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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995 Commission file number 1-3720
W. R. GRACE & CO.
Incorporated under the Laws of the I.R.S. Employer Identification No.
State of New York 13-3461988
ONE TOWN CENTER ROAD, BOCA RATON, FLORIDA 33486-1010
407/362-2000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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Common Stock, $1 par value } New York Stock Exchange, Inc.
Common Stock Purchase Rights } Chicago Stock Exchange, Incorporated
7-3/4% Notes Due 2002 }
(issued by W. R. Grace & Co.-Conn., } New York Stock Exchange, Inc.
a wholly owned subsidiary) and }
related Guarantees }
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in the Proxy Statement incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
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The aggregate market value of W. R. Grace & Co. voting stock held by
nonaffiliates was approximately $6.0 billion at February 1, 1996.
At March 1, 1996, 98,038,423 shares of W. R. Grace & Co. Common Stock, $1
par value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
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Document Where Incorporated
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Proxy Statement for Annual Meeting to be
held May 10, 1996 (specified portions) Part III
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TABLE OF CONTENTS
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PART I
Item 1. Business ........................................................... 1
Introduction ..................................................... 1
Strategic Restructuring and Other Growth
Initiatives .................................................... 1
Description of Business .......................................... 5
Discontinued Operations .......................................... 13
Research Activities .............................................. 16
Environmental, Health and Safety Matters ......................... 17
Item 2. Properties ......................................................... 18
Item 3. Legal Proceedings .................................................. 18
Item 4. Submission of Matters to a Vote of Security
Holders .......................................................... 32
Executive Officers .......................................................... 32
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters .............................................. 33
Item 6. Selected Financial Data ............................................ 35
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations ............................................ 35
Item 8. Financial Statements and Supplementary Data ........................ 35
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure ............................................. 35
PART III
Item 10. Directors and Executive Officers of the
Registrant ....................................................... 35
Item 11. Executive Compensation ............................................. 36
Item 12. Security Ownership of Certain Beneficial
Owners and Management ............................................ 36
Item 13. Certain Relationships and Related
Transactions ..................................................... 36
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K ............................................. 36
Signatures .................................................................. 43
Financial Supplement ........................................................ F-1
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PART I
ITEM 1. BUSINESS.
INTRODUCTION
W. R. Grace & Co., through its subsidiaries, is primarily engaged in the
packaging and specialty chemicals businesses on a worldwide basis. It has
classified its other businesses as discontinued operations, the most
significant of which are its health care and cocoa businesses.
As used in this Report, the term "Company" refers to W. R. Grace & Co., a
New York corporation, and the term "Grace" refers to the Company and/or one or
more of its subsidiaries. Grace's principal executive offices are located at
One Town Center Road, Boca Raton, Florida 33486-1010, and its telephone number
is 407/362-2000. At year-end 1995, Grace had approximately 21,200 full-time
employees worldwide in its continuing operations (approximately 21,100 in
discontinued operations).
Grace's Consolidated Financial Statements for the three years in the
period ended December 31, 1995 ("Consolidated Financial Statements"), and
certain other financial information included in the Company's 1995 Annual
Report to Shareholders, are set forth in the Financial Supplement to this
Report and incorporated by reference herein.
Information concerning the sales and revenues, pretax operating income and
identifiable assets of Grace's continuing operations by geographic area for
1995, 1994 and 1993 is contained in Note 18 to the Consolidated Financial
Statements in the Financial Supplement.
STRATEGIC RESTRUCTURING AND OTHER GROWTH INITIATIVES
Recent Strategic Initiatives. In mid-1995, Grace announced and began
implementing plans to enhance shareholder value by strengthening its balance
sheet and reducing costs. These objectives are being achieved through (a) the
pending dispositions of Grace's health care business and water treatment and
process chemicals business (discussed below); (b) the anticipated use of the
proceeds from these transactions to substantially reduce indebtedness, to
repurchase up to 20% of the Company's Common Stock, and to invest in Grace's
core businesses; (c) a worldwide restructuring program to streamline processes
and thereby reduce expenses by $100 million annually (with further actions
being taken
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to improve margins); and (d) the implementation of rigorous controls on working
capital and capital spending. These plans are designed to make Grace a
high-performance, high-value company focused on the strengths of its packaging
and specialty chemicals businesses.
Grace's core businesses are now packaging, catalysts and other
silica-based products, construction products, and container and specialty
polymer products. Each of these businesses is a market leader, offers high
value-added products, employs leading technology and has global reach. In
these businesses, Grace provides highly differentiated and superior products
and services through investments in research and development, facilities that
enable Grace to take advantage of expanding global market opportunities, and
technology platforms capable of providing multiple products to satisfy
customers' specific needs. Moreover, Grace has focused research and
development spending on core businesses, fostered an exchange of technology
among its product lines, and increased the level of process development
directed at streamlining operations.
In June 1995, the Company announced that its Board of Directors had
approved a plan to spin off National Medical Care, Inc., Grace's principal
health care subsidiary ("NMC"); as a result, Grace classified its health care
business as a discontinued operation in the second quarter of 1995. Following
NMC's receipt in October 1995 of five investigative subpoenas from the Office
of the Inspector General of the United States Department of Health and Human
Services (see "Legal Proceedings" below), the completion of the spin-off of
NMC, originally expected in the 1995 fourth quarter, was delayed.
In February 1996, Grace and Fresenius AG ("Fresenius") entered into a
definitive agreement to combine NMC with Fresenius' worldwide dialysis business
("FWD") to create Fresenius Medical Care ("FMC"). As a result of the
combination, FMC would acquire NMC, which would remain responsible for all
liabilities arising out of the investigations of NMC, discussed below.
However, Grace would retain certain health care assets, primarily a
bioseparation sciences business and a health care services company (classified
as discontinued operations), as well as other assets (including cash and
marketable securities).
The combination would follow a borrowing of approximately $2.3 billion by
NMC, a tax-free distribution of the 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 specialty chemicals businesses) other than NMC. As a result
of the separation of Grace's specialty chemicals businesses from NMC and
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the subsequent combination of NMC and FWD, the holders of the Company's Common
Stock would own 100% of the specialty chemicals company and 44.8% of FMC, and
Fresenius and other shareholders would own 55.2% of FMC. 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. Completion of the various transactions is
subject to customary conditions, including the approval of the shareholders of
the Company and Fresenius; United States, German and European regulatory
actions; and obtaining financing on satisfactory terms. Commitments for
financing have been received (which commitments are subject to various
conditions and have not been entered into), and it is expected that the various
transactions will be completed by the third quarter of 1996.
In March 1996, Grace announced that it had entered into a definitive
agreement to sell its Dearborn water treatment and process chemicals business
to Betz Laboratories, Inc. for $632 million. The transaction is expected to
close in the second quarter of 1996.
1991 Strategy; Sale and Monetization of Noncore Businesses; Other Actions.
The strategic initiatives described above reflect the further development of a
corporate strategy announced in 1991. The major components of the strategy
were to (a) focus on core businesses to accelerate profitable growth; (b)
upgrade financial performance, principally by selling or monetizing noncore
businesses, managing debt levels consistent with profitable growth
opportunities, and reducing overhead; and (c) integrate corporate and operating
unit functions through global product line management.
Pursuant to this strategy, during the 1991-1995 period Grace disposed of
most of its noncore businesses and investments, including its oil and gas, coal
and energy services businesses; its printing products business; its specialty
textiles business; its book, video and software distribution businesses; its
remaining agricultural businesses; and various chemical businesses, including
its organic chemicals and automotive materials businesses. Gross proceeds from
these and other divestments totaled $2.15 billion in the 1991-1995 period. In
1992, Grace also monetized a portion of its cocoa and chocolate business by
selling a 21% limited partnership interest in Grace Cocoa Associates, L.P.,
which owns this business and other assets, resulting in Grace's receipt of
approximately $300 million in cash. Grace is actively pursuing the disposition
of its cocoa business; during the fourth quarter of 1995, Grace revised the
divestment plan for this business, focusing on the improvement of operating
cash flow through the adoption of new strategies and a new global
organizational structure, while simultaneously positioning the business for
sale. As a result of
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these actions, Grace expects to complete the disposition of this business
during 1996.
As part of its 1991 corporate strategy, Grace also reorganized the
management of its core businesses on the basis of global product lines. As a
result of this reorganization, Grace is able to serve its multinational
customers in all global regions, as well as tailor its product offerings to
meet local preferences.
Strategic Acquisitions and Other Growth Initiatives. To focus on core
business growth, Grace has made strategic acquisitions directly related to its
core businesses, totaling $190.4 million in the 1991-1995 period, including
acquisitions intended to expand those businesses outside the United States. In
1992, Grace acquired the North American food service packaging business of Du
Pont Canada. In 1993, Grace acquired the Katalistics fluid cracking catalyst
additive business previously owned by a joint venture between Union Carbide
Corporation and AlliedSignal Inc. In 1993, Grace also formed a 51%-owned joint
venture with a large chemical and industrial concern headquartered in
Volgograd, Russia, to produce flexible packaging for sale throughout the
Commonwealth of Independent States; the joint venture began production in the
third quarter of 1994.
In 1994, Grace acquired the Schur Multiflex group of European flexible
packaging businesses; construction chemicals businesses; and a small pollution
control equipment producer. In addition, during 1994 Grace formed a 51%-owned
joint venture with an Indian company to supply water treatment products and
services in India.
In 1995, Grace formed a 51%-owned joint venture in Malaysia to produce
rigid plastic packaging products for sale throughout Southeast Asia; a
68%-owned joint venture with a Chinese packaging company to manufacture shrink
films for sausage casings and to market Grace's packaging products and systems
in China; a 51%-owned joint venture with a Russian company to produce container
and closure sealants for sale throughout the Commonwealth of Independent
States; and a 50%-owned joint venture with Engelhard Corporation to manufacture
and market metal-based catalytic converters to the automotive industry. In
early 1996, Grace agreed to form a joint venture to produce and market
coatings, closures and can-sealing compounds in India.
Although Grace intends to emphasize internal growth, it may also effect
acquisitions, joint ventures and strategic alliances that afford synergies or
other benefits necessary to fulfill strategic objectives of a core business
(such as a key technology or opportunities for geographic expansion) or that
provide a
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combination of a close fit with a core business with the potential for
exceptional returns.
See Notes 3, 5, 7, 12, 13 and 19 to the Consolidated Financial Statements
and "Management's Discussion and Analysis of Results of Operations and
Financial Condition" in the Financial Supplement for additional information.
DESCRIPTION OF BUSINESS
Grace's continuing operations consist principally of the development,
manufacture and sale of packaging and specialty chemical products and systems.
These products and systems serve highly specialized markets and represent an
important or critical component (but a relatively small portion of the cost) of
the end products in which they are used. Accordingly, competition tends to be
based primarily on technological capability, customer service, product quality
and, to a lesser extent, price.
Grace's products and systems are marketed primarily through direct sales
organizations. Through direct regular contact with its customers, Grace gains
an in-depth knowledge of their businesses and anticipates and caters to their
needs. Grace is often involved in the design of customers' production
processes and thereafter serves as a supplier for such processes.
The following is a description of the products and services provided by
each of Grace's businesses.
Packaging. Grace's packaging business ("Grace Packaging") provides
high-performance total packaging systems on a worldwide basis, competing
principally by providing superior quality products and services for specialized
customer needs. The principal products and services provided by Grace
Packaging are (a) flexible plastic packaging systems (including material,
equipment and services) for a broad range of perishable foods such as fresh,
smoked and processed meat products, cheese, poultry, prepared foods (including
soups and sauces for restaurants and institutions), baked goods and produce;
(b) shrink films used in packaging a variety of nonfood consumer and industrial
products; (c) foam trays for supermarkets and poultry and other food
processors; and (d) rigid plastic containers for dairy and other food and
nonfood products. Grace Packaging competes through three product groups:
flexible packaging (marketed extensively under the Cryovac(R) registered
trademark), Formpac(TM) foam trays and Omicron(TM) rigid plastic containers.
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The Cryovac packaging products group developed and introduced flexible
plastic vacuum shrink packaging to the food processing industry in the late
1940s, contributing to expanded food distribution and marketing by providing
superior protection against decay-inducing bacteria and moisture loss. The
market for Cryovac products has since expanded into the retail food market, and
Cryovac packaging technology has also been introduced in nonfood applications
for consumer merchandising of housewares, toys and compact discs, as well as
for electronic and medical products.
Cryovac flexible packaging products include shrink bags, shrink films,
laminated films and films for medical bags and equipment. Shrink bags are
multi-layered plastic bags that mold themselves to the exact shape of the
product, forming a clear "second skin." Using sophisticated coextrusion
technology, Cryovac shrink bags maximize barrier properties, optics, abuse
resistance, shrinkability and seal strength. Cryovac shrink films are
multi-layered shrinkable plastic films used to package a variety of food and
nonfood consumer goods to protect against damage, preserve freshness and
enhance marketability. Cryovac laminates are multi-layered, nonshrinkable and
normally high-barrier flexible materials used for packaging perishable foods,
shelf-stable products (nonrefrigerated foods, such as syrups, toppings and
tomato paste) and various nonfood products.
Grace's flexible packaging products differentiate themselves from
competitive products by offering a combination of the following core
competencies: (a) proprietary film processing technology; (b) resin technology,
permitting the production of materials suited to specific customer needs; (c)
packaging and food science expertise, providing better understanding of the
interaction between packaging materials and packaged products; (d) complete
systems support capability, providing a single source for customer needs; (e) a
talented employee base that strives to anticipate, meet and exceed customer
expectations; and (f) an effective sales and distribution network.
Today, Grace Packaging is recognized as a worldwide leader in flexible
packaging technology. Grace's technological leadership has spurred Grace
Packaging's growth in several markets: in the rapidly expanding packaged
fresh-cut produce market, Grace produces films that permit oxygen to pass
through at various rates, thereby matching the varying respiration rates of
different vegetables and permitting longer shelf life; in the fresh meat
market, Grace's case-ready program reduces supermarkets' in-store production
costs by allowing meat processors to centrally package meat products suitable
for display; in the bone-in pork market, Grace's TBG(TM) packaging products
have revolutionized the distribution of large subprimal cuts of pork by adding
a film patch to certain sections
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of a high-abuse barrier bag to prevent bone punctures; and in the processed
meats and poultry markets, Cryovac cook-in bags and laminates withstand high
cooking temperatures, reducing the potential for contamination and retaining
product shape, clarity and weight.
Formpac manufactures and sells polystyrene foam prepackaging trays used by
supermarkets and grocery stores to protect and display fresh meat, poultry and
produce, as well as foam food service items such as hinged-lid containers used
in institutional environments, by carry-out restaurants and by supermarkets for
sale to retail customers. Formpac manufactures foam trays in a two-stage
process consisting of the extrusion and thermoforming of polystyrene foam
sheets. Although the majority of Formpac's customers are located in the
eastern two-thirds of the United States, Formpac's proprietary technology has
also been successfully used in certain packaging applications outside of the
United States. Competition is based on service, price and product quality.
Grace Packaging's Omicron business group produces rigid plastic packaging
applications (primarily tubs for dairy products such as margarine and yogurt)
in Australia. Omicron products use proprietary thermoforming technology,
involving the controlled thinning and shaping of hot plastic sheets to increase
strength and rigidity while minimizing weight. Grace is expanding the Omicron
business into Southeast Asia through a 51%-owned joint venture formed in 1995
to produce rigid plastic packaging products in Malaysia.
Grace Packaging's sales and revenues were $1.7 billion in 1995, $1.4
billion in 1994 and $1.3 billion in 1993. Approximately 51% of Grace
Packaging's 1995 sales and revenues were generated in North America, 30% in
Europe, 11% in Asia Pacific and the remainder in Latin America. At year-end
1995, Grace Packaging employed approximately 9,900 people in 28 production
facilities (9 in North America, 8 in Europe, 6 in Asia Pacific and 5 in Latin
America) and 79 sales offices, serving approximately 24,000 customers.
Resins are the principal raw materials used by Grace Packaging. Although
prices for ethylene-based resins can be volatile, there is currently an
adequate worldwide supply of resins at generally stable prices. Further, Grace
Packaging has typically been able to increase the sales prices of its products
in response to increases in the prices of resins and other raw materials. In
most cases, multiple sources of resins and other raw materials exist, with at
least one source located in most global regions.
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Although sales and revenues tend to be slightly higher in the fourth
quarter, seasonality is generally not significant to Grace Packaging. As a
result of product introductions, marketing programs and improvements in global
economic conditions, worldwide demand for Grace Packaging products grew at a
rapid pace in 1994 and 1995, placing pressure on existing capacity. To address
this matter, Grace Packaging has added capacity in all regions (including a
shrink films manufacturing plant in Kuantan, Malaysia, that is expected to
become operational in 1996).
Catalysts and Other Silica-Based Products. This business ("Grace
Davison") is composed of three principal product groups: refinery catalysts,
polyolefin catalysts, and silica and zeolite adsorbents. These products apply
silica, alumina and zeolite technology and are designed and manufactured to
meet the varying specifications of such diverse customers as major oil
refiners, plastics and chemical manufacturers and consumer products companies.
Grace Davison's technological expertise provides a competitive edge, allowing
Grace Davison to quickly design products that meet customer specifications, as
well as to develop new products that expand its existing technology. For
example, Grace estimates that 95% of its 1995 fluid cracking catalyst sales
were attributable to products introduced in the last five years.
Refinery catalysts include (a) fluid cracking catalysts used by petroleum
refiners to convert crude oil into more valuable transportation fuels, such as
gasoline and jet and diesel fuel, as well as other petroleum-based products,
and (b) hydroprocessing catalysts that remove certain impurities (such as
nitrogen, sulfur and heavy metals) from crude oil prior to the use of fluid
cracking catalysts. Oil refining is a highly specialized discipline, demanding
that products be tailored to meet local variations in crude oil and the
refinery's changing operational needs. Grace Davison regularly works with most
of the approximately 360 refineries in the world, helping to find the most
appropriate catalyst formulations for the refiners' changing needs.
Competition is based on technology, product performance, customer service and
price. Grace believes it is one of the world leaders in refinery catalysts and
the largest supplier of fluid cracking catalysts in North America and Europe.
Grace Davison polyolefin catalysts and catalyst supports are essential
components used in manufacturing nearly half of all high density and linear low
density polyethylene resins, which are used in products such as plastic film,
high-performance pipe and household containers. The polyolefin catalyst
business is technology-intensive and focused on providing products specifically
formulated to meet end-user applications. Manufacturers generally compete on a
worldwide basis, and competition has intensified
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recently due to evolving technologies, particularly the use of metallocenes.
Silica and zeolite adsorbents are used in a wide variety of industrial and
consumer applications. Silicas are used in coatings as flatting agents (i.e.,
to reduce gloss), in plastics to improve handling, in toothpastes as thickeners
and cleaners, in food to carry flavors and prevent caking, and in the
purification of edible oils. Zeolite adsorbents are used between the two panes
of insulated glass to adsorb moisture and in process applications to separate
certain chemicals from mixtures. Competition is based on product performance,
customer service and price. Grace Davison is planning to expand its silica
business in the Asia Pacific region with a new plant in Kuantan, Malaysia, to
open in 1996.
Grace Davison's sales and revenues were $687 million in 1995, $610 million
in 1994 and $572 million in 1993; approximately 52% of Grace Davison's 1995
sales and revenues were generated in North America, 37% in Europe, 10% in Asia
Pacific and 1% in Latin America. At year-end 1995, Grace Davison employed
approximately 2,700 people worldwide in nine facilities (six in the United
States and one each in Canada, Germany and Brazil).
Most raw materials used in the manufacture of Grace Davison products are
available from multiple sources and, in some instances, are produced or
supplied by Grace. Because of the diverse applications of products using Grace
Davison technology and the geographic areas in which such products are used,
seasonality does not have a significant effect on Grace Davison's businesses.
Construction Products. Grace Construction Products ("Grace Construction")
is a leading supplier of specialty materials to the worldwide construction
industry. Grace Construction's products strengthen concrete, control
corrosion, prevent water damage and protect structural steel against collapse
due to fire. These include concrete admixtures, cement additives,
waterproofing systems and fireproofing materials. In North America, Grace
Construction also manufactures and distributes masonry block additives and
products and vermiculite products used in construction and other industrial
applications. Grace Construction's products are sold to a broad customer base,
including cement manufacturers, ready-mixed and prestressed concrete producers,
specialty subcontractors and applicators, masonry block manufacturers, building
materials distributors and other industrial manufacturers.
Grace Construction competes globally with several large construction
materials suppliers and regionally and locally with numerous smaller
competitors. Competition is based largely on
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price, product performance, proprietary technology and technical support and
service. Grace Construction's customers are frequently local contractors and
cement manufacturers; consequently, local suppliers are often able to compete
effectively.
Grace Construction's 1995 sales and revenues totaled $397 million (66% in
North America, 17% in each of Europe and Asia Pacific and less than 1% in Latin
America), versus $387 million and $333 million in 1994 and 1993, respectively.
At year-end 1995, Grace Construction employed approximately 1,900 people at 57
production facilities (27 in North America, 11 in Southeast Asia, 7 in
Australia/New Zealand, 7 in Europe, 4 in Latin America and 1 in Japan) and 70
sales offices worldwide.
The raw materials used for manufacturing Grace Construction products are
primarily commodities obtained from multiple sources, including commodity
chemical producers, petroleum companies and paper manufacturers. In most
instances, there are at least two alternative suppliers for each of the
principal raw materials used by Grace Construction. However, the worldwide
supply of calcium lignin, a wood pulping by-product used as a raw material in
the production of concrete admixtures, has been decreasing as paper mills
convert to new manufacturing processes. Grace Construction has secured
short-term supplies of calcium lignin and is exploring new technologies to
replace it in the future.
The construction business is seasonal, influenced by weather conditions,
and cyclical, in response to economic conditions and construction demand.
Grace Construction seeks to increase profitability and minimize the impact of
cyclical downturns in regional economies by introducing technically advanced,
value-added products, expanding geographically and developing business
opportunities in renovation construction markets. In addition, Grace
Construction has implemented a lower cost structure by consolidating
manufacturing operations in North America and through an extensive
restructuring plan in Europe.
Container and Specialty Polymer Products. Grace's container and specialty
polymers business ("Grace Container") consists primarily of four product lines:
container sealants, closure sealants, coatings for metal packaging, and
specialty polymers. Container sealants are applied to food and beverage cans,
as well as other rigid containers (such as industrial product containers and
aerosol cans), to ensure a hermetic seal between the lid and the can body.
Closure sealants are used to seal pry-off and twist-off metal crowns, as well
as roll-on pilfer proof and plastic closures, for the glass/plastic container
markets (primarily in beverage and food applications). Coatings are used in
the manufacture of cans and closures to protect the metal against
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corrosion, to protect the contents against the influences of metal, to ensure
proper adhesion of sealing compounds to metal surfaces, and to provide base
coats for inks and for decorative purposes. Formulated engineered polymers are
used in printed circuit board and component assembly in the electronics,
electrical, automotive and defense industries, including surface mount and
conductive adhesives, capacitor coatings, light-emitting diode encapsulants and
conformal coatings. Grace Container is expanding its product offering through
new technologies such as its oxygen-scavenging compound, which combines with
closure sealants to extend shelf life by eliminating oxygen, and oxygen's
effect on taste, from sealed beer and other beverage bottles.
Grace Container sales and revenues were $357 million, $325 million and
$306 million in 1995, 1994 and 1993, respectively. Its products are marketed
internationally, with 34% of 1995 sales and revenues in Europe, 28% in each of
North America and Asia Pacific and 10% in Latin America. At year-end 1995,
Grace Container employed approximately 1,600 people at 30 production facilities
(9 in Asia Pacific and 7 in each of North America, Europe and Latin America)
and 57 sales offices worldwide. Competition is based on providing high-quality
customer service at all customer sites, as well as on price and product quality
and reliability. Although the raw materials used in Grace Container's
operations, including resins, rubber and latices, are generally available from
multiple sources, the prices of these raw materials experienced rapid
escalation throughout most of 1995, negatively impacting Grace Container's
gross margins; improvements are expected in 1996 as raw materials prices
started to ease during the latter part of 1995. Although demand for container
packaging and sealant products tends to increase slightly during the second and
third quarters, the impact of such seasonality is not significant to Grace
Container.
Water Treatment. Grace's water treatment and process chemicals business
("Grace Dearborn") consists of water treatment and paper industry services
business lines, which market the following products: (a) water treatment
chemicals and support equipment to prevent corrosion, scale and microbiological
growth in industrial utility waters, heating, cooling and steam generation
applications, and industrial wastewater applications for clarification, sludge
de-watering, odor control and water recycling; (b) process chemicals and
support equipment to optimize and protect processing systems for the production
of pulp and paper, refined petroleum products and petrochemicals, sugar and
alcohol; (c) chemicals for the protection and cleaning of industrial cooking
and sterilization equipment for canned foods; (d) paint detackification
products to remove paint sludge from water wash paint spray systems; (e)
chemicals and equipment for the treatment of process waters in the mining and
processing of metal ores; and (f) chemicals and
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other products useful in servicing and maintaining vessels used in salt and
fresh water. Grace Dearborn also provides consulting services related to its
products and equipment.
Grace Dearborn sales and revenues for 1995 totaled $399 million (41% in
Europe, 37% in North America, 19% in Latin America and 3% in Asia Pacific).
Sales and revenues for 1994 and 1993 were $363 million and $330 million,
respectively. At year-end 1995, Grace Dearborn employed approximately 2,500
people at 23 manufacturing facilities (6 in each of Latin America and Asia
Pacific, 5 in Europe, 4 in North America and 2 in South Africa) and 122 sales
offices.
The raw materials used in Grace Dearborn's business lines are readily
available from multiple sources, generally at stable prices. The paper
industry services business is affected by the cyclicality of the global paper
market. The water treatment services business responds to (but is not
adversely affected by) seasonal fluctuations, concentrating on boiler
treatment in colder seasons and cooling system treatment in warmer seasons.
The effects of seasonality are diminished by the geographic diversity of the
markets served by Grace Dearborn. Grace Dearborn competes globally with
several large companies and regionally and locally with numerous smaller
companies. Competition is based primarily on technical service and product
performance.
In March 1996, Grace announced that it had entered into a definitive
agreement to sell its Dearborn water treatment and process chemicals business
to Betz Laboratories, Inc. for $632 million. The transaction is expected to
close in the second quarter of 1996.
Thermal and Emission Control Systems. Grace's thermal and emission
control systems business ("Grace TEC Systems") is a developmental business that
consists of four principal product groups: web processing products, industrial
emission control products, mobile emission control products and specialty
catalysts. These products are designed to customer specifications and are sold
to a variety of industrial customers.
Web processing products, consisting primarily of air flotation dryers and
auxiliary equipment, are sold principally to the graphic arts, coating and
converting markets. The industrial emission control products group
manufactures volatile organic compound control equipment, including thermal,
catalytic and regenerative oxidation systems. Demand for this equipment is
driven principally by government regulations. The mobile emission control
products group sells washcoat materials and specialty substrates. Washcoat
materials are used by catalyst manufacturers to enhance the perfor-
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<PAGE> 15
mance of catalytic converters sold to automotive original equipment
manufacturers. Specialty catalysts are used to control volatile organic
compounds, nitrogen oxides and carbon monoxide from a variety of sources.
Competition for Grace TEC Systems' products is based primarily on system
design, materials, technology, customer service, product performance and price.
DISCONTINUED OPERATIONS
In 1993 Grace classified its then remaining noncore businesses as
discontinued operations, and in 1995 Grace classified its health care business
as a discontinued operation. As discussed above (see "Strategic Restructuring
and Other Growth Initiatives"), Grace has completed the sale and monetization
of a substantial portion of its noncore businesses (although Grace remains
subject to certain liabilities relating to those businesses). Grace's health
care and cocoa businesses are the principal discontinued operations that have
not yet been divested. Grace is actively pursuing the disposition of these two
businesses and its other remaining discontinued operations and expects to
complete their disposition in 1996. Following is a description of Grace's
health care and cocoa businesses; see Notes 3, 5, 7, 12 and 13 to the
Consolidated Financial Statements and "Management's Discussion and Analysis of
Results of Operations and Financial Condition" in the Financial Supplement, and
"Strategic Restructuring and Other Growth Initiatives" above, for additional
information.
Health Care. Grace's health care business is conducted primarily through
NMC, which provides kidney dialysis services; manufactures and distributes
products and equipment for dialysis treatment; performs clinical laboratory
testing and other medical services; and provides home infusion, home
respiratory therapy and home health services.
NMC is the largest United States provider of kidney dialysis and related
services to patients suffering from chronic kidney disease and has been
actively expanding this business overseas. At December 31, 1995, NMC operated
and/or managed 681 outpatient dialysis centers (574 in North America, 62 in
Europe, 33 in Latin America and 12 in Asia Pacific); these centers,
substantially all of which are leased, average approximately 5,600 square feet
in size. NMC also provides inpatient acute dialysis services under contracts
with hospitals in the United States (526 at December 31, 1995) and furnishes
dialysis equipment and supplies to patients who elect home treatment. At
December 31, 1995, NMC was treating ap-
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<PAGE> 16
proximately 42,900 patients in the United States and 7,900 patients in other
countries. Revenues from kidney dialysis services were $1.5 billion in 1995,
$1.3 billion in 1994 and $1 billion in 1993.
Since 1991, Grace has made numerous acquisitions relating to its health
care business. These acquisitions, totaling $857 million plus 115,621 shares
of the Company's Common Stock over the 1991-1995 period, included a United
States provider of alternate-site infusion therapy and dialysis health care
services, a United States provider of home infusion therapy services, regional
United States providers of home infusion therapy services and home support
nursing services, and numerous dialysis centers located primarily in the
United States.
NMC manufactures disposable bloodlines, dialysis concentrates, artificial
kidneys (dialyzers) and dialysis machines for use in its dialysis centers and
for sale to unaffiliated dialysis providers and home patients; distributes
dialysis supplies and equipment and other medical products and supplies
manufactured by others; and provides laboratory services for dialysis and other
patients in the United States and Portugal.
NMC also provides infusion and respiratory therapies and home health
services to patients in their homes through a network of 105 United States
locations (104 leased and 1 owned) in 34 states. Infusion therapy consists of
the intravenous delivery of an expanding range of medications and nutritional
preparations, such as chemotherapy, total parenteral nutrition, antibiotic
therapy and drugs for pain management. Respiratory therapy consists of the
delivery of oxygen and aerosolized drugs and the use of monitors, nebulizers
and ventilators. In addition, NMC provides other home health services through
21 locations.
NMC provides various ancillary medications and services to patients
suffering from end-stage renal disease ("ESRD") at its dialysis centers, the
most significant of which is the administration of erythropoietin ("EPO"). EPO
is used to treat anemia, a medical complication frequently experienced by ESRD
patients, and is administered to most of NMC's dialysis patients. Revenues
from EPO accounted for approximately 13% of NMC's revenues in 1995. EPO is
produced by a single manufacturer, and any interruption of supply could
adversely affect NMC's business and results of operations.
NMC's United States business is dependent on the continuation of Medicare
and other third-party insurance coverage for dialysis and home care services
and products. At such time as Medicare becomes a patient's primary payor for
dialysis (generally, three months following commencement of treatment or, in
the case of
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<PAGE> 17
patients covered by employer-sponsored health insurance, 21 months
after commencement of treatment) and/or home care products and services,
Medicare currently reimburses suppliers of such services and products for
approximately 80% of established fees or reasonable charges; the remaining 20%
is paid by the patient and/or a non-Medicare insurance carrier. NMC estimates
that, in 1995, Medicare, Medicaid and other governmental health care programs
accounted for approximately 60% of NMC's revenues. The reimbursement rates
under such programs, as well as the scope of their coverage, are subject to
legislative change as a result of deficit reduction and other measures.
Because in most cases the prices of dialysis services and products in the
United States are directly or indirectly regulated by Medicare or other
government payors, competition for patients is based primarily on quality and
accessibility of service and referrals from physicians and hospitals. In
addition, some states limit competition under laws that restrict the number of
dialysis facilities within a geographic area based on need, as determined by
state agencies. Competition in the home care business is also based on quality
of service as well as price, and, where state laws do not impose limits on
competition, there are no significant barriers to entering this business.
Further, the rapid growth of managed care (a combination of financial
incentives and management controls intended to direct patients to efficient
providers in cost-effective settings) has resulted in greater emphasis on
service costs for patients insured by third parties; therefore, cost efficiency
is also a key element of competition in this market. Based upon its knowledge
and understanding of the health care industry in general and of other providers
of kidney dialysis and infusion therapy, as well as information obtained from
publicly available sources, NMC believes that it is among the most
cost-efficient of the companies in its field and that it is the leading United
States supplier of dialysis services and a leading United States provider of
infusion and respiratory therapies.
In most countries other than the United States where NMC provides dialysis
services, prices and the opening of new facilities are directly or indirectly
regulated by governments, and competition is based primarily on the quality and
availability of service and relationships with referring physicians.
NMC believes there are adequate sources of supply for the raw materials
and products used in its health care services and medical products businesses.
At year-end 1995, NMC employed approximately 18,900 people full-time at its
facilities worldwide.
On February 4, 1996, Grace and Fresenius AG announced that they had
entered into an agreement pursuant to which NMC would
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<PAGE> 18
combine with Fresenius' worldwide dialysis business. See "Strategic
Restructuring and Other Growth Initiatives" above for additional information.
See "Legal Proceedings" below for information concerning certain lawsuits
and government investigations and proceedings relating to NMC and Note 7 to
Grace's Consolidated Financial Statements and "Management's Discussion and
Analysis of Results of Operations and Financial Condition" in the Financial
Supplement for additional information concerning NMC.
Grace Cocoa. Grace's cocoa and chocolate business ("Grace Cocoa")
produces high-quality intermediate cocoa and chocolate products for sale as
ingredients to the bakery, confectionery, dairy and beverage industries. Cocoa
liquor, cocoa butter and cocoa powder are sold internationally; coatings and
intermediate chocolate products are sold to the European market; and
intermediate chocolate products, primarily coatings and cookie drops, are sold
to the North American market. Grace Cocoa competes primarily on the basis of
superior service, product quality and reliability. Sales of cocoa and
chocolate products were $798 million in 1995, $718 million in 1994 and $636
million in 1993. At year-end 1995, Grace Cocoa employed approximately 1,700
people at 9 production facilities (4 in each of Europe and North America and 1
in Asia Pacific) and 5 other offices worldwide.
See "Strategic Restructuring and Other Growth Initiatives" above and Notes
7 and 13 to Grace's Consolidated Financial Statements for additional
information concerning Grace Cocoa.
RESEARCH ACTIVITIES
Grace engages in research and development programs directed toward the
development of new products and processes and the improvement of, and
development of new uses for, existing products and processes. Research is
carried out by product line laboratories in North America, Europe, Asia and
Latin America and by the Corporate Research Division in Columbia, Maryland. The
Research Division's activities focus on Grace's core product lines and include
research in specialty polymers; water treatment; catalysis; construction
materials; photopolymers; specialty packaging; and process engineering,
principally involving the development of technologies to manufacture chemical
specialties.
Research and development expenses relating to continuing operations
amounted to $121 million in 1995, $107 million in 1994 and $112 million in 1993
(including expenses incurred in funding
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<PAGE> 19
external research projects). The amount of research and development expenses
relating to government- and customer-sponsored projects (as opposed to projects
sponsored by Grace) is not material.
See "Management's Discussion and Analysis of Results of Operations and
Financial Condition" in the Financial Supplement for additional information.
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
In constructing and operating its facilities, Grace incurs capital and
operating expenditures relating to the protection of the environment, as well
as costs to remediate properties. The following table sets forth Grace's
expenditures in the past three years, and its estimated expenditures in 1996
and 1997, for (a) the operation and maintenance of environmental facilities and
the disposal of hazardous and nonhazardous wastes with respect to continuing
operations; (b) capital improvements to environmental control facilities
relating to continuing operations; and (c) the remediation of sites:
<TABLE>
<CAPTION>
(a) (b) (c)
Operation of
Facilities and Capital
Waste Disposal Improvements Remediation
-------------- ------------ -----------
(in millions)
<S> <C> <C> <C>
1993 $41 $19 $44
1994 36 22 31
1995 44 15 31
1996 (est.) 45 20 30
1997 (est.) 47 17 20
</TABLE>
Such expenditures have not had, and are not expected to have, a material effect
on Grace's other capital expenditures or on its earnings or competitive
position. See Note 12 to the Consolidated Financial Statements and
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" in the Financial Supplement.
With the goal of continuously improving its environment, health and safety
("EHS") performance, Grace established its Commitment to Care(TM) initiative
(based on the Responsible Care(R) program of the Chemical Manufacturers
Association) in 1994 as the program under which all Grace EHS activities are to
be implemented.
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<PAGE> 20
To the extent applicable, Commitment to Care extends the basic elements of
Responsible Care to all Grace locations worldwide, embracing specific
objectives in the key areas of product stewardship, employee health and safety,
community awareness and emergency response, distribution, process safety and
pollution prevention.
In 1995 (following completion of the first year of the implementation of
the Commitment to Care program), Grace conducted a survey of facilities
worldwide to determine the program's results. The survey showed significant
progress toward Grace's goal of implementing the program in all Grace
facilities.
See Item 3 of this Report for information concerning environmental
proceedings to which Grace is a party and "Management's Discussion and Analysis
of Results of Operations and Financial Condition" in the Financial Supplement
for additional information concerning environmental matters.
ITEM 2. PROPERTIES.
Grace operates manufacturing and other types of plants and facilities
(including office and other service facilities) throughout the world, some of
which are shared by two or more of Grace's product lines. Grace considers its
major operating properties to be in good operating condition and suitable for
their current use. Although Grace believes that, after taking planned
expansion into account, the productive capacity of its plants and
other facilities is generally adequate for current operations and foreseeable
growth, it conducts ongoing, long-range forecasting of its capital requirements
to assure that additional capacity will be available when and as needed (see
information regarding Grace's capital expenditures in "Management's Discussion
and Analysis of Results of Operations and Financial Condition" and on page F-27
of the Financial Supplement). Accordingly, Grace does not anticipate that its
operations or income will be materially affected by the absence of available
capacity.
Additional information regarding Grace's properties is set forth in Item 1
above and in Notes 1, 9 and 12 to the Consolidated Financial Statements in the
Financial Supplement.
ITEM 3. LEGAL PROCEEDINGS.
Asbestos Litigation. Grace is a defendant in lawsuits relating to
previously sold asbestos-containing products and anticipates that it will be
named as a defendant in additional asbestos-related
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<PAGE> 21
lawsuits in the future. Grace was a defendant in approximately 40,800
asbestos-related lawsuits at year-end 1995 (47 involving claims for property
damage and the remainder involving approximately 92,400 claims for personal
injury), as compared to approximately 38,700 lawsuits at year-end 1994 (65
involving claims for property damage and the remainder involving approximately
67,900 claims for personal injury). In most of these lawsuits, Grace is one of
many defendants.
The plaintiffs in property damage lawsuits generally seek, among other
things, to have the defendants absorb the cost of removing, containing or
repairing the asbestos-containing materials in the affected buildings. Through
year-end 1995, 129 asbestos property damage cases were dismissed with respect
to Grace without payment of any damages or settlement amounts; judgments were
entered in favor of Grace in 10 cases (excluding cases settled following
appeals of judgments in favor of Grace and a case in which the plaintiff was
granted a new trial on appeal); Grace was held liable for a total of $74.7
million in 7 cases (2 of which are on appeal); and 177 property damage suits
and claims were settled for a total of $421.8 million.
Included in the asbestos property damage lawsuits pending against Grace
and others at year-end 1995 were the following class actions: (1) a
Pennsylvania state court action (Prince George Center, Inc. v. U.S. Gypsum
Company, et al., Court of Common Pleas of Philadelphia County), certified in
1992, covering all commercial buildings in the United States leased in whole or
in part to the United States government on or after May 30, 1986; (2) an
action, conditionally certified by the United States Court of Appeals for the
Fourth Circuit in 1993 and pending in the United States District Court for the
District of South Carolina, covering all public and private colleges and
universities in the United States whose buildings contain asbestos materials
(Central Wesleyan College, et al. v. W. R. Grace, et al.); and (3) a purported
class action (Anderson Memorial Hospital, et al. v. W. R. Grace & Co., et al.),
filed in 1992 in the Court of Common Pleas for Hampton County, South Carolina,
on behalf of all entities that own, in whole or in part, any building
containing asbestos materials manufactured by Grace or one of the other named
defendants, other than buildings subject to the class action lawsuits described
above and any building owned by the federal or any state government. In
December 1995, Grace entered into an agreement to settle the claims under
Prince George Center, Inc. v. U.S. Gypsum Company, et al. The terms of the
settlement agreement (which is subject to judicial review and approval after
class members have an opportunity to be heard) are not expected to have a
significant effect on Grace's consolidated results of operations or financial
position. In July
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<PAGE> 22
1994, the claims of most class members in Anderson Memorial Hospital, et al.,
v. W. R. Grace & Co., et al. were dismissed due to a ruling that a South
Carolina statute prohibits nonresidents from pursuing claims in the South
Carolina state courts with respect to buildings located outside the state. The
plaintiffs have requested that the court reconsider its decision. In August
1994, Grace entered into an agreement to settle In re: Asbestos School
Litigation, a nationwide class action brought in 1983 in the United States
District Court for the Eastern District of Pennsylvania on behalf of all public
and private elementary and secondary schools in the United States that contain
friable asbestos materials (other than schools that "opted out" of the class).
The terms of the settlement agreement (which were approved by the District
Court in September 1995) are not expected to have a significant effect on
Grace's consolidated results of operations or financial position.
The remaining asbestos lawsuits pending at year-end 1995 involved claims
for personal injury. Through year-end 1995, approximately 10,100 personal
injury lawsuits involving 24,500 claims were dismissed with respect to Grace
without payment of any damages or settlement amounts (primarily on the basis
that Grace products were not involved), and approximately 23,700 such suits
involving 29,600 claims were disposed of for a total of $109 million (see
"Insurance Litigation" below). However, as a result of various trends
(including the insolvency of other former asbestos producers and cross-claims
by co-defendants in asbestos personal injury lawsuits), the costs incurred in
disposing of such lawsuits in the past may not be indicative of the costs of
disposing of such lawsuits in the future.
In 1991, the Judicial Panel on Multi-District Litigation consolidated in
the United States District Court for the Eastern District of Pennsylvania, for
pre-trial purposes, all asbestos personal injury cases pending in the federal
courts, including approximately 7,000 cases then pending against Grace; 3,600
new cases involving 7,200 claims against Grace have subsequently been added to
the consolidated cases. To date, no action has been taken by the court
handling the consolidated cases that would indicate whether the consolidation
will affect Grace's cost of disposing of these cases or its defense costs.
Grace's ultimate exposure with respect to its asbestos-related lawsuits
and claims will depend on the extent to which its insurance will cover damages
for which it may be held liable, amounts paid in settlement and litigation
costs. As discussed below under "Insurance Litigation," a May 1994 decision of
the U.S. Court of Appeals for the Second Circuit limited the amount of
insurance
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<PAGE> 23
coverage available with respect to property damage lawsuits and claims.
Because Grace's insurance covers both property damage and personal injury
lawsuits and claims, the May 1994 decision has had the concomitant effect of
reducing the insurance coverage available with respect to Grace's asbestos
personal injury lawsuits and claims. However, in Grace's opinion, it is
probable that recoveries from its insurance carriers, along with other funds,
will be available to satisfy the property damage and personal injury lawsuits
and claims pending at year-end 1995, 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. See
"Insurance Litigation" below and Note 2 to the Consolidated Financial
Statements in the Financial Supplement for additional information.
Environmental Proceedings. Grace (together with other companies) has been
designated a "potentially responsible party" ("PRP") by the United States
Environmental Protection Agency ("EPA") with respect to absorbing the costs of
investigating and remediating pollution at various sites. At year-end 1995,
proceedings were pending with respect to approximately 30 sites as to which
Grace has been designated a PRP. Federal law provides that all PRPs may be
held jointly and severally liable for the costs of investigating and
remediating a site. Grace is also conducting investigatory and remediation
activities at sites under the jurisdiction of state and/or local authorities.
In addition, in 1989, Hatco Corporation ("Hatco"), which purchased the
assets of a Grace chemical business in 1978, instituted a lawsuit against Grace
in the United States District Court for the District of New Jersey (Hatco
Corporation v. W. R. Grace & Co.-Conn.) seeking recovery of cleanup costs for
waste allegedly generated at a New Jersey facility during the period of Grace's
ownership. Grace subsequently filed a lawsuit against its insurance carriers
seeking indemnity against any damages assessed against Grace in the underlying
lawsuit, as well as defense costs. In decisions rendered during 1993, the
District Court ruled that Grace is responsible for a substantial portion of
Hatco's costs. In July 1995, the United States Court of Appeals for the Third
Circuit reversed the decisions of the District Court and remanded the lawsuit
to the District Court for further proceedings. Specifically, the Court of
Appeals (a) reversed the District Court's ruling that Grace is responsible for
a substantial portion of Hatco's costs and (b) ruled that in the remand
proceeding the burden of proof would be on Hatco to establish that it had not
released Grace from the asserted liabilities. In an earlier
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<PAGE> 24
decision, the District Court had resolved, in a manner favorable to
Grace, certain legal issues regarding Grace's right to insurance coverage;
however, the ultimate liability of Grace's insurance carriers will be
determined at trial, should a trial be necessary after the remand proceedings
described above. Remediation costs, and Grace's share, if any, of such costs,
will be determined once ongoing site investigations are completed and a
remediation plan is approved by the State of New Jersey. As a result of the
above factors, the amount that Grace may be required to pay to Hatco, if any
(which Grace expects will be partially offset by recoveries from insurance
carriers), cannot be reliably estimated at this time.
In November 1995, Grace received a letter from the United States
Department of Energy ("DOE") inquiring as to Grace's willingness to contribute
to the continued cleanup of a former Grace property located in Wayne, New
Jersey. The letter asserted that Grace has a legal duty to pay for the site's
cleanup and that the total cost of cleanup may exceed $100 million. The
operations conducted by Grace at the Wayne site (from 1955 to 1970) included
work done on radioactive materials under contract with the United States
government for the "Manhattan Project" and with the United States Atomic Energy
Commission. In 1975, the United States Nuclear Regulatory Commission inspected
the site, concluded that it was decontaminated in accordance with applicable
regulations and released it for unrestricted use. In 1984, pursuant to a
request from the DOE, Grace transferred the Wayne property to the DOE and made
a cash payment as a contribution towards the DOE's cleanup efforts at the site,
which was acknowledged by the DOE as fulfilling any obligation Grace had to
contribute to DOE's cleanup effort. As a result of these transactions, Grace
believes it has no further obligation to contribute to the DOE's cleanup
activities.
In March 1993, an action was filed in the United States District Court for
the Southern District of Texas against Grace Drilling Company, a subsidiary of
the Company the business and assets of which have since been sold, and several
other defendants, for alleged violations of the Clean Water Act and the Rivers
and Harbors Act (U.S. v. Fina Oil and Chemical Co., et al.). The government
alleges that seagrasses and seabeds around a drilling rig operated by Fina Oil
and Chemical Co. were damaged in connection with the placing, servicing and
removal of the rig. The government is seeking injunctive relief requiring the
defendants to restore the damaged areas and to compensate for temporary loss of
the seagrass habitat, as well as civil penalties of up to $25,000 per day of
violation and attorneys' fees.
Grace is also a party to other proceedings involving federal, state and/or
local government agencies and private parties
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<PAGE> 25
regarding Grace's compliance with environmental laws and regulations.
These proceedings are not expected to result in significant sanctions or in any
material liability. As a voluntary participant in the EPA Toxic Substances
Control Act Compliance Audit Program, Grace agreed to undertake a
corporate-wide audit of compliance with Section 8 of such Act and to pay a
stipulated civil penalty for each study or report that EPA alleges should have
been, but was not, submitted to the EPA as required under such Section.
Although final review of the audit is not complete, Grace believes it will be
required to pay the EPA penalties aggregating from $250,000 to $400,000 for
information discovered in the course of the audit. In addition, Grace has
voluntarily reported to the EPA violations of certain notification and related
requirements under such Act, and penalties may be assessed against Grace in
connection therewith; however, the amount of such penalties cannot be
determined at this time.
Grace believes that the liabilities for environmental remediation costs
that have been recorded in the Consolidated Financial Statements are adequate.
In addition, Grace is presently involved in litigation with its insurance
carriers seeking to hold them responsible for certain amounts for which Grace
may be held liable with respect to such costs. The outcome of such litigation,
as well as the amounts of any recoveries that Grace may receive in connection
therewith, is presently uncertain. For further information, see Note 12 to the
Consolidated Financial Statements and "Management's Discussion and Analysis of
Results of Operations and Financial Condition" in the Financial Supplement.
Insurance Litigation. Grace is involved in litigation with certain
insurance carriers with respect to asbestos-related claims and environmental
liabilities. Its asbestos-related insurance actions consist of a case styled
Maryland Casualty Co. v. W. R. Grace & Co., pending in the United States
District Court for the Southern District of New York; Dayton Independent School
District v. United States Mineral Products Company, et al., pending in the
United States District Court for the Eastern District of Texas; Independent
School District No. 197, et al. v. W. R. Grace & Co. and Accident & Casualty
Insurance Co., et al., pending in the First Judicial District in Minnesota; The
County of Hennepin v. Central National Insurance Company, et al., pending in
the Fourth Judicial District in Minnesota; Ecolab, Inc. v. Central National
Insurance Co., pending in the District Court for Ramsey County, Minnesota; and
American Employers' Insurance Co., American Re-Insurance Co., Commercial Union
Insurance Co., and Unigard Security Insurance Co. v. W. R. Grace & Co.,
Continental Casualty Co., and Maryland Casualty Co., which is pending in the
New York state courts; Grace's insurance actions relating to environmental
liabilities consist of
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<PAGE> 26
Maryland Casualty Co. v. W. R. Grace & Co., pending in the United
States District Court for the Southern District of New York; and Hatco Corp. v.
W. R. Grace & Co.-Conn., pending in the United States District Court for the
District of New Jersey. The relief sought by Grace in these actions would
provide insurance to partially offset Grace's estimated exposure with respect
to the actions' subject matter, including amounts previously expended by Grace
to defend claims and satisfy judgments and settlements (see Note 2 to the
Consolidated Financial Statements in the Financial Supplement). The factual
bases underlying these actions are the nature of the underlying
asbestos-related and environmental claims, the language of the insurance
policies sold by the carriers to Grace and the drafting history of those
policies.
In 1991 (in an asbestos-related case involving Maryland Casualty Co.), the
United States District Court for the Southern District of New York determined
that coverage for property damage is triggered by the "discovery of damage"
during the period covered by the relevant policy. In September 1993, the
United States Court of Appeals for the Second Circuit reversed the District
Court's ruling as to a "discovery of damage" trigger for such claims and,
instead, ruled that coverage for these claims is triggered based on the date of
installation of asbestos-containing materials. In January 1994, the United
States Court of Appeals for the Second Circuit granted Grace's petition for a
rehearing concerning the September 1993 decision, and in May 1994, the Court
issued a new decision confirming its September 1993 decision. As a result,
Grace recorded net noncash charges totaling $300 million after taxes in 1993
and 1994 to reflect the reduction in asbestos property damage insurance
coverage. Subsequently, the Second Circuit refused to rehear its decision, and
the United States Supreme Court denied Grace's petition for a writ of
certiorari with respect to that decision.
In 1991 and 1994, a Mississippi court held that certain of Grace's excess
insurance carriers are obligated to defend and indemnify Grace, determining
that, for purposes of insurance coverage, damage to buildings from
asbestos-containing products occurs at the time such products are put in place
and that the damage continues as long as the building contains the products
(referred to as a "continuous trigger"); Grace subsequently settled with each
of the insurance carriers, and an appeal of the Mississippi court's decision
was dismissed. In 1992, the Minnesota court referred to above reached a
similar decision in interpreting Grace's insurance policies. In January 1994,
the Minnesota court entered judgment against certain of Grace's carriers in the
amount of $14.2 million, but that judgment was reversed by the Minnesota Court
of Appeals in January 1995. After the Minnesota Supreme Court
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<PAGE> 27
denied review of this decision, the parties agreed to settlements in
1995 and early 1996.
Prior to 1993, Grace received payments totaling $97.7 million from
insurance carriers, the majority of which represented the aggregate remaining
obligations owed to Grace by those carriers for primary-level insurance
coverage written for the period June 30, 1962 through June 30, 1987. In 1993
and 1994, Grace settled with insurance carriers for a total of $300.2 million
(portions of which were paid or will be paid in subsequent years) in
reimbursement for amounts expended by Grace in connection with asbestos-related
litigation. In 1995, Grace settled with a primary-level insurer for $100
million, and with other insurers for a total of $200.3 million, including
future payments of approximately $70 million. As a result of these
settlements, insurance litigations were dismissed as to the primary-level
product liability insurance coverage previously sold by the relevant insurers
to Grace; however, litigations continue as to certain excess-level carriers.
In a 1995 settlement included in the amounts set forth above, Grace
settled with an affiliated group of excess-level carriers that had agreed to a
settlement in 1993, had made a series of payments under that agreement and had
subsequently notified Grace that it would no longer honor the agreement.
Pursuant to the 1995 settlement, the group of carriers paid Grace $44 million
in 1995, and agreed to make additional payments totaling $60.2 million in 1996
and 1997. Pursuant to a settlement with another group of carriers, Grace
received $26.8 million in 1995 and $9.7 million in early 1996. Grace will also
continue to receive payments under these agreements based on future cash
outflows for asbestos-related litigation and claims; such payments are
estimated to represent approximately $237.3 million of the asbestos-related
receivable of $321.2 million at December 31, 1995.
See Note 2 to the Consolidated Financial Statements and "Management's
Discussion and Analysis of Results of Operations and Financial Condition" in
the Financial Supplement for additional information.
Fumed Silica Plant Litigation. In 1993, Grace initiated legal action
in the Belgian courts against the Flemish government to recover losses
resulting from the closing of Grace's fumed silica plant in Puurs, Belgium.
Grace is seeking damages in excess of four billion Belgian francs
(approximately $135.5 million at the December 29, 1995 exchange rate), plus
interest and lost profits. This claim was dismissed at the trial court level
and is now being appealed by Grace. The trial court also determined that Grace
should repay approximately 239 million Belgian francs (approximately $8.1
million at the December 29, 1995 exchange rate) plus
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interest to the Flemish government for previously received investment
grants; this decision is also being appealed by Grace. Also pending is an
arbitration involving the engineering company that was responsible for the
design and construction of the fumed silica plant. The outcome of this
proceeding may affect the action filed against the Flemish government.
