-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, J85aVmh++nIb9wyekGGluCdylJjwghXVClRY7pazS1YyP14lEbmJlD7zoUdd16vy avqK9HMrMp/o4YZwkrUEwQ== 0000912057-94-002481.txt : 19940805 0000912057-94-002481.hdr.sgml : 19940805 ACCESSION NUMBER: 0000912057-94-002481 CONFORMED SUBMISSION TYPE: 424B5 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19940804 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GRACE W R & CO /NY/ CENTRAL INDEX KEY: 0000042872 STANDARD INDUSTRIAL CLASSIFICATION: 2800 IRS NUMBER: 133461988 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B5 SEC ACT: 1933 Act SEC FILE NUMBER: 033-50983 FILM NUMBER: 94541679 BUSINESS ADDRESS: STREET 1: ONE TOWN CENTER RD CITY: BOCA RATON STATE: FL ZIP: 33486-1010 BUSINESS PHONE: 4073622000 FORMER COMPANY: FORMER CONFORMED NAME: GRACE W R & CO /CT/ DATE OF NAME CHANGE: 19900423 424B5 1 424B5 File No. 33-50983 Rule 424(b)(5) Prospectus Supplement (To Prospectus dated August 2, 1994) W. R. Grace & Co.-Conn. $300,000,000 8% NOTES DUE 2004 Unconditionally guaranteed by W. R. Grace & Co. INTEREST PAYABLE FEBRUARY 15 AND AUGUST 15 Issue price: 99.794% The Notes will bear interest from August 9, 1994 at the rate of 8% per annum, payable semiannually on February 15 and August 15, commencing February 15, 1995. The Notes will not be redeemable prior to maturity on August 15, 2004 and will not be subject to any sinking fund. See "Description of Notes and Guarantees" herein. All of the Notes will initially be represented by Global Securities (each a "Global Note"), which will be deposited with The Depository Trust Company ("DTC") and registered in the name of its nominee. Beneficial ownership of the Notes will be limited to institutions that have accounts with DTC ("Participants") or persons that hold interests through Participants. A beneficial interest in a Global Note will be shown on, and transfers thereof will be effected only through, records maintained by the Participants. A beneficial interest in a Global Note will be exchanged for Notes in certificated form only under limited circumstances. See "Description of Debt Securities and Guarantees -- Book-Entry Debt Securities" in the accompanying Prospectus. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - --------------------------------------------------------------------------------
Underwriting Price to discounts and Proceeds to Public (1) commissions (2) Company (1)(3) - --------------------------------------------------------------------------------------------------------------------------- Per Note 99.794% .650% 99.144% - -------------------------------------------------------------------------------------------------- Total $299,382,000 $1,950,000 $297,432,000 - --------------------------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from August 9, 1994. (2) The Company and the Guarantor have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933. (3) Before deduction of expenses, payable by the Company, estimated at $250,000. The Notes are offered, subject to prior sale, when, as and if accepted by the Underwriters and subject to approval of certain legal matters by Shearman & Sterling, counsel for the Underwriters. It is expected that delivery of the Global Notes will be made on or about August 9, 1994 through the facilities of DTC, against payment therefor in next-day funds. J.P. Morgan Securities Inc. Citicorp Securities, Inc. Merrill Lynch & Co. Salomon Brothers Inc August 2, 1994 IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. No dealer, salesman or other person has been authorized to give any information or to make any representations other than those contained or incorporated by reference in this Prospectus Supplement and the accompanying Prospectus in connection with the offer made by this Prospectus Supplement and the accompanying Prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by the Company, the Guarantor or any Underwriter. This Prospectus Supplement and the accompanying Prospectus do not constitute an offer to sell or a solicitation of an offer to buy any security in any jurisdiction in which or to any person to whom it is unlawful to make such offer or solicitation. Neither the delivery of this Prospectus Supplement and the accompanying Prospectus nor any sale made hereunder and thereunder shall under any circumstances create an implication that there has been no change in the affairs of the Company or the Guarantor since the date hereof.
TABLE OF CONTENTS PAGE --------- PROSPECTUS SUPPLEMENT Grace............................................................................. S-3 Use of Proceeds................................................................... S-3 Capitalization.................................................................... S-4 Selected Consolidated Financial Data.............................................. S-5 Description of Notes and Guarantees............................................... S-6 Underwriting...................................................................... S-6 PROSPECTUS Available Information............................................................. 2 Documents Incorporated by Reference............................................... 2 Grace............................................................................. 3 Use of Proceeds................................................................... 3 Grace Financial Information....................................................... 3 Description of Debt Securities and Guarantees..................................... 3 Description of Warrants........................................................... 20 Plan of Distribution.............................................................. 21 Legal Opinions.................................................................... 22 Experts........................................................................... 23
S-2 GRACE Grace is primarily engaged in the specialty chemical business on a worldwide basis and in specialized health care activities. In its chemical operations, Grace develops, manufactures and markets specialty chemicals and materials and related application systems. In health care, Grace is primarily engaged in supplying kidney dialysis and home infusion and respiratory therapy services and products. As used herein, the term "Company" refers to W. R. Grace & Co.-Conn., a Connecticut corporation wholly owned by W. R. Grace & Co.; the term "Guarantor" refers to W. R. Grace & Co., a New York corporation; and the term "Grace" refers to the Guarantor and/or one or more of its subsidiaries. USE OF PROCEEDS The net proceeds from the sale of the Notes will be used by the Company to repay commercial paper borrowings and/or bank borrowings, with various maturities and bearing interest at various rates, that were incurred to finance capital expenditures and working capital requirements and for other general corporate purposes. Pending such use, the proceeds may be temporarily invested. Information concerning Grace's capital expenditures is set forth in the documents incorporated herein by reference. Morgan Guaranty Trust Company of New York and J.P. Morgan Delaware, banking affiliates of J.P. Morgan Securities Inc., and Citibank, N.A., a banking affiliate of Citicorp Securities, Inc., are currently lenders to Grace. If the proceeds of this offering are used to repay bank borrowings, a portion of the proceeds may be received by these banking affiliates. See "Underwriting". S-3 CAPITALIZATION The following table sets forth Grace's consolidated capitalization at March 31, 1994 and as adjusted to give effect to (1) the sale of the Notes offered hereby and the application of the net proceeds therefrom (estimated at $297.4 million) to repay commercial paper borrowings and/or bank borrowings and (2) an after-tax charge of $200.0 million, recorded in the second quarter of 1994, relating to a May 1994 decision of the United States Court of Appeals for the Second Circuit that had the effect of reducing the amount of insurance coverage available to Grace with respect to asbestos property damage litigation and claims.
MARCH 31, 1994 ACTUAL AS ADJUSTED ------ ----------- (DOLLARS IN MILLIONS) SHORT-TERM DEBT (1): Commercial paper and bank borrowings (2)................ $ 332 $ 35 Current maturities of long-term debt.................... 6 6 Other short-term borrowings............................. 371 371 ------ ----------- Total short-term debt............................. $ 709 $ 412 ------ ----------- ------ ----------- LONG-TERM DEBT (1): Commercial paper and bank borrowings (2)................ $ 510 $ 510 Notes offered hereby.................................... - 300 7.4% Notes Due 2000..................................... 300 300 7.75% Notes Due 2002.................................... 150 150 6.5% Notes Due 1995..................................... 150 150 Sundry indebtedness (due 1994 - 2003)................... 38 38 ------ ----------- 1,148 1,448 Less amounts due within one year........................ 6 6 ------ ----------- Total long-term debt.................................. 1,142 1,442 ------ ----------- MINORITY INTERESTS........................................ 297 297 ------ ----------- SHAREHOLDERS' EQUITY: Capital stock: Preferred stocks...................................... 7 7 Common stock (93,909,000 shares outstanding).......... 94 94 Paid in capital......................................... 302 302 Retained earnings....................................... 1,202 1,002 Cumulative translation adjustments...................... (81) (81) ------ ----------- Total shareholders' equity........................ 1,524 1,324 ------ ----------- ------ ----------- Total capitalization...................................... $2,963 $3,063 ------ ----------- ------ ----------- - ------------------------ (1) This table does not reflect the sale, subsequent to March 31, 1994, of $108.5 million principal amount of Medium-Term Notes or the application of the $108.1 million of net proceeds therefrom to repay commercial paper borrowings and/or bank borrowings. The Medium-Term Notes mature at various dates from 1996 to 1999 and bear interest at rates from 6.55% to 7.84% per annum or at floating rates based on LIBOR. (2) Under its bank revolving credit agreement, Grace may borrow up to $1,225 million at interest rates based upon the prevailing prime, federal funds and/or Eurodollar rates. Of the $1,225 million, approximately $715 million is available under a 364-day facility expiring August 29, 1994, and the remainder is available under a three-year facility expiring September 1, 1995. At March 31, 1994, borrowings of $63 million were outstanding under the revolving credit agreement; these borrowings are included in Long-Term Debt - Commercial paper and bank borrowings above. At March 31, 1994, $779 million was reserved to support commercial paper borrowings and other bank borrowings outstanding, leaving net unused credit facilities of $383 million. Grace's ability to borrow the maximum amounts available under these facilities is subject to compliance with certain covenants, including minimum net worth and interest coverage requirements. Grace believes that, as of March 31, 1994, after giving effect to the sale of the Notes offered hereby, the financings referred to in Note (1) above and the after-tax charge referred to in the above table, it would have been able to borrow from approximately $409 million to $789 million of additional funds under the revolving credit agreement, depending upon the application of the proceeds of such borrowings.
S-4 SELECTED CONSOLIDATED FINANCIAL DATA The selected consolidated financial data set forth below have been derived from the consolidated financial statements previously filed with the SEC. The following information should be read in conjunction with the consolidated financial statements and related notes included in Grace's reports filed under the Exchange Act that are incorporated by reference in the Prospectus. See "Documents Incorporated by Reference" in the Prospectus. Separate financial information for the Company is not included herein or in reports filed by the Guarantor pursuant to the Exchange Act, as the Guarantor is a holding company and has no substantial operations other than those conducted by the Company and its subsidiaries. The assets and pretax income of the Company and its consolidated subsidiaries are substantially equivalent to those of the Guarantor and its consolidated subsidiaries.
