other Loan Documents for the
purpose of adding any provisions to this Agreement or the Notes, if any,
or the other Loan Documents or changing in any manner the rights of the
Banks, Grace New York or of the Borrowers hereunder or thereunder or
waiving, on such terms and conditions as the Agent may specify in such
instrument, any of the requirements of this Agreement or the Notes, if
any, or the other Loan Documents or any Default or Event of Default and
its consequences; PROVIDED, HOWEVER, that no such waiver and no such
amendment, supplement or modification shall (a) reduce the amount or
extend the maturity of any Loan or Note or any installment thereof, or
reduce the rate or extend the time of payment of interest thereon, or
reduce any fee payable to any Bank hereunder, or change the amount of any
Bank's Commitment, in each case without the consent of the Bank affected
thereby, or (b) amend, modify or waive any provision of this subsection
or reduce the percentage specified in the definition of Majority Banks,
or consent to the assignment or transfer by Grace New York or any
Borrower of any of its rights and obligations under this Agreement and
the other Loan Documents, or amend, modify or waive any provision of
Section 12, in each case without the written
<PAGE>
54
consent of all the Banks, or (c) amend, modify or waive any provision of
Section 11 without the written consent of the then Agent. Any such waiver
and any such amendment, supplement or modification shall apply equally to
each of the Banks and shall be binding upon Grace New York, the
Borrowers, the Banks, the Agent, all future holders of the Notes, if any,
and all future obligees under the Loans. In the case of any waiver, Grace
New York, the Borrowers, the Banks and the Agent shall be restored to
their former position and rights hereunder and under the outstanding
Loans or Notes, if any, and any other Loan Documents, and any Default or
Event of Default waived shall be deemed to be cured and not continuing;
but no such waiver shall extend to any subsequent or other Default or
Event of Default, or impair any right consequent thereon.
(b) Notwithstanding anything to the contrary contained in subsection
13.1(a), so long as no Default or Event of Default has occurred and is
continuing the Borrowers and Grace New York shall be permitted in their
discretion (but, if any Revolving Credit Loans are then outstanding, with
the consent of the Majority Banks (which consent shall not be
unreasonably withheld)) to amend this Agreement to replace one or more
Banks without the consent of any Bank to be so replaced pursuant to this
subsection 13.1(b) (a "REPLACED BANK") and to provide for (w) the
termination of the Commitments of such Replaced Bank, (x) the addition to
this Agreement of one or more other banking institutions, or an increase
in the Commitments of one or more of the other Banks (with the consent of
such other Banks), so that the total Commitments after giving effect to
such amendment shall be in the same amount as the total Commitments
immediately before giving effect to such amendment, (y) if any Loans are
outstanding at the time of such amendment, the making of such additional
Loans by such new financial institutions or other Bank or Banks, as the
case may be, as may be necessary to repay in full the outstanding Loans
of such Replaced Bank together with interest thereon and all accrued fees
and indemnities with respect thereto immediately before giving effect to
such amendment and (z) such other modifications to this Agreement as may
be necessary to effect the replacement of such Replaced Bank.
(c) Notwithstanding anything to the contrary contained in paragraph
(a) or (b) of this subsection 13.1, if as a result of a change in any
Requirement of Law after the date hereof any Borrower or Grace New York
has become obligated to, or reasonably believes that it will become
obligated to pay to any Bank any increased amount pursuant to subsection
5.11, 5.12 or 5.13, and such Bank shall not have waived payment of such
increased amounts, then the Borrowers and Grace New York may, if no
Default or Event of Default has occurred and is continuing and payment of
any such increased amounts as have become due has been made or
appropriately provided for, upon five Business Days' notice to the Agent
and such Bank, amend this Agreement, without the consent of any Bank or
the Agent, to replace any one or more of the Banks to which such
increased amounts have become payable or would become payable and to
provide for the matters referred to in clauses (w), (x), (y) and (z) of
subsection 13.1(b), and such
<PAGE>
55
replaced Bank or Banks shall be deemed to be Replaced Banks for purposes
of such clauses.
13.2 NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including
by telecopy), and, unless otherwise expressly provided herein, shall be
deemed to have been duly given or made on receipt, addressed as follows
in the case of the Company, Grace New York and the Agent, as set forth in
paragraph 5 of the Notice of Additional Borrower relating to any Borrower
other than the Company, in the case of such other Borrower, and as set
forth in Schedule I in the case of the other parties hereto, or to such
other address as may be hereafter notified by the respective parties
hereto and any future holders of the Notes, if any, or any future
obligees under the Loans:
The Company: W. R. Grace & Co.-Conn
One Town Center Road
Boca Raton, Florida 33486-1010
Attention: Treasurer
Telecopy: (407) 362-1944
Telephone: (407) 362-1949
Grace New
York: W. R. Grace & Co.
