UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Filed by the Registrant ☒ | | | Filed by a party other than the Registrant ☐ |
Check the appropriate box:
☒ | Preliminary Proxy Statement |
☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
☐ | Definitive Proxy Statement |
☐ | Definitive Additional Materials |
☐ | Soliciting Material under §240.14a-12 | |
W. R. GRACE & CO.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
☐ | | | No fee required. | |||
☒ | | | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |||
| | (1) | | | Title of each class of securities to which transaction applies: | |
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| | | | W. R. Grace & Co. common stock, par value $0.01 per share (“Grace common stock”) | ||
| | (2) | | | Aggregate number of securities to which transaction applies: | |
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| | | | As of the close of business on May 19, 2021, the maximum number of shares of Grace common stock to which this transaction applies is estimated to be 67,492,523, which consists of: (a) 66,265,488 shares of Grace common stock outstanding; (b) 684,048 shares of Grace common stock issuable pursuant to outstanding options with an exercise price below the per share merger consideration of $70.00; (c) 273,662 shares of Grace common stock underlying restricted stock units that are not subject to performance vesting; and (d) 269,325 shares of Grace common stock underlying performance-based restricted stock units (based on achievement of applicable performance criteria at the actual level of performance (for awards issued in 2019) or target levels (in the case of awards issued in 2020 or 2021)). | ||
| | (3) | | | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | |
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| | | | Solely for purposes of calculating the filing fee, the underlying value of the transaction was calculated based upon the sum of: (a) the product of 66,265,488 shares of Grace common stock and the per share merger consideration of $70.00; (b) the product of (i) 684,048 shares of Grace common stock issuable upon exercise of options with an exercise price below the per share merger consideration of $70.00 and (ii) the difference between $70.00 and the weighted average exercise price of such options of $61.63; (c) the product of 273,662 shares of Grace common stock underlying restricted stock units that are not subject to performance vesting and the per share merger consideration of $70.00; and (d) the product of 269,325 shares of Grace common stock underlying performance-based restricted stock units and the per share merger consideration of $70.00. | ||
| | (4) | | | Proposed maximum aggregate value of transaction: | |
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| | | | $4,682,318,732 | ||
| | (5) | | | Total fee paid: | |
| | | | $510,841 | ||
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| | | | In accordance with Section 14(g) of the Securities Exchange Act of 1934, as amended, the filed fee was determined by multiplying $4,682,318,732 by 0.00010910. | ||
☐ | | | Fee paid previously with preliminary materials. | |||
☐ | | | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |||
| | (1) | | | Amount Previously Paid: | |
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| | (2) | | | Form, Schedule or Registration Statement No.: | |
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| | (3) | | | Filing Party: | |
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| | (4) | | | Date Filed: | |
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PRELIMINARY PROXY STATEMENT—SUBJECT TO COMPLETION, DATED MAY 24, 2021
W. R. Grace & Co.
7500 Grace Drive
Columbia, Maryland 21044
[ ], 2021
Dear Grace Stockholder:
You are cordially invited to attend a special meeting (including any adjournments or postponements thereof, the “Special Meeting”) of stockholders of W. R. Grace & Co., a Delaware corporation (“Grace” or the “Company”) to be held at [ ], on [ ], 2021, at [ ], Eastern time.
At the Special Meeting, you will be asked to consider and vote on (i) a proposal to adopt the Agreement and Plan of Merger, dated as of April 26, 2021 (the “Merger Agreement”), by and among Gibraltar Acquisition Holdings LLC, a Delaware limited liability company (“Parent”), Gibraltar Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), and Grace, (ii) a proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Grace’s named executive officers that is based on or otherwise related to the Merger Agreement and the transactions contemplated by the Merger Agreement (the “Compensation Proposal”), and (iii) a proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to approve the proposal to adopt the Merger Agreement at the time of the Special Meeting (the “Adjournment Proposal”). Parent and Merger Sub are entities that are affiliated with Standard Industries Holdings Inc. (“Standard Industries Holdings”), the parent company of Standard Industries Inc., a privately held global industrial company. Standard Industries Holdings’ related investment platform 40 North Management LLC (“40 North”) is a long-standing stockholder of Grace. Pursuant to the terms of the Merger Agreement, Merger Sub will merge with and into Grace and the separate corporate existence of Merger Sub will cease, with Grace continuing as the surviving corporation (the “Merger”) and a wholly owned subsidiary of Parent.
If the Merger is completed, you will be entitled to receive $70.00 in cash, without interest and less any applicable withholding taxes, for each share of Grace common stock that you own, unless you have properly exercised your appraisal rights. This amount represents a premium of approximately 59% over Grace’s closing stock price of $44.05 on November 6, 2020, the last trading day prior to the announcement of 40 North’s initial proposal to acquire the Company on November 9, 2020.
The Board of Directors of Grace (the “Board of Directors”), after considering the factors more fully described in the enclosed proxy statement, has unanimously: (i) determined that it is in the best interests of Grace and its stockholders, and declared it advisable, to enter into the Merger Agreement; (ii) approved the execution, delivery and performance of the Merger Agreement by Grace and the consummation of the transactions contemplated by the Merger Agreement; and (iii) resolved to recommend that holders of Grace common stock adopt the Merger Agreement and the consummation of the transactions contemplated thereby. The Board of Directors unanimously recommends that you vote: (1) “FOR” the proposal to adopt the Merger Agreement; (2) “FOR,” on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the Adjournment Proposal.
The enclosed proxy statement provides detailed information about the Special Meeting, the Merger Agreement and the Merger. A copy of the Merger Agreement is attached as Annex A to the proxy statement.
The proxy statement also describes the actions and determinations of the Board of Directors in connection with its evaluation of the Merger Agreement and the Merger. You should carefully read and consider the entire enclosed proxy statement and its annexes, including, but not limited to, the Merger Agreement, as they contain important information about, among other things, the Merger and how it affects you.
Whether or not you plan to attend the Special Meeting in person, please sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card). If you attend the Special Meeting and vote in person, your vote will revoke any proxy that you have previously submitted.
If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your bank, broker or other nominee cannot vote on any of the proposals, including the proposal to adopt the Merger Agreement, without your instructions.
Your vote is very important, regardless of the number of shares that you own. We cannot complete the Merger unless the proposal to adopt the Merger Agreement is approved by the affirmative vote of the holders of at least a majority of the outstanding shares of Grace common stock entitled to vote at the Special Meeting. If you fail to vote in person or by proxy, or fail to instruct your broker on how to vote, it will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement.
If you have any questions or need assistance voting your shares, please contact our proxy solicitor:
MacKenzie Partners, Inc.
Collect: (212) 929-5550
Toll-Free: (800) 322-2885
E-mail: proxy@mackenziepartners.com
On behalf of the Board of Directors, I thank you for your support and appreciate your consideration of these matters.
Sincerely, | | | |
| | ||
Hudson La Force | | | |
President and Chief Executive Officer | |||
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Neither the U.S. Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved the Merger, passed upon the merits or fairness of the Merger, the Merger Agreement or the other transactions contemplated thereby or passed upon the adequacy or accuracy of the disclosure in this document. Any representation to the contrary is a criminal offense.
The accompanying proxy statement is dated [ ], 2021 and, together with the enclosed form of proxy card, is first being mailed on or about [ ], 2021.
PRELIMINARY PROXY STATEMENT—SUBJECT TO COMPLETION, DATED MAY 24, 2021
7500 Grace Drive
Columbia, Maryland 21044
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON [ ], 2021
Notice is hereby given that a special meeting of 2021 Annual Meeting of Shareholders
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The Board of Directors. The Proxy StatementDirectors unanimously recommends that you vote: (1) “FOR” the proposal to adopt the Merger Agreement; (2) “FOR,” on an advisory (non-binding) basis, the Compensation Proposal; and proxy were first made available on(3) “FOR” the internet or mailed to shareholders on or about May 24, 2021.Adjournment Proposal.
| | By Order of the Board of Directors, | |
| | ||
| | Cherée H. Johnson | |
| | Senior Vice President, General Counsel and Secretary |
Dated: [ ], 2021
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, WE ENCOURAGE YOU TO SUBMIT YOUR PROXY AS PROMPTLY AS POSSIBLE: (1) BY TELEPHONE; (2) THROUGH THE INTERNET; OR (3) BY SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE POSTAGE-PAID ENVELOPE PROVIDED. You may revoke your proxy or change your vote at any time before it is voted at the Special Meeting.
If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your broker or other agent cannot vote on any of the proposals, including the proposal to adopt the Merger Agreement, without your instructions.
If you are a shareholderGrace Stockholder of record, you may cast your vote in any of the following ways:
If you holdfail to (1) return your proxy card, (2) grant your proxy electronically over the Internet or by telephone or (3) vote in person at the Special Meeting, your shares throughwill not be counted for purposes of determining whether a broker, bank, financial institution or other nominee or intermediary that servesquorum is present at the Special Meeting and, if a quorum is present, will have the same effect as shareholder of record, you may cast youra vote by complying with“AGAINST” the instructions of your nominee or intermediary set forthproposal to adopt the Merger Agreement but will have no effect on the voting instruction card.Compensation Proposal or the Adjournment Proposal.
E-mail: proxy@mackenziepartners.com
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This Proxy Statement describessummary highlights selected information from this proxy statement related to the matters that we would like you to vote onmerger of Gibraltar Merger Sub Inc. with and provides information on those matters so that you can make an informed decision. For information about the Annual Meeting and the voting process, see “Questions and Answers about the Annual Meeting and the Voting Process” and “General Information” in this Proxy Statement.
Except as otherwise specifically noted in this proxy statement, “Grace,” “we,” “our,” “us,” the “Company” and similar words refer to W. R. Grace & Co. is (410) 531-4000.Throughout this proxy statement, we refer to Gibraltar Acquisition Holdings LLC as “Parent” and Gibraltar Merger Sub Inc. as “Merger Sub.” In addition, throughout this proxy statement we refer to the Agreement and Plan of Merger, dated April 26, 2021, by and among Parent, Merger Sub and Grace as the “Merger Agreement,” our common stock, par value $0.01 per share, as “Grace common stock,” and the holders of Grace common stock as “Grace Stockholders.” Unless indicated otherwise, any other capitalized term used herein but not otherwise defined herein has the meaning assigned to such term in the Merger Agreement.
Gibraltar Acquisition Holdings LLC
Parent was formed on April 22, 2021, meeting, affirmatively determined that allsolely for the purpose of our directors, other than Mr. La Force, are independent under NYSE rules, because none ofengaging in the directors has any direct or indirect material relationship with Grace or our subsidiaries under those rules.
Director | Audit | Compensation | Nominating and Governance | Corporate Responsibility | ||||||||||||||||||||||
Robert F. Cummings, Jr. | • | • | • | • | ||||||||||||||||||||||
Julie Fasone Holder | • | • | • | C | ||||||||||||||||||||||
Diane H. Gulyas | • | C | • | • | ||||||||||||||||||||||
Hudson La Force | ||||||||||||||||||||||||||
Henry R. Slack | • | • | • | • | ||||||||||||||||||||||
Christopher J. Steffen* | • | • | C | • | ||||||||||||||||||||||
Mark E. Tomkins | C | • | • | • | ||||||||||||||||||||||
Shlomo Yanai | • | • | • | • | ||||||||||||||||||||||
Number of 2020 Meetings | 5 | 7 | 1 | 2 |
Name | Fees Earned or Paid in Cash ($)(a) | Stock Awards ($)(b) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($)(c) | Total ($) | |||||||||||||||||||||||||||||||||||||
Robert F. Cummings, Jr. | 95,000 | 115,015 | — | — | — | — | 210,015 | |||||||||||||||||||||||||||||||||||||
Julie Fasone Holder | 105,000 | 115,015 | — | — | — | 3,000 | 223,015 | |||||||||||||||||||||||||||||||||||||
Diane H. Gulyas | 110,000 | 115,015 | — | — | — | — | 225,015 | |||||||||||||||||||||||||||||||||||||
Jeffry N. Quinn (d) | 15,834 | — | — | — | — | — | 15,834 | |||||||||||||||||||||||||||||||||||||
Kathleen G. Reiland (e) | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Henry R. Slack | 95,000 | 115,015 | — | — | — | — | 210,015 | |||||||||||||||||||||||||||||||||||||
Christopher J. Steffen | 205,000 | 115,015 | — | — | — | 3,000 | 323,015 | |||||||||||||||||||||||||||||||||||||
Mark E. Tomkins | 113,000 | 115,015 | — | — | — | — | 228,015 | |||||||||||||||||||||||||||||||||||||
Shlomo Yanai | 95,000 | 115,015 | — | — | — | — | 210,015 |
Gibraltar Merger Sub Inc.
Merger Sub is a wholly owned subsidiary of Parent and was formed on April 23, 2021, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement, and has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement and arranging of the annual retainer 2,280 shares of Grace common stock calculatedequity financing and debt financing in accordance with FASB ASC Topic 718.
Parent and Merger Sub are each person that is the beneficial owner of more than 5% of the outstanding shares of Grace common stock as reflected in such Schedule (or amendment thereto); and
Name and Address of Beneficial Owner (1) | Shares of Common Stock Beneficially Owned | Percent (2) | ||||||||||||
40 North Management LLC (3) | 9,865,008 | 14.9 | ||||||||||||
9 West 57th Street, 30th Floor New York, NY 10019 | ||||||||||||||
The Vanguard Group, Inc. (4) | 5,669,493 | 8.6 | ||||||||||||
100 Vanguard Blvd. Malvern, PA 19355 | ||||||||||||||
Robert F. Cummings | 18,823 | |||||||||||||
2,000 | (5) | |||||||||||||
20,823 | * | |||||||||||||
Julie Fasone Holder | 8,474 | * | ||||||||||||
Diane H. Gulyas | 14,823 | * | ||||||||||||
Hudson La Force | 123,107 | |||||||||||||
101,332 | (6) | |||||||||||||
224,439 | * | |||||||||||||
Henry R. Slack | 5,495 | * | ||||||||||||
Christopher J. Steffen | 25,887 | * | ||||||||||||
Mark E. Tomkins | 24,823 | * | ||||||||||||
Shlomo Yanai | 6,973 | * | ||||||||||||
William C. Dockman | 14,736 | |||||||||||||
21,065 | (6) | |||||||||||||
35,801 | * | |||||||||||||
Elizabeth C. Brown | 22,537 | |||||||||||||
31,517 | (6) | |||||||||||||
54,054 | * | |||||||||||||
Keith N. Cole | 16,946 | |||||||||||||
28,202 | (6) | |||||||||||||
45,148 | * | |||||||||||||
Mark A. Shelnitz | 69,104 | |||||||||||||
12,624 | (5) | |||||||||||||
30,865 | (6) | |||||||||||||
112,593 | * | |||||||||||||
Current directors, nominees, and executive officers as a group (12 persons) (7) | 282,624 | |||||||||||||
2,000 | (5) | |||||||||||||
182,116 | (6) | |||||||||||||
466,740 | 0.7 |
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (#)(b) | Weighted-average exercise price of outstanding options, warrants and rights ($)(b)(c) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities to be issued upon exercise of outstanding options, warrants and rights) (#)(d) | |||||||||||||||||
Equity compensation plans approved by security holders(a) | 1,981,159 | 66.86 | 6,304,064 | |||||||||||||||||
Equity compensation plans not approved by security holders | N/A | N/A | N/A | |||||||||||||||||
Total | 1,981,159 | 66.86 | 6,304,064 |
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In connection with the transactions contemplated by the Merger Agreement, (i) Standard Industries Holdings has provided Parent with an equity commitment of $3,516 million and (ii) Parent has obtained debt financing commitments in an aggregate amount of $3,455 million ($3,905 million including the revolving credit facility commitment) from JPMorgan Chase Bank, N.A., BNP Paribas, BNP Paribas Securities Corp., Citigroup Global Markets Inc. on behalf of certain entities affiliated with Citi, Deutsche Bank AG New York Branch, Deutsche Bank AG Cayman Islands Branch and Deutsche Bank Securities Inc. Such amounts will be used to fund the aggregate purchase price required to be paid at the closing of the Merger and to also fund certain other payments (including the Merger Amounts (as defined in the section of this proxy statement captioned “—Financing of the Merger”)), subject to the terms and conditions of the Merger Agreement. In addition, Standard Industries Holdings has agreed to guarantee the payment of certain liabilities and obligations of Parent under the Merger Agreement, subject to an aggregate cap equal to $290 million, including any termination fee and amounts in respect of certain reimbursement and indemnification obligations of Parent and Merger Sub for certain costs, expenses or losses incurred or sustained by Grace, as specified in the Merger Agreement. For more information, please see the section of this proxy statement captioned “—Financing of the Merger.”
Upon the terms and subject to the conditions of the Merger Agreement, Merger Sub will merge with and into Grace and the separate corporate existence of Merger Sub will cease, with Grace continuing as the surviving corporation and as a wholly owned subsidiary of Parent (the “Surviving Corporation”). As a result of the Merger, Grace common stock will no longer be publicly traded and will be delisted from NYSE. In addition, Grace common stock will be deregistered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Grace will no longer file periodic reports with the U.S. Securities and Exchange Commission (the “SEC”). If the Merger is completed, you will not own any shares of the capital stock of the Surviving Corporation. The time at which the Merger will become effective will occur upon the filing of a certificate of merger with the Secretary of State of the State of Delaware in accordance with the applicable provision of the General Corporation Law of the State of Delaware (the “DGCL”) (the time of such filing and the acceptance for record by the Secretary of State of the State of Delaware, or such later time as may be agreed in writing by Parent and Grace and specified in the certificate of merger, being referred to herein as the “Effective Time”).
Grace Common Stock
At the Effective Time, each then-outstanding share of Grace common stock (other than shares of Grace common stock (i) held by Grace as treasury stock, (ii) owned directly or indirectly by Parent, Merger Sub or any other subsidiary of Parent, (iii) owned by any wholly owned subsidiary of Grace or (iv) owned by Grace Stockholders who have properly and validly exercised their statutory rights of appraisal in respect of such shares of Grace common stock in accordance with Section 262 of the DGCL, collectively, the “Excluded Shares”) will be cancelled and retired and automatically converted into the right to receive an amount in cash equal to $70.00 (the “Merger Consideration”), without interest thereon and less any applicable withholding taxes.
Prior to the Effective Time, Parent will deposit (or cause to be deposited) an amount of cash equal to the aggregate Merger Consideration with a designated paying agent in trust for the benefit of the Grace Stockholders. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Exchange and Payment Procedures.”
After the Merger is completed, you will have the right to receive the Merger Consideration, but you will no longer have any rights as a stockholder (except that stockholders who properly exercise their appraisal rights may have the right to receive payment for the “fair value” of their shares determined pursuant to an appraisal proceeding, as contemplated by Delaware law). For more information, please see the section of this proxy statement captioned “The Merger—Appraisal Rights.”
Treatment of Company Equity Awards
Treatment of Company Options and Company SARs. The Merger Agreement provides that each option to purchase shares of Grace common stock (each, a “Company Option”) and each stock appreciation right with respect to shares of Common Stock (each, a “Company SAR”) that is outstanding immediately prior to the
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Effective Time will vest at closing and be converted into the right to receive an amount in cash equal to the product of the Merger Consideration (less the applicable exercise price) and the number of shares of Common Stock covered by such Company Option or Company SAR (without interest and less applicable withholding taxes). Payment of these cash amounts will be paid within three (3) business days after the Effective Time. Any Company Option or Company SAR that has a per share exercise price that is greater than or equal to the Merger Consideration will be cancelled at the Effective Time for no consideration or payment.
Treatment of Company RSU Awards and Company Performance Share Awards. The Merger Agreement provides that each restricted stock unit award (each, a “Company RSU Award”) and each performance-based unit award relating to shares of Common Stock (each, a “Company Performance Share Award” and, collectively with the Company Options, Company SARs and Company RSU Awards, the “Company Equity Awards”) that is outstanding immediately prior to the Effective Time will be assumed and converted into the right to receive an amount in cash (without interest) equal to the product obtained by multiplying the Merger Consideration by the number of shares of Common Stock covered by such award immediately prior to the Effective Time, which converted cash award will be subject to continued service vesting and other terms as set forth in the Merger Agreement.
For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Merger Consideration—Treatment of Company Equity Awards.”
The receipt of cash by Grace Stockholders in exchange for shares of Grace common stock in the Merger will be a taxable transaction to Grace Stockholders for U.S. federal income tax purposes. Such receipt of cash by each Grace Stockholder that is a U.S. Holder (as defined under the section, “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”) generally will result in the recognition of gain or loss in an amount equal to the difference, if any, between the amount of cash that such U.S. Holder receives in the Merger and such U.S. Holder’s adjusted tax basis in the shares of Grace common stock surrendered pursuant to the Merger.
Grace Stockholders should read the section of this proxy statement captioned “The Merger—Material U.S. Federal Income Tax Consequences of the Merger.”
Grace Stockholders should consult their tax advisors in light of their particular circumstances and any consequences arising under U.S. federal, state, local and non-U.S. income and other tax consequences relating to the Merger.