THREE MONTHS ENDED YEARS ENDED DECEMBER 31, MARCH 31, -------------------------------------------------- --------------------- 1989 1990 1991 1992 1993 1993 1994 ------ ------ --------- ---------- --------- --------- --------- (DOLLARS IN MILLIONS) INCOME STATEMENT DATA: Sales and revenues (1).............. $3,820 $4,310 $4,387 $4,337 $4,408 $ 986 $1,077 Interest expense.................... 121 137 115 90 82 19(2) 16(2) Income from continuing operations before income taxes................ 208 272 334(3) 193(4) 221(5) 54 49 Income from continuing operations... 146 175 202 58 134 32 38 Income (loss) from discontinued operations......................... 107 28 17 (162) (108) (3) -- Cumulative effect of accounting changes............................ -- -- -- (190)(6) -- -- -- Net income (loss)................... 253 203 219 (294) 26 28 38 Ratio of earnings to fixed charges (7)................................ 1.82x 1.99x 2.34x 1.92x 2.51x 2.41x 2.52x Ratio of earnings to combined fixed charges and preferred stock dividends (7)...................... 1.81x 1.98x 2.33x 1.91x 2.50x 2.40x 2.51x CASH FLOW DATA: Net pretax cash flows provided by (used for) operating activities of continuing operations.............. $ 125 $ 378 $ 559 $ 359 $ 302 (168) (68) Depreciation and amortization....... 199 227 233 225 228 53(8) 59 Capital expenditures................ 485 514 447 398 310 69 71 Businesses acquired in purchase transactions, net of cash acquired........................... 125 187 131 61 307 74 24 Net proceeds from divestments....... 380 -- 366 221 465 268 49 Dividends........................... 120 121 123 126 128 32 33 BALANCE SHEET DATA (AT END OF PERIOD): Working capital..................... $ 577 $ 700 $ 368 $ 452 $ 280(9) $ 660 $ 324(9) Property and equipment, net......... 2,220 2,462 2,558 1,708 1,454 1,713 1,449 Total assets........................ 5,619 6,227 6,007 5,599 6,109 5,642 6,157 Short-term debt..................... 379 322 466 465 533 337 709 Long-term debt...................... 1,638 1,964 1,793 1,354 1,173 1,671 1,142 Total shareholders' equity.......... 1,730 1,913 2,025 1,545 1,518 1,510 1,524(10) - ---------------------------------- (1) Sales and revenues for the years 1989 through 1992 include sales and revenues of divested units. (2) Does not include financing-related costs of $1 million and $5 million for the three months ended March 31, 1993 and 1994, respectively. (3) Includes net gains on strategic restructuring of $6.1 million for 1991. (4) Includes a provision of $140 million relating to a fumed silica plant in Belgium. (5) Includes a provision of $159 million relating to asbestos-related insurance coverage. (6) Grace adopted Statement of Financial Accounting Standards ("SFAS") No. 106, relating to accounting for certain postretirement benefits, in 1992. The adoption of SFAS No. 106, concurrent with the adoption of SFAS No. 109 (relating to accounting for income taxes), resulted in a charge of $190 million, net of $98 million of deferred income taxes. (7) Calculation excludes discontinued operations. (8) Includes a credit of $2 million relating to financing-related costs for the three months ended March 31, 1993. (9) Excludes the current portion of minority interests. (10) Does not reflect an after-tax charge of $200 million recorded in the second quarter of 1994. See "Capitalization".
S-5 DESCRIPTION OF NOTES AND GUARANTEES The following description of the terms of the Notes and Guarantees offered hereby supplements, and to the extent inconsistent therewith replaces, the description of the general terms and provisions of the Debt Securities and the Guarantees (each as defined in the Prospectus) set forth under the heading "Description of Debt Securities and Guarantees" in the Prospectus, to which description reference is hereby made. Whenever particular defined terms used in the Indenture (as defined in the Prospectus) are referred to, such defined terms are incorporated herein by reference. GENERAL The Notes will be limited to $300,000,000 aggregate principal amount and will mature on August 15, 2004. Each Note will bear interest at the rate per annum shown on the cover page of this Prospectus Supplement from August 9, 1994 or from the most recent Interest Payment Date to which interest has been paid or provided for, payable semiannually in arrears on February 15 and August 15 of each year, commencing February 15, 1995, to the person in whose name the Note (or any predecessor Note) is registered at the close of business on the February 1 or August 1, as the case may be, next preceding such Interest Payment Date. The Notes will be issued only in registered form without coupons in denominations of $1,000 and integral multiples thereof. The Notes will be unconditionally guaranteed by the Guarantor as described in the Prospectus. The Notes may not be redeemed prior to maturity and will not be subject to the operation of any sinking fund. The defeasance and covenant defeasance provisions of the Indenture described under "Description of Debt Securities and Guarantees -- Defeasance and Covenant Defeasance" in the Prospectus will apply to the Notes. BOOK-ENTRY NOTES Except in certain limited circumstances, the Notes will be issued only in the form of Global Notes that will be deposited with, or on behalf of, DTC and registered in the name of its nominee. See "Description of Debt Securities and Guarantees--Book-Entry Debt Securities" in the Prospectus for further information. UNDERWRITING Subject to the terms and conditions set forth in the Underwriting Agreement dated the date hereof, the Company has agreed to sell to each of the Underwriters named below, severally, and each of the Underwriters has severally agreed to purchase, the principal amount of Notes set forth opposite its name below:
PRINCIPAL AMOUNT NAME OF NOTES - -------------------------------------------------------------------------- -------------- J.P. Morgan Securities Inc................................................ $ 75,000,000 Citicorp Securities, Inc.................................................. 75,000,000 Merrill Lynch, Pierce, Fenner & Smith Incorporated.................................................... 75,000,000 Salomon Brothers Inc...................................................... 75,000,000 -------------- Total................................................................... $ 300,000,000 -------------- --------------
Under the terms and conditions of the Underwriting Agreement, the Underwriters are obligated to take and pay for all of the Notes if any are taken. The Underwriters initially propose to offer the Notes directly to the public at the public offering price set forth on the cover page of this Prospectus Supplement and to certain dealers at such price less a concession not in excess of .40% of the principal amount of the Notes. The Underwriters may allow, and S-6 such dealers may reallow, a concession not in excess of .25% of the principal amount of the Notes to certain other dealers. After the initial public offering, the public offering price and such concessions may be changed. The Company does not intend to apply for listing of the Notes on a national securities exchange, but has been advised by the Underwriters that they intend to make a market in the Notes. The Underwriters are not obligated, however, to make a market in the Notes and may discontinue market making at any time without notice. No assurance can be given as to the liquidity of the trading market for the Notes. The Company and the Guarantor have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act. J.P. Morgan Securities Inc. and Citicorp Securities, Inc. and/or their affiliates have in the past performed, and may in the future perform, commercial banking and investment banking services for Grace. See "Use of Proceeds". Merrill Lynch, Pierce, Fenner & Smith Incorporated and Salomon Brothers Inc and/or their affiliates have in the past performed, and may in the future perform, investment banking services for Grace. S-7 PROSPECTUS W. R. GRACE & CO.-CONN. DEBT SECURITIES WARRANTS TO PURCHASE DEBT SECURITIES ----------------- W. R. Grace & Co.-Conn. ("Company"), the principal operating subsidiary of W. R. Grace & Co. ("Guarantor"), may offer from time to time, together or separately, its debt securities ("Debt Securities") and warrants to purchase Debt Securities ("Warrants") on terms to be determined at the time of offering. The Guarantor will unconditionally guarantee the Debt Securities. By separate prospectus, the Guarantor may offer from time to time certain of its securities. Securities with an aggregate issue price of up to $750,000,000 (or the equivalent thereof, if any of the securities are denominated other than in U.S. dollars) may be issued, in one or more series, under this Prospectus and such separate prospectus. The Debt Securities will be unsecured and will rank equally with all other unsecured and unsubordinated indebtedness for borrowed money of the Company, and the guarantees thereon ("Guarantees") will be unsecured and will rank equally with all other unsecured and unsubordinated indebtedness for borrowed money of the Guarantor. See "Description of Debt Securities and Guarantees". The Debt Securities and/or Warrants proposed to be sold pursuant to this Prospectus and the accompanying prospectus supplement ("Prospectus Supplement") are referred to as the "Offered Securities", and the Offered Securities, together with any Debt Securities issuable upon exercise of Warrants, are referred to as the "Securities". The Prospectus Supplement sets forth certain terms of each series or issue of Securities in respect of which this Prospectus and the Prospectus Supplement are being delivered, including (where applicable): (1) in the case of Debt Securities (including Debt Securities issuable upon exercise of Warrants), their title, aggregate principal amount, maturity, rate of any interest (or the manner of calculation and time of payment thereof), any redemption or repayment terms, the currency or currencies, currency unit or units or composite currency or currencies ("Currency") in which such Debt Securities will be denominated or payable, any index, formula or other method pursuant to which principal, premium or interest may be determined and the form of such Debt Securities (which may be in global, registered or bearer form); (2) in the case of Warrants, their exercise price, detachability date, expiration date and other terms; and (3) any initial public offering price, the purchase price, the net proceeds to the Company, and the other terms of the offering of the Securities. ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------ Offered Securities may be sold directly to purchasers or to or through underwriters, dealers or agents. If any underwriters, dealers or agents are involved in the offering of any Offered Securities, their names and any applicable fee, commission or discount arrangements will be set forth in the Prospectus Supplement. See "Plan of Distribution". ------------------------ The date of this Prospectus is August 2, 1994. AVAILABLE INFORMATION The Guarantor is subject to the informational requirements of the Securities Exchange Act of 1934 ("Exchange Act") and in accordance therewith files reports and other information with the Securities and Exchange Commission ("SEC"). Reports, proxy statements and other information filed by the Guarantor with the SEC can be inspected and copied at the public reference facilities of the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's New York Regional Office, Seven World Trade Center, New York, New York 10048, and Chicago Regional Office, 500 West Madison Street, Chicago, Illinois 60606. Copies of such material can also be obtained at prescribed rates from the Public Reference Section of the SEC at its Washington address and can be inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005, and the Chicago Stock Exchange, Inc., One Financial Place, 440 South LaSalle Street, Chicago, Illinois 60606. Separate financial information for the Company is not included herein or in reports filed by the Guarantor pursuant to the Exchange Act, as the Guarantor is a holding company that has no substantial operations other than those conducted by the Company and its subsidiaries. The assets and pre-tax income of the Company and its consolidated subsidiaries are substantially equivalent to those of the Guarantor and its consolidated subsidiaries. This Prospectus constitutes a part of a registration statement (together with all amendments and exhibits, the "Registration Statement") filed by the Company and the Guarantor with the SEC under the Securities Act of 1933 ("Securities Act") with respect to the Securities (and certain other securities offered by the Guarantor and the Company under a separate prospectus). This Prospectus does not contain all of the information in the Registration Statement, certain portions of which have been omitted in accordance with the rules and regulations of the SEC. Reference is made to the Registration Statement and the exhibits thereto, as well as the documents incorporated by reference in this Prospectus, for further information with respect to the Company and the Guarantor, as well as the Securities. DOCUMENTS INCORPORATED BY REFERENCE The following documents filed with the SEC are incorporated by reference in this Prospectus: (1) The Guarantor's Annual Report on Form 10-K (including Exhibit 12, "Computation of Ratio of Earnings to Fixed Charges") for the latest fiscal year for which such a Report has been filed. (2) All Quarterly Reports on Form 10-Q and Current Reports on Form 8-K (including, where applicable, Exhibit 12, "Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends") filed by the Guarantor since the end of the latest fiscal year for which an Annual Report on Form 10-K has been filed by the Guarantor. All documents filed by the Guarantor pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of any offering of Securities made by this Prospectus shall be deemed to be incorporated by reference in and to be a part of this Prospectus from the date any such document is filed. A copy of any document incorporated by reference in this Prospectus (including any exhibit incorporated by reference in any such document or in this Prospectus) may be obtained without charge by contacting Shareholder Services, W. R. Grace & Co., One Town Center Road, Boca Raton, Florida 33486-1010 (407/362-2000). 