One Town Center Road
Boca Raton, Florida 33486-1010
Attention: Treasurer
Telecopy: (407) 362-1944
Telephone: (407) 362-1949
The Agent: NationsBank, N.A. (South)
100 S.E. Second Avenue, 14th Floor
FL 7-950-14-02
Miami, Florida 33131
Attention: John Miller
Telecopy: (305) 533-2437
Telephone: (305) 533-2417
13.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no
delay in exercising, on the part of the Agent or any Bank, any right,
remedy, power or privilege hereunder shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not
exclusive of any rights, remedies, powers and privileges provided by law.
13.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made hereunder and in any document, certificate or
statement delivered pursuant hereto or in connection herewith shall
survive the execution and delivery of this Agreement and the Notes, if
any.
<PAGE>
56
13.5 PAYMENT OF EXPENSES AND TAXES. The Company agrees (a) to pay or
reimburse the Agent for all its out-of-pocket costs and expenses incurred
in connection with the development, preparation and execution of, and any
amendment, supplement or modification to, this Agreement and any Notes
and the other Loan Documents and any other documents prepared in
connection herewith or therewith, and the consummation and administration
of the transactions contemplated hereby and thereby, including, without
limitation, the fees and disbursements of counsel to the Agent, (b) to
pay or reimburse each Bank and the Agent for all its costs and expenses
incurred in connection with the enforcement or preservation of any rights
under this Agreement, any Notes, the other Loan Documents and any such
other documents, including, without limitation, fees and disbursements of
counsel to the Agent and to the several Banks, and (c) to pay, indemnify,
and hold each Bank and the Agent harmless from, any and all recording and
filing fees and any and all liabilities with respect to, or resulting
from any delay in paying, stamp, excise and other transactional taxes, if
any, which may be payable or determined to be payable in connection with
the execution and delivery of, or consummation or administration of any
of the transactions contemplated by, or any amendment, supplement or
modification of, or any waiver or consent under or in respect of, this
Agreement, any Notes, the other Loan Documents and any such other
documents, and (d) to pay, indemnify, and hold each Bank and the Agent
harmless from and against any and all other liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever with respect to the
execution, delivery and performance by the Loan Parties, and
administration and enforcement by the Agent and the Banks of this
Agreement, any Notes and the other Loan Documents and any such other
documents (all the foregoing, collectively, the "indemnified
liabilities"), PROVIDED, that the Company shall have no obligation
hereunder to the Agent or any Bank with respect to indemnified
liabilities arising from (i) the gross negligence or willful misconduct
of the Agent or any such Bank, (ii) legal proceedings commenced against
the Agent or any such Bank by any security holder or creditor thereof
arising out of and based upon rights afforded any such security holder or
creditor solely in its capacity as such, or (iii) legal proceedings
commenced against the Agent or any such Bank by any other Bank or by any
Transferee (as defined in subsection 13.6). The agreements in this
subsection shall survive repayment of the Loans or Notes, if any, and all
other amounts payable hereunder.
13.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS; PURCHASING BANKS.
(a) This Agreement shall be binding upon and inure to the benefit of
Grace New York, the Borrowers, the Banks, the Agent, all future holders
of the Notes, if any, all future obligees under the Loans and their
respective successors and assigns, except that neither Grace New York nor
any Borrower may assign or transfer any of its rights or obligations
under this Agreement without the prior written consent of each Bank.
<PAGE>
57
(b) Any Bank may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to one
or more banks or other entities ("PARTICIPANTS") participating interests
in any Loan owing to such Bank, any Note held by such Bank, any
Commitments of such Bank or any other interest of such Bank hereunder and
under the other Loan Documents. In the event of any such sale by a Bank
of participating interests to a Participant, such Bank's obligations
under this Agreement to the other parties to this Agreement shall remain
unchanged, such Bank shall remain solely responsible for the performance
thereof, such Bank shall remain the holder of any such Note, if any, and
the obligee under any such Loan for all purposes under this Agreement and
the other Loan Documents, and Grace New York, the Borrowers and the Agent
shall continue to deal solely and directly with such Bank in connection
with such Bank's rights and obligations under this Agreement and the
other Loan Documents. Each of Grace New York and each of the Borrowers
agrees that if amounts outstanding under this Agreement and the Loans or
the Notes, if any, are due or unpaid, or shall have been declared or
shall have become due and payable upon the occurrence of an Event of
Default, each Participant shall be deemed to have the right of set-off in
respect of its participating interest in amounts owing under this
Agreement and any Loan or Note to the same extent as if the amount of its
participating interest were owing directly to it as a Bank under this
Agreement or any Loan or Note, PROVIDED that such Participant shall only
be entitled to such right of set-off if it shall have agreed in the
agreement pursuant to which it shall have acquired its participating
interest to share with the Banks the proceeds thereof as provided in
subsection 13.7. Each of Grace New York and each of the Borrowers also
agrees that each Participant shall be entitled to the benefits of
subsections 5.11, 5.12, 5.13 and 13.5 with respect to its participation
in the Commitments and the Loans outstanding from time to time; PROVIDED,
that no Participant shall be entitled to receive any greater amount
pursuant to such subsections than the transferor Bank would have been
entitled to receive in respect of the amount of the participation
transferred by such transferor Bank to such Participant had no such
transfer occurred.