If the Merger is consummated and certain conditions are met, Grace Stockholders who continuously hold shares of Grace common stock through the Effective Time, who do not vote in favor of the adoption of the Merger Agreement and who properly demand appraisal of their shares and who do not withdraw their demands or otherwise lose their rights to seek appraisal will be entitled to seek appraisal of their shares in connection with the Merger under Section 262 of the DGCL. This means that Grace Stockholders may be entitled to have their shares of Grace common stock appraised by the Delaware Court of Chancery, and to receive payment in cash of the “fair value” of their shares of Grace common stock, exclusive of any elements of value arising from the accomplishment or expectation of the Merger, together with interest to be paid on the amount determined to be fair value, if any, as determined by the court (or in certain circumstances described in further detail in the section of this proxy statement captioned “The Merger—Appraisal Rights,” on the difference between the amount determined to be the fair value and the amount paid by the Surviving Corporation in the Merger to each stockholder entitled to appraisal prior to the entry of judgment in any appraisal proceeding). Due to the complexity of the appraisal process, Grace Stockholders who wish to seek appraisal of their shares are encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights.
Grace Stockholders considering seeking appraisal should be aware that the fair value of their shares as determined pursuant to Section 262 of the DGCL could be more than, the same as, or less than the value of the consideration that they would receive pursuant to the Merger Agreement if they did not seek appraisal of their shares of Grace common stock.
To exercise appraisal rights, Grace Stockholders must: (i) submit a written demand for appraisal to Grace before the vote is taken on the proposal to adopt the Merger Agreement; (ii) not submit a proxy or otherwise
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vote in favor of the proposal to adopt the Merger Agreement; (iii) continue to hold shares of Grace common stock of record through the Effective Time; and (iv) strictly comply with all other procedures for exercising appraisal rights under the DGCL. Failure to follow exactly the procedures specified under the DGCL may result in the loss of appraisal rights. In addition, the Delaware Court of Chancery will dismiss appraisal proceedings in respect of Grace unless certain stock ownership conditions are satisfied by the Grace Stockholders seeking appraisal. The DGCL requirements for exercising appraisal rights are described in further detail in this proxy statement, which is qualified in its entirety by Section 262 of the DGCL, the relevant section of the DGCL regarding appraisal rights. A copy of Section 262 of the DGCL is reproduced in Annex D to this proxy statement. If you hold your shares of Grace common stock through a bank, broker or other nominee and you wish to exercise appraisal rights, you should consult with your bank, broker or other nominee to determine the appropriate procedures for the making of a demand for appraisal on your behalf by your bank, broker or other nominee. For more information, please see the section of this proxy statement captioned “The Merger—Appraisal Rights.”
HSR Act, U.S. Antitrust Matters and Other Regulatory Approvals
Under the Merger Agreement, the Merger cannot be completed until the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), has expired or been terminated and approvals, consents, waivers or clearances under the antitrust laws of certain specified foreign jurisdictions have been obtained. Grace and Parent made the filings required under the HSR Act on May 10, 2021.
Commitment to Obtain Approvals
Grace and Parent are each required to take (or cause to be taken), do (or cause to be done), and assist and cooperate in doing all things necessary or advisable to consummate the Merger as promptly as reasonably practicable. Additionally, Parent is required to take all actions necessary, proper or advisable to avoid or eliminate each and every impediment, including any judgment, that may be asserted by a governmental entity pursuant to any antitrust law with respect to the Merger. This includes, if required by regulatory authorities, (i) agreeing to sell, divest or dispose of any assets or businesses of Parent or its affiliates or Grace or its subsidiaries and (ii) agreeing to any limitation on the conduct of Parent or its affiliates (including, after the closing of the Merger, the Surviving Corporation) proposed by a governmental entity enforcing applicable laws. In connection with Parent’s effectuation of these transactions or restrictions, Grace is required to provide such reasonable assistance as Parent may reasonably request; provided that any such transactions or restrictions are subject to, conditioned upon and effective only after the closing of the Merger. See the section of this proxy statement captioned “The Merger—Regulatory Approvals Required for the Merger.”
The obligations of Grace, Parent and Merger Sub, as applicable, to consummate the Merger are subject to the satisfaction or waiver of customary conditions, including (among other conditions), the following:
the adoption of the Merger Agreement by the requisite affirmative vote of stockholders;
the expiration or termination of the applicable waiting period under the HSR Act and the receipt of approvals, consents, waivers or clearances under the antitrust laws of certain specified foreign jurisdictions;
the absence of any laws or judgments issued by a governmental entity of competent jurisdiction making the Merger illegal or otherwise prohibiting the Merger;
in the case of Parent and Merger Sub, no “Company Material Adverse Effect” having occurred since the date of the Merger Agreement (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Representations and Warranties”);
the accuracy of the representations and warranties of Grace, Parent and Merger Sub in the Merger Agreement, generally subject to a materiality qualification, as of the date of the Merger Agreement and as of the closing of the Merger as if made as of such time (except to the extent expressly made as of an earlier date, in which case as of such earlier date); and
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the performance in all material respects by Grace, Parent and Merger Sub of their respective obligations required to be performed by them under the Merger Agreement at or prior to the Effective Time.
The obligation of Parent and Merger Sub to consummate the Merger is not subject to any financing condition. We anticipate that the total amount of funds necessary to complete the Merger and the related transactions, and to pay the fees and expenses required to be paid at the closing of the Merger by Parent and Merger Sub under the Merger Agreement, will be approximately $7,151 million. This amount includes funds needed to: (i) pay Grace Stockholders the amounts due under the Merger Agreement for their Grace common stock, (ii) make payments in respect of our outstanding Company Equity Awards payable at closing of the Merger pursuant to the Merger Agreement, (iii) repay or refinance certain outstanding indebtedness of Grace and its subsidiaries contemplated by, or required in connection with the transactions described in, the Merger Agreement or the Commitment Letters (as defined below) and (iv) pay any fees and expenses of or payable by Parent, Merger Sub or the Surviving Corporation at the closing of the Merger (collectively, the “Merger Amounts”).
Standard Industries Holdings has committed to contribute or cause to be contributed to Parent at the closing of the Merger an aggregate amount in cash equal to $3,516 million, subject to the terms and conditions set forth in an equity commitment letter, dated as of April 26, 2021 (the “Equity Commitment Letter”). Grace is an express third-party beneficiary of the Equity Commitment Letter and may cause Standard Industries Holdings to perform its funding obligations under the Equity Commitment Letter subject to (i) the limitations and conditions set forth in the Equity Commitment Letter and (ii) the terms and conditions of the Merger Agreement. Standard Industries Holdings has announced that its equity commitment will be supported by (a) the available cash of its subsidiary, Standard Industries Inc., (b) up to $2,500 million in proceeds from a secured term loan and (c) a financing commitment of $600 million by certain investment funds affiliated with Apollo Global Management.
Pursuant to the limited guaranty delivered by Standard Industries Holdings in favor of Grace, dated as of April 26, 2021 (the “Guaranty”), Standard Industries Holdings has agreed to guarantee the payment of certain liabilities and obligations of Parent under the Merger Agreement, subject to an aggregate cap equal to $290 million, including any termination fee and amounts in respect of certain reimbursement and indemnification obligations of Parent and Merger Sub for certain costs, expenses or losses incurred or sustained by Grace, as specified in the Merger Agreement.
In addition, in connection with the Merger Agreement, Parent entered into a debt commitment letter, dated as of April 26, 2021 (as amended, supplemented or otherwise modified, the “Debt Commitment Letter” and, together with the Equity Commitment Letter, the “Commitment Letters”) with JPMorgan Chase Bank, N.A., BNP Paribas, BNP Paribas Securities Corp., Citigroup Global Markets Inc. on behalf of certain entities affiliated with Citi, Deutsche Bank AG New York Branch, Deutsche Bank AG Cayman Islands Branch and Deutsche Bank Securities Inc., pursuant to which the lenders have committed to provide, upon certain terms and subject to certain conditions, Parent with Debt Financing (as defined in the section of this proxy statement captioned “The Merger—Financing of the Merger”) in an aggregate principal amount of $3,455 million ($3,905 million including the revolving credit facility commitment). For more information, please see the section of this proxy statement captioned “The Merger—Financing of the Merger.”
Each of Parent and Merger Sub must use reasonable best efforts to take, or cause to be taken, all actions and do, or cause to be done, all things necessary, proper or advisable to arrange, consummate and obtain the financing described in the Commitment Letters on the terms and subject only to the conditions (including the “flex” provisions contained in any related fee letter) set forth in the Commitment Letters and the Merger Agreement.
Grace has agreed to use its reasonable best efforts to provide, and to use its reasonable efforts to cause its representatives to provide, to Parent and Merger Sub, at Parent’s sole cost and expense, such cooperation as is customary and reasonably requested by Parent in connection with the arrangement of the financing contemplated by the Debt Commitment Letter, subject to the terms set forth in the Merger Agreement. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Cooperation with Debt Financing.”
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The affirmative vote of the holders of a majority of the outstanding shares of Grace common stock entitled to vote at the Special Meeting is required to adopt the Merger Agreement. As of the Record Date, [ ] votes constitute a majority of the outstanding shares of Grace common stock entitled to vote at the Special Meeting. Approval of each of (i) the proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Grace’s named executive officers that is based on or otherwise relates to the Merger Agreement and the transactions contemplated by the Merger Agreement (the “Compensation Proposal”) and (ii) the proposal to adjourn the Special Meeting (the “Adjournment Proposal”), whether or not a quorum is present, requires the affirmative vote of a majority of the shares of Grace common stock present in person or represented by proxy at the Special Meeting and entitled to vote on the subject matter. The approval of the Compensation Proposal is advisory (non-binding) and is not a condition to the completion of the Merger.
As of the Record Date, our directors and executive officers beneficially owned and were entitled to vote, in the aggregate, [ ] shares of Grace common stock, representing approximately [ ]% of the shares of Grace common stock outstanding as of the Record Date (and approximately [ ]% of the shares of Grace common stock outstanding when taking into account Company Equity Awards held, in the aggregate, by our directors and executive officers).
40 North Latitude Master Fund Ltd. (“40 North”(the “Supporting Stockholder”), which owns approximately 14.9%an affiliate of the Company’s outstanding common stock, had40 North, entered into a voting agreement pursuantwith the Company, dated as of April 26, 2021 (the “Voting Agreement”). The Supporting Stockholder beneficially owns 9,865,008 shares of Grace common stock representing approximately 14.9% of the outstanding Grace common stock as of May 13, 2021. Pursuant to which 40 Norththe Voting Agreement, the Supporting Stockholder has agreed, among other things, to vote its shares of Grace common stock in favor of the transaction.
proposal to adopt the Merger Agreement (as described in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Company Board Recommendation; Company Adverse Recommendation Change”). For more information, see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Voting Agreement.”
Date, Time and Place
A special meeting of Grace Stockholders to consider and vote on the proposal to adopt the Merger Agreement will be held at [ ], on [ ], 2021, at [ ], Eastern time (the “Special Meeting”).
Record Date; Shares Entitled to Vote
You are entitled to vote at the Special Meeting if you owned shares of Grace common stock at the close of business on [ ], 2021 (the “Record Date”). Each holder of Grace common stock will be entitled to one (1) vote for each such share owned at the close of business on the Record Date.
Quorum
As of the Record Date, there were [ ] shares of Grace common stock outstanding and entitled to vote at the Special Meeting. The holders of a majority of the shares of Grace common stock issued and outstanding and entitled to vote, present in person or represented by proxy, will constitute a quorum at the Special Meeting.
The Board of Directors has unanimously: (i) determined that it is in the best interests of Grace and its stockholders, and declared it advisable, to enter into the Merger Agreement; (ii) approved the execution, delivery and performance of the Merger Agreement by Grace and the consummation of the transactions contemplated by the Merger Agreement; and (iii) resolved to recommend that Grace Stockholders adopt the Merger Agreement and the consummation of the transactions contemplated thereby.
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The Board of Directors unanimously recommends that you vote: (1) “FOR” the proposal to adopt the Merger Agreement; (2) “FOR,” on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the Adjournment Proposal.
Prior to the adoption of the Merger Agreement by Grace Stockholders, under certain circumstances, the Board of Directors may withdraw or change the foregoing recommendation if it determines in good faith (after consultation with its financial advisors and its outside legal counsel and after taking into account any changes to the terms of the Merger Agreement proposed by Parent during the notice and negotiation period described below) that failure to do so would be inconsistent with the Board of Directors’ fiduciary duties to stockholders under applicable law. However, the Board of Directors cannot withdraw or change the foregoing recommendation unless it complies with certain procedures in the Merger Agreement, including, but not limited to, negotiating with Parent and its representatives in good faith over a five (5) business day period (three (3) business days in the case of subsequent revisions to the material terms of a Superior Company Proposal (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Company Takeover Proposals; No Solicitation”)), after which the Board of Directors shall have determined that the failure to make a Company Adverse Recommendation Change (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Company Board Recommendation; Company Adverse Recommendation Change”) would be inconsistent with the Board of Directors’ fiduciary duties to stockholders under applicable law.
The termination of the Merger Agreement by Grace following the Board of Directors’ authorization for Grace to enter into a definitive agreement to consummate an alternative transaction contemplated by a Superior Company Proposal (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Company Takeover Proposals; No Solicitation”) will result in the payment by Grace of a termination fee of $141 million. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Company Board Recommendation; Company Adverse Recommendation Change.”
Goldman Sachs & Co. LLC (“Goldman Sachs”) delivered its opinion to the Board of Directors of Grace that, as of April 26, 2021 and based upon and subject to the factors and assumptions set forth therein, the Merger Consideration to be paid to the holders (other than Parent and its affiliates) of Grace common stock pursuant to the Merger Agreement was fair from a financial point of view to such holders.
The full text of the written opinion of Goldman Sachs, dated April 26, 2021, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex B to this proxy statement. Goldman Sachs provided advisory services and its opinion for the information and assistance of the Board of Directors in connection with its consideration of the Merger. The Goldman Sachs opinion is not a recommendation as to how any holder of Grace common stock should vote with respect to the Merger or any other matter.
For more information, see the section of this proxy statement captioned “The Merger—Opinion of Goldman Sachs & Co. LLC.”
At the April 25, 2021 meeting of the Board of Directors, Moelis & Company LLC (“Moelis”), financial advisor to Grace, rendered its oral opinion to the Board of Directors, confirmed by the delivery of a written opinion dated April 26, 2021, addressed to the Board of Directors to the effect that, as of the date of such opinion and Planbased upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken, the Merger Consideration to be received in the Merger by the holders of the Grace common stock (other than the Supporting Stockholder, Parent, Merger (the “Merger Agreement”) with Gibraltar Acquisition Holdings LLC, a Delaware limited liability company (“Parent”) and aSub, any other subsidiary of Parent, Grace or any wholly owned subsidiary of Standard Industries Holdings,Grace) was fair, from a financial point of view, to such holders.
The full text of Moelis’ written opinion dated April 26, 2021, which sets forth the assumptions made, procedures followed, matters considered and Gibraltarlimitations on the review undertaken in connection with the opinion, is attached as Annex C to this proxy statement and is incorporated herein by reference. Moelis’ opinion was provided for the use and benefit of the Board of Directors (solely in its capacity as such) in its
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evaluation of the Merger. Moelis’ opinion is limited solely to the fairness, from a financial point of view, of the Merger Consideration to be received by the holders of the Grace common stock (other than the Supporting Stockholder, Parent, Merger Sub, Inc., a Delaware corporation andany other subsidiary of Parent, Grace or any wholly owned subsidiary of Grace) in the Merger and does not address Grace’s underlying business decision to effect the Merger or the relative merits of the Merger as compared to any alternative business strategies or transactions that might be available to Grace. Moelis’ opinion does not constitute a recommendation as to how any holder of securities should vote or act with respect to the Merger or any other matter.
For more information, see the section of this proxy statement captioned “The Merger—Opinion of Moelis & Company LLC.”
When considering the foregoing recommendation of the Board of Directors that you vote to approve the proposal to adopt the Merger Agreement, Grace Stockholders should be aware that Grace’s directors and executive officers may have interests in the Merger that are different from, or in addition to, Grace Stockholders more generally. In (i) evaluating and negotiating the Merger Agreement, (ii) approving the Merger Agreement and the Merger and (iii) recommending that the Merger Agreement be adopted by stockholders, the Board of Directors was aware of and considered these interests, among other matters, to the extent that these interests existed at the time. These interests include:
at the Effective Time, each Company Equity Award held by an executive officer or director will receive the treatment described in the section of this proxy statement captioned “The Merger—Interests of Executive Officers and Directors of Grace in the Merger—Treatment of Company Equity Awards”;
eligibility of Grace’s executive officers to receive severance payments and benefits under their change in control severance agreements with Grace and equity award vesting acceleration on certain terminations of employment under the Grace stock incentive plans, as described in more detail in the section of this proxy statement captioned “The Merger—Interests of Executive Officers and Directors of Grace in the Merger”;
eligibility of Grace’s executive officers to receive a retention bonus equal to 50% of the severance payment (as defined in the applicable change in control severance agreement) that would be payable under each such executive’s change in control severance agreement, subject to continued employment through the first anniversary of the closing (and in the event any such executive’s employment is terminated by Grace prior to the first anniversary of the closing, the executive would remain eligible to receive a severance payment as set forth in the executive’s change in control severance agreement); and
continued indemnification and directors’ and officers’ liability insurance to be provided by the Surviving Corporation.
If the proposal to adopt the Merger Agreement is approved, the shares of Grace common stock held by Grace directors and executive officers will be treated in the same manner as outstanding shares of Grace common stock held by all other stockholders. For more information, see the section of this proxy statement captioned “The Merger—Interests of Executive Officers and Directors of Grace in the Merger.”
Under the Merger Agreement, Grace must not, and must cause its subsidiaries not to, and must use reasonable best efforts to cause its affiliates and any of its and their respective representatives not to, directly or indirectly: (i) solicit, initiate or knowingly encourage, induce or facilitate any Company Takeover Proposal (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Company Takeover Proposals; No Solicitation”) or any inquiry or proposal that would reasonably be expected to lead to a Company Takeover Proposal; or (ii) continue, enter into, maintain, participate or engage in any discussions or negotiations with any person regarding, furnish to any such person any non-public information with respect to, any Company Takeover Proposal or any inquiry or proposal that would reasonably be expected to lead to a Company Takeover Proposal. In addition, Grace must, and must cause its affiliates and its and their respective representatives to, (a) immediately cease and cause to be terminated all existing discussions, solicitations or negotiations with or of any person with respect to any Company Takeover Proposal, or any inquiry or proposal that would reasonably be expected to lead to a Company Takeover Proposal,
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(b) request the prompt return or destruction of all confidential information previously furnished and (c) terminate all physical and electronic data room access previously granted to any such person or its representatives.
Notwithstanding the foregoing restrictions, under certain specified circumstances, from the date of the Merger Agreement until the adoption of the Merger Agreement by the Grace Stockholders, Grace may, among other things, furnish information to, and participate in discussions and negotiations with, a person in respect of a bona fide, written Company Takeover Proposal made after the date of the Merger Agreement that does not result from a material breach of Grace’s non-solicitation obligations, as described in the immediately preceding paragraph if, subject to complying with certain procedures described in the subsequent paragraph, the Board of Directors determines in good faith (after consultation with its financial advisors and its outside legal counsel) that such Company Takeover Proposal constitutes or could reasonably be expected to lead to a Superior Company Proposal, and, in each case, if (and only if), the Board of Directors determines in good faith (after consultation with its financial advisors and its outside legal counsel) that the failure to take such actions would reasonably be expected to be inconsistent with the Board of Directors’ fiduciary duties to stockholders under applicable law, and Grace has delivered to Parent (“prior written notice that it intends to take such actions. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Sub”Agreement—Company Takeover Proposals; No Solicitation.”
Prior to the adoption of the Merger Agreement by the Grace Stockholders, Grace is entitled to terminate the Merger Agreement for the purpose of entering into an agreement in respect of a Superior Company Proposal if it complies with certain procedures in the Merger Agreement, including, but not limited to, negotiating with Parent in good faith over a five (5) business day period in an effort to amend the terms and conditions of the Merger Agreement (three (3) business days in the case of subsequent revisions to the material terms of such Superior Company Proposal), and the Board of Directors determines in good faith (after consultation with its outside legal counsel and financial advisors) that the failure to terminate the Merger Agreement as a result of such Superior Company Proposal would be inconsistent with the Board of Directors’ fiduciary duties under applicable law.
The termination of the Merger Agreement by Grace following the Board of Directors’ authorization for Grace to enter into a definitive agreement to consummate an alternative transaction contemplated by a Superior Company Proposal will result in the payment by Grace of a termination fee of $141 million. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Company Board Recommendation; Company Adverse Recommendation Change.”
In addition to the circumstances described above, Parent and Grace have certain rights to terminate the Merger Agreement under customary circumstances, including:
by mutual agreement;
the imposition of any final and non-appealable law or judgment by a governmental entity of competent jurisdiction that permanently restrains, enjoins or otherwise prohibits the consummation of the Merger;
the other party breaches or fails to perform any of its covenants or agreements set forth in the Merger Agreement or any of the other party’s representations or warranties fails to be true and correct, which, in either case would give rise to a failure of the conditions to completion of the Merger relating to the accuracy of the other party’s representations and warranties or performance of the other party’s covenants and is not reasonably capable of being cured by the End Date (as defined below) or, if capable of being cured, is not cured within 30 calendar days following the delivery of written notice of such breach or failure;
if the Merger has not been consummated by 5:00 p.m., New York City time, on January 26, 2022 (the “End Date”), (subject to extension to April 26, 2022 under certain circumstances, including for purposes of obtaining required regulatory approvals (as further described in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination of the Merger Agreement”)); or
if Grace Stockholders fail to adopt the Merger Agreement at the Special Meeting (or any adjournment or postponement thereof).
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Under some circumstances, (i) Grace is required to pay Parent a termination fee equal to $141 million (the “Company Termination Fee”); and (ii) Parent is required to pay Grace a termination fee equal to $281 million (the “Parent Termination Fee”). Please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination Fee.”