2 GRACE Grace is primarily engaged in the specialty chemical business on a worldwide basis and in specialized health care activities. In its chemical operations, Grace develops, manufactures and markets specialty chemicals and materials and related application systems. In health care, Grace is primarily engaged in supplying kidney dialysis and home infusion and respiratory therapy services and products. As used in this Prospectus, the term "Company" refers to W. R. Grace & Co.-Conn., a Connecticut corporation wholly owned by W. R. Grace & Co.; the term "Guarantor" refers to W. R. Grace & Co., a New York corporation; and the term "Grace" refers to the Guarantor and/or one or more of its subsidiaries (including the Company). 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. USE OF PROCEEDS Unless otherwise provided in the Prospectus Supplement, the net proceeds from the sale of the Securities will be used by Grace to repay commercial paper borrowings and/or bank borrowings, with various maturities and bearing interest at various rates, that were incurred to finance capital expenditures and working capital requirements and for other general corporate purposes. The amounts and timing of such repayments will depend upon conditions in the future; pending such use, the proceeds may be temporarily invested. Information concerning Grace's capital expenditures is set forth in the documents incorporated herein by reference and may be set forth in the Prospectus Supplement. GRACE FINANCIAL INFORMATION Financial information for Grace, including its ratio of earnings to fixed charges, is set forth in the documents incorporated herein by reference and may be set forth in the Prospectus Supplement. See "Documents Incorporated by Reference". Separate financial information for the Company is not included herein or in the documents incorporated herein by reference, as the Guarantor is a holding company that has no substantial operations other than those conducted by the Company and its subsidiaries. The assets and pre-tax income of the Company and its consolidated subsidiaries are substantially equivalent to those of the Guarantor and its consolidated subsidiaries. See "Available Information". DESCRIPTION OF DEBT SECURITIES AND GUARANTEES The Company may issue Debt Securities either separately or together with Warrants. The Debt Securities will be issued under an Indenture dated as of January 28, 1993 ("Indenture") among the Company, the Guarantor and NationsBank of Georgia, National Association, Trustee ("Trustee"). The Indenture has been filed as an exhibit to the Registration Statement. The Indenture is subject to and governed by the Trust Indenture Act of 1939 ("TIA"). The following summary of the material provisions of the Indenture does not purport to be complete and is subject to, and qualified in its entirety by reference to, the Indenture, including the definitions of certain terms therein, and to the specific terms of the Offered Debt Securities (as defined below) that are described in the Prospectus Supplement. GENERAL The Indenture provides that any Debt Securities proposed to be sold pursuant to this Prospectus and the Prospectus Supplement ("Offered Debt Securities") and any Debt Securities issuable upon the exercise of Warrants ("Underlying Debt Securities"), as well as other unsecured and unsubordinated debt securities of the Company issuable under the Indenture, may be issued in one or more series, in each case as authorized from time to time by the Company; the Indenture does not 3 limit the aggregate principal amount of debt securities that may be issued thereunder. Reference is made to the Prospectus Supplement relating to the Offered Debt Securities, the Underlying Debt Securities or both, as the case may be, for the following: (1) The title of such Debt Securities. (2) The aggregate principal amount of such Debt Securities, the percentage of their principal amount at which such Debt Securities will be issued and the date or dates on which the principal of such Debt Securities will be payable or the method by which such date or dates will be determined or extended. (3) The rate or rates (which may be fixed or variable) at which such Debt Securities will bear interest, if any, and, if variable, the method by which such rate or rates will be determined. (4) The date or dates from which any interest will accrue or the method by which such date or dates will be determined, the date or dates on which any interest will be payable (including the Regular Record Dates for such Interest Payment Dates in the case of any Registered Securities) and the basis on which any interest will be calculated if other than on the basis of a 360-day year of twelve 30-day months. (5) The place or places, if any, other than or in addition to New York City, where the principal of (and premium, if any, on) and interest, if any, on such Debt Securities will be payable, where any Registered Securities may be surrendered for registration of transfer, where such Debt Securities may be surrendered for exchange and where notices or demands to or upon the Company and the Guarantor in respect of such Debt Securities may be served. (6) The period or periods within which, the price or prices at which, the Currency in which, and the other terms and conditions upon which, such Debt Securities may be redeemed, in whole or in part, at the option of the Company, if the Company is to have that option. (7) The obligation, if any, of the Company and the Guarantor to redeem, purchase or repay such Debt Securities, in whole or in part, pursuant to any sinking fund or analogous provision or at the option of a holder thereof, and the period or periods within which, the price or prices at which, the Currency in which, and the other terms and conditions upon which, such Debt Securities will be so redeemed, purchased or repaid. (8) The Currency, if other than U.S. dollars, in which such Debt Securities will be denominated or in which the principal of (and premium, if any, on) and interest, if any, on such Debt Securities will be payable. (9) Whether the amount of payments of principal of (and premium, if any, on) and interest, if any, on such Debt Securities may be determined with reference to an index, formula or other method (which index, formula or method may, without limitation, be based on one or more Currencies, commodities or equity or other indices) and the manner in which such amounts will be determined. (10) Whether the Company, the Guarantor or a holder may elect payment of the principal of (and premium, if any, on) and interest, if any, on such Debt Securities in a Currency other than that in which such Debt Securities are stated to be payable, the period or periods within which, and the terms and conditions upon which, such election may be made, and the time and manner of determining the exchange rate between the Currency in which such Debt Securities are denominated or stated to be payable and the Currency in which such Debt Securities are to be so payable. (11) Any deletions from, modifications of or additions to the Events of Default or covenants of the Company or the Guarantor with respect to such Debt Securities (which Events of Default or covenants may not be consistent with the Events of Default or covenants set forth in the general provisions of the Indenture). 4 (12) If other than the entire principal amount thereof, the portion of the principal amount of such Debt Securities that will be payable upon declaration of acceleration of the maturity thereof or the method by which such portion will be determined. (13) Any provisions in modification of, in addition to or in lieu of any of the provisions concerning defeasance and covenant defeasance contained in the Indenture that will be applicable to such Debt Securities. (14) Any provisions granting special rights to the holders of such Debt Securities upon the occurrence of such events as may be specified. (15) If other than the Trustee, the designation of any Paying Agent or Security Registrar for such Debt Securities, and the designation of any transfer or other agents or depositories for such Debt Securities. (16) The designation of the Exchange Rate Agent, if any. (17) Whether such Debt Securities are to be issuable as Registered Securities, Bearer Securities or both, any restrictions applicable to the offer, sale or delivery of Bearer Securities and the terms, if any, upon which Bearer Securities may be exchanged for Registered Securities and vice versa (if permitted by applicable laws and regulations). (18) Whether such Debt Securities will be issuable initially in temporary global form, whether any such Debt Security is to be issuable in permanent global form (a "Global Security") with or without coupons and, if so, whether beneficial owners of interests in any Global Security may exchange such interests for Debt Securities of like tenor of any authorized form and denomination and the circumstances under which any such exchanges may occur, if other than in the manner provided in the Indenture, and, if Registered Securities are to be issuable as a Global Security, the identity of the depository for such Debt Securities. (19) The person to whom any interest on any Registered Security will be payable, if other than the person in whose name such Debt Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, the manner in which, or the person to whom, any interest on any Bearer Security will be payable, if otherwise than upon presentation and surrender of the coupons appertaining thereto as they severally mature, and the extent to which, or the manner in which, any interest payable on a temporary Debt Security issued in global form will be paid (if other than as described in "Book-Entry Debt Securities" below). (20) The denomination or denominations in which such Debt Securities will be issuable, if other than $1,000 or any integral multiple thereof in the case of Registered Securities and $5,000 in the case of Bearer Securities. (21) If such Debt Securities will be issuable upon the exercise of Warrants, the time, manner and place for such Debt Securities to be authenticated and delivered. (22) Whether and under what circumstances the Company or the Guarantor will pay Additional Amounts, as contemplated by Section 1010 of the Indenture, on such Debt Securities to any holder who is not a United States person (including any modification of the definition of such term as contained in the Indenture) in respect of any tax, assessment or governmental charge and, if so, whether the Company will have the option to redeem such Debt Securities rather than pay such Additional Amounts (and the terms of any such option). (23) Any other terms, conditions, rights and preferences (or limitations on such rights and preferences) of such Debt Securities not inconsistent with the provisions of the Indenture (Section 301). If applicable, the Prospectus Supplement will also set forth information concerning any Warrants offered thereby and a discussion of any relevant federal income tax considerations. 5 Debt Securities may provide for less than the entire principal amount thereof to be due and payable upon a declaration of acceleration of maturity. A discussion of the federal income tax and other considerations applicable to any Original Issue Discount Securities will be set forth in the Prospectus Supplement relating thereto. If the terms of any series of Debt Securities provide that the Company or the Guarantor may be required to pay Additional Amounts in respect thereof, for purposes of this Prospectus, any reference to the payment of the principal of (and premium, if any, on) or interest, if any, on such Debt Securities will be deemed to include mention of the payment of the Additional Amounts provided for by the terms of such Debt Securities. The Debt Securities will be unsecured obligations of the Company and will rank on a parity with all other unsecured and unsubordinated indebtedness for borrowed money of the Company. The Debt Securities will be guaranteed by the Guarantor as provided below. The Debt Securities referred to on the cover page of this Prospectus, and any additional debt securities issued under the Indenture, are herein collectively referred to, while a single Trustee is acting with respect to all debt securities issued thereunder, as the "Indenture Securities". The Indenture provides that there may be more than one Trustee thereunder, each with respect to one or more series of Indenture Securities. At a time when two or more Trustees are acting under the Indenture, each with respect to only certain series, the term "Indenture Securities" as used herein will mean the series with respect to which each respective Trustee is acting. In the event that there is more than one Trustee under the Indenture, the powers and trust obligations of each Trustee as described herein will extend only to the series of Indenture Securities for which it is the Trustee. If two or more Trustees are acting under the Indenture, then the Indenture Securities for which each Trustee is acting would be treated as if issued under separate indentures. The general provisions of the Indenture do not limit the ability of the Company or the Guarantor to incur indebtedness and do not afford holders of Debt Securities protection in the event of highly leveraged or similar transactions involving the Company or the Guarantor. However, the general provisions of the Indenture do provide that neither the Company, the Guarantor nor any Restricted Subsidiary will subject certain of its properties or assets to any mortgage or other encumbrance unless the Indenture Securities outstanding thereunder, the related Guarantees or both, as the case may be, are secured equally and ratably with or prior to such other indebtedness thereby secured. See "Liens" and "Sale and Leaseback Transactions" under the heading "Certain Covenants". Reference is made to the Prospectus Supplement for information with respect to any deletions from, modifications of or additions to the Events of Default or covenants of the Company and the Guarantor that are described below, including any addition of a covenant or other provision providing event risk or similar protection. If any series of Debt Securities is sold for, payable in or denominated in one or more Currencies other than U.S. dollars, applicable restrictions, elections, terms and other information with respect to such series and such Currencies, and a discussion of the federal income tax and other considerations applicable thereto, will be set forth in the Prospectus Supplement relating thereto. Under the Indenture, the Company has the ability to issue Indenture Securities with terms different from those of Indenture Securities previously issued thereunder and, without the consent of the holders, to reopen a previous issue of a series of Indenture Securities and issue additional Indenture Securities of such series (unless such reopening was restricted when such series was created) in an aggregate principal amount determined by the Company (Section 301). There is no requirement that future issues of debt securities of the Company be issued under the Indenture, and the Company will be free to employ other indentures or documentation, possibly containing provisions different from those included in the Indenture or applicable to one or more issues of Indenture Securities, in connection with such future issues. 