(c) Any Bank may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to any
Bank or any affiliate thereof and, with the consent of the Company (which
consent shall not be unreasonably withheld) and upon notice to the Agent,
to one or more additional banks or financial institutions ("PURCHASING
BANKS") all or any part of its rights and obligations under this
Agreement and the Loans or the Notes, if any, pursuant to a Commitment
Transfer Supplement, substantially in the form of Exhibit H, executed by
such Purchasing Bank, such transferor Bank (and, in the case of a
Purchasing Bank that is not then a Bank or an affiliate thereof, by the
Company and the Agent) and delivered to the Agent for its acceptance and
recording in the Register. Upon such execution, delivery, acceptance and
recording, from and after the Transfer Effective Date determined pursuant
to such Commitment Transfer Supplement, (x) the Purchasing Bank
<PAGE>
58
thereunder shall be a party hereto and, to the extent provided in such
Commitment Transfer Supplement, have the rights and obligations of a Bank
hereunder with a Commitment as set forth therein, and (y) the transferor
Bank thereunder shall, to the extent provided in such Commitment Transfer
Supplement, be released from its obligations under this Agreement (and,
in the case of a Commitment Transfer Supplement covering all or the
remaining portion of a transferor Bank's rights and obligations under
this Agreement, such transferor Bank shall cease to be a party hereto).
Such Commitment Transfer Supplement shall be deemed to amend this
Agreement to the extent, and only to the extent, necessary to reflect the
addition of such Purchasing Bank and the resulting adjustment of
Commitment Percentages arising from the purchase by such Purchasing Bank
of all or a portion of the rights and obligations of such transferor Bank
under this Agreement and the Loan or the Notes, if any. On or prior to
the Transfer Effective Date determined pursuant to such Commitment
Transfer Supplement, the relevant Borrower, at its own expense, if the
Purchasing Bank so requests, shall execute and deliver to the Agent in
exchange for any surrendered Revolving Credit Note and Bid Loan Note a
new Revolving Credit Note and Bid Loan Note to the order of such
Purchasing Bank in an amount equal to the Commitment assumed by it
pursuant to such Commitment Transfer Supplement and, if the transferor
Bank has retained a Commitment hereunder, new Notes to the order of the
transferor Bank in an amount equal to the Commitment retained by it
hereunder. Such new Notes shall be dated the Closing Date and shall
otherwise be in the form of the Notes replaced thereby. Any Notes
surrendered by the transferor Bank shall be returned by the Agent to the
Company marked "cancelled".
(d) The Agent shall maintain at its address referred to in
subsection 13.2 a copy of each Commitment Transfer Supplement delivered
to it and a register (the "REGISTER") for the recordation of the names
and addresses of the Banks and the Commitment of, and principal amount of
the Loans owing to, each Bank from time to time. The entries in the
Register shall be conclusive, in the absence of manifest error, and Grace
New York, the Borrowers, the Agent and the Banks may treat each Person
whose name is recorded in the Register as the owner of the Loan recorded
therein for all purposes of this Agreement. The Register shall be
available for inspection by Grace New York, the Borrowers or any Bank at
any reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of a Commitment Transfer Supplement executed by
a transferor Bank and Purchasing Bank (and, in the case of a Purchasing
Bank that is not then a Bank or an affiliate thereof, by the Company and
the Agent) together with payment to the Agent of a registration and
processing fee of $500, the Agent shall (i) promptly accept such
Commitment Transfer Supplement (ii) on the Transfer Effective Date
determined pursuant thereto record the information contained therein in
the Register and give notice of such acceptance and recordation to the
Banks and the Company.
<PAGE>
59
(f) Each of Grace New York and the Borrowers authorizes each Bank to
disclose to any Participant or Purchasing Bank (each, a "TRANSFEREE") and
any prospective Transferee any and all financial information in such
Bank's possession concerning such Borrower and its affiliates which has
been delivered to such Bank by or on behalf of Grace New York, the
Company or such Borrower pursuant to this Agreement or which has been
delivered to such Bank by or on behalf of Grace New York, the Company or
such Borrower in connection with such Bank's credit evaluation of such
Borrower and its affiliates prior to becoming a party to this Agreement.