Shareholder Litigation. Commencing in March 1995, five lawsuits were
brought against the Company and members of its Board of Directors (as well as
J. P. Bolduc, who resigned as President and Chief Executive Officer and a
director of the Company in March 1995) in New York State Supreme Court, New
York County. These lawsuits were consolidated in the case entitled Weiser, et
al. v. Grace, et al. The consolidated amended complaint in this lawsuit, which
purports to be a derivative action (i.e., an action brought on behalf of the
Company), alleges, among other things, that the individual defendants breached
their fiduciary duties to the Company (a) by providing J. Peter Grace, Jr. (the
Chairman and a director of the Company until his death in April 1995) with
certain compensation arrangements upon his voluntary retirement as the
Company's Chief Executive Officer in 1992 and (b) by approving Mr. Bolduc's
severance arrangements, and that Messrs. Grace and Bolduc breached their
fiduciary duties by accepting such benefits and payments. The lawsuit seeks
unspecified damages, the cancellation of all allegedly improper agreements, the
cancellation of the non-employee director retirement plan, the return of all
remuneration paid to the present and former directors who are defendants while
they were in breach of their fiduciary duties to the Company, an
award of attorneys' and experts' fees and costs and such other relief as the
Court may deem appropriate.
In March 1996, two purported shareholder derivative class actions were
filed in New York State Supreme Court, New York County, against the Company and
Albert J. Costello, the Company's Chairman, President and Chief Executive
Officer, alleging that the defendants breached their fiduciary duties to the
Company's shareholders by failing to investigate and consider fully a proposal
by Hercules, Incorporated to acquire or merge with Grace (Izes, etc. v. W. R.
Grace & Company, et al. and Polikoff, etc. v. W. R. Grace & Company, et al.).
The lawsuits seek injunctive relief ordering defendants to carry out their
fiduciary duties by considering and evaluating such proposal, unspecified
monetary damages, costs and counsel fees and such other relief as the Court
deems proper.
Securities and Exchange Commission Investigation. The Company has been
notified that the Securities and Exchange Commission has issued a formal order
of investigation with respect to the
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<PAGE> 29
Company's prior disclosures regarding benefits and retirement
arrangements provided to J. Peter Grace, Jr., and certain matters relating to
J. Peter Grace III, a son of J. Peter Grace, Jr. The Company is cooperating
fully with the investigation.
NMC - OIG Investigation. On October 17, 1995, NMC received five
investigative subpoenas from the Office of the Inspector General of the United
States Department of Health and Human Services ("OIG"). The subpoenas call for
the production of extensive documents relating to various aspects of NMC's
business. A letter accompanying the subpoenas stated that they had been issued
in conjunction with an investigation being conducted by the OIG, the United
States Attorney for the District of Massachusetts and others, concerning
possible violations of federal laws relating to health care payments and
reimbursements. The five subpoenas cover the following areas: (a) NMC's
corporate management, personnel and employees, organizational structure,
financial information and internal communications; (b) NMC's dialysis services
business, principally medical director contracts and compensation; (c) NMC's
treatment of credit balances resulting from overpayments received under the
Medicare ESRD program and its payment of supplemental medical insurance
premiums on behalf of indigent patients; (d) NMC's LifeChem laboratory
business, including documents relating to testing procedures, marketing,
customers, competition and certain overpayments totaling approximately $4.9
million that were received by LifeChem from the Medicare program with respect
to laboratory services rendered between 1989 and 1993; and (e) NMC's Homecare
Division and, in particular, information concerning the intradialytic
parenteral nutrition ("IDPN") business, including billing practices related to
various services, equipment and supplies and payments made to third parties as
compensation for administering IDPN therapy.
NMC is cooperating with the OIG investigation and has made, and is
expected to continue to make, extensive production of documents and information
in response to the subpoenas. 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.
Under the terms of the proposed transaction with Fresenius AG described
above under "Strategic Restructuring and Other Growth
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<PAGE> 30
Initiatives," any liability arising as a result of the OIG investigation would
remain the responsibility of NMC.
NMC - OBRA 93 Litigation. The Omnibus Budget Reconciliation Act of 1993
("OBRA 93") affected the payment of benefits under Medicare and employer health
plans for certain eligible ESRD patients. In July 1994, the Health Care
Financing Administration ("HCFA") issued an instruction to Medicare claims
processors to the effect that Medicare benefits for the patients affected by
OBRA 93 would be subject to a new 18-month "coordination of benefits" period.
This instruction had a positive impact on NMC's dialysis revenues because,
during the 18-month coordination of benefits period, the patient's employer
health plan was responsible for payment, which was generally at a rate higher
than that provided under Medicare.
In April 1995, HCFA issued a new instruction, reversing its original
instruction in a manner that would substantially diminish the positive effect
of the initial instruction on NMC's dialysis business. Under the new
instruction, no 18-month coordination of benefits period would arise, and
Medicare would remain the primary payor. HCFA further proposed that its new
instruction be effective retroactive to August 1993, the effective date of OBRA
93. Consequently, NMC may be required to refund payments received from
employer health plans for services provided after August 1993 under HCFA's
original instruction and to re-bill Medicare for the same services, which would
result in a cumulative reduction of net revenues to NMC totaling approximately
$120 million as of December 31, 1995. Effective July 1, 1995, NMC ceased to
recognize the incremental revenue realized under the original instruction,
which has resulted in a material reduction in NMC's operating earnings in
comparison to prior periods in which NMC recognized such incremental revenue.
However, NMC continued to bill the employer health plans as primary payors
through December 31, 1995, at which time NMC commenced billing Medicare for the
patients affected by OBRA 93.
In May 1995, NMC filed suit in the United States District Court for the
District of Columbia seeking a declaratory judgment with respect to HCFA's
instructions relating to OBRA 93 (National Medical Care, Inc., et al. v.
Shalala). In June 1995, the court granted NMC's motion for a preliminary
injunction to preclude HCFA from retroactively enforcing its new instruction.
The litigation is continuing with respect to NMC's request to permanently
enjoin HCFA's new instruction, both retroactively and prospectively. While
there can be no assurance that a permanent injunction will be issued, NMC
believes that it will ultimately prevail in its claim that the retroactive
reversal by HCFA of its original instruction
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<PAGE> 31
relating to OBRA 93 was impermissible under applicable law. If HCFA's revised
instruction is upheld, NMC's business, financial position and results of
operations would be materially adversely affected, particularly if the revised
instruction is applied retroactively.
NMC - IDPN Proceedings. NMC administers IDPN therapy to chronic
dialysis patients who suffer from severe gastrointestinal malfunctions. Since
late 1993, Medicare claims processors have applied medical coverage
interpretations in a manner that has 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 United States District Court for the Middle District of
Pennsylvania (NMC Homecare, Inc. v. Shalala) 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 $93
million as of December 31, 1995, and currently increasing at the rate of
approximately $5 million per month. If NMC is unable to collect its 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.
As previously reported, 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 March 1996, NMC
received a copy of 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. NMC, together with other interested parties, plans to
seek to effect certain changes in the new policy, and NMC is considering
changes to its patient qualification procedures in
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<PAGE> 32
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 results of
operations.
NMC - Import Alerts. In 1993, the United States Food and Drug
Administration ("FDA") issued import alerts with respect to (a) hemodialysis
bloodlines manufactured at NMC's facility in Reynosa, Mexico and (b)
hemodialyzers manufactured in NMC's Dublin, Ireland facility. Products subject
to FDA import alerts may not enter the United States until the FDA approves
the quality assurance systems of the facility at which such products are
manufactured. In January 1994, NMC entered into a consent decree providing
that the importation of bloodlines and hemodialyzers could resume upon
certification by NMC that the relevant facility complies with FDA regulations
and successful completion of an FDA inspection to verify such compliance. The
consent decree also required NMC to certify, and be inspected for, compliance
with applicable FDA manufacturing requirements at all of its United States
manufacturing facilities.
NMC submitted all required certifications for its United States and
non-United States facilities in accordance with the timetable specified in the
consent decree, and the bloodline import alert was lifted in March 1994. The
Dublin hemodialyzer import alert was lifted in December 1995. No fines or
penalties have been imposed on NMC as a result of the FDA's actions or in
connection with the consent decree.
NMC - Grand Jury Investigations. NMC has received multiple subpoenas from
a federal grand jury in the District of New Jersey investigating, among other
things, (a) NMC's efforts to persuade the United States Food and Drug
Administration to lift a January 1991 import hold issued with respect to NMC's
Dublin, Ireland facility, (b) whether NMC sold defective products, (c) the
manner in which NMC handled customer complaints and (d) the development of a
new dialyzer product line. Grace has also received two subpoenas relating to
this investigation. NMC and Grace have made extensive document production in
response to these subpoenas and have fully cooperated with the grand jury in
response to these subpoenas. In February 1996, the United States Attorney for
the District of New Jersey notified NMC that it is a target of the New Jersey
grand jury investigation, insofar as it relates to possible violations of
federal criminal law in connection with efforts to affect the January 1991
import hold referred to above; the material element of the import hold was
lifted in 1992.
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<PAGE> 33
In addition, in December 1994, a subsidiary of NMC received a subpoena
from a federal grand jury in the Eastern District of Virginia investigating the
contractual relationships between subsidiaries of NMC that provide dialysis
services and third parties that provide medical directorship and related
services to those subsidiaries. NMC has made document production in response
to this subpoena.
The outcome of these investigations and their impact, if any, on NMC's
business, financial condition and results of operations cannot be predicted at
this time.
Shareholder Actions relating to NMC. In 1995, nine purported class
action lawsuits were brought against the Company and certain of its officers
and directors in various federal courts. These lawsuits are being consolidated
in the case entitled Murphy, et al. v. W. R. Grace & Co., et al., which is
pending in the United States District Court for the Southern District of New
York. The first amended class action complaint in this lawsuit, which purports
to be a class action on behalf of all persons and entities who purchased the
Company's publicly traded securities during the period from March 13, 1995
through October 17, 1995, generally alleges that the defendants concealed
information, and issued misleading public statements and reports, concerning
NMC's financial position and business prospects, a proposed spin-off of NMC and
the matters that are the subject of the investigations described above in "NMC
- - OIG Investigation" and "NMC - Grand Jury Investigations," in violation of
federal securities laws. The lawsuit seeks unspecified damages, attorneys' and
experts' fees and costs and such other relief as the Court deems proper.
In October 1995, a purported derivative lawsuit was filed in the United
States District Court for the Southern District of Florida, Northern Division,
against the Company, certain of its directors and its former President and
Chief Executive Officer, alleging that such individuals breached their
fiduciary duties by failing to properly supervise the activities of NMC in the
conduct of its business (Bennett v. Bolduc, et al.). In December 1995, the
plaintiff in this action filed a new action, based on similar allegations, in
the United States District Court for the Southern District of New York (Bennett
v. Bolduc, et al.). The Florida action has been dismissed in favor of the
action filed in the Southern District of New York. A second action making
similar allegations was filed in October 1995 in New York State Supreme Court,
New York County (Bauer v. Bolduc, et al.). The Company has been advised that
this action will be dismissed or stayed in favor of the Bennett action, which
has been consolidated, for discovery purposes only, with the Murphy action
described above. The com-
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<PAGE> 34
plaint in the Bennett action seeks unspecified damages, attorneys' and
experts' fees and costs and such other relief as the Court deems proper.
In February 1996, a purported class action was filed in New York State
Supreme Court, New York County, against the Company, certain of its directors
and a former director, alleging that the defendants breached their fiduciary
duties in connection with the Company's agreement to combine NMC with Fresenius
AG's worldwide dialysis business, as described in Item 1 above under "Strategic
Restructuring and Other Growth Initiatives" (Rosman v. W. R. Grace & Co., et
al.). The lawsuit seeks injunctive relief ordering defendants to carry out
their fiduciary duties and preventing or rescinding the transaction or any
related transactions with Fresenius AG, unspecified monetary damages, an award
of attorneys' and experts' fees and costs and such other relief as the Court
may deem just and proper.
See Note 7 to the Consolidated Financial Statements for additional
information concerning litigation involving NMC.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
This Item is inapplicable, as no matters were submitted to a vote of the
Company's security holders during the fourth quarter of 1995.
EXECUTIVE OFFICERS
The Company's current executive officers are listed below. Executive
officers are elected to serve until the following annual meeting of the
Company's Board of Directors; the next such meeting is scheduled to be held on
May 10, 1996.
<TABLE>
<CAPTION>
Name and Age Office First Elected
------------ ------ -------------
<S> <C> <C>
R. H. Beber (62) Executive Vice President 05/10/93
and General Counsel 09/01/91
Robert J. Bettacchi (53) Vice President 02/01/90
Albert J. Costello (60) Chairman 05/10/95
President and Chief 05/01/95
Executive Officer
Larry Ellberger (48) Senior Vice President 07/06/95
</TABLE>
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<PAGE> 35
<TABLE>
<S> <C> <C>
Constantine L. Hampers (63) Executive Vice President 06/06/91
Peter D. Houchin (48) Senior Vice President and 08/03/95
Chief Financial Officer
James R. Hyde (57) Senior Vice President 07/06/95
J. Gary Kaenzig, Jr. (51) Senior Vice President 10/05/95
Donald H. Kohnken (61) Executive Vice President 12/07/89
Fred Lempereur (58) Senior Vice President 02/06/92
Ian Priestnell (51) Vice President 02/06/92
</TABLE>
All the above executive officers have been actively engaged in Grace's
business for the past five years, other than Mr. Costello, who served as
chairman of the board and chief executive officer of American Cyanamid Company
from April 1993 to December 1994 and as president of American Cyanamid Company
from 1991 through March 1993; Mr. Ellberger, who was a corporate vice president
and director of corporate development and planning from October 1991 until
1995, and prior to that vice president, industrial and performance products
division, of American Cyanamid Company; and Mr. Houchin, who was chief
executive officer of Gulfstream Land & Development prior to joining Grace in
October 1991.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Except as provided below, the information called for by this Item appears
in the Financial Supplement under the heading "Financial Summary" opposite the
caption "Other Statistics - Common shareholders of record" (page F-28); under
the heading "Quarterly Summary and Statistical Information - Unaudited"
opposite the captions "Dividends declared per common share" and "Market price
of common stock" (page F-26); and in Note 14 to the Consolidated Financial
Statements (page F-22).
Each share of the Company's Common Stock has an attendant Common Stock
Purchase Right ("Right"). The Rights are not and will not become exercisable
unless and until certain events occur (as described below). Until such events
occur, the Rights will automatically trade with the Common Stock and separate
certificates for
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<PAGE> 36
the Rights will not be distributed. The Rights will become
exercisable on the tenth business day (or such later business day as may be
fixed by the Company's Board of Directors) after a person or group (a) becomes
an "interested shareholder," as defined in Section 912 of the New York Business
Corporation Law (generally, a beneficial owner of 20% or more of the
outstanding voting stock), or (b) commences a tender offer or exchange offer
that would result in such person or group becoming an interested shareholder.
The Rights will not have any voting power at any time.
When the Rights become exercisable, each Right will initially entitle the
holder to buy from the Company one share of Common Stock for $87.50, subject to
adjustment in certain cases ("purchase price"). If, at any time after the
Rights become exercisable, (a) the Company is involved in a merger or other
business combination in which (i) the Company is not the surviving corporation
or (ii) any of the Common Stock is changed or converted into or exchanged for
stock or other securities of any other person or cash or other property, or (b)
50% of the Company's assets, cash flow or earning power is sold, each Right
will entitle the holder to buy a number of shares of common stock of the
acquiring company having a market value equal to twice the purchase price.
Alternatively, each right not owned by a person who becomes an interested
shareholder would become exercisable for Common Stock (or other consideration)
having a market value equal to twice the purchase price.
The Rights may be redeemed by the Company at $.025 per Right (payable in
cash, Common Stock or any other form of consideration deemed appropriate by the
Board) at any time through the tenth business day (or such later business day
as may be fixed by the Board) after a public announcement that a person or
group has become an interested shareholder; this right of redemption may be
reinstated if all interested shareholders reduce their holdings to 10% or less
of the outstanding Common Stock. The Rights will expire in January 1997.
In connection with its authorization of the proposed transaction with
Fresenius (see "Strategic Restructuring and Other Growth Initiatives" above),
the Company's Board of Directors authorized the amendment of the Rights so as
to prevent the Rights from becoming exercisable as a result of such transaction
and the other transactions contemplated thereby. The Rights may be further
amended either before or after they become exercisable. However, the basic
economic terms of the Rights (such as the purchase and redemption prices and
the expiration date) cannot be changed.
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<PAGE> 37
ITEM 6. SELECTED FINANCIAL DATA.
The information called for by this Item appears under the heading
"Financial Summary" (page F-28 of the Financial Supplement) and in Notes 6, 7,
10 and 17 to the Consolidated Financial Statements (pages F-13, F-15, F-19 and
F-24 of the Financial Supplement). In addition, Exhibit 12 to this Report
(page F-37 of the Financial Supplement) contains the ratio of earnings to fixed
charges and combined fixed charges and preferred stock dividends for Grace for
the years 1991-1995.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The information called for by this Item appears on pages F-29 to F-34 of
the Financial Supplement.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See the Index to Consolidated Financial Statements and Financial Statement
Schedule and Exhibits on page F-1 of the Financial Supplement.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
This item is inapplicable, as no such changes or disagreements have
occurred.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Except for information regarding the Company's executive officers (see
pages 32 and 33), the information called for by this Item is incorporated in
this Report by reference to the definitive Proxy Statement for the Company's
1996 Annual Meeting of Shareholders, except for information not deemed to be
"soliciting material" or "filed" with the Securities and Exchange Commission
("SEC"), information subject to Regulations 14A or 14C under the Securities
Exchange Act of 1934 ("Exchange Act") or information subject to the liabilities
of Section 18 of the Exchange Act.
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<PAGE> 38
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information called for by Items 11, 12 and 13 is incorporated in this
Report by reference to the definitive Proxy Statement for the Company's 1996
Annual Meeting of Shareholders, except for information not deemed to be
"soliciting material" or "filed" with the SEC, information subject to
Regulations 14A or 14C under the Exchange Act or information subject to the
liabilities of Section 18 of the Exchange Act.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS OF FORM 8-K.
Financial Statements and Schedules. See the Index to Consolidated
Financial Statements and Financial Statement Schedule and Exhibits on page F-1
of the Financial Supplement.
Reports on Form 8-K. The Company filed two Reports on Form 8-K during the
fourth quarter of 1995. On October 16, 1995, the Company filed a Report on
Form 8-K relating to (a) the Company's declaration of a quarterly cash dividend
at a rate lower than that previously in effect and (b) a program to repurchase
up to 10 million shares of the Company's Common Stock in open market or private
transactions from time to time. The Company filed a Report on Form 8-K on
October 27, 1995 concerning the receipt of five investigative subpoenas by NMC,
as well as lawsuits relating to NMC, as further described in Item 3, "Legal
Proceedings."
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, as further
discussed in Item 1 above under "Strategic Restructuring and Other Growth
Initiatives." The Company filed a Report on Form 8-K on February 13, 1996,
relating to (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, as further described in Item 3, "Legal
Proceedings." On March 6, 1996, the
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<PAGE> 39
Company filed a Report on Form 8-K announcing the resignation of Thomas L.
Gossage from its Board of Directors. The Company also filed a Report on
Form 8-K on March 27, 1996, relating to the agreement to sell Grace's water
treatment and process chemicals business to Betz Laboratories, Inc., as
further discussed in Item 1 above under "Strategic Restructuring and Other
Growth Initiatives."
Exhibits. The exhibits to this Report are listed below. Other than
exhibits that are filed herewith, all exhibits listed below are incorporated
herein by reference. Exhibits indicated by an asterisk (*) are the management
contracts and compensatory plans, contracts or arrangements required to be
filed as exhibits to this Report.
<TABLE>
<CAPTION>
Exhibit Where Located
- --------------------------------- ---------------------
<S> <C>
Agreement and Plan of Reorga- Exhibit 2 to Form 8-K
nization, dated as of February 4, (filed 2/6/96)
1996, between W. R. Grace & Co.
and Fresenius AG (including, as
exhibits thereto, the Distribu-
tion Agreement, dated as of
February 4, 1996, between W. R.
Grace & Co., Fresenius AG and
W. R. Grace & Co.-Conn., and the
Contribution Agreement, dated as
of February 4, 1996, among W. R.
Grace & Co., Fresenius AG,
Steril Pharma GmbH and W. R.
Grace & Co.-Conn.)
Grace Dearborn Worldwide Purchase Exhibit 99.2 to Form 8-K
and Sale Agreement, dated as of (filed 3/27/96)
March 11, 1996, between W. R.
Grace & Co.-Conn. and Betz
Laboratories, Inc.
Certificate of Incorporation of Exhibit 3 to Form 8-K
W. R. Grace & Co., as amended (filed 6/9/88)
By-laws of W. R. Grace & Co., as Exhibit 3.02 to Form 10-K
amended (filed 3/31/95)
Indenture dated as of Septem- Exhibit 4.2 to Form 10-K
ber 29, 1992 among W. R. Grace (filed 3/26/93)
& Co.-Conn., W. R. Grace & Co.
and Bankers Trust Company
</TABLE>
-37-
<PAGE> 40
<TABLE>
<S> <C>
Indenture dated as of January Exhibit 4.4 to Form 10-K
28, 1993 among W. R. Grace (filed 3/26/93)
& Co.-Conn., W. R. Grace & Co.
and Bank of New York (successor
to NationsBank of Georgia, N.A.)
364-Day Credit Agreement, dated Exhibit 4.1 to Form 10-Q
as of September 1, 1994, among (filed 11/10/94)
W. R. Grace & Co.-Conn., W. R.
Grace & Co., the several banks
parties thereto and Chemical
Bank, as agent for such banks
Credit Agreement, dated as of Exhibit 4.2 to Form 10-Q
September 1, 1994, among W. R. (filed 11/10/94)
Grace & Co.-Conn., W. R. Grace
& Co., the several banks parties
thereto and Chemical Bank, as
agent for such banks
First Amendment, dated as of Exhibit 4.05 to Form 10-K
December 28, 1994, to the 364- (filed 3/31/95)
Day Credit Agreement dated
as of September 1, 1994
First Amendment, dated as of Exhibit 4.06 to Form 10-K
December 28, 1994, to the (filed 3/31/95)
Credit Agreement dated
as of September 1, 1994
Second Amendment, dated as of Filed herewith
December 31, 1995, to the 364-
Day Credit Agreement dated as
of September 1, 1994
Second Amendment, dated as of Filed herewith
December 31, 1995, to the Credit
Agreement dated as of
September 1, 1994
Credit Agreement, dated as of Filed herewith
December 29, 1995, among W. R.
Grace & Co.-Conn., W. R. Grace &
Co., the several banks parties
thereto and Chemical Bank, as
agent for such banks
</TABLE>
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<PAGE> 41
<TABLE>
<S> <C>
First Amendment, dated as of Filed herewith
December 31, 1995, to the
Credit Agreement dated as of
December 29, 1995
Amended and Restated Rights Exhibit to Amendment on
Agreement dated as of June 7, Form 8 to Application for
1990 between W. R. Grace & Co. Registration on Form 8-B
and Manufacturers Hanover Trust (filed 6/19/90)
Company
W. R. Grace & Co. Executive Exhibit 19(f) to Form
Salary Protection Plan, as 8-K (filed 6/9/88)*
amended
W. R. Grace & Co. 1981 Stock Filed herewith*
Incentive Plan, as amended
W. R. Grace & Co. 1986 Stock Filed herewith*
Incentive Plan, as amended
W. R. Grace & Co. 1989 Stock Filed herewith*
Incentive Plan, as amended
W. R. Grace & Co. 1994 Stock Filed herewith*
Incentive Plan, as amended
W. R. Grace & Co. 1994 Stock Filed herewith*
Retainer Plan for Nonemployee
Directors, as amended
Forms of Stock Option Agreements Exhibit 10(h) to Form
10-K (filed 3/28/92)*
Forms of Restricted Share Award Exhibit 10(i) to Form 10-K
Agreements (filed 3/28/92)*
Information Concerning W. R. Pages 8-13 and 29-33 of
Grace & Co. Incentive Compen- Proxy Statement
sation Program, Deferred (filed 4/10/95)*
Compensation Program and
Long-Term Incentive Program
W. R. Grace & Co. Retirement Exhibit 10(o) to Form
Plan for Outside Directors, as 10-K (filed 3/28/92)*
amended
</TABLE>
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<PAGE> 42
<TABLE>
<S> <C>
Employment Agreement dated Exhibit 10(x) to Form
as of April 1, 1991 between 10-K (filed 3/28/92)*
W. R. Grace & Co.-Conn. and
Constantine L. Hampers, as
amended
Housing Loan Agreement dated Exhibit 10(q) to Form
as of August 1, 1987 between 10-K (filed 3/29/88);
W. R. Grace & Co. and J. P. Exhibit 19(i) to Form
Bolduc, related Amendment and 8-K (filed 6/9/88)*
Assignment dated May 10, 1988
Employment Agreement dated Exhibit 10.13 to Form
August 1, 1993 between J. P. 10-K (filed 3/28/94)*
Bolduc and W. R. Grace & Co.
Retirement Agreement between Exhibit 10.23 to Form 10-K
W. R. Grace & Co. and J. Peter (filed 3/26/93)*
Grace dated December 21, 1992
Executive Severance Agreement Exhibit 10.26 to Form 10-K
dated September 1, 1992 (filed 3/26/93)*
between W. R. Grace & Co. and
Constantine L. Hampers
Form of Executive Severance Exhibit 10.28 to Form 10-K
Agreement between W. R. Grace (filed 3/26/93)*
& Co. and others
Consulting Agreement Exhibit 10.29 to Form 10-K
dated June 1, 1992 between (filed 3/26/93)*
W. R. Grace & Co. and
Kamsky Associates, Inc.
Incentive Compensation Agreement Exhibit 10.30 to Form 10-K
dated June 1, 1992 between (filed 3/26/93)*
National Medical Care, Inc.
and Kamsky Associates, Inc.
Consulting Agreement dated as of Exhibit 10.23 to Form 10-K
December 1993 between National (filed 3/31/95)*
Medical Care, Inc. and Virginia
A. Kamsky
Amendment to Consulting Agreement, Exhibit 10.1 to Form 10-Q
dated as of May 1, 1995, among (filed 5/12/95)*
National Medical Care, Inc.,
Virginia A. Kamsky and Southeast
Asia Markets, Inc.
</TABLE>
-40-
<PAGE> 43
<TABLE>
<S> <C>
W. R. Grace & Co. Supplemental Exhibit 10.25 to Form 10-K
Executive Retirement Plan, as (filed 3/28/94)*
amended
Agreement dated March 1, 1995 Exhibit 10.27 to Form 10-K
between W. R. Grace & Co. and (filed 3/31/95)*
Jean-Louis Greze
Letter Agreement dated February Filed herewith*
12, 1996 between W. R. Grace &
Co. and Jean-Louis Greze
Letter Agreement dated June 15, Filed herewith*
1995 between W. R. Grace & Co.
and Dr. F. Peter Boer
Letter Agreement dated July 31, Filed herewith*
1995 between W. R. Grace & Co.
and Brian J. Smith and letter
dated August 9, 1995 from W. R.
Grace & Co. to Brian J. Smith
Agreements dated March 2 and Exhibit 10.28 to Form 10-K
March 7, 1995 between J. P. (filed 3/31/95)*
Bolduc and W. R. Grace & Co.
Agreement dated April 1, 1991 Exhibit 10.29 to Form 10-K
between National Medical Care, (filed 3/31/95)*
Inc. and Constantine L. Hampers
Employment Agreement dated as Exhibit 10.1 to Form 10-Q
of May 1, 1995 between the (filed 8/14/95)*
Company and Albert J. Costello
Weighted Average Number of Filed herewith
Shares and Earnings Used in (in Financial Supplement
Per Share Computations to 10-K)
Computation of Ratio of Earnings Filed herewith
to Fixed Charges and Combined (in Financial Supplement
Fixed Charges and Preferred to 10-K)
Stock Dividends
Selected Portions of the 1995 Filed herewith
Annual Report to Shareholders (in Financial Supplement
of W. R. Grace & Co. to 10-K)
List of Subsidiaries of Filed herewith
W. R. Grace & Co.
</TABLE>
-41-
<PAGE> 44
<TABLE>
<S> <C>
Consent of Independent Accoun- Filed herewith
tants (in Financial Supplement
to 10-K)
Powers of Attorney Filed herewith
Letter of Intent dated Exhibit 99.01 to Form 10-K
November 5, 1993 between (filed 3/31/95)
W. R. Grace & Co. and J.
Peter Grace III, as amended
Agency Agreement dated Exhibit 99.02 to Form 10-K
June 13, 1994 between HSC (filed 3/31/95)
Holding Co., Inc. and Grace
Hotel Services Corporation
Letter Agreement dated Exhibit 99.03 to Form 10-K
December 14, 1994 among HSC (filed 3/31/95)
Holding Co., Inc., Grace Hotel
Services Corporation and W. R.
Grace & Co.
Services Agreement dated Exhibit 99.04 to Form 10-K
November 10, 1994 between HSC (filed 3/31/95)
Holding Co., Inc. and Grace
Hotel Services Corporation
Settlement Agreement, dated as Filed herewith
of January 26, 1996, among HSC
Hospitality, Inc. (f/k/a HSC
Holding Co., Inc.), Grace Hotel
Services Corporation and W. R.
Grace & Co.
Consulting Agreement dated as Filed herewith
of December 1, 1995 between
W. R. Grace & Co. and Gordon
J. Humphrey
</TABLE>
-42-
<PAGE> 45
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
W. R. GRACE & CO.
By /s/ P. D. Houchin
--------------------------
P. D. Houchin
(Senior Vice President and
Chief Financial Officer)
Date: March 29, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 29, 1996.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
A. J. Costello* President and Director
(Principal Executive Officer)
</TABLE>
<TABLE>
<S> <C> <C> <C>
E. W. Duffy* T. A. Holmes* }
H. A. Eckmann* P. S. Lynch* }
M. A. Fox* R. C. Macauley* } Directors
J. W. Frick* J. E. Phipps* }
C. L. Hampers* E. J. Sullivan* }
</TABLE>
/s/ P. D. Houchin Senior Vice President
- ------------------------- (Principal Financial Officer and
(P. D. Houchin) Acting Principal Accounting Officer)
____________
* By signing his name hereto, Robert B. Lamm is signing this document on
behalf of each of the persons indicated above pursuant to powers of
attorney duly executed by such persons and filed with the Securities and
Exchange Commission.
By /s/ Robert B. Lamm
---------------------------------
Robert B. Lamm
(Attorney-in-Fact)
-43-
<PAGE> 46
FINANCIAL SUPPLEMENT
W. R. GRACE & CO.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1995
<PAGE> 47
FINANCIAL SUPPLEMENT
TO
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995
W. R. GRACE & CO. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE AND EXHIBITS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Certified Public Accountants on Financial Statement
Schedule........................................................................ F-2
Consent of Independent Certified Public Accountants............................... F-2
Report of Independent Certified Public Accountants................................ F-3
Consolidated Statement of Operations for the three years in the period ended
December 31, 1995............................................................... F-4
Consolidated Statement of Cash Flows for the three years in the period ended
December 31, 1995............................................................... F-5
Consolidated Balance Sheet at December 31, 1995 and 1994.......................... F-6
Consolidated Statement of Shareholders' Equity for the three years in the period
ended December 31, 1995......................................................... F-7
Notes to Consolidated Financial Statements........................................ F-8-F-25
Quarterly Summary and Statistical Information -- Unaudited........................ F-26
Capital Expenditures, Net Fixed Assets and Depreciation and Lease Amortization.... F-27
Financial Summary................................................................. F-28
Management's Discussion and Analysis of Results of Operations and Financial
Condition....................................................................... F-29
Financial Statement Schedule
Schedule VIII-Valuation and Qualifying Account and Reserves..................... F-35
Exhibit 11: Weighted Average Number of Shares and Earnings Used in Per Share
Computations.................................................................... F-36
Exhibit 12: Computation of Ratio of Earnings to Fixed Charges and Combined Fixed
Charges and Preferred Stock Dividends........................................... F-37
</TABLE>
The financial data listed above appearing in this Financial Supplement are
incorporated by reference herein. The Financial Statement Schedule should be
read in conjunction with the Consolidated Financial Statements and Notes
thereto. Financial statements of 50%- or less-owned persons and other persons
accounted for by the equity method have been omitted as provided in Rule 3-09 of
Securities and Exchange Commission Regulation S-X. Financial Statement Schedules
not included have been omitted because they are not applicable or the required
information is shown in the Consolidated Financial Statements or Notes thereto.
F-1
<PAGE> 48
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Shareholders and Board of Directors of W. R. Grace & Co.
Our audits of the consolidated financial statements referred to in our report
dated January 31, 1996 appearing on page 50 of the 1995 Annual Report to
Shareholders of W. R. Grace & Co. (which report and consolidated financial
statements are included in this Annual Report on Form 10-K) also included an
audit of the Financial Statement Schedule listed on page F-1 in the Index to
Consolidated Financial Statements and Financial Statement Schedule and Exhibits
of this Form 10-K. In our opinion, this Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein when read
in conjunction with the related consolidated financial statements.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Ft. Lauderdale, Florida
January 31, 1996
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting parts of the Registration Statements on Form S-3 (Nos. 33-51041,
33-50983 and 33-25962) and Form S-8 (Nos. 33-7504, 33-15182, 33-27960,
33-54201, 33-54203 and 33-59041) of W. R. Grace & Co. of our report dated
January 31, 1996 appearing on page 50 of the 1995 Annual Report to
Shareholders, which report is included at page F-3 of this Annual Report on
Form 10-K. We also consent to the incorporation by reference of our report on
the Financial Statement Schedule, which appears above.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Ft. Lauderdale, Florida
March 29, 1996
F-2
<PAGE> 49
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
Management is responsible for the preparation, as well as the integrity and
objectivity, of the consolidated financial statements and other financial
information included in this report. Such financial information has been
prepared in conformity with generally accepted accounting principles and
accordingly includes certain amounts that represent management's best
estimates and judgments.
For many years, management has maintained internal control systems to
assist it in fulfilling its responsibility for financial reporting,
including careful selection of personnel; segregation of duties; formal
business, accounting and reporting policies and procedures; and an internal
audit function. While no system can ensure elimination of all errors and
irregularities, Grace's systems, which are reviewed and modified in response
to changing conditions, have been designed to provide reasonable assurance
that assets are safeguarded, policies and procedures are followed and
transactions are properly executed and reported. The concept of reasonable
assurance is based on the recognition that there are limitations in all
systems and that the cost of such systems should not exceed the benefits to
be derived.
The Audit Committee of the Board of Directors, which is comprised of
directors who are neither officers nor employees of nor consultants to
Grace, meets regularly with Grace's senior financial personnel, internal
auditors and independent certified public accountants to review audit plans
and results as well as the actions taken by management in discharging its
responsibilities for accounting, financial reporting and internal control
systems. The Audit Committee reports its findings, and recommends the
selection of independent certified public accountants, to the Board of
Directors. Grace's management, internal auditors and independent certified
public accountants have direct and confidential access to the Audit
Committee at all times.
The independent certified public accountants are engaged to conduct the
audits of and render a report on the consolidated financial statements in
accordance with generally accepted auditing standards. These standards
require a review of the systems of internal controls and tests of
transactions to the extent considered necessary by the independent certified
public accountants for purposes of supporting their opinion as set forth in
their report.
Albert J. Costello Peter D. Houchin
Chairman, President and Senior Vice President
Chief Executive Officer and Chief Financial Officer
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
PRICE WATERHOUSE LLP January 31, 1996
One East Broward Boulevard
Ft. Lauderdale, FL 33301
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF W. R. GRACE & CO.
In our opinion, the consolidated financial statements appearing on pages F-4
through F-25 of this report present fairly, in all material respects, the
financial position of W. R. Grace & Co. and subsidiaries (Grace) at December
31, 1995 and 1994, and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of Grace's management; our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits of these statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
Price Waterhouse LLP
F-3
<PAGE> 50
CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
W. R. Grace & Co. and Subsidiaries
CONSOLIDATED STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Dollars in millions, except per share amounts 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales and revenues .................................................................. $3,665.5 $3,218.2 $2,895.5
Other income (Note 4) ............................................................... 41.9 42.6 57.8
-------- -------- --------
Total ........................................................................... 3,707.4 3,260.8 2,953.3
-------- -------- --------
Cost of goods sold and operating expenses ........................................... 2,243.7 1,900.8 1,746.7
Selling, general and administrative expenses ........................................ 905.6 773.6 673.1
Depreciation and amortization ....................................................... 186.3 165.0 153.5
Interest expense and related financing costs (Note 10) .............................. 71.3 49.5 42.9
Research and development expenses ................................................... 120.6 106.8 111.5
Corporate expenses previously allocated to health care operations ................... 37.8 37.1 37.4
Restructuring costs and asset impairments (Note 5) .................................. 179.5 -- --
Provision relating to asbestos-related liabilities and insurance coverage (Note 2) .. 275.0 316.0 159.0
-------- -------- --------
Total ........................................................................... 4,019.8 3,348.8 2,924.1
-------- -------- --------
(Loss)/income from continuing operations before income taxes ........................ (312.4) (88.0) 29.2
(Benefit from)/provision for income taxes (Note 6) .................................. (115.8) (46.6) 10.1
-------- -------- --------
(Loss)/income from continuing operations ............................................ (196.6) (41.4) 19.1
(Loss)/income from discontinued operations (Note 7) ................................. (129.3) 124.7 6.9
-------- -------- --------
Net (loss)/income ................................................................... $ (325.9) $ 83.3 $ 26.0
======== ======== ========
(Loss)/earnings per share:
Continuing operations ........................................................... $ (2.05) $ (.45) $ .20
Net (loss)/earnings ............................................................. $ (3.40) $ .88 $ .28
Fully diluted (loss)/earnings per share:
Continuing operations ........................................................... $ - (1)$ - (1)$ .20
Net (loss)/earnings ............................................................. $ - (1)$ .88 $ .28
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Notes to Consolidated Financial Statements, pages F-8 to F-25, are integral
parts of these statements.
(1) Not presented as the effect is anti-dilutive.
F-4
<PAGE> 51
CONSOLIDATED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Dollars in millions 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
(Loss)/income from continuing operations before income taxes ...................... $ (312.4) $ (88.0) $ 29.2
Reconciliation to cash provided by operating activities:
Depreciation and amortization ................................................. 186.3 165.0 153.5
Provision relating to asbestos-related liabilities and insurance coverage ..... 275.0 316.0 159.0
Noncash charge relating to restructuring costs and asset impairments .......... 159.9 -- --
Changes in assets and liabilities, excluding effect of businesses
acquired/divested and foreign exchange:
Increase in notes and accounts receivable, net ............................ (44.7) (159.5) (103.2)
Increase in inventories ................................................... (62.1) (43.4) (50.5)
Net (payments for)/proceeds from settlements of interest rate agreements .. -- (4.0) 67.9
Proceeds from asbestos-related insurance settlements ...................... 257.3 138.6 74.6
Payments made for asbestos-related litigation settlements, judgments and
defense costs ............................................................ (160.3) (198.6) (177.7)
(Decrease)/increase in accounts payable ................................... (48.3) 10.3 50.1
Other ..................................................................... (21.0) 74.5 (173.9)
-------- ------- -------
Net pretax cash provided by operating activities of continuing operations ......... 229.7 210.9 29.0
Net pretax cash provided by operating activities of discontinued operations ....... 114.2 328.6 316.8
-------- ------- -------
Net pretax cash provided by operating activities .................................. 343.9 539.5 345.8
Income taxes paid ................................................................. (236.9) (86.0) (102.7)
-------- ------- -------
Net cash provided by operating activities ......................................... 107.0 453.5 243.1
-------- ------- -------
INVESTING ACTIVITIES (1)
Capital expenditures .............................................................. (537.6) (444.6) (309.6)
Businesses acquired in purchase transactions, net of cash acquired and debt assumed (37.4) (276.9) (306.6)
Increase in net assets of discontinued operations ................................. (295.2) (32.9) (43.1)
Net proceeds from divestments ..................................................... 56.7 583.9 464.8
Net proceeds from sale/leaseback transactions ..................................... -- -- 27.2
Proceeds from disposals of assets ................................................. 17.9 34.0 15.4
Other ............................................................................. (6.0) 34.9 --
-------- ------- -------
Net cash used for investing activities ............................................ (801.6) (101.6) (151.9)
-------- ------- -------
FINANCING ACTIVITIES (2)
Dividends paid .................................................................... (112.6) (132.0) (128.4)
Repayments of borrowings having original maturities in excess of three months ..... (68.1) (141.2) (512.6)
Increase in borrowings having original maturities in excess of three months ....... 148.5 535.1 373.0
Net increase in/(repayments of) borrowings having original maturities
of less than three months. ....................................................... 414.9 (605.8) 155.7
Stock options exercised ........................................................... 164.1 20.9 21.0
Increase/(decrease) in net financing activities of discontinued operations ........ 120.8 .2 (15.5)
Other ............................................................................. (11.9) -- .9
-------- ------- -------
Net cash provided by/(used for) financing activities .............................. 655.7 (322.8) (105.9)
-------- ------- -------
Effect of exchange rate changes on cash and cash equivalents ...................... 1.2 1.6 (.5)
-------- ------- -------
(Decrease)/increase in cash and cash equivalents .................................. (37.7) 30.7 (15.2)
-------- ------- -------
Cash and cash equivalents, beginning of year ...................................... 78.3 47.6 62.8
-------- ------- -------
Cash and cash equivalents, end of year ............................................ $ 40.6 $ 78.3 $ 47.6
======== ======= =======
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
The Notes to Consolidated Financial Statements, pages F-8 to F-25, are integral
parts of these statements.
(1) See Note 3 to the Consolidated Financial Statements for supplemental
information relating to noncash investing activities.
(2) See Notes 3 and 10 to the Consolidated Financial Statements for
supplemental information relating to noncash financing activities.
F-5
<PAGE> 52
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Dollars in millions, except par value December 31, 1995 1994
- -------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents ............................................. $ 40.6 $ 78.3
Notes and accounts receivable, net (Note 8) ........................... 596.8 975.7
Inventories (Note 8) .................................................. 491.9 514.2
Net assets of discontinued operations (Note 7) ........................ 323.7 335.6
Deferred income taxes ................................................. 206.1 295.4
Other current assets .................................................. 22.2 29.7
-------- --------
TOTAL CURRENT ASSETS ............................................... 1,681.3 2,228.9
Properties and equipment, net (Note 9) ................................ 1,736.1 1,730.1
Goodwill, less accumulated amortization of $20.6 (1994 - $71.8) ....... 111.8 672.5
Net assets of discontinued operations - health care (Note 7) .......... 1,435.3 --
Asbestos-related insurance receivable (Note 2) ........................ 321.2 512.6
Deferred income taxes ................................................. 386.6 115.7
Other assets (Note 8) ................................................. 625.3 970.8
-------- --------
TOTAL ASSETS ....................................................... $6,297.6 $6,230.6
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt (Note 10) ............................................. $ 638.3 $ 430.9
Accounts payable ...................................................... 339.2 433.7
Income taxes .......................................................... 103.3 197.0
Other current liabilities ............................................. 836.4 872.9
Minority interest (Note 13) ........................................... 297.0 297.0
-------- --------
TOTAL CURRENT LIABILITIES .......................................... 2,214.2 2,231.5
Long-term debt (Note 10) .............................................. 1,295.5 1,098.8
Other liabilities ..................................................... 789.0 690.9
Deferred income taxes ................................................. 44.8 92.5
Noncurrent liability for asbestos-related litigation (Note 2) ......... 722.3 612.4
-------- --------
TOTAL LIABILITIES .................................................. 5,065.8 4,726.1
-------- --------
COMMITMENTS AND CONTINGENCIES (Notes 2, 7, 10 and 12)
SHAREHOLDERS' EQUITY (Note 14)
Preferred stocks, $100 par value ...................................... 7.4 7.4
Common stock, $1 par value; 300,000,000 shares authorized;
outstanding at December 31: 1995 - 97,375,000; 1994 - 94,083,000 .. 97.4 94.1
Paid in capital ....................................................... 459.8 308.8
Retained earnings ..................................................... 709.0 1,147.5
Cumulative translation adjustments .................................... (39.4) (53.3)
Treasury stock, 53,000 common shares, at cost ......................... (2.4) --
-------- --------
TOTAL SHAREHOLDERS' EQUITY ......................................... 1,231.8 1,504.5
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ......................... $6,297.6 $6,230.6
======== ========
- -------------------------------------------------------------------------------------------
</TABLE>
The Notes to Consolidated Financial Statements, pages F-8 to F-25, are
integral parts of these statements.
F-6
<PAGE> 53
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------
Dollars in millions 1995 1994 1993
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PREFERRED STOCKS
Balance, beginning of year ............................................ $ 7.4 $ 7.4 $ 7.5
Other ................................................................. -- -- (.1)
--------- -------- --------
Balance, end of year .................................................. 7.4 7.4 7.4
--------- -------- --------
COMMON STOCK
Balance, beginning of year ............................................ 94.1 93.5 89.9
Conversion of notes and debentures .................................... -- -- 2.8
Stock options and awards .............................................. 3.3 .6 .7
Acquisition ........................................................... -- -- .1
--------- -------- --------
Balance, end of year .................................................. 97.4 94.1 93.5
--------- -------- --------
PAID IN CAPITAL
Balance, beginning of year ............................................ 308.8 287.8 151.4
Conversion of notes and debentures .................................... -- -- 109.7
Stock options and awards .............................................. 151.1 20.5 22.9
Acquisition ........................................................... -- -- 3.7
Other ................................................................. (.1) .5 .1
--------- -------- --------
Balance, end of year .................................................. 459.8 308.8 287.8
--------- -------- --------
RETAINED EARNINGS
Balance, beginning of year ............................................ 1,147.5 1,196.2 1,298.6
Net (loss)/income ..................................................... (325.9) 83.3 26.0
Dividends paid ........................................................ (112.6) (132.0) (128.4)
--------- -------- --------
Balance, end of year .................................................. 709.0 1,147.5 1,196.2
--------- -------- --------
CUMULATIVE TRANSLATION ADJUSTMENTS
Balance, beginning of year ............................................ (53.3) (67.3) (2.4)
Translation adjustments ............................................... 13.9 14.0 (64.9)
--------- -------- --------
Balance, end of year .................................................. (39.4) (53.3) (67.3)
--------- -------- --------
TREASURY STOCK
Balance, beginning of year ............................................ -- -- --
Purchases of common stock ............................................. (12.1) -- --
Shares issued under stock option plans ................................ 9.7 -- --
--------- -------- --------
Balance, end of year .................................................. (2.4) -- --
--------- -------- --------
TOTAL SHAREHOLDERS' EQUITY ............................................ $1,231.8 $1,504.5 $1,517.6
======== ======== ========
- ------------------------------------------------------------------------------------------------------
</TABLE>
The Notes to Consolidated Financial Statements, pages F-8 to F-25, are
integral parts of these statements.
F-7
<PAGE> 54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Dollars in millions, except per share amounts
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING AND FINANCIAL REPORTING POLICIES
- --------------------------------------------------------------------------------
W. R. Grace & Co., through its subsidiaries, is primarily engaged in the
packaging and specialty chemicals businesses on a worldwide basis. W. R.
Grace & Co. has classified its other businesses as discontinued operations,
the most significant of which are its health care and cocoa businesses. As
used in these notes to the consolidated financial statements, the term
"Company" refers to W. R. Grace & Co., a New York corporation, and the term
"Grace" refers to the Company and/or one or more of its subsidiaries.
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include
the accounts of Grace and majority-owned companies. Intercompany
transactions and balances are eliminated in consolidation. Investments in
affiliated companies (20%-50% owned) are accounted for under the equity
method.
RECLASSIFICATIONS Certain amounts in the prior years' consolidated
financial statements and related notes have been reclassified to conform to
the current year's presentation and as required with respect to discontinued
operations.
USE OF ESTIMATES The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions affecting the reported amounts of assets and
liabilities (including disclosed amounts of contingent assets and
liabilities) at the date of the consolidated financial statements and the
reported revenues and expenses during the reporting period. Actual amounts
could differ from those estimates.
CASH EQUIVALENTS Cash equivalents consist of highly liquid instruments with
maturities of three months or less when purchased. The recorded amounts
approximate fair value because of the short maturities of these investments.
INVENTORIES Inventories are stated at the lower of cost or market. The
methods used to determine cost include first-in/first-out and, for
substantially all U.S. chemical inventories, last-in/first-out. Market
values for raw and packaging materials are based on current cost and, for
other inventory classifications, on net realizable value.
PROPERTIES AND EQUIPMENT Properties and equipment are stated at the lower
of cost or net realizable value. Depreciation of properties and equipment
is generally computed using the straight-line method over the estimated
useful lives of the assets. Interest is capitalized in connection with
major project expenditures and amortized, generally on a straight-line
basis, over the estimated useful lives of the assets.
Fully depreciated assets are retained in properties and equipment and
related accumulated depreciation accounts until they are removed from
service. In the case of disposals, assets and related depreciation are
removed from the accounts and the net amount, less any proceeds from
disposal, is charged or credited to income.
GOODWILL Goodwill arises from certain purchase transactions and is
amortized using the straight-line method over appropriate periods not
exceeding 40 years.
IMPAIRMENT Grace has adopted Statement of Financial Accounting Standards
(SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." In accordance with this Statement,
Grace reviews long-lived assets and related goodwill for impairment whenever
events or changes in circumstances indicate that the carrying amount of such
assets may not be fully recoverable.
INCOME TAXES Grace uses an asset and liability approach for the accounting
and financial reporting of income taxes.
FOREIGN CURRENCY TRANSLATION Foreign currency transactions and financial
statements (except for those relating to countries with highly inflationary
economies) are translated into U.S. dollars at current exchange rates,
except that revenues, costs and expenses are translated at average exchange
rates during each reporting period. The financial statements of
subsidiaries located in countries with highly inflationary economies must be
remeasured as if the functional currency were the U.S. dollar. The
remeasurement creates translation adjustments that are reflected in net
income. Allocations for income taxes included in the translation
adjustments account in shareholders' equity were not significant.
F-8
<PAGE> 55
FINANCIAL INSTRUMENTS Grace enters into interest rate agreements and
foreign exchange forward and option contracts to manage exposure to
fluctuations in interest and foreign currency exchange rates.
The cash differentials paid or received on interest rate agreements are
accrued and recognized as adjustments to interest expense. Gains and losses
realized upon settlement of these agreements (recorded as other liabilities
and other assets, respectively) are deferred and either amortized to
interest expense over a period relevant to the agreement if the underlying
hedged instrument remains outstanding, or recognized immediately if the
underlying hedged instrument is settled. Cash flows related to the
agreements are classified as operating activities in the Consolidated
Statement of Cash Flows, consistent with the interest payments on the
underlying debt.
Gains and losses on foreign currency forward and option contracts
offset gains and losses resulting from the underlying transactions. Gains
and losses on contracts that hedge specific foreign currency commitments are
deferred and recorded in net income in the period in which the related
transaction is consummated. Gains and losses on contracts that hedge net
investments in foreign subsidiaries are recorded in the cumulative
translation adjustments account in shareholders' equity.
EARNINGS PER SHARE Primary earnings per share are computed on the basis of
the weighted average number of common shares outstanding. Fully diluted
earnings per share assume the issuance of common stock equivalents related
to employee stock options and, prior to 1994, the conversion of convertible
debt (with an increase in net income for the after-tax interest savings).
- -------------------------------------------------------------------------------
2. ASBESTOS AND RELATED INSURANCE LITIGATION
- -------------------------------------------------------------------------------
Grace is a defendant in lawsuits relating to previously sold
asbestos-containing products and anticipates that it will be named as a
defendant in additional asbestos-related lawsuits in the future. Grace was
a defendant in approximately 40,800 asbestos-related lawsuits at December
31, 1995 (47 involving claims for property damage and the remainder
involving approximately 92,400 claims for personal injury), as compared to
approximately 38,700 lawsuits at December 31, 1994 (65 involving claims for
property damage and the remainder involving approximately 67,900 claims for
personal injury).
PROPERTY DAMAGE LITIGATION
The plaintiffs in property damage lawsuits generally seek, among other
things, to have the defendants absorb the cost of removing, containing or
repairing the asbestos-containing materials in the affected buildings.
Through December 31, 1995, 129 asbestos property damage cases were dismissed
with respect to Grace without payment of any damages or settlement amounts;
judgments were entered in favor of Grace in 10 cases (excluding cases
settled following appeals of judgments in favor of Grace and a case in which
the plaintiff was granted a new trial on appeal); Grace was held liable for
a total of $74.7 in 7 cases (2 of which are on appeal); and 177 property
damage suits and claims were settled for a total of $421.8.
Included in the asbestos property damage lawsuits pending against Grace
and others at year-end 1995 was a class action, conditionally certified by
the U.S. Court of Appeals for the Fourth Circuit in 1993 and pending in a
U.S. District Court in South Carolina, covering all public and private
colleges and universities in the U.S. whose buildings contain asbestos
materials.
In July 1994, a South Carolina state court judge dismissed the claims
of most class members from another purported nationwide class action
asbestos property damage lawsuit. In his ruling, the judge held that a
South Carolina statute prohibits nonresidents from pursuing claims in the
South Carolina state courts with respect to buildings located outside the
state. The plaintiffs have requested that the court reconsider its
decision.
In December 1995, Grace entered into an agreement to settle a
Pennsylvania state court action, certified as a class action in 1992,
covering all commercial buildings in the U.S. leased in whole or in part to
the U.S. government on or after May 30, 1986. The terms of the settlement
agreement (which is subject to judicial review and approval after class
members have an opportunity to be heard) are not expected to have a
significant effect on Grace's consolidated results of operations or
financial position.
PERSONAL INJURY LITIGATION
Through December 31, 1995, approximately 10,100 asbestos personal injury
lawsuits involving 24,500 claims were dismissed with respect to Grace
without payment of any damages or settlement amounts (primarily on the basis
that Grace products were not involved), and approximately 23,700 such suits
involving 29,600 claims were disposed of for a total of $109.0.