If the Merger Agreement is not adopted by Grace Stockholders, or if the Merger is not completed for any other reason:
the Grace Stockholders will not be entitled to, nor will they receive, any payment for their respective shares of Grace common stock pursuant to the Merger Agreement;
(i) Grace will remain an independent public company; (ii) Grace common stock will continue to be listed and traded on NYSE and registered under the Exchange Act; and (iii) Grace will continue to file periodic reports with the SEC; and
under certain specified circumstances, Grace will be required to pay Parent a Company Termination Fee of $141 million upon the termination of the Merger Agreement. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination Fee.”
The Supporting Stockholder, which beneficially owns 9,865,008 shares of Grace common stock representing approximately 14.9% of the outstanding Grace common stock as of May 13, 2021, entered into the Voting Agreement with the Company. Pursuant to the Voting Agreement, the Supporting Stockholder has agreed, among other things, to vote its shares of Grace common stock in favor of the proposal to adopt the Merger Agreement.
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The following questions and answers address some commonly asked questions regarding the Merger, the Merger Agreement and the Special Meeting. These questions and answers may not address all questions that are important to you. You should carefully read and consider the more detailed information contained elsewhere in this proxy statement and the annexes to this proxy statement, including, but not limited to, the Merger Agreement, along with all of the documents we refer to in this proxy statement, as they contain important information about, among other things, the Merger and how it affects you. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under the caption, “Where You Can Find More Information.”
Q: | Why am I receiving these materials? |
A: | The Board of Directors is furnishing this proxy statement and form of proxy card to the holders of shares of Grace common stock in connection with the solicitation of proxies to be voted at the Special Meeting. |
Q: | When and where is the Special Meeting? |
A: | Grace will hold the Special Meeting at [ ], on [ ], 2021, at [ ], Eastern time. |
Q: | What am I being asked to vote on at the Special Meeting? |
A: | You are being asked to vote on the following proposals: |
to adopt the Merger Agreement pursuant to which Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger asGrace, and Grace will become a wholly owned subsidiary of Parent. Our Board has unanimously approvedParent;
to approve, on an advisory (non-binding) basis, the Compensation Proposal; and
to approve the Adjournment Proposal.
Q: | Who is entitled to vote at the Special Meeting? |
A: | Only holders of record of Grace common stock as of the close of business on [ ], 2021, the Record Date for the Special Meeting, are entitled to notice of the Special Meeting and to vote at the Special Meeting. Each holder of Grace common stock will be entitled to cast one (1) vote on each matter properly brought before the Special Meeting for each such share owned at the close of business on the Record Date. |
Q: | How do I attend the Special Meeting? |
A: | If you are a stockholder of record as of the Record Date, you may attend the Special Meeting in person. If you plan to attend the Special Meeting in person, you must provide proof of ownership of Grace common stock as of the Record Date, such as an account statement indicating ownership on that date and a form of personal identification for admission to the meeting. |
Even if you plan to attend the Special Meeting in person, to ensure that your shares will be represented at the Special Meeting, we encourage you to sign, date and return the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card). If you attend the Special Meeting and vote in person, your vote will revoke any proxy previously submitted.
If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your broker or other agent cannot vote on any of the proposals, including the proposal to adopt the Merger Agreement.Agreement, without your instructions. If you hold your shares in “street name,” you may not vote your shares in person at the Special Meeting unless you obtain a “legal proxy” from your bank, broker or other nominee.
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Q: | How many shares are needed to constitute a quorum? |
A: | A quorum will be present if holders of a majority of the shares of Grace common stock issued and outstanding and entitled to vote at the Special Meeting are present in person or represented by proxy at the Special Meeting. If a quorum is not present at the Special Meeting, the Special Meeting may be adjourned or postponed from time to time until a quorum is obtained. |
As a result of the Merger, each shareRecord Date, there were [ ] shares of Grace common stock outstanding and entitled to vote at the Special Meeting.
If you submit a proxy but fail to provide voting instructions or abstain on any of the proposals listed on the proxy card, your shares will be counted for the purpose of determining whether a quorum is present at the Special Meeting.
If your shares are held in “street name” by your broker, bank or other nominee and you do not instruct the nominee how to vote your shares, your broker, bank or other nominee will not vote on your behalf with respect to any of the proposals, and your shares will not be counted for purposes of determining whether a quorum is present for the transaction of business at the Special Meeting.
Q: | What will I receive if the Merger is completed? |
A: | Upon completion of the Merger, you will be entitled to receive the Merger Consideration of $70.00 in cash, without interest and less any applicable withholding taxes, for each share of Grace common stock that you own, unless you have properly exercised and not withdrawn your appraisal rights under the DGCL. For example, if you own 100 shares of Grace common stock, you will receive $7,000 in cash in exchange for your shares of Grace common stock, without interest and less any applicable withholding taxes. |
Additionally, the Merger Agreement provides that each Company Option and Company SAR outstanding immediately prior to the effective timeEffective Time, whether vested or unvested, will be cancelled at the Effective Time and be converted into the right to receive a cash payment (without interest and less applicable withholding taxes) equal to the product of (i) the excess of the Merger (the “Effective Time”) (subject to certain exceptions, including forConsideration over the per share exercise price of such Company Option or Company SAR, and (ii) the number of shares of Grace common stock ownedcovered by shareholderssuch Company Option or Company SAR immediately prior to the Effective Time. Any Company Option or Company SAR that has a per share exercise price that is greater than or equal to the Merger Consideration will be cancelled for no consideration or payment.
Each Company RSU Award and each Company Performance Share Award that is outstanding immediately prior to the Effective Time will be assumed at the Effective Time and converted into the right to receive an amount in cash (without interest) equal to the product of (i) the Merger Consideration and (ii) the number of shares of Grace common stock covered by the applicable award immediately prior to the Effective Time, which converted cash award will be subject to continued service vesting and other terms as set forth in the Merger Agreement, as described in greater detail in the section of this proxy statement captioned “The Merger—Interests of Executive Officers and Directors of Grace in the Merger—Treatment of Company Equity Awards.”
Q: | What vote is required to adopt the Merger Agreement? |
A: | The affirmative vote of the holders of a majority of the outstanding shares of Grace common stock entitled to vote at the Special Meeting is required to adopt the Merger Agreement. |
If a quorum is present at the Special Meeting, the failure of any stockholder of record to: (i) submit a signed proxy card; (ii) grant a proxy over the Internet or by telephone (using the instructions provided in the enclosed proxy card); or (iii) vote in person at the Special Meeting will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement. If you hold your shares in “street name” and a quorum is present at the Special Meeting, the failure to instruct your bank, broker or other nominee how to vote your shares will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement. If a quorum is present at the Special Meeting, abstentions will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement. Each “broker non-vote” will also count as a vote “AGAINST” the proposal to adopt the Merger Agreement but will have no effect on the Compensation Proposal or the Adjournment Proposal. If you properly sign your proxy card but do not mark the boxes showing how your
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shares should be voted on a matter, the shares represented by your properly signed proxy will be voted: (1) “FOR” the proposal to adopt the Merger Agreement; (2) “FOR,” on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the Adjournment Proposal.
Q: | Have any Grace Stockholders already agreed to approve the proposal to adopt the Merger Agreement? |
A: | Yes. 40 North Latitude Master Fund Ltd., the Supporting Stockholder, which beneficially owns 9,865,008 shares of Grace common stock representing approximately 14.9% of the outstanding Grace common stock as of May 13, 2021, has entered into the Voting Agreement with the Company. Pursuant to the Voting Agreement, the Supporting Stockholder has agreed, among other things, to vote its shares of Grace common stock in favor of the proposal to adopt the Merger Agreement. For more information, see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Voting Agreement.” |
Q: | What happens if the Merger is not completed? |
A: | If the Merger Agreement is not adopted by Grace Stockholders or if the Merger is not completed for any other reason, Grace Stockholders will not receive any payment for their shares of Grace common stock. Instead, Grace will remain an independent public company, Grace common stock will continue to be listed and traded on the NYSE and registered under the Exchange Act, and we will continue to file periodic reports with the SEC. |
In the event that either Grace or Parent terminates the Merger Agreement, then, under specified circumstances, Grace will be required to pay Parent a termination fee of $141 million or Parent will be required to pay Grace the Parent Termination Fee of $281 million, as described in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination Fee.”
Q: | Why are the stockholders being asked to cast an advisory (non-binding) vote to approve the Compensation Proposal? |
A: | The Exchange Act and applicable SEC rules thereunder require Grace to seek an advisory (non-binding) vote with respect to certain payments that could become payable to its named executive officers in connection with the Merger. |
Q: | What vote is required to approve the Compensation Proposal? |
A: | The affirmative vote of the holders of a majority of the shares present in person or represented by proxy at the Special Meeting and entitled to vote on the subject matter is required for approval of the Compensation Proposal. An abstention with respect to the Compensation Proposal will have the same effect as a vote “AGAINST” this proposal. A failure to return your proxy card or otherwise vote your shares of Grace common stock (including a failure of your broker, bank or other nominee to vote shares held on your behalf) will have no effect on this proposal, assuming a quorum is present. |
Q: | What will happen if the stockholders do not approve the Compensation Proposal at the Special Meeting? |
A: | Approval of the Compensation Proposal is not a condition to the completion of the Merger. The vote with respect to the Compensation Proposal is an advisory vote and will not be binding on Grace. Therefore, if the other requisite stockholder approvals are obtained and the Merger is completed, the amounts payable under the Compensation Proposal will continue to be payable to Grace’s named executive officers in accordance with the terms and conditions of the applicable agreements. |
Q: | What vote is required to approve the Adjournment Proposal? |
A: | The affirmative vote of the holders of a majority of the shares present in person or represented by proxy at the Special Meeting and entitled to vote on the subject matter is required for approval of the Adjournment Proposal. An abstention with respect to the Adjournment Proposal will have the same |
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effect as a vote “AGAINST” the proposal. A failure to return your proxy card or otherwise vote your shares of Grace common stock (including a failure of your broker, bank or other nominee to vote shares held on your behalf), will have no effect on this proposal, assuming a quorum is present.
Q: | How does the Board of Directors recommend that I vote? |
A: | The Board of Directors unanimously recommends that Grace Stockholders vote: |
“FOR” the proposal to adopt the Merger Agreement;
“FOR” the proposal to approve, on an advisory (non-binding) basis, the Compensation Proposal; and
“FOR” the Adjournment Proposal.
For a discussion of the factors that the Board of Directors considered in determining to recommend in favor of the proposal to adopt the Merger Agreement, see the section of this proxy statement captioned “The Merger—Recommendation of the Board of Directors; Reasons for the Merger.” In addition, in considering the recommendation of the Board of Directors with respect to the Merger Agreement, you should be aware that some of our directors and executive officers have interests that may be different from, or in addition to, the interests of Grace Stockholders generally. For a discussion of these interests, see the section of this proxy statement captioned “The Merger—Interests of Executive Officers and Directors of Grace in the Merger.”
Q: | How do the Grace directors and executive officers intend to vote? |
A: | Grace’s directors and executive officers have informed us that they intend to vote their shares of Grace common stock in favor of the proposal to adopt the Merger Agreement and the other proposals to be considered at the Special Meeting, although they have no obligation to do so. As of the Record Date, our directors and executive officers owned and were entitled to vote, in the aggregate, approximately [ ] shares of Grace common stock, or approximately [ ]% of the outstanding shares of Grace common stock entitled to vote at the Special Meeting. |
Q: | Am I entitled to rights of appraisal under the DGCL? |
A: | If the Merger is completed, stockholders who do not vote in favor of the adoption of the Merger Agreement and who properly demand appraisal of their shares will be entitled to appraisal rights in connection with the Merger under Section 262 of the DGCL. This means that holders of shares of Grace common stock are entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of their shares of Grace common stock, exclusive of any elements of value arising from the accomplishment or expectation of the Merger, together with interest on the amount determined to be fair value, if any, as determined by the court. Grace Stockholders who wish to seek appraisal of their shares are in any case encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights due to the complexity of the appraisal process. The DGCL requirements for exercising appraisal rights are described in additional detail in this proxy statement, and the relevant section of the DGCL regarding appraisal rights is reproduced in Annex D to this proxy statement. See the section of this proxy statement captioned “The Merger—Appraisal Rights.” |
Q: | What do I need to do now? |
A: | You should carefully read and consider this entire proxy statement and the annexes to this proxy statement, including, but not limited to, the Merger Agreement, along with all of the documents that we refer to in this proxy statement, as they contain important information about, among other things, the Merger and how it affects you. Then sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying reply envelope, or grant your proxy electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card), so that your shares can be voted at the Special Meeting, unless you wish to seek appraisal. If you hold your shares in “street name,” please refer to the voting instruction forms provided by your bank, broker or other nominee to vote your shares. |
Q: | Should I send in my stock certificates or other evidence of ownership now? |
A: | No. You should not return your stock certificates or send in other documents evidencing ownership of Grace common stock with the proxy card. If the Merger is completed, if your shares |
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of Grace common stock are evidenced by stock certificates, the paying agent for the Merger will send you a letter of transmittal and written instructions that explain how to exchange shares of Grace common stock for the Merger Consideration (without interest and subject to required withholding taxes).
Q: | What happens if I sell or otherwise transfer my shares of Grace common stock after the Record Date but before the Special Meeting? |
A: | The Record Date for the Special Meeting is earlier than the date of the Special Meeting and the date the Merger is expected to be completed. If you sell or transfer your shares of Grace common stock after the Record Date but before the Special Meeting, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you sell or otherwise transfer your shares and each of you notifies Grace in writing of such special arrangements, you will transfer the right to receive the Merger Consideration, if the Merger is completed, to the person to whom you sell or transfer your shares, but you will retain your right to vote those shares at the Special Meeting. Even if you sell or otherwise transfer your shares of Grace common stock after the Record Date, we encourage you to sign, date and return the enclosed proxy card in the accompanying reply envelope or grant your proxy electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card). |
Q: | What is the difference between holding shares as a stockholder of record and as a beneficial owner? |
A: | If your shares are registered directly in your name with our transfer agent, EQ Shareowner Services, you are considered, with respect to those shares, to be the “stockholder of record.” In this case, this proxy statement and your proxy card have been sent directly to you by Grace. |
If your shares are held through a bank, broker or other nominee, you are considered the “beneficial owner” of shares of Grace common stock held in “street name.” In that case, this proxy statement has been forwarded to you by your bank, broker or other nominee who is considered, with respect to those shares, to be the stockholder of record. As the beneficial owner, you have the right to direct your bank, broker or other nominee how to vote your shares by following their instructions for voting. You are also invited to attend the Special Meeting. However, because you are not the stockholder of record, you may not vote your shares in person at the Special Meeting unless you obtain a “legal proxy” from your bank, broker or other nominee.
Q: | How may I vote? |
A: If you are a stockholder of record (that is, if your shares of Grace common stock are registered in your name with EQ Shareowner Services, our transfer agent), there are four (4) ways to vote:
by signing, dating and returning the enclosed proxy card in the accompanying prepaid reply envelope;
by visiting the Internet at the address on your proxy card;
by calling toll-free (within the U.S. (including its territories) and Canada) at the phone number on your proxy card; or
by attending the Special Meeting in person.
Please be aware that, although there is no charge for voting your shares, if you vote electronically over the Internet by visiting the address on your proxy card or by telephone by calling the phone number on your proxy card, in each case, you may incur costs such as Internet access and telephone charges for which you will be responsible.
Even if you plan to attend the Special Meeting in person, you are strongly encouraged to vote your shares of Grace common stock by proxy. If you are a record holder or if you obtain a “legal proxy” to vote shares that you beneficially own, you may still vote your shares of Grace common stock in person at the Special Meeting even if you have previously voted by proxy. If you are present at the Special Meeting and vote in person, your previous vote by proxy will not be counted.
If your shares are held in “street name” through a bank, broker or other nominee, you may vote through your bank, broker or other nominee by completing and returning the voting form provided by your bank, broker
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or other nominee, or, if such a service is provided by your bank, broker or other nominee, electronically over the Internet or by telephone. To vote over the Internet or by telephone through your bank, broker or other nominee, you should follow the instructions on the voting form provided by your bank, broker or nominee.
Q: | If my broker holds my shares in “street name,” will my broker vote my shares for me? |
A: | No. Your bank, broker or other nominee is permitted to vote your shares on any proposal currently scheduled to be considered at the Special Meeting only if you instruct your bank, broker or other nominee how to vote. You should follow the procedures provided by your bank, broker or other nominee to vote your shares. Without instructions, your shares will not be voted on such proposals, which will have the same effect as if you voted “AGAINST” the proposal to adopt the Merger Agreement but will have no effect on the Compensation Proposal or the Adjournment Proposal. |
Q: | May I change my vote after I have mailed my signed and dated proxy card? |
A: | Yes. If you are a stockholder of record, you may change your vote or revoke your proxy at any time before it is voted at the Special Meeting by: |
signing another proxy card with a later date and returning it to us prior to the Special Meeting;
submitting a new proxy electronically over the Internet or by telephone after the date of the earlier submitted proxy;
delivering a written notice of revocation to the Corporate Secretary of Grace; or
by attending the Special Meeting and voting in person.
Please note that if you want to revoke your proxy by mailing a new proxy card to us or by sending a written notice of revocation to us, you should ensure that you send your new proxy card or written notice of revocation in sufficient time for it to be received by us before the Special Meeting.
If you hold your shares of Grace common stock in “street name,” you should contact your bank, broker or other nominee for instructions regarding how to change your vote. You may also vote in person at the Special Meeting if you obtain a “legal proxy” from your bank, broker or other nominee.
Q: | What is a proxy? |
A: | A proxy is your legal designation of another person to vote your shares of Grace common stock. The written document describing the matters to be considered and voted on at the Special Meeting is called a “proxy statement.” The document used to designate a proxy to vote your shares of Grace common stock is called a “proxy card.” |
Q: | If a stockholder gives a proxy, how are the shares voted? |
A: | Regardless of the method you choose to vote, the individuals named on the enclosed proxy card, or your proxies, will vote your shares in the way that you indicate. When completing the Internet or telephone process or the proxy card, you may specify whether your shares should be voted for or against or to abstain from voting on all, some or none of the specific items of business to come before the Special Meeting. |
If you properly sign your proxy card but do not mark the boxes showing how your shares should be voted on a matter, the shares represented by your properly signed proxy will be voted: (1) “FOR” the proposal to adopt the Merger Agreement; (2) “FOR,” on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the Adjournment Proposal.
Q: | What should I do if I receive more than one (1) set of voting materials? |
A: | Please sign, date and return (or grant your proxy electronically over the Internet or by telephone using the instructions provided in the enclosed proxy card) each proxy card and voting instruction card that you receive. |
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You may receive more than one (1) set of voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one (1) brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one (1) name, you will receive more than one (1) proxy card.
Q: | What is householding and how does it affect me? |
A: | The SEC permits companies to send a single set of proxy materials to any household at which two or more stockholders reside, unless contrary instructions have been received, but only if the company provides advance notice and follows certain procedures. In such cases, each stockholder continues to receive a separate notice of the meeting and proxy card. Certain brokerage firms may have instituted householding for beneficial owners of common stock held through brokerage firms. If your family has multiple accounts holding common stock, you may have already received a householding notification from your broker. Please contact your broker directly if you have any questions or require additional copies of this proxy statement. The broker will arrange for delivery of a separate copy of this proxy statement promptly upon your written or oral request. You may decide at any time to revoke your decision to household, and thereby receive multiple copies. |
Q: | Who will solicit and pay the costs of soliciting proxies? |
A: | The Board of Directors is soliciting your proxy, and Grace will bear the costs of this solicitation. MacKenzie Partners, Inc. (“MacKenzie Partners”) has been retained to assist with the solicitation of proxies. MacKenzie Partners will be paid $[ ] and will be reimbursed for its reasonable out-of-pocket expenses for these and other advisory services in connection with the Special Meeting. We will reimburse brokerage firms and others for their reasonable expenses of forwarding solicitation material to beneficial owners of outstanding Grace common stock. Proxies may be solicited by mail, personal interview, e-mail, telephone or via the Internet or, without additional compensation, by certain of Grace’s directors, officers and employees. |
Q: | Where can I find the voting results of the Special Meeting? |
A: | Grace intends to publish final voting results in a Current Report on Form 8-K to be filed with the SEC following the Special Meeting. All reports that Grace files with the SEC are publicly available when filed. For more information, please see the section of this proxy statement captioned “Where You Can Find More Information.” |
Q: | When do you expect the Merger to be completed? |
A: | We are working toward completing the Merger as quickly as possible and currently expect to complete the Merger in the fourth quarter of 2021. However, the exact timing of completion of the Merger cannot be predicted because the Merger is subject to the closing conditions specified in the Merger Agreement, many of which are outside of our control. |
Q: | Will the Merger be a taxable transaction? |
A: | The Merger will be a taxable transaction for U.S. federal income tax purposes. Grace Stockholders should read the section of this proxy statement captioned “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” for a more detailed explanation of the U.S. federal income tax consequences of the Merger. Grace Stockholders should consult their tax advisors in light of their particular circumstances and any consequences arising under U.S. federal, state, local and non-U.S. income and other tax consequences relating to the Merger. |
Q: | Who can help answer my questions? |
A: | If you have any questions concerning the Merger, the Special Meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of Grace common stock, please contact our proxy solicitor: |
MacKenzie Partners, Inc.