(g) If, pursuant to this subsection, any interest in this Agreement
or any Note is transferred to any Transferee which is organized under the
laws of any jurisdiction other than the United States or any state
thereof, the transferor Bank shall cause such Transferee, concurrently
with the effectiveness of such transfer, (i) to represent to the
transferor Bank (for the benefit of the transferor Bank, the Agent, Grace
New York and the Borrowers) that under applicable law and treaties no
taxes will be required to be withheld by the Agent, Grace New York, the
Borrowers or the transferor Bank with respect to any payments to be made
to such Transferee in respect of the Loans, (ii) to furnish to the
transferor Bank (and, in the case of any Purchasing Bank registered in
the Register, the Agent, Grace New York and the Company) either U.S.
Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form
1001 (wherein such Transferee claims entitlement to complete exemption
from U.S. federal withholding tax on all interest payments hereunder) and
(iii) to agree (for the benefit of the transferor Bank, the Agent, Grace
New York and the Company) to provide the transferor Bank (and, in the
case of any Purchasing Bank registered in the Register, the Agent, Grace
New York and the Company) a new Form 4224 or Form 1001 upon the
expiration or obsolescence of any previously delivered form and
comparable statements in accordance with applicable U.S. laws and
regulations and amendments duly executed and completed by such
Transferee, and to comply from time to time with all applicable U.S. laws
and regulations with regard to such withholding tax exemption.
(h) Nothing herein shall prohibit any Bank from pledging or
assigning any Note to any Federal Reserve Bank in accordance with
applicable law.
13.7 ADJUSTMENTS; SET-OFF.
(a) If any Bank (a "BENEFITTED BANK") shall at any time receive any
payment of all or part of its Revolving Credit Loans, or interest
thereon, or receive any collateral in respect thereof (whether
voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in Section 10(f), or otherwise), in
a greater proportion than any such payment to or collateral received by
any other Bank, if any, in respect of such other Bank's Revolving Credit
Loans, or interest thereon, such benefitted Bank shall purchase for cash
from the other Banks such portion of each such other Bank's Loan,
<PAGE>
60
or shall provide such other Banks with the benefits of any such
collateral, or the proceeds thereof, as shall be necessary to cause such
benefitted Bank to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Banks; PROVIDED, HOWEVER,
that if all or any portion of such excess payment or benefits is
thereafter recovered from such benefitted Bank, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of
such recovery, but without interest. Each Borrower agrees that each Bank
so purchasing a portion of another Bank's Loan may exercise all rights of
payment (including, without limitation, rights of set-off) with respect
to such portion as fully as if such Bank were the direct holder of such
portion.
(b) In addition to any rights and remedies of the Banks provided by
law, each Bank shall have the right, without prior notice to Grace New
York and the Borrowers, any such notice being expressly waived by Grace
New York and the Borrowers, to the extent permitted by applicable law,
upon any amount not being paid when due and payable by any Borrower
hereunder or under the Notes (whether at the stated maturity, by
acceleration or otherwise) to set-off and appropriate and apply against
such amount any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held
or owing by such Bank or any branch or agency thereof to or for the
credit or the account of Grace New York or such Borrower. Each Bank
agrees promptly to notify Grace New York, the Borrowers and the Agent
after any such set-off and application made by such Bank, PROVIDED that
the failure to give such notice shall not affect the validity of such
set-off and application.
13.8 COUNTERPARTS. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts, and
all of said counterparts taken together shall be deemed to constitute one
and the same instrument. A set of the copies of this Agreement signed by
all the parties shall be lodged with Grace New York, the Company and the
Agent.
13.9 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof,
and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.
13.10 INTEGRATION. This Agreement represents the agreement of Grace
New York, each Borrower, the Agent and the Banks with respect to the
subject matter hereof, and there are no promises, undertakings,
representations or warranties by the Agent or any Bank relative to
subject matter hereof not expressly
<PAGE>
61
set forth or referred to herein, in the other Loan Documents or in any
documentation entered into pursuant to subsection 3.1(b).
13.11 GOVERNING LAW. THIS AGREEMENT (INCLUDING SECTION 12) AND THE
NOTES AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT
AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
13.12 SUBMISSION TO JURISDICTION; WAIVERS. (a) Each of Grace New
York, each Borrower, the Agent and the Banks hereby irrevocably and
unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents
to which it is a party, or for recognition and enforcement of any
judgment in respect thereof, to the non-exclusive general
jurisdiction of the Courts of the State of New York sitting in New
York County, the courts of the United States of America for the
Southern District of New York, and the appellate courts from any
thereof;
(ii) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court
or that such action or proceeding was brought in an inconvenient
court and agrees not to plead or claim the same;
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered
or certified mail (or any substantially similar form of mail),
postage prepaid, to Grace New York or such Borrower at its address
set forth in subsection 13.2 or, with respect to Borrowers other
than the Company, the Notice of Additional Borrower relating to such
Borrower or at such other address of which the Agent shall have been
notified pursuant thereto;
(iv)agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
(v) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or
proceeding referred to in this subsection any special, exemplary,
punitive or consequential damages.