ASBESTOS-RELATED LIABILITY
Subject to the factors discussed below, 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 December 31, 1995
and 1994 (and, in the case of the 1995 estimate, personal injury lawsuits
and claims expected to be filed through 1998), is as follows:
F-9
<PAGE> 56
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
December 31, 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
Current liability for asbestos-related litigation (1) .. $100.0 $100.0
Noncurrent liability for asbestos-related litigation ... 722.3 612.4
------ ------
Total asbestos-related liability ..................... $822.3 $712.4
- --------------------------------------------------------------------------------
</TABLE>
(1) Included in "Other current liabilities" in the Consolidated Balance Sheet.
In the fourth quarter of 1995, Grace recorded a noncash pretax charge
of $260.0 ($169.0 after-tax) for asbestos-related liabilities, primarily to
reflect the estimated costs to defend against and dispose of personal injury
claims expected to be filed through 1998; Grace believes that it now has
adequate experience to reasonably estimate the number of personal injury
claims to be filed through 1998 and the costs of defending against and
disposing of these claims. Other components of the 1995 provision include
increases in the estimated costs of defending against and disposing of
certain property damage cases pending at year-end 1995 and personal injury
lawsuits and claims filed during 1995.
While personal injury cases and claims are generally similar to each
other (differing only in the type of asbestos-related illness allegedly
suffered by the plaintiff), Grace's estimated liability for such cases and
claims is influenced by numerous variables that are difficult to predict
(including the insolvency of other former asbestos producers, cross-claims
by co-defendants, the rate at which new cases and claims are filed and the
defense and disposition costs associated with these cases and claims).
Consequently, actual costs may vary from any estimate. For these reasons,
Grace believes that it is not possible to reasonably estimate the number of
cases and claims to be filed after 1998 or the costs of defending against
and disposing of such cases and claims.
Each property damage case is unique in that the age, type, size and use
of the building, and the difficulty of asbestos abatement, if necessary,
vary from structure to structure; thus, the amounts involved in prior
dispositions of property damage cases are not necessarily indicative of the
amounts that may be required to dispose of such cases in the future. In
addition, in property damage cases, information regarding product
identification on a building-by-building basis (i.e., whether or not Grace
products were actually used in the construction of the building), the age,
type, size and use of the building, the jurisdictional history of prior
cases and the court in which the case is pending provide the only meaningful
guidance as to potential future costs. However, much of this information is
not yet available in some of the property damage cases currently pending
against Grace. Accordingly, it is not possible to estimate with precision
the costs of defending against and disposing of these cases. Further, Grace
believes that the number of property damage cases to be filed in the future
and the costs associated with these filings are not estimable.
ASBESTOS-RELATED INSURANCE RECEIVABLE
Grace's ultimate exposure with respect to its asbestos-related lawsuits and
claims will depend on the extent to which its insurance will cover damages
for which it may be held liable, amounts paid in settlement and litigation
costs. 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 litigation and claims:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
December 31, 1995 1994
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Notes receivable from insurance carriers - current, net of discounts of $4.3 in 1995 (1) ..... $ 62.0 $127.0
Notes receivable from insurance carriers - noncurrent, net of discounts of $7.3 in 1995 (2) .. 56.4 60.0
Asbestos-related insurance receivable ........................................................ 321.2 512.6
------ ------
Total amounts due from insurance carriers ................................................ $439.6 $699.6
====== ======
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Included in "Notes and accounts receivable, net" in the Consolidated
Balance Sheet.
(2) Included in "Other assets" in the Consolidated Balance Sheet.
At December 31, 1995, settlements with certain insurance carriers
provided for the future receipt by Grace of $130.0, which Grace has recorded
as notes receivable (both current and noncurrent) of $118.4, after
discounts. In 1995, Grace received a total of $257.3 pursuant to
settlements with insurance carriers in reimbursement for monies previously
expended by Grace in connection with asbestos-related litigation; of this
amount, $127.0 was received pursuant to settlements entered into in 1993 and
1994, which had previously been classified as notes receivable.
During 1995, Grace settled with an affiliated group of carriers that
had agreed to a settlement in 1993, had made a series of payments under that
agreement and had subsequently notified Grace that it would no longer honor
the agreement. Pursuant to the 1995 settlement, the group of carriers paid
Grace $44.0 in 1995 and agreed to make additional payments totalling $60.2
in 1996 and 1997 (which Grace has recorded as notes receivable, after
discounts, of $54.5). Pursuant to a settlement with another group of
carriers, Grace received $26.8 in 1995 and expects to receive an additional
payment of $9.7 in 1996. Under both settlements, Grace will continue to
receive payments based on future cash outflows for asbestos-related
litigation and claims; such payments are estimated to represent
approximately $237.3 of the asbestos-related receivable of $321.2 at
December 31, 1995.
F-10
<PAGE> 57
As a result of these settlements and a reassessment of its insurance
receivable, Grace recorded a noncash net pretax charge of $15.0 ($9.7
after-tax) during the fourth quarter of 1995 to reflect a reduction in the
receivable, primarily due to lower than anticipated settlements with
insurance carriers and a discount on notes receivable in connection with
prior settlements, partially offset by an increase in expected future
reimbursements of costs to defend against and dispose of property damage
cases pending at year-end 1995 and personal injury claims to be filed
through 1998.
INSURANCE LITIGATION
Grace continues to seek to recover from its excess insurers the balance of
the payments it has made with respect to asbestos-related litigation. As
part of this effort, Grace continues to be involved in litigation with
certain of its insurance carriers (having previously settled with certain
primary and excess carriers, as discussed above). For the period October
1962 through June 1985 -- the most relevant period for asbestos-related
litigation -- Grace purchased, on an annual basis, as much as eight levels
of excess insurance coverage. (In general, excess policies provide that
when claims paid exhaust coverage at one level, the insured may seek payment
from the carriers at the next higher level.) For that 23-year period, the
first six levels of excess insurance available from the insurance companies
that Grace believes to be solvent (based primarily upon reports from a
leading independent insurance rating service) provide nominal coverage of
approximately $1,200.0 (including the amounts reflected in the receivable
discussed above). However, (a) a portion of the personal injury lawsuits
and claims pending at year-end 1995 and expected to be filed against Grace
through 1998 will likely relate to periods for which no excess coverage is
available; and (b) even where such excess coverage is available, the number
of personal injury lawsuits and claims expected to be filed against Grace in
the future is not expected to be sufficient to result in significant
payments under such coverage. Further, as a result of the May 1994 decision
of the U.S. Court of Appeals for the Second Circuit, discussed below, a
significant portion of the nominal excess coverage is not available in
connection with property damage lawsuits. In addition, $142.0 of the
$1,200.0 relates to excess coverage written by a group of insurance carriers
that, while currently solvent, has experienced financial difficulties in
recent years. This group of carriers settled with Grace in 1995 (as
discussed above). The asbestos-related receivable of $321.2 at December 31,
1995 includes $54.7 to be paid by this group; management believes this
amount is fully collectible.
As previously reported, in September 1993 the U.S. Court of Appeals for
the Second Circuit ruled that, under New York law (which governs a
significant portion of the policies that provide Grace's asbestos-related
insurance coverage), such coverage is triggered based on the date of
installation of asbestos-containing materials. As a result of this decision
(which had the effect of reducing the amount of insurance coverage available
to Grace with respect to asbestos property damage litigation and claims),
Grace recorded a noncash pretax charge of $475.0 ($300.0 after-tax) in the
1993 third quarter. Grace reversed $316.0 ($200.0 after-tax) of the pretax
charge in the 1993 fourth quarter after the court withdrew its September
1993 decision and agreed to rehear the case, but reinstated the $316.0
pretax charge ($200.0 after-tax) in the second quarter of 1994, when the
court issued a new decision confirming its September 1993 decision. Because
Grace's insurance covers both property damage and personal injury lawsuits
and claims, the May 1994 decision has had the concomitant effect of reducing
the insurance coverage available with respect to Grace's asbestos personal
injury lawsuits and claims. 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 December 31, 1995, 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.
- -------------------------------------------------------------------------------
3. ACQUISITIONS AND DIVESTMENTS
- -------------------------------------------------------------------------------
ACQUISITIONS
During 1995, Grace made acquisitions totalling $260.8 (inclusive of cash
acquired and debt assumed), all of which involved cash purchases of kidney
dialysis centers and medical imaging facilities by National Medical Care,
Inc. (NMC), Grace's principal health care subsidiary. Acquisitions in the
first quarter of 1995, prior to the classification of NMC as a discontinued
operation (see Note 7), totalled $41.1 (inclusive of cash acquired and debt
assumed). Acquisitions by NMC subsequent to the first quarter of 1995 are
presented as an investing activity and are included in "Increase in net
assets of discontinued operations" in the Consolidated Statement of Cash
Flows.
In 1994, Grace made acquisitions totalling $351.7 (inclusive of cash
acquired and debt assumed), primarily in health care. Grace acquired Home
Nutritional Services, Inc. for approximately $131.8 (inclusive of cash and
assumed debt totalling $30.4) and acquired kidney dialysis centers and other
health care businesses during 1994 for an aggregate of approximately $145.3
in cash. 1994 acquisitions also included construction chemicals businesses
and a European flexible packaging business.
In 1993, Grace acquired Home Intensive Care, Inc. for approximately
$129.0 in cash and acquired other health care businesses for an aggregate of
$115.0 in cash and $3.8 in common stock. Additionally, during 1993 Grace
acquired Latin America's largest water treatment business for approximately
$57.6 in cash.
F-11
<PAGE> 58
DIVESTMENTS
During 1995, Grace realized gross proceeds of $58.8 (inclusive of debt
assumed by the buyers) from divestments, including payments received in
connection with divestments completed in prior years. The operations
divested in 1995 consisted of three small units of Grace's construction
products business, the composite materials business (previously classified
as a discontinued operation), Grace's transportation services business and
various investments.
In 1994, Grace realized gross proceeds of $646.2 (inclusive of debt
assumed by the buyers) from divestments, including payments received in
connection with divestments completed in prior years. Substantially all of
the businesses divested during 1994 had previously been classified as
discontinued operations. Divestment proceeds received in 1994 included
$42.8 for Grace's remaining interest in The Restaurant Enterprises Group,
Inc. (REG).
In 1993, Grace completed the sale of substantially all of its oil and
gas operations, as well as certain corporate investments, all of which had
previously been classified as discontinued operations. Other noncore
businesses divested during 1993 included a 50% interest in a Japanese
chemical operation and a food industry hygiene services business for
approximately $31.4 and $11.2, respectively.
See Note 7 for a discussion of divestment activity related to
discontinued operations.
- -------------------------------------------------------------------------------
4. OTHER INCOME
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income ............................. $15.8 $1.3 $22.6
Equity in earnings of affiliated companies .. .2 2.1 .6
Gains on sales of investments ............... 3.1 27.3 22.9
Other, net .................................. 22.8 11.9 11.7
----- ----- -----
$41.9 $42.6 $57.8
===== ===== =====
- -------------------------------------------------------------------------------
</TABLE>
Interest income in 1995 and 1993 includes $9.8 and $20.0, respectively,
relating to the settlement of prior years' Federal income tax returns.
Gains on sales of investments include a 1994 gain of $27.0 on the sale of
Grace's remaining interest in REG and a 1993 gain of $21.7 on the sale of a
50% interest in a Japanese chemical operation (see Note 3). Other, net in
1995 includes a $5.4 gain on the sale of Grace's transportation services
business.
- -------------------------------------------------------------------------------
5. RESTRUCTURING COSTS AND ASSET IMPAIRMENTS
- -------------------------------------------------------------------------------
RESTRUCTURING COSTS
During the third quarter of 1995, Grace began implementing a worldwide
restructuring program aimed at streamlining processes and reducing general
and administrative expenses, factory administration costs and noncore
corporate research and development expenses. The program is expected to be
substantially completed by the end of 1996. In the third and fourth
quarters of 1995, Grace recorded pretax charges totalling $44.3 and $91.7
($27.2 and $61.9 after-tax), respectively, comprised of $77.4 for employee
termination benefits; $13.4 for plant closure and related costs, including
lease termination costs; $15.5 for prior business exits and related costs;
$20.8 for asset writedowns; and $8.9 for other costs. The $77.4 for
employee termination benefits primarily represents severance pay and other
benefits associated with the elimination of approximately 1,000 positions
worldwide; more than 50% of the total cost reductions will come from
corporate staff functions worldwide.
Through December 31, 1995, Grace recorded approximately $25.4 in costs
against its 1995 restructuring reserve, of which $19.6 represented cash
expenditures and $5.8 represented the noncash effects of asset writedowns
and losses on asset sales. The $19.6 of cash expenditures were comprised of
$13.0 in partial payments of employee termination benefits for over 500
employees, $3.0 for consulting services to develop the restructuring
program, and $3.6 of other costs.
ASSET IMPAIRMENTS
During 1995, Grace determined that, due to various events and changes in
circumstances (including the worldwide restructuring program described
above), certain long-lived assets and related goodwill were impaired. As a
result, in the fourth quarter of 1995, Grace recorded a $43.5 pretax charge
($29.0 after-tax), the majority of which related to assets that will
continue to be held and used in Grace's continuing operations; the charge
included no significant individual components. Grace determined the amount
of the charge based on various valuation techniques, including discounted
cash flow, replacement cost and net realizable value for assets to be
disposed of.
F-12
<PAGE> 59
- --------------------------------------------------------------------------------
6. INCOME TAXES
- --------------------------------------------------------------------------------
Grace applies SFAS No. 109, "Accounting for Income Taxes," which uses an
asset and liability approach requiring the recognition of deferred tax
assets and liabilities with respect to the expected future tax consequences
of events that have been recorded in the consolidated financial statements
and tax returns. If it is more likely than not that all or a portion of a
deferred tax asset will not be realized, a valuation allowance must be
recognized.
The components of (loss)/income from continuing operations before
income taxes and the related (benefit from)/provision for domestic and
foreign taxes are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
1995 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic ................................ $ (424.0) $ (181.7) $ (70.5)
Foreign ................................. 111.6 93.7 99.7
-------- --------- -------
$ (312.4) $ (88.0) $ 29.2
======== ========= =======
Federal income taxes:
Current ................................ $ 34.3 $ (80.9) $ (.6)
Deferred ............................... (160.0) (6.4) (30.5)
State and local income taxes - current .. .7 1.9 3.0
Foreign income taxes:
Current ................................ 61.0 44.0 39.8
Deferred ............................... (51.8) (5.2) (1.6)
-------- --------- -------
$ (115.8) $ (46.6) $ 10.1
======== ========= =======
- ---------------------------------------------------------------------------
</TABLE>
The components of (loss)/income from consolidated operations before
income taxes and the related (benefit from)/provision for domestic and
foreign taxes are as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic ............................................................................ $ (480.5) $ 44.3 $ (4.6)
Foreign ............................................................................. 72.7 94.8 95.9
-------- ------ -------
$ (407.8) $139.1 $ 91.3
======== ====== =======
Federal income taxes:
Current ......................................................................... $ 105.6 $ 25.3 $ 114.9
Deferred ........................................................................ (226.3) (34.8) (147.4)
State and local income taxes - current .............................................. 21.7 21.8 32.7
Foreign income taxes:
Current ......................................................................... 68.5 49.1 44.4
Deferred ........................................................................ (51.4) (5.6) 20.7
-------- ------ -------
$ (81.9) $ 55.8 $ 65.3
======== ====== =======
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
The components of consolidated (benefit from)/provision for taxes are as
follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Continuing operations ............................................................ $ (115.8) $(46.6) $ 10.1
Discontinued operations:
Operations .................................................................... 82.6 102.4 77.5
Loss on disposals of operations................................................ (48.7) -- (22.3)
-------- ------ -------
$ (81.9) $ 55.8 $ 65.3
======== ====== =======
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
F-13
<PAGE> 60
At December 31, 1995 and 1994, deferred tax assets and liabilities
consisted of the following items:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
1995 1994
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Reserves not yet deductible for tax purposes ...................................................... $223.6 $254.4
Provision relating to net asbestos-related expenses ............................................... 219.4 36.2
Research and development expenses ................................................................. 115.8 107.3
Postretirement benefits other than pensions ....................................................... 88.9 93.3
State deferred taxes .............................................................................. 70.1 37.5
Pension and insurance reserves .................................................................... 35.2 14.8
Capitalized inventory costs and inventory reserves ................................................ 11.9 15.3
Net operating loss carryforwards .................................................................. 47.1 54.4
Tax credit carryforwards .......................................................................... 27.2 49.0
Other ............................................................................................. 43.9 54.4
------ ------
Total deferred tax assets ..................................................................... 883.1 716.6
------ ------
Depreciation and amortization ..................................................................... 112.6 167.4
Prepaid pension cost .............................................................................. 104.8 72.3
Other ............................................................................................. 20.1 21.3
------ ------
Total deferred tax liabilities ................................................................ 237.5 261.0
------ ------
Valuation allowance for deferred tax assets ....................................................... 97.7 137.0
------ ------
Net deferred tax assets ....................................................................... $547.9 $318.6
====== ======
</TABLE>
The valuation allowance shown above arises from uncertainty as to the
realization of certain deferred tax assets, including U.S. tax credit
carryforwards, state and local net operating loss carryforwards and net
deferred tax assets. As a result of the favorable resolution of an audit,
the valuation allowance on net operating loss carryforwards in foreign
jurisdictions was reversed in 1995. Based upon anticipated future results,
Grace has concluded, after consideration of the valuation allowance, that it
is more likely than not that the remaining balance of the net deferred tax
assets will be realized.
At December 31, 1995, there were $25.3 of tax credit carryforwards with
expiration dates primarily through 1996 and $1.9 of tax credit carryforwards
with no expiration. Additionally, there were state and local and foreign
net operating loss carryforwards with a tax benefit of $47.1 and various
expiration dates.
The U.S. Federal corporate tax rate reconciles to the effective tax
rate for continuing operations as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Federal corporate tax rate ........................................ (35.0)% (35.0)% 35.0%
Increase/(decrease) in tax rate resulting from:
Nontaxable income/nondeductible expenses .............................. (.7) (1.4) (29.5)
Basis difference on sale of investment ................................ -- (10.5) --
State and local income taxes, net of U.S. Federal income tax benefit .. .2 1.5 6.8
U.S. and foreign taxes on foreign operations .......................... 9.8 .3 75.0
Utilization of general business credits ............................... (.5) (9.1) (18.5)
Impact of U.S. and foreign tax rate changes on deferred taxes ......... -- -- (25.2)
Valuation allowance for deferred tax assets ........................... (14.4) -- (2.8)
Other, net ............................................................ 3.5 1.2 (6.2)
------- ------- ------
Effective tax rate ..................................................... (37.1)% (53.0)% 34.6%
======= ======= ======
- --------------------------------------------------------------------------------------------------
</TABLE>
U.S. and foreign taxes have not been provided on approximately $256.1
of undistributed earnings of certain foreign subsidiaries, as such earnings
are expected to be retained indefinitely by such subsidiaries for
reinvestment. The distribution of these earnings would result in additional
foreign withholding taxes of approximately $14.9 and additional U.S. Federal
income taxes to the extent they are not offset by foreign tax credits. It
is not practicable to estimate the total tax liability that would be
incurred upon such a distribution.
F-14
<PAGE> 61
- --------------------------------------------------------------------------------
7. DISCONTINUED OPERATIONS
- --------------------------------------------------------------------------------
HEALTH CARE
In June 1995, the Company announced that its Board of Directors had approved
a plan to spin off NMC. As a result, Grace classified its health care
business as a discontinued operation in the second quarter of 1995 and,
accordingly, NMC's operations are included in "(Loss)/income from
discontinued operations" in the Consolidated Statement of Operations.
Following NMC's receipt in October 1995 of five investigative subpoenas
from the Office of the Inspector General of the U.S. Department of Health
and Human Services (OIG), as discussed below, the completion of the spin-off
of NMC, originally expected in the 1995 fourth quarter, was delayed.
In February 1996, Grace and Fresenius AG (Fresenius) entered into a
definitive agreement to combine NMC with Fresenius' worldwide dialysis
business (FWD) to create Fresenius Medical Care (FMC). As a result of the
combination, FMC would acquire NMC, which would remain responsible for all
liabilities arising out of the investigations, discussed below. However,
Grace would retain certain health care assets, primarily a bioseparation
sciences business, a health care services company and other assets
(including cash and marketable securities).
The combination would follow a borrowing of approximately $2.3 billion
by NMC, a tax-free distribution of the 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 specialty chemicals businesses) other
than NMC. As a result of the separation of Grace's specialty chemicals
businesses from NMC and the subsequent combination of NMC and FWD, the
holders of the Company's Common Stock would own 100% of the specialty
chemicals company and 44.8% of FMC, and Fresenius and other shareholders
would own 55.2% of FMC. 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. Completion of the various transactions is subject to
customary conditions, including the approval of the shareholders of the
Company and Fresenius; U.S., German and European regulatory actions; and
obtaining financing on satisfactory terms. Commitments for financing have
been received, and it is expected that the various transactions will be
completed by the third quarter of 1996.
OIG Investigative Subpoenas
In October 1995, NMC received five investigative subpoenas from the OIG.
The subpoenas call for the production of extensive documents relating to
various aspects of NMC's business. A letter accompanying the subpoenas
stated that they had been issued in conjunction with an investigation being
conducted by the OIG, the U.S. Attorney for the District of Massachusetts
and others, concerning possible violations of Federal laws relating to
health care payments and reimbursements.
The five subpoenas cover the following areas: (a) NMC's corporate
management, personnel and employees, organizational structure, financial
information and internal communications; (b) NMC's dialysis services
business, principally medical director contracts and compensation; (c) NMC's
treatment of credit balances resulting from overpayments received under the
Medicare end stage renal disease (ESRD) program and its payment of
supplemental medical insurance premiums on behalf of indigent patients; (d)
NMC's LifeChem laboratory business, including documents relating to testing
procedures, marketing, customers, competition and certain overpayments
totalling approximately $4.9 that were received by LifeChem from the
Medicare program with respect to laboratory services rendered between 1989
and 1993; and (e) NMC's Homecare Division and, in particular, information
concerning the intradialytic parenteral nutrition (IDPN) business described
below, including billing practices related to various services, equipment
and supplies and payments made to third parties as compensation for
administering IDPN therapy.
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.
OBRA 93
The Omnibus Budget Reconciliation Act of 1993 (OBRA 93) affected the payment
of benefits under Medicare and employer health plans for certain eligible
ESRD patients. In July 1994, the Health Care Financing Administration
(HCFA) issued an instruction to Medicare claims processors to the effect
that Medicare benefits for the patients affected by OBRA 93 would be subject
to a new 18-month "coordination of benefits" period. This instruction had a
positive impact on NMC's dialysis revenues because, during the 18-month
coordination of benefits period, the patient's employer health plan was
responsible for payment, which was generally at a rate higher than that
provided under Medicare.
In April 1995, HCFA issued a new instruction, reversing its original
instruction in a manner that would substantially diminish the positive
effect of the initial instruction on NMC's dialysis business. Under the new
instruction, no 18-month coordination of benefits period would arise, and
Medicare would remain the primary payor. HCFA further proposed that its new
instruction be effective retroactive to August 1993, the effective date of
OBRA 93. Consequently, NMC may be required to refund payments
F-15
<PAGE> 62
received from employer health plans for services provided after August 1993
under HCFA's original instruction and to re-bill Medicare for the same
services, which would result in a cumulative reduction of net revenues to
NMC totalling approximately $120.0 as of December 31, 1995. Effective July
1, 1995, NMC ceased to recognize the incremental revenue realized under the
original instruction, which has resulted in a material reduction in NMC's
operating earnings in comparison to prior periods in which NMC recognized
such incremental revenue. However, NMC continued to bill the employer
health plans as primary payors through December 31, 1995, at which time NMC
commenced billing Medicare for the patients affected by OBRA 93.
In May 1995, NMC filed suit in the U.S. District Court for the District
of Columbia seeking a declaratory judgment with respect to HCFA's
instructions relating to OBRA 93. In June 1995, the court granted NMC's
motion for a preliminary injunction to preclude HCFA from retroactively
enforcing its new instruction. The litigation is continuing with respect to
NMC's request to permanently enjoin HCFA's new instruction, both
retroactively and prospectively. While there can be no assurance that a
permanent injunction will be issued, NMC believes that it will ultimately
prevail in its claim that the retroactive reversal by HCFA of its original
instruction relating to OBRA 93 was impermissible under applicable law. If
HCFA's revised instruction is upheld, NMC's business, financial position and
results of operations would be materially adversely affected, particularly
if the revised instruction is applied retroactively.
IDPN Therapy
NMC administers IDPN therapy to chronic dialysis patients who suffer from
severe gastrointestinal malfunctions. Since late 1993, Medicare claims
processors have applied medical coverage interpretations in a manner that
has 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 to 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 $93.0 and $28.0 as of December 31, 1995 and 1994,
respectively, and currently increasing at the rate of approximately $5.0 per
month. If NMC is unable to collect its 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 addition, a current draft of a new coverage policy would limit
or preclude continued coverage of IDPN therapy and thereby have a material
adverse effect on NMC's financial position and results of operations.
Other Legal Proceedings
NMC has received multiple subpoenas from a Federal grand jury in the
District of New Jersey investigating, among other things, NMC's efforts to
persuade the U.S. Food and Drug Administration to lift a January 1991 import
hold issued with respect to NMC's Dublin, Ireland facility, whether NMC sold
defective products, the manner in which NMC handled customer complaints and
the development of a new dialyzer product line. Grace has also received two
subpoenas relating to this investigation. In February 1996, the U.S.
Attorney for the District of New Jersey notified NMC that it is a target of
the New Jersey grand jury investigation, insofar as it relates to possible
violations of Federal criminal law in connection with efforts to affect the
January 1991 import hold referred to above; the material element of the
import hold was lifted in 1992. In addition, in December 1994, a subsidiary
of NMC received a subpoena from a Federal grand jury in the Eastern District
of Virginia investigating the contractual relationships between subsidiaries
of NMC that provide dialysis services and third parties that provide medical
directorship and related services to those subsidiaries. The outcome of
these investigations and their impact, if any, on NMC's business, financial
condition and results of operations cannot be predicted at this time.
COCOA, BATTERY SEPARATORS AND ENGINEERED MATERIALS AND SYSTEMS
In the second quarter of 1993, Grace classified as discontinued operations
its cocoa business; its battery separators business; certain engineered
materials businesses, principally its printing products, material technology
and electromagnetic radiation control businesses (collectively, EMS); and
other noncore businesses. At that time, a provision of $105.0 (net of an
applicable tax benefit of $22.3) was recorded to reflect the losses expected
on the divestment of these businesses.
During the fourth quarter of 1995, Grace revised the divestment plan
for its cocoa business. The revised plan focuses on the improvement of
operating cash flow through the adoption of new strategies and a new global
organizational structure, while simultaneously positioning the business for
sale. Grace expects to implement the revised plan and to conclude the sale
of its cocoa business by the fourth quarter of 1996. As a result of this
revised divestment plan, recent trends and a reassessment of forecasts for
all remaining discontinued operations, Grace recorded an additional
provision of $151.3 (net of an applicable tax benefit of $48.7) related to
its remaining discontinued operations, principally the cocoa business.
F-16
<PAGE> 63
During 1994, Grace sold its battery separators business and other EMS
businesses for gross proceeds of $316.2, approximating prior estimates. In
February 1995, Grace sold its composite materials business for gross
proceeds of $3.0, leaving its microwave business as the only unsold EMS
business.
GRACE ENERGY
In 1994, Grace sold substantially all of its interests in Colowyo Coal
Company (Colowyo), Grace's only remaining significant energy operation, for
proceeds of $218.3, including $192.8 of proceeds from a nonrecourse
financing secured by a portion of the revenues from certain long-term coal
contracts. Grace retained a limited partnership interest in Colowyo,
entitling it to share in the revenues from these coal contracts. In 1993,
Grace sold substantially all of its oil and gas operations for net cash
proceeds of $386.0. The total proceeds received from these divestments
approximated prior estimates.
OTHER
In 1994, Grace sold its animal genetics and Caribbean fertilizer operations
for proceeds of $44.1. These and other businesses were classified as
discontinued operations in 1993. In 1993, Grace completed the sale of its
minority interests in Canonie Environmental Services Corporation and
Grace-Sierra Horticultural Products Company for total proceeds of $41.3.
Losses from Grace's discontinued operations, other than its
discontinued health care operations, subsequent to their classification as
such were $45.2, $14.2 and $54.6 in 1995, 1994 and 1993, respectively; these
amounts have been charged against established reserves, including
adjustments to those reserves in 1995. The sales and revenues and results
of the discontinued health care operations for 1995, 1994 and 1993, and the
1993 sales and revenues and results of the other discontinued operations,
prior to their classification as such, are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------
1995 1994 1993
- -----------------------------------------------------------------------------------
HEALTH CARE
Sales and revenues ................................ $2,076.8 $1,875.1 $1,512.9
-------- -------- --------
Income from operations before taxes (1) ........... $ 104.6 $ 227.1 $ 192.0
Income tax provision .............................. 82.6 102.4 76.7
-------- -------- --------
Income from discontinued operations ............... $ 22.0 $ 124.7 $ 115.3
-------- -------- --------
- -----------------------------------------------------------------------------------
COCOA, BATTERY SEPARATORS AND EMS
Sales and revenues ................................ $ -- $ -- $ 235.9
-------- -------- --------
Loss from operations before taxes (1) ............. $ -- $ -- $ (.9)
Income tax provision .............................. -- -- (1.1)
-------- -------- --------
Loss from discontinued operations ................. $ -- $ -- $ (2.0)
-------- -------- --------
- -----------------------------------------------------------------------------------
OTHER
Sales and revenues ................................ $ -- $ -- $ 14.4
-------- -------- --------
Loss from operations before taxes (1) ............. $ -- $ -- $ (1.7)
Income tax benefit ................................ -- -- .3
-------- -------- --------
Loss from discontinued operations ................. $ -- $ -- $ (1.4)
-------- -------- --------
Total operating results of discontinued operations .. $ 22.0 $ 124.7 $ 111.9
Net pretax loss on disposals of operations .......... (200.0) -- (127.3)
Income tax benefit on disposals of operations ....... 48.7 -- 22.3
-------- -------- --------
Total (loss)/income from discontinued operations .... $ (129.3) $ 124.7 $ 6.9
======== ======== ========
- -----------------------------------------------------------------------------------
</TABLE>
(1) Reflects an allocation of interest expense based on the ratio of the
net assets of the businesses classified as discontinued operations as
compared to Grace's total capital. The above operating results include
interest expense allocations of $93.5, $60.4 and $43.9 for 1995, 1994
and 1993, respectively.
For financial reporting purposes, the assets, liabilities, results of
operations and cash flows of Grace Cocoa Associates, L.P. (LP) (see Note 13)
are included in Grace's consolidated financial statements as a component of
discontinued operations, and the outside investors' interest in LP is
reflected as a minority interest in the Consolidated Balance Sheet.
F-17
<PAGE> 64
The net assets of Grace's remaining discontinued operations (excluding
intercompany assets) at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
HEALTH
CARE COCOA OTHER TOTAL
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Current assets ....................................... $ 665.9 $280.4 $21.1 $ 967.4
Properties and equipment, net ........................ 399.3 193.8 21.9 615.0
Investments in and advances to affiliated companies .. -- -- 35.2 35.2
Other assets ......................................... 993.7 62.2 18.0 1,073.9
-------- ------ ----- --------
Total assets ...................................... $2,058.9 $536.4 $96.2 $2,691.5
-------- ------ ----- --------
Current liabilities .................................. $ 533.8 $193.1 $12.7 $ 739.6
Other liabilities .................................... 89.8 92.5 10.6 192.9
-------- ------ ----- --------
Total liabilities ................................. $ 623.6 $285.6 $23.3 $ 932.5
-------- ------ ----- --------
Net assets ........................................ $1,435.3 $250.8 $72.9 $1,759.0
======== ====== ===== ========
- -----------------------------------------------------------------------------------------
</TABLE>
8. OTHER BALANCE SHEET ITEMS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
NOTES AND ACCOUNTS RECEIVABLE
Trade receivables, less allowances of $12.8 (1994 - $95.1) ............................... $488.5 $742.0
Notes receivable from insurance carriers - current, net of discounts of $4.3 in 1995 ..... 62.0 127.0
Other receivables, less allowances of $.1 (1994 - $.1) ................................... 46.3 106.7
------ ------
$596.8 $975.7
====== ======
- ----------------------------------------------------------------------------------------------------------
INVENTORIES
Raw and packaging materials .............................................................. $137.1 $129.8
In process ............................................................................... 78.0 75.3
Finished products ........................................................................ 248.6 289.5
General merchandise ...................................................................... 76.6 62.7
Less: Adjustment of certain inventories to a last-in/first-out (LIFO) basis .............. (48.4) (43.1)
------ ------
$491.9 $514.2
====== ======
- ----------------------------------------------------------------------------------------------------------
OTHER ASSETS
Prepaid pension costs .................................................................... $245.8 $226.6
Patient relationships, less accumulated amortization of $117.2 in 1994 ................... -- 214.9
Deferred charges ......................................................................... 106.9 124.9
Long-term receivables, less allowances of $24.7 (1994 - $20.6) ........................... 83.5 92.3
Long-term investments .................................................................... 69.4 79.3
Notes receivable from insurance carriers - noncurrent, net of discounts of $7.3 in 1995 .. 56.4 60.0
Patents and licenses ..................................................................... 34.0 39.9
Investments in and advances to affiliated companies ...................................... 17.4 56.0
Other .................................................................................... 11.9 76.9
------ ------
$625.3 $970.8
====== ======
- ----------------------------------------------------------------------------------------------------------
</TABLE>
During 1995 and 1994, Grace entered into agreements to sell up to $120.0 and
$320.0, respectively, of interests in designated pools of trade receivables
(excluding $180.0 in 1995 pertaining to the discontinued health care
operations). At December 31, 1995 and 1994, $116.0 and $296.8,
respectively, had been received pursuant to such sales (excluding $179.8 in
1995 pertaining to the discontinued health care operations); these amounts
are reflected as reductions to trade accounts receivable. Under the terms
of these agreements, new interests in trade receivables are sold as
collections reduce previously sold trade receivables. While only interests
in designated pools of trade receivables are sold, the entire designated
pools are available as the sole recourse with respect to the interests sold.
There is no further recourse to Grace, nor is Grace required to repurchase
any of the trade receivables in the pools. The costs related to such sales
are expensed as incurred and recorded as interest expense and related
financing costs. There were no gains or losses on these transactions.
Inventories valued at LIFO cost comprised 21.6% and 18.9% of total
inventories at December 31, 1995 and 1994, respectively. The liquidation of
prior years' LIFO inventory layers in 1995, 1994 and 1993 did not materially
affect cost of goods sold in any of these years.
F-18
<PAGE> 65
- -------------------------------------------------------------------------------
9. PROPERTIES AND EQUIPMENT
- -------------------------------------------------------------------------------
<TABLE>
1995 1994
- -------------------------------------------------------------------------
<S> <C> <C>
Land ....................................... $ 44.1 $ 52.4
Buildings .................................. 595.5 698.3
Machinery, equipment and other ............. 1,967.1 2,080.2
Projects under construction ................ 548.2 397.4
--------- ---------
Properties and equipment, gross ........... 3,154.9 3,228.3
Accumulated depreciation and amortization .. (1,418.8) (1,498.2)
--------- ---------
Properties and equipment, net ............. $ 1,736.1 $ 1,730.1
========= =========
- -------------------------------------------------------------------------
</TABLE>
Interest costs are incurred in connection with the financing of certain
assets prior to placing them in service. Interest costs capitalized in
1995, 1994 and 1993 were $21.3, $9.4 and $7.4, respectively.
Depreciation and lease amortization expense relating to properties and
equipment amounted to $170.4, $158.0 and $146.3 in 1995, 1994 and 1993,
respectively.
Grace's rental expense for operating leases amounted to $25.7, $28.8
and $34.3 in 1995, 1994 and 1993, respectively. See Note 12 for information
regarding contingent rentals.
At December 31, 1995, minimum future payments for operating leases are:
<TABLE>
- -------------------------------------------------------------------------
<S> <C>
1996 .......................... $ 28.0
1997 .......................... 22.6
1998 .......................... 19.0
1999 .......................... 15.4
2000 .......................... 14.5
Later years ................... 26.8
------
Total minimum lease payments .. $126.3
======
- -------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------
The above minimum lease payments reflect sublease income of $11.6 per
year for 1996 through 2000 and a total of $28.0 in later years.
- -------------------------------------------------------------------------
10. DEBT
- -------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
1995 1994
- -------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM DEBT
Bank borrowings (6.2% weighted average interest rate at year-end 1995) (1) ................................ $ 295.3 $ --
Current maturities of long-term debt ...................................................................... 22.2 166.6
Other short-term borrowings (2) ........................................................................... 320.8 264.3
-------- --------
$ 638.3 $ 430.9
======== ========
LONG-TERM DEBT
Commercial paper (6.2% and 6.0% weighted average interest rates at year-end
1995 and 1994, respectively) (1) $ 45.7 $ 5.5
Bank borrowings (6.2% and 5.8% weighted average interest rates at year-end 1995 and 1994, respectively) (1) 304.3 103.5
8.0% Notes Due 2004 (3) ................................................................................... 300.0 300.0
7.4% Notes Due 2000 (4) ................................................................................... 287.0 300.0
7.75% Notes Due 2002 (5) .................................................................................. 131.0 150.0
6.5% Notes Due 1995 (6) ................................................................................... -- 150.0
Term Loan Agreement (6.3% weighted average interest rate at year-end 1995) (7) ............................ 30.0 --
Medium-Term Notes, Series A (6.9% weighted average interest rate at year-end 1995 and 1994) (8) ........... 128.5 128.5
Sundry indebtedness with various maturities through 2002 .................................................. 91.2 127.9
-------- --------
1,317.7 1,265.4
Less current maturities of long-term debt ................................................................. 22.2 166.6
-------- --------
$1,295.5 $1,098.8
======== ========
Full-year weighted average interest rate on total debt (9) ................................................ 7.8% 5.8%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-19
<PAGE> 66
(1) Under bank revolving credit agreements in effect at year-end 1995,
Grace may borrow up to $950.0 at interest rates based upon the
prevailing prime, Federal funds and/or Eurodollar rates. Of that
amount, $600.0 is available under short-term facilities, with $350.0
expiring on August 29, 1996 and $250.0 expiring on September 30, 1996;
and $350.0 is available under a long-term facility expiring on
September 1, 1999. These agreements also support the issuance of
commercial paper and bank borrowings, $645.3 of which was outstanding
at December 31, 1995 (included in Short-Term and Long-Term Debt above).
At December 31, 1995, the aggregate amount of net unused and
unreserved borrowings under the short-term and long-term facilities was
$304.7. Grace's ability to borrow under the current facilities is
subject to compliance with various covenants, including maintenance of
ratios of total debt to total capitalization and interest coverage.
(2) Represents borrowings under various lines of credit and other
miscellaneous borrowings, primarily of non-U.S. subsidiaries.
(3) During the third quarter of 1994, Grace sold $300.0 of 8.0% Notes Due
2004 at an initial public offering price of 99.794% of par, to yield
8.03%. Interest is payable semiannually, and the Notes may not be
redeemed prior to maturity.
(4) During the first quarter of 1993, Grace sold at par $300.0 of 7.4%
Notes Due 2000. Interest is payable semiannually, and the Notes may
not be redeemed prior to maturity; however, Grace has repurchased Notes
from time to time in response to unsolicited offers received through
banks and brokers.
(5) During the third quarter of 1992, Grace sold at par $150.0 of 7.75%
Notes Due 2002. Interest is payable semiannually, and the Notes may
not be redeemed prior to maturity; however, Grace has repurchased Notes
from time to time in response to unsolicited offers received through
banks and brokers.
(6) During the fourth quarter of 1992, Grace sold $150.0 of 6.5% Notes Due
1995 at an initial public offering price of 99.758% of par, to yield
6.59%. The Notes were paid at maturity in the fourth quarter of 1995.
(7) During the second quarter of 1995, Grace entered into a three-year
term loan agreement with a maturity date of April 24, 1998. The
agreement provides for interest at a Eurodollar floating rate, with
interest payable semiannually.
(8) During the second quarter of 1994, Grace entered into an agreement
providing for the issuance and sale from time to time of its
Medium-Term Notes, Series A (MTNs), with an aggregate issue price of up
to $300.0. The MTNs may bear interest at either fixed or floating
rates and have maturity dates more than nine months from their
respective dates of issuance. Interest on each fixed rate MTN is
payable semiannually, and interest on each floating rate MTN is payable
as established at the time of issuance.
(9) Computation includes interest expense allocated to discontinued
operations.
Payment of a majority of Grace's borrowings may be accelerated, and its
principal borrowing agreements terminated, upon the occurrence of a default
under certain Grace borrowings.
Scheduled maturities of long-term debt outstanding at December 31, 1995
are: 1996 - $22.2; 1997 - $113.2; 1998 - $46.4; 1999 - $351.2; 2000 -
$350.3; and thereafter - $434.4.
Interest expense, excluding related financing costs and amounts
allocated to discontinued operations, for 1995, 1994 and 1993 amounted to
$53.3, $30.9 and $33.7, respectively. Including amounts allocated to
discontinued operations, interest payments made in 1995, 1994 and 1993,
excluding related financing costs, amounted to $183.1, $101.8 and $109.0,
respectively.
A registration statement that became effective in 1994 covers $750.0 of
debt and/or equity securities that may be sold from time to time. At
December 31, 1995, $321.5 (including up to $171.5 of MTNs) remain available
under the registration statement.
- --------------------------------------------------------------------------------
11. FINANCIAL INSTRUMENTS
- -------------------------------------------------------------------------------
LONG-TERM DEBT/INTEREST RATE AGREEMENTS
To manage exposure to changes in interest rates, Grace enters into interest
rate agreements, most of which have the effect of converting fixed-rate debt
into variable-rate debt based on the London Interbank Offered Rate. At
December 31, 1995 and 1994, the notional amounts of Grace's interest rate
swaps consist of the following: $1,219.5 and $1,013.5, respectively, which
convert fixed-rate debt into variable-rate debt; and $626.0 and $1,200.0,
respectively, which convert variable-rate debt into fixed-rate debt.
Notional amounts do not quantify risk or represent assets or liabilities of
Grace, but are used in the calculation of cash settlements under the
agreements.
Grace's debt and interest rate management objective is to reduce its
cost of funding over the long term, considering economic conditions and
their potential impact on Grace. The strategy emphasizes improving
liquidity by developing and maintaining access to a variety of long-term and
short-term capital markets. Grace enters into standard interest rate swaps
that have readily identifiable impacts on interest cost and are
characterized by broad market liquidity. Grace is not a party to leveraged
interest rate agreements.
During 1995 and 1994, Grace realized (negative)/positive cash flows of
$(16.5) and $10.0, respectively, from interest rate agreements. Realized
gains and losses on interest rate agreements are amortized to interest
expense over a period relevant to the agreement (1 - 10 years); at December
31, 1995 and 1994, unamortized net gains were $31.7 and $43.0, respectively.
At December 31, 1995 and 1994, Grace would have been required to pay $32.5
and $118.1, respectively, to retire these agreements. The maturities and
notional amounts of the swaps closely match underlying debt instruments.
This will result in the changes in the fair value of swaps being
substantially offset by changes in the fair value of the debt.
FAIR VALUE OF FINANCIAL INSTRUMENTS
At December 31, 1995 and 1994, the recorded value of financial instruments
such as cash, short-term investments, trade receivables and payables and
short-term debt approximated their fair values, based on the short-term
maturities and floating rate characteristics
F-20
<PAGE> 67
of these instruments. Additionally, the recorded value of both long-term
investments and receivables approximated fair values. At December 31, 1995
and 1994, the fair value of long-term debt was $1,361.1 and $1,212.1,
respectively. Fair value is determined based on expected future cash flows
(discounted at market interest rates), quotes from financial institutions
and other appropriate valuation methodologies. Grace does not hold or issue
financial instruments for trading purposes.
FOREIGN CURRENCY CONTRACTS
Grace conducts business in a wide variety of currencies and consequently
enters into foreign exchange forward and option contracts to manage its
exposure to fluctuations in foreign currency exchange rates. These
contracts generally involve the exchange of one currency for another at a
future date. At December 31, 1995 and 1994, Grace had notional principal
amounts of approximately $45.5 and $10.0, respectively, in contracts to buy
or sell foreign currency in the future. The recorded values at December 31,
1995 and 1994, which approximated fair value based on exchange rates at
December 31, 1995 and 1994, were not significant.
CREDIT RISK
Grace is exposed to credit risk to the extent of potential nonperformance by
counterparties on financial instruments. The counterparties to Grace's
interest rate swap agreements and currency exchange contracts comprise a
diversified group of major financial institutions, all of which are rated
investment grade. Credit risk is further reduced by bilateral netting
agreements between Grace and its counterparties. As of December 31, 1995,
Grace's credit exposure was insignificant and limited to the fair value
stated above; Grace believes the risk of incurring losses due to credit risk
is remote.
MARKET RISK
Exposure to market risk on financial instruments results from fluctuations
in interest and currency rates during the periods in which the contracts are
outstanding. The mark-to-market valuations of interest rate, foreign
currency agreements and of associated underlying exposures are closely
monitored at all times. Grace uses portfolio sensitivities and stress tests
to monitor risk. Overall financial strategies and the effects of using
derivatives are reviewed periodically.
- --------------------------------------------------------------------------------
12. COMMITMENTS AND CONTINGENT LIABILITIES
- --------------------------------------------------------------------------------
Grace is the named tenant or guarantor with respect to certain leases
entered into by previously divested businesses. The leases, some of which
extend through the year 2015, have future minimum lease payments aggregating
$121.6 (including leases assigned to the previously divested Hermans
business having future minimum lease payments of $14.6), offset by $119.8 of
future minimum rental income from tenants and subtenants.
In addition, Grace is the named tenant or guarantor with respect to
leases entered into by a previously divested home center business that had
been rejected in bankruptcy. These leases have future minimum lease
payments of $47.0, fully offset by $48.5 of future minimum rental income
from tenants and subtenants.
Grace is also contingently liable with respect to leases entered into
by REG's subsidiaries. After undergoing a reorganization in 1993, REG (now
named Family Restaurants, Inc.) has agreed to indemnify Grace with respect
to these leases. At December 31, 1995, these leases have future minimum
lease payments of $64.2, fully offset by future minimum rental income from
tenants and subtenants.
Grace believes that the risk of significant loss from the above lease
obligations is remote, except that Grace may incur losses relating to the
Hermans and REG leases as the result of recent developments. The likelihood
and amounts of these losses cannot be reasonably estimated. In addition,
Grace is liable for other expenses (primarily property taxes) relating to
the above leases; these expenses are paid by the tenants and subtenants.
Grace is subject to loss contingencies resulting from environmental
laws and regulations that, among other things, impose obligations to remove
or mitigate the effects on the environment of the disposal or release of
substances at various sites. Grace accrues for anticipated costs associated
with investigatory and remediation efforts where an assessment has indicated
that a loss is probable and can be reasonably estimated. At December 31,
1995, Grace's liability for environmental investigatory and remediation
costs related to continuing and discontinued operations totalled
approximately $280.3, as compared to $216.0 at December 31, 1994. The
principal reason for this increase is a change in the estimated costs of
remediation at former manufacturing sites.
In 1995 and 1994, periodic provisions were recorded for environmental
and plant closure expenses, which include the costs of future environmental
investigatory and remediation activities. Additionally, in the fourth
quarter of 1995 and first quarter of 1994, Grace recorded pretax provisions
of $77.0 and $40.0 ($50.0 and $26.0 after-tax), respectively, principally
to provide for future costs related to remediation activities required at
former manufacturing sites. These provisions are included in the
Consolidated Statement of Operations as part of cost of goods sold and
operating expenses. In 1995, 1994 and 1993, Grace incurred costs of $31.3,
$30.8 and $44.4, respectively, to remediate its environmentally impaired
sites. These amounts have been charged against the previously established
reserves. Future cash outlays for remediation costs are expected to total
$30.0 in 1996 and $20.0 in 1997. Grace considers its current reserves to be
adequate to cover its environmental liabilities. Additionally, Grace's
classification between
F-21
<PAGE> 68
current and noncurrent liabilities with respect to its environmental
reserves is considered appropriate in relation to expected future cash
outlays.
Grace's environmental liabilities are reassessed whenever circumstances
become better defined and/or remediation efforts and their costs can be
better estimated. The measurement of the liability is evaluated quarterly
based on currently available information, including the progress of remedial
investigation at each site, the current status of discussions with
regulatory authorities regarding the method and extent of remediation at
each site, and the apportionment of costs among potentially responsible
parties. As some of these issues are decided (the outcome of which is
subject to various uncertainties) and/or new sites are assessed and costs
can be reasonably estimated, Grace will continue to review and analyze the
need for adjustments to the recorded accruals.
See Note 7 for a discussion of commitments and contingent liabilities
pertaining to NMC.
- --------------------------------------------------------------------------------
13. MINORITY INTEREST
- --------------------------------------------------------------------------------
Minority interest consists of a limited partnership interest in LP. The
total capital of LP at December 31, 1995 was approximately $1,488.0. 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.
Grace had $347.0 of borrowings from LP at December 31, 1995. Four Grace
entities serve as general partners of LP and own general partnership
interests totalling 79.03% in LP; the sole limited partner of LP, which
initially acquired its interest in LP in exchange for a $300.0 cash capital
contribution ($297.0 of which was funded by outside investors), owns a
20.97% limited partnership interest in LP. LP is a separate and distinct
legal entity from each of the Grace entities and has separate assets,
liabilities, business functions and operations. For financial reporting
purposes, the assets, liabilities, results of operations and cash flows of
LP are included in Grace's consolidated financial statements as a component
of discontinued operations and the outside investors' interest in LP is
reflected as a minority interest.
- --------------------------------------------------------------------------------
14. SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
The weighted average number of shares of common stock outstanding during
1995 was 95,822,000 (1994 - 93,936,000; 1993 - 91,461,000).
The Company is authorized to issue 300,000,000 shares of common stock.
Of the common stock unissued at December 31, 1995, approximately 7,655,000
shares were reserved for issuance pursuant to stock options and other stock
incentives. In addition, at December 31, 1995, approximately 105,084,000
shares were reserved for issuance under Common Stock Purchase Rights
(Rights). A Right is issued for each outstanding share of common stock; the
Rights are not and will not become exercisable unless and until certain
events occur, and at no time will the Rights have any voting power.
Preferred stocks authorized, issued and outstanding are:
<TABLE>
<CAPTION>
Par Value of
Shares as of December 31, 1995 Shares Outstanding
---------------------------------------------------- -----------------------------
Authorized In Out-
and Issued Treasury standing 1995 1994 1993
------------------- ------------------- ---------- ------ ------------- ------
<S> <C> <C> <C> <C> <C> <C>
6% Cumulative (1) 40,000 3,540 36,460 $3.6 $3.6 $3.6
8% Cumulative Class A (2) 50,000 33,644 16,356 1.6 1.6 1.6
8% Noncumulative Class B (2) 40,000 18,423 21,577 2.2 2.2 2.2
------ --------- ------
$7.4 $7.4 $7.4
====== ========= ======
- --------------------------------------------------------------------------------
</TABLE>
(1) 160 votes per share.
(2) 16 votes per share.
Dividends paid on the preferred stocks amounted to $.5 in each of 1995,
1994 and 1993.
The Certificate of Incorporation also authorizes 5,000,000 shares of
Class C Preferred Stock, $1 par value, none of which
has been issued.
- --------------------------------------------------------------------------------
15. STOCK INCENTIVE PLANS
- --------------------------------------------------------------------------------
Stock options are granted under the Company's stock incentive plans. Each
option has an exercise price equal to the fair market value of the Company's
Common Stock on the date of grant. Options become exercisable at the time
or times determined by the Compensation Committee and may have terms of up
to ten years and one month.
F-22
<PAGE> 69
Changes in outstanding common stock options are summarized below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
1995 1994 1993
--------------------- ------------------------- -------------------------
AVERAGE Average Average
NUMBER EXERCISE Number Exercise Number Exercise
OF SHARES PRICE of Shares Price of Shares Price
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of year .... 7,612,888 $38.08 6,965,304 $36.48 6,365,187 $35.09
Options granted ................. 1,704,150 46.66 1,358,900 42.27 1,461,425 38.00
----------- --------- ---------
9,317,038 8,324,204 7,826,612
Options exercised ............... (3,551,123) 38.30 (606,444) 29.21 (683,255) 25.89
Options terminated or canceled .. (71,719) 42.27 (104,872) 37.33 (178,053) 40.13
----------- --------- ---------
Balance at end of year .......... 5,694,196 40.45 7,612,888 38.08 6,965,304 36.48
=========== ========= =========
- --------------------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1995, options covering 4,172,391 shares (1994 -
5,633,761; 1993 - 5,056,256) were exercisable and 1,913,163 shares (1994 -
3,547,094; 1993 - 1,804,122) were available for additional grants.
Currently outstanding options expire on various dates between February 1996
and July 2005.
Grace will adopt the disclosure requirements of SFAS No. 123,
"Accounting for Stock-Based Compensation" in 1996. However, Grace
anticipates that it will continue to follow the measurement provisions of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," as permitted by SFAS No. 123.
- --------------------------------------------------------------------------------
16. PENSION PLANS
- --------------------------------------------------------------------------------
Grace maintains defined benefit pension plans covering employees of certain
units who meet age and service requirements. Benefits are generally based
on final average salary and years of service. Grace funds its U.S. pension
plans in accordance with Federal laws and regulations. Non-U.S. pension
plans are funded under a variety of methods because of differing local laws
and customs and therefore cannot be summarized. Approximately 60% of U.S.
and non-U.S. plan assets at December 31, 1995 were common stocks, with the
remainder primarily fixed income securities.
Pension cost/(benefit) is comprised of the following components:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
1995 1994 1993
-------------------- ---------------- ---------------------
U.S. NON-U.S. U.S. Non-U.S. U.S. Non-U.S.
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost on benefits earned during the year .... $ 14.6 $ 10.5 $ 19.8 $ 13.4 $ 12.7 $ 9.5
Interest cost on benefits earned in prior years .... 50.6 21.4 46.9 19.3 33.8 17.1
Actual (return)/loss on plan assets ................ (132.3) (52.0) 16.9 10.6 (101.7) (56.7)
Deferred loss/(gain) on plan assets ................ 71.1 26.2 (84.6) (37.4) 55.1 36.0
Amortization of net gains and prior service costs .. (.8) (.8) (7.1) (1.6) (4.9) (1.7)
------- ------ ------ ------ ------- ------
Net pension cost/(benefit) ......................... $ 3.2 $ 5.3 $ (8.1) $ 4.3 $ (5.0) $ 4.2
======= ====== ====== ====== ======= ======
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
The funded status of these plans was as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
U.S. NON-U.S.