Collect: (212) 929-5550
Toll-Free: (800) 322-2885
E-mail : proxy@mackenziepartners.com
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This proxy statement, and any document to which Grace refers in this proxy statement, may contain forward-looking statements, that is, information related to future, not past, events. Such statements generally include the words “believes,” “plans,” “intends,” “targets,” “will,” “expects,” “suggests,” “anticipates,” “outlook,” “continues,” or similar expressions. Forward-looking statements include, without limitation, statements regarding: financial positions; results of operations; cash flows; financing plans; business strategy; operating plans; capital and other expenditures; impact of COVID-19 on Grace’s business; competitive positions; growth opportunities for existing products; benefits from new technology; benefits from cost reduction initiatives; succession planning; markets for securities; the anticipated timing of closing of the proposed transaction and the potential benefits of the proposed transaction. For these statements, Grace claims the protections of the safe harbor for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Grace is subject to risks and uncertainties that could cause actual results or events to differ materially from its projections or that could cause forward-looking statements to prove incorrect. Factors that could cause actual results or events to differ materially from those contained in the forward-looking statements include, without limitation:
risks related to foreign operations, especially in areas of active conflicts and in emerging regions;
the costs and availability of raw materials, energy, and transportation;
the effectiveness of Grace’s research and development and growth investments;
acquisitions and divestitures of assets and businesses;
developments affecting Grace’s outstanding indebtedness;
developments affecting Grace’s pension obligations;
legacy matters (including product, environmental, and other legacy liabilities) relating to past activities of Grace;
its legal and environmental proceedings;
environmental compliance costs (including existing and potential laws and regulations pertaining to climate change);
the inability to establish or maintain certain business relationships;
the inability to hire or retain key personnel;
natural disasters such as storms and floods;
fires and force majeure events;
the economics of our customers’ industries, including the petroleum refining, petrochemicals, and plastics industries, and shifting consumer preferences;
public health and safety concerns, including pandemics and quarantines;
changes in tax laws and regulations;
international trade disputes, tariffs, and sanctions;
the potential effects of cyberattacks;
the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement;
the failure to obtain Grace stockholder approval of the transaction or the failure to satisfy any of the other conditions to the completion of the Merger;
risks relating to the financing required to complete the Merger;
the effect of the announcement of the Merger on the ability of Grace to retain and hire key personnel and maintain relationships with its customers, vendors and others with whom it does business, or on its operating results and businesses generally;
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the effects of the transaction on the previously announced Fine Chemistry Services business acquisition, which is pending as of the date of this filing, and the integration thereof;
risks associated with the disruption of management’s attention from ongoing business operations due to the transaction;
the ability to meet expectations regarding the timing and completion of the Merger;
significant transaction costs, fees, expenses and charges;
the risk of litigation and/or regulatory actions related to the Merger;
other business effects, including the effects of industry, market, economic, political, regulatory or world health conditions (including new or ongoing effects of the COVID-19 pandemic), and other factors detailed in Grace’s Annual Report on Form 10-K filed with the SEC for the fiscal year ended December 31, 2020 and Grace’s other filings with the SEC, which are available at www.sec.gov and on Grace’s website at www.grace.com.
Our reported results should not be considered as an indication of our future performance. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Grace undertakes no obligation to release publicly any revisions to our projections and forward-looking statements, or to update them to reflect events or circumstances occurring after the dates those projections and statements are made.
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The enclosed proxy is solicited on behalf of the Board of Directors for use at the Special Meeting.
The Special Meeting will be held at [ ], on [ ], 2021, at [ ], Eastern time.
At the Special Meeting, we will ask stockholders to vote on proposals to:
approve the adoption of the Merger Agreement, which is further described in the sections of this proxy statement captioned “The Merger” and “Proposal 1: Adoption of the Merger Agreement”;
approve, on an advisory (non-binding) basis, certain compensation that may be paid or become payable to Grace’s named executive officers that is based on or otherwise related to the Merger Agreement and the transactions contemplated by the Merger Agreement, the value of which is disclosed in the table in the section of this proxy statement captioned “The Merger—Interests of Executive Officers and Directors of Grace in the Merger”; and
adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.
Our stockholders must adopt the Merger Agreement for the Merger to occur. If our stockholders fail to adopt the Merger Agreement, the Merger will not occur. A copy of the Merger Agreement is attached to this proxy statement as Annex A, and certain provisions of the Merger Agreement are described in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement.”
The vote on the named executive officer Merger-related compensation proposal is a vote separate and apart from the vote on the proposal to adopt the Merger Agreement. Accordingly, you may vote to adopt the Merger Agreement and vote not to approve the named executive officer Merger-related compensation proposal and vice versa. Because the vote on the named executive officer Merger-related compensation proposal is advisory only, it will not be binding on either Grace or Parent. Accordingly, if the Merger Agreement is adopted and the Merger is completed, the compensation will be payable, subject only to the conditions applicable thereto under the applicable compensation agreements and arrangements, regardless of the outcome of the non-binding, advisory vote of the Grace Stockholders.
We do not expect that any matters other than the proposals set forth above will be brought before the Special Meeting. If, however, such a matter is properly presented at the Special Meeting or any adjournment or postponement thereof, the persons appointed as proxies will have discretionary authority to vote the shares represented by duly executed proxies.
This proxy statement and the enclosed form of proxy are first being mailed to our stockholders on or about [ ].
Only stockholders of record as of the close of business on [ ], the Record Date for the Special Meeting, are entitled to notice of the Special Meeting and to vote at the Special Meeting. As of the Record Date, there were [ ] shares of Grace common stock outstanding and entitled to vote at the Special Meeting.
The holders of a majority of the Grace common stock issued and outstanding and entitled to vote in person or as represented by proxy will constitute a quorum at the Special Meeting. In the event that a quorum is not present at the Special Meeting, it is expected that the meeting will be adjourned to solicit additional proxies. Once a share is represented at the Special Meeting, it will be counted for purposes of determining whether a quorum is present at the Special Meeting. However, if a new record date is set for an adjourned Special Meeting, a new quorum will have to be established. Proxies received but marked as abstentions will be included in the calculation of the number of shares considered to be present at the Special Meeting.
The affirmative vote of the holders of a majority of the outstanding shares of Grace common stock entitled to vote at the Special Meeting is required to adopt the Merger Agreement. As of the Record Date, [ ]
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votes constitute a majority of the outstanding shares of Grace common stock entitled to vote at the Special Meeting. The adoption of the Merger Agreement by stockholders is a condition to the closing of the Merger.
Approval of each of (i) the Adjournment Proposal, whether or not a quorum is present, and (ii) the Compensation Proposal requires the affirmative vote of a majority of the shares present in person or represented by proxy at the Special Meeting and entitled to vote on the subject matter.
An abstention occurs when a stockholder attends a meeting, in person or by proxy, but abstains from voting. At the Special Meeting, abstentions will be counted in determining whether a quorum is present. If a stockholder abstains from voting or fails to vote its shares of Grace common stock (including the failure of a record owner to execute and return a proxy card and the failure of a beneficial owner of shares held in “street name” by a broker to give voting instructions to the broker), that abstention or failure to vote will have the same effect as if the stockholder voted “AGAINST” the proposal to adopt the Merger Agreement. For stockholders who attend the meeting or are represented by proxy and abstain from voting, the abstention will have the same effect as if the stockholder voted “AGAINST” the Compensation Proposal and “AGAINST” the Adjournment Proposal. However, a failure to return your proxy card or otherwise vote your shares of Grace common stock will have no effect on the Compensation Proposal and the Adjournment Proposal, assuming a quorum is present.
Each “broker non-vote” will also count as a vote “AGAINST” the proposal to adopt the Merger Agreement but will have no effect on the Compensation Proposal or the Adjournment Proposal. Broker non-votes are shares held by brokers that are present in person or by proxy at the Special Meeting, but with respect to which the broker is not instructed by the beneficial owner of such shares how to vote on a particular proposal and the broker does not have discretionary voting power on such proposal. Because brokers do not have discretionary voting authority with respect to any of the three proposals described in this proxy statement, if a beneficial owner of shares of Grace common stock held in “street name” does not give voting instructions to the broker, then those shares will not be present in person or by proxy at the Special Meeting. For shares of Grace common stock held in “street name,” only shares of Grace common stock affirmatively voted “FOR” the proposal to adopt the Merger Agreement will be counted as a vote in favor of such proposal.
Shares Held by Grace’s Directors and Executive Officers
As of the Record Date, our directors and executive officers beneficially owned and were entitled to vote, in the aggregate, [ ] shares of Grace common stock, representing approximately [ ]% of the shares of Grace common stock outstanding on the Record Date (and approximately [ ]% of the total shares of Grace common stock outstanding when taking into account Company Options held, in the aggregate, by our directors and executive officers).
We currently expect that our directors and executive officers will vote all of their respective shares of Grace common stock (1) “FOR” the adoption of the Merger Agreement, (2) “FOR,” on an advisory (non-binding) basis, the Compensation Proposal, and (3) “FOR” the Adjournment Proposal.
Shares Held by 40 North Latitude Master Fund Ltd.
The Supporting Stockholder, which beneficially owns 9,865,008 shares of Grace common stock representing approximately 14.9% of the outstanding Grace common stock as of May 13, 2021, has entered into the Voting Agreement with the Company. Pursuant to the Voting Agreement, the Supporting Stockholder has agreed, among other things, to vote its shares of Grace common stock in favor of the proposal to adopt the Merger Agreement. For more information, see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Voting Agreement.”
Attendance
All holders of shares of Grace common stock as of the close of business on [ ], the Record Date, including stockholders of record and beneficial owners of Grace common stock registered in the “street name” of a broker, bank or other nominee, are invited to attend the Special Meeting.
To attend the Special Meeting in person, you must provide proof of ownership of Grace common stock as of the Record Date, such as an account statement indicating ownership on that date, and a form of personal
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identification for admission to the Special Meeting. If you hold your shares in “street name,” and you also wish to be able to vote at the Special Meeting, you must obtain a “legal proxy”, executed in your favor, from your bank, broker or other nominee.
Shares of Grace Common Stock Held by Record Holders
If your shares are registered in your name with our transfer agent, EQ Shareowner Services, you may cause your shares to be voted by returning a signed and dated proxy card in the accompanying prepaid envelope, or you may vote in person at the Special Meeting. Additionally, you may grant a proxy electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card). You must have the enclosed proxy card available and follow the instructions on the proxy card in order to grant a proxy electronically over the Internet or by telephone. Based on your proxy cards or Internet and telephone proxies, the proxy holders will vote your shares according to your directions.
If you plan to attend the Special Meeting and wish to vote in person, you will be given a ballot at the Special Meeting. If your shares are registered in your name, you are encouraged to vote by proxy even if you plan to attend the Special Meeting in person. If you attend the Special Meeting and vote in person, your vote will revoke any previously submitted proxy.
Voting instructions are included on your proxy card. All shares represented by properly signed and dated proxies received in time for the Special Meeting will be voted at the Special Meeting in accordance with the instructions of the stockholder. Properly signed and dated proxies that do not contain voting instructions will be voted: (1) “FOR” adoption of the Merger Agreement; (2) “FOR,” on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the Adjournment Proposal. If you fail to return your proxy card or vote by telephone or via the Internet, and you are a holder of record on the Record Date, unless you attend the Special Meeting and vote in person, your shares of Grace common stock will not be considered present at the Special Meeting for purposes of determining whether a quorum is present at the Special Meeting, which will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement and, assuming a quorum is present, will have no effect on the Compensation Proposal or the Adjournment Proposal.
Shares of Grace Common Stock Held in “Street Name”
If your shares are held in “street name” through a bank, broker or other nominee, you may vote through your bank, broker or other nominee by completing and returning the voting form provided by your bank, broker or other nominee or attending the Special Meeting and voting in person with a “legal proxy” from your bank, broker or other nominee. If such a service is provided, you may vote over the Internet or telephone through your bank, broker or other nominee by following the instructions on the voting form provided by your bank, broker or other nominee. If you do not return your bank’s, broker’s or other nominee’s voting form, do not vote via the Internet or telephone through your bank, broker or other nominee, if possible, or do not attend the Special Meeting and vote in person with a “legal proxy” from your bank, broker or other nominee, it will have the same effect as if you voted “AGAINST” the proposal to adopt the Merger Agreement but will not have any effect on the Compensation Proposal or the Adjournment Proposal.
If you are a stockholder of record, you may change your vote or revoke your proxy at any time before it is voted at the Special Meeting by:
signing another proxy card with a later date and returning it to us prior to the Special Meeting;
submitting a new proxy electronically over the Internet or by telephone after the date of the earlier submitted proxy;
delivering a written notice of revocation to the Corporate Secretary of Grace; or
attending the Special Meeting and voting in person.
Please note that if you want to revoke your proxy by mailing a new proxy card to us or by sending a written notice of revocation to us, you should ensure that you send your new proxy card or written notice of revocation in sufficient time for it to be received by us before the Special Meeting.
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If you have submitted a proxy, your appearance at the Special Meeting will not have the effect of revoking your prior proxy, provided that you do not vote in person or submit an additional proxy or revocation, which, in each case, will have the effect of revoking your proxy.
If you hold your shares of Grace common stock in “street name,” you should contact your bank, broker or other nominee for instructions regarding how to change your vote. You may also vote in person at the Special Meeting if you obtain a “legal proxy” from your bank, broker or other nominee.
Any adjournment, postponement or other delay of the Special Meeting, including for the purpose of soliciting additional proxies, will allow stockholders who have already sent in their proxies to revoke them at any time prior to their use at the Special Meeting as adjourned, postponed or delayed.
The Board of Directors has unanimously: (i) determined that it is in the best interests of Grace and its stockholders, and declared it advisable, to enter into the Merger Agreement; (ii) approved the execution, delivery and performance of the Merger Agreement by Grace and the consummation of the transactions contemplated by the Merger Agreement; and (iii) resolved to recommend that Grace Stockholders adopt the Merger Agreement and the consummation of the transactions contemplated thereby.
The Board of Directors unanimously recommends that you vote: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR,” on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the Adjournment Proposal.
The expense of soliciting proxies will be borne by Grace. We have retained MacKenzie Partners, a proxy solicitation firm, to solicit proxies in connection with the Special Meeting at a cost of approximately $[ ] plus expenses. We will also indemnify MacKenzie Partners against losses arising out of its provision of these services on our behalf. In addition, we may reimburse banks, brokers and other nominees representing beneficial owners of shares for their expenses in forwarding soliciting materials to such beneficial owners. Proxies may also be solicited by our directors, officers and employees, personally or by telephone, e-mail, fax, over the Internet or other means of communication. No additional compensation will be paid for such services.
You should not votedreturn your stock certificates or send in other documents evidencing ownership of Grace common stock with the proxy card. If the Merger is completed, if your shares of Grace common stock are evidenced by stock certificates, the paying agent for the Merger will send you a letter of transmittal and related materials and instructions for exchanging your shares of Grace common stock evidenced by stock certificates for the Merger Consideration (without interest and subject to required withholding taxes).
Assuming timely satisfaction of necessary closing conditions, including the approval by Grace Stockholders of the proposal to adopt the Merger Agreement, we anticipate that the Merger will be consummated in the fourth quarter of 2021.
If the Merger is consummated, stockholders who continuously hold shares of Grace common stock through the Effective Time, who do not vote in favor of the adoption of the Merger Agreement and who properly demand appraisal of their shares and do not withdraw their demands or otherwise lose their rights to seek appraisal will be entitled to seek appraisal of their shares in connection with the Merger under Section 262 of the DGCL. This means that holders of shares of Grace common stock who perfect their appraisal rights, who do not thereafter withdraw their demand for appraisal, and who follow the procedures in the manner prescribed by Section 262 of the DGCL may be entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of their shares of Grace common stock, exclusive of any elements of value arising from the accomplishment or expectation of the Merger, as determined by the Delaware Court of Chancery, together with interest to be paid on the amount determined to be fair value, if any (or in certain
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circumstances described in further detail in the section of this proxy statement captioned “The Merger—Appraisal Rights,” on the difference between the amount determined to be the fair value and the amount paid by the Surviving Corporation in the Merger to each stockholder entitled to appraisal prior to the entry of judgment in any appraisal proceeding). Due to the complexity of the appraisal process, stockholders who wish to seek appraisal of their shares are encouraged to review Section 262 of the DGCL carefully and to seek the advice of legal counsel with respect to the exercise of appraisal rights.
Stockholders considering seeking appraisal should be aware that the fair value of their shares as determined pursuant to Section 262 of the DGCL could be more than, the same as or less than the value of the consideration that they would receive pursuant to the Merger Agreement if they did not seek appraisal of their shares.
To exercise your appraisal rights, you must: (i) submit a written demand for appraisal to Grace before the vote is taken on the adoption of the Merger Agreement; (ii) not submit a proxy or otherwise vote in favor of the proposal to adopt the Merger Agreement; (iii) continue to hold your shares of Grace common stock of record through the Effective Time; and (iv) strictly comply with all other procedures for exercising appraisal rights under Section 262 of the DGCL. Your failure to follow exactly the procedures specified under Section 262 of the DGCL may result in the loss of your appraisal rights. In addition, the Delaware Court of Chancery will dismiss appraisal proceedings in respect of the Merger unless certain stock ownership conditions are satisfied by the stockholders seeking appraisal. The DGCL requirements for exercising appraisal rights are described in further detail in the section of this proxy statement captioned “The Merger—Appraisal Rights,” which is qualified in its entirety by Section 262 of the DGCL, the relevant section of the DGCL regarding appraisal rights. A copy of Section 262 of the DGCL is reproduced and attached as Annex D to this proxy statement and incorporated herein by reference. If you hold your shares of Grace common stock through a bank, brokerage firm or other nominee and you wish to exercise appraisal rights, you should consult with your bank, brokerage firm or other nominee to determine the appropriate procedures for the making of a demand for appraisal by such bank, brokerage firm or nominee.
If the Merger is completed, the shares of Grace common stock will be delisted from the NYSE and deregistered under the Exchange Act, and shares of Grace common stock will no longer be publicly traded.
At this time, we know of no other matters to be voted on at the Special Meeting. If any other matters properly come before the Special Meeting, your shares of Grace common stock will be voted in accordance with the discretion of the appointed proxy holders.
Unless we have received contrary instructions, we may send a single copy of this proxy statement to any household at which two (2) or more stockholders reside if we believe the stockholders are members of the same family. Each stockholder in the household will continue to receive a separate proxy card. This process, known as “householding,” reduces the volume of duplicate information received at your household and helps to reduce our expenses.
If you would like to receive your own set of our disclosure documents, please contact us using the instructions set forth below. Similarly, if you share an address with another stockholder and together both of you would like to receive only a single set of our disclosure documents, please contact us using the instructions set forth below.
If you are a stockholder of record, you may contact us by calling or writing to Grace Shareholder Services at the address or phone number provided below. Eligible stockholders of record receiving multiple copies of this proxy statement can request householding by contacting us in the same manner. If a bank, broker or other nominee holds your shares, please contact your bank, broker or other nominee directly.
W. R. Grace & Co.
Attention: Grace Shareholder Services
7500 Grace Drive
Columbia, Maryland 21044
(410) 531-4167
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If you have any questions concerning the Merger, the Special Meeting or this proxy statement, would like additional copies of this proxy statement or need help voting your shares of Grace common stock, please contact our proxy solicitor:
MacKenzie Partners, Inc.
Collect: (212) 929-5550
Toll-Free: (800) 322-2885
E-mail : proxy@mackenziepartners.com
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This discussion of the Merger is qualified in its entirety by reference to the Merger Agreement, which is attached to this proxy statement as Annex A and incorporated into this proxy statement by reference. You should carefully read and consider the entire Merger Agreement, which is the legal document that governs the Merger, because this document contains important information about the Merger and how it affects you.
W. R. Grace & Co.
7500 Grace Drive
Columbia, Maryland 21044
(410) 531-4000
Grace, a Delaware corporation, is a leading global specialty chemical company. Grace’s two industry-leading business segments—Catalysts Technologies and Materials Technologies—provide innovative products, technologies, and services that enhance the products and processes of our customers around the world. With approximately 4,000 employees, Grace operates and/or sells to customers in over 60 countries. More information about Grace is available at www.grace.com. Grace common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “GRA.”
A detailed description of the Company’s business is contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as amended, which is incorporated by reference into this proxy statement. See the section of this proxy statement captioned “Where You Can Find More Information.”
Gibraltar Acquisition Holdings LLC
9 West 57th Street, 47th Floor
New York, New York 10019
(973) 872-4423
Parent was formed on April 22, 2021, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement, and has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement and arranging of the equity financing and debt financing in connection with the Merger.
Gibraltar Merger Sub Inc.
9 West 57th Street, 47th Floor
New York, New York 10019
(973) 872-4423
Merger Sub is a wholly owned subsidiary of Parent and was formed on April 23, 2021, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement, and has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement and arranging of the equity financing and debt financing in connection with the Merger.
Parent and Merger Sub are each affiliated with Standard Industries Holdings, the parent company of Standard Industries, a privately held global industrial company operating in over 80 countries with over 15,000 employees. The Standard Industries ecosystem spans a broad array of holdings, technologies and investments—including both public and private companies from early to late-stage—as well as world-class building materials assets and next-generation solar solutions. Throughout its 140-year history, Standard Industries has leveraged its deep industry expertise and vision to create outsize value across its businesses, which today include operating companies GAF, BMI, Siplast, GAF Energy, Schiedel and SGI, as well as related businesses 40 North, a multi-billion-dollar investment platform, 40 North Ventures and Winter Properties. More information about Standard Industries is available at www.standardindustries.com. Standard Industries Holdings’ related investment platform 40 North is a long-standing stockholder of Grace. At the Effective Time, the Surviving Corporation, will be directly owned by Parent.