6 GUARANTEES The Debt Securities will have endorsed thereon Guarantees by which the Guarantor will unconditionally guarantee the due and punctual payment of the principal of (and premium, if any, on) and interest, if any, on the Debt Securities, when and as the same become due and payable, whether at Stated Maturity, upon redemption or repayment, upon declaration of acceleration or otherwise. The Guarantees will be unsecured obligations of the Guarantor and will rank on a parity with all other unsecured and unsubordinated indebtedness for borrowed money of the Guarantor (including any other unsecured and unsubordinated guarantees given by the Guarantor). The Guarantees will be unconditional obligations of the Guarantor, regardless of the enforceability of the related Debt Securities or the Indenture (Section 1701). FORM AND DENOMINATIONS Debt Securities of a series may be issuable solely as Registered Securities, solely as Bearer Securities or as both Registered Securities and Bearer Securities. Unless otherwise provided in the applicable Prospectus Supplement, Debt Securities denominated in U.S. dollars (other than Global Securities, which may be of any denomination) are issuable in denominations of $1,000 and integral multiples of $1,000 (in the case of Registered Securities) and in the denomination of $5,000 (in the case of Bearer Securities). The Indenture also provides that Debt Securities of a series may be issuable in global form. See "Book-Entry Debt Securities" below. Unless otherwise indicated in the applicable Prospectus Supplement, Bearer Securities will have interest coupons attached (Sections 201 and 302). PAYMENT, TRANSFER AND EXCHANGE If Debt Securities of a series are issuable solely as Registered Securities, the Company and the Guarantor will be required to maintain an office or agency in each Place of Payment for such series, and may from time to time designate additional offices or agencies, at which the principal of (and premium, if any, on) and interest, if any, on such series will be payable. If so provided in the Prospectus Supplement, the Place of Payment for a series issuable solely as Registered Securities will be New York City, and the Company and the Guarantor will initially designate the office of the agent of the Trustee in New York City as an office where such principal, premium and interest will be payable. If so provided in the Prospectus Supplement, the Company and the Guarantor will also initially designate the corporate trust office of the Trustee in Atlanta, Georgia as an additional office or agency for payment of the Debt Securities of such series. Notwithstanding the foregoing, at the option of the Company or the Guarantor, interest, if any, may be paid on Registered Securities (1) by check mailed to the person entitled thereto at such person's address appearing in the Security Register or (2) by wire transfer to an account located inside the United States maintained by the person entitled thereto as specified in the Security Register (Sections 307 and 1002). Unless otherwise provided in the Prospectus Supplement, payment of any installment of interest on Registered Securities will be made to the person in whose name such Registered Security is registered at the close of business on the Regular Record Date for such interest (Section 307). If Debt Securities of a series are issuable solely as Bearer Securities or as both Registered Securities and Bearer Securities and if so provided in the applicable Prospectus Supplement, the Company and the Guarantor will be required to maintain an office or agency (1) in each Place of Payment outside the United States at which, subject to any applicable laws and regulations, the principal of (and premium, if any, on) and interest, if any, on such series will be payable and (2) in New York City, for payments with respect to any Registered Securities of such series (and for payments with respect to Bearer Securities of such series in the limited circumstances described below, but not otherwise); provided that, if required in connection with any listing of such Debt Securities on a stock exchange located outside the United States, the Company and the Guarantor will maintain an office or agency for such Debt Securities in any city located outside the United States required by such stock exchange (Section 1002). The initial locations of such offices or agencies will be specified in the applicable Prospectus Supplement. Unless otherwise provided in the Prospectus Supplement, principal of (and premium, if any) and interest, if any, on Bearer Securities may be paid by wire transfer to 7 an account maintained by the person entitled thereto with a bank located outside the United States (Sections 307 and 1002). Unless otherwise provided in the Prospectus Supplement, payment of any installment of interest on any Bearer Securities on or before maturity will be made only against surrender of coupons for such interest installments as they severally mature (Section 1001). Unless otherwise provided in the Prospectus Supplement, no payment with respect to any Bearer Security will be made at any office or agency of the Company or the Guarantor in the United States or by check mailed to any address in the United States or by transfer to an account maintained with a bank located in the United States; provided that payments of principal of (and premium, if any, on) and interest, if any, on Bearer Securities payable in U.S. dollars will be made at the office or agency of the Company and the Guarantor in New York City if (but only if) payment of the full amount thereof in U.S. dollars at all offices or agencies outside the United States maintained by the Company and the Guarantor is illegal or effectively precluded by exchange controls or other similar restrictions (Section 1002). The Company and the Guarantor may from time to time designate additional offices or agencies, approve a change in the location of any office or agency and, except as provided above, rescind the designation of any office or agency. Unless otherwise provided in the Prospectus Supplement, with respect to any series of Debt Securities denominated or payable in one or more Currencies other than U.S. dollars, the Company and the Guarantor will maintain one or more Exchange Rate Agents for the purpose of making any exchange determinations specified in the Prospectus Supplement (Sections 313 and 1002). Unless otherwise provided in the Prospectus Supplement, all payments of principal of (and premium, if any, on) and interest, if any, on any Debt Security that is payable in a Currency other than U.S. dollars will be made in U.S. dollars in the event that such Currency (1) is a currency, and it ceases to be used both by the government of the country that issued the currency and by a central bank or other public institutions of or within the international banking community for the settlement of transactions, (2) is the ECU, and it ceases to be used both within the European Monetary System and for the settlement of transactions by public institutions of or within the European Communities or (3) is any other currency unit (or composite currency) other than the ECU, and it ceases to be used for the purposes for which it was established (each of the events described in clauses (1) through (3), a "Conversion Event") (Section 312). All moneys paid by the Company or the Guarantor to the Trustee or a Paying Agent for the payment of principal of (or premium, if any, on) or interest, if any, on any Debt Security that remains unclaimed for two years after such principal, premium or interest becomes due and payable will be repaid to the Company or the Guarantor, as the case may be, and the holder of such Debt Security or any related coupon will (subject to applicable abandoned property or similar laws) thereafter look only to the Company or the Guarantor for payment thereof (Section 1003). Registered Securities of any series will be exchangeable for other Registered Securities of the same series of any authorized denominations and of a like aggregate principal amount. If (but only if) provided in the Prospectus Supplement, Bearer Securities of any series (with all unmatured coupons, except as provided below, and all matured coupons in default) may be similarly exchanged for Registered Securities of the same series of any authorized denominations. If so provided, Bearer Securities of such series surrendered in exchange for Registered Securities during the period (1) on or after a Regular Record Date and before the opening of business on the relevant Interest Payment Date or (2) on or after a Special Record Date and before the opening of business on the related proposed date for payment of Defaulted Interest, will be surrendered without the coupon relating to such Interest Payment Date or proposed date for payment, and such interest or Defaulted Interest, as the case may be, will not be payable in respect of the Registered Security issued in exchange for such Bearer Security, but will be payable only to the holder of such coupon when due in accordance with the terms of the Indenture. Unless otherwise specified in the Prospectus Supplement, Bearer Securities will not be issued in exchange for Registered Securities (Section 305). 8 Registered Securities of a series may be presented for registration of transfer and Debt Securities of a series may be presented for exchange (1) at each office or agency required to be maintained by the Company and the Guarantor for payment of such series, as described above, and (2) at each other office or agency that the Company and the Guarantor may designate from time to time for such purposes. Registration of transfers and exchanges will be effected if the transfer agent is satisfied with the evidence of ownership and identity of the person making the request and, in the case of Registered Securities, if the transfer form thereon is duly executed. No service charge will be made for any registration of transfer or exchange of Debt Securities, but the Company may require payment of any tax or other governmental charge payable in connection therewith (Section 305). In the event of any redemption in part, the Company will not be required (1) to register the transfer of or exchange Debt Securities of any series during a period beginning at the opening of business 15 days before any selection of Debt Securities of that series to be redeemed and ending at the close of business on the date the relevant notice of redemption is mailed or published, as the case may be, (2) to register the transfer of or exchange any Registered Security or portion thereof called for redemption, except the unredeemed portion, if any, of a Registered Security being redeemed in part, (3) to exchange any Bearer Security called for redemption, except to exchange such Bearer Security for a Registered Security of that series and like tenor that is simultaneously surrendered for redemption or (4) to register the transfer of or exchange any Debt Security that has been surrendered for repayment at the option of the holder, except the portion, if any, of such Debt Security not to be so repaid (Section 305). CONSOLIDATION, MERGER AND SALE OF ASSETS Neither the Company nor the Guarantor may consolidate with or merge into any other corporation or other entity, or convey or transfer its properties and assets substantially as an entirety to any person, unless each of the following conditions is satisfied: (1) Immediately thereafter, no Event of Default (or event that with notice or lapse of time, or both, would be such) with respect to the Indenture Securities will have happened and be continuing. (2) The corporation formed by such consolidation or into which the Company or the Guarantor is merged, or the person to which such properties and assets will have been conveyed or transferred, assumes the Company's obligation as to the due and punctual payment of the principal of (and premium, if any, on) and interest, if any, on the Indenture Securities or the Guarantor's obligations under the Guarantees, as the case may be, and the performance and observance of every covenant to be performed by the Company or the Guarantor, as the case may be, under the Indenture, and will be organized under the laws of the United States, one of the States thereof or the District of Columbia; provided that the requirements of this clause (2) will not apply to a transaction in which the Guarantor consolidates with or merges into the Company. (3) In the event of any such consolidation, merger, conveyance or transfer, the Indenture provides that, if any Principal Facility or any Restricted Security would thereupon become subject to any Lien, the Indenture Securities (or the related Guarantees, as the case may be) will be secured, as to such Principal Facility or Restricted Security, equally and ratably with (or prior to) the Debt that upon the occurrence of such transaction would become secured by such Lien, unless such Lien could be created under the Indenture without equally and ratably securing such Indenture Securities or Guarantees. (4) The Company or the Guarantor has delivered to the Trustee an officers' certificate and opinion of counsel, each stating that the transaction complies with these conditions (Sections 801 and 803). 