- ---------------------------------------------------------------------------------------------------------------------
ASSETS EXCEED ACCUMULATED ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS BENEFITS EXCEED ASSETS
------------- -------------- ------------- -------------
1995 1994 1995 1994 1995 1994 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Actuarial present value of benefit obligation:
Vested........................................... $679.6 $536.2 $ 52.0 $ 39.0 $133.5 $114.2 $ 67.5 $ 57.2
------ ------ ------ ------ ------ ------ ------ ------
Accumulated benefit obligation................... $680.4 $540.8 $ 52.0 $ 39.0 $133.9 $115.3 $ 75.1 $ 64.4
------ ------ ------ ------ ------ ------ ------ ------
Total projected benefit obligation............... $710.0 $596.3 $ 55.7 $ 40.4 $189.4 $158.5 $ 92.4 $ 81.8
Plan assets at fair value........................ 795.8 751.6 -- -- 302.5 255.8 7.3 12.5
------ ------ ------ ------ ------ ------ ------ ------
Plan assets in excess of/(less than) projected
benefit obligation............................... 85.8 155.3 (55.7) (40.4) 113.1 97.3 (85.1) (69.3)
Unamortized net (gain)/loss at initial adoption.. (73.7) (89.5) 4.9 5.6 (6.3) (8.4) 4.5 4.6
Unamortized prior service cost................... 41.7 13.0 16.3 18.3 3.6 4.0 -- --
Unrecognized net loss/(gain)..................... 97.6 62.3 8.6 1.1 (16.0) (7.4) (3.2) (5.6)
------ ------ ------ ------ ------ ------ ------ ------
Prepaid/(accrued) pension cost................... $151.4 $141.1 $(25.9) $(15.4) $ 94.4 $ 85.5 $(83.8) $(70.3)
====== ====== ====== ====== ====== ====== ====== ======
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
F-23
<PAGE> 70
The following significant assumptions were used in 1995, 1994 and 1993:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993
-------------------- -------------------- --------------------
U.S. NON-U.S. U.S. Non-U.S. U.S. Non-U.S.
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Discount rate at December 31, ...................... 7.25% 5.1 - 11.6% 8.5% 5.0 - 12.0% 7.5% 4.5 - 9.2%
Expected long-term rate of return .................. 9.0 6.0 - 10.5 9.0 6.0 - 10.5 9.0 6.0 - 10.5
Rate of compensation increase ...................... 4.5 4.0 - 7.5 5.5 4.0 - 7.5 5.5 3.5 - 7.5
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Grace's Retirement Plan for Salaried Employees (Plan) contains
provisions under which the Plan would automatically terminate in the event
of a change in control of the Company, and Plan benefits would be secured
through the purchase of annuity contracts. Upon such termination, a portion
of the Plan's excess assets would be placed in an irrevocable trust to fund
various employee benefit plans and arrangements of Grace, and any balance
would be returned to Grace.
During 1995, Grace approved a cost-of-living increase, effective
January 1, 1996, for retirees under the Plan and Grace's Retirement Plan for
Hourly Employees of Canadian subsidiaries.
- --------------------------------------------------------------------------------
17. OTHER POSTRETIREMENT BENEFIT PLANS
- --------------------------------------------------------------------------------
Grace provides certain other postretirement health care and life insurance
benefits for retired employees of specified U.S. units. These retiree
medical and life insurance plans provide various levels of benefits to
employees (depending on their date of hire) who retire from Grace after age
55 with at least 10 years of service. The plans are currently unfunded.
Grace applies SFAS No. 106, which requires the accrual method of
accounting for the future costs of postretirement health care and life
insurance benefits over the employees' years of service. Grace pays the
costs of postretirement benefits as they are incurred.
Included in other liabilities as of December 31, 1995 and 1994 are the
following:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
1995 1994
- -----------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees ..................................... $209.0 $192.6
Fully eligible participants .................. 15.2 12.1
Active ineligible participants ............... 34.4 26.3
------ ------
Accumulated postretirement benefit obligation .. 258.6 231.0
Unrecognized net loss ........................ (54.9) (28.5)
Unrecognized prior service benefit ........... 44.3 48.6
------ ------
Accrued postretirement benefit obligation ...... $248.0 $251.1
====== ======
- -----------------------------------------------------------------------------
</TABLE>
Net periodic postretirement benefit cost for the years ended December
31, 1995, 1994 and 1993 is comprised of the following components:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
1995 1994 1993
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost .................................................... $ 1.6 $ 2.1 $ 2.2
Interest cost on accumulated postretirement benefit obligation .. 18.3 16.2 13.2
Amortization of net loss ........................................ .2 1.2 .2
Amortization of prior service benefit ........................... (4.3) (4.3) (4.5)
----- ----- -----
Net periodic postretirement benefit cost ........................ $15.8 $15.2 $11.1
===== ===== =====
- ----------------------------------------------------------------------------------------
</TABLE>
During 1992, Grace's retiree medical plans were amended to increase
cost sharing by employees retiring after January 1, 1993. This amendment
decreased the accumulated postretirement benefit obligation by $44.3 at
December 31, 1995 and will be amortized over an average remaining future
service life of approximately 11 years.
Medical care cost trend rates were projected at 10.7% in 1995,
declining to 6.0% through 2003 and remaining level thereafter. A one
percentage point increase in each year's assumed medical care cost trend
rate, holding all other assumptions constant, would increase the annual net
periodic postretirement benefit cost by $2.5 and the accumulated
postretirement benefit obligation by $20.2. The discount rates at December
31, 1995, 1994 and 1993 were 7.25%, 8.5% and 7.5%, respectively.
Effective January 1, 1994, Grace adopted SFAS No. 112, "Employers'
Accounting for Postemployment Benefits," which requires accrual accounting
for nonaccumulating postemployment benefits. Grace's primary postemployment
obligation is for disabled workers' medical benefits. These are currently
included in accrued postretirement costs under SFAS No. 106. The adoption
of SFAS No. 112 did not have a material effect on Grace's results of
operations or financial position.
F-24
<PAGE> 71
- --------------------------------------------------------------------------------
18. GEOGRAPHIC AREA INFORMATION
- --------------------------------------------------------------------------------
The table below presents information related to Grace's specialty chemicals
segment (its only industry segment) by geographic area for the years 1995
- -1993.
<TABLE>
<CAPTION>
United Asia Latin
States Canada Europe Pacific America Total
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales and revenues .................. 1995 $1,693 $128 $1,147 $445 $253 $3,666
1994 1,558 121 955 366 218 3,218
1993 1,432 123 852 307 182 2,896
Pretax operating (loss)/income (1) .. 1995 (120) 23 39 62 10 14
1994 (133) 9 69 56 20 21
1993 23 7 38 44 13 125
Identifiable assets (2) ............. 1995 2,031 101 998 411 246 3,787
1994 1,796 83 905 308 208 3,300
1993 2,042 81 720 243 154 3,240
- ---------------------------------------------------------------------------------------------
</TABLE>
Pretax operating income and total identifiable assets for the specialty
chemicals segment are reconciled below to income from continuing operations
before income taxes and consolidated total assets, respectively, as
presented in the Consolidated Statement of Operations and the Consolidated
Balance Sheet. Grace allocates to its specialty chemicals segment general
corporate overhead expenses, general corporate research expenses and certain
other income and expense items that can be identified with specialty
chemicals operations.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pretax operating income - specialty chemicals segment (1) ....................... $ 14 $ 21 $ 125
Interest expense and related financing costs .................................... (71) (50) (43)
Corporate restructuring costs and asset impairments/other activities ............ (122) -- --
Provisions relating to environmental liabilities at former manufacturing sites .. (77) (40) --
Provision for corporate governance .............................................. (30) -- --
Gain on sale of remaining interest in REG ....................................... -- 27 --
Corporate expenses previously allocated to health care operations (3) ........... (38) (37) (37)
Other income/(expenses), net .................................................... 12 (9) (16)
------ ------ ------
(Loss)/income from continuing operations before income taxes .................... $ (312) $ (88) $ 29
====== ====== ======
- ---------------------------------------------------------------------------------------------------------
Identifiable assets - specialty chemicals segment (2) ........................... $3,787 $3,300 $3,240
General corporate assets (4) .................................................... 752 860 811
Discontinued operations' net assets ............................................. 1,759 2,071 2,058
------ ------ ------
Total assets .................................................................... $6,298 $6,231 $6,109
====== ====== ======
</TABLE>
- --------------------------------------------------------------------------------
(1) Includes (a) 1995, 1994 and 1993 pretax provisions of $275, $316 and
$159, respectively, relating to asbestos-related liabilities and
insurance coverage (see Note 2 for further information); and (b) a 1995
pretax charge of $98 relating to restructuring costs, asset impairments
and other costs (see Note 5 for further information).
(2) Includes asbestos-related receivables and settlements due from
insurance carriers, net of discounts, of $321 and $118, respectively,
in 1995; $513 and $187, respectively, in 1994; and $962 and $114,
respectively, in 1993.
(3) These costs will not be assumed by NMC following the completion of its
proposed separation from Grace, and it is expected that these costs
will be eliminated.
(4) General corporate assets consist principally of deferred tax assets,
prepaid pension costs, and corporate receivables and investments.
- --------------------------------------------------------------------------------
19. SUBSEQUENT EVENTS
- --------------------------------------------------------------------------------
As more fully discussed in Note 7, in February 1996, Grace and Fresenius
entered into a definitive agreement to combine NMC with Fresenius' worldwide
dialysis business. The transaction is expected to be completed by the third
quarter of 1996.
In March 1996, Grace announced that it had entered into a definitive
agreement to sell its Grace Dearborn water treatment and process chemicals
business to Betz Laboratories, Inc. for $632.0. The transaction is expected
to be completed in the second quarter of 1996.
F-25
<PAGE> 72
- --------------------------------------------------------------------------------
QUARTERLY SUMMARY AND STATISTICAL INFORMATION Unaudited - dollars in
millions, except per share
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
QUARTER ENDED 1Q 2Q 3Q 4Q
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
Total sales and revenues ................... $ 853.4 $ 932.3 $ 946.4 $ 933.4
Cost of goods sold and operating expenses .. 500.9 550.7 566.0 626.1
Net income/(loss) .......................... 47.5(3) 78.7 21.7(4) (473.8)(5)
Earnings/(loss) per share: (1)
Net earnings/(loss) .................... $ .50 $ .83 $ .22 $ (4.87)
Fully diluted earnings per share:
Net earnings/(loss) .................... $ .49 $ .80 $ .22 $ -- (6)
Dividends declared per common share ........ $ .35 $ .35 $ .35 $ .125
Market price of common stock: (2)
High ................................... $54 1/2 $65 1/8 $71 1/4 $66 1/4
Low .................................... 38 1/2 51 3/8 61 9/16 54 3/4
Close .................................. 53 1/4 61 3/8 66 3/4 59 1/8
- -------------------------------------------------------------------------------------------------------
1994 (7)
Total sales and revenues ................... $ 675.4 $ 782.9 $ 815.5 $ 944.4
Cost of goods sold and operating expenses .. 437.8 464.5 475.0 523.5
Net income/(loss) .......................... 38.2(8) (134.3)(9) 76.0 103.4
Earnings/(loss) per share: (1)
Net earnings/(loss) .................... $ .41 $ (1.43) $ .81 $ 1.10
Fully diluted earnings per share:
Net earnings/(loss) .................... $ .40 $ -- (6) $ .80 $ 1.09
Dividends declared per common share ........ $ .35 $ .35 $ .35 $ .35
Market price of common stock: (2)
High ................................... $46 1/2 $ 43 $42 3/8 $41 1/8
Low .................................... 40 3/8 39 38 1/4 36
Close .................................. 41 1/4 39 7/8 41 1/2 38 5/8
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) Per share results for the four quarters differ from full-year per
share results, as a separate computation of earnings per share is made
for each quarter presented.
(2) Principal market: New York Stock Exchange.
(3) Includes a $12.5 charge for matters relating to corporate governance.
(4) Includes a $27.1 charge for restructuring costs; a $6.1 charge for
matters relating to corporate governance; and a $33.5 charge to the
discontinued health care operations, primarily relating to asset
impairments.
(5) Includes a $178.7 provision relating to asbestos-related liabilities
and insurance coverage; a $50.0 provision for environmental
liabilities; a $116.9 charge for restructuring costs, asset impairments
and other items; a $151.3 provision for other discontinued operations;
and a $68.9 charge to the discontinued health care operations,
primarily relating to asset impairments and other items.
(6) Not presented as the effect is anti-dilutive.
(7) Certain amounts have been reclassified to conform to the 1995
presentation.
(8) Includes a $27.0 gain on the sale of Grace's remaining interest in The
Restaurant Enterprises Group, Inc. (REG), offset by a $26.0 provision,
primarily for environmental liabilities.
(9) Includes a $200.0 reinstatement of a provision relating to
asbestos-related insurance coverage.
F-26
<PAGE> 73
<TABLE>
- -------------------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES, NET FIXED ASSETS AND DEPRECIATION AND
LEASE AMORTIZATION Dollars in millions
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
Depreciation and
Capital Expenditures (1) Net Fixed Assets Lease Amortization (2)
------------------------ -------------------------- ---------------------
1995 1994 1993 1995 1994 1993 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING GROUP
Specialty chemicals .......... $459 $329 $209 $1,581 $1,262 $1,049 $155 $144 $135
General corporate ............ 49 30 21 155 144 128 15 14 11
---- ---- ---- ------ ------ ------ ---- ---- ----
Total continuing operations .. 508 359 230 1,736 1,406 1,177 170 158 146
Discontinued operations ...... 30 86 80 -- 324 277 -- -- --
---- ---- ---- ------ ------ ------ ---- ---- ----
Total ........................ $538 $445 $310 $1,736 $1,730 $1,454 $170 $158 $146
==== ==== ==== ====== ====== ====== ==== ==== ====
- -------------------------------------------------------------------------------------------------------------
GEOGRAPHIC LOCATION
United States and Canada ..... $246 $202 $126 $ 869 $ 714 $ 608 $ 75 $ 77 $ 74
Europe ....................... 100 75 57 441 382 321 59 51 46
Other areas .................. 113 52 26 271 166 120 21 16 15
---- ---- ---- ------ ------ ------ ---- ---- ----
Subtotal ..................... 459 329 209 1,581 1,262 1,049 155 144 135
General corporate ............ 49 30 21 155 144 128 15 14 11
---- ---- ---- ------ ------ ------ ---- ---- ----
Total continuing operations .. 508 359 230 1,736 1,406 1,177 170 158 146
Discontinued operations ...... 30 86 80 -- 324 277 -- -- --
---- ---- ---- ------ ------ ------ ---- ---- ----
Total ........................ $538 $445 $310 $1,736 $1,730 $1,454 $170 $158 $146
==== ==== ==== ====== ====== ====== ==== ==== ====
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes capital expenditures of discontinued operations subsequent to
their classification as such.
(2) Certain 1994 and 1993 amounts have been reclassified to conform to the
1995 presentation.
F-27
<PAGE> 74
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
FINANCIAL SUMMARY (1) Dollars in millions, except per share amounts
- ---------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
Sales and revenues ............................................ $3,665.5 $3,218.2 $2,895.5 $3,061.8 $3,326.2
Cost of goods sold and operating expenses ..................... 2,243.7 1,900.8 1,746.7 1,871.8 2,027.9
Depreciation and amortization ................................. 186.3 165.0 153.5 164.5 178.3
Interest expense and related financing costs .................. 71.3 49.5 42.9 49.4 73.7
Research and development expenses ............................. 120.6 106.8 111.5 105.2 102.0
(Loss)/income from continuing operations before
income taxes................................................. (312.4) (88.0) 29.2 81.3 256.5
(Benefit from)/provision for income taxes ..................... (115.8) (46.6) 10.1 79.9 99.1
Income from continuing operations before special items (2) .... 194.7 157.6 119.1 146.5 153.9
(Loss)/income from continuing operations ...................... (196.6) (41.4) 19.1 1.4 157.4
(Loss)/income from discontinued operations (3) ................ (129.3) 124.7 6.9 (105.9) 61.2
Cumulative effect of accounting changes ....................... -- -- -- (190.0) --
Net (loss)/income ............................................. (325.9) 83.3 26.0 (294.5) 218.6
- ---------------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Current assets ................................................ $1,681.3 $2,228.9 $2,077.6 $2,091.4 $1,990.0
Current liabilities ........................................... 2,214.2 2,231.5 1,992.6 1,639.6 1,622.1
Properties and equipment, net ................................. 1,736.1 1,730.1 1,454.1 1,707.9 2,558.2
Total assets .................................................. 6,297.6 6,230.6 6,108.6 5,598.6 6,007.1
Total debt .................................................... 1,933.8 1,529.7 1,706.1 1,819.2 2,259.4
Shareholders' equity - common stock ........................... 1,224.4 1,497.1 1,510.2 1,537.5 2,017.7
- ---------------------------------------------------------------------------------------------------------------------------------
DATA PER COMMON SHARE
Earnings from continuing operations before special items (2) .. $ 2.03 $ 1.68 $ 1.30 $ 1.63 $ 1.76
(Loss)/earnings from continuing operations .................... (2.05) (.45) .20 .01 1.80
Cumulative effect of accounting changes ....................... -- -- -- (2.12) --
Net (loss)/earnings ........................................... (3.40) .88 .28 (3.29) 2.50
Dividends ..................................................... 1.175 1.40 1.40 1.40 1.40
Book value .................................................... 12.57 15.91 16.16 17.10 22.77
Average common shares outstanding (thousands) ................. 95,822 93,936 91,461 89,543 87,236
- ---------------------------------------------------------------------------------------------------------------------------------
OTHER STATISTICS
Dividends paid on common stock ................................ $ 112.1 $ 131.5 $ 127.9 $ 125.4 $ 122.0
Capital expenditures .......................................... 537.6 444.6 309.6 398.4 447.0
% Total debt to total capital ................................. 61.1% 50.4% 52.9% 54.1% 52.7%
Common shareholders of record ................................. 19,496 18,501 19,358 20,869 21,949
Common stock price range ..................................... 71 1/4-38 1/2 46 1/2-36 41 1/4-34 5/8 45-32 40 3/4-23 3/8
Number of employees - continuing operations (thousands) ....... 21.2 20.6 20.4 20.0 21.5
- ---------------------------------------------------------------------------------------------------------------------------------
(1) Certain prior year amounts have been reclassified to conform to the
1995 presentation.
(2) Income from continuing operations before special items reconciles to
(loss)/income from continuing operations as follows:
<CAPTION>
1995 1994 1993 1992 1991
-------- ------- ------- ------- ------
<C> <C> <C> <C> <C> <C>
Income from continuing operations before special items .... $ 194.7 $ 157.6 $ 119.1 $ 146.5 $153.9
Special items (after-tax):
Provision for corporate governance ....................... (18.6) -- -- -- --
Gain on sale of remaining interest in REG ................ -- 27.0 -- -- --
Restructuring costs and asset impairments/other activities (144.0) -- -- -- --
Provisions for environmental liabilities at former
manufacturing sites ................................... (50.0) (26.0) -- -- --
Provision relating to a fumed silica plant ............... -- -- -- (140.0) --
Postretirement benefits prior to plan amendments ......... -- -- -- (5.1) --
Strategic restructuring gain ............................. -- -- -- -- 3.5
Provisions relating to asbestos-related liabilities
and insurance coverage ................................ (178.7) (200.0) (100.0) -- --
-------- ------- ------- ------- ------
(Loss)/income from continuing operations .................. $ (196.6) $ (41.4) $ 19.1 $ 1.4 $157.4
======== ======= ======= ======= ======
</TABLE>
The special items included in the foregoing table have also been excluded
in determining earnings per common share from continuing operations before
special items.
(3) Includes income of $22.0, $124.7 and $115.3 in 1995, 1994 and 1993,
respectively, from the discontinued health care operations. 1995
health care results reflect special charges totalling $102.4, relating
to asset impairments of $83.6, the phase-out of certain of Grace's
health care research programs of $5.6, additional costs associated with
Grace's long-term incentive programs applicable to NMC of $4.8, changes
in accounting estimates of $1.8 and other items totalling $6.6.
F-28
<PAGE> 75
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
REVIEW OF OPERATIONS
OVERVIEW
Sales and revenues increased 14% in 1995 over 1994, as compared to an
increase of 11% in 1994 over 1993.
(Loss)/income from continuing operations was $(196.6) million, $(41.4)
million and $19.1 million in 1995, 1994 and 1993, respectively. These
results reflected (a) 1995, 1994 and 1993 pretax provisions of $275.0
million, $316.0 million and $159.0 million ($178.7 million, $200.0 million
and $100.0 million after-tax), respectively, relating to asbestos-related
liabilities and insurance coverage (see "Financial Condition:
Asbestos-Related Matters" below and Note 2 to the Consolidated Financial
Statements for further information); (b) 1995 and 1994 pretax provisions of
$77.0 million and $40.0 million ($50.0 million and $26.0 million after-tax),
respectively, relating to environmental liabilities (see "Financial
Condition: Environmental Matters" below for further information); (c) a 1995
pretax charge of $220.0 million ($144.0 million after-tax) relating to
restructuring costs, asset impairments and other costs (see "Statement of
Operations: Restructuring Costs, Asset Impairments and Other Costs" below
for further information); (d) a 1995 pretax charge of $30.0 million ($18.6
million after-tax) relating to corporate governance matters; and (e) a 1994
gain of $27.0 million (pre- and after-tax) on the sale of Grace's remaining
interest in The Restaurant Enterprises Group, Inc. Excluding these
provisions and charges from all years, income from continuing operations in
1995 increased 24%, to $194.7 million, as compared to 1994, and in 1994
increased 32%, to $157.6 million, over 1993.
Income from continuing operations reflects corporate expenses of $37.8
million, $37.1 million and $37.4 million in 1995, 1994 and 1993,
respectively, previously allocated to the discontinued health care
operations. These expenses will not be assumed by National Medical Care,
Inc. (NMC), Grace's principal health care subsidiary, following completion
of its proposed separation from Grace, and it is expected that these costs
will be eliminated. See below for additional information regarding the
proposed separation of NMC from Grace and Grace's cost management efforts.
For all periods presented, the Consolidated Statement of Operations has
been restated to reflect the classification of certain businesses as
discontinued operations, as discussed in Note 7 to the Consolidated
Financial Statements.
SPECIALTY CHEMICALS
Operating Results - 1995 Compared to 1994
As noted above, sales and revenues increased 14% in 1995 as compared to
1994, reflecting favorable volume, price/product mix and currency
translation variances estimated at 7%, 4% and 3%, respectively. All product
lines experienced improved volumes in 1995. Packaging volume increases
reflected higher sales of bags and films in all regions, and higher sales of
laminates in all regions other than Latin America. Volume increases in
catalysts and other silica-based products reflected higher sales in all
regions, especially refinery catalysts in Asia Pacific and Europe, and
silica/adsorbent products in Europe and Asia Pacific. Container volume
increases were due to increased sales of specialty polymers and can sealing
products in Asia Pacific, and coating products in Latin America. Volume
increases in water treatment reflected higher paper industry process
chemicals sales in Europe and North America caused by market share gains, as
well as higher water treatment chemicals sales in Latin America.
Construction products experienced volume increases, primarily in Asia
Pacific, due to increased construction activity, partially offset by volume
decreases in both fire protection products in North America (due to a small
market share loss) and waterproofing products in Europe and North America.
Operating income before taxes (which excludes for all years the items
discussed in the second paragraph of "Overview" above) increased by 15% in
1995 as compared to 1994. North American results in 1995 improved,
reflecting strong growth in packaging due to the volume increases noted
above (especially in bags). However, this was partially offset by reduced
profitability in refinery catalysts, as North American refiners continued to
experience low margins. The narrow spread between light and heavy crude oil
prices led customers to crack higher quality light crude rather than heavy
crude oil (which requires more catalysts). In addition, water treatment
chemicals in North America experienced lower profitability due to ongoing
market consolidations. European results in 1995 improved significantly
versus 1994, primarily in packaging, reflecting volume increases caused by
an economic recovery that revitalized key markets, partially offset by
unfavorable results in construction waterproofing products due to higher
material costs and a slowdown in the nonresidential construction market.
European results also benefited from the absence of costs incurred in 1994
to streamline European packaging, water treatment and container operations.
In Asia Pacific, favorable results were achieved versus 1994, primarily in
refinery catalysts and silica/adsorbent and construction products (due to
the volume increases noted above), partially offset by higher operating
costs incurred to increase market share in the region. Latin American 1995
results declined slightly versus 1994, primarily due to the effect of
inflation indexation on wage and employee benefit costs in the Brazilian
water treatment operations, partially offset by increased profitability in
packaging due to improved volumes and in container products due to market
share gains in coating products. The above results reflect the allocation
of corporate overhead and corporate research expenses; corporate interest
and financing costs and nonallocable expenses are not reflected in the
results of specialty chemicals.
F-29
<PAGE> 76
Operating Results - 1994 Compared to 1993
Sales and revenues increased by 11%, and operating income before taxes
increased by 19%, in 1994 as compared to 1993. The increase in sales and
revenues reflected favorable volume, price/product mix and currency
translation variances estimated at 9%, 1% and 1%, respectively. Volume
increases were experienced by all core product lines. North American
results in 1994 were positively affected by strong growth in construction
and packaging, mainly due to the volume increases, partially offset by
reduced profitability in refinery catalysts due to volume decreases as a
result of customers' use of higher quality crude oil and an increase in
customer maintenance shutdowns. European results in 1994 improved
significantly versus 1993, primarily due to improvements in refinery and
polyolefin catalysts and construction products (due to the volume
increases), partially offset by costs associated with streamlining European
operations. In Asia Pacific, favorable results were achieved versus 1993,
primarily due to volume increases in refinery and polyolefin catalysts and
container products. Latin American 1994 results improved versus 1993,
primarily due to increased profitability in packaging (due to increased
volumes in bags, films and laminates). Latin American results also
benefited from improved economic conditions in Brazil; however, this was
partially offset by the devaluation of the Mexican peso in late 1994.
STATEMENT OF OPERATIONS
OTHER INCOME
See Note 4 to the Consolidated Financial Statements for information relating
to other income.
INTEREST EXPENSE AND RELATED FINANCING COSTS
Excluding amounts allocated to discontinued operations (as discussed in Note
7 to the Consolidated Financial Statements), interest expense and related
financing costs of $71.3 million in 1995 increased 44% versus 1994.
Including amounts allocated to discontinued operations, interest expense and
related financing costs increased 50% in 1995 over 1994, to $164.8 million,
primarily due to higher average effective short-term interest rates and
higher debt levels.
Grace's debt and interest rate management objectives are to reduce its
cost of funding over the long term, considering economic conditions and
their potential impact on Grace, and to improve liquidity by developing and
maintaining access to a variety of long-term and short-term capital markets.
To manage its exposure to changes in interest rates, Grace enters into
interest rate agreements; during 1995, most of these agreements effectively
converted fixed-rate debt into variable-rate debt. These agreements have
readily identifiable impacts on interest cost and are characterized by broad
market liquidity. See Note 11 to the Consolidated Financial Statements for
further information on interest rate agreements.
See "Financial Condition: Liquidity and Capital Resources" below and
Note 10 to the Consolidated Financial Statements for information on
borrowings.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development spending increased 13% in 1995 versus 1994.
Research and development spending continues to be directed toward Grace's
core specialty chemicals businesses. As discussed below, during 1995 Grace
undertook a worldwide restructuring program, including a study of
company-wide research and development expenses. Certain actions have
already been taken based on this study, including the shutdown of Grace's
Japan research center and the phase-out of certain research programs related
to noncore operations.
RESTRUCTURING COSTS, ASSET IMPAIRMENTS AND OTHER COSTS
Restructuring Costs
As discussed in Note 5 to the Consolidated Financial Statements, during the
third quarter of 1995, Grace began implementing a worldwide restructuring
program aimed at streamlining processes and reducing general and
administrative expenses, factory administration costs and noncore corporate
research and development expenses. The program is expected to be
substantially completed by the end of 1996. In the third and fourth
quarters of 1995, Grace recorded pretax charges totalling $44.3 million and
$91.7 million ($27.2 million and $61.9 million after-tax), respectively,
comprised of $77.4 million for employee termination benefits; $13.4 million
for plant closure and related costs, including lease termination costs;
$15.5 million for prior business exits and related costs; $20.8 million for
asset writedowns; and $8.9 million for other costs. The $77.4 million for
employee termination benefits primarily represents severance pay and other
benefits associated with the elimination of approximately 1,000 positions
worldwide; more than 50% of the total cost reductions will come from
corporate staff functions worldwide.
Grace expects to implement additional cost reductions and efficiency
improvements beyond those discussed above, as its businesses further
evaluate and reengineer their operations. These reductions and efficiencies
are expected in areas such as purchasing, logistics, working capital
management and manufacturing.
F-30
<PAGE> 77
Asset Impairments
During 1995, Grace determined that, due to various events and changes
in circumstances (including the worldwide restructuring program described
above), certain long-lived assets and related goodwill were impaired. As a
result, in the fourth quarter of 1995, Grace recorded a $43.5 million pretax
charge ($29.0 million after-tax), the majority of which related to assets
that will continue to be held and used in Grace's continuing operations; the
charge included no significant individual components. Grace determined the
amount of the charge based on various valuation techniques, including
discounted cash flow, replacement cost and net realizable value for assets
to be disposed of.
Other Costs
Also, in the fourth quarter of 1995, Grace recorded pretax charges
totalling $40.5 million ($25.9 million after-tax) relating to the writedown
of corporate assets ($27.0 million) and working capital assets ($13.5
million). These amounts are included in "Cost of goods sold and operating
expenses" in the Consolidated Statement of Operations.
INCOME TAXES
Grace's effective tax rates were (37.1)%, (53.0)% and 34.6% in 1995, 1994
and 1993, respectively. Excluding the items discussed in the second
paragraph of "Review of Operations: Overview" above, Grace's effective tax
rates were 32.8%, 34.6% and 36.7% in 1995, 1994 and 1993, respectively. The
lower effective tax rate in 1995, as compared to 1994, was largely due to
the reversal of the valuation allowance on foreign net operating losses and
lower state income taxes, partially offset by higher taxes on foreign
operations. The lower effective tax rate in 1994, as compared to 1993, was
largely due to lower taxes on foreign operations.
Grace has recognized a valuation allowance relating to uncertainty as
to the realization of certain deferred tax assets, including U.S. tax credit
carryforwards, state and local net operating loss carryforwards and net
deferred tax assets. As a result of the favorable resolution of an audit,
the valuation allowance on net operating loss carryforwards in foreign
jurisdictions was reversed in 1995. Based upon anticipated future results,
Grace has concluded, after consideration of the valuation allowance, that it
is more likely than not that the remaining balance of the net deferred tax
assets will be realized.
See Note 6 to the Consolidated Financial Statements for further
information on income taxes.
DISCONTINUED OPERATIONS
HEALTH CARE
In June 1995, the Company announced that its Board of Directors had approved
a plan to spin off NMC. As a result, Grace classified its health care
business as a discontinued operation in the second quarter of 1995 and,
accordingly, NMC's operations are included in "(Loss)/income from
discontinued operations" in the Consolidated Statement of Operations.
Following NMC's receipt in October 1995 of five investigative subpoenas
from the Office of the Inspector General of the U.S. Department of Health
and Human Services (OIG), as discussed below, the completion of the spin-off
of NMC, originally expected in the 1995 fourth quarter, was delayed.
In February 1996, Grace and Fresenius AG (Fresenius) entered into a
definitive agreement to combine NMC with Fresenius' worldwide dialysis
business (FWD) to create Fresenius Medical Care (FMC). As a result of the
combination, FMC would acquire NMC, which would remain responsible for all
liabilities arising out of the investigations, discussed below. However,
Grace would retain certain health care assets, primarily a bioseparation
sciences business, a health care services company and other assets
(including cash and marketable securities).
The combination would follow a borrowing of approximately $2.3 billion
by NMC, a tax-free distribution of the 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 specialty chemicals businesses) other
than NMC. As a result of the separation of Grace's specialty chemicals
businesses from NMC and the subsequent combination of NMC and FWD, the
holders of the Company's Common Stock would own 100% of the specialty
chemicals company and 44.8% of FMC, and Fresenius and other shareholders
would own 55.2% of FMC. 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. Completion of the various transactions is subject to
customary conditions, including the approval of the shareholders of the
Company and Fresenius; U.S., German and European regulatory actions; and
obtaining financing on satisfactory terms. Commitments for financing have
been received, and it is expected that the various transactions will be
completed by the third quarter of 1996.
Operating Results - 1995 Compared to 1994
Health care sales and revenues for 1995 increased by 11% over 1994, due to
increases of 13%, 3% and 10%, respectively, in kidney dialysis services,
home health care and medical products operations. The increase in kidney
dialysis services reflects acquisitions in 1995 and 1994, and the increase
in home health care reflects the full-year ownership of Home Nutritional
Services, Inc., a national provider of home infusion therapy services
acquired in April 1994. The number of centers providing dialysis and
related services increased 15%, from 590 at December 31, 1994 to 681 at
December 31, 1995 (574 in North America, 62 in Europe, 33 in Latin America
and 12 in Asia Pacific).
F-31
<PAGE> 78
Operating income before taxes in 1995 increased 10%, to $315.6 million,
as compared to 1994, excluding 1995 pretax charges totalling $117.5 million
($102.4 million after-tax). These pretax charges are comprised of (a) asset
impairments of $84.3 million ($83.6 million after-tax); (b) the phase-out of
certain of Grace's health care research programs of $8.8 million ($5.6
million after-tax); (c) changes in accounting estimates totalling $8.7
million ($1.8 million after-tax); (d) additional costs associated with
Grace's long-term incentive programs applicable to NMC of $8.3 million ($4.8
million after-tax); and (e) other items totalling $7.4 million ($6.6 million
after-tax). Health care results reflect the allocation of Grace's health
care-related research expenses; however, corporate interest and financing
costs allocated to the health care business are not reflected in operating
income before taxes. These allocations are not necessarily indicative of
the costs that would be incurred by the health care business on a
stand-alone basis.
The 1995 asset impairments totalling $84.3 million pretax, referred to
above, are comprised of: (a) NMC's investment in a German dialysis machine
manufacturing operation - $39.8 million (pre- and after-tax); (b) NMC's
investment in a dialyzer development operation in Ireland - $16.6 million
(pre- and after-tax); (c) Grace's investment in a health care services
company - $26.2 million (pre- and after-tax); and (d) other items of $1.7
million pretax ($1.0 million after-tax).
Operating Results - 1994 Compared to 1993
Sales and revenues for 1994 increased by 24% over 1993, due to increases of
28% and 47%, respectively, in kidney dialysis services and home health care
operations, partially offset by a decrease of 7% in medical products
revenues. The decrease in medical products operations reflects a decline in
bloodline sales resulting from warning letters and import alerts issued by
the U.S. Food and Drug Administration (FDA) in the second quarter of 1993.
Operating income before income taxes for 1994 increased 23%, to $287.5
million, over 1993, reflecting the continued growth of all health care
businesses, as well as improvements in cost controls, operating efficiencies
and capacity utilization. These favorable results were partially offset by
the costs of improving and expanding quality assurance systems for medical
products manufacturing operations, as a result of the FDA warning letters
and import alerts.
Other Significant Health Care Matters
In October 1995, NMC received five investigative subpoenas from the OIG.
The subpoenas call for the production of extensive documents relating to
various aspects of NMC's business. A letter accompanying the subpoenas
stated that they had been issued in conjunction with an investigation being
conducted by the OIG, the U.S. Attorney for the District of Massachusetts
and others concerning possible violations of Federal laws relating to health
care payments and reimbursements. The results of the investigation and its
impact, if any, cannot be predicted at this time. In the event that any
government agency believes that wrongdoing related to the investigation 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.
NMC's business, financial position and results of operations could also
be materially adversely affected by (a) an adverse outcome in the pending
litigation concerning the implementation of certain provisions of the
Omnibus Budget Reconciliation Act of 1993 relating to the coordination of
benefits between Medicare and employer health plans in the case of certain
dialysis patients; (b) an adverse outcome in the pending challenge by NMC of
changes effected by Medicare in approving reimbursement claims relating to
the administration of intradialytic parenteral nutrition (IDPN) therapy; or
(c) the adoption of pending Medicare proposals to change IDPN coverage
prospectively.
See Note 7 to the Consolidated Financial Statements for additional
information relating to the above matters.
COCOA AND OTHER BUSINESSES
In the second quarter of 1993, Grace classified as discontinued operations
its cocoa business; its battery separators business; certain engineered
materials businesses, principally its printing products, material technology
and electromagnetic radiation control businesses (collectively, EMS); and
other noncore businesses. At that time, a provision of $105.0 million (net
of an applicable tax benefit of $22.3 million) was recorded to reflect the
losses expected on the divestment of these businesses.
During the fourth quarter of 1995, Grace revised the divestment plan
for its cocoa business. As a result of this revised divestment plan, recent
trends and a reassessment of forecasts for all remaining discontinued
operations, Grace recorded an additional provision of $151.3 million (net of
an applicable tax benefit of $48.7 million) related to its remaining
discontinued operations, principally the cocoa business.
See Note 7 to the Consolidated Financial Statements for additional
information relating to the above matters.
F-32
<PAGE> 79
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
During 1995, the net pretax cash provided by Grace's continuing operating
activities was $229.7 million, versus $210.9 million in 1994. The increase
was primarily due to net cash inflows of $97.0 million in 1995 from
settlements with certain insurance carriers for asbestos-related litigation,
net of amounts paid for the defense and disposition of asbestos-related
litigation (see discussion below), as compared to the net outflow of $60.0
million for asbestos-related litigation in 1994. However, the 1995 increase
was offset by an increase in the use of operating working capital. After
giving effect to the net pretax cash provided by operating activities of
discontinued operations (including an increase in the use of operating
working capital by NMC in 1995) and increased payments of income taxes
(attributable to taxable income resulting from settlements of
asbestos-related litigation, as well as audit adjustments to prior years'
Federal income tax returns), the net cash provided by operating activities
was $107.0 million in 1995 versus $453.5 million in 1994.
Investing activities used $801.6 million of cash in 1995, largely
reflecting capital expenditures of $537.6 million (more than 75% of which
relates to Grace's packaging and catalyst and other silica-based businesses)
and the acquisition of dialysis centers and medical products facilities for
a total of $37.4 million in the first quarter of 1995. Also, investing
activities of discontinued operations for 1995 used $295.2 million,
primarily reflecting the classification of the health care segment as a
discontinued operation in the second quarter. Management anticipates that
the level of capital expenditures in 1996 will approximate that of 1995. In
1995, Grace launched a $350.0 million global capital expansion program in
its packaging product line, including $50.0 million to build a plant in
Seneca, South Carolina to serve the fresh-cut produce market. In 1996,
Grace is also scheduled to open new silica and packaging plants in Kuantan,
Malaysia.
Net cash provided by financing activities in 1995 was $655.7 million,
primarily reflecting an increase in total debt from December 31, 1994 and
the exercise of employee stock options, offset by the payment of $112.6
million of dividends. Total debt was $1,933.8 million at December 31, 1995,
an increase of $404.1 million from December 31, 1994. Grace's total debt as
a percentage of total capital (debt ratio) increased from 50.4% at December
31, 1994 to 61.1% at December 31, 1995, primarily due to the reduction in
shareholders' equity (due to the charges discussed in the second paragraph
of "Review of Operations: Overview" and "Statement of Operations:
Discontinued Operations" above) and the increase in total debt. At December
31, 1995, the net assets of the discontinued health care segment included
$226.7 million of debt.
Grace expects to receive a substantial amount of cash in 1996 from the
expected distribution by NMC (as discussed in "Statement of Operations:
Discontinued Operations" above and Note 7 to the Consolidated Financial
Statements), the sale of the Grace Dearborn water treatment and process
chemicals business (see discussion below), and, to a lesser extent, funds
generated by operations. Grace expects to apply a substantial portion of
the cash proceeds generated by these transactions to the reduction of
borrowings. Any net excess is expected to be applied to the repurchase of
shares of the Company's Common Stock and selected strategic acquisitions
that complement existing businesses.
In the third quarter of 1995, Grace announced that its Board of
Directors had authorized management to pursue options to maximize the value
of its Grace Dearborn water treatment and process chemicals business. In
March 1996, Grace announced that it had entered into a definitive agreement
to sell Grace Dearborn to Betz Laboratories, Inc. for $632.0 million. The
transaction is expected to be completed in the second quarter of 1996.
In October 1995, in anticipation of the then pending spin-off of NMC,
the Company's Board of Directors declared a quarterly cash dividend of 12.5
cents per share on the Company's Common Stock, a reduction from the previous
quarterly cash dividend of 35 cents per share. At that time, the Board also
approved a policy of paying dividends at a rate of 20% - 30% of the prior
year's net earnings and authorized the repurchase of up to 10 million shares
of the Company's Common Stock. In February 1996, after entering into the
definitive agreement to combine NMC with FWD, the Board increased the number
of shares that may be repurchased to 20% of the Company's outstanding Common
Stock (see "Statement of Operations: Discontinued Operations" above and Note
7 to the Consolidated Financial Statements).
ASBESTOS-RELATED MATTERS
As reported in Note 2 to the Consolidated Financial Statements, Grace is a
defendant in lawsuits relating to previously sold asbestos-containing
products and is involved in related litigation with certain of its insurance
carriers. In 1995, Grace received $97.0 million under settlements with
certain insurance carriers, net of amounts paid for the defense and
disposition of asbestos-related property damage and personal injury
litigation. During the fourth quarter of 1995, Grace recorded a noncash
pretax charge of $275.0 million ($178.7 million after-tax), primarily to
reflect the estimated costs of defending against and disposing of personal
injury lawsuits and claims expected to be filed through 1998. The balance
sheet at December 31, 1995 includes a receivable due from insurance
carriers, a portion of which is subject to litigation, of $321.2 million.
Grace has also recorded notes receivable of $130.0 million ($118.4 million
after discounts) for amounts to be received in 1996 to 1999 pursuant to
settlement agreements previously entered into with certain insurance
carriers.
F-33
<PAGE> 80
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 2 to the Consolidated Financial Statements). 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
Grace incurs costs to comply with environmental laws and regulations and to
fulfill its commitment to industry initiatives and Grace standards.
Worldwide expenses of continuing operations related to the operation and
maintenance of environmental facilities and the disposal of hazardous and
nonhazardous wastes totalled $43.5 million, $35.7 million and $40.7 million
in 1995, 1994 and 1993, respectively. Such costs are estimated to be
approximately $45.0 million and $47.0 million in 1996 and 1997,
respectively. In addition, worldwide capital expenditures for continuing
operations relating to environmental protection totalled $14.9 million in
1995, compared to $21.5 million and $19.3 million in 1994 and 1993,
respectively. Capital expenditures to comply with environmental initiatives
in future years are estimated to be $20.0 million and $17.0 million in 1996
and 1997, respectively. Grace has also incurred costs to remediate
environmentally impaired sites. These costs were $31.3 million, $30.8
million and $44.4 million in 1995, 1994 and 1993, respectively. These
amounts have been charged against previously established reserves. Future
cash outlays for remediation costs are expected to total $30.0 million in
1996 and $20.0 million in 1997. Expenditures have been funded from internal
sources of cash and are not expected to have a significant effect on
liquidity.
Grace accrues for anticipated costs associated with investigatory and
remediation efforts relating to the environment in accordance with Statement
of Financial Accounting Standards No. 5, "Accounting for Contingencies,"
which requires estimating the probability and amount of future costs. At
December 31, 1995, Grace's liability for environmental investigatory and
remediation costs related to continuing and discontinued operations totalled
approximately $280.3 million, which amount does not take into account any
discounting for future expenditures or possible future insurance recoveries.
The measurement of the liability is evaluated quarterly based on currently
available information. In 1995 and 1994, periodic provisions were recorded
for environmental and plant closure expenses, which include the costs of
future environmental investigatory and remediation activities.
Additionally, in the fourth quarter of 1995 and first quarter of 1994, Grace
recorded pretax provisions of $77.0 million and $40.0 million ($50.0 million
and $26.0 million after-tax), respectively, principally to provide for
future costs related to remediation activities required at former
manufacturing sites.
F-34
<PAGE> 81
SCHEDULE VIII
W. R. GRACE & CO. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(in millions)
<TABLE>
<CAPTION>
For the Year 1995
Additions (deductions)
---------------------
Charged
Balance at (credited) to Balance
beginning costs and Other, at end
Description of period expenses net** of period
----------- --------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Valuation and qualifying accounts deducted from assets:
Allowances for notes and accounts receivable................. $ 95.2 $ 131.2 $ (213.5) $ 12.9
------------ ---------- ----------- -----------
Allowances for long-term receivables......................... $ 20.6 $ 3.7 $ .4 $ 24.7
------------ ---------- ----------- -----------
Securities of divested businesses............................ $ 4.9 $ - $ (1.4) $ 3.5
------------ ---------- ----------- -----------
Valuation allowance for deferred tax assets.................. $ 137.0 $ (32.0) $ (7.3) $ 97.7
------------ ---------- ----------- -----------
Reserves:
Foreign employee benefit obligations* ....................... $ 82.5 $ 10.6 $ 2.2 $ 95.3
------------ ---------- ----------- -----------
Discontinued operations...................................... $ 239.3 $ 127.4 $ - $ 366.7
------------ ---------- ----------- -----------
For the Year 1994
Additions (deductions)
---------------------
Charged
Balance at (credited) to Balance
beginning costs and Other, at end
Description of period expenses net** of period
----------- --------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Valuation and qualifying accounts deducted from assets:
Allowances for notes and accounts receivable................. $ 50.3 $ 102.2 $ (57.3) $ 95.2
------------ --------- --------- -----------
Allowances for long-term receivables......................... $ 13.4 $ 6.9 $ .3 $ 20.6
------------ --------- --------- -----------
Securities of divested businesses............................ $ 161.2 $ - $ (156.3) $ 4.9
------------ --------- --------- -----------
Valuation allowance for deferred tax assets.................. $ 129.7 $ - $ 7.3 $ 137.0
------------ --------- --------- -----------
Reserves:
Foreign employee benefit obligations* ....................... $ 64.4 $ 11.6 $ 6.5 $ 82.5
------------ --------- --------- -----------
Discontinued operations ..................................... $ 132.1 $ 107.2 $ - $ 239.3
------------ --------- --------- -----------
For the Year 1993
Additions (deductions)
---------------------
Charged
Balance at (credited) to Balance
beginning costs and Other, at end
Description of period expenses net** of period
----------- --------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Valuation and qualifying accounts deducted from assets:
Allowances for notes and accounts receivable................. $ 39.3 $ 67.4 $ (56.4) $ 50.3
------------ --------- --------- -----------
Allowances for long-term receivables......................... $ 8.4 $ 5.3 $ (.3) $ 13.4
------------ --------- --------- -----------
Securities of divested businesses............................ $ 152.9 $ 8.3 $ - $ 161.2
------------ --------- --------- -----------
Valuation allowance for deferred tax assets.................. $ 143.1 $ - $ (13.4) $ 129.7
------------ --------- --------- -----------
Reserves:
Foreign employee benefit obligations* ....................... $ 83.4 $ 12.2 $ (31.2) $ 64.4
------------ --------- --------- -----------
Discontinued operations ..................................... $ 144.7 $ (12.6) $ - $ 132.1
------------ --------- --------- -----------
</TABLE>
* Represents legally mandated employee benefit obligations, primarily
pension benefits, relating to Grace's operations in Europe.
** Consists of additions and deductions applicable to businesses
acquired, disposals of businesses, bad debt write-offs, foreign
currency translation, reclassifications (including the deconsolidation
of amounts relating to discontinued operations) and miscellaneous
other adjustments.
F-35
<PAGE> 82
Exhibit 11
W. R. GRACE & CO. AND SUBSIDIARIES
WEIGHTED AVERAGE NUMBER OF SHARES AND EARNINGS USED IN PER SHARE COMPUTATIONS
The weighted average number of shares of Common Stock outstanding were as
follows:
<TABLE>
<CAPTION>
(in thousands)
-----------------------------------
1995 1994 1993
-------- ----------- --------
<S> <C> <C> <C>
Weighted average number of shares of Common
Stock outstanding . . . . . . . . . . . . . . . . . 95,822 93,936 91,461
Conversion of convertible debt obligations . . . . . . . . . - - 46
Additional dilutive effect of outstanding options
(as determined by the application of the treasury
stock method) . . . . . . . . . . . . . . . . . . 2,189 659 680
------ ------ ------
Weighted average number of shares of Common
Stock outstanding assuming full dilution . . . . . 98,011 94,595 92,187
====== ====== ======
</TABLE>
(Loss)/income used in the computation of (loss)/earnings per share were as
follows:
<TABLE>
<CAPTION>
(in millions, except per share)
----------------------------------------
1995 1994 1993
--------- ----------- ---------
<S> <C> <C> <C>
Net (loss)/income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (325.9) $ 83.3 $ 26.0
Dividends paid on preferred stocks . . . . . . . . . . . . . . . . . . . . . . (.5) (.5) (.5)
--------- ----------- ---------
(Loss)/income used in per share computation of earnings and in
per share computation of earnings assuming full dilution . . . . . . $ (326.4) $ 82.8 $ 25.5
========= =========== =========
(Loss)/earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . $ (3.40) $ .88 $ .28
(Loss)/earnings per share assuming full dilution . . . . . . . . . . . . . . . $ (3.33) $ .88 $ .28
</TABLE>
F-36
<PAGE> 83
EXHIBIT 12
W.R. GRACE & CO. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(in millions, except ratios)
(Unaudited)
<TABLE>
<CAPTION> Years Ended December 31, (b)
-----------------------------------------------------------------
1995(c) 1994(d) 1993(e) 1992(f) 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net (loss)/income from continuing operations.......... $ (196.6) $ (41.4) $ 19.1 $ 1.4 $ 157.4
Add (deduct):
(Benefit from)/provision for income taxes ....... (115.8) (46.6) 10.1 79.9 99.1
Income taxes of 50%-owned companies ............ - - .1 2.1 1.5
Minority interest in income of
majority-owned subsidiaries................... - - - - -
Equity in unremitted losses/(earnings)
of less than 50%-owned companies.............. .8 (.6) (.5) (2.0) (.9)
Interest expense and related financing costs,
including amortization of capitalized interest 179.8 138.5 122.7 162.7 209.6
Estimated amount of rental expense
deemed to represent the interest factor....... 8.5 10.1 11.3 14.0 12.7
------ ------- ------- ------- -------
(Loss)/income as adjusted............................ $ (123.3) $ 60.0 $ 162.8 $ 258.1 $ 479.4
========= ======== ======= ======= =======
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
Estimated amount of rental expense
deemed to represent the interest factor...... 9.1 10.1 11.3 14.0 12.7
-------- ------- ------- ------- -------
Fixed charges........................................ 204.6 153.3 134.1 190.3 237.2
Preferred stock dividend requirements(a)............. .5 .5 .8 .8 .9
-------- ------- ------- ------- -------
Combined fixed charges and preferred
stock dividends................................. $ 205.1 $ 153.8 $ 134.9 $ 191.1 $ 238.1
======== ======= ======== ======= =======
Ratio of earnings to fixed charges................... (g) (g) 1.21 1.36 2.02
======== ======= ======== ======= =======
Ratio of earnings to combined fixed charges and
preferred stock dividends....................... (g) (g) 1.21 1.35 2.01
======== ======= ======== ======= =======
</TABLE>
(a) For each period with an income tax provision, the preferred stock
dividend requirements are increased to an amount representing the
pretax earnings required to cover such requirements based on
Grace's effective tax rate.
(b) Certain amounts have been restated to conform to the 1995
presentation.
(c) 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.
(d) Includes a pretax provision of $316.0 relating to asbestos-related
liabilities and insurance coverage.
(e) Includes a pretax provision of $159.0 relating to asbestos-related
liabilities and insurance coverage.
(f) Includes a pretax provision of $140.0 relating to a fumed silica
plant in Belgium.
(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.
F-37
<PAGE> 84
W. R. GRACE & CO.
Annual Report on Form 10-K
for the Fiscal Year Ended December 31, 1995
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT WHERE LOCATED
- ------- ------- -------------
<S> <C> <C>
2.01 Agreement and Plan of Exhibit 2 to Form 8-K
Reorganization, dated as (filed 2/6/96)
of February 4, 1996, between
W. R. Grace & Co. and
Fresenius AG (including, as
exhibits thereto, the Distri-
bution Agreement, dated as of
February 4, 1996, between
W. R. Grace & Co., Fresenius
AG and W. R. Grace & Co.-Conn.,
and the Contribution Agreement,
dated as of February 4, 1996,
among W. R. Grace & Co.,
Fresenius AG, Steril Pharma
GmbH and W. R. Grace & Co.-
Conn.)
2.02 Grace Dearborn Worldwide Exhibit 99.2 to Form
Purchase and Sale Agreement, 8-K (filed 3/27/96)
dated as of March 11, 1996,
between W. R. Grace & Co.-Conn.
and Betz Laboratories, Inc.
3.01 Certificate of Incorporation of Exhibit 3 to Form 8-K
W. R. Grace & Co., as amended (filed 6/9/88)
3.02 By-laws of W. R. Grace & Co., as Exhibit 3.02 to Form
amended 10-K (filed 3/31/95)
</TABLE>
- ----------------
Other than exhibits that are filed herewith, all exhibits listed in this
Exhibit Index are incorporated herein by reference. Exhibits indicated by an
asterisk (*) are the management contracts and compensatory plans, contracts or
arrangements required to be filed as exhibits to this Report. In accordance
with paragraph (b)(4)(iii) of Item 601 of Regulation S-K, certain instruments
relating to long-term debt are not being filed; W. R. Grace & Co. agrees to
furnish a copy of any such instrument to the Securities and Exchange Commission
upon request.
<PAGE> 85
<TABLE>
<S> <C> <C>
4.01 Indenture dated as of Septem- Exhibit 4.2 to Form 10-K
ber 29, 1992 among W. R. Grace (filed 3/26/93)
& Co.-Conn., W. R. Grace & Co.
and Bankers Trust Company
4.02 Indenture dated as of January Exhibit 4.4 to Form 10-K
28, 1993 among W. R. Grace (filed 3/26/93)
& Co.-Conn., W. R. Grace & Co.
and Bank of New York (successor
to NationsBank of Georgia, N.A.)