In connection with the transactions contemplated by the Merger Agreement, (i) Standard Industries Holdings has provided Parent with an equity commitment of $3,516 million and (ii) Parent has obtained debt financing commitments in an aggregate amount of $3,455 million ($3,905 million including the revolving credit facility
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commitment) from JPMorgan Chase Bank, N.A., BNP Paribas, BNP Paribas Securities Corp., Citigroup Global Markets Inc. on behalf of certain entities affiliated with Citi, Deutsche Bank AG New York Branch, Deutsche Bank AG Cayman Islands Branch and Deutsche Bank Securities Inc. Such amounts will be used to fund the aggregate purchase price required to be paid at the closing of the Merger and to also fund certain other payments (including the Merger Amounts), subject to the terms and conditions of the Merger Agreement. In addition, Standard Industries Holdings has agreed to guarantee the payment of certain liabilities and obligations of Parent under the Merger Agreement, subject to an aggregate cap equal to $290 million, including any termination fee and amounts in respect of certain reimbursement and indemnification obligations of Parent and Merger Sub for certain costs, expenses or losses incurred or sustained by Grace, as specified in the Merger Agreement. For more information, please see the section of this proxy statement captioned “—Financing of the Merger.”
Upon the terms and subject to the conditions of the Merger Agreement, Merger Sub will merge with and into Grace and the separate corporate existence of Merger Sub will cease, with Grace continuing as the Surviving Corporation. As a result of the Merger, Grace will become a wholly owned subsidiary of Parent, and Grace common stock will no longer be publicly traded and will be delisted from the NYSE. In addition, Grace common stock will be deregistered under the Exchange Act, and we will no longer file periodic reports with the SEC. If the Merger is completed, you will not own any shares of the capital stock of the Surviving Corporation.
The Effective Time will occur upon the filing of a certificate of merger with the Secretary of State of the State of Delaware (or at such later time as we, Parent and Merger Sub may agree and specify in the certificate of merger).
If the Merger Agreement is not adopted by Grace Stockholders, or if the Merger is not completed for any other reason:
the Grace Stockholders will not be entitled to, nor will they receive, any payment for their respective shares of Grace common stock pursuant to the Merger Agreement;
(i) Grace will remain an independent public company; (ii) Grace common stock will continue to be listed and traded on the NYSE and registered under the Exchange Act; and (iii) Grace will continue to file periodic reports with the SEC;
we anticipate that (i) management will operate the business in a manner similar to that in which it is being operated today and (ii) stockholders will be subject to similar types of risks and uncertainties as those to which they are currently subject, including, but not limited to, risks and uncertainties with respect to Grace’s business, prospects and results of operations, as such may be affected by, among other things, the highly competitive industry in which Grace operates and economic conditions;
the price of Grace common stock may decline significantly, and if that were to occur, it is uncertain when, if ever, the price of Grace common stock would return to the price at which it trades as of the date of this proxy statement;
the Board of Directors will continue to evaluate and review Grace’s business operations, strategic direction and capitalization, among other things, and will make such changes as are deemed appropriate; irrespective of these efforts, it is possible that no other transaction acceptable to the Board of Directors will be offered or that Grace’s business, prospects and results of operations will be adversely impacted; and
under specified circumstances, Grace will be required to pay Parent the Company Termination Fee of $141 million upon the termination of the Merger Agreement, as described in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination Fee.”
Grace Common Stock
At the Effective Time, each share of Grace common stock (other than Excluded Shares, which include, for example, shares of Grace common stock owned by stockholders who have properly and validly exercised their
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statutory rights of appraisal rights in accordance with Section 262 of the General Corporation LawDGCL) outstanding as of the State of Delaware (the “DGCL”)) will, atimmediately prior to the Effective Time will be cancelled and automatically be converted into the right to receive $70.00 in cash,the Merger Consideration, without interest subject toand less any applicable withholding taxes (the “Merger Consideration”).taxes.
Treatment of Company Equity Awards
Treatment of Company Options and Company SARs. The Merger Agreement provides that each Company Option and each stock appreciation right with respect to shares of Grace common stockCompany SAR that is outstanding immediately prior to the Effective Time will vest at closing and be converted into the right to receive an amount in cash equal to the product of Merger Consideration (less the applicable exercise price) and the number of shares of Grace common stockCommon Stock covered by such optionCompany Option or Company SAR (without interest and less applicable withholding taxes). Payment of these cash amounts will be paid within three (3) business days after the Effective Time. Any Company Option or Company SAR that has a per share exercise price that is greater than or equal to the Merger Consideration will be cancelled at the Effective Time for no consideration or payment.
Treatment of Company RSU Awards and (2)Company Performance Share Awards. The Merger Agreement provides that each restricted stock unit awardCompany RSU Award and each performance-based unit award relating to shares of Grace common stockCompany Performance Share Award that is outstanding immediately prior to the Effective Time will be assumed and converted into the right to receive an amount in cash (without interest) equal to the product obtained by multiplying the Merger Consideration by the number of shares of Common Stock covered by such award immediately prior to the Effective Time, which converted cash award will be subject to continued service vesting and other terms as set forth in the Merger Agreement.
As part of its ongoing consideration and evaluation of its long-term value creation opportunities, the Board of Directors and senior management regularly review and assess the Company’s business strategies, objectives and key initiatives, including strategic opportunities and challenges, and have considered various strategic options potentially available to the Company, all with the goal of enhancing value for Grace Stockholders. The strategic considerations have focused on, among other things, the Company’s growth opportunities as well as the business environment facing the Company and its industry and have from time to time included consideration of capital structure, potential business combination, acquisition or sale transactions and other financial and strategic alternatives.
Beginning in 2018 after 40 North made its initial investment in the Company, representatives of 40 North periodically met with members of Company management to discuss the Company’s strategic direction and ongoing business plans, among other matters.
On May 7, 2018, 40 North filed with the SEC a beneficial ownership report on Schedule 13D (the “13D”), which disclosed, among other things, that 40 North had acquired beneficial ownership of 9.9% of the then-outstanding shares of Grace common stock. Thereafter, 40 North filed with the SEC several amendments to the 13D, which disclosed, among other things, successive increases in 40 North’s beneficial ownership of Grace common stock such that, as of the December 26, 2018 amendment to the 13D, 40 North reported beneficial ownership of 13.9% of the then-outstanding shares of Grace common stock.
On February 20, 2019, the Company entered into a letter agreement (the “2019 Letter Agreement”) with 40 North and certain of its affiliates pursuant to which the Company agreed to increase the size of the Board of Directors and to include Kathleen G. Reiland, an employee of 40 North, and Henry R. Slack, who had been identified by 40 North but was not associated with either 40 North or the Company, on the slate of director nominees recommended by the Board of Directors for election at the Company’s 2019 annual meeting of stockholders. Pursuant to the 2019 Letter Agreement, 40 North agreed to certain standstill restrictions and confidentiality obligations. In connection with its entry into the 2019 Letter Agreement, 40 North filed with the SEC an amendment to the 13D, which disclosed, among other things, 40 North’s beneficial ownership of 14.0% of the then-outstanding shares of Grace common stock.
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In February 2019, the Company and a potential strategic partner (“Counterparty A”), which had previously expressed an interest in exploring a potential strategic transaction with the Company, entered into a confidentiality agreement and began to engage in discussions and due diligence regarding a potential business combination transaction. Discussions and due diligence continued throughout February and March 2019.
In March 2019, a representative of the Company contacted another potential strategic partner (“Counterparty B”) on behalf of the Company to assess Counterparty B’s possible interest in a potential strategic transaction with the Company. Counterparty B indicated that it did not have an interest in further discussions regarding a transaction with the Company.
In April 2019, Counterparty A notified the Company that it would not continue to pursue a potential strategic transaction with the Company, explaining that it did not want to assume certain legacy liabilities of the Company.
On May 8, 2019, Ms. Reiland and Mr. Slack were elected to the Board of Directors at the Company’s 2019 annual meeting of stockholders for terms expiring at the Company’s annual meeting of stockholders in 2020 and 2022, respectively.
Throughout the second half of 2019 and first half of 2020, the Board of Directors continued to review the Company’s strategic alternatives, including by preliminary discussions with a significant shareholder of Counterparty A to explore possible alternative structures for a potential strategic transaction involving the Company and Counterparty A. The dialogue between the shareholder of Counterparty A and the Company during such period did not include any discussion of the valuation of the Company or the price that would be paid for shares of Grace common stock in a potential strategic transaction.
On May 12, 2020, Ms. Reiland’s term as a director expired and the Board of Directors reappointed her to the Board of Directors for a term expiring at the Company’s annual meeting of stockholders in 2021.
On August 23, 2020, Ms. Reiland sent an email to other members of the Board of Directors to raise concerns regarding the Company’s stock price performance and to urge the Board of Directors to accelerate its plans to undertake a strategic review process.
On August 30, 2020, a meeting of the Board of Directors was held, during which the Board of Directors discussed its plans to undertake a strategic review process, as it has historically undertaken from time to time. The consensus view of the Board of Directors was that the Board of Directors should undertake a strategic review process. Following discussion, the Board of Directors determined to engage Goldman Sachs and Moelis to serve as the Company’s financial advisors in conducting a strategic review of the Company’s strategic alternatives, with each of Goldman Sachs and Moelis undertaking independent analyses, in order to assist the Board of Directors in determining the best course of action to maximize long-term value for the Company and its stockholders. The Board of Directors retained each of Goldman Sachs and Moelis based upon their qualifications, experience and expertise.
On September 8, 2020, the Company’s Chief Executive Officer, Hudson La Force, met telephonically with 40 North’s principals, David J. Millstone and David S. Winter, to provide an update on the Board of Directors’ intent to conduct a strategic review with the advice and assistance of the Company’s financial advisors, Goldman Sachs and Moelis, as well as the Company’s outside counsel, Wachtell, Lipton, Rosen & Katz (“Wachtell Lipton”).
On September 9, 2020, a meeting of the Board of Directors was held, which was attended by representatives of Goldman Sachs, Moelis and Wachtell Lipton. Representatives of Goldman Sachs and Moelis separately discussed with the Board of Directors their initial perspectives on strategic alternatives potentially available to the Company and plans for a more detailed preliminary assessment scheduled for a subsequent meeting. In addition, representatives of Wachtell Lipton described to the directors their fiduciary duties in connection with evaluating strategic alternatives or considering a mergers and acquisitions process.
On October 9, 2020, a meeting of the Board of Directors was held, during which representatives of Goldman Sachs and Moelis separately presented their independent preliminary assessments regarding the Company’s potential strategic alternatives, including a review of the public equity market perspectives regarding the Company, a financial analysis of the Company’s standalone plan, potential counterparties to strategic transactions, and possible means of pursuing certain strategic transactions involving the Company. In the course
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of their presentations, representatives of Goldman Sachs and Moelis reviewed their independent preliminary financial analyses of the Company based on various valuation methodologies. The representatives of Goldman Sachs and Moelis each independently advised the Board of Directors that, in light of equity market volatility and dislocation due to the Covid-19 pandemic, the then-current valuation of Grace common stock in public equity markets undervalued the Company relative to its specialty chemical peers and the Company’s intrinsic value. In addition, the representatives of Goldman Sachs and Moelis each independently advised the Board of Directors that any outreach to potential counterparties to a business combination or sale transaction should be made privately, in order to, among other things, mitigate the risk that public outreach by the Company would lead to the use of a dislocated market price of Grace common stock as a reference point for possible proposals by potential transaction counterparties rather than the Company’s intrinsic value. Following the presentations from the Company’s financial advisors and discussion among the directors, the Board of Directors directed the Company’s management and financial advisors to contact potential transaction counterparties to evaluate the possibility of a potential business combination or sale transaction involving the Company.
On October 13, 2020, Ms. Reiland delivered to the Board of Directors a letter tendering her resignation from the Board of Directors, effective immediately. In connection with Ms. Reiland’s resignation, 40 North filed with the SEC an amendment to the 13D, which disclosed, among other things, 40 North’s beneficial ownership of 14.9% of the then-outstanding shares of Grace common stock, and to which Ms. Reiland’s resignation letter was attached as an exhibit. As a result of Ms. Reiland’s resignation, pursuant to the 2019 Letter Agreement, the standstill restrictions applicable to 40 North and its affiliates pursuant to the 2019 Letter Agreement expired 15 days following the date of her resignation.
Over the course of October, November and December 2020, Mr. La Force and representatives of the Company, including its financial advisors, at the direction of the Board of Directors, contacted five strategic parties identified by the Company, Goldman Sachs and Moelis as potentially having an interest in a potential strategic transaction involving the Company. In addition, representatives of various financial sponsors contacted Goldman Sachs and Moelis to express an interest in a possible strategic transaction involving a combination of the Company with all or a part of their portfolio companies. While certain parties held one or more meetings with the Company’s management or financial advisors, none of the parties (other than Counterparty C (as defined below)) entered into a confidentiality or standstill agreement with the Company to facilitate further discussions regarding a potential transaction.
In addition, Mr. La Force met telephonically with the Chairman of Counterparty A on multiple occasions between November 2020 and February 2021. The Chairman of Counterparty A indicated that Counterparty A could be interested in a potential strategic transaction with the Company, but did not make a proposal for a transaction with the Company and ultimately did not continue discussions regarding such a transaction.
On November 9, 2020, 40 North sent a letter to the Board of Directors, which was also filed with the SEC as an exhibit to an amendment to the 13D, pursuant to which 40 North and its affiliated investment funds proposed to acquire the Company for $60.00 per share of Grace common stock in cash, subject to certain conditions (the “November 9 Proposal”).
Later that day a meeting of the Board of Directors was held, which was attended by representatives of Goldman Sachs, Moelis and Wachtell Lipton, during which the Board of Directors reviewed and considered the November 9 Proposal. Following discussion, the Board of Directors determined that the November 9 Proposal was inadequate and significantly undervalued the Company. Following the conclusion of the special meeting of the Board of Directors, the Company issued a press release confirming the Company’s receipt of the November 9 Proposal. The press release disclosed that the Board of Directors was “carefully evaluating and thoroughly discussing its value creation opportunities” and that given “the Company’s strong prospects and its ongoing review of the alternative opportunities available, Grace’s Board of Directors unanimously believes that 40 North’s $60 per share proposal significantly undervalues the Company and is not a basis for further discussion.” The press release also explained that the Board of Directors remained “open to all opportunities to maximize value for shareholders.”
On November 17, 2020, Mr. La Force met telephonically with representatives of Counterparty B. Counterparty B indicated that it did not have an interest in pursuing a potential strategic transaction involving the Company at such time.
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On November 23, 2020, a meeting of the Board of Directors was held, during which Mr. La Force provided an update regarding the ongoing review of strategic alternatives and the assessment of potential transactions that would maximize the long-term value of the Company for its stockholders.
On December 4, 2020, the Chairman and Chief Executive Officer of a portfolio company of a financial sponsor, along with representatives of the financial sponsor, met telephonically with representatives of the Company to discuss a possible strategic transaction involving a combination of the Company with the portfolio company (“Counterparty C”).
On December 16, 2020, the Company and Counterparty C entered into a confidentiality agreement containing customary provisions, including a customary standstill provision that would terminate upon the occurrence of certain events, including the entry by the Company into an agreement providing for the sale or change in control of the Company. Thereafter, during the remainder of December 2020 and throughout the first three months of 2021, Counterparty C, with the assistance of its advisors, conducted due diligence on the Company, including through telephone calls and videoconferences with Company management.
On December 18, 2020, a meeting of the Board of Directors was held, during which Mr. La Force provided an update regarding the ongoing review of strategic alternatives.
On January 11, 2021, 40 North sent another letter to the Board of Directors, which was also filed with the SEC as an exhibit to an amendment to the 13D, pursuant to which 40 North and its affiliated investment funds proposed to acquire the Company for $65.00 per share of Grace common stock in cash, subject to certain conditions (the “January 11 Proposal”). This letter explained that the January 11 Proposal represented “a premium of 62% over the Company’s unaffected share price” prior to October 14, 2020, when 40 North filed an amendment to the 13D disclosing Ms. Reiland’s resignation, and “a 54% premium over the Company’s unaffected 30-day VWAP” per Bloomberg, as of October 13, 2020. 40 North disclosed that they were advised “by Citi and J.P. Morgan, and [that] they, along with Deutsche Bank and BNP Paribas, have confirmed to us in writing that they are highly confident that they will be able to arrange the necessary financing for the acquisition.” In addition, 40 North reiterated that “we have conducted extensive due diligence and analysis based on publicly available information and can reconfirm that our remaining diligence requirements are strictly confirmatory in nature and can be completed on an accelerated basis.”
On January 12, 2021, a meeting of the Board of Directors was held, which was attended by representatives of Goldman Sachs, Moelis and Wachtell Lipton, during which Mr. La Force provided an update regarding the ongoing review of strategic alternatives, including the Company’s ongoing engagement with Counterparty C. The Board of Directors reviewed 40 North’s January 11 Proposal and determined that it would be in the best interests of the Company to respond to 40 North by offering to enter into a customary confidentiality agreement with 40 North, so that the Company might provide 40 North with additional information, and to engage with 40 North in discussions regarding 40 North’s proposal, in order for 40 North to be in a position to potentially further increase the value of its offer.
On January 15, 2021, in response to 40 North’s January 11 Proposal, the Company sent a letter to Messrs. Millstone and Winter, the text of which was included in a press release issued by the Company. The letter explained that the Board of Directors had “met and discussed [40 North’s] revised proposal [and is] willing to discuss a sale of Grace to 40 North in the context of [Grace’s] ongoing review of strategic alternatives. Any transaction would need to be at a price level that reflects the full value of Grace for its shareholders.” The Company’s letter conveyed that the Company “would be willing to share with [40 North], under customary and appropriate confidentiality arrangements, information that would support a full valuation of Grace.”
Over the course of January 14 and 15, 2021, members of management of the Company and representatives of Counterparty C, including their financial advisors, held a series of meetings by videoconference to present information regarding each of their respective businesses, managements, strategies and financial attributes.
On January 18, 2021, representatives of Wachtell Lipton provided a draft confidentiality agreement (the “2021 Confidentiality Agreement”) to representatives of Sullivan & Cromwell LLP (“Sullivan & Cromwell”), outside counsel to 40 North.
On January 21, 2021, a meeting of the Board of Directors was held, during which Mr. La Force provided an update regarding the ongoing review of strategic alternatives, including the discussions with Counterparty C and its evaluation of a potential strategic transaction involving the Company, as well as the status of negotiations of
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the 2021 Confidentiality Agreement with 40 North. The Board of Directors directed the Company’s management to continue to negotiate the 2021 Confidentiality Agreement with 40 North and, following its execution, proceed with furnishing certain due diligence information to 40 North so that it might be in a position to potentially further increase the value of its offer.
Also on January 21, 2021, representatives of Sullivan & Cromwell provided a revised draft of the 2021 Confidentiality Agreement to representatives of Wachtell Lipton, and over the course of the final two weeks of January 2021, representatives of Wachtell Lipton and Sullivan & Cromwell continued to exchange drafts of the 2021 Confidentiality Agreement.
On January 22, 2021, representatives of the Company and Counterparty C, including their respective financial advisors, met by videoconference to discuss certain financial analyses with respect to, and the potential synergies that might be realized by, a hypothetical combined company in order that such parties might determine whether to pursue a potential business combination transaction.
On February 1, 2021, the Company entered into the 2021 Confidentiality Agreement with 40 North and certain of its affiliates. In the 2021 Confidentiality Agreement, 40 North and its affiliates agreed, among other things, to comply with certain standstill restrictions until March 31, 2021, subject to the earlier termination of such restrictions in certain circumstances. The Company agreed, among other things, that the Board of Directors would consider timely any nomination by 40 North of director candidates for the Company’s 2021 annual meeting of stockholders delivered to the Company on or before the fifteenth (15th) day following the expiration or termination of the standstill restrictions.
On February 8, 2021, 40 North and certain of its advisors were provided with access to an electronic data room containing confidential due diligence information with respect to the Company. Thereafter, throughout February, March and April 2021, 40 North, with the assistance of its advisors, conducted additional due diligence on the Company, including through telephone calls and videoconferences with Company management.
On February 15, 2021, members of management of the Company, including its financial advisors, held a series of meetings by videoconference with representatives of 40 North to present information regarding the Company’s business, its management, strategy and financial attributes.
On February 17, 2021, representatives of the Company and Counterparty C, including their respective financial advisors, again met by videoconference to discuss the potential synergies that might be realized by a hypothetical combined company.
On February 22, 2021, Counterparty C delivered a letter from its Chairman and Chief Executive Officer to Mr. La Force, which letter proposed an all-stock merger with Counterparty C (the “February 22 Proposal”), subject to certain conditions. Counterparty C’s February 22 Proposal indicated that Grace Stockholders would retain a 36%-37% ownership interest in the combined company. A financial analysis of Counterparty C’s February 22 Proposal conducted by the Company’s financial advisors indicated that the proposal implied an upfront value per share of Grace common stock (before giving effect to synergies) that was less than the $65.00 per share offered by 40 North in its January 11 Proposal. The financial analysis also indicated that Counterparty C’s February 22 Proposal did not reflect that, based on the information about Counterparty C available to the Company and its advisors at the time, the Company should be valued at a premium multiple relative to the business of Counterparty C proposed to be combined with the Company, even before accounting for a change-of-control premium for the Company’s stockholders.