9 In the event that any transaction described in and complying with the conditions listed in the immediately preceding paragraph occurs, the Company or the Guarantor would be discharged from all obligations and covenants under the Indenture, and all obligations under the Indenture Securities or the Guarantees, as the case may be, and could be dissolved and liquidated (Section 802). For the purpose of providing the equal and ratable security referred to in clause (3) above, the principal amount of Indenture Securities outstanding under the Indenture that are Original Issue Discount Securities or Indexed Securities will mean the amount that, at the time of making such provision for such equal and ratable security, would be due and payable pursuant to Section 502 of the Indenture and the terms of such Original Issue Discount Securities or Indexed Securities upon an acceleration thereof (see "Events of Default" below), and the extent of such equal and ratable security will be adjusted, to the extent permitted by law, as and when such amount changes over time pursuant to the terms of such Original Issue Discount Securities or Indexed Securities (Sections 502 and 803). MODIFICATION AND WAIVER The Indenture permits the Company, the Guarantor and the applicable Trustee, with the consent of the holders of not less than a majority in aggregate principal amount of outstanding Indenture Securities affected thereby, to execute supplemental indentures adding any provisions to or changing or eliminating any provisions of the Indenture or modifying the rights of such holders, except that no such supplemental indenture may, without the consent of the holder of each outstanding Indenture Security affected thereby: (1) Change the Stated Maturity of the principal of (or premium, if any, on) or any installment of interest on any Indenture Security, or reduce the principal amount thereof (or any premium, if any, thereon) or the rate of interest, if any, thereon, or change any obligation of the Company and the Guarantor to pay Additional Amounts on any Indenture Security as contemplated by Section 1010 of the Indenture, or change any Place of Payment where or the Currency in which any such principal, premium or interest is payable, or reduce the amount of the principal of an Indexed Security or an Original Issue Discount Security that would be due and payable upon an acceleration of maturity thereof or the amount thereof provable in bankruptcy, or adversely affect the right of repayment, if any, at the option of the holder, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or on or after any Redemption Date or Repayment Date). (2) Reduce the quorum and voting requirements at meetings of holders. (3) Change in any manner adverse to the interests of the holders of the outstanding Indenture Securities the terms and conditions of the obligations of the Guarantor in respect of the due and punctual payment of the principal of (and premium, if any, on) and interest, if any, on such Indenture Securities. (4) Reduce the percentage in principal amount of outstanding Indenture Securities (or of outstanding Indenture Securities of any series, as the case may be), the consent of the holders of which is required for any supplemental indenture or to waive certain covenants or Events of Default under the Indenture (Section 902). The holders of a majority in aggregate principal amount of outstanding Indenture Securities have the right to waive compliance by the Company and the Guarantor with certain covenants contained in the Indenture (Section 1011). Modification and amendment of the Indenture may be made by the Company, the Guarantor and the Trustee without the consent of any holder, for any of the following purposes: (1) to evidence the succession of another person to the Company or the Guarantor as obligor under the Indenture; (2) to add to the covenants of the Company or the Guarantor for the benefit of the holders of any series of Indenture Securities and any related coupons; (3) to add Events of Default for the benefit of the holders of any such series; (4) to add or change any provisions of the Indenture to facilitate the 10 issuance of Bearer Securities; (5) to change or eliminate any provisions of the Indenture, provided that any such change or elimination will become effective only when there is no Indenture Security outstanding thereunder of any series that is entitled to the benefit of such provisions; (6) to secure the Indenture Securities outstanding under the Indenture or the related Guarantees pursuant to the requirements of Section 803 or 1008 of the Indenture, or otherwise; (7) to establish the form or terms of Indenture Securities of any series or the related Guarantees, as permitted by Sections 201 and 301 of the Indenture; (8) to provide for the acceptance of appointment by a successor Trustee or facilitate the administration of the trusts under the Indenture by more than one Trustee; (9) to close the Indenture with respect to the authentication and delivery of additional series of Indenture Securities and to cure any ambiguity or inconsistency in such Indenture, provided such action does not adversely affect in any material respect the interests of holders of Indenture Securities of any series thereunder and related coupons; or (10) to supplement any of the provisions of the Indenture to the extent necessary to permit or facilitate defeasance and discharge of any series of Indenture Securities and the related Guarantees thereof, provided that such action does not adversely affect in any material respect the interests of the holders of the Indenture Securities and related coupons (Section 901). The Indenture provides that in determining whether the holders of the requisite principal amount of Indenture Securities of a series then outstanding have given any request, demand, authorization, direction, notice, consent or waiver thereunder or whether a quorum is present at a meeting of holders of such Indenture Securities, (1) the principal amount of an Original Issue Discount Security that will be deemed to be outstanding will be the amount of the principal thereof that would be due and payable as of the date of such determination upon acceleration of the maturity thereof, (2) the principal amount of an Indenture Security denominated in a Currency other than U.S. dollars will be the U.S. dollar equivalent, determined as of the date of original issuance of such Indenture Security, of the principal amount thereof (or, in the case of an Original Issue Discount Security, the U.S. dollar equivalent as of such date of original issuance of the amount determined as provided in clause (1) above) and (3) the principal amount of an Indexed Security that may be counted in making such determination or calculation and that will be deemed outstanding for such purpose will be equal to the principal face amount of such Indexed Security at original issuance, unless otherwise provided with respect to such Indenture Security pursuant to Section 301 (Section 101). The Indenture contains provisions for convening meetings of holders of Indenture Securities of a series if Indenture Securities of that series are issuable as Bearer Securities (Section 1501). A meeting may be called at any time by (1) the Trustee or (2) upon request by the Company, the Guarantor or the holders of at least 10% in aggregate principal amount of the Indenture Securities of such series outstanding, in any such case upon notice given as provided in the Indenture (Section 1502). Except for any consent that must be given by the holder of each Indenture Security affected thereby, as described above, any resolution presented at a meeting (or an adjourned meeting duly reconvened) at which a quorum is present may be adopted by the affirmative vote of the holders of a majority in principal amount of the Indenture Securities of that series; provided that any resolution with respect to any request, demand, authorization, direction, notice, consent, waiver or other action that may be made, given or taken only by the holders of a specified percentage, which is less than a majority, in principal amount of Indenture Securities of a series may be adopted at a meeting (or an adjourned meeting duly reconvened) at which a quorum is present by the affirmative vote of the holders of at least such specified percentage. Any resolution passed or decision taken at any meeting of holders of Indenture Securities of a series duly held in accordance with the Indenture will be binding on all holders of Indenture Securities of that series and any related coupons. The quorum at any meeting called to adopt a resolution will be persons holding or representing a majority in principal amount of the outstanding Indenture Securities of a series; provided that, if any action is to be taken at such meeting with respect to a consent or waiver that may only be given by the holders of not less than a specified percentage in principal amount of the outstanding Indenture Securities of a series, the persons entitled to vote such specified percentage will constitute a quorum; and provided further that, 11 at the reconvening of any meeting adjourned for lack of a quorum, the holders of 25% in principal amount of the outstanding Indenture Securities of a series at the time will constitute a quorum for the taking of any action set forth in the notice of the original meeting. Notwithstanding the foregoing, if any action is to be taken at a meeting of holders of Indenture Securities of a series with respect to any request, demand, authorization, direction, notice, consent, waiver or other action that the Indenture expressly provides may be made, given or taken by the holders of a specified percentage in principal amount of all outstanding Indenture Securities affected thereby, or of the holders of that series and one or more additional series, then (1) there will be no minimum quorum requirement for such meeting and (2) the principal amount of the outstanding Indenture Securities of that series that vote in favor of such request, demand, authorization, direction, notice, consent, waiver or other action will be taken into account in determining whether such request, demand, authorization, direction, notice, consent, waiver or other action has been made, given or taken under the Indenture (Section 1504). EVENTS OF DEFAULT The following are Events of Default with respect to any series of Indenture Securities: (1) default in the payment of any installment of interest upon any Indenture Security of such series when it becomes due and payable, continued for 30 days; (2) default in the payment of the principal of (or premium, if any, on) any Indenture Security of such series at its maturity; (3) failure on the part of the Company or the Guarantor to observe or perform any other covenant or agreement contained in the Indenture (other than a covenant or agreement included in the Indenture solely for the benefit of less than all series of Indenture Securities or a covenant the default in the performance of which would be covered by clause (6) below) for 60 days after written notice of such failure, requiring the Company or the Guarantor to remedy the same, has been given to the Company and the Guarantor by the Trustee or to the Company, the Guarantor and the Trustee by the holders of at least 25% in aggregate principal amount of outstanding Indenture Securities; (4) default under any indenture or instrument under which the Company, the Guarantor or any Restricted Subsidiary (other than a Restricted Subsidiary principally engaged in business outside the United States and Canada) has at the time outstanding indebtedness for borrowed money or guarantees thereof in any individual instance in excess of $25,000,000 and, if not already matured in accordance with its terms, such indebtedness has been accelerated and such acceleration is not rescinded or annulled within three Business Days after notice thereof has been given to the Company and the Guarantor by the Trustee or to the Company, the Guarantor and the Trustee by the holders of at least 25% in aggregate principal amount of outstanding Indenture Securities of such series; provided that, if, prior to the entry of judgment in favor of the Trustee for payment of the Indenture Securities of such series, the default under such indenture or instrument has been remedied or cured by the Company, the Guarantor or such Restricted Subsidiary, or waived by the holders of such indebtedness, then the Event of Default under the Indenture will be deemed likewise to have been remedied, cured or waived; (5) certain events in bankruptcy, insolvency or reorganization; and (6) any other Event of Default included in the Indenture for the benefit of Indenture Securities of such series. If an Event of Default described in clause (1), (2), (4) or (6) above with respect to outstanding Indenture Securities of any series has occurred and is continuing, the Trustee or the holders of not less than 25% in aggregate principal amount of the outstanding Indenture Securities of that series may declare the principal amount (or, if the Indenture Securities of that series are Original Issue Discount Securities or Indexed Securities, such portion of the principal amount as may be specified in the terms of that series) of all outstanding Indenture Securities of such series to be immediately due and payable. If an Event of Default described in clause (3) or (5) above has occurred and is continuing, the Trustee or the holders of not less than 25% in principal amount of all the outstanding Indenture Securities may declare the principal amount (or, if any such Indenture Securities are Original Issue Discount Securities or Indexed Securities, such portion of the principal amount as may be specified in the terms of that series) of all of the outstanding Indenture Securities to be