4.03 364-Day Credit Agreement, dated Exhibit 4.1 to Form 10-Q
as of September 1, 1994, among (filed 11/10/94)
W. R. Grace & Co.-Conn., W. R.
Grace & Co., the several banks
parties thereto and Chemical
Bank, as agent for such banks
4.04 Credit Agreement, dated as of Exhibit 4.2 to Form 10-Q
September 1, 1994, among W. R. (filed 11/10/94)
Grace & Co.-Conn., W. R. Grace
& Co., the several banks parties
thereto and Chemical Bank, as
agent for such banks
4.05 First Amendment, dated as of Exhibit 4.05 to Form 10-K
December 28, 1994, to the 364- (filed 3/31/95)
Day Credit Agreement dated
as of September 1, 1994
4.06 First Amendment, dated as of Exhibit 4.06 to Form 10-K
December 28, 1994, to the (filed 3/31/95)
Credit Agreement dated as of
September 1, 1994
4.07 Second Amendment, dated as of Filed herewith
December 31, 1995, to the 364-
Day Credit Agreement dated as
of September 1, 1994
4.08 Second Amendment, dated as of Filed herewith
December 31, 1995, to the
Credit Agreement dated as of
September 1, 1994
</TABLE>
<PAGE> 86
<TABLE>
<S> <C> <C>
4.09 Credit Agreement, dated as of Filed herewith
December 29, 1995, among W. R.
Grace & Co.-Conn., W. R. Grace
& Co., the several banks par-
ties thereto and Chemical Bank,
as agent for such banks
4.10 First Amendment, dated as of Filed herewith
December 31, 1995, to the
Credit Agreement dated as of
December 29, 1995
4.11 Amended and Restated Rights Exhibit to Amendment on
Agreement dated as of June 7, Form 8 to Application
1990 between W. R. Grace & Co. for Registration on
and Manufacturers Hanover Trust Form 8-B (filed 6/19/90)
Company
10.01 W. R. Grace & Co. Executive Exhibit 19(f) to Form
Salary Protection Plan, as 8-K (filed 6/9/88)*
amended
10.02 W. R. Grace & Co. 1981 Stock Filed herewith*
Incentive Plan, as amended
10.03 W. R. Grace & Co. 1986 Stock Filed herewith*
Incentive Plan, as amended
10.04 W. R. Grace & Co. 1989 Stock Filed herewith*
Incentive Plan, as amended
10.05 W. R. Grace & Co. 1994 Stock Filed herewith*
Incentive Plan, as amended
10.06 W. R. Grace & Co. 1994 Stock Filed herewith*
Retainer Plan for Nonemployee
Directors, as amended
10.07 Forms of Stock Option Agree- Exhibit 10(h) to Form
ments 10-K (filed 3/28/92)*
10.08 Forms of Restricted Share Exhibit 10(i) to Form
Award Agreements 10-K (filed 3/28/92)*
10.09 Information Concerning W. R. Pages 8-13 and 29-33 of
Grace & Co. Incentive Compen- Proxy Statement
sation Program, Deferred (filed 4/10/95)*
Compensation Program and
Long-Term Incentive Program
</TABLE>
<PAGE> 87
<TABLE>
<S> <C> <C>
10.10 W. R. Grace & Co. Retirement Exhibit 10(o) to Form
Plan for Outside Directors, as 10-K (filed 3/28/92)*
amended
10.11 Employment Agreement dated Exhibit 10(x) to Form
as of April 1, 1991 between 10-K (filed 3/28/92)*
W. R. Grace & Co.-Conn. and
Constantine L. Hampers, as
amended
10.12 Housing Loan Agreement dated Exhibit 10(q) to Form
as of August 1, 1987 between 10-K (filed 3/29/88);
W. R. Grace & Co. and J. P. Exhibit 19(i) to Form
Bolduc, related Amendment and 8-K (filed 6/9/88)*
Assignment dated May 10, 1988
10.13 Employment Agreement dated Exhibit 10.13 to Form
August 1, 1993 between J. P. 10-K (filed 3/28/94)*
Bolduc and W. R. Grace & Co.
10.14 Retirement Agreement between Exhibit 10.23 to Form
W. R. Grace & Co. and J. Peter 10-K (filed 3/26/93)*
Grace dated December 21, 1992
10.15 Executive Severance Agreement Exhibit 10.26 to Form
dated September 1, 1992 10-K (filed 3/26/93)*
between W. R. Grace & Co. and
Constantine L. Hampers
10.16 Form of Executive Severance Exhibit 10.28 to Form
Agreement between W. R. Grace 10-K (filed 3/26/93)*
& Co. and others
10.17 Consulting Agreement dated Exhibit 10.29 to Form
June 1, 1992 between W. R. 10-K (filed 3/26/93)*
Grace & Co. and Kamsky
Associates, Inc.
10.18 Incentive Compensation Agree- Exhibit 10.30 to Form
ment dated June 1, 1992 10-K (filed 3/26/93)*
between National Medical
Care, Inc. and Kamsky
Associates, Inc.
10.19 Consulting Agreement dated as Exhibit 10.23 to Form
of December 1993 between 10-K (filed 3/31/95)*
National Medical Care, Inc. and
Virginia A. Kamsky
</TABLE>
<PAGE> 88
<TABLE>
<S> <C> <C>
10.20 Amendment to Consulting Agree- Exhibit 10.1 to Form 10-Q
ment, dated as of May 1, 1995, (filed 5/12/95)*
among National Medical Care,
Inc., Virginia A. Kamsky and
Southeast Asia Markets, Inc.
10.21 W. R. Grace & Co. Supplemental Exhibit 10.25 to Form
Executive Retirement Plan, as 10-K (filed 3/28/94)*
amended
10.22 Agreement dated March 1, 1995 Exhibit 10.27 to Form
between W. R. Grace & Co. and 10-K (filed 3/31/95)*
Jean-Louis Greze
10.23 Letter Agreement dated February Filed herewith*
12, 1996 between W. R. Grace &
Co. and Jean-Louis Greze
10.24 Letter Agreement dated June 15, Filed herewith*
1995 between W. R. Grace & Co.
and Dr. F. Peter Boer
10.25 Letter Agreement dated July 31, Filed herewith*
1995 between W. R. Grace & Co.
and Brian J. Smith and letter
dated August 9, 1995 from W. R.
Grace & Co. to Brian J. Smith
10.26 Agreements dated March 2 and Exhibit 10.28 to Form
March 7, 1995 between J. P. 10-K (filed 3/31/95)*
Bolduc and W. R. Grace & Co.
10.27 Agreement dated April 1, Exhibit 10.29 to Form
1991 between National Medical 10-K (filed 3/31/95)*
Care, Inc. and Constantine
L. Hampers
10.28 Employment Agreement dated as Exhibit 10.1 to Form 10-Q
of May 1, 1995 between the (filed 8/14/95)*
Company and Albert J. Costello
11 Weighted Average Number of Filed herewith
Shares and Earnings Used in (in Financial Supplement
Per Share Computations to 10-K)
12 Computation of Ratio of Earn- Filed herewith
ings to Fixed Charges and (in Financial Supplement
Combined Fixed Charges and to 10-K)
Preferred Stock Dividends
</TABLE>
<PAGE> 89
<TABLE>
<S> <C> <C>
13 Selected Portions of the 1995 Filed herewith
Annual Report to Shareholders (in Financial Supplement
of W. R. Grace & Co. to 10-K)
21 List of Subsidiaries of Filed herewith
W. R. Grace & Co.
23 Consent of Independent Accoun- Filed herewith
tants (in Financial Supplement
to 10-K)
24 Powers of Attorney Filed herewith
99.01 Letter of Intent dated Exhibit 99.01 to Form
November 5, 1993 between 10-K (filed 3/31/95)
W. R. Grace & Co. and J.
Peter Grace III, as amended
99.02 Agency Agreement dated Exhibit 99.02 to Form
June 13, 1994 between HSC 10-K (filed 3/31/95)
Holding Co., Inc and Grace
Hotel Services Corporation
99.03 Letter Agreement dated Exhibit 99.03 to Form
December 14, 1994 among HSC 10-K (filed 3/31/95)
Holding Co., Inc., Grace Hotel
Services Corporation and W. R.
Grace & Co.
99.04 Services Agreement dated Exhibit 99.04 to Form
November 10, 1994 between HSC 10-K (filed 3/31/95)
Holding Co., Inc. and Grace
Hotel Services Corporation
99.05 Settlement Agreement, dated as Filed herewith
of January 26, 1996, among HSC
Hospitality, Inc. (f/k/a HSC
Holding Co., Inc.), Grace Hotel
Services Corporation and W. R.
Grace & Co.
99.06 Consulting Agreement dated as Filed herewith
of December 1, 1995 between
W. R. Grace & Co. and Gordon
J. Humphrey
</TABLE>
<PAGE> 1
EXHIBIT 4.07
SECOND AMENDMENT
SECOND AMENDMENT, dated as of December 31, 1995 (this
"Amendment"), to the 364-Day Credit Agreement, dated as of September 1, 1994
(as amended, supplemented or otherwise modified prior to the date hereof, the
"Credit Agreement"), among W. R. GRACE & CO.-CONN., a Connecticut corporation
(the "Company"), W. R. GRACE & CO., a New York corporation ("Grace New York"),
the banks parties thereto (the "Banks") and CHEMICAL BANK, a New York banking
corporation, as agent (in such capacity the "Agent") for the Banks.
W I T N E S S E T H :
WHEREAS, the Company and Grace New York have requested the
Agent and the Banks to agree to amend the Credit Agreement in certain respects
as hereinafter set forth; and
WHEREAS, the Agent and the Banks are willing to agree to such
amendment, but only on the terms and subject to the conditions set forth in
this Amendment;
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company, Grace New York, the Banks and the Agent
hereby agree as follows:
1. Definitions. Unless otherwise defined herein, terms
defined in the Credit Agreement are used herein as therein defined.
2. Amendment of Section 1. Section 1 of the Credit
Agreement is hereby amended by deleting therefrom each reference to the phrase
"asbestos property damage" in the definitions of "Consolidated Adjusted Net
Worth" and "EBIT" and substituting therefore the phrase "asbestos related".
3. Effectiveness. This Amendment shall become effective
upon receipt by the Agent of evidence satisfactory to the Agent that this
Amendment has been executed and delivered by the Company, Grace New York and
the Majority Banks.
4. No Other Amendments. Except as expressly amended
hereby, the Credit Agreement and the other Loan Documents (if any) shall remain
in full force and effect in accordance with their respective terms.
5. Counterparts. This Amendment may be executed by
one or more of the parties hereto on any number of separate counterparts and
all of said counterparts taken together shall be deemed to constitute one and
the same instrument.
<PAGE> 2
2
6. Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK.
<PAGE> 3
3
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered as of the day and year first above
written.
W. R. GRACE & CO.-CONN.
By:__________________________
Title:
W. R. GRACE & CO.
By:__________________________
Title:
CHEMICAL BANK, as Agent
By:__________________________
Title:
<PAGE> 4
4
The undersigned Banks hereby consent and agree to the
foregoing Amendment:
CHEMICAL BANK
By:____________________________
Title:
ABN AMRO BANK N.V.
By:____________________________
Title:
By:____________________________
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:____________________________
Title:
THE BANK OF NOVA SCOTIA
By:____________________________
Title:
BARCLAYS BANK PLC
By:____________________________
Title:
<PAGE> 5
5
THE CHASE MANHATTAN BANK, N.A.
By:____________________________
Title:
COMMERZBANK AG, ATLANTA AGENCY
By:____________________________
Title:
By:____________________________
Title:
CREDIT LYONNAIS ATLANTA AGENCY
By:____________________________
Title:
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES
By:____________________________
Title:
By:____________________________
Title:
THE HONGKONG AND SHANGHAI
BANKING CORPORATION LIMITED
By:____________________________
Title:
<PAGE> 6
6
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By:____________________________
Title:
NATIONSBANK OF FLORIDA, N.A.
By:____________________________
Title:
SWISS BANK CORPORATION-NEW
YORK BRANCH
By:____________________________
Title:
By:____________________________
Title:
UNION BANK OF SWITZERLAND
By:____________________________
Title:
By:____________________________
Title:
<PAGE> 1
EXHIBIT 4.08
SECOND AMENDMENT
SECOND AMENDMENT, dated as of December 31, 1995 (this
"Amendment"), to the Credit Agreement, dated as of September 1, 1994 (as
amended, supplemented or otherwise modified prior to the date hereof, the
"Credit Agreement"), among W. R. GRACE & CO.-CONN., a Connecticut corporation
(the "Company"), W. R. GRACE & CO., a New York corporation ("Grace New York"),
the banks parties thereto (the "Banks") and CHEMICAL BANK, a New York banking
corporation, as agent (in such capacity the "Agent") for the Banks.
W I T N E S S E T H :
WHEREAS, the Company and Grace New York have requested the
Agent and the Banks to agree to amend the Credit Agreement in certain respects
as hereinafter set forth; and
WHEREAS, the Agent and the Banks are willing to agree to such
amendment, but only on the terms and subject to the conditions set forth in
this Amendment;
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company, Grace New York, the Banks and the Agent
hereby agree as follows:
1. Definitions. Unless otherwise defined herein, terms
defined in the Credit Agreement are used herein as therein defined.
2. Amendment of Section 1. Section 1 of the Credit
Agreement is hereby amended by deleting therefrom each reference to the phrase
"asbestos property damage" in the definitions of "Consolidated Adjusted Net
Worth" and "EBIT" and substituting therefore the phrase "asbestos related".
3. Effectiveness. This Amendment shall become effective
upon receipt by the Agent of evidence satisfactory to the Agent that this
Amendment has been executed and delivered by the Company, Grace New York and
the Majority Banks.
4. No Other Amendments. Except as expressly amended
hereby, the Credit Agreement and the other Loan Documents (if any) shall remain
in full force and effect in accordance with their respective terms.
5. Counterparts. This Amendment may be executed by
one or more of the parties hereto on any number of separate counterparts and
all of said counterparts taken together shall be deemed to constitute one and
the same instrument.
<PAGE> 2
2
6. Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK.
<PAGE> 3
3
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered as of the day and year first above
written.
W. R. GRACE & CO.-CONN.
By:__________________________
Title:
W. R. GRACE & CO.
By:__________________________
Title:
CHEMICAL BANK, as Agent
By:__________________________
Title:
<PAGE> 4
4
The undersigned Banks hereby consent and agree to the
foregoing Amendment:
CHEMICAL BANK
By:____________________________
Title:
ABN AMRO BANK N.V.
By:____________________________
Title:
By:____________________________
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:____________________________
Title:
THE BANK OF NOVA SCOTIA
By:____________________________
Title:
BARCLAYS BANK PLC
By:____________________________
Title:
<PAGE> 5
5
THE CHASE MANHATTAN BANK, N.A.
By:____________________________
Title:
COMMERZBANK AG, ATLANTA AGENCY
By:____________________________
Title:
By:____________________________
Title:
CREDIT LYONNAIS ATLANTA AGENCY
By:____________________________
Title:
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES
By:____________________________
Title:
By:____________________________
Title:
THE HONGKONG AND SHANGHAI
BANKING CORPORATION LIMITED
By:____________________________
Title:
<PAGE> 6
6
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By:____________________________
Title:
NATIONSBANK OF FLORIDA, N.A.
By:____________________________
Title:
SWISS BANK CORPORATION-NEW
YORK BRANCH
By:____________________________
Title:
By:____________________________
Title:
UNION BANK OF SWITZERLAND
By:____________________________
Title:
By:____________________________
Title:
<PAGE> 1
EXHIBIT 4.09
================================================================================
CREDIT AGREEMENT
AMONG
W. R. GRACE & CO. - CONN.,
W. R. GRACE & CO.,
THE SEVERAL BANKS
PARTIES HERETO
and
CHEMICAL BANK,
AS AGENT
DATED AS OF DECEMBER 29, 1995
================================================================================
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.1 Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.2 Obligations of Borrowers; Revolving Credit Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.3 Procedure for Revolving Credit Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3. BILATERAL OPTION LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.1 Requests for Offers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.2 Reports to Agent; Determination of Dollar Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.3 Judgment Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.4 Repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 4. BID LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.1 The Bid Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.2 Procedure for Bid Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.3 Repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.4 Interest on Bid Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.5 Obligations of Borrowers; Bid Loan Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 5. LOAN FACILITY COMMON PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.1 Interest Rates and Payment Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.2 Facility Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.3 Termination or Reduction of Commitments; Change of Control Date . . . . . . . . . . . . . . . . . . . . . . 24
5.4 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.5 Conversion and Continuation Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.6 Minimum Amounts of Eurodollar Tranches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.7 Computation of Interest and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.8 Inability to Determine Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.9 Pro Rata Treatment and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.10 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.11 Requirements of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.13 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 6. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.1 Corporate Existence; Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.2 Corporate Power, Authorization; Enforceable
Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.3 No Legal Bar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.4 No Material Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.5 Ownership of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.6 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.7 Disclosure of Contingent Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.8 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.9 Certain Federal Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
i
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<TABLE>
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<S> <C>
6.10 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.12 Investment Company Act; Other Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.13 Purpose of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.14 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.15 Principal Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 7. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.1 Conditions to Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.2 Conditions to Each Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 8. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.1 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.2 Certificates; Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.3 Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.4 Conduct of Business and Maintenance of Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.6 Inspection of Property, Books and Records;
Discussions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.8 Environmental Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 9. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.1 Financial Condition Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.2 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.3 Limitation on Fundamental Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.4 Limitation on Asset Transfers to Foreign
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.5 Limitation on Subordinated Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 10. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 11. THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.3 Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.4 Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.5 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.6 Non-Reliance on Agent and Other Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
11.8 Agent in Its Individual Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
11.9 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 12. GUARANTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.1 Grace New York Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.2 Company Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.3 No Subrogation, Contribution, Reimbursement or
Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
12.4 Amendments, etc., with respect to the Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
12.5 Guarantee Absolute and Unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
12.6 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
12.7 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 13. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
13.1 Amendments and Waivers; Replacement of Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
</TABLE>
ii
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<TABLE>
<CAPTION>
Page
<S> <C>
13.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
13.3 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
13.4 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
13.5 Payment of Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
13.6 Successors and Assigns; Participations;
Purchasing Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
13.7 Adjustments; Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
13.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
13.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
13.10 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
13.11 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
13.12 Submission to Jurisdiction; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
13.13 Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
13.14 WAIVERS OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
13.15 Additional Borrowers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
</TABLE>
iii
<PAGE> 5
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 Simpson Thacher & Bartlett
Exhibit G Form of Officer's Certificate
Exhibit H Form of Commitment Transfer Supplement
Exhibit I Form of Notice of Additional Borrower
iv
<PAGE> 6
CREDIT AGREEMENT, dated as of December 29, 1995, 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
CHEMICAL BANK, a New York banking corporation, 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
<PAGE> 7
published for any day which is a Business Day, the average 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):
<TABLE>
<CAPTION>
Margin S&P Moody's
------ --- -------
<S> <C> <C>
.450% BB+ or lower Ba1 or lower
.325% BBB- Baa3
.300% BBB Baa2
.270% BBB+ Baa1
.240% A- or higher A3 or higher
</TABLE>
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
<PAGE> 8
3
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 "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.
<PAGE> 9
4
"Bilateral Option Loan Report": as defined in subsection 3.2.
"Board": The Board of Governors of the Federal Reserve System
or any successor thereto.
"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.
"Chemical": Chemical Bank.
"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.
<PAGE> 10
5
"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 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
property damage 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 property damage 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.
<PAGE> 11
6
"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.
"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
<PAGE> 12
7
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 property damage 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 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 property damage 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.
<PAGE> 13
8
"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 Chemical 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.
"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, 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, 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
<PAGE> 14
9
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 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
<PAGE> 15
10
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 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
<PAGE> 16
11
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%.
"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.
"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).
<PAGE> 17
12
"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).
"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.
<PAGE> 18
13
"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. Section 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 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.
<PAGE> 19
14
"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.
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.
<PAGE> 20
15
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.
(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.
<PAGE> 21
16
(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 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
<PAGE> 22
17
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.
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
<PAGE> 23
18
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 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
<PAGE> 24
19
(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 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
<PAGE> 25
20
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 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,
<PAGE> 26
21
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 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
<PAGE> 27
22
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.
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
<PAGE> 28
23
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> 29
24
<TABLE>
<CAPTION>
<S> <C> <C>
FACILITY FEE
RATE S&P MOODY'S
---------- --- -------
<S> <C> <C>
.1500% BB+ or lower Ba1 or lower
.1250% BBB- Baa3
.1000% BBB Baa2
.0800% BBB+ Baa1
.0600% A- or higher A3 or higher
</TABLE>
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
<PAGE> 30
25
giving rise thereto, and (B) such Bank, by written notice given to the Company
not later than 30 days after the Change of Control 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., Bio-Medical Application Management or the Dearborn Division of the
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.
<PAGE> 31
26
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 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
<PAGE> 32
27
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 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
<PAGE> 33
28
(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 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:
<PAGE> 34
29
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 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
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30
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 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
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31
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 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
<PAGE> 37
32
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 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
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33
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 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
<PAGE> 39
34
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 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.
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35
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 three- and 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 three- and 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, 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
<PAGE> 41
36
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 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.
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37
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 December 29,
1995:
(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.
(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 Simpson Thacher
& Bartlett, counsel to the Agent, substantially in the form of
Exhibit F-2.
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38
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 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.
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39
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 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).
<PAGE> 45
40
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 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
<PAGE> 46
41
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:
(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
<PAGE> 47
42
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
(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
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43
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 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;
<PAGE> 49
44
(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;
(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
<PAGE> 50
45
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.
<PAGE> 51
46
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
<PAGE> 52
47
the instrument or agreement under which such Indebtedness was created;
or (ii) default in the observance or 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
<PAGE> 53
48
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 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
<PAGE> 54
49
(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.
SECTION 11. THE AGENT
11.1 Appointment. Each Bank hereby irrevocably designates
and appoints Chemical as the Agent of such Bank under this Agreement and the
other Loan Documents, and each such Bank irrevocably authorizes Chemical, 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
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50
in, or conditions of, this Agreement or any other Loan Document, or to inspect
the properties, books or records of any Loan Party.
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
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51
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 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
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52
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 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
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53
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 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.
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54
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, 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
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55
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, 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
<PAGE> 61
56
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 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
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57
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 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
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58
The Agent: Chemical Bank
270 Park Avenue
New York, New York 10017
Attention: Scott S. Ward
Telecopy: (212) 270-3125
Telephone: (212) 270-2625
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.
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
<PAGE> 64
59
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.
(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
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60
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
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
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61
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.
(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
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62
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, 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
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63
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 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
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64
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 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.
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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 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
<PAGE> 71
66
been given by such Subsidiary as a Borrower and is effective;
(ii) if such 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> 72
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
W. R. GRACE & CO.
By:
---------------------------
Title: Vice President
CHEMICAL BANK, as Agent and as
a Bank
By:
---------------------------
Title: Vice President
<PAGE> 73
68
SCHEDULE I
BANK COMMITMENT
----------
Chemical Bank $250,000,000
<PAGE> 74
69
Lending Offices; Address For Notices
CHEMICAL BANK
-------------
Domestic Lending Office: Chemical Bank
270 Park Avenue
New York, New York 10017
Eurodollar Lending Office: Chemical Bank
270 Park Avenue
New York, New York 10017
Address for Notices: Chemical Bank
270 Park Avenue
New York, New York 10017
Attention: Scott S. Ward
Telephone: (212) 270-3125
Telecopy: (212) 270-2625
Address for Bid Loan Notices: Chemical Bank
270 Park Avenue
New York, New York 10017
Attention: Scott S. Ward
Telephone: (212) 270-3125
Telecopy: (212) 270-2625
<PAGE> 1
EXHIBIT 4.10
FIRST AMENDMENT
FIRST AMENDMENT, dated as of December 31, 1995 (this
"Amendment"), to the Credit Agreement, dated as of December 29, 1995 (as
amended, supplemented or otherwise modified prior to the date hereof, the
"Credit Agreement"), among W. R. GRACE & CO.-CONN., a Connecticut corporation
(the "Company"), W. R. GRACE & CO., a New York corporation ("Grace New York"),
the banks parties thereto (the "Banks") and CHEMICAL BANK, a New York banking
corporation, as agent (in such capacity the "Agent") for the Banks.
W I T N E S S E T H :
WHEREAS, the Company and Grace New York have requested the
Agent and the Banks to agree to amend the Credit Agreement in certain respects
as hereinafter set forth; and
WHEREAS, the Agent and the Banks are willing to agree to such
amendment, but only on the terms and subject to the conditions set forth in
this Amendment;
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company, Grace New York, the Banks and the Agent
hereby agree as follows:
1. Definitions. Unless otherwise defined herein, terms
defined in the Credit Agreement are used herein as therein defined.
2. Amendment to Section 1. Section 1 of the Credit
Agreement is hereby amended by deleting therefrom each reference to the phrase
"asbestos property damage" in the definitions of "Consolidated Adjusted Net
Worth" and "EBIT" and substituting therefore the phrase "asbestos related".
3. Effectiveness. This Amendment shall become effective
upon receipt by the Agent of evidence satisfactory to the Agent that this
Amendment has been executed and delivered by the Company, Grace New York and
the Majority Banks.
4. No Other Amendments. Except as expressly amended
hereby, the Credit Agreement and the other Loan Documents (if any) shall remain
in full force and effect in accordance with their respective terms.
5. Counterparts. This Amendment may be executed by
one or more of the parties hereto on any number of separate counterparts and
all of said counterparts taken together shall be deemed to constitute one and
the same instrument.
<PAGE> 2
2
6. Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK.
<PAGE> 3
3
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered as of the day and year first above
written.
W. R. GRACE & CO.-CONN.
By:__________________________
Title:
W. R. GRACE & CO.
By:__________________________
Title:
CHEMICAL BANK, as Agent
By:__________________________
Title:
<PAGE> 1
EXHIBIT 10.02
-----
W. R. GRACE & CO.
1981 STOCK INCENTIVE PLAN
(As amended through March 7, 1996)
<PAGE> 2
W. R. GRACE & CO.
1981 STOCK INCENTIVE PLAN
Section 1. PURPOSES: The purposes of this Plan are (a) to secure
for the Company the benefits of incentives inherent in ownership of Common
Stock by Key Employees, (b) to encourage Key Employees to increase their
interest in the future growth and prosperity of the Company and to stimulate
and sustain constructive and imaginative thinking by Key Employees, (c) to
further the identity of interests of those who hold positions of major
responsibility in the Company and its Subsidiaries with the interests of the
Company's shareholders, and (d) to induce the employment or continued
employment of Key Employees and to enable the Company to compete with other
organizations offering similar or other incentives in obtaining and retaining
the services of competent executives.
Section 2. DEFINITIONS: Unless otherwise required by the context,
the following terms when used in this Plan shall have the meanings set forth in
this Section 2.
Board of Directors: The Board of Directors of the Company.
Common Stock: The common stock of the Company, par value $1.00 per
share, or such other class of shares or other securities or property as may be
applicable pursuant to the provisions of section 8.
Company: W. R. Grace & Co., a New York corporation.
Fair Market Value: As applied to any date, the mean between the high
and low sales prices of a share of Common Stock as reported on the Consolidated
Transactions Tape for securities listed on the New York Stock Exchange for such
date or, if no such sales were reported for such date, on the next preceding
date for which sales were so reported.
Grace - Connecticut: W. R. Grace & Co.- Conn., a Connecticut
corporation which is a subsidiary of the Company and which was formerly known
as "W. R. Grace & Co."
Incentive Committee: The committee designated by the Board of
Directors to administer stock incentive and stock option plans of the Company
and its subsidiaries.
Incentive Compensation: Bonuses, extra and other compensation payable
in addition to a salary or other base amount, whether contingent or not,
whether discretionary or required to be paid pursuant to a plan, agreement,
resolution or arrangement, and whether payable currently or on a deferred
basis, in cash, Common Stock or other property, awarded by the Company or a
Subsidiary prior or subsequent to the date of the approval and adoption of this
Plan.
<PAGE> 3
Incentive Stock Option: An option, including an Option as the context
may require, intended to meet the requirements of section 422A of the Internal
Revenue Code and the regulations thereunder applicable to incentive stock
options adopted by the Secretary of the Treasury or his delegate, or any
provisions that may be adopted to amend or replace such section or regulations
or both.
Key Employee: An employee of the Company or of a Subsidiary, including
an officer or director who is an employee, who in the opinion of the Incentive
Committee can contribute significantly to the growth and successful operations
of the Company or a Subsidiary. The grant of a Stock Incentive to an employee
by the Incentive Committee shall be deemed a determination by the Incentive
Committee that such employee is a Key Employee.
Non-Statutory Stock Option: An option, including an Option as the
context may require, which is not an Incentive Stock Option or another form of
statutory stock option (within the meanings of sections 422, 423 and 424 of the
Internal Revenue Code and the regulations thereunder as adopted and amended
from time to time by the Secretary of the Treasury or his delegate).
Option: An option to purchase shares of Common Stock.
Plan: The 1981 Stock Incentive Plan of the Company herein set forth as
the same may from time to time be amended.
Performance Unit: A unit representing a share of Common Stock subject
to a Stock Award, the issuance, transfer or retention of which, in whole or in
part, is contingent upon or measured by the attainment of a specified
performance objective or objectives, including, without limitation, objectives
determined (on a consolidated or unconsolidated basis) by reference to or
changes in (a) the Fair Market Value, book value or earnings per share of
Common Stock, or (b) the sales and revenues, earnings, return on capital
employed, asset values or net worth of the Company or one or more of its
groups, divisions, Subsidiaries or other units, or (c) a combination of two or
more of the foregoing or other factors.
Stock Award: An issuance or transfer of shares of Common Stock at the
time the Stock Incentive is granted or as soon thereafter as practicable, or an
undertaking (other than an Option) to issue or transfer such shares in the
future, including, without limitation, such an issuance, transfer or
undertaking with respect to Performance Units.
Stock Incentive: A stock incentive granted under this Plan in one of
the forms provided for in section 3.
-2-
<PAGE> 4
Subsidiary: A corporation (or other form of business association) of
which shares (or other ownership interests) (a) having 50% or more of the
voting power regularly entitled to vote for directors (or equivalent management
rights) or (b) regularly entitled to receive 50% or more of the dividends (or
their equivalents) paid on the common stock (or its equivalent) are owned,
directly or indirectly, by the Company; provided, however, that in the case of
an Incentive Stock Option, the term "Subsidiary" shall mean a Subsidiary (as
defined by the preceding clause) which is also a "subsidiary corporation" as
defined in section 425(f) of the Internal Revenue Code and the regulations
thereunder adopted by the Secretary of the Treasury or his delegate, or any
provisions that may be adopted to amend or replace such section or regulations
or both.
Section 3. GRANTS OF STOCK INCENTIVES:
(a) Subject to the provisions of this Plan, the Incentive
Committee may at any time, or from time to time, grant Stock Incentives under
this Plan to, and only to, Key Employees.
(b) Stock Incentives may be granted in the following forms:
(i) a Stock Award, or
(ii) an Option, or
(iii) a combination of a Stock Award and an Option.
Section 4. STOCK SUBJECT TO THIS PLAN:
(a) Subject to the provisions of paragraph (c) of this section
4 and of section 8, (i) the maximum number of shares of Common Stock which may
be issued or transferred pursuant to Stock Incentives granted under this Plan
shall not exceed 5,000,000 shares of Common Stock, (ii) the maximum number of
shares of Common Stock which may be acquired upon exercise of Options granted
at any time or from time to time under this Plan to any one Key Employee shall
in no event exceed 5% of the maximum number of shares which may be issued or
transferred pursuant to Stock Incentives granted under this Plan, and (iii) the
maximum number of shares of Common Stock which may be acquired upon exercise of
Options granted at any time or from time to time under this Plan to Key
Employees serving as directors of the Company at the time they recommend this
Plan for approval and adoption by the shareholders of the Company shall in no
event exceed 25% of the maximum number of the shares which may be issued or
transferred pursuant to Stock Incentives granted under this Plan.
(b) Authorized but unissued shares of Common Stock and shares
of Common Stock held in the treasury, whether acquired by the Company
specifically for use under this Plan or otherwise, may be used, as the
Incentive Committee may from time to time determine, for purposes of this Plan,
provided, however, that any shares acquired or
-3-
<PAGE> 5
held by the Company for the purposes of this Plan shall, unless and until
transferred to a Key Employee in accordance with the terms and conditions of a
Stock Incentive, be and at all times remain treasury shares of the Company,
irrespective of whether such shares are entered in a special account for
purposes of this Plan, and shall be available for any corporate purpose.
(c) If any shares of Common Stock subject to a Stock Incentive
shall not be issued or transferred and shall cease to be issuable or
transferable because of the termination, in whole or in part, of such Stock
Incentive or for any other reason, or if any such shares shall, after issuance
or transfers be reacquired by the Company or a Subsidiary because of an
employee's failure to comply with the terms and conditions of a Stock
Incentive, the shares not so issued or transferred, or the shares so reacquired
by the Company or a Subsidiary, shall no longer be charged against any of the
limitations provided for in paragraph (a) of this section 4 and may again be
made subject to Stock Incentives.
(d) For purposes of this section 4, Common Stock shall include
shares of common stock, par value $1.00 per share, of Grace-Connecticut issued
or transferred pursuant to Stock Incentives granted by Grace-Connecticut under
this Plan as in effect prior to its adoption by the Company, except that in
determining, for purposes of this section 4, the number of shares so issued or
transferred by Grace-Connecticut prior to the two-for-one split of the common
stock of Grace-Connecticut which occurred in December 1987, adjustment shall be
made to reflect such stock split.
Section 5. STOCK AWARDS: Stock Incentives in the form of Stock Awards
shall be subject to the following provisions:
(a) A Stock Award shall be granted only in payment of
Incentive Compensation that has been earned or as Incentive Compensation to be
earned, including, without limitation, Incentive Compensation awarded
concurrently with or prior to the grant of the Stock Award.
(b) For the purposes of this Plan, in determining the value of
a Stock Award, all shares of Common Stock subject to such Stock Award shall be
valued at not less than 100% of the Fair Market Value of such shares on the
date such Stock Award is granted, regardless of whether or when such shares are
issued or transferred to the Key Employee and whether or not such shares are
subject to restrictions which affect their value.
(c) Shares of Common Stock subject to a Stock Award may be
issued or transferred to the Key Employee at the time the Stock Award is
granted, or at any time subsequent thereto, or in installments from time to
time, as the Incentive Committee shall determine. In the event that any such
issuance or transfer shall not be made to the Key Employee at the time the
Stock Award is granted, the Incentive Committee may provide
-4-
<PAGE> 6
for payment to such Key Employee, either in cash or shares of Common Stock,
from time to time or at the time or times such shares shall be issued or
transferred to such Key Employee, of amounts not exceeding the dividends which
would have been payable to such Key Employee in respect of such shares (as
adjusted under section 8) if such shares had been issued or transferred to such
Key Employee at the time such Stock Award was granted. Any amount payable in
shares of Common Stock under the terms of a Stock Award may, at the discretion
of the Company, be paid in cash, on each date on which delivery of shares would
otherwise have been made, in an amount equal to the Fair Market Value on such
date of the shares which would otherwise have been delivered.
(d) A Stock Award shall be subject to such terms and
conditions, including, without limitation, restrictions on the sale or other
disposition of the Stock Award or of the shares issued or transferred pursuant
to such Stock Award, as the Incentive Committee shall determine; provided,
however, that upon the issuance or transfer of shares pursuant to a Stock
Award, the recipient shall, with respect to such shares, be and become a
shareholder of the Company fully entitled to receive dividends, to vote and to
exercise all other rights of a shareholder except to the extent otherwise
provided in the Stock Award. Each Stock Award shall be evidenced by a written
instrument in such form as the Incentive Committee shall determine provided the
Stock Award is consistent with this Plan and incorporates it by reference.
Section 6. OPTIONS: Except as otherwise provided in section 12, Stock
Incentives in the form of Options shall be subject to the following provisions:
(a) Subject to the provisions of section 8, the purchase price
per share shall be not less than 100% of the Fair Market Value of a share of
Common Stock on the date the Option is granted. The purchase price shall be
paid in cash or, if so provided in the Option or authorized by the Incentive
Committee (and subject to such terms and conditions as are specified in the
Option or by the Incentive Committee), in shares of Common Stock delivered to
the Company or in a combination of cash and such shares. Shares of Common
Stock thus delivered shall be valued at their Fair Market Value on the date of
exercise.
(b) Each Option may be exercisable in full at the time of
grant, or may become exercisable in one or more installments and at such time
or times, as the Incentive Committee shall determine. Unless otherwise provided
in the Option, an Option, to the extent it is or becomes exercisable, may be
exercised at any time in whole or in part until the expiration or termination
of the Option.
(c) Each Option shall be exercisable during the life of the
optionee only by him, and after his death only by his estate or by a person who
acquired the right to exercise the Option by will or the laws of descent and
distribution. An Option, to the extent that it shall not have been exercised,
shall terminate when the optionee ceases to be an
-5-
<PAGE> 7
employee of the Company or a Subsidiary, unless he ceases to be an employee by
reason of his resignation with the consent of the Incentive Committee (which
consent may be given before or after resignation), or by reason of his death,
incapacity or retirement under a retirement plan of the Company or a
Subsidiary. Except as provided in the next sentence, if the optionee ceases to
be an employee by reason of such resignation, the Option shall terminate three
months after he ceases to be an employee. If the optionee ceases to be an
employee by reason of such death, incapacity or retirement, or if he should die
during the three-month period referred to in the preceding sentence, the Option
shall terminate 15 months after he ceases to be an employee. Where an Option
is exercised more than three months after the optionee ceased to be an
employee, it may be exercised only to the extent it could have been exercised
three months after he ceased to be an employee. A leave of absence for
military or governmental service or for other purposes shall not, if approved
by the Incentive Committee, be deemed a termination of employment within the
meaning of this paragraph (c), provided, however, that an Option may not be
exercised during any such leave of absence. Notwithstanding the foregoing
provisions of this paragraph (c) or any other provision of this Plan, no Option
shall be exercisable after expiration of a period of ten years and one month
from the date the Option is granted. Where a Non-Statutory Stock Option is
granted for a term of less than ten years and one month, the Incentive
Committee may, at any time prior to the expiration of the Option, extend its
term for a period ending not later than ten years and one month from the date
the Option was granted. Such an extension shall not be deemed the grant of an
Option under this Plan.
(d) Options shall be granted for such lawful consideration as
the Incentive Committee may determine.
(e) Neither the Company nor any Subsidiary may directly or
indirectly lend any money to any person for the purpose of assisting him to
purchase or carry shares of Common Stock issued or transferred upon the
exercise of an Option.
(f) No Option nor any right thereunder may be assigned or
transferred by the optionee except by will or the laws of descent and
distribution. If so provided in the Option or if so authorized by the
Incentive Committee and subject to such terms and conditions as are specified
in the Option or by the Incentive Committee, the Company shall, upon or without
the request of the holder of the Option and at any time or from time to time,
cancel all or a portion of the Option then subject to exercise and either (i)
pay the holder an amount of money equal to the excess, if any, of the Fair
Market Value, at such time or times, of the shares subject to the portion of
the Option so canceled over the purchase price of such shares, or (ii) issue or
transfer shares of Common Stock to the holder with a Fair Market Value, at such
time or times, equal to such excess.
(g) An Option granted under the Plan may, but need not, be an
Incentive Stock Option. All shares of Common Stock which may be made subject
to Stock
-6-
<PAGE> 8
Incentives under this Plan may be made subject to Incentive Stock Options;
provided that, the aggregate Fair Market Value (determined as of the time the
option is granted) of the shares subject to each installment becoming
exercisable for the first time in any calendar year under Incentive Stock
Options granted to any employee on or after January 1, 1987 (under all plans,
including this Plan, of his employer corporation and its parent and subsidiary
corporation) shall not exceed $100,000.
(h) Each Option shall be evidenced by a written instrument,
which shall contain such terms and conditions, and shall be in such form, as
the Incentive Committee shall determine, provided the Option is consistent with
this Plan and incorporates it by reference. Notwithstanding the preceding
sentence, an Option, if so approved by the Incentive Committee, may include
restrictions and limitations in addition to those provided for in this Plan.
Section 7. COMBINATIONS OF STOCK AWARDS AND OPTIONS: Stock Incentives
authorized by paragraph (b)(iii) of section 3 in the form of combinations of
Stock Awards and Options shall be subject to the following provisions:
(a) A Stock Incentive may be a combination of any form of
Stock Award with any form of Option; provided, however, that the terms and
conditions of such Stock Incentive pertaining to a Stock Award are consistent
with section 5 and the terms and conditions of such Stock Incentive pertaining
to an Option are consistent with section 6.
(b) Such combination Stock Incentive shall be subject to such
other terms and conditions as the Incentive Committee may determine, including,
without limitation, a provision terminating in whole or in part a portion
thereof upon the exercise in whole or in part of another portion thereof. Such
combination Stock Incentive shall be evidenced by a written instrument in such
form as the Incentive Committee shall determine, provided it is consistent with
this Plan and incorporates it by reference.
Section 8. ADJUSTMENT PROVISIONS:
(a) In the event that any reclassification, split-up or
consolidation of shares of Common Stock shall be effected, or the outstanding
shares of Common Stock are, in connection with a merger or consolidation of the
Company or a sale by the Company of all or a part of its assets, exchanged for
a different number or class of shares of stock or other securities or property
of the Company or for shares of the stock or other securities or property of
any other corporation or person, or a record date for determination of holders
of Common Stock entitled to receive a dividend payable in Common Stock shall
occur, (i) the number and class of shares or other securities or property that
may be issued or transferred pursuant to Stock Incentives thereafter granted,
(ii) the number and class of shares or other securities or property that have
not been issued or transferred under outstanding Stock Incentives, (iii) the
purchase price to be paid per share or other unit
-7-
<PAGE> 9
under outstanding Stock Incentives, and (iv) the price to be paid per share or
other unit by the Company or a Subsidiary for shares or other securities or
property issued or transferred pursuant to Stock Incentives that are subject to
a right of the Company or a Subsidiary to reacquire such shares or other
securities or property, shall in each case be equitably adjusted as determined
by the Incentive Committee.
(b) In the event that there shall occur any spin-off or other
distribution of assets of the Company to its shareholders (including without
limitation an extraordinary dividend), (i) the number and class of shares or
other securities or property that may be issued pursuant to Stock Incentives
thereafter granted, (ii) the number and class of shares or other securities or
property that have not been issued under outstanding Stock Incentives, (iii)
the purchase price to be paid per share or other unit under outstanding Stock
Incentives, and (iv) the price to be paid per share or other unit by the
Company or a Subsidiary for shares or other securities or property issued
pursuant to Stock Incentives that are subject to a right of the Company or a
Subsidiary to reacquire such shares or other securities or property, shall in
each case be equitably adjusted as determined by the Incentive Committee.
Section 9. TERM: This Plan was deemed adopted and became effective on
the date it was approved and adopted by the shareholders of Grace-Connecticut.
This Plan was deemed adopted as to the Company on the date of the adoption and
assumption thereof by the Board of Directors with the approval of the
shareholders of Grace-Connecticut and became effective as to the Company on the
effective date of the merger of Grace Merger Corp., a subsidiary of the
Company, with and into Grace-Connecticut. No Stock Incentives shall be granted
under this Plan after April 30, 1991.
Section 10. ADMINISTRATION:
(a) This Plan shall be administered by the Incentive
Committee. No director shall be designated as or continue to be a member of
the Incentive Committee unless he shall at the time of designation and service
be a "disinterested person" within the meaning of Rule 16b-3 of the Securities
and Exchange Commission (or any successor provision at the time in effect). A
member of the Incentive Committee shall not be eligible to be granted a Stock
Incentive while serving on the Incentive Committee. Grants of Stock Incentives
may be made by the Incentive Committee either in or without consultation with
employees, but in either case the Incentive Committee shall have full authority
to act in the matter of selection of all Key Employees and in granting Stock
Incentives to them.
(b) The Incentive Committee may establish such rules and
regulations, not inconsistent with the provisions of this Plan, as it deems
necessary to determine eligibility to participate in this Plan and for the
proper administration of this Plan, and may amend or revoke any rule or
regulation so established. The Incentive Committee may make such
determinations and interpretations under or in connection with this Plan as it
deems
-8-
<PAGE> 10
necessary or advisable. All such rules, regulations, determinations and
interpretations, subject to the provisions of section 3.1 of the By-laws of the
Company, shall be binding and conclusive upon the Company, its Subsidiaries,
its shareholders and all employees, and upon their respective legal
representatives, beneficiaries, successors and assigns and upon all other
persons claiming under or through any of them.
(c) Any action required or permitted to be taken by the
Incentive Committee under this Plan may be taken in accordance with Article III
of the By-laws of the Company even though, because of a vacancy or vacancies as
a result of resignations or otherwise, the total number of directors who are
then members of the Incentive Committee shall be less than the number initially
designated by the Board of Directors.
(d) Members of the Board of Directors and members of the
Incentive Committee acting under this Plan shall be fully protected in relying
in good faith upon the advice of counsel and shall incur no liability except
for gross negligence or willful misconduct in the performance of their duties.
Section 11. GENERAL PROVISIONS:
(a) Nothing ln this Plan nor in any instrument executed
pursuant hereto shall confer upon any employee any right to continue in the
employ of the Company or a Subsidiary, or shall affect the right of the Company
or of a Subsidiary to terminate the employment of any employee with or without
cause.
(b) No shares of Common Stock shall be issued or transferred
pursuant to a Stock Incentive unless and until all legal requirements
applicable to the issuance or transfer of such shares have, in the opinion of
counsel to the Company, been compiled with. In connection with any such
issuance or transfer the person acquiring the shares shall, if requested by the
Company, give assurances, satisfactory to counsel to the Company, in respect of
such matters as the Company or a Subsidiary may deem desirable to assure
compliance with all applicable legal requirements.
(c) No employee (individually or as a member of a group), and
no beneficiary or other person claiming under or through him, shall have any
right, title or interest in or to any shares of Common Stock allocated or
reserved for the purposes of this Plan or subject to any Stock Incentive except
as to such shares of Common Stock, if any, as shall have been issued or
transferred to him.
(d) The Company or a Subsidiary may, with the approval of the
Incentive Committee, enter into an agreement or other commitment to grant a
Stock Incentive in the future to a person who is or will be a Key Employee at
the time of grant, and,
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<PAGE> 11
notwithstanding any other provision of this Plan, any such agreement or
commitment shall not be deemed the grant of a Stock Incentive until the date on
which the Incentive Committee takes action to implement such agreement or
commitment.
(e) In the case of a grant of a Stock Incentive to an employee
of a Subsidiary, such grant may, if the Incentive Committee so directs, be
implemented by the Company issuing or transferring the shares, if any, covered
by the Stock Incentive to the Subsidiary, for such consideration as the
Incentive Committee may specify, upon the condition or understanding that the
Subsidiary will transfer the shares to the employee in accordance with the
terms of the Stock Incentive specified by the Incentive Committee pursuant to
the provisions of this Plan. Notwithstanding any other provision hereof, such
Stock Incentive may be issued by and in the name of the Subsidiary and shall be
deemed granted on the date it is approved by the Incentive Committee, on the
date it is delivered by the Subsidiary or on such other date between said two
dates as the Incentive Committee shall specify.
(f) The Company or a Subsidiary may make such provisions as it
may deem appropriate for the withholding of any taxes which the Company or a
Subsidiary determines it is required to withhold in connection with any Stock
Incentive.
(g) Nothing ln this Plan is intended to be a substitute for,
or shall preclude or limit the establishment or continuation of, any other
plan, practice or arrangement for the payment of compensation or fringe
benefits to employees generally, or to any class or group of employees, which
the Company or any Subsidiary now has or may hereafter lawfully put into
effect, including, without limitation, any incentive compensation, retirement,
pension, group insurance, stock purchase, stock bonus or stock option plan.
Section 12. ACQUISITIONS: If the Company or any Subsidiary should
merge or consolidate with, or purchase stock or assets or otherwise acquire the
whole or part of the business of, another company, the Company in connection
therewith, upon the approval of the Incentive Committee, (a) may assume, in
whole or in part and with or without modifications or conditions, any stock
options granted by the acquired company to its employees in their capacity as
such, or (b) may grant new Options in substitution therefor; provided that the
granting of an option with the terms and conditions of the assumed or
substitute options is permissible under either this Plan or a plan approved by
the shareholders of the acquired company. For the purposes of the preceding
sentence, the permissibility of the granting of an option under a plan shall be
determined as of the date of grant of the original option by the acquired
company and not as of the date of assumption or substitution by the Company.
Section 13. AMENDMENTS AND DISCONTINUANCE:
(a) This Plan may be amended by the Board of Directors upon
the recommendation of the Incentive Committee, provided that, without the
approval of the
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<PAGE> 12
shareholders of the Company, no amendment shall be made which (i) increases the
maximum number of shares of Common Stock that may be issued or transferred
pursuant to Stock Incentives, the maximum number of shares of Common Stock that
may be acquired upon exercise of Options granted to any one employee or the
maximum number of shares of Common Stock that may be acquired upon exercise of
Options granted to employees serving as directors, in each case as provided in
paragraph (a) of section 4, (ii) except as may be required to conform this Plan
to changes in the federal securities laws and the rules and regulations of the
Securities and Exchange Commission (or any successor agency), withdraws the
administration of this Plan from the Incentive Committee or amends the
provisions of paragraph (a) of section 10 with respect to eligibility and
disinterest of members of the Incentive Committee, (iii) permits any person who
is not at the time a Key Employee to be granted a Stock Incentive, (iv) amends
the provisions of paragraph (b) of section 5 or paragraph (a) of section 6 to
permit shares to be valued at, or to have a purchase price of, respectively,
less than 100% of Fair Market Value, (v) amends section 9 to extend the date
set forth therein, or (vi) amends this section 13.
(b) The Board of Directors may by resolution adopted by a
majority of the entire Board of Directors discontinue this Plan.
(c) No amendment or discontinuance of this Plan by the Board
of Directors or the shareholders of the Company shall, without the consent of
the employee, adversely affect any Stock Incentive theretofore granted to him,
and no amendment by the Incentive Committee of any such Stock Incentive shall,
without the consent of the employee, adversely affect such Stock Incentive.
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<PAGE> 1
EXHIBIT 10.03
-----
W. R. GRACE & CO.
1986 STOCK INCENTIVE PLAN
(As amended through March 7, 1996)
<PAGE> 2
W. R. GRACE & CO.
1986 STOCK INCENTIVE PLAN
1. Purposes: The purposes of this Plan are (a) to secure for Key
Persons the benefits of incentives attributable to Common Stock, (b) to
encourage Key Persons to increase their interest in the future growth and
prosperity of the Company and to stimulate and sustain constructive and
imaginative thinking by Key Persons, (c) to further the identity of interests
of Key Persons with the interests of the Company's shareholders, and (d) to
induce the service or continued service of Key Persons and to enable the
Company to compete with other organizations offering similar or other
incentives in obtaining and retaining the services of competent individuals.
2. Definitions: Unless otherwise required by the context, the
following terms when used in this Plan shall have the meanings set forth in
this Section 2.
Board of Directors: The Board of Directors of the Company.
cessation of service (or words of similar import): When a person
ceases to be, and is no longer, an employee of, or consultant to, the Company
or a Subsidiary; provided, however, in the case of an Incentive Stock Option,
"cessation of service" (or words of similar import) shall mean when a person
ceases to be an employee of the Company or a Subsidiary.
Common Stock: The common stock of the Company, par value $1.00 per
share, or such other class of shares or other securities or property as may be
applicable pursuant to the provisions of section 8.
Company: W. R. Grace & Co., a New York corporation.
Fair Market Value: The fair market value of a share of Common Stock
determined in accordance with any reasonable method approved by the Incentive
Committee. In the absence of any such approved method, Fair Market Value, as
applied to any date, shall be the mean between the high and low sales prices of
a share of Common Stock as reported on the Consolidated Transactions Tape for
securities listed on the New York Stock Exchange for such date or, if no such
sales were reported for such date, for the next preceding date for which sales
were so reported.
Grace-Connecticut: W. R. Grace & Co.-Conn., a Connecticut corporation
which is a subsidiary of the Company and which was formerly known as "W. R.
Grace & Co."
Incentive Committee: The committee designated by the Board of
Directors to administer stock incentive and stock option plans of the Company
and its subsidiaries.
<PAGE> 3
Incentive Compensation: Bonuses, extra and other compensation payable
in addition to a salary or other base amount, whether contingent or not,
whether discretionary or required to be paid pursuant to a plan, agreement,
resolution or arrangement, and whether payable currently or on a deferred
basis, in cash, Common Stock or other property, awarded by the Company or a
Subsidiary prior or subsequent to the date of the approval and adoption of this
Plan.
Incentive Stock Option: An option, including an Option as the context
may require, intended to meet the requirements of section 422A of the Internal
Revenue Code and the regulations thereunder applicable to incentive stock
options adopted by the Secretary of the Treasury or his delegate, or any
provisions that may be adopted to amend or replace such section or regulations
or both.
Key Employee: An employee of the Company or a Subsidiary who is a Key
Person.
Key Person: An employee of, or a consultant to, the Company or a
Subsidiary, including an officer or director who is an employee or consultant,
who in the opinion of the Incentive Committee can contribute significantly to
the growth and successful operations of the Company or a Subsidiary. The grant
of a Stock Incentive to an employee or consultant by the Incentive Committee
shall be deemed a determination by the Incentive Committee that such person is
a Key Person.
Non-Statutory Stock Option: An option, including an Option as the
context may require, which is not an Incentive Stock Option or another form of
statutory stock option (within the meanings of sections 422, 423 and 424 of the
Internal Revenue Code and the regulations thereunder as adopted and amended
from time to time by the Secretary of the Treasury or his delegate).
Option: An option granted under this Plan to purchase shares of Common
Stock.
Plan: The 1986 Stock Incentive Plan of the Company herein set forth as
the same may from time to time be amended.
Performance Unit: A unit representing a share of Common Stock subject
to a Stock Award, the issuance, transfer or retention of which, in whole or in
part, is contingent upon or measured by the attainment of a specified
performance objective or objectives, including, without limitation, objectives
determined (on a consolidated or unconsolidated basis) by reference to or
changes in (a) the Fair Market Value, book value or earnings per share of
Common Stock, or (b) the sales and revenues, net income, return on capital
employed, asset values or net worth of the Company or one or more of its
groups, divisions, Subsidiaries or other units, or (c) a combination of two or
more of the foregoing or other factors.