On February 24, 2021, Mr. La Force contacted the Chairman and Chief Executive Officer of Counterparty C to express disappointment in the economic terms implied by the proposal, in particular that such terms implied a change of control of the Company without offering an adequate premium. Mr. La Force and the Chairman and Chief Executive Officer of Counterparty C agreed to continue discussions and due diligence, and that the Company and Counterparty C would continue to engage with their respective financial advisors so that Counterparty C might submit a revised proposal that would provide greater value to Grace Stockholders.
On February 25, 2021, a meeting of the Board of Directors was held, during which Mr. La Force updated the other members of the Board of Directors regarding the Company’s ongoing engagement with Counterparty C and 40 North. During the meeting, Mr. La Force and the other members of the Board of Directors reviewed the terms of Counterparty C’s February 22 Proposal and considered it in the context of 40 North’s January 11 Proposal. The Board of Directors discussed Mr. La Force’s response to the Chairman and Chief Executive
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Officer of Counterparty C, and expressed their concurrence with Mr. La Force’s encouragement of continued engagement between the Company and Counterparty C so that Counterparty C might submit a proposal on terms that could be compelling to the Company. The Board of Directors also directed the Company’s management and financial advisors to continue to provide due diligence information to 40 North so that it might be in a position to potentially further increase the value of its offer.
Throughout March 2021, representatives of the Company, including at various times Mr. La Force and the Company’s financial advisors and outside counsel, participated in discussions with representatives of Counterparty C with a view to obtaining additional information from Counterparty C regarding its business and proposed valuation, improving Counterparty C’s proposal and exploring potential transaction structures.
On March 7, 2021, a meeting of the Board of Directors was held, during which the Board of Directors reviewed Counterparty C’s February 22 Proposal and considered it in the context of 40 North’s January 11 Proposal as well as the Company’s standalone strategic plan. The Board of Directors discussed that Counterparty C’s February 22 Proposal depended on valuation assumptions regarding Counterparty C that the Company was not in a position to verify given that Counterparty C was privately held, whereas the material information regarding the Company was publicly disclosed. The Board of Directors discussed that the Company would need additional information from Counterparty C to verify its proposed valuation of itself relative to the Company and that, to date, Counterparty C was unwilling to proceed with mutual due diligence. Therefore, the Board of Directors directed the Company’s management to further engage with Counterparty C, including to respond with a counteroffer to the February 22 Proposal and to seek to facilitate mutual due diligence, in order to determine whether Counterparty C would make an actionable proposal for a potential business combination transaction, while also continuing to engage in the active due diligence process with 40 North to enable 40 North to complete its due diligence review of the Company and submit its best and final offer to acquire the Company.
On March 8, 2021, Mr. La Force called the Chairman and Chief Executive Officer of Counterparty C to convey a counteroffer, in response to Counterparty C’s February 22 Proposal and subject to further due diligence, of a relative valuation that would result in Grace Stockholders retaining a 45% ownership interest in the combined company.
On March 12, 2021, the Chairman and Chief Executive Officer of Counterparty C met telephonically with Mr. La Force and conveyed to Mr. La Force a revised proposal for an all-stock merger between the Company and Counterparty C (the “March 12 Proposal”), subject to certain conditions. Counterparty C’s March 12 Proposal indicated that Grace Stockholders would retain a 39%-40% ownership interest in the combined company.
On March 17, 2021, Mr. La Force met telephonically with the Chairman and Chief Executive Officer of Counterparty C to convey a counteroffer, in response to Counterparty C’s March 12 Proposal and subject to further due diligence, of a relative valuation that would result in Grace Stockholders retaining a 41%-42% ownership interest in the combined company.
In a March��19, 2021 email to Mr. La Force, the Chairman and Chief Executive Officer of Counterparty C reiterated the ownership range contemplated by the March 12 Proposal.
On March 22, 2021, Mr. La Force met telephonically with representatives of Counterparty C to discuss Counterparty C’s March 12 Proposal and the additional work, including due diligence and consideration of transaction structures and mechanics, that would be required to progress discussions toward an actionable proposal. During this conversation and various conversations between the advisors to the Company and the advisors to Counterparty C, Counterparty C was unwilling to commit to further improvements to its offer or to advance with any mutual due diligence without an agreement in principle on the relative valuation implied by Counterparty C’s March 12 Proposal.
On March 25, 2021, a meeting of the Board of Directors was held, which was attended by representatives of Goldman Sachs, Moelis and Wachtell Lipton, during which Mr. La Force updated the other members of the Board of Directors regarding the ongoing engagement with Counterparty C and 40 North. Mr. La Force advised the Board of Directors that, in recent discussions, Counterparty C had not been willing to improve the terms of its offer or proceed with further engagement until the Company agreed in principle to the relative valuation implied by Counterparty C’s March 12 Proposal. Mr. La Force also described the status of the ongoing due diligence process undertaken by 40 North, and explained that the Company was continuing to provide
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information in the virtual data room and organize due diligence calls in an effort to finalize the diligence process and advance the negotiation of deal terms and transaction documentation. Shortly following the conclusion of the Board of Directors’ meeting, at the direction of the Board of Directors, representatives of the Company delivered to representatives of 40 North a bid instruction letter with directions for 40 North’s submission of a final, definitive, binding proposal, including details regarding purchase price, financing, closing certainty and timing, as well as mark-ups of key transaction documents to be provided by the Company.
On March 25, 2021, Mr. La Force wrote the Chairman and Chief Executive Officer of Counterparty C to reiterate that the Company could not commit to the valuation range implied by Counterparty C’s March 12 Proposal and that any change-of-control combination must be at a valuation that compared favorably at the outset with other available alternatives. Mr. La Force suggested that the parties progress their engagement by proceeding with more advanced mutual due diligence and transaction-structuring discussions, without commitments of either party to a specific valuation range.
On March 27, 2021, the Chairman and Chief Executive Officer of Counterparty C responded to Mr. La Force to confirm that it had not identified any means of reaching a compromise on valuation, including in light of the alternatives available to the Company. The Chairman and Chief Executive Officer of Counterparty C further explained that Counterparty C would not agree to mutual due diligence without an agreement in principle on relative valuation.
On March 30, 2021, representatives of Wachtell Lipton sent to representatives of 40 North, including Sullivan & Cromwell, an initial draft of a Merger Agreement and Voting Agreement reflecting, among other things, (1) a termination fee equal to 2.0% of the Company’s equity value payable by the Company upon a termination of the Merger Agreement under certain circumstances, (2) a reverse termination fee equal to 10.0% of the Company’s equity value payable by Parent upon a termination of the Merger Agreement under certain circumstances and (3) a right of the Company to continue to pay, during the pendency of the Merger, a dividend to Grace Stockholders consistent with its historical practice. On March 31, 2021, representatives of Wachtell Lipton sent an initial draft of the confidential disclosure schedules to the Merger Agreement to representatives of 40 North, including Sullivan & Cromwell.
On April 1, 2021, following the expiration of the standstill provisions of the 2021 Confidentiality Agreement entered into by the Company and 40 North on February 1, 2021, 40 North delivered another letter to the Board of Directors, which was also filed with the SEC as an exhibit to an amendment to the 13D, pursuant to which 40 North and its affiliated investment funds proposed to acquire the Company for $70.00 per share of Grace common stock in cash, subject to certain conditions (the “April 1 Proposal”). 40 North’s letter explained that the April 1 Proposal did not include any financing contingency, and that 40 North’s financing banks were Citi, J.P. Morgan, Deutsche Bank and BNP Paribas. In its letter, 40 North expressed its confidence that all necessary regulatory approvals could be received in a timely manner. 40 North noted that it had “engaged numerous advisers, consultants and specialists to further [its] analysis of the various facets of [the Company’s] business” and explained that its proposal was “subject only to confirmatory diligence, which [40 North] expect[ed] to be able to complete in two weeks, and the execution of definitive documentation.” 40 North’s proposal letter characterized the April 1 Proposal as 40 North’s “best and final offer.”
Shortly thereafter on April 1, 2021, Mr. La Force sent a letter to Messrs. Millstone and Winter, the text of which was included in a press release issued by the Company. In this letter, Mr. La Force acknowledged the Company’s receipt of 40 North’s April 1 Proposal and reiterated the Company’s requests for the information described in the Company’s bid instruction letter provided to 40 North on March 25, 2021, including the details of 40 North’s debt and equity financing commitments, as well as any comments on the draft transaction documentation previously provided to 40 North.
On April 5, 2021, representatives of 40 North provided to representatives of the Company a revised draft of the Merger Agreement, as well as additional draft transaction documentation, including drafts of the Equity and Debt Commitment Letters and the Limited Guaranty. The delivery of the transaction documentation was confirmed by 40 North on April 6, 2021 in a letter from Messrs. Millstone and Winter to Mr. La Force, which letter was also filed with the SEC as an exhibit to an amendment to the 13D. 40 North’s revised draft of the Merger Agreement provided for, among other things, (1) a termination fee equal to 4.0% of the Company’s equity value payable by the Company upon a termination of the Merger Agreement under certain circumstances,
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(2) a reverse termination fee equal to 5.0% of the Company’s equity value payable by Parent upon a termination of the Merger Agreement under certain circumstances and (3) a requirement for the Company to obtain Parent’s consent prior to paying dividends to Grace Stockholders during the pendency of the Merger.
On April 6, 2021, Moelis met telephonically with the Chairman and Chief Executive Officer of Counterparty C to assess Counterparty C’s interest in re-engaging in discussions or submitting a proposal for a strategic transaction that might be competitive with 40 North’s April 1 Proposal. The Chairman and Chief Executive Officer of Counterparty C explained that a representative of Counterparty C would contact the Company or its representatives if it had an interest in re-engaging in discussions regarding a potential strategic transaction, but thereafter no such contact was made.
On April 7, 2021, a meeting of the Board of Directors was held, during which members of the Company’s senior management and representatives of Wachtell Lipton, Goldman Sachs and Moelis were present. At the meeting, the Board of Directors discussed the Company’s ongoing strategic review, including 40 North’s April 1 Proposal and preliminary financial analyses of the April 1 Proposal. The Board of Directors discussed that Counterparty C had neither demonstrated a willingness to compromise further on relative valuation nor engage in due diligence or other transaction discussions without an agreement on an upfront valuation that did not compare favorably to 40 North’s April 1 Proposal, as well as that Counterparty C had not expressed any interest in re-engaging in discussions. The Board of Directors also discussed the Company’s solicitation activity during its outreach to potential transaction counterparties and the fact that, despite the fact that it had been widely and publicly known for months that Grace was conducting a strategic review process and was engaged in discussions with 40 North, there had been no other indications of interest from other potential counterparties to a strategic business combination or sale transaction. Following the discussion, it was the consensus of the Board of Directors that the Company should proceed in discussions with 40 North on the basis of its April 1 Proposal, contingent on 40 North obtaining acceptable financing commitments and the negotiation of definitive transaction documentation with terms that would be protective of Grace Stockholders and customary for transactions of a similar type and size.
On April 9, 2021, representatives of Wachtell Lipton sent to representatives of Sullivan & Cromwell revised drafts of the Merger Agreement and related transaction and financing documentation. The revised draft of the Merger Agreement provided for, among other things, (1) a termination fee equal to 2.5% of the Company’s equity value payable by the Company upon a termination of the Merger Agreement under certain circumstances, (2) a reverse termination fee equal to 8.0% of the Company’s equity value payable by Parent upon a termination of the Merger Agreement under certain circumstances and (3) the right of the Company to continue to pay, during the pendency of the Merger, a dividend to Grace Stockholders consistent with its historical practice.
On April 14, 2021, at 40 North’s request in order for 40 North and its financing sources to complete their due diligence, the Company entered into an amendment to the 2021 Confidentiality Agreement with 40 North and certain of its affiliates, pursuant to which the Company agreed to extend the nomination deadline for 40 North to submit candidates for election to the Company’s Board of Directors at the Company’s 2021 annual meeting of stockholders to April 26, 2021. The Company and 40 North also agreed not to make any further public statements regarding the other party or the ongoing discussions between the parties prior to April 26, 2021.
Between April 14, 2021 and April 25, 2021, representatives of Wachtell Lipton exchanged drafts of the Merger Agreement and the other transaction documents with representatives of Sullivan & Cromwell and negotiated the terms of such documents.
On April 14, 2021, representatives of Sullivan & Cromwell sent to representatives of Wachtell Lipton a revised draft of the Merger Agreement that did not specify proposed termination fee or reverse termination fee amounts but provided for, among other things, a requirement for the Company to obtain Parent’s consent prior to paying dividends to Grace Stockholders during the pendency of the Merger.
On April 16, 2021, representatives of Wachtell Lipton sent to representatives of Sullivan & Cromwell a revised draft of the Merger Agreement that provided for, among other things, (1) a termination fee equal to 3.0% of the Company’s equity value payable by the Company upon a termination of the Merger Agreement
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under certain circumstances, (2) a reverse termination fee equal to 8.0% of the Company’s equity value payable by Parent upon a termination of the Merger Agreement under certain circumstances and (3) the right of the Company to continue to pay, during the pendency of the Merger, a dividend to Grace Stockholders consistent with its historical practice.
On April 22, 2021, representatives of Sullivan & Cromwell sent to representatives of Wachtell Lipton a revised draft of the Merger Agreement that did not specify proposed termination fee or reverse termination fee amounts but provided for, among other things, a requirement for the Company to obtain Parent’s consent prior to paying dividends to Grace Stockholders during the pendency of the Merger.
On April 24, 2021, representatives of Wachtell Lipton sent to representatives of Sullivan & Cromwell a revised draft of the Merger Agreement that provided for, among other things, (1) a termination fee equal to 3.0% of the Company’s equity value payable by the Company upon a termination of the Merger Agreement under certain circumstances, (2) a reverse termination fee equal to 6.0% of the Company’s equity value payable by Parent upon a termination of the Merger Agreement under certain circumstances and (3) the right of the Company to continue to pay, during the pendency of the Merger, a dividend to Grace Stockholders consistent with its historical practice.
Early in the morning of April 25, 2021, representatives of Sullivan & Cromwell sent to representatives of Wachtell Lipton a revised draft of the Merger Agreement that, consistent with the Company’s prior proposal, provided for, among other things, a termination fee equal to 3.0% of the Company’s equity value payable by the Company upon a termination of the Merger Agreement under certain circumstances and a reverse termination fee equal to 6.0% of the Company’s equity value payable by Parent upon a termination of the Merger Agreement under certain circumstances. The revised draft of the Merger Agreement also included a requirement for the Company to obtain Parent’s consent prior to paying dividends to Grace Stockholders during the pendency of the Merger.
On April 25, 2021, a meeting of the Board of Directors was held, during which members of the Company’s senior management and representatives of Wachtell Lipton, Goldman Sachs and Moelis were present. Mr. La Force presented to the other members of the Board of Directors an update on the negotiations with 40 North and Standard Industries Holdings regarding the proposed acquisition of the Company, including the terms of the draft transaction documentation. A representative of Wachtell Lipton described to the directors their fiduciary duties in connection with their consideration of the proposed transaction. Representatives of Goldman Sachs presented the financial analysis undertaken by Goldman Sachs regarding the proposed transaction, including by reference to presentation materials which had been made available to the Board of Directors prior to the meeting. After discussion among the Board of Directors and the Company’s advisors, Goldman Sachs delivered its oral opinion, to be confirmed by delivery of a written opinion, dated April 26, 2021, to the Board of Directors to the effect that, as of such date and based upon and subject to the various matters, limitations, qualifications and assumptions set forth therein, the Merger Consideration to be paid to the holders (other than Parent and its affiliates) of Grace common stock in the proposed transaction was fair, from a financial point of view, to such holders. Representatives of Moelis then presented the financial analysis undertaken by Moelis regarding the proposed transaction, including by reference to presentation materials which had been made available to the Board of Directors prior to the meeting. After discussion among the Board of Directors and the advisors, Moelis rendered its oral opinion, to be subsequently confirmed by delivery of a written opinion, dated April 26, 2021, to the Board of Directors to the effect that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken set forth therein, the Merger Consideration to be received by the holders of shares of Grace common stock (other than the Supporting Stockholder, Parent, Merger Sub, any other subsidiary of Parent, the Company or any other wholly owned subsidiary of the Company) in the Merger was fair from a financial point of view to such holders. Representatives of Wachtell Lipton reviewed the terms of the draft Merger Agreement and other transaction documentation, including by reference to a summary of the agreements and drafts of the agreements, which had been made available to the Board of Directors prior to the meeting. Following discussion among the Board of Directors, the members of the Company’s senior management and representatives of the Company’s advisors, the Board of Directors instructed Mr. La Force to engage with Messrs. Millstone and Winter and attempt to reach a compromise on the outstanding issues in the Merger Agreement. Following a series of adjournments while Mr. La Force engaged in further discussions with Messrs. Millstone and Winter, Mr. La Force and Messrs. Winter and Millstone agreed to a compromise. When the meeting was finally reconvened later in the evening of
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April 25, the Board of Directors then engaged in a general discussion of the potential transaction and the matters summarized for the Board of Directors at the meeting, including asking questions of the Company’s advisors and senior management. Following this discussion, and after carefully considering the proposed terms of the transaction, and taking into consideration the matters discussed during the meeting and prior meetings of the Board of Directors, the Board of Directors unanimously (i) determined that it is in the best interests of the Company and its stockholders, and declared it advisable, to enter into the Merger Agreement; (ii) approved the execution, delivery and performance of the Merger Agreement by the Company and the consummation of the transactions contemplated by the Merger Agreement; and (iii) resolved to recommend that Grace Stockholders approve the adoption of the Merger Agreement and the consummation of the transactions contemplated thereby.
Early in the morning of April 26, 2021, the parties executed and delivered the Merger Agreement, Voting Agreement, Equity Commitment Letter, Limited Guaranty and Debt Commitment Letter. Shortly thereafter, the parties issued a press release announcing the transaction.
Recommendation of the Board of Directors
The Board of Directors has unanimously: (i) determined that it is in the best interests of Grace and its stockholders, and declared it advisable, to enter into the Merger Agreement; (ii) approved the execution, delivery and performance of the Merger Agreement by Grace and the consummation of the transactions contemplated by the Merger Agreement; and (iii) resolved to recommend that Grace Stockholders approve the adoption of the Merger Agreement and the consummation of the transactions contemplated thereby.
The Board of Directors unanimously recommends that you vote: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR,” on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the Adjournment Proposal.