immediately due and payable. However, at any time after such a declaration of acceleration with respect to outstanding 12 Indenture Securities of a series (or of all outstanding Indenture Securities, as the case may be) has been made, but before a judgment has been obtained by the Trustee, the holders of a majority in principal amount of outstanding Indenture Securities of such series (or of all outstanding Indenture Securities, as the case may be) may, subject to certain conditions, rescind and annul such declaration if all Events of Default (other than the nonpayment of accelerated principal, or a specified portion thereof, premium, or interest, if any) with respect to outstanding Indenture Securities of such series (or of all outstanding Indenture Securities, as the case may be) have been cured or waived as provided in the Indenture (Section 502). The holders of not less than a majority in aggregate principal amount of the outstanding Indenture Securities of a series (or of all outstanding Indenture Securities, as the case may be) have the right, subject to certain conditions and exceptions, to waive defaults other than defaults in the payment of the principal of (or premium, if any, on) or interest, if any, on any Indenture Security of such series and defaults in respect of a covenant or provision that cannot be modified or amended without the consent of the holder of each outstanding Indenture Security of such series affected thereby (Sections 502 and 513). Reference is made to the Prospectus Supplement relating to any series of Debt Securities that are Original Issue Discount Securities or Indexed Securities for the particular provisions relating to acceleration of a portion of the principal amount thereof upon the occurrence and the continuation of an Event of Default. No holder of any Indenture Security of any series will have any right to institute any proceeding with respect to the Indenture, or for any remedy under the Indenture, unless (1) such holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Indenture Securities of such series, (2) the holders of at least 25% in aggregate principal amount of outstanding Indenture Securities of such series in the case of any Event of Default described in clause (1), (2), (4) or (6) above, or the holders of at least 25% in aggregate principal amount of all outstanding Indenture Securities in the case of any Event of Default described in clause (3) or (5) above, have made a written request and offered reasonable security or indemnity to the Trustee to institute such proceeding, (3) the Trustee has failed to institute any such proceeding within 60 days after its receipt of such notice, request and offer and (4) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the holders of a majority in aggregate principal amount of outstanding Indenture Securities of such series (or of all outstanding Indenture Securities, as the case may be). No one or more of such holders will have any right under any provision of the Indenture to affect, disturb or prejudice the rights of any other holders of outstanding Indenture Securities of the same series (in the case of an Event of Default described in clause (1), (2), (4) or (6) above), or holders of all outstanding Indenture Securities (in the case of an Event of Default described in clause (3) or (5) above), or to obtain preference or priority over any other holders, or to enforce any right under the Indenture, except in the manner provided in the Indenture and for the equal and ratable benefit of all the holders of outstanding Indenture Securities of the same series (in the case of an Event of Default described in clause (1), (2), (4) or (6) above), or holders of all outstanding Indenture Securities (in the case of an Event of Default described in clause (3) or (5) above) (Section 507). Subject to provisions relating to the duties of the Trustee in case an Event of Default has occurred and is continuing, the Trustee is under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any holders unless such holders have offered to the Trustee reasonable security or indemnity (Section 602 and TIA Section 315). Subject to such provision for the indemnification of the Trustee and certain limitations contained in the Indenture, the holders of a majority in principal amount of outstanding Indenture Securities of a series (or of all outstanding Indenture Securities, as the case may be) will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee (Section 512). The Trustee will, within 90 days after the occurrence of a default actually known to it with respect to the outstanding Indenture Securities of any series, give notice to all holders of such series of all uncured defaults; provided that, except in the case of default in the payment of the principal of (or 13 premium, if any, on) or interest, if any, on any outstanding Indenture Security of such series, the Trustee will be protected in withholding such notice if it determines in good faith that the withholding of such notice is in the interests of such holders; and provided further that, in the case of a default with respect to the outstanding Indenture Securities of the character specified in clause (3) of the definition of Events of Default, no such notice will be given until at least 30 days after the occurrence thereof (Section 601). The Company and the Guarantor will be required to furnish annually to the Trustee a statement as to the fulfillment by the Company and the Guarantor of all of their respective obligations under the Indenture (Section 1004). DEFEASANCE AND COVENANT DEFEASANCE The Indenture provides that the Company may elect either (1) to defease and be discharged, for itself and the Guarantor, from any and all obligations with respect to all or a portion of the Indenture Securities of any series and any related coupons (except for the obligations (a) to pay Additional Amounts, if any; (b) to register the transfer of or exchange such Indenture Securities and any related coupons; (c) to replace temporary or mutilated, destroyed, lost or stolen Indenture Securities of such series and any related coupons; (d) to maintain an office or agency in respect of such Indenture Securities and any related coupons; and (e) to hold moneys for payment in trust) ("defeasance"); or (2) to be released, for itself and the Guarantor, from its obligations with respect to such outstanding Indenture Securities and any related coupons under Sections 1008 and 1009 of the Indenture (being the restrictions described above under "Liens" and "Sale and Leaseback Transactions", respectively, under the heading "Certain Covenants") or, if so provided in the Prospectus Supplement, its and the Guarantor's obligations with respect to any other covenant, and any omission to comply with such obligations will not constitute a default or an Event of Default with respect to such Indenture Securities and any related coupons ("covenant defeasance"), in the case of either clause (1) or clause (2), upon the irrevocable deposit by the Company or the Guarantor with the Trustee (or other qualifying trustee), in trust, of (i) an amount, in the Currency in which such Indenture Securities and any related coupons are then specified as payable at Stated Maturity, (ii) Government Obligations (as defined below) applicable to such Indenture Securities and any related coupons (with such applicability being determined on the basis of the Currency in which such Indenture Securities are then specified as payable at Stated Maturity) that, through the payment of principal and interest in accordance with their terms, will provide money in an amount, or (iii) a combination thereof in an amount, sufficient to pay the principal of (and premium, if any, on) and interest, if any, on such Indenture Securities and any related coupons, and any mandatory sinking fund or analogous payments thereon, on the scheduled due dates therefor. Such a trust may only be established if, among other things, the Company has delivered to the Trustee an opinion of counsel to the effect that the holders of such Indenture Securities and any related coupons will not recognize income, gain or loss for United States federal income tax purposes as a result of such defeasance or covenant defeasance and will be subject to United States federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance or covenant defeasance had not occurred, and such opinion, in the case of defeasance under clause (1) above, must refer to and be based upon a ruling of the Internal Revenue Service or a change in applicable United States federal income tax law occurring after the date of the Indenture (Article 14). Unless otherwise provided in the applicable Prospectus Supplement, "Government Obligations" means securities that are (1) direct obligations of the government that issued the Currency in which the Indenture Securities of a series are payable or (2) obligations of a person controlled or supervised by and acting as an agency or instrumentality of such government, the payment of which obligations is unconditionally guaranteed by such government, that, in either case, are full faith and credit obligations of such government payable in such Currency and are not callable or redeemable at the option of the issuer thereof. Such term will also include a depository receipt issued by a bank or trust company 14 as custodian with respect to any such Government Obligation or a specific payment of principal of or interest on any such Government Obligation held by such custodian for the account of the holder of a depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt with respect to any amount received by the custodian in respect of the Government Obligation for the specific payment of interest or principal of the Government Obligation evidenced by such depository receipt (Section 101). Unless otherwise provided in the Prospectus Supplement, if, after the Company or the Guarantor has deposited funds, Government Obligations or both to effect defeasance with respect to any Indenture Securities (1) the holder of such an Indenture Security is entitled to, and does, elect pursuant to the terms of such Indenture Security to receive payment in a Currency other than that in which such deposit has been made or (2) a Conversion Event occurs, the indebtedness represented by such Indenture Security and any related coupons will be deemed to have been, and will be, fully discharged and satisfied through the payment of the principal of (and premium, if any, on) and interest, if any, on such Indenture Security as they become due out of the proceeds yielded by converting (from time to time in the case of such an election) the amount so deposited into the Currency in which such Indenture Security becomes payable as a result of such election or such cessation of usage based on the applicable Market Exchange Rate (as defined in the Indenture or in the Prospectus Supplement) for such Currency in effect on the second Business Day prior to each payment date (with respect to such an election) or (as nearly as feasible) in effect at the time of such a cessation of usage (with respect to such a cessation of usage) (Section 1405). In the event the Company effects covenant defeasance with respect to any Indenture Securities and any related coupons and such Indenture Securities and coupons are declared due and payable because of the occurrence of any Event of Default other than (a) an Event of Default described in clause (3) under "Events of Default" with respect to Sections 1008 and 1009 of the Indenture (which Sections would no longer be applicable to such Indenture Securities or coupons) or (b) an Event of Default described in clause (3) or (6) under "Events of Default" with respect to any other covenant as to which there has been defeasance, the realizable value of the money and Government Obligations on deposit with the Trustee may not be sufficient to pay amounts due on such Debt Securities and coupons at the time of the acceleration resulting from such Event of Default, in that the required deposit with the Trustee is based upon scheduled cash flows rather than market value, which will vary depending upon interest rates and other factors. However, the Company and the Guarantor would remain liable to make payment of such shortfall amounts due at the time of acceleration. The Prospectus Supplement may further describe the provisions, if any, permitting such defeasance or covenant defeasance, including any modifications to the provisions described above, with respect to the Indenture Securities of or within a particular series, any related coupons and the related Guarantees. CERTAIN COVENANTS LIENS The Indenture provides that each of the Company and the Guarantor will not itself, and will not permit any of its Restricted Subsidiaries to, create, incur, issue, assume or guarantee any Debt secured by a Lien on any Principal Facility or on any Restricted Security without in any such case effectively providing that the Indenture Securities issued thereunder (in the case of the Company), the related Guarantees (in the case of the Guarantor) or the Indenture Securities and Guarantees (in the case of a Restricted Subsidiary) (and, at the option of the Company or the Guarantor, as the case may be, any other Debt of the Company, the Guarantor or any such Restricted Subsidiary ranking equally with the Indenture Securities or Guarantees or the senior Debt of such Restricted Subsidiary, as the case may be) will be secured equally and ratably with or prior to such secured Debt, except that the foregoing restriction will not apply to: (1) Liens existing as of the date of the first issuance by the Company of any such Indenture Securities. (2) Liens on property or assets of, or on any shares of stock or Debt issued by, any corporation existing at the time such corporation becomes a Restricted Subsidiary. 