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<PAGE> 4
service: Service as an employee of, or a consultant to, the Company or
a Subsidiary. "To serve" has a correlative meaning.
Stock Award: An issuance or transfer of shares of Common Stock at the
time the Stock Incentive is granted or as soon thereafter as practicable, or an
undertaking (other than an Option) to issue or transfer such shares in the
future, including, without limitation, such an issuance, transfer or
undertaking with respect to Performance Units.
Stock Incentive: A stock incentive granted under this Plan in one of
the forms provided for in section 3.
Subsidiary: A corporation (or other form of business association) of
which shares (or other ownership interests) (a) having 50% or more of the
voting power regularly entitled to vote for directors (or equivalent management
rights) or (b) regularly entitled to receive 50% or more of the dividends (or
their equivalents) paid on the common stock (or its equivalent) are owned,
directly or indirectly, by the Company; provided, however, that in the case of
an Incentive Stock Option, the term "Subsidiary" shall mean a Subsidiary (as
defined by the preceding clause) which is also a "subsidiary corporation" as
defined in section 425(f) of the Internal Revenue Code and the regulations
thereunder adopted by the Secretary of the Treasury or his delegate, or any
provisions that may be adopted to amend or replace such section or regulations
or both.
3. "Grant" of Stock Incentives:
(a) Subject to the provisions of this Plan, the Incentive Committee
may at any time, or from time to time, grant Stock Incentives under this Plan
to, and only to, Key Persons; provided, however, that Incentive Stock Options
may be granted to, and only to, Key Employees.
(b) Stock Incentives may be granted in the following forms:
(i) a Stock Award, or
(ii) an Option, or
(iii) a combination of a Stock Award and an Option.
4. Stock Subject to this Plan:
(a) Subject to the provisions of paragraph (c) of this section 4 and
of section 8, (i) the maximum number of shares of Common Stock which may be
issued or transferred pursuant to Stock Incentives granted under this Plan
shall not exceed 5,000,000 shares of Common Stock, (ii) the maximum number of
shares of Common Stock which may be acquired upon exercise of Options granted
at any time or from time to time under this Plan to any one Key Person shall in
no event exceed 5% of the maximum number of shares
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<PAGE> 5
which may be issued or transferred pursuant to Stock Incentives granted under
this Plan, and (iii) the maximum number of shares of Common Stock which may be
acquired upon exercise of Options granted at any time or from time to time
under this Plan to Key Persons serving as directors of the Company at the time
they recommend this Plan for approval and adoption by the shareholders of the
Company shall in no event exceed 25% of the maximum number of the shares which
may be issued or transferred pursuant to Stock Incentives granted under this
Plan.
(b) Authorized but unissued shares of Common Stock and shares of
Common Stock held in the treasury, whether acquired by the Company specifically
for use under this Plan or otherwise, may be used, as the Incentive Committee
may from time to time determine, for purposes of this Plan, provided, however,
that any shares acquired or held by the Company for the purposes of this Plan
shall, unless and until transferred to a Key Person in accordance with the
terms and conditions of a Stock Incentive, be and at all times remain treasury
shares of the Company, irrespective of whether such shares are entered in a
special account for purposes of this Plan, and shall be available for any
corporate purpose.
(c) If any shares of Common Stock subject to a Stock Incentive shall
not be issued or transferred and shall cease to be issuable or transferable
because of the termination, in whole or in part, of such Stock Incentive or for
any other reason, or if any such shares shall, after issuance or transfer, be
reacquired by the Company or a Subsidiary because of an employee's failure to
comply with the terms and conditions of a Stock Incentive, the shares not so
issued or transferred, or the shares so reacquired by the Company or a
Subsidiary, shall no longer be charged against any of the limitations provided
for in paragraph (a) of this section 4 and may again be made subject to Stock
Incentives.
(d) For purposes of this section 4, Common Stock shall include shares
of common stock, par value $1.00 per share, of Grace-Connecticut issued or
transferred pursuant to Stock Incentives granted by Grace-Connecticut under
this Plan as in effect prior to its adoption by the Company, except that in
determining, for purposes of this section 4, the number of shares so issued or
transferred by Grace-Connecticut prior to the two-for-one split of the common
stock of Grace-Connecticut which occurred in December 1987, adjustment shall be
made to reflect such stock split.
5. Stock Awards: Except as otherwise provided in section 12 and
in paragraph (f) of section 11, Stock Incentives in the form of Stock Awards
shall be subject to the following provisions:
(a) A Stock Award shall be granted only in payment of Incentive
Compensation that has been earned or as Incentive Compensation to be earned,
including, without limitation, Incentive Compensation awarded concurrently with
or prior to the grant of the Stock Award.
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<PAGE> 6
(b) For the purposes of this Plan, in determining the value of a
Stock Award, all shares of Common Stock subject to such Stock Award shall be
valued at not less than 100% of the Fair Market Value of such shares on the
date such Stock Award is granted, regardless of whether or when such shares are
issued or transferred to the Key Person and whether or not such shares are
subject to restrictions which affect their value.
(c) Shares of Common Stock subject to a Stock Award may be issued or
transferred to the Key Person at the time the Stock Award is granted, or at any
time subsequent thereto, or in installments from time to time, as the Incentive
Committee shall determine. In the event that any such issuance or transfer
shall not be made to the Key Person at the time the Stock Award is granted, the
Incentive Committee may provide for payment to such Key Person, either in cash
or shares of Common Stock, from time to time or at the time or times such
shares shall be issued or transferred to such Key Person, of amounts not
exceeding the dividends which would have been payable to such Key Person in
respect of such shares (as adjusted under section 8) if such shares had been
issued or transferred to such Key Person at the time such Stock Award was
granted. Any amount payable in shares of Common Stock under the terms of a
Stock Award may, at the discretion of the Company, be paid in cash, on each
date on which delivery of shares would otherwise have been made, in an amount
equal to the Fair Market Value on such date of the shares which would otherwise
have been delivered.
(d) A Stock Award shall be subject to such terms and conditions,
including, without limitation, restrictions on the sale or other disposition of
the Stock Award or of the shares issued or transferred pursuant to such Stock
Award, as the Incentive Committee shall determine; provided, however, that upon
the issuance or transfer of shares pursuant to a Stock Award, the recipient
shall, with respect to such shares, be and become a shareholder of the Company
fully entitled to receive dividends, to vote and to exercise all other rights
of a shareholder except to the extent otherwise provided in the Stock Award.
Each Stock Award shall be evidenced by a written instrument in such form as the
Incentive Committee shall determine, provided the Stock Award is consistent
with this Plan and incorporates it by reference.
6. Options: Except as otherwise provided in section 12 and in
paragraph (f) of section 11, Stock Incentives in the form of Options shall be
subject to the following provisions:
(a) Subject to the provisions of section 8, the purchase price per
share shall be not less than 100% of the Fair Market Value of a share of Common
Stock on the date the Option is granted. The purchase price shall be paid in
cash or, if so provided in the Option or authorized by the Incentive Committee
(and subject to such terms and conditions as are specified in the Option or by
the Incentive Committee), in shares of Common Stock delivered to the Company or
in a combination of cash and such shares. Share of Common Stock thus delivered
shall be valued at their Fair Market Value on the date of exercise.
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<PAGE> 7
(b) Each Option may be exercisable in full at the time of grant, or
may become exercisable in one or more installments and at such time or times,
as the Incentive Committee shall determine. Unless otherwise provided in the
Option, an Option, to the extent it is or becomes exercisable, may be exercised
at any time in whole or in part until the expiration or termination of the
Option.
(c) Each Option shall be exercisable during the life of the optionee
only by him, and after death only by his estate or by a person who acquired the
right to exercise the Option by will or the laws of descent and distribution.
An Option, to the extent that it shall not have been exercised or canceled,
shall terminate as follows after the optionee ceases to serve: (i) if the
optionee shall voluntarily resign without the consent of the Incentive
Committee or be terminated for cause, the Option shall terminate immediately
upon cessation of service; (ii) if the optionee shall cease to serve by reason
of death, incapacity or retirement under a retirement plan of the Company or a
Subsidiary, the Option shall terminate 15 months after cessation of service if
the optionee has served for less than 15 years, the Option shall terminate two
years after cessation of service if the optionee has served 15 or more years
but less than 25 years, and the Option shall terminate three years after
cessation of service if the optionee has served 25 or more years; and (iii)
except as provided in the next sentence, in all other cases the Option shall
terminate three months after cessation of service unless the Incentive
Committee shall approve a longer period (which approval may be given before or
after cessation of service), not to exceed, however, the period which would
have been applicable if the optionee had died, become incapacitated or retired
under a retirement plan of the Company or a Subsidiary. If the optionee shall
die or become incapacitated during the three-month period (or such longer
period as the Incentive Committee may approve) referred to in the preceding
clause (iii), the Option shall terminate at such time as it would have
terminated had the service of the optionee ceased by reason of his death,
incapacity or retirement under a retirement plan of the Company or Subsidiary.
A leave of absence for military or governmental service or for other purposes
shall not, if approved by the Incentive Committee (which approval may be given
before or after the leave of absence commences), be deemed a termination of
employment within the meaning of this paragraph (c); provided, however, that an
Option may not be exercised or canceled during any such leave of absence.
Notwithstanding the foregoing provisions of this paragraph (c) or any other
provision of this Plan, no Option shall be exercisable after expiration of a
period of ten years and one month from the date the Option is granted. Where a
Non-Statutory Stock Option is granted for a term of less than ten years and one
month, the Incentive Committee may, at any time prior to the expiration of the
Option, extend its term for a period ending not later than ten years and one
month from the date the Option was granted. Such an extension shall not be
deemed the grant of an Option under this Plan.
(d) Options shall be granted for such lawful consideration as may be
provided in the Option or as the Incentive Committee may determine.
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<PAGE> 8
(e) No Option nor any right thereunder may be assigned or transferred
except by will or the laws of descent and distribution. If so provided in the
Option or if so authorized by the Incentive Committee and subject to such terms
and conditions as are specified in the Option or by the Incentive Committee,
the Company shall, upon or without the request of the holder of the Option and
at any time or from time to time, cancel all or a portion of the Option then
subject to exercise and either (i) pay the holder an amount of money equal to
the excess, if any, of the Fair Market Value, at such time or times, of the
shares subject to the portion of the Option so canceled over the purchase price
of such shares, or (ii) issue or transfer shares of Common Stock to the holder
with a Fair Market Value, at such time or times, equal to such excess.
(f) An Option may, but need not, be an Incentive Stock Option. All
shares of Common Stock which may be made subject to Stock Incentives under this
Plan may be made subject to Incentive Stock Options; provided that the
aggregate Fair Market Value (determined as of the time the option is granted)
of the shares subject to each installment becoming exercisable for the first
time in any calendar year under Incentive Stock Options granted to any employee
on or after January 1, 1987 (under all plans, including this Plan, of his
employer corporation and its parent and subsidiary corporations) shall not
exceed $100,000.
(g) Each Option shall be evidenced by a written instrument, which
shall contain such terms and conditions, and shall be in such form, as the
Incentive Committee shall determine, provided the Option is consistent with
this Plan and incorporates it by reference. Notwithstanding the preceding
sentence, an Option, if so approved by the Incentive Committee, may include
restrictions and limitations in addition to those provided for in this Plan.
7. Combinations of Stock Awards and Options: Stock Incentives
authorized by paragraph (b)(iii) of section 3 in the form of combinations of
Stock Awards and Options shall be subject to the following provisions:
(a) A Stock Incentive may be a combination of any form of Stock Award
with any form of Option; provided, however, that the terms and conditions of
such Stock Incentive pertaining to a Stock Award are consistent with section 5
and the terms and conditions of such Stock Incentive pertaining to an Option
are consistent with section 6.
(b) Such combination Stock Incentive shall be subject to such other
terms and conditions as the Incentive Committee may determine, including,
without limitation, a provision terminating in whole or in part a portion
thereof upon the exercise in whole or in part of another portion thereof. Such
combination Stock Incentive shall be evidenced by a written instrument in such
form as the Incentive Committee shall determine, provided it is consistent with
this Plan and incorporates it by reference.
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<PAGE> 9
8. Adjustment Provisions:
(a) In the event that any reclassification, split-up or consolidation
of shares of Common Stock shall be effected, or the outstanding shares of
Common Stock are, in connection with a merger or consolidation of the Company
or a sale by the Company of all or a part of its assets, exchanged for a
different number or class of shares of stock or other securities or property of
the Company or for shares of the stock or other securities or property of any
other corporation or person, or a record date for determination of holders of
Common Stock entitled to receive a dividend payable in Common Stock shall
occur, (i) the number and class of shares or other securities or property that
may be issued or transferred pursuant to Stock Incentives thereafter granted,
(ii) the number and class of shares or other securities or property that have
not been issued or transferred under outstanding Stock Incentives, (iii) the
purchase price to be paid per share or other unit under outstanding Stock
Incentives, and (iv) the price to be paid per share or other unit by the
Company or a Subsidiary for shares or other securities or property issued or
transferred pursuant to Stock Incentives which are subject to a right of the
Company or a Subsidiary to reacquire such shares or other securities or
property, shall in each case be equitably adjusted as determined by the
Incentive Committee.
(b) In the event that there shall occur any spin-off or other
distribution of assets of the Company to its shareholders (including without
limitation an extraordinary dividend), (i) the number and class of shares or
other securities or property that may be issued pursuant to Stock Incentives
thereafter granted, (ii) the number and class of shares or other securities or
property that have not been issued under outstanding Stock Incentives, (iii)
the purchase price to be paid per share or other unit under outstanding Stock
Incentives, and (iv) the price to be paid per share or other unit by the
Company or a Subsidiary for shares or other securities or property issued
pursuant to Stock Incentives that are subject to a right of the Company or a
Subsidiary to reacquire such shares or other securities or property, shall in
each case be equitably adjusted as determined by the Incentive Committee.
9. Term: This Plan was deemed adopted and became effective on
the date it was approved and adopted by the shareholders of Grace-Connecticut.
This Plan was deemed adopted as to the Company on the date of the adoption and
assumption thereof by the Board of Directors with the approval of the
shareholders of Grace-Connecticut and became effective as to the Company on the
effective date of the merger of Grace Merger Corp., a subsidiary of the
Company, with and into Grace-Connecticut. No Stock Incentives shall be granted
under this Plan after April 30, 1996.
10. Administration:
(a) This Plan shall be administered by the Incentive Committee. No
director shall be designated as or continue to be a member of the Incentive
Committee unless he shall
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<PAGE> 10
at the time of designation and service be a "disinterested person" within the
meaning of Rule 16b-3 of the Securities and Exchange Commission (or any
successor provision at the time in effect). A member of the Incentive
Committee shall not be eligible to be granted a Stock Incentive while serving
on the Incentive Committee. Grants of Stock Incentives may be made by the
Incentive Committee either in or without consultation with employees, but in
either case the Incentive Committee shall have full authority to act in the
matter of selection of all Key Persons and in granting Stock Incentives to
them.
(b) The Incentive Committee may establish such rules and regulations,
not inconsistent with the provisions of this Plan, as it deems necessary to
determine eligibility to participate in this Plan and for the proper
administration of this Plan, and may amend or revoke any rule or regulation so
established. The Incentive Committee may make such determinations and
interpretations under or in connection with this Plan as it deems necessary or
advisable. All such rules, regulations, determinations and interpretations,
subject to the provisions of section 3.1 of the By-laws of the Company, shall
be binding and conclusive upon the Company, its Subsidiaries, its shareholders,
and its directors, officers, consultants and employees, and upon their
respective legal representatives, beneficiaries, successors and assigns and
upon all other persons claiming under or through any of them.
(c) Any action required or permitted to be taken by the Incentive
Committee under this Plan may be taken in accordance with Article III or the
By-laws of the Company even though, because of a vacancy or vacancies as a
result of resignations or otherwise, the total number of directors who are then
members of the Incentive Committee shall be less than the number initially
designated by the Board of Directors.
(d) Members of the Board of Directors and members of the Incentive
Committee acting under this Plan shall be fully protected in relying in good
faith upon the advice of counsel and shall incur no liability except for gross
negligence or willful misconduct in the performance of their duties.
11. General Provisions:
(a) Nothing in this Plan nor in any instrument executed pursuant
hereto shall confer upon any person any right to continue in the service of the
Company or a Subsidiary, or shall affect the right of the Company or of a
Subsidiary to terminate the service of any person with or without cause.
(b) No shares of Common Stock shall be issued or transferred pursuant
to a Stock Incentive unless and until all legal requirements applicable to the
issuance or transfer of such shares have, in the opinion of counsel to the
Company, been complied with. In connection with any such issuance or transfer
the person acquiring the shares shall, if requested by the Company, give
assurances, satisfactory to counsel to the Company, in
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<PAGE> 11
respect of such matters as the Company or a Subsidiary may deem desirable to
assure compliance with all applicable legal requirements.
(c) No person (individually or as a member of a group), and no
beneficiary or other person claiming under or through him, shall have any
right, title or interest in or to any shares of Common Stock allocated or
reserved for the purposes of this Plan or subject to any Stock Incentive except
as to such shares of Common Stock, if any, as shall have been issued or
transferred to him.
(d) The Incentive Committee may grant a Stock Incentive to be
effective at a specified future date or upon the future happening of a
specified event, not more than sixty days from the date on which the Incentive
Committee acts. For the purposes of this Plan, any such Stock Incentive shall
be deemed granted on the date it is effective. An agreement or other
commitment to grant a Stock Incentive in the future to a person who is or will
be a Key Person at the time of grant shall not be deemed the grant of a Stock
Incentive until the date on which the Incentive Committee takes action to
implement such agreement or commitment.
(e) In the case of a grant of a Stock Incentive to a Key Person of a
Subsidiary, such grant may, if the Incentive Committee so approves, be
implemented by the Company entering into an agreement with the Subsidiary
containing such terms and provisions as the Incentive Committee may authorize,
including, without limitation, a provision for the issuance or transfer of the
shares covered by the Stock Incentive to the Subsidiary, for such consideration
as the Incentive Committee may approve, upon the condition or understanding
that the Subsidiary will transfer the shares to the Key Person in accordance
with the terms of the Stock Incentive.
(f) In the event the laws of a foreign country, in which the Company
or a Subsidiary has employees, prescribes certain requirements for stock
incentives to qualify for advantageous tax treatment under the laws of that
country (including, without limitation, laws establishing options analogous to
Incentive Stock Options), the Board of Directors, upon the recommendation of
the Incentive Committee, may restate, in whole or in part, this Plan and may
include in such restatement additional provisions for the purpose of qualifying
the restated plan and Stock Incentives granted thereunder under such laws of
such foreign country; provided, however, that (i) the terms and conditions of a
Stock Incentive granted under such restated plan may not be more favorable to
the recipient than would be permitted if such Stock Incentive had been granted
under this Plan as herein set forth, (ii) all shares allocated to or utilized
for the purposes of such restated plan shall be subject to the limitations of
section 4, and (iii) the provisions of the restated plan may restrict but may
not extend or amplify the provisions of sections 9 and 13.
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(g) The Company or a Subsidiary may make such provisions as it may
deem appropriate for the withholding of any taxes which the Company or a
Subsidiary determines it is required to withhold in connection with any Stock
Incentive.
(h) Nothing in this Plan is intended to be a substitute for, or shall
preclude or limit the establishment or continuation of, any other plan,
practice or arrangement for the payment of compensation or fringe benefits to
directors, officers, employees or consultants generally, or to any class or
group of such persons, which the Company or any Subsidiary now has or may
hereafter lawfully put into effect, including, without limitation, any
incentive compensation, retirement, pension, group insurance, stock purchase,
stock bonus or stock option plan.
12. Acquisitions: If the Company or any Subsidiary should merge
or consolidate with, or purchase stock or assets or otherwise acquire the whole
or part of the business of, another company, the Company in connection
therewith, upon the approval of the Incentive Committee, (a) may assume, in
whole or in part and with or without modifications or conditions, any stock
incentives granted by the acquired company to its directors, officers,
employees or consultants in their capacity as such, or (b) may grant new Stock
Incentives in substitution therefor. Such assumed or substitute stock
incentives may contain terms and conditions inconsistent with the provisions of
this Plan, including additional benefits for the recipient; provided that such
terms and conditions are permitted under the plan of the other company and such
plan was approved by the shareholders of such other company. For the purposes
of any applicable plan provision involving time or a date, a substitute stock
incentive shall be deemed granted as of the date of grant of the original stock
incentive by the other company.
13. Amendments and Termination:
(a) This Plan may be amended or terminated by the Board of Directors
upon the recommendation of the Incentive Committee; provided that, without the
approval of the shareholders of the Company, no amendment shall be made which
(i) increases the maximum number of shares of Common Stock that may be issued
or transferred pursuant to Stock Incentives, the maximum number of shares of
Common Stock that may be acquired upon exercise of Options granted to any one
person or the maximum number of shares of Common Stock that may be acquired
upon exercise of Options granted to persons serving as directors, in each case
as provided in paragraph (a) of section 4, (ii) except as may be required to
conform this Plan to changes in the federal securities laws and the rules and
regulations of the Securities and Exchange Commission (or any successor
agency), withdraws the administration of this Plan from the Incentive Committee
or amends the provisions of paragraph (a) of section 10 with respect to
eligibility and disinterest of members of the Incentive Committee, (iii)
permits any person who is not a Key Person to be granted a Stock Incentive
(except as otherwise provided in section 12), (iv) amends the provisions of
paragraph (b) of section 5 or paragraph (a) of section 6 to
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<PAGE> 13
permit shares to be valued at, or to have a purchase price of, respectively,
less than 100% of Fair Market Value, (v) amends section 9 to extend the date
set forth therein, or (vi) amends this section 13.
(b) No amendment or termination of this Plan by the Board of Directors
or the shareholders of the Company shall adversely affect any Stock Incentive
theretofore granted without the consent of the holder thereof, and no amendment
by the Incentive Committee of any such Stock Incentive shall adversely affect
such Stock Incentive without the consent of the holder thereof.
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<PAGE> 1
EXHIBIT 10.04
W. R. GRACE & CO.
----------------
1989 STOCK INCENTIVE PLAN
(As amended through March 7, 1996)
<PAGE> 2
W. R. GRACE & CO.
--------------
1989 STOCK INCENTIVE PLAN
--------------
1. Purposes: The purposes of this Plan are (a) to enable Key Persons to
have incentives related to Common Stock, (b) to encourage Key Persons to
increase their interest in the growth and prosperity of the Company and to
stimulate and sustain constructive and imaginative thinking by Key Persons, (c)
to further the identity of interests of Key Persons with the interests of the
Company's shareholders, and (d) to induce the service or continued service of
Key Persons and to enable the Company to compete with other organizations
offering similar or other incentives in obtaining and retaining the services of
competent individuals.
2. Definitions: Unless otherwise required by the context, the following
terms when used in this Plan shall have the meanings set forth in this
section 2.
Board of Directors: The Board of Directors of the Company.
Cessation of service (or words of similar import): When a person ceases to
be an employee of, or consultant to, the Company or a Subsidiary; provided,
however, in the case of an Incentive Stock Option, "cessation of service" (or
words of similar import) shall mean when a person ceases to be an employee of
the Company or a Subsidiary.
Code: The Internal Revenue Code of 1986, as amended.
Common Stock: The common stock of the Company, par value $1.00 per share,
or such other class of shares or other securities or property as may be
applicable pursuant to the provisions of section 8.
Company: W. R. Grace & Co., a New York corporation.
Fair Market Value: (a) The mean between the high and low sales prices of a
share of Common Stock as reported on the Consolidated Transactions Tape for
securities listed on the New York Stock Exchange for the applicable date or, if
no sales of shares of Common Stock were reported for such date, for the next
preceding date for which such
<PAGE> 3
sales were so reported, or (b) the fair market value of a share of Common Stock
determined in accordance with any reasonable method approved by the Incentive
Committee.
Incentive Committee: The committee designated by the Board of Directors to
administer stock incentive and stock option plans of the Company and its
subsidiaries generally or this Plan specifically.
Incentive Stock Option: A stock option which states that it is an
incentive stock option and which is intended to meet the requirements of
Section 422A of the Code and the regulations thereunder applicable to incentive
stock options, as in effect from time to time.
Issuance (or words of similar import): The issuance of authorized but
unissued Common Stock or the transfer of issued Common Stock held by the
Company or a Subsidiary.
Key Employee: An employee of the Company or a Subsidiary who is a Key
Person.
Key Person: An employee of, or consultant to, the Company or a Subsidiary
who, in the opinion of the Incentive Committee, has contributed or can
contribute significantly to the growth and successful operations of the Company
or a Subsidiary. The grant of a Stock Incentive to an employee or consultant
shall be deemed a determination by the Incentive Committee that such person is
a Key Person.
Non-Statutory Stock Option: An Option which is not an Incentive Stock
Option or another form of statutory stock option (within the meanings of
sections 422, 423 and 424 of the Code and the regulations thereunder, as in
effect from time to time).
Option: An option granted under this Plan to purchase shares of Common
Stock.
Plan: The 1989 Stock Incentive Plan of the Company herein set forth, as
the same may from time to time be amended.
Rule 16b-3: Rule 16b-3 of the Securities and Exchange Commission (or any
successor provision in effect at the applicable time).
Service: Service to the Company or a Subsidiary as an employee or
consultant. "To serve" has a correlative meaning.
Stock Award: An issuance of shares of Common Stock at the time the Stock
Incentive is granted or as soon thereafter as practicable, or an undertaking
(other than an Option) to issue such shares in the future.
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<PAGE> 4
Stock Incentive: A stock incentive granted under this Plan in one of the
forms provided for in section 3.
Subsidiary: A corporation (or other form of business association) of which
shares (or other ownership interests) having 50% or more of the voting power
regularly entitled to vote for directors (or equivalent management rights) are
owned, directly or indirectly, by the Company; provided however, that in the
case of an Incentive Stock Option, the term "Subsidiary" shall mean a
Subsidiary (as defined by the preceding clause) which is also a "subsidiary
corporation" as defined in section 425(f) of the Code and the regulations
thereunder, as in effect from time to time.
3. Grants of Stock Incentives:
(a) Subject to the provisions of this Plan, the Incentive Committee may at
any time, and from time to time, grant Stock Incentives under this Plan to, and
only to, Key Persons; provided, however, that Incentive Stock Options may be
granted to, and only to, Key Employees.
(b) The Incentive Committee may grant a Stock Incentive to be effective at
a specified future date or upon the future occurrence of a specified event.
For the purposes of this Plan, any such Stock Incentive shall be deemed granted
on the date it is effective. An agreement or other commitment to grant a Stock
Incentive in the future to a person who is a Key Person or will be a Key Person
at the time the grant is intended to become effective shall not be deemed the
grant of a Stock Incentive until the date on which the Incentive Committee
makes such grant effective.
(c) Stock Incentives may be granted in the following forms:
(i) a Stock Award, or
(ii) an Option, or
(iii) a combination of a Stock Award and an Option.
4. Stock Subject to this Plan:
(a) Subject to the provisions of paragraph (c) of this section 4 and the
provisions of section 8, the maximum number of shares of Common Stock which may
be issued pursuant to Stock Incentives granted under this Plan shall not exceed
7,500,000 shares of Common Stock.
(b) Authorized but unissued shares of Common Stock and issued shares of
Common Stock held by the Company or a Subsidiary, whether acquired specifically
for use
-3-
<PAGE> 5
under this Plan or otherwise, may be used for purposes of this Plan; provided,
however, that any shares acquired or held by the Company or a Subsidiary, or
otherwise reserved, for the purposes of this Plan shall, unless and until
issued to a Key Person in accordance with the terms and conditions of a Stock
Incentive, be and at all times remain available for any corporate purpose.
(c) If any shares of Common Stock subject to a Stock Incentive shall not
be issued and shall cease to be issuable because of the termination, in whole
or in part, of such Stock Incentive or for any other reason, or if any such
shares shall, after issuance, be reacquired by the Company or a Subsidiary for
any reason, such shares shall no longer be charged against the limitation
provided for in paragraph (a) of this section 4 and may again be made subject
to Stock Incentives.
5. Stock Awards: Except as otherwise provided in section 12, Stock
Incentives in the form of Stock Awards shall be subject to the following
provisions:
(a) For the purposes of this Plan, all shares of Common Stock subject to a
Stock Award shall be valued at not less than 100% of the Fair Market Value of
such shares on the date such Stock Award is granted, regardless of whether or
when such shares are issued to the Key Person and whether or not such shares
are subject to restrictions which affect their value.
(b) Shares of Common Stock subject to a Stock Award may be issued to the
Key Person at the time the Stock Award is granted, or at any time subsequent
thereto, or in installments from time to time. In the event that any such
issuance shall not be made at the time the Stock Award is granted, the Stock
Award may provide for payment to such Key Person, either in cash or shares of
Common Stock, of amounts not exceeding the dividends which would have been
payable to such Key Person in respect of such shares (as adjusted under section
8) if such shares had been issued to such Key Person at the time such Stock
Award was granted. Any Stock Award may provide that the value of any shares of
Common Stock to be issued under the terms of such Stock Award may be paid in
cash, on each date on which shares would otherwise have been issued, in an
amount equal to the Fair Market Value on such date of the shares which would
otherwise have been issued.
(c) The material terms of each Stock Award shall be determined by the
Incentive Committee. Each Stock Award shall be evidenced by a written
instrument consistent with this Plan. A Stock Award (i) may be made contingent
upon the attainment of a specified performance objective or objectives, (ii)
may be subject to restrictions on the sale or other disposition of the Stock
Award or of the shares issued pursuant to such Stock Award, and (iii) may
include restrictions and limitations in addition to those provided for in this
Plan.
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<PAGE> 6
(d) Stock Awards shall be granted for such lawful consideration as may be
provided for in the Stock Award.
6. Options: Except as otherwise provided in section 12, Stock Incentives
in the form of Options shall be subject to the following provisions:
(a) Subject to the provisions of paragraph (f) of this section 6, the
purchase price per share of Common Stock shall be not less than 85% of the Fair
Market Value of a share of Common Stock on the date the Option is granted. The
Option may provide for the purchase price to be paid (i) in cash, or (ii) in
shares of Common Stock (including shares issued pursuant to a Stock Award
granted subject to restrictions as provided for in paragraph (c) of section 5),
or (iii) in a combination of cash and such shares. Any shares of Common Stock
delivered to the Company in payment of the purchase price shall be valued at
their Fair Market Value on the date of exercise. No certificate for shares of
Common Stock shall be issued upon the exercise of an Option until the purchase
price for such shares has been paid in full.
(b) If so provided in the Option, the Company shall, upon the request of
the holder of the Option and at any time and from time to time, cancel all or a
portion of the Option then subject to exercise and either (i) pay the holder an
amount of money equal to the excess, if any, of the Fair Market Value, at such
time or times, of the shares subject to the portion of the Option so cancelled
over the purchase price of such shares, or (ii) issue shares of Common Stock to
the holder with a Fair Market Value, at such time or times, equal to such
excess, or (iii) pay such excess by a combination of money and shares.
(c) Each Option may be exercisable in full at the time of grant, or may
become exercisable in one or more installments and at such time or times or
upon the occurrence of such events, as may be specified in the Option. Unless
otherwise provided in the Option, an Option, to the extent it is or becomes
exercisable, may be exercised at any time in whole or in part until the
expiration or termination of the Option.
(d) Each Option shall be exercisable during the life of the optionee only
by him and, after his death, only by his estate or by a person who acquired the
right to exercise the Option by will or the laws of descent and distribution.
An Option, to the extent that it shall not have been exercised or cancelled,
shall terminate as follows after the optionee ceases to serve: (i) if the
optionee shall voluntarily cease to serve without the consent of the Incentive
Committee or shall have his service terminated for cause, the Option shall
terminate immediately upon cessation of service; (ii) if the optionee shall
cease to serve by reason of death, incapacity or retirement under a retirement
plan of the Company or a Subsidiary, the Option shall terminate three years
after the date on which he ceased to serve, and (iii) except as provided in the
next sentence, in all other cases the Option shall terminate three months after
the date on which the optionee ceased to serve unless the Incentive Committee
shall approve a longer period (which approval may be given before
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<PAGE> 7
or after cessation of service), not to exceed, however, three years. If the
optionee shall die or become incapacitated during the three-month period (or
such longer period as the Incentive Committee may approve) referred to in the
preceding clause (iii), the Option shall terminate three years after the date
on which he ceased to serve. A leave of absence for military or governmental
service or other purposes shall not, if approved by the Incentive Committee
(which approval may be given before or after the leave of absence commences), be
deemed a cessation of service within the meaning of this paragraph (d).
Notwithstanding the foregoing provisions of this paragraph (d) or any other
provision of this Plan, no Option shall be exercisable after expiration of a
period of ten years and one month from the date the Option is granted. Where a
Non-Statutory Stock Option is granted for a term of less than ten years and one
month, the Incentive Committee may, at any time prior to the expiration of the
Option, extend its term for a period ending not later than ten years and one
month from the date the Option was granted. Such an extension shall not be
deemed the grant of an Option under this Plan.
(e) No Option nor any right thereunder may be assigned or transferred
except by will or the laws of descent and distribution.
(f) An Option may, but need not, be an Incentive Stock Option. All shares
of Common Stock which may be made subject to Stock Incentives under this Plan
may be made subject to Incentive Stock Options; provided that (i) no Incentive
Stock Option may be granted more than ten years after the effective date of
this Plan as provided in section 9, (ii) the purchase price per share of Common
Stock subject to an Incentive Stock Option shall be not less than 100% of the
Fair Market Value of a share of Common Stock on the date such Incentive Stock
Option is granted, and (iii) the aggregate Fair Market Value (determined as of
the time an Incentive Stock Option is granted) of the shares subject to each
installment becoming exercisable for the first time in any calendar year under
Incentive Stock Options granted, on or after January 1, 1987 (under all plans,
including this Plan, of his employer corporation and its parent and subsidiary
corporations), to the Key Employee to whom such Incentive Stock Option is
granted, shall not exceed $100,000.
(g) The material terms of each Option shall be determined by the Incentive
Committee. Each Option shall be evidenced by a written instrument consistent
with this Plan. An Option may include restrictions and limitations in addition
to those provided for in this Plan.
(h) Options shall be granted for such lawful consideration as may be
provided for in the Option.
7. Combinations of Stock Awards and Options: Stock Incentives authorized
by paragraph (b)(iii) of section 3 in the form of combinations of Stock Awards
and Options shall be subject to the following provisions:
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<PAGE> 8
(a) A Stock Incentive may be a combination of any form of Stock Award with
any form of Option, provided, however, that the terms and conditions of such
Stock Incentive pertaining to a Stock Award are consistent with section 5 and
the terms and conditions of such Stock Incentive pertaining to an Option are
consistent with section 6.
(b) Such combination Stock Incentive shall be subject to such other terms
and conditions as may be specified therein including, without limitation, a
provision terminating in whole or in part a portion thereof upon the exercise
in whole or in part of another portion thereof.
(c) The material terms of each combination Stock Incentive shall be
determined by the Incentive Committee. Each combination Stock Incentive shall
be evidenced by a written instrument consistent with this Plan.
8. Adjustment Provisions:
(a) In the event that any reclassification, split-up or consolidation of
shares of Common Stock shall be effected, or the outstanding shares of Common
Stock are, in connection with a merger or consolidation of the Company or a
sale by the Company of all or a part of its assets, exchanged for a different
number or class of shares of stock or other securities or property of the
Company or for shares of the stock or other securities or property of any other
corporation or person, or a record date for determination of holders of Common
Stock entitled to receive a dividend payable in Common Stock shall occur, (i)
the number and class of shares or other securities or property that may be
issued pursuant to Stock Incentives thereafter granted, (ii) the number and
class of shares or other securities or property which have not been issued
under outstanding Stock Incentives, (iii) the purchase price to be paid per
share or other unit under outstanding Stock Incentives, and (iv) the price to
be paid per share or other unit by the Company or a Subsidiary for shares or
other securities or property issued pursuant to Stock Incentives which are
subject to a right of the Company or a Subsidiary to reacquire such shares or
other securities or property, shall in each case be equitably adjusted as
determined by the Incentive Committee.
(b) In the event that there shall occur any spin-off or other distribution
of assets of the Company to its shareholders (including without limitation an
extraordinary dividend), (i) the number and class of shares or other securities
or property that may be issued pursuant to Stock Incentives thereafter granted,
(ii) the number and class of shares or other securities or property which have
not been issued under outstanding Stock Incentives, (iii) the purchase price to
be paid per share or other unit under outstanding Stock Incentives, and (iv)
the price to be paid per share or other unit by the Company or a Subsidiary for
shares or other securities or property issued pursuant to Stock Incentives
which are subject to a right of the Company or a Subsidiary to reacquire such
shares or
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<PAGE> 9
other securities or property, shall in each case be equitably adjusted as
determined by the Incentive Committee.
9. Term: This Plan shall be deemed adopted and shall become effective on
the date it is approved by the shareholders of the Company. No Stock
Incentives shall be granted under this Plan after April 30, 1999.
10. Administration:
(a) This Plan shall be administered by the Incentive Committee. No
director shall be designated as or continue to be a member of the Incentive
Committee unless he shall at the time of designation and at all times during
service as a member of the Incentive Committee be a "disinterested person"
within the meaning of Rule 16b-3. The Incentive Committee shall have full
authority to act in the matter of selection of Key Persons and in granting
Stock Incentives to them and such other authority as is granted to the
Incentive Committee by this Plan.
(b) The Incentive Committee may establish such rules and regulations, not
inconsistent with the provisions of this Plan, as it deems necessary to
determine eligibility to be granted Stock Incentives under this Plan and for
the proper administration of this Plan, and may amend or revoke any rule or
regulation so established. The Incentive Committee may make such
determinations and interpretations under or in connection with this Plan as it
deems necessary or advisable. All such rules, regulations, determinations and
interpretations shall be binding and conclusive upon the Company, its
Subsidiaries, its shareholders and its directors, officers, consultants and
employees, and upon their respective legal representatives, beneficiaries,
successors and assigns, and upon all other persons claiming under or through
any of them.
(c) Members of the Board of Directors and members of the Incentive
Committee acting under this Plan shall be fully protected in relying in good
faith upon the advice of counsel and shall incur no liability in the
performance of their duties except as otherwise provided by applicable law.
11. General Provisions:
(a) Nothing in this Plan or in any instrument executed pursuant hereto
shall confer upon any person any right to continue in the service of the
Company or a Subsidiary, or shall affect the right of the Company or of a
Subsidiary to terminate the service of any person with or without cause.
(b) No shares of Common Stock shall be issued pursuant to a Stock
Incentive unless and until all legal requirements applicable to the issuance of
such shares have, in the opinion of counsel to the Company, been complied with.
In connection with any such
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<PAGE> 10
issuance the person acquiring the shares shall, if requested by the Company,
give assurances, satisfactory to counsel to the Company, in respect of such
matters as the Company or a Subsidiary may deem desirable to assure compliance
with all applicable legal requirements.
(c) No person (individually or as a member of a group), and no beneficiary
or other person claiming under or through him, shall have any right, title or
interest in or to any shares of Common Stock allocated or reserved for the
purposes of this Plan or subject to any Stock Incentive except as to such
shares of Common Stock, if any, as shall have been issued to him.
(d) In the case of a grant of a Stock Incentive to a Key Person of a
Subsidiary, such grant may provide for the issuance of the shares covered by
the Stock Incentive to the Subsidiary, for such consideration as may be
provided, upon the condition or understanding that the Subsidiary will transfer
the shares to the Key Person in accordance with the terms of the Stock
Incentive.
(e) In the event the laws of a foreign country, in which the Company or a
Subsidiary has employees, prescribe certain requirements for stock incentives
to qualify for advantageous tax treatment under the laws of that country
(including, without limitation, laws establishing options analogous to
Incentive Stock Options), the Board of Directors, upon the recommendation of
the Incentive Committee, may, for the benefit of such employees, amend, in
whole or in part, this Plan and may include in such amendment additional
provisions for the purposes of qualifying the amended plan and Stock Incentives
granted thereunder under such laws of such foreign country; provided, however,
that (i) the terms and conditions of a Stock Incentive granted under such
amended plan may not be more favorable to the recipient than would be permitted
if such Stock Incentive had been granted under this Plan as herein set forth,
(ii) all shares allocated to or utilized for the purposes of such amended plan
shall be subject to the limitations of section 4, and (iii) the provisions of
the amended plan may restrict but may not extend or amplify the provisions of
sections 9 and 13.
(f) The Company or a Subsidiary may make such provisions as it may deem
appropriate for the withholding of any taxes which the Company or a Subsidiary
determines it is required to withhold in connection with any Stock Incentive.
(g) Nothing in this Plan is intended to be a substitute for, or shall
preclude or limit the establishment or continuation of, any other plan,
practice or arrangement for the payment of compensation or benefits to
directors, officers, employees or consultants generally, or to any class or
group of such persons, which the Company or any Subsidiary now has or may
hereafter put into effect, including, without limitation, any incentive
compensation, retirement, pension, group insurance, stock purchase, stock bonus
or stock option plan.
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<PAGE> 11
12. Acquisitions: If the Company or any Subsidiary should merge or
consolidate with, or purchase stock or assets or otherwise acquire the whole or
part of the business of, another company, the Company, upon the approval of the
Incentive Committee, (a) may assume, in whole or in part and with or without
modifications or conditions, any stock incentives granted by the acquired
company to its directors, officers, employees or consultants in their capacity
as such, or (b) may grant new Stock Incentives in substitution therefor. Such
assumed or substitute stock incentives may contain terms and conditions
inconsistent with the provisions of this Plan, including additional benefits
for the recipient, provided that, if such assumed or substitute stock
incentives are Incentive Stock Options, such terms and conditions are permitted
under the plan of the other company. For the purposes of any applicable plan
provision involving time or a date, a substitute stock incentive shall be
deemed granted as of the date of grant of the original stock incentive by the
other company.
13. Amendments and Termination:
(a) This Plan may be amended or terminated by the Board of Directors upon
the recommendation of the Incentive Committee; provided that, without the
approval of the shareholders of the Company, no amendment shall be made which
(i) causes this Plan to no longer comply with Rule 16b-3 or applicable law,
(ii) permits any person who is not a Key Person to be granted a Stock Incentive
(except as otherwise provided in section 12), (iii) amends the provisions of
paragraph (a) of section 5 or paragraph (a) or paragraph (f) of section 6 to
permit shares to be valued at, or to have a purchase price of, respectively,
less than the respective percentages of Fair Market Value specified therein,
(iv) amends section 9 to extend the date set forth therein, or (v) amends this
section 13.
(b) No amendment or termination of this Plan shall adversely affect any
Stock Incentive theretofore granted, and no amendment of any Stock Incentive
granted pursuant to this Plan shall adversely affect such Stock Incentive,
without the consent of the holder thereof.
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<PAGE> 1
EXHIBIT 10.05
W. R. GRACE & CO.
_____________
1994 STOCK INCENTIVE PLAN
(AS AMENDED THROUGH MARCH 7, 1996)
THIS DOCUMENT CONSTITUTES PART OF A
PROSPECTUS COVERING SECURITIES THAT
HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933.
<PAGE> 2
W. R. GRACE & CO.
_____________
1994 STOCK INCENTIVE PLAN
1. Purposes: The purposes of this Plan are (a) to enable
Key Persons to have incentives related to Common Stock, (b) to encourage Key
Persons to increase their interest in the growth and prosperity of the Company
and to stimulate and sustain constructive and imaginative thinking by Key
Persons, (c) to further the identity of interests of Key Persons with the
interests of the Company's shareholders, and (d) to induce the service or
continued service of Key Persons and to enable the Company to compete with
other organizations offering similar or other incentives in obtaining and
retaining the services of the most highly qualified individuals.
2. Definitions: When used in this Plan, the following terms
shall have the meanings set forth in this section 2.
Board of Directors: The Board of Directors of the Company.
cessation of service (or words of similar import): When a
person ceases to be an employee of, or consultant to, the Company or a
Subsidiary; provided, however, in the case of an Incentive Stock Option,
"cessation of service" (or words of similar import) shall mean when a person
ceases to be an employee of the Company or a Subsidiary.
Code: The Internal Revenue Code of 1986, as amended.
Committee: The Compensation, Employee Benefits and Stock
Incentive Committee of the Board of Directors of the Company or any other
committee designated by such Board of Directors to administer stock incentive
and stock option plans of the Company and its subsidiaries generally or this
Plan specifically.
Common Stock: The common stock of the Company, par value
$1.00 per share, or such other class of shares or other securities or property
as may be applicable pursuant to the provisions of section 8.
Company: W. R. Grace & Co., a New York corporation.
<PAGE> 3
Fair Market Value: (a) The mean between the high and low
sales prices of a share of Common Stock in New York Stock Exchange Composite
Transactions on the applicable date, as reported in The Wall Street Journal or
another newspaper of general circulation, or, if no sales of shares of Common
Stock were reported for such date, for the next preceding date for which such
sales were so reported, or (b) the fair market value of a share of Common Stock
determined in accordance with any other reasonable method approved by the
Committee.
Incentive Stock Option: A stock option that states that it is
an incentive stock option and that is intended to meet the requirements of
Section 422A of the Code and the regulations thereunder applicable to incentive
stock options, as in effect from time to time.
issuance (or words of similar import): The issuance of
authorized but unissued Common Stock or the transfer of issued Common Stock
held by the Company or a Subsidiary.
Key Employee: An employee of the Company or a Subsidiary who
is a Key Person.
Key Person: An employee of, or consultant to, the Company or
a Subsidiary who, in the opinion of the Committee, has contributed or can
contribute significantly to the growth and successful operations of the Company
or one or more Subsidiaries. The grant of a Stock Incentive to an employee or
consultant shall be deemed a determination by the Committee that such person is
a Key Person.
Non-Statutory Stock Option: An Option that is not an
Incentive Stock Option or another form of statutory stock option (within the
meanings of sections 422, 423 and 424 of the Code and the regulations
thereunder, as in effect from time to time).
Option: An option granted under this Plan to purchase shares
of Common Stock.
Plan: The 1994 Stock Incentive Plan of the Company herein set
forth, as the same may from time to time be amended.
Rule 16b-3: Rule 16b-3 of the Securities and Exchange
Commission (or any successor provision in effect at the applicable time).
service: Service to the Company or a Subsidiary as an
employee or consultant. "To serve" has a correlative meaning.
- 2 -
<PAGE> 4
Stock Award: An issuance of shares of Common Stock or an
undertaking (other than an Option) to issue such shares in the future.
Stock Incentive: A stock incentive granted under this Plan in
one of the forms provided for in section 3.
Subsidiary: A corporation (or other form of business
association) of which shares (or other ownership interests) having 50% or more
of the voting power regularly entitled to vote for directors (or equivalent
management rights) are owned, directly or indirectly, by the Company; provided,
however, that in the case of an Incentive Stock Option, the term "Subsidiary"
shall mean a Subsidiary (as defined by the preceding clause) that is also a
"subsidiary corporation" as defined in section 425(f) of the Code and the
regulations thereunder, as in effect from time to time.
3. Grants of Stock Incentives:
(a) Subject to the provisions of this Plan, the Committee may
at any time and from time to time grant Stock Incentives under this Plan to,
and only to, Key Persons; provided, however, that Incentive Stock Options may
be granted to, and only to, Key Employees.
(b) The Committee may grant a Stock Incentive to be effective
at a specified future date or upon the future occurrence of a specified event.
For the purposes of this Plan, any such Stock Incentive shall be deemed granted
on the date it becomes effective. An agreement or other commitment to grant a
Stock Incentive that is to be effective in the future shall not be deemed the
grant of a Stock Incentive until the date on which such Stock Incentive becomes
effective.
(c) Stock Incentives may be granted in the form of:
(i) a Stock Award, or
(ii) an Option, or
(iii) a combination of a Stock Award and an Option.
4. Stock Subject to this Plan:
(a) Subject to the provisions of paragraph (c) of this
section 4 and the provisions of section 8, the maximum number of shares of
Common Stock that may be issued pursuant to Stock Incentives granted under this
Plan shall not exceed 3,000,000 shares of Common Stock.
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<PAGE> 5
(b) Authorized but unissued shares of Common Stock and issued
shares of Common Stock held by the Company or a Subsidiary, whether acquired
specifically for use under this Plan or otherwise, may be used for purposes of
this Plan.
(c) If any shares of Common Stock subject to a Stock
Incentive shall not be issued and shall cease to be issuable because of the
termination, in whole or in part, of such Stock Incentive or for any other
reason, or if any such shares shall, after issuance, be reacquired by the
Company or a Subsidiary for any reason, such shares shall no longer be charged
against the limitation provided for in paragraph (a) of this section 4 and may
again be made subject to Stock Incentives.
(d) Of the total number of shares specified in paragraph (a)
of this section 4 (subject to adjustment as specified therein), during the term
of this Plan as defined in section 9, (i) no more than 10% may be subject to
Options granted to any one Key Person, (ii) no more than 15% may be subject to
Stock Incentives granted to any one Key Person, and (iii) no more than 3% in
the aggregate may be subject to Stock Incentives granted to all Key Persons who
are consultants to the Company and/or one or more Subsidiaries at the date the
relevant Stock Incentive is granted
5. Stock Awards:
Except as otherwise provided in section 12, Stock Incentives
in the form of Stock Awards shall be subject to the following provisions:
(a) For purposes of this Plan, all shares of Common Stock
subject to a Stock Award shall be valued at not less than 100% of the Fair
Market Value of such shares on the date such Stock Award is granted, regardless
of whether or when such shares are issued pursuant to such Stock Award and
whether or not such shares are subject to restrictions affecting their value.
(b) Shares of Common Stock subject to a Stock Award may be
issued to a Key Person at the time the Stock Award is granted, or at any time
subsequent thereto, or in installments from time to time. In the event that
any such issuance shall not be made at the time the Stock Award is granted, the
Stock Award may provide for the payment to such Key Person, either in cash or
shares of Common Stock, of amounts not exceeding the dividends that would have
been payable to such Key Person in respect of the number of shares of Common
Stock subject to such Stock Award (as adjusted under section 8) if such shares
had been issued to such Key Person at the time such Stock Award was granted.
Any Stock Award
- 4 -
<PAGE> 6
may provide that the value of any shares of Common Stock subject to such Stock
Award may be paid in cash, on each date on which shares would otherwise have
been issued, in an amount equal to the Fair Market Value on such date of the
shares that would otherwise have been issued.
(c) The material terms of each Stock Award shall be
determined by the Committee. Each Stock Award may be evidenced by a written
instrument consistent with this Plan. It is intended that a Stock Award
would be (i) made contingent upon the attainment of one or more specified
performance objectives and/or (ii) subject to restrictions on the sale or other
disposition for a period of three or more years of the Stock Award or the
shares subject thereto; provided that (x) a Stock Award may include
restrictions and limitations in addition to those provided for herein and (y)
of the total number of shares specified in paragraph (a) of section 4 (subject
to adjustment as specified therein), up to 3% may be subject to Stock Awards
not subject to clause (i) or clause (ii) of this sentence.
(d) A Stock Award shall be granted for such lawful
consideration as may be provided for therein.
6. Options: Except as otherwise provided in section 12,
Stock Incentives in the form of Options shall be subject to the following
provisions:
(a) Subject to the provisions of paragraph (f) of this
section 6, the purchase price per share of Common Stock shall be not less than
100% of the Fair Market Value of a share of Common Stock on the date the Option
is granted. The Option may provide for the purchase price to be paid (i) in
cash, or (ii) in shares of Common Stock (including shares issued pursuant to a
Stock Award granted subject to restrictions as provided for in paragraph (c) of
section 5), or (iii) in a combination of cash and such shares. Any shares of
Common Stock delivered to the Company in payment of the purchase price shall be
valued at their Fair Market Value on the date of exercise. No certificate for
shares of Common Stock shall be issued upon the exercise of an Option until the
purchase price for such shares has been paid in full.
(b) If so provided in the Option, the Company shall, upon the
request of the holder of the Option and at any time and from time to time,
cancel all or a portion of the Option then subject to exercise and either (i)
pay the holder an amount of money equal to the excess, if any, of the Fair
Market Value, at such time or times, of the shares subject to the portion of
the Option so canceled over the purchase price for such shares, or (ii) issue
shares of Common Stock to the holder with a Fair Market Value, at
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<PAGE> 7
such time or times, equal to such excess, or (iii) pay such excess by a
combination of money and shares.
(c) Each Option may be exercisable in full at the time of
grant, or may become exercisable in one or more installments and at such time
or times or upon the occurrence of such events, as may be specified in the
Option, as determined by the Committee. Unless otherwise provided in the
written instrument provided in paragraph (g) of this section 6, an Option, to
the extent it is or becomes exercisable, may be exercised at any time in whole
or in part until the expiration or termination of such Option.
(d) Each Option shall be exercisable during the life of the
holder only by him and, after his death, only by his estate or by a person who
acquires the right to exercise the Option by will or the laws of descent and
distribution. An Option, to the extent that it shall not have been exercised
or canceled, shall terminate as follows after the holder ceases to serve: (i)
if the holder shall voluntarily cease to serve without the consent of the
Committee or shall have his service terminated for cause, the Option shall
terminate immediately upon cessation of service; (ii) if the holder shall cease
to serve by reason of death, incapacity or retirement under a retirement plan
of the Company or a Subsidiary, the Option shall terminate three years after
the date on which he ceased to serve; and (iii) except as provided in the next
sentence, in all other cases the Option shall terminate three months after the
date on which the holder ceased to serve unless the Committee shall approve a
longer period (which approval may be given before or after cessation of
service) not to exceed three years. If the holder shall die or become
incapacitated during the three-month period (or such longer period as the
Committee may approve) referred to in the preceding clause (iii), the Option
shall terminate three years after the date on which he ceased to serve. A
leave of absence for military or governmental service or other purposes shall
not, if approved by the Committee (which approval may be given before or after
the leave of absence commences), be deemed a cessation of service within the
meaning of this paragraph (d). Notwithstanding the foregoing provisions of
this paragraph (d) or any other provision of this Plan, no Option shall be
exercisable after expiration of a period of ten years and one month from the
date the Option is granted. Where a Non-Statutory Stock Option is granted for
a term of less than ten years and one month, the Committee may, at any time
prior to the expiration of the Option, extend its term for a period ending not
later than ten years and one month from the date the Option was granted. Such
an extension shall not be deemed the grant of a new Option under this Plan.