(b) Each Borrower other than the Company hereby appoints and
empowers each of Grace New York and the Company, 1114 Avenue of the
Americas, New York, New York 10036-7794, Attention: Treasurer, as its
authorized agent (the "PROCESS AGENT") to receive on behalf of such
Borrower service of any and all process and documents in any such legal
action or proceeding
<PAGE>
62
brought in a New York state or federal court sitting in New York City. It
is understood that a copy of such process served on the Process Agent
will be promptly hand delivered or mailed (by registered or certified
airmail if available), postage prepaid, to such Borrower at its address
set forth in paragraph 5 of such Borrower's Notice of Additional
Borrower, but the failure of such Borrower to receive such copy shall not
affect in any way the service of such process on the Process Agent. If
the Process Agent shall refuse or be prevented from acting as agent,
notice thereof shall immediately be given by such Borrowers to the Agent
by registered or certified airmail (if available), postage prepaid, and
such Borrowers agree promptly to designate another agent in New York
City, satisfactory to the Agent, to serve in place of the Process Agent
and deliver to the Agent written evidence of such substitute agent's
acceptance of such designation.
13.13 ACKNOWLEDGMENTS. Each of Grace New York, each Borrower, the
Agent and the Banks hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the Notes and the other
Loan Documents;
(b) neither the Agent nor any Bank has any fiduciary
relationship with or duty to Grace New York or such Borrower, as the
case may be, arising out of or in connection with this Agreement or
any of the other Loan Documents, and the relationship between Agent
and Banks, on one hand, and Grace New York and the Borrowers, on the
other hand, in connection herewith or therewith is solely that of
debtor and creditor; and
(c) as to any matter relating to any Loan Documents, no joint
venture exists among the Banks or among Grace New York, the
Borrowers and the Banks.
13.14 WAIVERS OF JURY TRIAL. GRACE NEW YORK, THE BORROWERS, THE
AGENT AND THE BANKS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR THE
NOTES OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
13.15 ADDITIONAL BORROWERS. (a) Any Subsidiary of the Company shall
have the right to become a "Borrower" hereunder, and to borrow hereunder
subject to the terms and conditions hereof applicable to a Borrower and
to the following additional conditions:
(i) the Company shall deliver a notice in substantially the
form of Exhibit I hereto (a "NOTICE OF ADDITIONAL BORROWER") signed
by such Subsidiary and countersigned by Grace New York and the
Company to the Agent and the Banks stating that such Subsidiary
desires to become a "Borrower" under this Agreement and agrees to be
bound by the terms hereof. From the time of receipt of such Notice
<PAGE>
63
of Additional Borrower by the Agent and the Banks and subject to the
satisfaction of each condition precedent contained in such Notice of
Additional Borrower, such Subsidiary shall be a "Borrower" hereunder
with all of the rights and obligations of a Borrower hereunder;
PROVIDED, HOWEVER, that the Company may revoke a Notice of
Additional Borrower with respect to any Subsidiary (other than the
Company) upon five Business Days' written notice to the Agent, so
long as such Borrower has no Obligations outstanding. No Notice of
Additional Borrower relating to a Subsidiary may be revoked as to
amounts owed by such Subsidiary to the Banks under this Agreement or
any Notes or when an irrevocable notice pursuant to subsection 2.3,
or a notice of acceptance pursuant to subsection 3.1 or 4.2, has
been given by such Subsidiary as a Borrower and is effective;
(ii) if subsidiary is a Foreign Subsidiary, if reasonably
requested by the Majority Banks, such Notice of Additional Borrower
shall be accompanied by an opinion of counsel for such Subsidiary as
specified in paragraph 4(a)(ii) of such Notice of Additional
Borrower;
(iii) and the other conditions set forth in such Notice of
Additional Borrower shall have been satisfied (including the
representations and warranties contained therein being true and
correct as of the date thereof).
(b) Promptly, upon receipt of any Notice of Additional Borrower by
the Agent, the Agent shall notify each Bank thereof, and shall deliver to
each Bank copies of each document delivered to the Agent pursuant to such
Notice of Additional Borrower.
<PAGE>
64
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in New York, New York by their proper and duly
authorized officers as of the day and year first above written.