Reasons for the Merger
In the course of reaching its determination and recommendation, the Board of Directors consulted with Grace management, Wachtell Lipton, Goldman Sachs and Moelis. The Board of Directors considered a number of factors, including those below (which are not listed in any relative order of importance), all of which it viewed as generally supporting its (i) approval of the execution, delivery and performance of the Merger Agreement by Grace and the consummation of the transactions contemplated by the Merger Agreement; and (ii) resolution to recommend that Grace Stockholders approve the adoption of the Merger Agreement and the consummation of the transactions contemplated thereby:
the current and historical market prices of Grace common stock, including the market performance of the Grace common stock relative to those of other participants in Grace’s industry and general market indices, and the fact that the Merger Consideration constituted a premium of 59% over Grace’s closing stock price of $44.05 on November 6, 2020 (the last trading day prior to the public announcement of 40 North’s initial proposal to acquire Grace on November 9, 2020);
the belief of the Board of Directors, based upon the course and history of negotiations with 40 North and Standard Industries Holdings (as described in more detail under the section of this proxy statement captioned “—Background of the Merger”), that the Merger Consideration represents the highest price that Parent was willing to pay and that the terms of the Merger Agreement include the most favorable terms to the Company, in the aggregate, to which Parent was willing to agree;
the Board of Directors’ consideration of the strategic alternatives reasonably available to Grace, including the results of the strategic review process undertaken by Grace with the assistance of its financial advisors described in the section of this proxy statement captioned “—Background of the Merger”;
the fact that, during the course of such strategic review process, other than Counterparty C, no strategic parties or financial sponsors made a proposal to Grace with respect to a strategic business combination or sale transaction;
the fact that, despite the fact that it had been widely and publicly known for months that Grace was conducting a strategic review process and was engaged in discussions with 40 North (as described in
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more detail under the section of this proxy statement captioned “—Background of the Merger”), there had been no indications of interest from other potential counterparties (other than 40 North and Counterparty C) to a strategic business combination or sale transaction;
the fact that, as described in the section of this proxy statement captioned “—Background of the Merger,” Counterparty C would not agree to mutual due diligence without an agreement in principle on a relative valuation that did not compare favorably other strategic alternatives reasonably available to the Company;
the fact that, despite an invitation to Counterparty C from representatives of the Company to re-engage in discussions following 40 North’s best and final April 1 Proposal, Counterparty C did not express any interest in re-engaging in discussions or submitting a proposal that might be competitive with 40 North’s April 1 Proposal (as described in more detail under the section of this proxy statement captioned “—Background of the Merger”);
the high degree of certainty that the closing would be achieved in a timely manner, in view of the terms of the Merger Agreement;
the view of the Board of Directors that the Merger Consideration was more favorable to Grace Stockholders on a risk-adjusted basis than the potential value that might result from other alternatives reasonably available to Grace, based upon the Board of Directors’ extensive knowledge of Grace’s business, assets, financial condition and results of operations, its competitive position and historical and projected financial performance, and the belief that the Merger Consideration represented an attractive and comparatively certain value for Grace Stockholders relative to the risk-adjusted prospects for Grace on a standalone basis;
the fact that the Supporting Stockholder, the Company’s most significant stockholder and a long-term investor in the Company, was prepared to execute and deliver the Voting Agreement;
the financial analysis presentation of Goldman Sachs, and the oral opinion of Goldman Sachs, subsequently confirmed by delivery of a written opinion, dated April 26, 2021, to the Board of Directors to the effect that, as of such date and based upon and subject to the various matters, limitations, qualifications and assumptions set forth therein, the Merger Consideration to be paid to the holders (other than Parent and its affiliates) of Grace common stock in the Merger was fair, from a financial point of view, to such holders, as more fully described below under the section of this proxy statement captioned “—Opinion of Goldman Sachs & Co. LLC,” the full text of which written opinion is attached as Annex B to this proxy statement and is incorporated by reference in this proxy statement in its entirety;
the financial analysis presentation of Moelis, and the oral opinion of Moelis, subsequently confirmed by delivery of a written opinion, dated April 26, 2021, to the Board of Directors to the effect that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken set forth therein, the Merger Consideration to be received by the holders of shares of Grace common stock (other than the Supporting Stockholder, Parent, Merger Sub, any other subsidiary of Parent, the Company or any other wholly owned subsidiary of the Company) in the Merger was fair from a financial point of view to such holders, as more fully described below under the section of this proxy statement captioned “—Opinion of Moelis & Company LLC,” the full text of which written opinion is attached as Annex C to this proxy statement and is incorporated by reference in this proxy statement in its entirety;
the terms and conditions of the Merger Agreement and the other transaction documents, including the following:
Grace’s ability to terminate the Merger Agreement in order to accept a Superior Company Proposal, subject to certain conditions of the Merger Agreement and paying Parent the Company Termination Fee of $141 million – an amount which the Board of Directors believed, based upon the advice of its financial and legal advisors, was unlikely to deter third parties from making Company Takeover Proposals;
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the conditions to closing contained in the Merger Agreement, which are limited in number and scope, and which, in the case of the condition related to the accuracy of Grace’s representations and warranties, is generally subject to a Company Material Adverse Effect (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Representations and Warranties”) qualification;
the requirement that the Merger Agreement be adopted by the affirmative vote of the holders of a majority of the outstanding shares of Grace common stock entitled to vote at the Special Meeting;
the fact that Grace has sufficient operating flexibility to conduct its business in the ordinary course prior to the consummation of the Merger;
the provision of the Merger Agreement allowing the Board of Directors to effect a Company Adverse Recommendation Change and to terminate the Merger Agreement, in certain circumstances relating to the presence of a Superior Company Proposal (or to effect a change of recommendation in response to an intervening event) subject to the applicable procedures, terms and conditions set forth in the Merger Agreement (including, if applicable, payment of termination fees) (for more information, see the sections of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Company Board Recommendation; Company Adverse Recommendation Change,” “Proposal 1: Adoption of the Merger Agreement—Termination of the Merger Agreement” and “Proposal 1: Adoption of the Merger Agreement—Termination Fee”);
the absence of a financing condition in the Merger Agreement;
the limited overlaps between the businesses of Grace and Parent relative to those that could be present in transactions with certain other industry participants;
the end date of January 26, 2022 (subject to extension to April 26, 2022 under certain circumstances, including for purposes of obtaining required regulatory approvals) allowing for sufficient time to complete the Merger;
that Parent has obtained committed debt financing for the transaction from reputable financial institutions and committed equity financing for the transaction from Standard Industries Holdings, an affiliated entity of Parent, that together provide funding of an amount sufficient to cover the aggregate Merger Consideration, all fees and expenses payable by Parent, Merger Sub or Grace and the repayment or refinancing of certain indebtedness required to be repaid or refinanced;
that Parent has announced that the equity commitment from Standard Industries Holdings will be supported by (i) the available cash of Standard Industries Holdings’ subsidiary, Standard Industries Inc. and (ii) up to $2,500 million in proceeds from a secured term loan;
the obligation of Parent and Merger Sub to use reasonable best efforts to consummate the financing and the limited number and nature of the conditions to the debt and equity financing;
the Company’s ability, under circumstances specified in the Merger Agreement, to specifically enforce the obligations of Parent and Merger to consummate the Merger; and
the requirement that, in the event of a failure of the Merger to be consummated under certain circumstances, Parent will pay the Company the Parent Termination Fee of $281 million, and the obligation to pay such amount by Standard Industries Holdings, pursuant to the terms of a limited guaranty, as more fully described under the section of this proxy statement captioned “—Financing of the Merger—Equity Financing” and “—Financing of the Merger—Guaranty.”
the availability of appraisal rights under Delaware law to holders of shares of Grace common stock who do not vote in favor of the adoption of the Merger Agreement and comply with all of the required procedures under Delaware law, which provides those eligible stockholders with an opportunity to have a Delaware court determine the fair value of their shares, which may be more than, less than, or the same as the amount such stockholders would have received under the Merger Agreement; and
the fact that, in the absence of the Merger, Grace would continue to incur significant expenses by remaining a public company, including legal, accounting, transfer agent, printing and filing fees, and that those expenses could adversely affect Grace’s financial performance and the value of its shares.
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The Board of Directors also considered a number of uncertainties and risks concerning the Merger, including the following (which factors are not necessarily presented in order of relative importance):
the fact that Grace would no longer exist as an independent, publicly traded company, and stockholders would no longer participate in any future earnings or growth and would not benefit from any potential future appreciation in value of Grace;
the risks and costs to Grace if the Merger is not completed in a timely manner or at all, including the potential adverse effect on Grace’s ability to attract and retain key personnel, the diversion of management resources and the potential disruptive effect on Grace’s day-to-day operations and Grace’s relationships with employees, customers, suppliers, partners and other third parties, any or all of which risks and costs, among other things, could adversely affect Grace’s overall competitive position and the trading price of its common stock;
the requirement under certain circumstances that Grace pay Parent a termination fee following termination of the Merger Agreement, including if the Merger Agreement is terminated by Grace in order to enter into a Superior Company Proposal or by Parent because the Board of Directors effects a Company Adverse Recommendation Change;
the fact that, under the terms of the Merger Agreement, if Parent fails to complete the Merger as a result of failure to obtain the Debt Financing (as defined in the section of this proxy statement captioned “The Merger—Financing of the Merger”), the Company’s remedies will be limited to the termination fee payable by Parent described above, which may be inadequate to compensate Grace for the damage caused;
the restrictions on the conduct of Grace’s business prior to the consummation of the Merger, which may delay or prevent Grace from undertaking business opportunities that may arise before the completion of the Merger and that, absent the Merger Agreement, Grace might have pursued;
the fact that an all cash transaction would be taxable to Grace’s stockholders that are U.S. persons for U.S. federal income tax purposes;
the fact that under the terms of the Merger Agreement, subject to certain exceptions, Grace is unable to solicit other Company Takeover Proposals;
the significant costs involved in connection with entering into the Merger Agreement and completing the Merger (many of which are payable whether or not the Merger is consummated) and the substantial time and effort of Grace management required to complete the Merger, which may disrupt its business operations and have a negative effect on its financial results;
the risk that the Merger might not be completed and the effect of the resulting public announcement of termination of the Merger Agreement on the trading price of Grace common stock;
the fact that the completion of the Merger requires certain regulatory clearances and consents, which clearances and consents could subject the Merger to unforeseen delays and risks;
the fact that Grace’s directors and officers may have interests in the Merger that may be different from, or in addition to, those of Grace’s stockholders generally (see below under the caption “—Interests of Executive Officers and Directors of Grace in the Merger”); and
the possible loss of key management or other personnel of Grace during the pendency of the Merger.
The foregoing discussion of reasons for the recommendation to approve the adoption of the Merger Agreement is not meant to be exhaustive but addresses the material information and factors considered by the Board of Directors in consideration of its recommendation. In view of the wide variety of factors considered by the Board of Directors in connection with its evaluation of the Merger and the complexity of these matters, the Board of Directors did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. Rather, in considering the information and factors described above, individual members of the Board of Directors each applied his or her own personal business judgment to the process and may have given differing weights to differing factors.
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The Board of Directors based its unanimous recommendation on the totality of the information presented. The explanation of the factors and reasoning set forth above contain forward-looking statements that should be read in conjunction with the section of this proxy statement captioned “Forward-Looking Statements.”
Goldman Sachs rendered its opinion to the Board of Directors that, as of April 26, 2021 and based upon and subject to the factors and assumptions set forth therein, the Merger Consideration to be paid to the holders (other than Parent and its affiliates) of Grace common stock pursuant to the Merger Agreement was fair from a financial point of view to such holders.
The full text of the written opinion of Goldman Sachs, dated April 26, 2021, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex B to this proxy statement. The summary of Goldman Sachs’ opinion contained in this proxy statement is qualified in its entirety by reference to the full text of Goldman Sachs’ written opinion. Goldman Sachs provided advisory services and its opinion for the information and assistance of the Board of Directors in connection with its consideration of the Merger. The Goldman Sachs opinion is not a recommendation as to how any holder of Grace common stock should vote with respect to the Merger or any other matter.
In connection with rendering the opinion described above and performing its related financial analyses, Goldman Sachs reviewed, among other things:
the Merger Agreement;
annual reports to Grace Stockholders and Annual Reports on Form 10-K of Grace for the five fiscal years ended December 31, 2020;
certain interim reports to Grace Stockholders and Quarterly Reports on Form 10-Q of Grace;
certain other communications from Grace to the Grace Stockholders;
certain publicly available research analyst reports for Grace; and
certain internal financial analyses and forecasts for Grace prepared by its management, as approved for Goldman Sachs’ use by Grace (as described in the section of this proxy statement captioned “—Management Projections”).
Goldman Sachs also held discussions with members of the senior management of Grace regarding their assessment of the past and current business operations, financial condition and future prospects of Grace; reviewed the reported price and trading activity for the Grace common stock; compared certain financial and stock market information for Grace with similar information for certain other companies the securities of which are publicly traded; reviewed the financial terms of certain recent business combinations in the chemicals industry and in other industries; and performed such other studies and analyses, and considered such other factors, as it deemed appropriate.
For purposes of rendering this opinion, Goldman Sachs, with Grace’s consent, relied upon and assumed the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by, it, without assuming any responsibility for independent verification thereof. In that regard, Goldman Sachs assumed with Grace’s consent that the Management Projections (as defined in the section of this proxy statement captioned “—Management Projections”) were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of Grace. Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or other off-balance-sheet assets and liabilities) of Grace or any of its subsidiaries and Goldman Sachs was not furnished with any such evaluation or appraisal. Goldman Sachs assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the Merger will be obtained without any adverse effect on the expected benefits of the Merger in any way meaningful to its analysis. Goldman Sachs has also assumed that the Merger will be consummated on the terms set forth in the Merger Agreement, without the waiver or modification of any term or condition the effect of which would be in any way meaningful to its analysis.
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Goldman Sachs’ opinion does not address the underlying business decision of Grace to engage in the Merger or the relative merits of the Merger as compared to any strategic alternatives that may be available to Grace, nor does it address any legal, regulatory, tax or accounting matters. Goldman Sachs’ opinion addresses only the fairness from a financial point of view to the holders (other than Parent and its affiliates) of Grace common stock, as of the date of the opinion, of the Merger Consideration to be paid to such holders pursuant to the Merger Agreement. Goldman Sachs’ opinion does not express any view on, and does not address, any other term or aspect of the Merger Agreement or the Merger or any term or aspect of any other agreement or instrument contemplated by the Merger Agreement or entered into or amended in connection with the Merger, including the fairness of the Merger to, or any consideration received in connection therewith by, the holders of any other class of securities, creditors, or other constituencies of Grace, nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of Grace, or class of such persons in connection with the transaction, whether relative to the Merger Consideration to be paid to the holders (other than Parent and its affiliates) of Grace common stock pursuant to the Merger Agreement or otherwise. Goldman Sachs’ opinion was necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to it as of, the date of the opinion, and Goldman Sachs assumed no responsibility for updating, revising or reaffirming its opinion based on circumstances, developments or events occurring after the date of its opinion. In addition, Goldman Sachs does not express any opinion as to the prices at which shares of Grace common stock trade at any time, as to the potential effects of volatility in the credit, financial and stock markets on Grace, Parent or the Merger, or as to the impact of the Merger on the solvency or viability of Grace or Parent or the ability of Grace or Parent to pay their respective obligations when they come due. Goldman Sachs’ opinion was approved by a fairness committee of Goldman Sachs.
The following is a summary of the material financial analyses delivered by Goldman Sachs to the Board of Directors in connection with rendering the opinion described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by Goldman Sachs, nor does the order of analyses described represent relative importance or weight given to those analyses by Goldman Sachs. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Goldman Sachs’ financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before April 23, 2021, the last trading day before the public announcement of the Merger, and is not necessarily indicative of current market conditions.
Historical Stock Trading Analysis. Goldman Sachs analyzed the $70.00 in cash per share to be paid to holders of Grace common stock (other than Excluded Shares) pursuant to the Merger Agreement in relation to:
the closing price per share of Grace common stock on April 23, 2021;
the closing price per share of Grace common stock on March 31, 2021, the last trading day before the public announcement of the proposal by 40 North to acquire Grace at $70.00 in cash per share of Grace common stock;
the volume weighted average price per share (“VWAP”) of Grace common stock over the 20-day trading period ended March 31, 2021;
the VWAP of Grace common stock over the 30-day trading period ended March 31, 2021;
the VWAP of Grace common stock after November 6, 2020, the last trading day before the first public announcement of a proposal by 40 North to acquire Grace, through April 23, 2021;
the closing price per share of Grace common stock on November 6, 2020;
the highest closing price per share of Grace common stock during the 52-week period ended April 23, 2021; and
the highest closing price per share of Grace common stock during the 52-week period ended November 6, 2020.
In addition Goldman Sachs calculated the average stock price performance for the following selected companies (i) after November 6, 2020 through April 23, 2021 and (ii) after October 13, 2020, the last trading day before Kathleen Reiland, the director on the Board of Directors employed and designated by 40 North, announced her resignation from the Board of Directors, through April 23, 2021, and then applied these average
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performances to the closing price per share of Grace common stock on November 6, 2020 and October 13, 2020, respectively, to derive what are referred to in this proxy statement, for November 6, 2020 or October 13, 2020, as the case may be, as the “hypothetical undisturbed stock price” from such date. The selected companies used in this calculation were:
Umicore;
Clariant;
Johnson Matthey;
PQ Group;
PPG;
Ashland;
Avient; and
NewMarket
Although none of these selected companies is directly comparable to Grace, the companies included were chosen because they are publicly traded companies with operations that for purposes of analysis may be considered similar to certain operations of Grace.
This analysis indicated that the $70.00 in cash per share to be paid to the holders of Grace common stock pursuant to the Merger Agreement represented:
a premium of 9.0% based on the closing price per share of the Grace common stock on April 23, 2021 of $64.24;
a premium of 16.9% based on the closing price per share of the Grace common stock on March 31, 2021 of $59.86;
a premium of 17.3% based on the VWAP of the Grace common stock over the 20-day trading period ended March 31, 2021 of $59.69;
a premium of 17.0% based on the VWAP of the Grace common stock over the 30-day trading period ended March 31, 2021 of $59.82;
a premium of 19.2% based on the VWAP of the Grace common stock after November 6, 2020 through April 23, 2021 of $58.71;
a premium of 58.9% based on the closing price per share on November 6, 2020 of $44.05;
a premium of 7.4% based on the highest closing price per share of Grace common stock during the 52-week period ended April 23, 2021 of $65.17;
a discount of 4.6% based on the highest closing price per share of Grace common stock during the 52-week period ended November 6, 2020 of $73.36;
a premium of 19.1% based on the hypothetical undisturbed stock price from November 6, 2020 of $58.77; and
a premium of 31.6% based on the hypothetical undisturbed stock price from October 13, 2020 of $53.21.
Illustrative Discounted Cash Flow Analysis. Using the Management Projections, Goldman Sachs performed an illustrative discounted cash flow analysis on Grace. Using discount rates ranging from 8.0% to 9.0%, reflecting estimates of Grace’s weighted average cost of capital, Goldman Sachs discounted to present value as of December 31, 2020 (i) estimates of unlevered free cash flow for Grace for the years 2021 through 2025 derived from the Management Projections and (ii) a range of illustrative terminal values for Grace, which were calculated by applying exit terminal year multiples ranging from 9.5x to 11.5x, to an estimate of Grace’s earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the terminal year, as reflected in the Management Projections (which analysis implied a perpetuity growth rate ranging from 2.0% to 3.9%). Goldman Sachs derived such discount rates by application of the Capital Asset Pricing Model, which requires certain
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company-specific inputs, including Grace’s target capital structure weightings, the cost of long-term debt, after-tax yield on permanent excess cash, if any, future applicable marginal cash tax rate and a beta for Grace, as well as certain financial metrics for the United States financial markets generally. The illustrative terminal value to EBITDA multiple range was derived by Goldman Sachs using its professional judgment and taking into account, among other things, the Management Projections and EBITDA multiples implied by the historical trading prices of the Grace common stock. Goldman Sachs derived ranges of illustrative enterprise values for Grace by adding the ranges of present values it derived above. Goldman Sachs then subtracted, from the range of illustrative enterprise values it derived for Grace, the net debt of Grace, as of December 31, 2020 and adjusted to give effect on a pro forma basis to the pending acquisition by Grace of the FCS business announced in February 2021, as provided by the management of Grace, to derive a range of illustrative equity values for Grace. Goldman Sachs then determined the net present value of tax attributes of Grace, as reflected in the Management Projections and excluded from the foregoing calculations, by applying a discount rate of 8.5%, representing the midpoint of the range of discount rates described above, to the value of these tax attributes and added these tax attributes to the range of illustrative equity values of Grace to derive a range of illustrative equity values that included an illustrative value for the tax attributes. Goldman Sachs then divided the range of illustrative equity values it derived including the tax attributes and excluding the tax attributes, respectively, by the number of fully diluted outstanding shares of Grace, as provided by the management of Grace, to derive a range of illustrative present values per share (including the tax attributes) ranging from $69.20 to $89.70 and a range of illustrative present values per share (excluding the tax attributes) ranging from $61.62 to $82.21.
Illustrative Present Value of Future Share Price Analysis. Goldman Sachs performed an illustrative analysis of the implied present value of an illustrative future value per share of Grace common stock, which is designed to provide an indication of the present value of a theoretical future value of a company’s equity as a function of such company’s financial multiples. For this analysis, Goldman Sachs used the Management Projections for each of the fiscal years 2022 through 2025. Goldman Sachs first calculated the implied enterprise value (“EV”) of Grace as of December 31 for each of the fiscal years 2021 to 2024, by multiplying the one-year forward EBITDA (“NTM EBITDA”) as of such date by an illustrative range of multiples of 9.0x to 11.0x. These illustrative multiple estimates were derived by Goldman Sachs utilizing its professional judgment and experience, taking into account current and historical trading data and EV/NTM EBITDA multiples for Grace. To derive illustrative implied equity values per share of Grace common stock, Goldman Sachs then subtracted the amount of Grace’s projected net debt as of December 31 for each of the fiscal years 2021 to 2024, as provided by the management of Grace, to determine implied equity values per share of Grace common stock as of December 31 for each of the fiscal years 2021 to 2024. Goldman Sachs then discounted these implied equity values per share to December 31, 2020 using a discount rate of 10.13%, reflecting an estimate of Grace’s cost of equity. Goldman Sachs derived such discount rate by application of the Capital Asset Pricing Model, which requires certain company-specific inputs, including a beta for Grace, as well as certain financial metrics for the United States financial markets generally. Goldman Sachs then added to such implied present values the aggregate dividends per share of Grace common stock estimated to be paid by Grace for each of the fiscal years 2021 to 2014 in the Management Projections, and as discounted to December 31, 2020 using a discount rate of 10.13%, reflecting an estimate of Grace’s cost of equity. These analyses resulted in a range of implied present values of $58.17 to $87.08 per share of Grace common stock.
Selected Transactions Analysis. Goldman Sachs analyzed certain publicly available information relating to the following selected transactions in the chemicals industry since 2015:
| Date | | | Acquirer | | | Target | |
| March 2021 | | | Cerberus / Koch | | | PQ’s Performance Chemicals Business | |
| February 2021 | | | Grace | | | Albemarle’s Fine Chemistry Services Business | |
| February 2021 | | | Bain Capital / Cinven | | | Lonza Specialty Ingredients | |
| October 2020 | | | Ardian | | | Angus Chemical Company | |
| December 2019 | | | Lone Star | | | BASF Construction Chemicals | |
| December 2019 | | | Avient | | | Clariant Masterbatches | |
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| Date | | | Acquirer | | | Target | |
| April 2019 | | | Merck | | | Versum | |
| April 2019 | | | Parker-Hannifin | | | LORD | |
| April 2019 | | | Nippon | | | Dulux | |
| January 2019 | | | Sika | | | Parex | |
| August 2018 | | | Cabot Microelectronics | | | KMG Chemicals | |
| July 2018 | | | Messer / CVC | | | Linde North America | |
| March 2018 | | | Carlyle | | | Specialty Chemicals Business of Akzo Nobel | |
| December 2017 | | | Grace | | | Albemarle Polyolefin Catalysts | |
| September 2017 | | | Kuraray | | | Calgon Carbon | |
| September 2017 | | | H.B. Fuller | | | Royal Adhesives | |
| April 2017 | | | Houghton | | | Quaker | |
| March 2017 | | | Henkel | | | Darex | |
| October 2016 | | | Carlyle | | | Atotech | |
| June 2016 | | | BASF | | | Chemetall | |
| May 2016 | | | Evonik | | | Air Products Performance Materials | |
| March 2016 | | | Sherwin-Williams | | | Valspar Corp | |
| November 2015 | | | Air Liquide SA | | | Airgas | |
| July 2015 | | | Platform Specialty | | | Alent plc | |
| July 2015 | | | Solvay | | | Cytec Industries | |
| June 2015 | | | Apollo Global Management, LLC | | | OM Group, Inc. | |
| February 2015 | | | Tronox Limited | | | FMC Corp’s Alkali Chemicals Business | |
While none of the companies that participated in the selected transactions are directly comparable to Grace, the target companies in the selected transactions are companies with operations that, for the purposes of analysis, may be considered similar to certain of Grace’s results, market size and product profile. For each of the selected transactions, Goldman Sachs calculated the implied enterprise value of the applicable target company based on the consideration paid in the applicable transaction, as a multiple of the estimated EBITDA of the target company for the last 12-month period ended prior to announcement of each applicable transaction (“LTM EBITDA”), as disclosed in public company filings and other publicly available information.