15 (3) Liens in favor of the Company, the Guarantor or any Restricted Subsidiary. (4) Liens on any Principal Facility or Restricted Security existing at the time of acquisition thereof or certain purchase money Liens. (5) Liens on any Principal Facility to secure all or any part of the cost of exploration, drilling, development, operation, construction, alteration, repair or improvement of all or any part of such Principal Facility or to secure certain Debt incurred for the purpose of financing all or any part of such cost. (6) Any extension, renewal, substitution or replacement (or successive extensions, renewals, substitutions or replacements), in whole or in part, of any Lien referred to in the foregoing clauses (1) through (5). Notwithstanding the above, the Company, the Guarantor and any Restricted Subsidiary may, without securing such Indenture Securities, Guarantees or senior Debt, create, incur, issue, assume or guarantee Debt secured by a Lien that would otherwise be subject to the foregoing restrictions, provided that, after giving effect thereto, the aggregate principal amount of such secured Debt then outstanding, whenever created, incurred, issued, assumed or guaranteed (not including Debt secured by Liens permitted or excepted under the foregoing exceptions) plus all Attributable Debt of the Company, the Guarantor and the Restricted Subsidiaries in respect of sale and leaseback transactions involving Principal Facilities, entered into after the date of the first issuance by the Company of any such Indenture Securities (other than sale and leaseback transactions described in clause (2) or (3) of the section entitled "Sale and Leaseback Transactions"), would not exceed 10% of Consolidated Net Tangible Assets (Section 1008). SALE AND LEASEBACK TRANSACTIONS The Indenture further provides that each of the Company and the Guarantor will not itself, and will not permit any of its Restricted Subsidiaries to, enter into any sale and leaseback transaction (except a lease for a temporary period, including renewals, not exceeding three years and except leases with the Company, the Guarantor or any such Restricted Subsidiary) covering any Principal Facility that has been or is to be sold or transferred by the Company, the Guarantor or such Restricted Subsidiary, unless (1) the Attributable Debt of the Company, the Guarantor and the Restricted Subsidiaries in respect thereof and all other sale and leaseback transactions covering Principal Facilities, whenever entered into (other than such sale and leaseback transactions as are in compliance with the provisions described in clause (2) or (3) of this paragraph), plus the aggregate principal amount of Debt secured by Liens on Principal Facilities or on Restricted Securities then outstanding (other than Debt secured by Liens permitted or excepted without securing the Indenture Securities outstanding thereunder and the related Guarantees and other than Debt if such Indenture Securities are secured equally and ratably with or prior to such Debt), would not exceed 10% of Consolidated Net Tangible Assets or (2) an amount ("Designated Amount") equal to the greater of the net proceeds of such sale or the fair market value of such Principal Facility (as determined by the Company or the Guarantor, as the case may be) is applied within 120 days after the transaction to the retirement of Funded Debt of the Company or the Guarantor (other than at maturity or pursuant to any mandatory sinking fund payment or mandatory prepayment provision), except that the amount to be applied to retirement of Funded Debt of the Company or the Guarantor will be reduced by (a) the aggregate principal amount of any such Indenture Securities called for redemption by the Company within 120 days after such transaction or delivered within such 120-day period to the Trustee for retirement and cancellation and (b) the aggregate principal amount of Funded Debt, other than such Indenture Securities, voluntarily retired by the Company or the Guarantor within 120 days after such transaction, or (3) the Company, the Guarantor or such Restricted Subsidiary, within a period commencing 12 months prior to and ending 12 months after the date of the sale or transfer in respect of such sale and leaseback transaction, has expended or reasonably expects to expend within such period moneys to acquire or construct any Principal Facility or Facilities, in which case the Company, the Guarantor or such Restricted Subsidiary may enter into such sale and leaseback transaction, but only if the Designated Amount in respect thereof is less than or equal to such moneys expended or to be expended within such period (Section 1009). 16 DEFINITIONS "ATTRIBUTABLE DEBT" means, as to any particular lease under which any person is at the time liable, at any date as of which the amount thereof is to be determined, the total net amount of rent required to be paid by such person under such lease during the remaining term thereof (excluding amounts required to be paid on account of maintenance and repairs, services, insurance, taxes, assessments, water rates and similar charges and contingent rents), discounted from the respective due dates thereof at the weighted average of the rates of interest (or Yields to Maturity, in the case of Original Issue Discount Securities) borne by the Indenture Securities then outstanding under the Indenture, compounded annually (Section 101). "CONSOLIDATED NET TANGIBLE ASSETS" means the aggregate amount of assets of the Guarantor and its consolidated Subsidiaries after deducting therefrom (1) applicable reserves and other properly deductible items, (2) all current liabilities of the Guarantor and its consolidated Subsidiaries (excluding any current liabilities constituting Funded Debt by reason of being renewable or extendable) and (3) all goodwill, trade names, trademarks, patents, organization expenses and other like intangibles of the Guarantor and its consolidated Subsidiaries, all as set forth on the latest available balance sheet of the Guarantor and its consolidated Subsidiaries as of the last day of a calendar quarter (but, in any event, within 150 days of the date of determination), prepared in accordance with generally accepted accounting principles (Section 101). "DEBT" means notes, bonds, debentures or other similar evidences of indebtedness for money borrowed (Section 101). "FUNDED DEBT" means all Debt having a maturity of more than 12 months from the date such Debt was incurred or having a maturity of less than 12 months but by its terms being renewable or extendable, at the option of the borrower, beyond 12 months from the date such Debt was incurred (Section 101). "LIEN" means any pledge, mortgage, lien, encumbrance or security interest (Section 101). "PRINCIPAL FACILITY" means any manufacturing plant or warehouse, together with the land upon which it is erected and fixtures comprising a part thereof, owned by the Company, the Guarantor or any Restricted Subsidiary and located in the United States, the gross book value of which (without deduction of any depreciation reserves) on the date as of which the determination is being made exceeds 1% of Consolidated Net Tangible Assets, other than any such plant or warehouse or any portion thereof (together with such land and fixtures) that, in the opinion of the Board of Directors of the Guarantor, is not of material importance to the business conducted by the Company, the Guarantor and the Restricted Subsidiaries, taken as a whole (Section 101). "RESTRICTED SECURITY" means any share of stock or Debt issued by any Restricted Subsidiary (Section 1008). "RESTRICTED SUBSIDIARY" means any Subsidiary of the Company and/or the Guarantor, other than an Unrestricted Subsidiary (Section 101). "SUBSIDIARY" means any corporation or other entity of which at the time of determination the Company and/or the Guarantor, directly and/or indirectly through one or more Subsidiaries, owns Voting Stock sufficient to elect a majority of the directors or comparable officials thereof (Section 101). "UNRESTRICTED SUBSIDIARY" means (1) any Subsidiary principally engaged in (a)(i) owning, leasing, managing or otherwise operating, or franchising or licensing (A) facilities engaged in the retail sale of goods or services to the general public, or (B) fast food, coffee shop, restaurant or other retail facilities principally engaged in providing food or beverages to the general public, or (ii) providing services to the facilities described in clause (i); (b) owning, leasing, dealing in or developing real property used or to be used principally by persons other than the Company, the Guarantor or any Subsidiary for residential, shopping center, industrial, warehouse or office building purposes; or (c) purchasing or financing accounts receivable, making loans, extending credit or other activities of a character conducted by a finance company; (2) any Subsidiary, that is primarily engaged in the business of developing, testing, manufacturing, marketing or providing products, facilities or services used or useful in connection with, or constituting, the furnishing of medical, dental or veterinary care, 17 including kidney dialysis and other intravenous therapy products and services and pharmaceutical products and services; (3) any Subsidiary, the major portion of the assets of which consists of one or more general or limited partnership interests, so long as no such interest represents more than 50% of the total ownership interest in such partnership; and (4) any Subsidiary substantially all of the assets of which consist of capital stock or securities of the Subsidiaries described in clauses (1), (2) and/or (3) of this paragraph. If there is a question as to whether a Subsidiary is an Unrestricted Subsidiary, such matter will be determined by the Board of Directors of the Company or the Guarantor, as the case may be (Section 101). BOOK-ENTRY DEBT SECURITIES Debt Securities of a series (and the related Guarantees) may be issued in whole or in part in the form of one or more Global Securities that will be deposited with, or on behalf of, a depository identified in the Prospectus Supplement relating to such series. Global Securities may be issued in either registered or bearer form and in either temporary or permanent form. Unless otherwise provided in the Prospectus Supplement, Debt Securities of a series (and the related Guarantees) that are represented by a Global Security may be issued in any denomination, and will be issued in registered form only, without coupons. Payments of principal of (and premium, if any, on) and interest, if any, on Debt Securities of such series represented by a Global Security will be made by the Company or the Trustee to the depository. The Company anticipates that any Global Securities will be deposited with, or on behalf of, The Depository Trust Company ("DTC"), New York, New York, that such Global Securities will be registered in the name of DTC's nominee, and that the following provisions will apply to the depository arrangements with respect to any such Global Securities. Additional or differing terms of the depository arrangement will be described in the Prospectus Supplement relating to Offered Debt Securities issued in the form of Global Securities. So long as DTC or its nominee is the registered owner of a Global Security, DTC or its nominee, as the case may be, will be considered the sole holder of the Debt Securities represented by such Global Security for all purposes under the Indenture. Except as described below, owners of beneficial interests in a Global Security will not be entitled to have Debt Securities represented by such Global Security registered in their names, will not receive or be entitled to receive physical delivery of Debt Securities in certificated form and will not be considered the owners or holders of Debt Securities under the Indenture. The laws of some states require that certain purchasers of securities take physical delivery of such securities in certificated form; accordingly, such laws may limit the transferability of beneficial interests in a Global Security. If DTC is at any time unwilling or unable to continue as depository and a successor depository is not appointed by the Company within 90 days following notice to the Company, the Company will issue individual Debt Securities in certificated form in exchange for the Global Securities. In addition, the Company may at any time, and in its sole discretion, determine not to have any Debt Securities of one or more series represented by Global Securities and, in such event, will issue individual Debt Securities of such series in certificated form in exchange for the relevant Global Securities. In any such instance, an owner of a beneficial interest in a Global Security will be entitled to physical delivery of individual Debt Securities in certificated form equal in principal amount to such beneficial interest and to have such Debt Securities in certificated form registered in its name. The following is based on information furnished by DTC: DTC will act as securities depository for the Debt Securities. The Debt Securities will be issued as fully registered securities registered in the name of Cede & Co. (DTC's partnership nominee). One fully registered Debt Security certificate will be issued with respect to each $150 million of principal amount of the Debt Securities of a series, and an additional certificate will be issued with respect to any remaining principal amount of such series. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds securities that its participants ("Participants") deposit with DTC. 18 DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations ("Direct Participants"). DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The rules applicable to DTC and its Participants are on file with the SEC. Purchases of Debt Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Debt Securities on DTC's records. The ownership interest of each actual purchaser of each Debt Security ("Beneficial Owner") is in turn to be recorded on the Participants' records. A Beneficial Owner will not receive written confirmation from DTC of its purchase, but such Beneficial Owner is expected to receive a written confirmation providing details of the transaction, as well as periodic statements of its holdings, from the Participant through which such Beneficial Owner entered into the transaction. Transfers of ownership interests in Debt Securities are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Debt Securities, except in the event that use of the book-entry system for the Debt Securities is discontinued. To facilitate subsequent transfers, the Debt Securities will be registered in the name of DTC's partnership nominee, Cede & Co. The deposit of the Debt Securities with DTC and their registration in the name of Cede & Co. will effect no change in beneficial ownership. DTC will have no knowledge of the actual Beneficial Owners of the Debt Securities; DTC records will reflect only the identity of the Direct Participants to whose accounts Debt Securities are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Delivery of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Neither DTC nor Cede & Co. will consent or vote with respect to the Debt Securities. Under its usual procedures, DTC mails a proxy (an "Omnibus Proxy") to the issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Debt Securities are credited on the record date (identified on a list attached to the Omnibus Proxy). Principal, premium and interest payments on the Debt Securities will be made to DTC. DTC's practice is to credit Direct Participants' accounts on the payable date in accordance with their respective holdings as shown on DTC's records unless DTC has reason to believe that it will not receive payment on the payable date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name", and will be the responsibility of such Participant and not of DTC, the Paying Agent or the Company, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the Company or the Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Debt Securities at any time by giving reasonable notice to the Company or the Paying Agent. Under such circumstances, in the event that a successor securities depository is not appointed, Debt Security certificates are required to be printed and delivered. 19 The Company may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Debt Security certificates will be printed and delivered. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources (including DTC) that the Company and the Guarantor believe to be reliable, but the Company and the Guarantor take no responsibility for the accuracy thereof. Unless stated otherwise in the applicable Prospectus Supplement, the underwriters or agents with respect to Offered Debt Securities issued as Global Securities will be Direct Participants in DTC. None of the Company, the Guarantor, any underwriter or agent, the Trustee or any Paying Agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial interests in a Global Security, or for maintaining, supervising or reviewing any records relating to such beneficial interests. CONCERNING THE TRUSTEE NationsBank of Georgia, National Association, Atlanta, Georgia, is the Trustee under the Indenture. The Trustee is expected to serve as warrant agent (see "Description of Warrants"). Grace also maintains customary banking relationships with the Trustee and its banking affiliates, one of which is a party to a revolving credit agreement with Grace. DESCRIPTION OF WARRANTS The Company may issue Warrants either separately or together with Offered Debt Securities. Each issue of Warrants will be made under a warrant agreement (each a "Warrant Agreement") to be entered into between the Company and the bank or trust company specified in the Prospectus Supplement ("Warrant Agent"). The Warrant Agent is expected to be the Trustee. The form of the Warrant Agreement has been filed with the SEC as an exhibit to the Registration Statement. The following summary of the material provisions of the Warrant Agreement does not purport to be complete and is subject to, and qualified in its entirety by reference to, the Warrant Agreement, including the definitions of certain terms therein, and to the specific terms of the Warrants set forth in the Prospectus Supplement. GENERAL Reference is made to the Prospectus Supplement for the specific terms of the Warrants in respect of which this Prospectus and the Prospectus Supplement are being delivered, including the following: (1) The title and aggregate number of such Warrants. (2) The offering price of such Warrants. (3) The title, aggregate principal amount and terms of the Underlying Debt Securities issuable upon exercise of such Warrants (as specified under "Description of Debt Securities and Guarantees -- General"). (4) The principal amount of Underlying Debt Securities issuable upon exercise of each such Warrant, and the price, or the manner of determining the price, at which such principal amount may be purchased upon such exercise. (5) The time or times at which, or period or periods during which, such Warrants may be exercised and the expiration date of such Warrants. (6) The terms of any right of the Company to redeem such Warrants. (7) Whether such Warrants are to be issued with any Offered Debt Securities and, if so, the title, aggregate principal amount and terms of such Offered Debt Securities (as specified under "Description of Debt Securities and Guarantees -- General") and the number of such Warrants to be issued with each $1,000 principal amount of such Offered Debt Securities (or such other principal amount as may be established). (8) The date, if any, on and after which such Warrants and such Offered Debt Securities will be separately transferable. 20 If applicable, the Prospectus Supplement will also set forth information concerning any Offered Debt Securities offered thereby and a discussion of any relevant federal income tax considerations. Certificates representing Warrants ("Warrant Certificates") may be issued in registered or bearer form, or both, as set forth in the Prospectus Supplement, and will be exchangeable for new Warrant Certificates of different denominations. No service charge will be made for any permitted transfer or exchange of Warrant Certificates, but the Company may require payment of any tax or other governmental charge payable in connection therewith. Warrants may be exercised at the corporate trust office of the Warrant Agent or any other office indicated in the Prospectus Supplement. EXERCISE OF WARRANTS Each Warrant will entitle the holder thereof to purchase such amount of Underlying Debt Securities at the exercise price set forth in, or calculable from, the Prospectus Supplement relating to such Warrants. After the close of business on the applicable expiration date, unexercised Warrants will become void. Warrants may be exercised by payment to the Warrant Agent of the applicable exercise price and by delivery to the Warrant Agent of the information specified on the Warrant Certificate. Warrants will be deemed to have been exercised upon receipt of the exercise price, subject to the receipt by the Warrant Agent, within five business days thereafter, of the Warrant Certificate or Certificates evidencing such Warrants. Upon receipt of such payment and properly completed Warrant Certificates at the corporate trust office of the Warrant Agent or any other office indicated in the applicable Prospectus Supplement, the Company will, as soon as practicable, deliver the amount of Underlying Debt Securities purchased upon such exercise. If fewer than all of the Warrants represented by any Warrant Certificate are exercised, a new Warrant Certificate will be issued for the unexercised Warrants. The holder of a Warrant will be required to pay any tax or other governmental charge that may be imposed in connection with any transfer involved in the issuance of Underlying Debt Securities purchased upon such exercise. MODIFICATIONS The Warrant Agreement and the terms of the Warrants may be amended by the Company and the Warrant Agent, without the consent of any holder, for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective or inconsistent provision contained therein, or in any other manner that the Company deems necessary or desirable and that will not materially and adversely affect the interests of the holders of the Warrants. The Company and the Warrant Agent also may modify or amend the Warrant Agreement and terms of the Warrants with the consent of the holders of not less than a majority in number of the then outstanding unexercised Warrants affected thereby; provided that no such modification or amendment that accelerates the expiration date, increases the exercise price, reduces the number of outstanding Warrants the consent of the holders of which is required for modification or amendment of the Warrant Agreement or the terms of the Warrants, or otherwise materially and adversely affects the rights of the holders of Warrants, may be made without the consent of each holder affected thereby. NO RIGHTS AS HOLDERS OF UNDERLYING DEBT SECURITIES Holders of Warrants are not entitled, by virtue of being such holders, to payment of principal of (or premium, if any, on) or interest, if any, on the related Underlying Debt Securities or to exercise any other rights whatsoever as holders of such Underlying Debt Securities. PLAN OF DISTRIBUTION Offered Securities may be sold directly to one or more purchasers or through underwriters, dealers or agents. If underwriters are used in an offering of Offered Securities, the name of each managing underwriter and any other underwriters and the terms of the transaction, including any underwriting discounts and other items constituting compensation of the underwriters and dealers, if any, will be set forth in the Prospectus Supplement relating to such offering, and the Offered Securities will be acquired by the underwriters for their own accounts and may be resold from time to time in one or 21 more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. Any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time. Only underwriters named in a Prospectus Supplement will be deemed to be underwriters in connection with the Offered Securities described therein; a firm not so named will have no direct or indirect participation in the underwriting of such Offered Securities, although such firm may participate in the distribution of such Offered Securities under circumstances entitling it to a dealer's commission. It is anticipated that any underwriting agreement pertaining to any Offered Securities will (1) entitle the underwriters to indemnification by the Company against certain civil liabilities under the Securities Act, (2) provide that the obligations of the underwriters will be subject to certain conditions precedent and (3) provide that the underwriters will be obligated to purchase all Offered Securities (other than any subject to Delayed Delivery Contracts) if any are purchased. If a dealer is used in an offering of Offered Securities, the Company will sell such Offered Securities to the dealer, as principal. The dealer may then resell such Offered Securities to the public at varying prices to be determined by such dealer at the time of resale. The name of the dealer and the terms of the transaction will be set forth in the Prospectus Supplement relating thereto. If an agent is used in an offering of Offered Securities, the agent will be named, and the terms of the agency will be set forth, in the Prospectus Supplement relating thereto. Unless otherwise indicated in such Prospectus Supplement, an agent will act on a best efforts basis for the period of its appointment. Dealers and agents named in a Prospectus Supplement may be deemed to be underwriters (within the meaning of the Securities Act) of the Offered Securities described therein and, under agreements that may be entered into, may be entitled to indemnification by the Company and the Guarantor against certain civil liabilities under the Securities Act. Underwriters, dealers and agents may be customers of, engage in transactions with or perform services for Grace in the ordinary course of business. Offers to purchase Offered Securities may be solicited, and sales thereof may be made, by the Company directly to institutional investors or others, who may be deemed to be underwriters within the meaning of the Securities Act with respect to any resales thereof. The terms of any such offers will be set forth in the Prospectus Supplement relating thereto. If so indicated in the Prospectus Supplement, the Company will authorize underwriters or other agents of the Company to solicit offers by certain institutional investors to purchase Offered Securities from the Company pursuant to contracts providing for payment and delivery at a future date. Institutional investors with which such contracts may be made include commercial and savings banks, insurance companies, pension funds, investment companies, educational and charitable institutions and others, but in all cases such purchasers must be approved by the Company. The obligations of any purchaser under any such contract will not be subject to any conditions except that (1) the purchase of the Offered Securities shall not at the time of delivery be prohibited under the laws of any jurisdiction to which such purchaser is subject and which govern such investment and (2) if the Offered Securities are also being sold to underwriters, the Company shall have sold to such underwriters the Offered Securities not subject to delayed delivery. Underwriters and other agents will not have any responsibility in respect of the validity or performance of such contracts. The anticipated date of delivery of Offered Securities will be set forth in the Prospectus Supplement relating to each offering. LEGAL OPINIONS The validity of the Securities and the Guarantees will be passed upon for the Company and the Guarantor by Robert H. Beber, General Counsel of the Company and the Guarantor, and for the underwriters, dealers and agents, if any, by Shearman & Sterling, 599 Lexington Avenue, New York, New York 10022. Mr. Beber is also an Executive Vice President of the Company and the Guarantor and beneficially owns certain securities of the Guarantor. Shearman & Sterling occasionally represents Grace in corporate transactions and antitrust matters. 22 EXPERTS The audited consolidated financial statements and schedules incorporated in this Prospectus by reference to the Guarantor's filings pursuant to the Exchange Act have been so incorporated in reliance on the reports of Price Waterhouse LLP, independent accountants, given upon the authority of such firm as experts in auditing and accounting. 23 -----END PRIVACY-ENHANCED MESSAGE-----