W. R. GRACE & CO.-CONN.
By:_____________________________
Title: Vice President
and Treasurer
W. R. GRACE & CO.
By:_____________________________
Title: Vice President
and Treasurer
NationsBank, N.A. (South), as
Agent and as a Bank
By: ____________________________
Title: Assistant Vice
President
March 29, 1996
Mr. Albert J. Costello
Chairman, President and
Chief Executive Officer
W. R. Grace & Co.
One Town Center Road
Boca Raton, Florida 33486-1010
Dear Al:
The purpose of this letter is to confirm our understanding
with respect to my Employment Agreement ("Employment Agreement"), dated as of
April 1, 1991, with a subsidiary of W. R. Grace & Co. ("Grace"), as follows:
1. I hereby conditionally rescind the notice previously
given to you that I had elected to convert the Employment Agreement into a
consulting agreement upon the terms and conditions set forth in Section 7 of
the Employment Agreement.
2. In consideration of such conditional rescission, Grace
agrees to extend the Employment Agreement, and I hereby agree to remain in
Grace's employ, until the first to occur of (a) December 31, 1996 or (b) the
disposition of National Medical Care, Inc. ("NMC") by Grace, whether or not
such disposition is in the form of the proposed transaction between Grace and
Fresenius AG ("Fresenius"). During the period that the Employment Agreement
remains in effect, both parties shall continue to be bound by the provisions
thereof (including without limitation the provisions under which I have the
right to convert the Employment Agreement into a consulting agreement);
provided, however, that:
(a) I understand and agree that I will not be a participant
in Grace's Long-Term Incentive Program for the 1996-1998 Performance
Period or any subsequent Performance Period and that I will not be
eligible to receive any portion of the pool that has been established
to provide NMC employees with "stay bonuses" in connection with
Grace's proposed disposition of NMC (I understand, however, that I
will be eligible to participate in the portions of the NMC incentive
compensation pool relating to annual performance and cash flow
performance, respectively); and
(b) In the event the proposed transaction with Fresenius is
not consummated by December 31, 1996, or in the event that such
transaction is so consummated but the New Agreement (as defined
below) is not executed by me and Fresenius by December 31, 1996, the
conditional rescission referred to above will automatically be
revoked, and, effective January 1, 1997, the Employment Agreement
will be converted into a consulting agreement upon the terms and
conditions set forth in Section 7 of the Employment Agreement.
<PAGE>
3. Grace management will recommend that I be nominated to
stand for election as a Class II Director of Grace at its 1996 Annual Meeting
of Shareholders, for a term expiring at the 1997 Annual Meeting of
Shareholders. However, I agree to resign, and I hereby tender my resignation,
as a director of Grace, such resignation to be effective on the date of
termination of my employment by Grace as specified in paragraph 2 above.
4. In connection with the transaction with Fresenius
referred to in paragraph 2 above, I expect to enter into an agreement ("New
Agreement") providing for my service as an employee of and/or consultant to
NMC (or another affiliate of Fresenius) following completion of such
transaction. I hereby agree as follows in connection with the New Agreement:
(a) I agree to negotiate the terms of the New Agreement in
good faith with representatives of Fresenius.
(b) Upon the effectiveness of the New Agreement, the
Employment Agreement shall terminate and be of no further force and
effect, except as specified in Section 4.2 thereof (which contains
covenants as to confidentiality), and I shall have no right to serve
as a consultant to Grace.
If the foregoing correctly sets forth our understanding,
please sign this letter and the accompanying copy as indicated below and
return one copy to me.
Very truly yours,
Constantine L. Hampers
Agreed as set forth above:
W. R. Grace & Co.
By: -----------------------------
Albert J. Costello
Chairman, President and
Chief Executive Officer
<PAGE>
W. R. GRACE & CO.
NON-STATUTORY STOCK OPTION
Under the W. R. Grace & Co. 1994 Stock Incentive Plan (the "Plan")
GRANTED TO: ALBERT J. COSTELLO
Date of Grant: May 1, 1995
Expiration Date: April 30, 2005
In accordance with the Plan (a copy of which is attached hereto as Annex
A), you are hereby granted an Option to purchase 300,000 shares of Common
Stock upon the following terms and conditions:
(1) The purchase price shall be $52.3750 per share.
(2) Subject to the other provisions hereof, this Option shall become
exercisable as follows:
100,000 shares on May 2, 1996
100,000 shares on May 2, 1997
100,000 shares on May 2, 1998,
except that it shall become exercisable in full upon the occurrence of any of
the events specified in section 3(g)(iii) of the Employment Agreement dated
May 1, 1995 between you and the Company, as such Agreement may be amended
from time to time.
Once exercisable, an installment may be exercised (together with any other
installments that have become exercisable) at any time in whole or in part
until the expiration or termination of this Option.
(3) This Option shall not be treated as an Incentive Stock Option (as such
term is defined in the Plan.)
(4) This Option may be exercised only by serving written notice on the
Treasurer of the Company. The purchase price shall be paid in cash or, with
the permission of the Company, in shares of Common Stock or in a combination
of cash and such shares (see section 6(a) of the Plan). Any shares of Common
Stock applied toward the purchase price payable upon exercise of this Option
must have been owned by you for at least six months prior to such exercise,
and if such shares were granted to you by the Company subject to
restrictions, such restrictions must have lapsed at least six months prior to
such exercise.