- 6 -
<PAGE> 8
(e) No Option nor any right thereunder may be assigned or
transferred except by will or the laws of descent and distribution, unless
otherwise provided in the Option.
(f) An Option may, but need not, be an Incentive Stock
Option. All shares of Common Stock that may be made subject to Stock
Incentives under this Plan may be made subject to Incentive Stock Options;
provided that (i) no Incentive Stock Option may be granted more than ten years
after the effective date of this Plan, as provided in section 9, (ii) the
purchase price per share of Common Stock subject to an Incentive Stock Option
shall be not less than 100% of the Fair Market Value of a share of Common Stock
on the date such Incentive Stock Option is granted, and (iii) the aggregate
Fair Market Value (determined as of the time an Incentive Stock Option is
granted) of the shares subject to each installment becoming exercisable for the
first time in any calendar year under Incentive Stock Options granted, on or
after January 1, 1987 (under all plans, including this Plan, of his employer
corporation and its parent and subsidiary corporations), to the Key Employee to
whom such Incentive Stock Option is granted, shall not exceed $100,000.
(g) The material terms of each Option shall be determined by
the Committee. Each Option shall be evidenced by a written instrument
consistent with this Plan. An Option may include restrictions and limitations
in addition to those provided for in this Plan.
(h) Options shall be granted for such lawful consideration as
may be provided for in the Option.
7. Combination of Stock Awards and Options: Stock
Incentives authorized by paragraph (c)(iii) of section 3 in the form of
combinations of Stock Awards and Options shall be subject to the following
provisions:
(a) A Stock Incentive may be a combination of any form of
Stock Award and any form of Option, provided, however, that the terms and
conditions of such Stock Incentive pertaining to a Stock Award are consistent
with section 5 and the terms and conditions of such Stock Incentive pertaining
to an Option are consistent with section 6.
(b) Such combination Stock Incentive shall be subject to such
other terms and conditions as may be specified therein including, without
limitation, a provision terminating in whole or in part a portion thereof upon
the exercise in whole or in part of another portion thereof.
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<PAGE> 9
(c) The material terms of each combination Stock Incentive
shall be determined by the Committee. Each combination Stock Incentive shall
be evidenced by a written instrument consistent with this Plan.
8. Adjustment Provisions:
(a) In the event that any reclassification, split-up or
consolidation of the Common Stock shall be effected, or the outstanding shares
of Common Stock are, in connection with a merger or consolidation of the
Company or a sale by the Company of all or a part of its assets, exchanged for
a different number or class of shares of stock or other securities or property
of the Company or for shares of the stock or other securities or property of
any other corporation or person, or a record date for determination of holders
of Common Stock entitled to receive a dividend payable in Common Stock shall
occur, (i) the number and class of shares or other securities or property that
may be issued pursuant to Stock Incentives thereafter granted, (ii) the number
and class of shares or other securities or property that have not been issued
under outstanding Stock Incentives, (iii) the purchase price to be paid per
share or other unit under outstanding Stock Incentives, and (iv) the price to
be paid per share or other unit by the Company or a Subsidiary for shares or
other securities or property issued pursuant to Stock Incentives that are
subject to a right of the Company or a Subsidiary to re-acquire such shares or
other securities or property, shall in each case be equitably adjusted as
determined by the Committee.
(b) In the event that there shall occur any spin-off or other
distribution of assets of the Company to its shareholders (including without
limitation an extraordinary dividend), (i) the number and class of shares or
other securities or property that may be issued pursuant to Stock Incentives
thereafter granted, (ii) the number and class of shares or other securities or
property that have not been issued under outstanding Stock Incentives, (iii)
the purchase price to be paid per share or other unit under outstanding Stock
Incentives, and (iv) the price to be paid per share or other unit by the
Company or a Subsidiary for shares or other securities or property issued
pursuant to Stock Incentives that are subject to a right of the Company or a
Subsidiary to re-acquire such shares or other securities or property, shall in
each case be equitably adjusted as determined by the Committee.
(c) In the event of a merger or consolidation of the Company
in which the Common Stock is converted into the right to receive a specified
amount of cash per share (the "merger price"), then each Option outstanding
immediately prior to the effective time of such merger or consolidation (the
"effective time") shall be treated as follows: (i) each
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<PAGE> 10
such Option having a per share purchase price equal to or greater than the
merger price shall terminate at the effective time and be of no further force
and effect, without the making of any payment to the holder of such Option; and
(ii) each such Option having a per share purchase price less than the merger
price shall terminate at the effective time and be of no further force and
effect, and the holder of such Option shall be paid in cash, as promptly as
practicable following the effective time, an amount equal to the product of (A)
the excess of the merger price over the per share purchase price of such Option
times (B) the number of shares covered by such Option immediately prior to the
effective time.
9. Term:
This Plan shall be deemed adopted and shall become effective
on the date it is approved by the shareholders of the Company. No Stock
Incentives shall be granted under this Plan after April 30, 2004.
10. Administration:
(a) This Plan shall be administered by the Committee. No
director shall be designated as or continue to be a member of the Committee
unless he shall at the time of designation and at all times during service as a
member of the Committee be a "disinterested person" within the meaning of Rule
16b-3. The Committee shall have full authority to act in the matter of
selection of Key Persons and in granting Stock Incentives to them and such
other authority as is granted to the Committee by this Plan.
(b) The Committee may establish such rules and regulations,
not inconsistent with the provisions of this Plan, as it deems necessary to
determine eligibility to be granted Stock Incentives under this Plan and for
the proper administration of this Plan, and may amend or revoke any rule or
regulation so established. The Committee may make such determinations and
interpretations under or in connection with this Plan as it deems necessary or
advisable. All such rules, regulations, determinations and interpretations
shall be binding and conclusive upon the Company, the Subsidiaries, its
shareholders and its directors, officers, consultants and employees, and upon
their respective legal representatives, beneficiaries, successors and assigns,
and upon all other persons claiming under or through any of them.
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<PAGE> 11
(c) Members of the Board of Directors and members of the
Committee acting under this Plan shall be fully protected in relying in good
faith upon the advice of counsel and shall incur no liability in the
performance of their duties except as otherwise provided by applicable law.
11. General Provisions:
(a) Nothing in this Plan or in any instrument executed
pursuant hereto shall confer upon any person any right to continue in the
service of the Company or a Subsidiary, or shall affect the right of the
Company or of a Subsidiary to terminate the service of any person with or
without cause.
(b) No shares of Common Stock shall be issued pursuant to a
Stock Incentive unless and until all legal requirements applicable to the
issuance of such shares have, in the opinion of counsel to the Company, been
complied with. In connection with any such issuance the person acquiring the
shares shall, if requested by the Company, give assurances, satisfactory to
counsel to the Company, in respect of such matters as the Company or a
Subsidiary may deem desirable to assure compliance with all applicable legal
requirements.
(c) No person (individually or as a member of a group), and
no beneficiary or other person claiming under or through him, shall have any
right, title or interest in or to any shares of Common Stock allocated or
reserved for the purposes of this Plan or subject to any Stock Incentive except
as to such shares of Common Stock, if any, as shall have been issued to him.
(d) In the case of a grant of a Stock Incentive to a Key
Person of a Subsidiary, such grant may provide for the issuance of the shares
covered by the Stock Incentive to the Subsidiary, for such consideration as may
be provided, upon the condition or understanding that the Subsidiary will
transfer the shares to the Key Person in accordance with the terms of the Stock
Incentive.
(e) In the event the laws of a country in which the Company
or a Subsidiary has employees prescribe certain requirements for stock
incentives to qualify for advantageous tax treatment under the laws of that
country (including, without limitation, laws establishing options analogous to
Incentive Stock Options), the Committee, may, for the benefit of such
employees, amend, in whole or in part, this Plan and may include in such
amendment additional provisions for the purposes of qualifying the amended plan
and Stock Incentives granted thereunder
- 10 -
<PAGE> 12
under such laws; provided, however, that (i) the terms and conditions of a
Stock Incentive granted under such amended plan may not be more favorable to
the recipient than would be permitted if such Stock Incentive had been granted
under this Plan as herein set forth, (ii) all shares allocated to or utilized
for the purposes of such amended plan shall be subject to the limitations of
section 4, and (iii) the provisions of the amended plan may restrict but may
not extend or amplify the provisions of sections 9 and 13.
(f) The Company or a Subsidiary may make such provisions as
it may deem appropriate for the withholding of any taxes that the Company or a
Subsidiary determines it is required to withhold in connection with any Stock
Incentive.
(g) Nothing in this Plan is intended to be a substitute for,
or shall preclude or limit the establishment or continuation of, any other
plan, practice or arrangement for the payment of compensation or benefits to
directors, officers, employees or consultants generally, or to any class or
group of such persons, that the Company or any Subsidiary now has or may
hereafter put into effect, including, without limitation, any incentive
compensation, retirement, pension, group insurance, stock purchase, stock bonus
or stock option plan.
12. Acquisitions: If the Company or any Subsidiary should
merge or consolidate with, or purchase stock or assets or otherwise acquire the
whole or part of the business of, another entity, the Company, upon the
approval of the Committee, (a) may assume, in whole or in part and with or
without modifications or conditions, any stock incentives granted by the
acquired entity to its directors, officers, employees or consultants in their
capacities as such, or (b) may grant new Stock Incentives in substitution
therefor. Such assumed or substitute stock incentives may contain terms and
conditions inconsistent with the provisions of this Plan (including the
limitations set forth in paragraph (d) of section 4), including additional
benefits for the recipient, provided that, if such assumed or substitute stock
incentives are Incentive Stock Options, such terms and conditions are permitted
under the plan of the acquired entity. For the purposes of any applicable plan
provision involving time or a date, a substitute stock incentive shall be
deemed granted as of the date of grant of the original stock incentive by the
acquired entity.
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<PAGE> 13
13. Amendments and Termination:
(a) This Plan may be amended or terminated by the Board of
Directors upon the recommendation of the Committee; provided that, without the
approval of the shareholders of the Company, no amendment shall be made which
(i) causes this Plan to cease to comply with Rule 16b-3 or applicable law,
(ii) permits any person who is not a Key Person to be granted a Stock Incentive
(except as otherwise provided in section 12), (iii) amends the provisions of
paragraph (d) of section 4, paragraph (a) of section 5 or paragraph (a) or
paragraph (f) of section 6 to permit shares to be valued at, or to have a
purchase price of, respectively, less than the percentage of Fair Market Value
specified therein, (iv) amends section 9 to extend the date set forth therein,
or (v) amends this section 13.
(b) No amendment or termination of this Plan shall adversely
affect any Stock Incentive theretofore granted, and no amendment of any Stock
Incentive granted pursuant to this Plan shall adversely affect such Stock
Incentive, without the consent of the holder thereof.
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<PAGE> 1
EXHIBIT 10.06
W. R. GRACE & CO.
_______________
1994 STOCK RETAINER PLAN FOR NONEMPLOYEE DIRECTORS
(AS AMENDED THROUGH MARCH 7, 1996)
_______________
THIS DOCUMENT CONSTITUTES PART OF A
PROSPECTUS COVERING SECURITIES THAT
HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933.
<PAGE> 2
W. R. GRACE & CO.
_______________
1994 STOCK RETAINER PLAN FOR NONEMPLOYEE DIRECTORS
_______________
1. Purposes: The purposes of this Plan are (a) to further
the identity of interests of nonemployee directors of the Company with the
interests of the Company's shareholders, (b) to stimulate and sustain
constructive and imaginative thinking by such nonemployee directors, and (c) to
induce the service or continued service of the most highly qualified
individuals to serve as nonemployee directors of the company.
2. Definitions: When used in this Plan, the following
terms shall have the meanings set forth in this section 2.
Board of Directors: The Board of Directors of the Company.
Code: The Internal Revenue Code of 1986, as amended.
Common Stock: The common stock of the Company, par value
$1.00 per share, or such other class of shares or other securities or property
as may be applicable pursuant to the provisions of section 6.
Company: W. R. Grace & Co., a New York corporation.
Fair Market Value: (a) The mean between the high and low
sales prices of a share of Common Stock in New York Stock Exchange Composite
Transactions for the applicable date, as reported in The Wall Street Journal or
another newspaper of general circulation, or, if no sales of shares of Common
Stock were reported for such date, for the next preceding date for which such
sales were so reported, or (b) the fair market value of a share of Common Stock
determined in accordance with any other reasonable method.
issuance (or words of similar import): The issuance of
authorized but unissued Common Stock or the transfer of issued Common Stock
held by the Company or a Subsidiary.
<PAGE> 3
nonemployee director: An individual, not employed by the
Company or a Subsidiary, who is serving as a director of the Company.
Plan: The 1994 Stock Retainer Plan for Nonemployee Directors
herein set forth, as the same may from time to time be amended.
Rule 16b-3: Rule 16b-3 of the Securities and Exchange
Commission (or any successor provision in effect at the applicable time).
service: Service to the Company as a nonemployee director.
"To serve" has a correlative meaning.
Stock Retainer: An issuance of shares of Common Stock in
payment of an annual retainer for service as a nonemployee director.
Subsidiary: A corporation (or other form of business
association) of which shares (or other ownership interests) having 50% or more
of the voting power regularly entitled to vote for directors (or equivalent
management rights) are owned, directly or indirectly, by the Company.
3. Eligibility and Participation: All nonemployee
directors are eligible to participate in the Plan and each such director will
participate as described in section 5.
4. Stock Subject to this Plan:
(a) Subject to the provisions of paragraph (c) of this
section 4 and the provisions of section 6, the maximum number of shares of
Common Stock that may be issued pursuant to Stock Retainers under this Plan
shall not exceed 66,000 shares of Common Stock.
(b) Authorized but unissued shares of Common Stock and
issued shares of Common Stock held by the Company or a Subsidiary, whether
acquired specifically for use under this Plan or otherwise, may be used for
purposes of this Plan.
(c) If any shares of Common Stock issued pursuant to a Stock
Retainer shall, after issuance, be reacquired by the Company
2
<PAGE> 4
for any reason, such shares shall no longer be charged against the limitation
provided for in paragraph (a) of this section 4 and may again be issued
pursuant to Stock Retainers.
5. Stock Retainers: Stock Retainers shall be subject to
the following provisions:
(a) For the purposes of this Plan, all shares of Common
Stock issued pursuant to a Stock Retainer shall be valued at not less than 100%
of the Fair Market Value of such shares on the effective date as of which such
Stock Retainer is paid, regardless of when such shares are actually issued to
the nonemployee director and whether or not such shares are subject to
restrictions that affect their value.
(b) Except as provided in paragraph (c) of this section 5,
effective as of July 1, 1994, and on each following July 1 through July 1,
1999, each person serving as a nonemployee director on such July 1 will, for
service as such, be paid a Stock Retainer consisting of a whole number of
shares of Common Stock equal to the quotient obtained by dividing (i) $24,000
(the "Retainer Amount") by (ii) the Fair Market Value of a share of Common
Stock on such July 1. To the extent that such calculation does not result in a
whole number of shares, the fractional share shall be rounded upwards to the
next whole number so that no fractional shares shall be issued.
(c) (i) In the event that a Stock Retainer is to be paid,
effective July 1 of any calendar year, to a person who shall have commenced
service as a nonemployee director subsequent to January 1 of such calendar
year, the Retainer Amount shall be proportionately reduced to reflect the
percentage of such calendar year prior to such commencement of service.
(ii) In the event that a Stock Retainer is to be paid,
effective July 1 of any calendar year, to a person who shall have commenced
service as a nonemployee director subsequent to July 1 of the prior calendar
year, the Retainer Amount shall be proportionately increased to reflect the
percentage of the prior calendar year during which such nonemployee director
served as such.
(d) The shares referred to in paragraph (b) of this section
5 shall be delivered to each nonemployee director as soon as practicable
following each July 1 during the term of this plan. After the delivery of the
shares, each nonemployee director shall have all
3
<PAGE> 5
the rights of a shareholder with respect to such shares (including the right to
vote such shares and the right to receive all dividends paid with respect to
such shares).
(e) No shares will be issued in a calendar year to a
nonemployee director who, prior to July 1 of such calendar year, is removed for
cause, as specified in the Company's Certificate of Incorporation, as the same
may be amended, or who voluntarily terminates service prior to retirement under
the Company's Retirement Plan for Outside Directors, as the same may be
amended.
6. Adjustment Provisions:
(a) In the event that any reclassification, split-up or
consolidation of the Common Stock shall be effected, or the outstanding shares
of Common Stock are, in connection with a merger or consolidation of the
Company or a sale by the Company of all or a part of its assets, exchanged for
a different number or class of shares of stock or other securities or property
of the Company or for shares of the stock or other securities or property of
any other corporation or person, or a record date for determination of holders
of Common Stock entitled to receive a dividend payable in Common Stock shall
occur, (i) the number and class of shares that may be issued pursuant to Stock
Retainers thereafter paid, and (ii) the number and class of shares that have
not been issued under effective Stock Retainers, shall in each case be
equitably adjusted.
(b) In the event that there shall occur any spin-off or
other distribution of assets of the Company to its shareholders (including
without limitation an extraordinary dividend), the number and class of shares
that may be issued pursuant to Stock Retainers thereafter paid shall be
equitably adjusted as determined by the Board of Directors.
7. Term: This Plan shall be deemed adopted and shall
become effective on the date it is approved by the shareholders of the Company.
No Stock Retainers shall be paid under this Plan with respect to any period
beginning after July 1, 1999.
4
<PAGE> 6
8. General Provisions:
(a) Nothing in this Plan or in any instrument executed
pursuant hereto shall confer upon any person any right to continue to serve as
a nonemployee director of the Company.
(b) No shares of Common Stock shall be issued pursuant to a
Stock Retainer unless and until all legal requirements applicable to the
issuance of such shares have, in the opinion of counsel to the Company, been
complied with. In connection with any such issuance, the person acquiring the
shares shall, if requested by the Company, give assurances, satisfactory to
counsel to the Company, in respect of such matters as the Company or a
Subsidiary may deem desirable to assure compliance with all applicable legal
requirements.
(c) No person (individually or as a member of a group), and
no beneficiary or other person claiming under or through him, shall have any
right, title or interest in or to any shares of Common Stock allocated or
reserved for the purposes of this Plan or subject to any Stock Retainer except
as to such shares of Common Stock, if any, as shall have been issued to him.
(d) Nothing in this Plan is intended to be a substitute for,
or shall preclude or limit the establishment or continuation of, any other
plan, practice or arrangement for the payment of compensation or benefits to
nonemployee directors that the Company now has or may hereafter put into
effect.
9. Amendments and Termination:
(a) This Plan may be terminated, suspended or amended at any
time by the Board of Directors upon the recommendation of its Compensation,
Employee Benefits and Stock Incentive Committee; provided, however, that (i)
no amendment shall become effective without the approval of the shareholders of
the Company to the extent shareholder approval is required in order to comply
with Rule 16b-3, and (ii) neither the Retainer Amount, nor any other provision
of this Plan affecting the number of shares of Common Stock receivable pursuant
to a Stock Retainer or the frequency with which Stock Retainers are paid, shall
be amended or otherwise modified more than once every six months, except as may
be necessary or appropriate to comport with the Code or the Employee Retirement
Income Security Act, as either of the same may be amended, or the rules and
regulations promulgated thereunder.
5
<PAGE> 7
(b) No termination, suspension or amendment of this Plan
shall adversely affect any Stock Retainer theretofore paid.
6
<PAGE> 1
EXHIBIT 10.23
-----
William L. Monroe
Vice President Human Resources
W.R. Grace & Co.
One Town Center Road
Boca Raton, FL 33486-1010
February 12, 1996
Mr. Jean-Louis Greze
W. R. Grace & Co.
One Town Center Road
Boca Raton, FL 33486
Dear Jean-Louis:
This letter outlines the arrangements and understanding relating to
your retirement as Executive Vice President of W. R. Grace & Co. ("Company").
1. You will retire effective February 29, 1996 and, effective as of that
date, resign your position as Executive Vice President of the Company and
all other positions you hold with subsidiaries and affiliates of the
Company.
2. Following your retirement on February 29, 1996, you will be entitled to
the compensation and benefits set forth below in accordance with and
subject to the following terms:
A. INCENTIVE COMPENSATION
You will be considered for an annual incentive compensation award for
1995 based on the financial performance of Grace Packaging and your
individual performance. Your 1995 award, which is subject to Board
approval, will be paid to you in March 1996.
B. EXECUTIVE SALARY PROTECTION PLAN AND SPLIT-DOLLAR LIFE INSURANCE PLAN
Your death benefit coverage under the Executive Salary Protection Plan
shall cease on March 31, 1996, while your disability coverage under that
Plan will cease on February 29, 1996, in accordance with the terms of
that Plan. Your participation in the Split-Dollar Life Insurance Plan
will cease on July 31, 1996, although you may purchase the policy by
reimbursing the Company for the premiums paid by the Company for that
policy on your behalf through the date of your retirement. Estimated
premiums paid by the Company through July 31, 1996 are expected to total
approximately $297,853 for four policy years. Your death benefit
coverage is $800,000.
C. LONG-TERM INCENTIVE PLAN
Your participation in the Company's Long-Term Incentive Plan for the
1993-95, 1994-96 and 1995-97 Performance Periods will vest and be paid to
you at the same time as other participants. While you will participate
for the full 1993-95 cycle, your awards for 1994-96 and 1995-97 will be
prorated as of your February 29, 1996 retirement date.
<PAGE> 2
D. STOCK OPTIONS
All of your stock options, which cover 168,000 shares as of January 9,
1996, are fully vested. Subject to SEC requirements and restrictions (as
to which you should consult Bob Lamm), you will be free to exercise your
stock options and to sell the shares acquired on exercise following your
retirement on February 29, 1996. After your retirement, you will have a
three-year grace period during which you may exercise your options.
E. SAVINGS AND INVESTMENT PLAN
Following your retirement, you may elect to take a lump sum distribution
under the Savings and Investment Plan, defer your distribution until age
70 1/2 or elect to begin receiving installment payments over a period of
up to 10 years, in accordance with the terms of the Plan. Your S&I
balance as of January 10, 1996 was $163,263.28. In March 1996 you will
be eligible to receive your Savings & Investment Replacement payment for
1995 in an amount estimated to be $17,550. As you know, you elected to
defer this amount, and it will be paid out in a lump sum, according to
your election.
F. In accordance with the arrangement between you and the Company dated
December 8, 1995, all of your deferred compensation balances totaling
$564,068.81 as of December 30, 1995, will be consolidated into one
balance and paid to you in one lump sum on August 31, 1996, along with
earnings credited through that date.
G. POST-RETIREMENT MEDICAL COVERAGE
You and your dependents will have medical coverage as of March 1, 1996
under the Swiss medical system.
H. PENSIONS
Your active participation in the Grace A.G. Wallisallen Pension Plan
("Swiss Pension Plan") will continue until your retirement date of
February 29, 1996. Your benefit payments from the Swiss Pension Plan
will be paid in accordance with the provisions of that Plan commencing as
of your retirement date. Your benefits from the Swiss Pension Plan will
be based on all of your service with the Company, including your service
in the United States. Your benefits from the Swiss Pension Plan (reduced
by the benefits payable to you from the French Repartition system) will
be:
<TABLE>
<S> <C> <C>
Lump sum payment 3/1/96 SFr. 2,737,062.00
Retirement pension 3/1/96 SFr. 174,000.00 per annum
Retiree's child pension 8/1/96 SFr. 37,250.40 per annum
</TABLE>
You are not entitled to receive payments from the Company's Third Country
National Plan as benefits under such Plan, with your agreement, were
replaced by your participation in the Swiss Pension Plan.
I. PERQUISITES
You may continue to use your Company-provided leased car through August
31, 1996 and receive reimbursement for Company-provided financial
counseling expenses incurred through August 31, 1996. You will be
provided with the services of Ernst & Young in the preparation and filing
of your 1996 U.S. tax return(s).
<PAGE> 3
-3-
J. UNUSED VACATION PAYMENT
You are entitled to paid vacation aggregating not less than five weeks
during 1996. You will be entitled to payment for any unused vacation
time in accordance with Company policy at the time of your retirement on
February 29, 1996, including up to a maximum of ten days, if applicable,
carried over from 1995.
K. HOUSING LOAN
Your Company-provided housing loan in the amount of $400,000 will be
repaid by you upon the sale of your home or by December 31, 1996, if
sooner.
L. REPATRIATION
The cost of your move to Switzerland and assistance with the sale of your
home in Florida will be provided as described in your letter agreement
with the Company dated March 1, 1995.
This letter summarizes all of the compensation and benefit
arrangements in which you participate as they apply to you at retirement. If
you have any questions, please contact me.
Jean-Louis, I extend my very best wishes to you and your family upon
your retirement.
Sincerely,
/s/ William L. Monroe
cc: P. J. Hamilton
D. H. Kohnken
<PAGE> 1
EXHIBIT 10.24
Albert J. Costello
Chairman, President and CEO
W.R. Grace & Co.
One Town Center Road
Boca Raton, FL 33486-1010
June 15, 1995
Dr. F. Peter Boer
W. R. Grace & Co.
One Town Center Road
Boca Raton, FL 33486
Dear Peter:
This letter outlines the arrangements relating to your resignation and
retirement as Executive Vice President and Chief Technical Officer of W. R.
Grace & Co. ("Company")
1. You will resign your position effective June 15, 1995. You will remain
in employment status until December 31, 1995, thus allowing you to "grow into"
retirement age. You will then retire on December 31, 1995.
2. You will continue to receive your salary at your current annual rate
and to receive other benefits currently provided to you as an active employee
(with the exception of the Long-Term Disability Plan participation) while you
remain in employment status.
3. Following your retirement under paragraph 1 above, you shall be
entitled to the compensation and benefits set forth below in accordance with
and subject to the following terms:
A. Severance pay, payable in January 1996, in the form of a lump sum for 5
1/2 months at your current annual rate of base pay which, when combined with 6
1/2 months of continuing base salary in 1995, will total one year of severance
pay.
B. Incentive Compensation
You shall be considered for annual incentive compensation for 1995 based
on the financial performance of the Company and your individual performance.
Though the 1995 Corporate formula for the Annual Incentive Plan has not yet been
approved, it is anticipated that your 1995 bonus will be consistent with your
1994 bonus.
<PAGE> 2
2
C. Executive Salary Protection Plan and Split-Dollar Life
Insurance Plan
Your participation in the Executive Salary Protection Plan shall cease
30 days following the date of your retirement with respect to death benefit
coverage, and on June 15, 1995 with respect to disability coverage in accordance
with the terms of such Plan. In accordance with the terms of the Split-Dollar
Life Insurance Plan, your participation in such Plan will cease upon your
termination of employment, although you may purchase the policy from the Company
by reimbursing the Company for the premiums paid by the Company in your behalf
through the date of termination of your employment. Estimated premiums paid by
the Company through December 31, 1995 are expected to total approximately
$408,000 for four policy years.
D. Long-Term Incentive Plan
Your participation in the Company's Long-Term Incentive Plan for the
1993-95, 1994-96 and 1995-97 Performance Periods will vest (subject to consent
of Compensation Committee on July 6, 1995) and be paid to you at the same time
as other participants. While you will participate for the full 1993-95 cycle,
your awards for 1994-96 and 1995-97 will be prorated as of your December 31,
1995 retirement.
E. Stock Options
Your November 4, 1993, April 7, 1994, and March 2, 1995 as well as your
1991 and 1992 stock option grants are fully vested. Subject to SEC requirements
and restrictions (as to which you should consult Bob Lamm), you are free to
exercise your stock options and to sell the shares acquired on exercise.
However, please note that under these SEC rules, you should not sell any shares
covered by your 1995 grant until six months after the date of grant (September
3, 1995). After your retirement, you will have a three-year grace period during
which you may exercise your options.
F. Stock Swap Arrangement
The 50,482 shares of restricted stock granted under the August 1, 1991
"Stock Swap Arrangement" are scheduled to have the restrictions lapse in five
equal installments during the five-year period beginning January 31, 1997 and
ending with the restrictions lapsing on the last installment on January 31,
2001. The 147,500 stock option shares covered under the August 1, 1991 "Stock
Swap Arrangement" are scheduled to vest in five equal annual installments
beginning January 31, 1997 through January 31, 2001. Notwithstanding this
schedule, as a result of your retirement on December 31, 1995, all such stock
option installments will vest, to the extent not already vested, on June 30,
1998 (30 months following your retirement) and you will have until December 31,
1998 to exercise such shares during the six month remainder of the three-year
grace period to exercise stock option shares following your retirement.
However, it is my intention to recommend to the Compensation Committee of the
Board at the July 6 meeting that the restrictions on the restricted shares be
lifted upon retirement, and in addition to recommend that the 30 month waiting
period be eliminated with respect to the stock options. We can not guarantee
that the Committee will approve these actions.
G. Deferred Compensation
Your deferred compensation balances, estimated at $694,700 as of April
30, 1995, will be paid in accordance with the distribution elections you have
previously made.
<PAGE> 3
3
H. Savings and Investment Plan
Following your termination of employment, you may elect to take a lump
sum distribution under the Savings and Investment Plan, defer your distribution
out to age 70 1/2 or elect to begin receiving installment payments over a period
of up to 10 years, any such election being in accordance with the Plan. Your
balance as of May 30, 1995 totals $549,294.
I. Post-Retirement Life and Medical Coverage
You may participate in the Company's post-retirement life and medical
plans in accordance with their terms following your retirement on December 31,
1995.
J. Pensions
Under the Company's Retirement Plan for Salaried Employees and the
Supplemental Retirement Plan and assuming continuous service through December
31, 1995 and continuation of your base salary through such date, your estimated
annual benefit would be $69,600 on a straight life basis. You can elect your
preferred option under the plan.
K. Perquisites
You may continue have use of Company car, with auto fringe gross-up, and
financial counseling through the end of 1995.
L. Unused Vacation Payment
You shall be entitled to paid vacation aggregating not less than four
weeks during 1995. You shall be entitled to payment for any unused vacation
time in accordance with Company policy at the time your employment terminates.
Please confirm your agreement with the foregoing by signing a copy of
this memorandum where indicated below and returning it to me.
/s/ A. J. Costello
------------------
A. J. Costello
Accepted and agreed to
this 15th Day of June, 1995
/s/ Dr. F. Peter Boer
- ----------------------
Dr. F. Peter Boer
<PAGE> 1
EXHIBIT 10.25
Albert J. Costello
Chairman and CEO
W.R. Grace & Co.
One Town Center Road
Boca Raton, FL 33486-1010
July 31, 1995
Mr. Brian J. Smith
2667 N.W. 63rd Place
Boca Raton, FL 33496
Dear Brian:
This letter outlines the arrangements relating to your resignation as
Executive Vice President and Chief Financial Officer of W.R. Grace & Co.
("Company").
1. You resigned your position as Executive Vice President and Chief
Financial Officer effective as of July 18, 1995. You will remain in employment
status until July 31, 1996 and continue to receive your salary at your current
annual rate and to receive other benefits currently provided to you (with the
exception of the Long-Term Disability Plan participation) while you remain in
employment status until that date.
2. Following your termination of active employment status under paragraph
1 above, you shall be entitled to the compensation and benefits set forth below
in accordance with and subject to the following terms:
Compensation
A. No severance pay will be paid to you either before or after the
expiration of the one year period described in paragraph 1, which ends July 31,
1996. However, you may elect to take the remainder of the pay described in
that paragraph as a lump sum at any time before July 31, 1996 (including in May
1996 after reaching age 52 to qualify for post-retirement life and medical
coverage). As of the date that any such lump sum is paid to you, your
participation as an active employee in the Company's benefit plans will cease.
B. Incentive Compensation
You shall be considered for annual incentive compensation for 1995
based on the financial performance of the Company and your individual
performance. You will not be eligible for 1996 incentive compensation.
C. Executive Salary Protection Plan and Split-Dollar Life Insurance Plan
Your participation in the Executive Salary Protection Plan shall cease
30 days following the date of termination of your employment (July 31, 1996)
with respect to death benefit coverage, and on August 1, 1995 with respect to
disability coverage in accordance with the terms of such Plan. In accordance
with the terms of the Split-Dollar Life Insurance Plan, your participation in
such Plan will cease upon your termination of employment (July 31, 1996),
although you may purchase the policy from
<PAGE> 2
-2-
the Company by reimbursing the Company for the premiums paid by the Company in
your behalf through the date of termination of your employment. Estimated
premiums paid by the Company through August 1, 1996 are expected to total
approximately $325,000 for five policy years.
D. Long-Term Incentive Plan
Your participation in the Company's Long-Term Incentive Plan for the
1993-95, 1994-96 and 1995-97 Performance Periods will vest and be paid to you
at the same time as other participants. While you will participate for the
full 1993-1995 cycle, your awards for 1994-96, and 1995-97 will be prorated as
of your July 31, 1996 date of termination unless the Plan is otherwise amended
by the Board.
E. Stock Options
Your 1995, 1994, and 1993 as well as your 1991 and 1992 stock option
grants are fully vested. Subject to SEC requirements and restrictions (as to
which you should consult Bob Lamm), you are free to exercise your stock options
and to sell the shares acquired on exercise. However, please note that under
these SEC rules, you should not sell any shares covered by your 1995 grant
until six months after the date of grant (September 3, 1995). You will have a
three-year grace period following the termination of your employment during
which you may exercise your options, i.e., through July 31, 1999.
F. Stock Swap Arrangement
The 11,150 shares of restricted stock granted under the August
1, 1991 "Stock Swap Arrangement" are scheduled to have the restrictions lapse
as scheduled beginning in 1997. The Compensation Committee will be asked on
August 3, 1995, to amend the restricted share award and accelerate the lapse of
restrictions effective August 3, 1995. The Committee will be asked to amend
the option granted to you on August 1, 1991 to make it exercisable in full
effective August 3, 1995 and to provide a three-year grace period following
July 31, 1996 during which the option may be exercised, i.e., through July 31,
1999.
G. Deferred Compensation
Your deferred compensation balances, estimated at $509,573 as of May
31, 1995, will be paid in accordance with the distribution elections you have
previously made regarding amounts attributable to the pre-1990 program
($205,764) following July 31, 1996. The remainder will be paid in a lump sum
after July 31, 1996.
Benefits
H. Active benefit coverages continue for 12 months through July
31, 1996, (or only through such earlier date if you elect to receive a lump
sum payment of your remaining salary payments) for medical, dental and accident
plans and participation in the Company's Retirement and Savings Plans
continue through July 31, 1996; Long-term Disability Plan participation ceases
on August 1, 1995.
<PAGE> 3
-3-
I. Savings and Investment Plan
Following your termination of employment on July 31, 1996, you may
elect to take a lump sum distribution under the Savings and Investment Plan,
defer your distribution out to age 70 1/2 or elect to begin receiving
installment payments over a period of up to 10 years, any such election being
in accordance with the Plan. Your balance as of July 14, 1995 totals $934,110.
J. Post-Retirement Life and Medical Coverage
You may participate in the Company's post-retirement life (coverage of
$5,000) and medical plans, beginning August 1, 1996, in accordance with their
terms (which provide for special eligibility at or after age 52) following your
termination of employment.
K. Pensions
Under the Company's Retirement Plan for Salaried Employees and the
Supplemental Retirement Plan and assuming continuous service through July 31,
1996, and continuation of your base salary through July 31, 1996, your
estimated annual benefit on a straight life basis would be $151,572 at age 55
and $182,616 at age 62. You can elect your preferred option under the plan.
L. Perquisites
You may continue to have use of your Company-provided lease car
through December 31, 1995, and to continue financial counseling for expenses
incurred for 1995 and through July 31, 1996.
M. Unused Vacation Payment
You shall be entitled to paid vacation aggregating not less than five
weeks during 1995 and 1996. You shall be entitled to payment for any unused
vacation time in accordance with Company policy at the time your employment
terminates on July 31, 1996.
Please confirm your agreement with the foregoing by signing a copy of
this memorandum where indicated below and returning it to me.
/s/ A. J. Costello
-------------------
A. J. Costello
Accepted and agreed to
this 2nd Day of August
/s/ B.J. Smith
<PAGE> 4
[GRACE LOGO] Pamela J. Hamilton, Senior Vice President
W. R. Grace & Co.
One Town Center Road
Boca Raton, FL 33486-1010
August 9, 1995
Mr. Brian J. Smith
2667 N.W. 63rd Place
Boca Raton, FL 33496
Dear Brian:
The purpose of this letter is to confirm that your request to have the
restrictions lapse on the restricted stock and to accelerate the vesting of
your stock options that were part of the 1991 "stock swap" was presented to the
Compensation Committee on August 3, 1995. As was the case with another
officer, the Committee declined to approve the request.
The restrictions on your restricted stock are scheduled to lapse on July
31, 1996. Should you elect to receive a lump sum payout of your remaining base
salary prior to July 31, 1996, thereby ending your "employment status," the
restrictions would end on such date. The three year grace period under your
options commences on the termination of employment (in other words, July 31,
1996, or any earlier termination date).
Please do not hesitate to call me (x2101) or Bill Monroe (x2221) should
you have any questions.
Sincerely,
/s/ Pamela J. Hamilton
----------------------
Pamela J. Hamilton
<PAGE> 1
EXHIBIT 21
1/31/96
W. R. GRACE & CO.
SUBSIDIARY LIST
Attached is a list of subsidiaries of W. R. Grace & Co. at January 31, 1996.
United States subsidiaries (including those in Puerto Rico and the Virgin
Islands) are listed alphabetically indicating the state of incorporation,
ownership (by whom) and any notes that may pertain to the subsidiary. W. R.
Grace & Co.-Conn. ("Grace-Conn") is the sole owner of the stock of each
subsidiary listed unless otherwise noted or indicated by an "A", which means
that the subsidiary is owned either (1) jointly by Grace-Conn. and one or more
of its United States or non-United States wholly owned subsidiaries or (2)
solely by one or more of those subsidiaries.
Non-United States subsidiaries are listed by country and also indicate the
ownership (percentage and by whom) and any notes that may pertain to the
subsidiary.
Also attached is a list of partnerships in which Grace-Conn., or one of
its subsidiaries, is a partner and a list of investments (at least 20% but not
more than 50%) held by W. R. Grace & Co. or Grace-Conn. and/or one or more of
its subsidiaries.
<PAGE> 2
1/31/96
U. S. SUBSIDIARIES
<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY NAME INCORP. OWNERSHIP NOTES
- --------------- --------- --------- -----
<S> <C> <C> <C>
A-1 Bit & Tool Co., Inc. . . . . . . . . . . . . . . . . . . . . . . . . . DE A
Advanced Integrated Medical Services, Inc. . . . . . . . . . . . . . . . . NJ A
Agracetus, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DE
Alewife Boston Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . MA A
Alewife Land Corporation . . . . . . . . . . . . . . . . . . . . . . . . . MA A
Amasi Medical Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . CA A 2
Ambulatory Care Associates, Inc. . . . . . . . . . . . . . . . . . . . . . DE A
American Home Therapies, Inc. . . . . . . . . . . . . . . . . . . . . . . . MD A
American Homecare Equipment, Inc. . . . . . . . . . . . . . . . . . . . . . VA 5
Amicon, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DE A
Babcock Artificial Kidney Center, Inc. . . . . . . . . . . . . . . . . . . MA A
Bio-Medical Applications Home Dialysis Services, Inc. . . . . . . . . . . . DE A
Bio-Medical Applications Management Company, Inc. . . . . . . . . . . . . . DE A
Bio-Medical Applications of Aguadilla, Inc. . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Alabama, Inc. . . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Alameda County, Inc. . . . . . . . . . . . . . DE A
Bio-Medical Applications of Anacostia, Inc. . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Arecibo, Inc. . . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Arizona, Inc. . . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Arkansas, Inc. . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Bakersfield, Inc. . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Bayamon, Inc. . . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Blue Springs, Inc. . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Boston, Inc. . . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Brockton, Inc. . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Caguas, Inc. . . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of California, Inc. . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Camarillo, Inc. . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Cape Cod, Inc. . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Capitol Hill, Inc. . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Carolina, Inc. . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Carson, Inc. . . . . . . . . . . . . . . . . . DE A
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY NAME INCORP. OWNERSHIP NOTES
- --------------- --------- --------- -----
<S> <C> <C> <C>
Bio-Medical Applications of Chicopee, Inc. . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Chula Vista, Inc. . . . . . . . . . . . . . . . DE A 2
Bio-Medical Applications of Clinton, Inc. . . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Colorado, Inc. . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Columbia Heights, Inc. . . . . . . . . . . . . DE A
Bio-Medical Applications of Delaware, Inc. . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Dover, Inc. . . . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Dublin, Inc. . . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of East Orange, Inc. . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Essex, Inc. . . . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Eureka, Inc. . . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Fajardo, Inc. . . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Fayetteville, Inc. . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Florida, Inc. . . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Framingham, Inc. . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Fremont, Inc. . . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Fresno, Inc. . . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Georgia, Inc. . . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Glendora, Inc. . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Guayama, Inc. . . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Hayward, Inc. . . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Hillside, Inc. . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Hoboken, Inc. . . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Humacao, Inc. . . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Illinois, Inc. . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Indiana, Inc. . . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Irvington, Inc. . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Jersey City, Inc. . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Kansas, Inc. . . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Kentucky, Inc. . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of La Mesa, Inc. . . . . . . . . . . . . . . . . . DE A 2
Bio-Medical Applications of Las Americas, Inc. . . . . . . . . . . . . . . DE A
</TABLE>
- 2 -
<PAGE> 4
<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY NAME INCORP. OWNERSHIP NOTES
- --------------- --------- --------- -----
<S> <C> <C> <C>
Bio-Medical Applications of Long Beach, Inc. . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Los Angeles, Inc. . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Los Gatos, Inc. . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Louisiana, Inc. . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Maine, Inc. . . . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Manchester, Inc. . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Maryland, Inc. . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Massachusetts, Inc. . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Mayaguez, Inc. . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Medford, Inc. . . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Michigan, Inc. . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Mission Hills, Inc. . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Mississippi, Inc. . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Missouri, Inc. . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of MLK, Inc. . . . . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of National City, Inc. . . . . . . . . . . . . . . DE A 2
Bio-Medical Applications New Hampshire, Inc. . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of New Jersey, Inc. . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of New Mexico, Inc. . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of New York, Inc. . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Newington, Inc. . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of North Carolina, Inc. . . . . . . . . . . . . . DE A
Bio-Medical Applications of North City, Inc. . . . . . . . . . . . . . . . DE A 2
Bio-Medical Applications of Northeast D.C., Inc. . . . . . . . . . . . . . DE A
Bio-Medical Applications of Oakland, Inc. . . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Ohio, Inc. . . . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Oklahoma, Inc. . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Pennsylvania, Inc. . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Pine Brook, Inc. . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Ponce, Inc. . . . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Port Orange, Inc. . . . . . . . . . . . . . . . DE A 2
Bio-Medical Applications of Puerto Rico, Inc. . . . . . . . . . . . . . . . DE A
</TABLE>
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<PAGE> 5
<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY NAME INCORP. OWNERSHIP NOTES
- --------------- --------- --------- -----
<S> <C> <C> <C>
Bio-Medical Applications of Quincy, Inc. . . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Rhode Island, Inc. . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Rio Piedras, Inc. . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of San Antonio, Inc. . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of San German, Inc. . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of San Juan, Inc. . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Sarasota, Inc. . . . . . . . . . . . . . . . . DE A 2
Bio-Medical Applications of South Carolina, Inc. . . . . . . . . . . . . . DE A
Bio-Medical Applications of South Queens, Inc. . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Southeast San Diego, Inc. . . . . . . . . . . . DE A 2
Bio-Medical Applications of Southeast Washington, Inc. . . . . . . . . . . DE A
Bio-Medical Applications of Southeastern Massachusetts, Inc. . . . . . . . DE A
Bio-Medical Applications of Springfield, Inc. . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Tarpon Springs, Inc. . . . . . . . . . . . . . DE A 2
Bio-Medical Applications of Tennessee, Inc. . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Texas, Inc. . . . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of The District of Columbia, Inc. . . . . . . . . DE A
Bio-Medical Applications of Torrance, Inc. . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Trenton, Inc. . . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Ukiah, Inc. . . . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Union City, Inc. . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Virginia, Inc. . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of West Virginia, Inc. . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Westwood, Inc. . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Whittier, Inc. . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Wisconsin, Inc. . . . . . . . . . . . . . . . . DE A
Bio-Medical Applications of Woonsocket, Inc. . . . . . . . . . . . . . . . DE A
Bio-Trax Connecticut, Inc. . . . . . . . . . . . . . . . . . . . . . . . . CT A
Bio-Trax International, Inc. . . . . . . . . . . . . . . . . . . . . . . . DE A
Bradley Dialysis Clinic, Inc. . . . . . . . . . . . . . . . . . . . . . . . TN A
Clinical Diagnostic Systems, Inc. . . . . . . . . . . . . . . . . . . . . . FL A
Coalgrace, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DE A
</TABLE>
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<PAGE> 6
<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY NAME INCORP. OWNERSHIP NOTES
- --------------- --------- --------- -----
<S> <C> <C> <C>
Coalgrace II, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . DE A
Conejo Valley Dialysis, Inc. . . . . . . . . . . . . . . . . . . . . . . . CA A 2
Continue Care Pharmaceuticals, Inc. . . . . . . . . . . . . . . . . . . . . WY A
Continue Care of Wyoming, Inc. . . . . . . . . . . . . . . . . . . . . . . WY A
Construction Products Dubai, Inc. . . . . . . . . . . . . . . . . . . . . . DE
Creative Food 'N Fun Company . . . . . . . . . . . . . . . . . . . . . . . DE A
D Interim, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . GA A
Darex Puerto Rico, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . DE
Dearborn International Holdings, Inc. . . . . . . . . . . . . . . . . . . . DE
De Zaan, Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . NY 7
Del Taco Restaurants, Inc. . . . . . . . . . . . . . . . . . . . . . . . . DE
Dewey and Almy Company . . . . . . . . . . . . . . . . . . . . . . . . . . MA
Diagnostic Management Services, Inc. . . . . . . . . . . . . . . . . . . . A
Dialysis Assistance, Inc. . . . . . . . . . . . . . . . . . . . . . . . . NJ A
Dialysis Associates West, Inc. . . . . . . . . . . . . . . . . . . . . . . TN A
Dialysis Management Group, Inc. . . . . . . . . . . . . . . . . . . . . . . TN A
Dialysis Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . TX A
Ecarg, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NJ
Emerson & Cuming, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . DE
Erika International Sales Corporation . . . . . . . . . . . . . . . . . . . DE A 2
Erika of Texas, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . DE A
Five Alewife Boston Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . MA A
G/B Cocoa Holding Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . DE 7
GC Holding Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DE
GEC Management Corporation . . . . . . . . . . . . . . . . . . . . . . . . DE A
GPC Thomasville Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . DE A
Gloucester New Communities Company, Inc. . . . . . . . . . . . . . . . . . NJ A
Grace A-B Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DE A
Grace-A-B II Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . DE A
Grace Asia Pacific, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . DE
Grace Chemicals, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . DE
Grace Chemical Company of Cuba . . . . . . . . . . . . . . . . . . . . . . IL 6
</TABLE>
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<PAGE> 7
<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY NAME INCORP. OWNERSHIP NOTES
- --------------- --------- --------- -----
<S> <C> <C> <C>
Grace Cocoa, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DE 7
Grace Cocoa Limited Partners I, Inc. . . . . . . . . . . . . . . . . . . . DE
Grace Cocoa Limited Partners II, Inc. . . . . . . . . . . . . . . . . . . . DE