(5) This Option and any right thereunder is nonassignable and
nontransferable except by will or the laws of descent and distribution, and
is exercisable during your lifetime only by you. If you cease to serve the
Company or a Subsidiary, this Option shall terminate as provided in section
6(d) of the Plan, subject, however, to the following:
THIS DOCUMENT CONSTITUTES PART OF A
PROSPECTUS COVERING SECURITIES THAT
HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933.
<PAGE>
(a) For the purposes of said section 6(d), your service shall be
deemed to have terminated by reason of retirement if (i) you retire under
a retirement plan of the Company or a Subsidiary, (ii) the retirement is
voluntary, and (iii) you have served the Company or a Subsidiary for at
least five years. Any other retirement may, at the discretion of the
Company, be deemed to be a resignation.
(b) In the event you should become incapacitated or die and neither
you nor your legal representative(s) or other person(s) entitled to
exercise this Option exercise this Option to the fullest extent possible
on or before its termination, the Company shall pay you, your legal
representative(s) or such other person(s), as the case may be, an amount
of money equal to the Fair Market Value of any shares remaining subject to
this Option on the last date it could have been exercised, less the
aggregate purchase price of such shares.
(c) Notwithstanding any provision of the Plan, in the event (i) you
voluntarily retire under a retirement plan of the Company or a Subsidiary
prior to the date on which the first installment of this Option becomes
exercisable and (ii) you do not continue to serve the Company or a
Subsidiary until such date, this Option shall terminate as of the date you
cease to serve.
(d) In the event you cease to serve as an employee but immediately
thereafter commence to serve as a consultant and subsequently you cease to
serve as a consultant for reasons other than those described in clause (i)
of section 6(d) of the Plan, this Option shall terminate three years after
the cessation of your service as a consultant, but subject to the
limitation set forth in the fifth sentence of such section 6(d).
(6) If you are or become an employee of, or a consultant to, a Subsidiary,
the Company's obligations hereunder shall be contingent on the approval of
the Plan and this Option by the Subsidiary and the Subsidiary's agreement
that (a) the Company may administer this Plan on its behalf and, (b) upon the
exercise of this Option, the Subsidiary will purchase from the Company the
shares subject to the exercise at their Fair Market Value on the date of
exercise, such shares to be then transferred by the Subsidiary to the holder
of this Option upon payment by the holder of the purchase price to the
Subsidiary. Where appropriate, such approval and agreement of the Subsidiary
shall be indicated by its signature below. The provisions of this paragraph
and the obligations of the Subsidiary so undertaken may be waived, in whole
or in part, from time to time by the Company.
<PAGE>
(7) The Plan is hereby incorporated by reference. Terms defined in the
Plan shall have the same meaning herein. This Option is granted subject to
the Plan and shall be construed in conformity with the Plan.
W. R. GRACE & CO.
Executive Vice President
Approved and Agreed to: *
- - -----------------------------
(Name of Subsidiary)
By
--------------------------
(Authorized Officer)
RECEIPT ACKNOWLEDGED:
-------------------------------
- - -----------------------------
* This will be completed only if you are or become an employee of, or a
consultant to, a Subsidiary.
EXHIBIT 11
W. R. GRACE & CO. AND SUBSIDIARIES
WEIGHTED AVERAGE NUMBER OF SHARES AND EARNINGS USED IN PER SHARE COMPUTATIONS
(Unaudited)
The weighted average number of shares of Common Stock outstanding were as
follows (in thousands):
<TABLE>
<CAPTION>
3 Mos. Ended
----------------------
3/31/96 3/31/95
------- -------
<S> <C> <C>
Weighted average number of shares of Common
Stock outstanding................................................................. 97,888 94,137
Additional dilutive effect of outstanding options
(as determined by the application of the treasury
stock method)..................................................................... 2,166 2,018
------- ------
Weighted average number of shares of Common
Stock outstanding assuming full dilution.......................................... 100,054 96,155
======= ======
</TABLE>
Income used in the computation of earnings per share were as follows (in
millions, except per share):
<TABLE>
<CAPTION>
3 Mos. Ended
----------------------
3/31/96 3/31/95
------- -------
<S> <C> <C>
Net income.............................................................................. $63.6 $47.5
Dividends paid on preferred stocks...................................................... (.1) (.1)
----- -----