Grace Cocoa Management, Inc. . . . . . . . . . . . . . . . . . . . . . . . DE
Grace Collections, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . DE
Grace Communications, Inc. . . . . . . . . . . . . . . . . . . . . . . . . DE
Grace Culinary Systems, Inc. . . . . . . . . . . . . . . . . . . . . . . . MD
Grace Drilling Company . . . . . . . . . . . . . . . . . . . . . . . . . . DE A
Grace Energy Corporation . . . . . . . . . . . . . . . . . . . . . . . . . DE
Grace Environmental, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . DE A 4
Grace Europe, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . DE
Grace H-G Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DE A
Grace H-G II Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DE A
Grace Hotel Services Corporation . . . . . . . . . . . . . . . . . . . . . DE 4
Grace JVH, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DE
Grace (Middle East) Inc. . . . . . . . . . . . . . . . . . . . . . . . . . DE
Grace Logistics Services, Inc. . . . . . . . . . . . . . . . . . . . . . . DE
Grace Management Services, Inc. . . . . . . . . . . . . . . . . . . . . . . DE
Grace Offshore Company . . . . . . . . . . . . . . . . . . . . . . . . . . LA A
Grace PAR Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . DE
Grace Petroleum Libya Incorporated . . . . . . . . . . . . . . . . . . . . DE A
Grace Tarpon Investors, Inc. . . . . . . . . . . . . . . . . . . . . . . . DE
Grace Ventures Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . DE
Grace Washington, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . DE 4
W. R. Grace Capital Corporation . . . . . . . . . . . . . . . . . . . . . . NY A
W. R. Grace Land Corporation . . . . . . . . . . . . . . . . . . . . . . . NY
W. R. Grace & Co.-Conn. . . . . . . . . . . . . . . . . . . . . . . . . . . CT 4
Gracoal, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DE A
Gracoal II, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DE A
Greater Southeast Community Center for Renal Disease, Inc. . . . . . . . . DC A
Guanica-Caribe Land Development Corporation . . . . . . . . . . . . . . . . DE
Gulf Region Mobile Dialysis, Inc. . . . . . . . . . . . . . . . . . . . . . DE A
</TABLE>
- 6 -
<PAGE> 8
<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY NAME INCORP. OWNERSHIP NOTES
- --------------- --------- --------- -----
<S> <C> <C> <C>
Gynesis Healthcare, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . DE A
Gynesis Healthcare for Women of Florida, Inc. . . . . . . . . . . . . . . . FL A
Gynesis Healthcare of Maryland, Inc. . . . . . . . . . . . . . . . . . . . MD A
Gynesis Healthcare of New Jersey, Inc. . . . . . . . . . . . . . . . . . . NJ A
Gynesis Healthcare of New York, Inc. . . . . . . . . . . . . . . . . . . . NY A
Gynesis Healthcare of Oklahoma, Inc. . . . . . . . . . . . . . . . . . . . OK A
Gynesis Healthcare of Pennsylvania, Inc. . . . . . . . . . . . . . . . . . PA A
Gynesis Healthcare of South Carolina, Inc. . . . . . . . . . . . . . . . . SC A
Gynesis Resources, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . DE A
HNS Accucare, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . GA A
HNS Integrated Care Centers, Inc. . . . . . . . . . . . . . . . . . . . . . GA A
HNS Medical Technology Services, Inc. . . . . . . . . . . . . . . . . . . . GA A
HNS Michigan, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . GA A
HNS New York, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . NY A
HNS Quality Home Care, Inc. . . . . . . . . . . . . . . . . . . . . . . . . GA A
HNS UP Home Care, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . GA A
Hanover Square Corporation . . . . . . . . . . . . . . . . . . . . . . . . DE
Healthdyne Home Infusion Therapy, Inc. . . . . . . . . . . . . . . . . . . ? A
Healthy Options for Personal Enrichment, Inc. . . . . . . . . . . . . . . . GA A
Homco International, Inc. . . . . . . . . . . . . . . . . . . . . . . . . DE A
Home Dialysis Care, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . TX A
Home Intensive Care, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . DE A
Home Intensive Care of Arizona, Inc. . . . . . . . . . . . . . . . . . . . AZ A
Home Intensive Care of California, Inc. . . . . . . . . . . . . . . . . . . CA A
Home Intensive Care of Colorado, Inc. . . . . . . . . . . . . . . . . . . . CO A
Home Intensive Care of Connecticut, Inc. . . . . . . . . . . . . . . . . . CT A
Home Intensive Care of Florida, Inc. . . . . . . . . . . . . . . . . . . . FL A
Home Intensive Care of Georgia, Inc. . . . . . . . . . . . . . . . . . . . GA A
Home Intensive Care of Illinois, Inc. . . . . . . . . . . . . . . . . . . . IL A
Home Intensive Care of Kansas, Inc. . . . . . . . . . . . . . . . . . . . . KS A
Home Intensive Care of Las Vegas, Inc. . . . . . . . . . . . . . . . . . . NV A
Home Intensive Care of Louisiana, Inc. . . . . . . . . . . . . . . . . . . LA A
</TABLE>
- 7 -
<PAGE> 9
<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY NAME INCORP. OWNERSHIP NOTES
- --------------- --------- --------- -----
<S> <C> <C> <C>
Home Intensive Care of Maryland, Inc. . . . . . . . . . . . . . . . . . . . MD A
Home Intensive Care of Massachusetts, Inc. . . . . . . . . . . . . . . . . MA A
Home Intensive Care of Michigan, Inc. . . . . . . . . . . . . . . . . . . . MI A
Home Intensive Care of Missouri, Inc. . . . . . . . . . . . . . . . . . . . MO A
Home Intensive Care of Nevada, Inc. . . . . . . . . . . . . . . . . . . . . NV A
Home Intensive Care of New Jersey, Inc. . . . . . . . . . . . . . . . . . . NJ A
Home Intensive Care of New York, Inc. . . . . . . . . . . . . . . . . . . . NY A
Home Intensive Care of Northern Ohio, Inc. . . . . . . . . . . . . . . . . OH A
Home Intensive Care of Ohio, Inc. . . . . . . . . . . . . . . . . . . . . . OH A
Home Intensive Care of Pennsylvania, Inc. . . . . . . . . . . . . . . . . . PA A
Home Intensive Care of Rhode Island, Inc. . . . . . . . . . . . . . . . . . RI A
Home Intensive Care of Tampa, Inc. . . . . . . . . . . . . . . . . . . . . FL A
Home Intensive Care of Virginia, Inc. . . . . . . . . . . . . . . . . . . . VA A
Home Nutritional Services, Inc. . . . . . . . . . . . . . . . . . . . . . . CA A
Home Nutritional Services, Inc. . . . . . . . . . . . . . . . . . . . . . . NJ A
Home Pharmacy Care of Michigan, Inc. . . . . . . . . . . . . . . . . . . . MI A
Homestead Artificial Kidney Center, Inc. . . . . . . . . . . . . . . . . . FL A 2
I. V. Solutions, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . TX A
Infusions Innovations of Jacksonville, Inc. . . . . . . . . . . . . . . . FL A
Infusions Innovations of Tampa, Inc. . . . . . . . . . . . . . . . . . . . FL A
International Medical Care, Inc. . . . . . . . . . . . . . . . . . . . . . DE A
KDNY, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DE A
Kidney Disease and Hypertension Center, Ltd. . . . . . . . . . . . . . . . AZ A
LaFollette Dialysis Center, Inc. . . . . . . . . . . . . . . . . . . . . . TN A
LB Realty, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DE
Life Assist Medical Products Corp. . . . . . . . . . . . . . . . . . . . . PR A
Lifechem, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DE A
Lifeline Medical Supplies, Inc. . . . . . . . . . . . . . . . . . . . . . . FL A
Lifeline Medical Systems, Inc. . . . . . . . . . . . . . . . . . . . . . . CA A
Lifeline Medical Systems, Inc. . . . . . . . . . . . . . . . . . . . . . . FL A
The Medical Accountability Group, Inc. . . . . . . . . . . . . . . . . . . TX A
</TABLE>
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<PAGE> 10
<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY NAME INCORP. OWNERSHIP NOTES
- --------------- --------- --------- -----
<S> <C> <C> <C>
Medical Supply Company, Inc. . . . . . . . . . . . . . . . . . . . . . . . VA A
Medi-Sure Testing, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . DE A
Med-X-Press, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . DE A
Metro Dialysis Center - Kirkwood, Inc. . . . . . . . . . . . . . . . . . . MO A
Metro Dialysis Center - Normandy, Inc. . . . . . . . . . . . . . . . . . . MO A
Metro Dialysis Center - North, Inc. . . . . . . . . . . . . . . . . . . . . MO A
Monolith Enterprises, Incorporated . . . . . . . . . . . . . . . . . . . . DC
Monroe Street, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . DE
National Medical Care, Inc. . . . . . . . . . . . . . . . . . . . . . . . DE A
National Medical Care Home Care Service Agency, Inc. . . . . . . . . . . . NY A
National Medical Care of Taiwan, Inc. . . . . . . . . . . . . . . . . . . . DE A
Nephrology Applications of Mobile, Inc. . . . . . . . . . . . . . . . . . . AL A
NMC Asia-Pacific, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . DE A
NMC China, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DE A
NMC Diabetic Foot Care, Inc. . . . . . . . . . . . . . . . . . . . . . . . DE A
NMC Diabetic Foot Care Centers Orthotics, Inc. . . . . . . . . . . . . . . DE A
NMC Diagnostics Services, Inc. . . . . . . . . . . . . . . . . . . . . . . DE A
NMC Dialysis Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . DE A
NMC Dialysis Services (Romania), Inc. . . . . . . . . . . . . . . . . . . . DE A
NMC Holding, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DE A
NMC Homecare, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . DE A
NMC Homecare of Michigan, Inc. . . . . . . . . . . . . . . . . . . . . . . DE A 5
NMC International, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . DE A
NMC Latin America, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . FL A
NMC Management Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . DE A
NMC Medical Products, Inc. . . . . . . . . . . . . . . . . . . . . . . . . DE A
NMC Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . DE A
NMC Services (Romania), Inc. . . . . . . . . . . . . . . . . . . . . . . . DE A
NMC Ventures, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . DE A
Norlab, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A
North Knoxville Dialysis Center, Inc. . . . . . . . . . . . . . . . . . . . TN
PD Solutions, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . DE A
</TABLE>
- 9 -
<PAGE> 11
<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY NAME INCORP. OWNERSHIP NOTES
- --------------- --------- --------- -----
<S> <C> <C> <C>
PD Solutions of Arizona, Inc. . . . . . . . . . . . . . . . . . . . . . . . AZ A
PD Solutions of California, Inc. . . . . . . . . . . . . . . . . . . . . . CA A
PD Solutions Georgia, Inc. . . . . . . . . . . . . . . . . . . . . . . . . GA A
PD Solutions of Illinois, Inc. . . . . . . . . . . . . . . . . . . . . . . IL A
PD Solutions Kansas, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . KS A
PD Solutions of Louisiana, Inc. . . . . . . . . . . . . . . . . . . . . . . LA A
PD Solutions Maryland, Inc. . . . . . . . . . . . . . . . . . . . . . . . . MD A
PD Solutions Michigan, Inc. . . . . . . . . . . . . . . . . . . . . . . . . MI A
PD Solutions Missouri, Inc. . . . . . . . . . . . . . . . . . . . . . . . . MO A
PD Solutions of Nevada, Inc. . . . . . . . . . . . . . . . . . . . . . . . NV A
PD Solutions New Jersey, Inc. . . . . . . . . . . . . . . . . . . . . . . . NJ A
PD Solutions of New York, Inc. . . . . . . . . . . . . . . . . . . . . . . NY A
PD Solutions of Ohio, Inc. . . . . . . . . . . . . . . . . . . . . . . . . OH A
PD Solutions Pennsylvania, Inc. . . . . . . . . . . . . . . . . . . . . . . PA A
PD Solutions of Texas, Inc. . . . . . . . . . . . . . . . . . . . . . . . . TX A
PD Solutions Virginia, Inc. . . . . . . . . . . . . . . . . . . . . . . . . VA A
PML, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A
Park Diagnostic Imaging Center, Inc. . . . . . . . . . . . . . . . . . . . A
Park Imaging, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . MA A
Park Imaging, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . FL A
Park Imaging, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . PA A
Park Portable X-Ray, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . A
Personal Care Health Services, Inc. . . . . . . . . . . . . . . . . . . . . DE A
Phoenix Consulting Services, Inc. . . . . . . . . . . . . . . . . . . . . . FL A
Preferred Homecare of Florida, Inc. . . . . . . . . . . . . . . . . . . . . FL A
Preferred Homecare of New Jersey, Inc. . . . . . . . . . . . . . . . . . . NJ A
Preferred Pharmacy Services, Inc. . . . . . . . . . . . . . . . . . . . . . FL A
Prochrom, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IN A
Quality Care Dialysis Centers, Inc. . . . . . . . . . . . . . . . . . . . . FL A
Quality Care Dialysis Center of Baltimore, Inc. . . . . . . . . . . . . . . MD A
Quality Care Dialysis Center of Boston, Inc. . . . . . . . . . . . . . . . MA A
Quality Care Dialysis Center of Creve Coeur, Inc. . . . . . . . . . . . . . MO A
</TABLE>
- 10 -
<PAGE> 12
<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY NAME INCORP. OWNERSHIP NOTES
- --------------- --------- --------- -----
<S> <C> <C> <C>
Quality Care Dialysis Center of Dallas, Inc. . . . . . . . . . . . . . . . TX A
Quality Care Dialysis Center of Greensburg, Inc. . . . . . . . . . . . . . LA A
Quality Care Dialysis Center of Hammond, Inc. . . . . . . . . . . . . . . . DE A
Quality Care Dialysis Center of Houston, Inc. . . . . . . . . . . . . . . . TX A
Quality Care Dialysis Center of Las Vegas, Inc. . . . . . . . . . . . . . . NV A
Quality Care Dialysis Center of Margate, Inc. . . . . . . . . . . . . . . . FL A
Quality Care Dialysis Center of Mt. Vernon, Inc. . . . . . . . . . . . . . VA A
Quality Care Dialysis Center of New Orleans, Inc. . . . . . . . . . . . . . LA A
Quality Care Dialysis Center of North County, Inc. . . . . . . . . . . . . MO A
Quality Care Dialysis Center of Patapsco, inc. . . . . . . . . . . . . . . MD A
Quality Care Dialysis Center of San Antonio, Inc. . . . . . . . . . . . . . TX A
Quality Care Dialysis Center of Southern Maryland, Inc. . . . . . . . . . . MD A
Quality Care Dialysis Center of St. Augustine, Inc. . . . . . . . . . . . . FL A
Quality Care Dialysis Center of St. Clair Shores, Inc. . . . . . . . . . . MI A
Quality Care Dialysis Center of St. Louis, Inc. . . . . . . . . . . . . . . MO A
Quality Care Dialysis Center of Stoneham, Inc. . . . . . . . . . . . . . . MA A
Quality Care Dialysis Center of University City . . . . . . . . . . . . . . MO A
Quality Care Dialysis Center of Vega Baja, Inc. . . . . . . . . . . . . . . PR A
Quality Care Dialysis Center of Vista, Inc. . . . . . . . . . . . . . . . . CA A
Quality Care Dialysis Center of Weymouth, Inc. . . . . . . . . . . . . . . MA A
Renal Scientific Service, Inc. . . . . . . . . . . . . . . . . . . . . . . DE A
Renal Scientific Service of Texas, Inc. . . . . . . . . . . . . . . . . . DE A 2
Renal Supply (Tenn) Corporation . . . . . . . . . . . . . . . . . . . . . NJ A
Retaw, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FL A
Rockwood Dialysis Center, Inc. . . . . . . . . . . . . . . . . . . . . . . VA A
San Diego Dialysis Services, Inc. . . . . . . . . . . . . . . . . . . . . . DE A
Santa Barbara Community Dialysis Center, Inc. . . . . . . . . . . . . . . . CA A
Security Health Services, Inc. . . . . . . . . . . . . . . . . . . . . . . NV A
St. Louis Regional Dialysis Center, Inc. . . . . . . . . . . . . . . . . . MO A
Sourgasco II Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . DE A
Southern Oil, Resin & Fiberglass, Inc. . . . . . . . . . . . . . . . . . . FL
Sover Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DE A
</TABLE>
- 11 -
<PAGE> 13
<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY NAME INCORP. OWNERSHIP NOTES
- --------------- --------- --------- -----
<S> <C> <C> <C>
Tappahanock Dialysis Center, Inc. . . . . . . . . . . . . . . . . . . . . . VA A
UKC-North, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TX A
United Dialysis Corporation . . . . . . . . . . . . . . . . . . . . . . . . CA A
University Kidney Center, Inc. . . . . . . . . . . . . . . . . . . . . . . TX A
Warrenton Dialysis Facility, Inc. . . . . . . . . . . . . . . . . . . . . . VA A
Water Street Corporation . . . . . . . . . . . . . . . . . . . . . . . . . DE
West End Dialysis Center, Inc. . . . . . . . . . . . . . . . . . . . . . . VA A
Woolwich Sewer Company, Inc. . . . . . . . . . . . . . . . . . . . . . . . NJ A
Woolwich Water Co., Inc. . . . . . . . . . . . . . . . . . . . . . . . . . NJ A
W. R. C. Technical Ventures, Inc. . . . . . . . . . . . . . . . . . . . . DE
WRG (Delaware) Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . DE
Zenex Capital Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . FL A
</TABLE>
- 12 -
<PAGE> 14
NON-U.S. SUBSIDIARIES
<TABLE>
<CAPTION>
OWNERSHIP
COUNTRY SUBSIDIARY NAME % / BY WHOM NOTES
- ------- --------------- ----------- -----
<S> <C> <C> <C>
ARGENTINA AQT Quimica Argentina, S.A. 100 / A
Grace Argentina, S.A. 100 / A
NMC de Argentina, S.A. 100 / A
Inere, S.A. 100 / A
Centro Nefrologico Bahia Blanca S. R. 100 / A
Diali Salta S.A. 100 / A
Centro de Dialisis Ituzaingo, S.A. 100 / A
AUSTRALIA W. R. Grace Australia Limited 100 / A
W. R. Grace Catalysts Pty. Limited 100 / A
Omicron Proprietary Limited 100 / A
Omipac Pty. Ltd. 51/A 12
BELGIUM Alexim N.V. 100 / A
Grace Dearborn N.V. 100 / A
Finac N.V. 100 / A
Grace N.V. 100 / A
Grace Silica N.V. 100 / A 1
BERMUDA Erika, Ltd. 100 / A
NMC Holdings, Ltd. 100 / A
Trans-Meridian Assurance Ltd. 100 / A
BRAZIL Grace Brasil S.A. 100 / A
PEADCO-Engenharia, Comercio Industria Ltda. 100 / A
NMC do Brasil Ltda. 100 / A
Maia de Almedia Industria e Comercio S.A. 100 / A
Renal-Tec Industria Comercia e Servicos, Ltda. 100 / A
International Holdings Ltda. 100 / A
Dearborn International Ltda. 100 / A
CANADA Ambrosia Chocolate Ltd. 100/A 9
Amicon Canada Limited 100 /
Erika Laboratories, Ltd. 100 / A
GEC Divestment Corporation Limited 100 / A
Grace Dearborn Inc. 100 /
W. R. Grace & Co. of Canada Ltd. 100 /
W. R. Grace Finance (NRO) Ltd. 100
Erika Laboratories, Ltd. 100 / A 2
National Medical Care Canada Inc. 100 / A
NMC Canada Dialysis Services Inc. 100 / A
</TABLE>
- 13 -
<PAGE> 15
<TABLE>
<CAPTION>
OWNERSHIP
COUNTRY SUBSIDIARY NAME % / BY WHOM NOTES
- ------- --------------- ----------- -----
<S> <C> <C> <C>
CAYMAN ISLANDS Grace Cocoa Hong Kong Ltd. 100 / A
Global Cocoa Holdings Ltd. 100 / A
Grace China Holdings I, Inc. 100
Grace Davison China, Inc. 100
CHILE Grace Quimica Compania Limitada 100 / A
COLOMBIA Grace Colombia, S.A. 100 / A
Aquatec de Colombia S.A. 100 / A
CUBA Envases Industriales y Comerciales, S.A. 100 / 6
Papelera Camagueyana, S.A. 100 / 6
CZECH REPUBLIC Grace Spol. s r.o. 100 /
National Medical Care, s r.o. 100 / A
DENMARK W. R. Grace A/S 100 /
ECUADOR Grace Cocoa Ecuador S.A. 100 / A
FINLAND W. R. Grace Oy 100 / A
Prochrom Oy 100 / A 1
FRANCE Grace Cocoa France S.A. 100 / A 7
Grace S.A. 100 / A
Grace Service Chemicals S.A. 100 / A
Prochrom S.A. 100 / A
Prochrom Recherche et Developpement 100 / A
Soboca S.A. 100 / 7
Societe Civile Immobiliere Les Rosiers 100 / A 1
GERMANY Amicon G.m.b.H. 100 /
A-1 Bit & Tool Co. G.m.b.H. 100 / A
Chomerics G.m.b.H. 100 / A
De Zaan B.V.m.b.H. 100 / 7
EAP Akustik GmbH 100 / A 1
Emerson & Cuming G.m.b.H. 100 / A
Grace G.m.b.H. 100 / A
Kascho Kakao- und Schokoladenwerke, G.m.b.H. 100 / 7
National Medical Care (Deutschland) G.m.b.H. 100 / A
NMC Dialysebehandlung G.m.b.H. i.g. 100 / A
NMC Holding GmbH 100 / A
Riggers Dialysatoren G.m.b.H. 100 / A
Riggers Dialysatoren Produktion Thalheim G.m.b.H. 100 / A
Rena-Med 100 / A
Riggers Medizintechnik Thalheim G.m.b.H. 100 / A
Grace Multiflex GmbH 100/A
</TABLE>
- 14 -
<PAGE> 16
<TABLE>
<CAPTION>
OWNERSHIP
COUNTRY SUBSIDIARY NAME % / BY WHOM NOTES
- ------- --------------- ----------- -----
<S> <C> <C> <C>
GREECE Grace Hellas E.P.E. 100 /
GUATEMALA Grace Central America, S.A. 100 /
HONG KONG Amicon Polymers (H.K.). Limited 100 / A 1
W. R. Grace Southeast Asia Holdings Limited 100 /
W. R. Grace Far East Investment Company Limited 100 / 1
W. R. Grace (Hong Kong) Limited 100 / A
HUNGARY Grace kft. 100 / A
NMC Dialyzis Szolgaltato, kft. 100 / A
NMC Asset Handling Limited Liability Company 100 / A
INDIA Dearborn I.E.I. (India) Private Ltd. 51 / 11
W. R. Grace & Co. (India) Private Limited 100
INDONESIA P.T. Grace Specialty Chemicals Indonesia 100 / A
IRELAND Amicon Ireland Limited 100 /
W.R. Grace (Ireland) Ltd. 100 / A
Trans-Meridian Dublin Ltd. 100
ITALY Emerson & Cuming Italiana S.r.L. 100 / A 1
Grace Finanziaria S.r.L. 100 / 1
Grace Italiana S.p.A. 100 / A
JAPAN Grace Japan Kabushiki Kaisha 100 /
Amicon Japan K.K. 100 / A
KOREA Grace Korea Inc. 100 /
NMC Korea, Inc. 100 / A
MALAYSIA W. R. Grace (Malaysia) Sendiran Berhad 100 / A
W. R. Grace Packaging (Malaysia) Sdn. Bhd. 100 /
W. R. Grace Specialty Chemicals 100 /
(Malaysia) Sdn. Bhd.
MEXICO Erika de Reynosa S.A. de C.V. 100 / A
Invertol S.A. de C.V. 100 / A
Especialidades Quimicas Grace de Mexico, 100 / A
S.A. de. C.V.
Grace Holdings, S.A. de C. V. 100
NETHERLANDS Amicon B.V. 100 /
Berisford Cacao Nederland B.V. 100 / 7
Cacao De Zaan B.V. 100 / 7
Grace B.V. 100 /
</TABLE>
- 15 -
<PAGE> 17
<TABLE>
<CAPTION>
OWNERSHIP
COUNTRY SUBSIDIARY NAME % / BY WHOM NOTES
- ------- --------------- ----------- -----
<S> <C> <C> <C>
NETHERLANDS Grace Cocoa B.V. 100 / 7
(continued) Grace Dearborn B.V. 100 / A
J. G. van Bruinessen B.V. 100 / A 7
Storm van Bentem & Kluyver B.V. 100 / A
Twincon B.V. 100 / 7
NETHERLANDS ANTILLES W. R. Grace N.V. 100 /
NEW ZEALAND W. R. Grace (N.Z.) Limited 100 / A
NORWAY W. R. Grace A/S 100 / A
PEOPLE'S REPUBLIC
OF CHINA Global Huada (Guangzhou) Confectionery Ltd. 100 17
Grace China Ltd. 100 /
Shanghai Ren Ji - NMC Hemodialysis Center 100 / A
Grace Packaging Gaoming Co. Ltd. 67.7 / A 16
Shenyang Liaoning NMC Hemodialysis Center
Co. Ltd. 100 / A
PHILIPPINES W. R. Grace (Philippines) Inc. 100 / A
POLAND W. R. Grace Sp. z.O.O. 100 /
National Medical Care Polska Sp. z.O.O. 100 / A
PORTUGAL Abrandial-Clinica de Doencas Renais, Lda. 100 / A
Ambulancias 111, SA 100 / A
Clinica de Diagnosticos Dr. Fernando Teixeira 100 / A
Limitada
Cancho, Lda. 100 / A
CNH - Centro Nacional de Hemodialise, Lda. 100 / A
Egidial, Lda. 100 / A
Hemodial, Lda 100 / A
Grace Portuguesa (Produtos Quimicos e 100 / A
Plasticos) Lda.
NMC-Centro Medico Nacional, Lda. 100 / A
Ribadial, Lda 100 / A
Visodial, Lda. 100 / A
Ascencao Afonso, Lda. 100 / A
Flaviano Gusmao, Lda. 100 / A
Gnostica, S.A. 100 / A
LPC-Lab Patoogia Clinica 100 / A
Lab. Analises Clinicas Dra. Susan Pereira Rosas 100 / A
Lac-Lab De Analises Clinicas 100 / A
Cal & Silveria - Analises Clinicas, Lda. 100 / A
Analises Xira, Lda. 100 / A
Diagnostic Laboratorial Dra. Helena Farrojota, Lda. 100 / A
</TABLE>
- 16 -
<PAGE> 18
<TABLE>
<CAPTION>
OWNERSHIP
COUNTRY SUBSIDIARY NAME % / BY WHOM NOTES
- ------- --------------- ----------- -----
<S> <C> <C> <C>
PORTUGAL Laboratorio de Analises Clinicas Dr. Joao Ribeiro
(continued) e Dra. Maria da Graca Cardoso, Lda. 100 / A
Louro & Pires, Lda. 100 / A
RUSSIA A/O Grace 100 / A
A/O Grace Kaustik 51 / A 10
A/O Grace Kriz 51 / A 15
SINGAPORE A-1 Bit & Tool Company Pte. Ltd. 100 / A
De Zaan Far East Pte. Ltd. 100 / 7
Grace Cocoa Singapore Pte. Ltd. 100 / 7
W. R. Grace (Singapore) Private Limited 100 / A
SOUTH AFRICA W. R. Grace Africa (Pty) Limited 100 /
SPAIN Centro De Dialisis Recoletas Albacete, S.L. 100 / A
Dialcentro, S.A. 100 / A
Grace, S.A. 100 /
Instituto de Ciencias Neurologicas, S.A. 100 / A
Kidney, S.L. 100 / A
National Medical Care of Spain, S.A. 100 / A
Socodi Club, S.L. 100 / A
Teroson Espanola, S.L. 100 / A 3
SWEDEN Grace AB 100
Grace Dearborn AB 100 / A
Grace Sweden AB 100 / A
Grace TEC Systems AB 100 / A
SWITZERLAND Grace A.G. 100 / A
Grace Cocoa Chocolate Mgt. S.A. 100 / A 7
Syncrete S.A. 100 / 3
Neue Transvac Maschinen A.G. 99.99%
TAIWAN W. R. Grace Taiwan Inc. 100 / A
THAILAND W. R. Grace (Thailand) Ltd. 100 / A 3
TURKEY Grace TLS 100 / A
UNITED KINGDOM A.A. Consultancy & Cleaning Company Limited 100 / A
Amicon Limited 100 /
Amicon Merger, Ltd. 100 / A 1
Cormix Limited 100 / A 3
Dearborn (U.K.) Limited 100 / A 3
Dearborn Europe Limited 100 / A 3
Renacare Limited 100 / A
</TABLE>
- 17 -
<PAGE> 19
<TABLE>
<CAPTION>
OWNERSHIP
COUNTRY SUBSIDIARY NAME % / BY WHOM NOTES
- ------- --------------- ----------- -----
<S> <C> <C> <C>
UNITED KINGDOM Renalyte Services Limited 100 / A
(continued) U.K. Renal Services Limited 100 / A
W. R. Grace Limited 100 / A
URUGUAY Aquatec de Uruguay, S.A. 100 / A
Grace Uruguay S.A. 100 /
VENEZUELA Grace Venezuela, S.A. 100 / A
Inversiones GSC, S.A. 100 /
NMC National Medical Care de Venezuela C.A. 100 / A
</TABLE>
- 18 -
<PAGE> 20
U.S. AND NON-U.S. NOTES
1 In liquidation
2 Inactive
3 Dormant, assets sold
4 Owned by W. R. Grace & Co.
5 Owned by National Medical Care, Inc. as of 1/1/94
6 Assets and business expropriated by Cuban Government
7 Owned by a partnership, Grace Cocoa Associates, L.P., or a subsidiary
thereof
8 To be merged into W. R. Grace Limited
9 Common stock owned 100% by Grace Cocoa Associates, L.P./Preferred stock
owned 100% by W. R. Grace & Co. of Canada Ltd.
10 Joint stock company, 46% owned by Grace Italiana S.p.A., 5% owned by W.
R. Grace Ltd., 49% owned by A/O Kaustik
11 Joint Venture, 51% owned by W. R. Grace & Co.-Conn., 49% owned by Ion
Exchange India
12 Joint Venture, 51% owned by Omicron Proprietary Limited, 49% owned by
Parade Packaging Sdn Bhd
13 To be merged into Grace GmbH
14 To be merged into Grace AB
15 A Russia Joint Venture, owned 31% by Grace S.A., 20% by W. R. Grace
Limited and 49% by A/O Kriz
16 A China Joint Venture, owned 67.7% by Grace China Holdings I, Inc. and
32.3% by Sanzhou Economic Development General Company
17 A China Joint Venture, owned 70% by Grace Cocoa Hong Kong Ltd. and 30% by
Guangzhou Confectionery Factory
- 19 -
<PAGE> 21
PARTNERSHIPS
Axial Basin Ranch Company
a Delaware partnership, owned 50% by Grace A-B Inc., 50% Grace A-B II Inc.
Boodin Partnership
Owned 50% by NMC Homecare, Inc.
Carbon Dioxide Slurry Systems L.P.
a Delaware partnership, owned 50% by W. R. Grace & Co.-Conn.
Cormix Middle East LLC
a Dubai LLC, owned 49% Construction Products Dubai, Inc., 51% Sheikh Hasher
Maktoum Juma Al Maktoum
Dearborn USA, Limited Partnership
a Delaware limited partnership. owned 1% by W. R. Grace & Co.-Conn., Sole
General Partner and 99% by LB Realty, Inc., Sole Limited Partner
Emirates Chemicals LLC
a Dubai LLC, owned 49% Construction Products Dubai, Inc., 51% Sheikh Hasher
Maktoum Juma Al Maktoum
Grace Cocoa Associates, L.P.
a Delaware limited partnership, owned 24.04% by W. R. Grace & Co.-Conn.,
6.02% GC Holding Inc., 48.93% Grace Cocoa Ventures, L.P., .04% Grace Cocoa
Management, Inc., 20.9% Tarpon Investors, L.P.
Grace Cocoa Ventures, L.P.
a Delaware limited partnership, owned .001% by Grace Cocoa Limited Partners
I, Inc., 99.999% owned by Grace Cocoa Ventures, Inc.
Grace Offshore Turnkey
a Texas partnership, owned 50% by Grace Offshore Company
Guangzhou Nanfang NMC Hemodialysis Center Company Limited
a China joint venture at least 50% owned by NMC International, Inc.
HIC Pharmacy Services, L.P.
a Michigan LimIted Partnership, owned 75% by Home Pharmacy Care of
Michigan, Inc. and 25% by Stuart E. Bas
- 20 -
<PAGE> 22
Hayden-Gulch West Coal Company
a Delaware partnership, owned 50% by Grace H-G Inc., 50% by
Grace H-G II, Inc.
Healthtech Medical
a California partnership, owned 50% by NMC Ventures, Inc.
H-G Coal Company
a Delaware partnership, owned 50% by Coalgrace, Inc., 50% by
Coalgrace II, Inc.
Immunecare of Hollywood
a Florida partnership, owned 50% by NMC Ventures, Inc.
ImmuneCare of Key West
a Massachusetts partnership, owned 50% by NMC Ventures, Inc.
Infusion Systems
a Nevada partnership, owned 50% by NMC Ventures, Inc.
Metreon
an Ohio joint venture/partnership, owned 50% by Grace JVH, Inc., 50% by
Englehard MC, Inc.
New Bedford Infusioncare
a Massachusetts partnership, owned 50% by NMC Ventures, Inc.
Nippon Dearborn Kabushiki Kaisha
a Japanese partnership, owned 50% by Grace Japan Kabushiki Kaisha
North Suburban Dialysis
a Massachusetts partnership, owned 50% by Bio-Medical Applications of
Essex, Inc.
OB One & IV Too
an Indiana partnership, owned 50% by NMC Ventures, Inc.
Palm Springs I.V. Care II
owned 50% by NMC Homecare, Inc.
Parade & Omicron Sdn Bhd
a Malaysia Joint Venture, owned 51% by Omipac Proprietary Ltd. and 49% by
Parade Industries Pte. Ltd.
Paramont Coal Company
a Virginia partnership, owned 50% by Grace PAR Corporation
Pharmacy Direct
a Massachusetts partnership, owned 50% by NMC Dialysis Services, Inc.
Primecare Home Health Services
owned 50% by NMC Homecare, Inc.
Pursue Gas Processing and Petrochemical Company
a Texas partnership, owned 25% by Sourgasco II Corp.
- 21 -
<PAGE> 23
Quality Homecare Services of Watertown, NY
a Massachusetts partnership, owned 50% by NMC Dialysis Services, Inc.
Renal Services (Malaysia) Sdn. Bhd., a Malaysia joint venture owned 25% by
International Medical Care, Inc.
Riggers Dialysatoren Produktion Thalheim G.m.b.H. & Co. K.G.
a German partnership, owned 50% by Riggers Medizintechnik G.m.b.H., 50% by
Riggers Dialysatoren Produktion Thalheim G.m.b.H.
Sleep Diagnostic Associates
an Arizona partnership, owned 50% by NMC Ventures, Inc. and 50% by Sleep
Diagnostics, Inc.
Sisters of Charity Home Health Care
Owned 50% by NMC Homecare, Inc.
VNA/NMC Homecare Partnership
Owned 50% by NMC Homecare, Inc.
- 22 -
<PAGE> 24
INVESTMENTS
(holdings of at least 20% but not more than 50%)
<TABLE>
<CAPTION>
OWNERSHIP
COMPANY NAME JURISDICTION PERCENT NOTES
- ------------ ------------ ------------ -----
<S> <C> <C> <C>
Arral & Partners British Virgin Islands 20.8%
Asian Food Investment Limited British Virgin Islands 40%
Colowyo Coal Company L.P. Delaware 6
Denka Grace K.K. Japan 45%
General Cocoa Trading House Inc. British Virgin Islands
GKA Company Limited Hong Kong 25%
GN Holdings, Inc.* Delaware 47%
Incacao Fabrica Nacional de Ecuador 10% 2
Elaboradoes de Cacao S.A.
Intercao, S.A. British Virgin Islands 20% 2
PJ Margo Private Limited India 50%
Noxso Corporation Virginia 23.1%
Productos Derivados de la Sal Colombia 30.1% 3
Productora de Papeles S.A. (PROPAL) Colombia 36.16%
Societe Novelle Sifca, S.A. Ivory Coast 30% 7
Tarpon Investors, L.P. Delaware 20% 4
Unicao B.V. Netherlands 20% 5
Unicao S.A. Ivory Coast 20% 5
</TABLE>
NOTES:
1 Owned by W. R. Grace & Co.
2 Owned by Grace Cocoa, Inc.
3 Owned by Productora de Papeles S.A.
4 Owned by Grace Tarpon Investors, Inc.
5 Owned by Twincon B.V.
6 Limited Partnership interests are owned by Gracoal, Inc. and Gracoal
II, Inc.
7 Owned by Targhee Holdings, B.V., a wholly owned subsidiary
of Grace Cocoa B.V., a Netherlands corporation
* formerly CCHP Delaware, Inc.
- 23 -
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
The undersigned director of W. R. GRACE & CO. ("Company") hereby appoints
PETER D. HOUCHIN and ROBERT B. LAMM as his true and lawful attorneys-in-fact
for the purpose of signing the Company's Annual Report on Form 10-K for the
year ended December 31, 1995, and all amendments thereto, to be filed with the
Securities and Exchange Commission. Each of such attorneys-in-fact is
appointed with full power to act without the other.
/s/ E. W. Duffy /s/ P. S. Lynch
/s/ H. A. Eckmann /s/ R. C. Macauley
/s/ J. W. Frick /s/ J. E. Phipps
/s/ C. L. Hampers /s/ E. J. Sullivan
/s/ T. A. Holmes
Dated: March 29, 1996
<PAGE> 2
POWER OF ATTORNEY
The undersigned director of W. R. GRACE & CO. ("Company") hereby appoints
PETER D. HOUCHIN and ROBERT B. LAMM as her true and lawful attorneys-in-fact
for the purpose of signing the Company's Annual Report on Form 10-K for the
year ended December 31, 1995, and all amendments thereto, to be filed with the
Securities and Exchange Commission. Each of such attorneys-in-fact is
appointed with full power to act without the other.
/s/ M. A. Fox
Dated: March 29, 1996
<PAGE> 3
POWER OF ATTORNEY
The undersigned, Chairman, President and Chief Executive Officer
(Principal Executive Officer) and a director of W. R. GRACE & CO. ("Company"),
hereby appoints PETER D. HOUCHIN and ROBERT B. LAMM as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1995, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
/s/ A. J. Costello
Dated: March 29, 1996
<PAGE> 4
POWER OF ATTORNEY
The undersigned, Senior Vice President and Chief Financial Officer
(Principal Financial Officer and Acting Principal Accounting Officer) of W. R.
GRACE & CO. ("Company"), hereby appoints ROBERT B. LAMM as his true and lawful
attorney-in-fact for the purpose of signing the Company's Annual Report on Form
10-K for the year ended December 31, 1995, and all amendments thereto, to be
filed with the Securities and Exchange Commission.
/s/ P. D. Houchin
Dated: March 29, 1996
<PAGE> 1
EXHIBIT 99.05
SETTLEMENT AGREEMENT
AGREEMENT made as of the 26th day of January, 1996 by and
between HSC Hospitality, Inc., formerly known as HSC Holding Co., Inc. ("HSC"),
a Delaware corporation, Grace Hotel Services Corporation ("GHSC"), a Delaware
corporation, and W. R. Grace & Co. ("Grace"), a New York corporation.
WHEREAS, HSC and GHSC entered into a letter agreement, dated
December 14, 1994 (the "letter agreement"), pursuant to which certain monies
were paid to GHSC by HSC and other sums were put in an interest bearing escrow
account (the "Escrow Account") until a final determination was made regarding
those sums.
WHEREAS, an arbitration was commenced before the American
Arbitration Association by GHSC against HSC regarding certain disputed sums,
including those held in the Escrow Account (the "arbitration").
WHEREAS, GHSC and HSC desire to settle their disputes
regarding the disputed sums held in the Escrow Account that are the subject of
the arbitration.
NOW THEREFORE, in consideration of the mutual promises
contained herein and other good and valuable consideration, receipt of which is
hereby acknowledged, the parties hereto agree as follows:
1. The sum of $110,312.50, together with all interest
earned on $111,000 of the principal amount in the Escrow Fund from the date of
deposit to the date of
<PAGE> 2
disbursement, shall be paid from the Escrow Account to GHSC, $1,575.00 shall be
paid to the American Arbitration Association and the remaining balance in the
Escrow Account shall be paid to HSC.
2. Although GHSC continues to maintain that the full
balance ($164,903) of the amount of the final determination (as that term is
used in the letter agreement) is still due to GHSC and HSC continues to dispute
that it is due to GHSC, in the interest of settling this matter, the parties
have agreed that (a) the payments set forth in paragraph one, above, are in
full payment and satisfaction of all claims made in the arbitration and all
outstanding amounts owed by HSC to GHSC under paragraphs 1(ii), 2 and 3 of the
letter agreement and (b) the arbitration shall be discontinued with prejudice.
The parties shall execute a joint letter to the American Arbitration
Association in the form annexed hereto as Exhibit A.
3. HSC henceforth shall be the rightful owner of the
safe that currently is in HSC's possession and the Time Management System, the
HP Hewlett Packard Desk Jet Printer, the Dell 486P33 and the Dell 333 100 MP
that currently are in GHSC's possession, the ownership of which was disputed in
the arbitration. HSC shall pick up from GHSC the Time Management System, the
HP Hewlett Packard Desk Jet Printer, the Dell 486P33 and the Dell 333 100 MP
(collectively the "equipment") within two weeks from the execution of this
Settlement Agreement. HSC
- 2 -
<PAGE> 3
shall assume all obligations under any and all service contracts or other
agreements pertaining to the equipment. GHSC represents that since November 9,
1994 it has not entered any service contracts pertaining to the equipment.
GHSC henceforth shall be the rightful owner of all other assets in its
possession, custody or control, the ownership of which was disputed in the
arbitration. GHSC shall have the right to give to HSC at no charge any or none
of such assets of which GHSC is the rightful owner or to otherwise dispose of
such assets, in its sole, absolute and unreviewable discretion.
4. HSC acknowledges that it is responsible for all of
the obligations arising from or relating to the food and beverage service
business it operates or has operated, including but not limited to the food and
beverage service at the following locations: (1) two Embassy Suites in
Orlando, Florida; (2) Bourbon Orleans Hotel in New Orleans, Louisiana; (3)
Embassy Suites in Altamonte Springs, Florida; (4) Embassy Suites in
Jacksonville, Florida; (5) Embassy Suites in Nashville, Tennessee; (6)
Michelangelo Hotel in New York City; (7) Embassy Suites in downtown San Diego,
California; (8) Embassy Suites at the St. Louis airport, Missouri; (9) Dumont
Plaza Hotel in New York City; and (10) Shelburne Hotel in New York City
(hereinafter referred to as "HSC Business"). HSC agrees that it will assume
and discharge in due course all obligations relating to HSC Business regardless
of whether it
- 3 -
<PAGE> 4
incurred such obligations in the name of HSC or GHSC or otherwise, provided,
however, that GHSC's obligations with respect to the Michelangelo Hotel in New
York City relating to the period prior to June 13 1994, and GHSC's obligations
with respect to the Dumont Plaza and Shelburne Hotels in New York City relating
to the period prior to July 7, 1995, shall remain the responsibility of GHSC
(June 12, 1994 and July 6, 1995 being the dates on which GHSC ceased operating
the food and beverage service at the Michelangelo and the Dumont Plaza and
Shelburne Hotels, respectively). HSC agrees to defend and to indemnify GHSC
with respect to all claims arising from or relating to HSC Business, and GHSC
agrees to defend and indemnify HSC with respect to all claims arising from or
relating to the GHSC food and beverage service business during the time that
such business was operated by GHSC.
5. Each party shall bear its own costs and attorneys'
fees with respect to this matter, including all costs and fees incurred with
respect to the arbitration.
6. The terms and conditions of paragraphs 4B, 4C, 5, and
6 of the letter agreement shall remain in full force and effect, with the
exception of the second to last sentence in paragraph 5 and the first sentence
of paragraph 6.
7. The parties agree that the terms of this Settlement
Agreement will be kept confidential and not disclosed to anyone not a party to
this Settlement Agreement, except as
- 4 -
<PAGE> 5
may be required (i) pursuant to securities laws and regulations, as determined
in the sole and absolute discretion of counsel to the parties herein, or (ii)
by court order. In the event of a court order requiring disclosure, each party
agrees to give the other notice and an opportunity to request that such court
reverse or modify such order. Notwithstanding anything contained herein, in
the event that a lawsuit is commenced to which Grace, GHSC or HSC is a party,
and which lawsuit relates or refers to the Settlement Agreement, any of them
shall be free to produce and refer to this Settlement Agreement.
8. Each party represents that it has carefully read this
Settlement Agreement, understands its provisions, and signs this Settlement
Agreement freely and voluntarily with full knowledge of its significance. Each
party represents that it has conferred with its attorneys.
9. No provision of this Settlement Agreement may be
changed or modified except by an instrument in writing signed by all parties.
10. This Settlement Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective successors and
assigns.
11. This Settlement Agreement may be signed in two or
more counterparts, and such counterparts bearing the signatures of the parties
shall, when taken together, constitute one and the same instrument.
- 5 -
<PAGE> 6
12. All matters affecting the interpretation of this
Settlement Agreement and the rights of the parties hereto shall be governed by
the laws of the State of New York.
13. This Settlement Agreement constitutes the entire
understanding of the parties. There are no representations, promises,
warranties, covenants or undertakings other than those expressly set forth
herein.
IN WITNESS WHEREOF, the parties have signed this Settlement
Agreement on the date first set forth above.
HSC HOSPITALITY, INC., formerly known as
HSC HOLDING CO., INC.
By: /s/ J. Peter Grace, III
-----------------------
J. Peter Grace, III
Chief Executive Officer
GRACE HOTEL SERVICES CORPORATION
By: /s/ Richard M. Gordon
-----------------------
Richard M. Gordon
President
W. R. GRACE & CO.
By: /s/ Robert H. Beber
-----------------------
Robert H. Beber
Executive Vice President
- 6 -
<PAGE> 7
January , 1996
Mr. Scott Besendorfer
Case Administrator
American Arbitration Association
140 West 51st Street
New York, New York 10020-1203
Re: Grace Hotel Services Corporation
and HSC Holding Co., Inc.
Case No. 13 199 00239 95
--------------------------------
Dear Mr. Besendorfer:
This is to inform you that Grace Hotel Services Corporation
and HSC Holding Co., Inc., presently known as HSC Hospitality, Inc., have
settled the issues that were the subject of the above referenced arbitration.
Accordingly, the arbitration should be discontinued with prejudice.
We very much appreciate your courtesy with respect to this
matter. Please also extend our thanks and appreciation to the arbitrators
assigned to this matter.
Very truly yours,
FLEMMING, ZULACK & WILLIAMSON, LLP
By:
---------------------
Richard A. Williamson
PARCHER & HAYES
By:
-------------------
Steven M. Hayes
- 7 -
<PAGE> 1
EXHIBIT 99.06
CONSULTING AGREEMENT
This Consulting Agreement ("Agreement") is made as of December 1, 1995
by and between W. R. Grace & Co. (the "Company"), a New York corporation having
an office at One Town Center Road, Boca Raton, Florida, and Gordon J. Humphrey
(the "Consultant"), who has an office at 78 Garvins Hill Road, Chichester, New
Hampshire 03234.
1. Services and Performance - The Company does hereby appoint and engage
the Consultant for the term of this Agreement to perform such services
as are specifically assigned and pre-approved by the Company. The
Consultant shall only receive assignments (and/or pre-approvals)
hereunder from the Company's Chief Executive Officer and/or his
designees. The nature of the services that the Consultant may be
required to render include promoting the Company's interest with
officials of the U.S. Government and performing projects related to
the Company's businesses in the Commonwealth of Independent States
(including Russia) and such other projects as the Company shall
request from time to time. The Consultant shall also represent the
Company in the most favorable possible light with customers, community
and academic groups and individuals as well as the public at large.
2. Term - The term of this Agreement shall be for a period of 24 calendar
months commencing on December 1, 1995 and ending on November 30, 1997.
Notwithstanding the preceding sentence, this Agreement shall also
terminate and the Consultant's compensation shall cease to accrue
forthwith upon (i) his death,
<PAGE> 2
(ii) any failure by him to observe or perform his agreements as
described hereunder (including his voluntary cessation of services
hereunder), (iii) his neglect of the faithful performance of his
duties and responsibilities hereunder, or (iv) his inability to
perform his duties hereunder (other than ordinary temporary inability
due to sickness), as determined by the Company in its sole discretion.
All provisions of this Agreement, except the provisions of Articles 1,
3 and 4 hereof, shall survive any termination of this Agreement.
3. Consultant's Compensation - As full and complete compensation for the
services which Consultant provides hereunder and for the covenants
provided in this Agreement, the Consultant will be paid a monthly
retainer of $5,000.00 for each calendar month during the term of this
Agreement, and such additional fees as are mutually agreeable to the
Company and the Consultant with respect to any specific projects
assigned by the Company to the Consultant. The monthly retainer
payment for each such calendar month shall be made to the Consultant
the first of the month to which the payment relates.
4. Reimbursement Of Out-Of-Pocket Expenses - The Company shall reimburse
the Consultant for reasonable and necessary (which terms shall be
interpreted in accordance with the Company's practices with respect to
its employees) out-of-pocket expenses incurred for travel and other
expenditures directly related to services performed by the Consultant
for the Company pursuant to this Agreement; provided that, no
expenditure in excess of $1,000 shall be reimbursed unless
specifically pre-approved in writing by an authorized representative
of the
- 2 -
<PAGE> 3
Company. Reimbursement of authorized expenditures will be made only
upon the Consultant's providing to the Company itemized records of
those expenditures and related receipts that are acceptable to the
Company.
5. Independent Contractor Status - The Consultant is and at all times
shall be, during his service as a consultant under the terms of this
Agreement, an independent contractor and shall not be deemed to be an
employee of the Company for any purpose, and no partnership, joint
venture or other joint undertaking between the Company and the
Consultant shall be deemed to be created by reason of this Agreement.
The Consultant is not authorized to (i) represent that the Consultant
is an agent of the Company or any affiliate, (ii) enter into contracts
on behalf of the Company, or (iii) otherwise commit the Company or any
affiliate to any legally binding liabilities or obligations. The
Consultant is permitted to perform services for or become employed by
others during the term of this Agreement, consistent with Section
6.06.
6. Representations, Warranties and Covenants
6.01 The Consultant represents and warrants to the Company
that the Consultant is free to undertake the performance of consulting
services as provided under this Agreement and that the Consultant has
no prior or other commitments of any kind to anyone or conflicts of
interest that would in any way hinder or interfere with the
Consultant's acceptance of, or the full, uninhibited and faithful
performance of, the Consultant's obligations under this Agreement, or
the exercise of his best efforts as a consultant to the Company.
- 3 -
<PAGE> 4
6.02 The Consultant will not (except in the performance of his
duties hereunder) at any time or in any manner make or cause to be made any
copies, pictures, duplicates, facsimiles or summaries of any reports, studies,
memoranda, correspondence, manuals, records, plans, or other written, printed
or otherwise recorded materials of any kind whatsoever belonging to, or in the
possession of, the Company or any affiliate of the Company. The Consultant
shall have no right, title or interest in any such material, and he agrees that
(except in the performance of his services hereunder) he will not, without the
prior written consent of the Company, remove any such material from any
premises of the Company or any affiliate of the Company, and that he will
surrender all such material to the Company immediately upon the termination of
this Agreement or at any time prior thereto upon the request of the Company.
6.03 Without the prior written consent of the Company, the
Consultant shall not at any time (whether during or after the term of
this Agreement)
(i) use for the Consultant's own benefit or
purposes, or for the benefit or purposes of
any other person, firm, partnership,
association, corporation or business entity,
or
(ii) disclose (except in the performance of the
Consultant's duties under this Agreement) in
any manner to any person, firm, partnership,
association, corporation or business entity,
any trade secrets, data, know-how, knowledge or information
(including, but not limited to, that relating to the costs, products,
equipment, merchandising and
- 4 -
<PAGE> 5
marketing methods, supplies, customs, personnel training programs,
business expansion plans or financing) belonging to, or relating to
the affairs of, the Company or any affiliate of the Company.
Without limiting the generality of the foregoing, the
Consultant shall not publish, or submit for publication, any material
that includes information with respect to technology owned or used by
the Company or any affiliate of the Company, or with respect to other
matters related to the Company, unless the manuscript has been
reviewed by the Company, and if the Company advises the Consultant
that it believes publication of such information would be detrimental
to its interests, such information shall be deleted from the
manuscript.
6.04 The provisions of Section 6.02 and 6.03 shall not
apply to any information that is available to the public, or becomes
so available through no act or omission of the Consultant.
6.05 The Consultant shall promptly disclose to the Company
in writing (and to no one else) all improvements, discoveries, ideas
and inventions, made or conceived by the Consultant alone or in
conjunction with others (whether or not patentable, and whether or not
made or conceived at the request of or upon the suggestion of the
Company or any affiliate of the Company during or out of the
Consultant's usual hours of work or in or about the premises of the
Company or elsewhere) while a consultant under this Agreement, or made
or conceived within one year after the termination of this Agreement.
All such improvements, discoveries, ideas and inventions shall be the
sole and exclusive property of the
- 5 -
<PAGE> 6
Company and are hereby assigned to the Company. At the request of the
Company and at its cost, the Consultant shall assist the Company, or
any other person designated by it, in obtaining patents in the United
States and/or in such countries as may be designated by the Company,
covering such improvements, discoveries, ideas and inventions and
shall in connection therewith execute such applications, statements or
other documents, furnish information and data, and take such other
actions (including, but not limited to, the giving of testimony) as
the Company may from time to time request.
6.06 During the term of this Agreement and for a period of
two years after the Consultant has ceased to provide services under
this Agreement, the Consultant shall not
(i) directly or indirectly engage, or
(ii) assist or have an active interest in (whether
as proprietor, partner, stockholder, officer,
director or any type of principal whatever),
or enter the employment of or act as an agent
for or advisor or consultant to, any person,
corporation or business entity that is, or is
about to become, directly or indirectly
engage
in any business (whether in operation or in the planning or
development stage), in the Commonwealth of Independent States
(including, but not limited to, Russia) and any other areas where the
Consultant performs services for the Company under this Agreement
(including, but not limited to, Washington, D.C.), that competes with
or
- 6 -
<PAGE> 7
is substantially similar to any business that the Company has
operated, or had in the planning or development stage, during the
120-day period immediately prior to the Consultant's ceasing to
provide services under this Agreement; provided that, the restrictions
contained in this Section shall only apply to any business in any area
where the Company shall have operated such business in such area, or
had such business in the planning or development stage therein, during
the 120-day period immediately prior to the Consultant's ceasing to
provide services under this Agreement.
The Consultant hereby acknowledges and confirms that
the length of the period specified in this Section 6.06 (and the
geographic area specified in Exhibit A) is reasonable and necessary
for the protection of the Company against the injurious effects of any
violation of the provisions of this Agreement.
6.07 The Consultant hereby acknowledges and confirms that
the Company's remedy at law for any breach of any of the Consultant's
obligations under Sections 6.02, 6.03, 6.05 or 6.06 of this Agreement
would be inadequate, and that damages would be difficult or impossible
to ascertain, and consents that temporary and permanent injunctive
relief may be granted in accordance with equity in any proceeding
which may be brought to enforce any provision of such Sections without
the necessity of proof of actual damage. The Consultant acknowledges
that (i) the Company has reserved and is to have the right to prove
any damages which the Company is able to prove resulting from any
breach of any of the Consultant's obligations under such Sections, and
(ii) the value of the consideration which the
- 7 -
<PAGE> 8
Consultant is to receive in connection with this Agreement is not to
be considered as equivalent to, or an evidence of, the amount or
extent of any such damages.
7. General
7.01 Except as provided in the second paragraph of this
Section 7.01, this Agreement sets forth the entire agreement and
understanding of the parties concerning the subject matter of this
Agreement and supersedes all prior agreements, arrangements and
understandings concerning such subject matter between the parties
hereto. No representation, promise, inducement or statement of
intention has been made by or on behalf of any party hereto, or any
related party, that is not set forth in this Agreement.
Notwithstanding any other provision of this Agreement
to the contrary, this Agreement does not supersede, but is in addition
to, any non-competition or confidentiality agreement or understanding
between the Consultant and the Company. The rights and remedies of
the Company and its successors and assigns under this Agreement shall
be independent of, and separate and distinct from, their rights and
remedies under any such other agreement or understanding, and no
default thereunder or termination thereof shall in any way affect the
obligations of the Consultant or the rights and remedies of the
Company under this Agreement.
7.02 This Agreement may be amended, superseded or
cancelled, and any of the terms or provisions hereof may be waived, or
a departure from the terms or provisions hereof may be consented to,
only by a written instrument specifically
- 8 -
<PAGE> 9
stating that it amends, supersedes or cancels this Agreement, or
waives or consents to a departure from the terms or provisions hereof,
executed by each of the parties, or in the case of a waiver or
consent, by the party granting such waiver or consent.
7.03 The terms and provisions of this Agreement shall be
binding on and inure to the benefit of the Company or any affiliate of
the Company and their respective successors and assigns, including
such successors and assigns that purchase substantially all of the
assets of the Company. The terms and provisions of this Agreement
shall be binding on and inure to the benefit of the Consultant and the
Consultant's legal representatives, but the Consultant's obligations
hereunder shall not be assignable.
7.04 If the scope of any restriction contained in this
Agreement is too broad to permit enforcement of such restriction to
its full extent, then such restriction shall be enforced to the
maximum extent permitted at law and in equity, and in that event the
Consultant hereby consents that such scope may be judicially modified
accordingly in any proceeding brought to enforce such restriction.
7.05 The failure of either party to require performance of
the other party's obligations under this Agreement at any time shall
in no manner affect either such party's right to enforce any provision
of this Agreement at a subsequent time, and the waiver by either party
of any right arising out of any breach of this Agreement shall not be
construed as a waiver of any right arising out of any other or
subsequent breach of this Agreement.
- 9 -
<PAGE> 10
7.06 The Article headings contained in this Agreement are
for convenient reference only, and shall not in any way affect the
meaning or interpretation of this Agreement.
7.07 This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York, U.S.A.,
other than the conflict-of-laws provisions thereof that would
otherwise require the application of the law of any other
jurisdiction.
- 10 -
<PAGE> 11
7.08 Notices and instructions under this Agreement shall be
addressed as follows and sent by certified mail:
To the Consultant: Gordon J. Humphrey
78 Garvins Hill Road
Chichester, New Hampshire 03234
To the Company: A. J. Costello
W. R. Grace & Co.
One Town Center Road
Boca Raton, Florida 33486-1010
IN WITNESS WHEREOF, the parties have executed this instrument as of the date
first above written.
/s/ Gordon J. Humphrey
--------------------------
GORDON J. HUMPHREY
W. R. GRACE & CO.
By: /s/ Albert J. Costello
------------------------
ALBERT J. COSTELLO,
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
- 11 -
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 40,600
<SECURITIES> 0
<RECEIVABLES> 609,700
<ALLOWANCES> 12,900
<INVENTORY> 491,900
<CURRENT-ASSETS> 1,681,300<F1>
<PP&E> 3,154,900
<DEPRECIATION> 1,418,800
<TOTAL-ASSETS> 6,297,600<F1>
<CURRENT-LIABILITIES> 2,214,200
<BONDS> 1,295,500
0
7,400
<COMMON> 97,400
<OTHER-SE> 1,127,000
<TOTAL-LIABILITY-AND-EQUITY> 6,297,600
<SALES> 3,665,500<F2>
<TOTAL-REVENUES> 3,707,400
<CGS> 2,243,700
<TOTAL-COSTS> 2,243,700
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 71,300
<INCOME-PRETAX> (312,400)<F3>
<INCOME-TAX> (115,800)
<INCOME-CONTINUING> (196,600)<F3>
<DISCONTINUED> (129,300)<F4><F5><F6>
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (325,900)
<EPS-PRIMARY> (3.40)
<EPS-DILUTED> (3.33)<F7>
<FN>
<F1>Included within current assets and total assets are net assets of
discontinued operations of $323,700 and $1,759,000, respectively.
<F2>Excludes 1995 sales of the discontinued health care business of $2,076,800.
<F3>Includes provisions of $30,000 ($18,600 after-tax) for corporate governance,
$220,000 ($144,000 after-tax) for restructuring, asset impairments and other
costs, $77,000 ($50,000 after-tax) for environmental liabilities and $275,000
($178,700 after-tax) for asbestos-related liabilities.
<F4>In June 1995, the Company announced that its Board of Directors had
approved a plan to spin off NMC. As a result, Grace has classified its
health care business as a discontinued operation.
<F5>Includes after-tax provisions of $83,600 for asset impairments, $5,600
for the phase-out of certain health care research programs, $4,800 for
additional costs associated with Grace's long-term incentive programs, $1,800
for changes in accounting estimates and $6,600 for other items.
<F6>Discontinued operations includes an after-tax provision of $151,300
relating to a reassessment of forecasts for all remaining discontinued
operations.
<F7>Fully diluted EPS is not presented on the face of the Consolidated
Statement of Operations as amount is anti-dilutive.
</FN>
</TABLE>