Income used in per share computation of earnings and in per
share computation of earnings assuming full dilution.............................. $63.5 $47.4
===== =====
Earnings per share...................................................................... $ .65 $ .50
Earnings per share assuming full dilution............................................... $ .63 $ .49
</TABLE>
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>
Three Months Ended
Years Ended December 31, March 31,
---------------------------------------------------- ----------------
1995 (b) 1994 (c) 1993 (d) 1992 (e) 1991 1996 1995 (f)
--------- --------- --------- ---------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net (loss)/income from continuing operations....... $(196.6) $ (41.4) $ 19.1 $ 1.4 $157.4 $ 41.6 $22.9
Add/(deduct):
(Benefit from)/provision for income taxes...... (115.8) (46.6) 10.1 79.9 99.1 24.4 8.5
Income taxes of 50%-owned companies............ - - .1 2.1 1.5 - -
Equity in unremitted losses/(earnings)
of less than 50%-owned companies............. .8 (.6) (.5) (2.0) (.9) .2 -
Interest expense and related financing costs,
including amortization of capitalized interest 179.8 138.5 122.7 162.7 209.6 47.6 40.1
Estimated amount of rental expense
deemed to represent the interest factor...... 8.5 10.1 11.3 14.0 12.7 2.8 2.5
---------- -------- --------- -------- -------- --------- -------
(Loss)/Income as adjusted.......................... $(123.3) $ 60.0 $162.8 $258.1 $479.4 $116.6 $74.0
======= ======= ====== ====== ====== ====== =====
Combined fixed charges and preferred stock dividends:
Interest expense and related financing costs,
including capitalized interest............... $195.5 $143.2 $122.8 $176.3 $224.5 $53.1 $43.0
Estimated amount of rental expense
deemed to represent the interest factor...... 8.5 10.1 11.3 14.0 12.7 2.8 2.5
--------- -------- -------- -------- -------- ------- -------
Fixed charges...................................... 204.0 153.3 134.1 190.3 237.2 55.9 45.5
Preferred stock dividend requirements (a).......... .5 .5 .8 .8 .9 .2 .2
--------- -------- -------- -------- -------- ------- -------
Combined fixed charges and preferred
stock dividends................................. $204.5 $153.8 $134.9 $191.1 $238.1 $56.1 $45.7
========= ======== ======== ======== ======== ======= =======
Ratio of earnings to fixed charges................. (g) (g) 1.21 1.36 2.02 2.09 1.63
========= ======== ======== ======== ======== ======= =======
Ratio of earnings to combined fixed charges
and preferred stock dividends.................. (g) (g) 1.21 1.35 2.01 2.08 1.62
========= ======== ======== ======== ======== ======= =======
</TABLE>
(a) For each period with an income tax provision, the preferred stock
dividend requirements are increased to include the pretax earnings
required to cover such requirements based on Grace's effective tax
rate for that period.
(b) Includes pretax provisions of $275.0 for asbestos-related
liabilities and insurance coverage; $220.0 relating to
restructuring costs, asset impairments and other activities; $77.0
for environmental liabilities at former manufacturing sites; and
$30.0 for corporate governance activities.
(c) Includes a pretax provision of $316.0 relating to asbestos-related
liabilities and insurance coverage.
(d) Includes a pretax provision of $159.0 relating to asbestos-related
liabilities and insurance coverage.
(e) Includes a pretax provision of $140.0 relating to a fumed silica
plant in Belgium.
(f) Includes a pretax provision of $20.0 for corporate governance
activities.
(g) As a result of the losses incurred for the years ended December 31,
1995 and 1994, Grace was unable to fully cover the indicated fixed
charges.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<PERIOD-START> JAN-01-1996
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 56,500
<SECURITIES> 0
<RECEIVABLES> 666,800 <F1>
<ALLOWANCES> 0
<INVENTORY> 481,100
<CURRENT-ASSETS> 1,747,900 <F2>
<PP&E> 3,256,700
<DEPRECIATION> 1,446,700
<TOTAL-ASSETS> 6,485,500 <F2>
<CURRENT-LIABILITIES> 2,389,200
<BONDS> 1,265,400
<COMMON> 98,500
0
7,400
<OTHER-SE> 1,225,000
<TOTAL-LIABILITY-AND-EQUITY> 6,485,500
<SALES> 886,000 <F3>
<TOTAL-REVENUES> 889,800
<CGS> 531,800
<TOTAL-COSTS> 531,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,400
<INCOME-PRETAX> 66,000
<INCOME-TAX> 24,400
<INCOME-CONTINUING> 41,600
<DISCONTINUED> 22,000 <F4>
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 63,600
<EPS-PRIMARY> 0.65
<EPS-DILUTED> 0.63
<FN>
<F1> Amount shown is net of allowances.
<F2> Included within current assets and total assets are net assets of
discontinued operations of $314,400 and $1,854,900, respectively.
<F3> Excludes sales reported by the discontinued health care segment of
$539,700 for the first quarter of 1996.
<F4> In the second quarter of 1995, Grace classified its health care business
as a discontinued operation.
</TABLE>