The following table presents the results of this analysis:
| | Selected Transactions | | | Proposed Transaction | |||||||
| | Range | | | Median | | | Mean | | |||
EV / LTM EBITDA | | | 9.2x – 16.5x | | | 13.1x | | | 13.0x | | | 14.0x |
Goldman Sachs then applied a range of multiples of 9.2x to 16.5x, derived from this analysis, to the estimated 2021 EBITDA for Grace, as reflected in the Management Projections, to derive an illustrative range of enterprise values for Grace. Goldman Sachs then subtracted, from the range of illustrative enterprise values it derived for Grace, the net debt of Grace, as of December 31, 2020 and adjusted to give effect on a pro forma basis to the pending acquisition by Grace of the FCS business announced in February 2021, as provided by the management of Grace, to derive a range of illustrative equity values for Grace. Goldman Sachs then divided the range of illustrative equity values it derived by the number of fully diluted outstanding shares of Grace, as provided by the management of Grace, to derive a range of illustrative values per share ranging from $48.66 to $114.22.
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Premia Analysis. Goldman Sachs reviewed and analyzed, using publicly available information, the acquisition premia for all-cash acquisition transactions announced during the time period from 2016 through April 23, 2021 involving a public company based in the United States as the target where the disclosed enterprise values for the transaction were between $5.0 billion and $10 billion. For the entire period, using publicly available information, Goldman Sachs calculated the median, 25th percentile and 75th percentile premiums of the price paid in the transactions relative to the target’s stock price four weeks prior to the announcement of the transaction. This analysis indicated a median premium of 34.1% across the period. This analysis also indicated a 25th percentile premium of 20.8% and 75th percentile premium of 41.4% across the period. Using this analysis, Goldman Sachs applied a reference range of illustrative premiums of 20.8% to 41.4% to the undisturbed closing price per share of Grace common stock of $44.05 as of November 6, 2020 (the last trading day before the first public announcement of a proposal by 40 North to acquire Grace) and calculated a range of implied equity values per share of Grace common stock of $53.21 to $62.29. In addition, Goldman Sachs applied a reference range of illustrative premiums of 20.8% to 41.4% to the hypothetical undisturbed stock price from November 6, 2020 of $58.77 and calculated a range of implied equity values per share of Grace common stock of $70.99 to $83.10.
The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs’ opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the above analyses as a comparison is directly comparable to Grace or Parent or the contemplated transaction.
Goldman Sachs prepared these analyses for purposes of Goldman Sachs’ providing its opinion to the Board of Directors as to the fairness from a financial point of view of the Merger Consideration to be paid to the holders (other than Parent and its affiliates) of Grace common stock pursuant to the Merger Agreement. These analyses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of Grace, Parent, Goldman Sachs or any other person assumes responsibility if future results are materially different from those forecast.
The Merger Consideration was determined through arm’s-length negotiations between Grace and Parent and was approved by the Board of Directors. Goldman Sachs provided advice to Grace during these negotiations. Goldman Sachs did not, however, recommend any specific amount of consideration to Grace or the Board of Directors or that any specific amount of consideration constituted the only appropriate consideration for the Merger.
As described above, Goldman Sachs’ opinion to the Board of Directors was one of many factors taken into consideration by the Board of Directors in making its determination to approve the Merger Agreement. The foregoing summary does not purport to be a complete description of the analyses performed by Goldman Sachs in connection with the fairness opinion and is qualified in its entirety by reference to the written opinion of Goldman Sachs attached as Annex B to this proxy statement.
Goldman Sachs and its affiliates are engaged in advisory, underwriting and financing, principal investing, sales and trading, research, investment management and other financial and non-financial activities and services for various persons and entities. Goldman Sachs and its affiliates and employees, and funds or other entities they manage or in which they invest or have other economic interests or with which they co-invest, may at any time purchase, sell, hold or vote long or short positions and investments in securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments of Grace, Parent, any of their respective affiliates and third parties, including 40 North, and its respective affiliates and portfolio companies, or any currency or commodity that may be involved in the Merger. Goldman Sachs acted as financial advisor to Grace in connection with, and participated in certain of the negotiations leading to, the Merger. Goldman Sachs has provided certain financial advisory and/or underwriting services to Grace and/or its affiliates from time to time for which the Investment Banking Division of Goldman Sachs has received, and may receive, compensation, including having
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acted as bookrunner with respect to Grace’s 4.875% Senior Notes due 2027 (aggregate principal amount $750,000,000) in June 2020, Grace’s financial advisor in connection with Grace’s agreement to acquire the FCS business from Albemarle Corporation in February 2021 and as sole arranger with respect to Grace’s Senior Secured Term Loan B-3 due March 2028 (aggregate principal amount $300,000,000) in March 2021. During the two year period ended April 26, 2021, Goldman Sachs has recognized compensation for financial advisory and/or underwriting services provided by its Investment Banking Division to Grace and/or its affiliates of approximately $1,000,000. Goldman Sachs may also in the future provide financial advisory and/or underwriting services to Grace, Parent and 40 North and their respective affiliates and, as applicable, portfolio companies for which the Investment Banking Division of Goldman Sachs may receive compensation. Affiliates of Goldman Sachs also may have co-invested with 40 North and its affiliates from time to time and may have invested in limited partnership units of affiliates of 40 North from time to time and may do so in the future.
The Board of Directors selected Goldman Sachs as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the Merger. Pursuant to a letter agreement dated March 22, 2021, Grace engaged Goldman Sachs to act as its financial advisor in connection with the Merger. Pursuant to this engagement letter, Grace has agreed to pay Goldman Sachs a $5,000,000 quarterly fee for financial advisory services from and after the fourth quarter of 2020 of up to an aggregate of $25,000,000 (the “Financial Advisory Fee”). This engagement letter also provides for a transaction fee, based on the information available as of the date of announcement of the Merger, of approximately $48,700,000, all of which is contingent upon consummation of the Merger (the “Transaction Fee”). Any Financial Advisory Fee that Grace has already paid to Goldman Sachs will reduce the subsequent Transaction Fee. No Financial Advisory Fee will be due to Goldman Sachs after the payment of the Transaction Fee. In addition, Grace has agreed to reimburse Goldman Sachs for certain of its expenses, including attorneys’ fees and disbursements, and to indemnify Goldman Sachs and related persons against various liabilities, including certain liabilities under the federal securities laws.
At a meeting of the Board of Directors held on April 25, 2021 to evaluate and approve the Merger, Moelis rendered its oral opinion to the Board of Directors, confirmed by the delivery of a written opinion dated April 26, 2021, addressed to the Board of Directors to the effect that, as of the date of such opinion and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken, the Merger Consideration to be received in the Merger by the holders of the Grace common stock (other than the Supporting Stockholder, Parent, Merger Sub, any other subsidiary of Parent, Grace or any wholly owned subsidiary of Grace) was fair, from a financial point of view, to such holders.
The full text of Moelis’ written opinion dated April 26, 2021, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex C to this proxy statement and is incorporated herein by reference. Moelis’ opinion was provided for the use and benefit of the Board of Directors (solely in its capacity as such) in its evaluation of the Merger. Moelis’ opinion is limited solely to the fairness, from a financial point of view, of the Merger Consideration to be received by the holders of the Grace common stock (other than the Supporting Stockholder, Parent, Merger Sub, any other subsidiary of Parent, Grace or any wholly owned subsidiary of Grace) in the Merger and does not address Grace’s underlying business decision to effect the Merger or the relative merits of the Merger as compared to any alternative business strategies or transactions that might be available to Grace. Moelis’ opinion does not constitute a recommendation as to how any holder of securities should vote or act with respect to the Merger or any other matter. Moelis’ opinion was approved by a Moelis fairness opinion committee.
In arriving at its opinion, Moelis, among other things:
reviewed certain publicly available business and financial information relating to Grace;
reviewed certain internal information relating to the business, earnings, cash flow, assets, liabilities and prospects of Grace furnished to Moelis by Grace, including financial forecasts provided to or discussed with Moelis by the management of Grace (as described in the section of this proxy statement captioned “—Management Projections”);
reviewed information relating to the capitalization (including incentive equity) of Grace furnished to Moelis by Grace;
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conducted discussions with members of the senior management and representatives of Grace concerning the information described in the foregoing three items in this paragraph, as well as the business and prospects of Grace generally;
reviewed publicly available financial and stock market data of certain other companies in lines of business that Moelis deemed relevant;
reviewed the financial terms of certain other transactions that Moelis deemed relevant;
reviewed an execution version of each of (i) the Merger Agreement, (ii) the Debt Commitment Letter, (iii) the Equity Commitment Letter, (iv) the Guaranty, (v) the Voting Agreement and (vi) the debt commitment letter among JPMorgan Chase Bank, N.A., BNP Paribas Securities Corp., Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and Standard Industries;
participated in certain discussions and negotiations among representatives of Grace and Parent and their advisors; and
conducted such other financial studies and analyses and took into account such other information as Moelis deemed appropriate.
In connection with its review, with the consent of the Board of Directors, Moelis relied on the information supplied to, discussed with or reviewed by it for purposes of its opinion being complete and accurate in all material respects. Moelis did not assume any responsibility for independent verification of, and did not independently verify, any of such information. With the consent of the Board of Directors, Moelis relied upon, without independent verification, the assessment of Grace and its legal, tax, regulatory and accounting advisors with respect to legal, tax, regulatory and accounting matters. With respect to the Management Projections (as defined in the section of this proxy statement captioned “—Management Projections”), Moelis assumed, at the direction of the Board of Directors, that they were reasonably prepared on a basis reflecting the best currently available estimates and judgments of Grace’s management as to the future performance of Grace. Moelis expressed no views as to the reasonableness of the Management Projections and other financial forecasts or the assumptions on which they were based. In addition, with the consent of the Board of Directors, Moelis did not make any independent evaluation or appraisal of any of the assets or liabilities (contingent, derivative, off-balance-sheet, or otherwise) of Grace, nor was Moelis furnished with any such evaluation or appraisal.
Moelis’ opinion did not address Grace’s underlying business decision to effect the Merger or the relative merits of the Merger as compared to any alternative business strategies or transactions that might be available to Grace and did not address any legal, regulatory, tax or accounting matters. At the direction of the Board of Directors, Moelis was not asked to, nor did it, offer any opinion as to any terms of the Merger Agreement or any aspect or implication of the Merger, except for the fairness of the Merger Consideration from a financial point of view to the holders of the Grace common stock (other than the Supporting Stockholder, Parent, Merger Sub, any other subsidiary of Parent, Grace or any wholly owned subsidiary of Grace). Moelis did not express any opinion as to fair value or the solvency of Grace following the closing of the Merger. In addition, Moelis noted that, pursuant to the Merger Agreement, the Excluded Shares will not be converted into the right to receive the Merger Consideration, and Moelis expressed no opinion with respect to such shares or as to the fairness of the Merger Consideration to holders thereof. In rendering its opinion, Moelis assumed, with the consent of the Board of Directors, that the final executed form of the Merger Agreement would not differ in any material respect from the draft that Moelis reviewed, that the Merger would be consummated in accordance with its terms without any waiver or modification that could be material to Moelis’ analysis, and that the parties to the Merger Agreement would comply with all the material terms of the Merger Agreement. Moelis assumed, with the consent of the Board of Directors, that all governmental, regulatory or other consents or approvals necessary for the completion of the Merger would be obtained, except to the extent that could not be material to Moelis’ analysis.
Moelis’ opinion was necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to Moelis as of, the date of its opinion, and Moelis assumed no responsibility to update its opinion for developments after the date of its opinion.
Moelis’ opinion did not address the fairness of the Merger or any aspect or implication of the Merger to, or any other consideration of or relating to, the holders of any class of securities, creditors or other constituencies of Grace, other than the fairness of the Merger Consideration from a financial point of view to the holders of the Grace common stock (other than the Supporting Stockholder, Parent, Merger Sub, any other subsidiary of Parent,
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Grace or any wholly owned subsidiary of Grace). In addition, Moelis did not express any opinion as to the fairness of the amount or nature of any compensation to be received by any officers, directors or employees of any parties to the Merger, or any class of such persons, relative to the Merger Consideration or otherwise. Moelis’ opinion was approved by a Moelis fairness opinion committee.
Summary of Financial Analyses
The following is a summary of the material financial analyses prepared by Moelis for the Board of Directors in connection with rendering its written opinion. Some of the summaries of financial analyses below include information presented in tabular format. In order to fully understand Moelis’ analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the analyses. Considering the data described below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Moelis’ analyses.
Unless the context indicates otherwise, stock prices (i) with respect to Grace, are based on the closing stock price of Grace common stock on April 23, 2021 and March 31, 2021 (which Moelis deemed to be the unaffected trading date for purposes of its analyses) and (ii) with respect to other companies, are also based on closing stock prices on April 23, 2021. For purposes of, among other things, deriving per share implied equity values for Grace, Moelis calculated certain per share amounts for Grace based on diluted shares outstanding as of April 22, 2021 provided by Grace management and approved for use by Moelis in rendering its opinion. For purposes of Moelis’ analyses, Moelis also used Grace management’s projected December 31, 2020 balance sheet, as set forth in the Management Projections and provided as of January 27, 2021, which management confirmed on April 24, 2021 was unchanged.
For purposes of its analyses, Moelis reviewed a number of financial metrics, including the following:
Adjusted EBITDA: generally calculated as the relevant company’s earnings before interest, taxes, depreciation and amortization, as adjusted to exclude one-time charges and benefits and to reflect the full-year impact of material corporate transactions.
Enterprise Value (or EV): which (i) with respect to Grace, was calculated as the market value of Grace’s fully diluted common equity based on its closing stock prices on April 23, 2021 and March 31, 2021 (which Moelis deemed to be the unaffected trading date for purposes of its analyses) and share count information as of April 22, 2021 provided by Grace management and approved by Grace management for use by Moelis in rendering its opinion, plus (a) preferred stock, plus (b) debt, less (c) cash and cash equivalents, less (d) unconsolidated assets and plus (e) book value of non-controlling interests (in each of the foregoing clauses (a) through (e), as projected by Grace management as of December 31, 2020 and provided as of January 27, 2021, which management confirmed on April 24, 2021 was unchanged), and (ii) with respect to other companies, was calculated as the market value of the relevant company’s fully diluted common equity based on its closing stock price as of April 23, 2021, plus (a) preferred stock, plus (b) debt, less (c) cash and cash equivalents, less (d) unconsolidated assets and plus (e) book value of non-controlling interests (in each of the foregoing clauses (a) through (e), as of the relevant company’s most recently reported quarter end).
Unless the context indicates otherwise, (i) the estimates of the future financial performance for the selected publicly traded companies listed below were based on certain publicly available research analyst estimates for those companies, and (ii) the estimates of the future financial performance of Grace relied upon for the financial analyses described below were based on the Management Projections.
Selected Publicly Traded Companies Analysis
Moelis reviewed financial and stock market information of the selected publicly traded companies noted below that manufacture specialty chemicals and catalysts on a global basis serving a broad range of transportation, industrial and consumer applications and other specialty chemical companies with similar growth trajectory, financial profile and technological expertise and deemed generally relevant by Moelis in certain respects to Grace. Moelis excluded companies that primarily manufacture commodity chemicals due to the significant differences in business models, go-to-market strategies, competitive dynamics and margin profile compared to Grace.
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Moelis reviewed, among other things, the EV of the selected publicly traded companies as a multiple of estimated Adjusted EBITDA for calendar year 2021 and estimated Adjusted EBITDA for calendar year 2022. Financial data for the selected publicly traded companies were based on publicly available median consensus research analyst estimates and public filings. In the case of estimated Adjusted EBITDA for Grace, Moelis reviewed both median consensus research analyst estimates and the Management Projections.
The selected publicly traded companies used in this analysis and their implied trading values to estimated Adjusted EBITDA for calendar year 2021 and estimated Adjusted EBITDA for calendar year 2022 multiples are summarized in the following table:
| | Market Cap ($ in millions) | | | EV ($ in millions) | | | EV / Adj. EBITDA 2021E | | | EV / Adj. EBITDA 2022E | |
Specialty Chemical Companies | | | | | | | | | ||||
Air Products & Chemicals, Inc. | | | $64,687 | | | $66,883 | | | 16.5x | | | 14.9x |
Albemarle Corporation | | | $18,947 | | | $20,673 | | | 24.8x | | | 19.3x |
Ashland Global Holdings Inc. | | | $5,718 | | | $7,898 | | | 12.9x | | | 11.8x |
Celanese Corporation | | | $18,091 | | | $20,695 | | | 10.8x | | | 10.5x |
DuPont de Nemours, Inc. | | | $41,641 | | | $55,670 | | | 14.2x | | | 13.3x |
Element Solutions Inc. | | | $5,145 | | | $6,367 | | | 13.9x | | | 13.0x |
Hexcel Corporation | | | $4,848 | | | $5,678 | | | 28.8x | | | 17.3x |
Mean | | | | | | | 17.4x | | | 14.3x | ||
Median | | | | | | | 14.2x | | | 13.3x | ||
Catalyst Companies (For Reference Only) | | | | | | | | | ||||
Albemarle Corporation | | | $18,947 | | | $20,673 | | | 24.8x | | | 19.3x |
Umicore SA | | | $14,579 | | | $16,363 | | | 13.7x | | | 13.1x |
Johnson Matthey Plc. | | | $8,796 | | | $9,967 | | | 9.7x | | | 8.9x |
Clariant AG | | | $7,318 | | | $8,377 | | | 11.6x | | | 10.6x |
PQ Group Holdings Inc. | | | $2,343 | | | $2,712 | | | 12.1x | | | 10.6x |
Mean | | | | | | | 14.4x | | | 12.5x | ||
Median | | | | | | | 12.1x | | | 10.6x | ||
| | | | | | | | |||||
Grace Consensus (Current – as of 04/23/21) | | | $4,299 | | | $5,987 | | | 11.3x | | | 10.1x |
Grace Consensus (Unaffected – as of 03/31/21) | | | $4,002 | | | $5,689 | | | 10.7x | | | 9.7x |
Grace Management Projections (Current – as of 04/23/21) | | | $4,299 | | | $6,572 | | | 11.4x | | | 9.4x |
Grace Management Projections (Unaffected – as of 03/31/21) | | | $4,002 | | | $6,274 | | | 10.9x | | | 8.9x |
In reviewing the characteristics of the selected publicly traded companies for purposes of selecting its reference ranges to apply to Grace’s estimated financial metrics, Moelis noted that the low-end of its reference ranges was informed by Grace’s unaffected trading metrics. Since the three public proposals by 40 North to acquire Grace, Grace had experienced significant share price outperformance relative to the selected publicly traded companies. Moelis deemed the unaffected trading date for these purposes to be March 31, 2021, which was one day prior to 40 North’s “best and final” $70.00 per share cash offer made publicly. Moelis also noted that the high-end of its reference ranges was informed by Ashland Global Holdings Inc., DuPont de Nemours, Inc., and Element Solutions Inc., considering their similar growth trajectory, margin profile, and technological expertise. While considered, Moelis did not utilize data for Air Products & Chemicals, Inc. and Albemarle Corporation in its reference ranges because Moelis assessed that those companies have a different customer mix than Grace. Moelis also did not utilize data for Celanese Corporation in its reference ranges because Moelis assessed that Celanese’s overall portfolio of business assets contains less specialty chemical assets than Grace. Finally, Moelis did not utilize data for Hexcel Corporation in its reference ranges because Moelis assessed that Hexcel’s EBITDA estimates are depressed given Hexcel’s exposure to aerospace and defense, which has been disproportionally impacted by COVID-19. The other catalyst manufacturers were included for reference only and not utilized by Moelis for purposes of selecting the reference range due to the limited relative revenue contribution of the catalyst segments to the aggregate product portfolio of the companies.
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Based on the foregoing analysis and its professional judgment and experience, Moelis selected reference ranges of 10.5x to 12.5x estimated pro forma Adjusted EBITDA for calendar year 2021 and 9.5x to 11.5x estimated Adjusted EBITDA for calendar year 2022. Moelis then applied these multiples to Grace’s estimated pro forma Adjusted EBITDA for calendar year 2021 and estimated Adjusted EBITDA for calendar year 2022, respectively, provided by Grace’s management. This analysis indicated an implied per share value ranges for the Grace common stock of $60.34 to $78.13 per share, and $65.72 to $86.43 per share, respectively. Moelis compared the implied per share value ranges to the Merger Consideration of $70.00 per share.
Selected Precedent Transactions Analysis
Moelis reviewed financial information for selected precedent transactions announced since 2013 with an EV of at least approximately $300 million involving companies that manufacture specialty chemicals and catalysts on a global basis serving a broad range of transportation, industrial and consumer applications and high value specialty chemical companies with similar financial profile, technology focus and customer exposure. Moelis reviewed, among other things, transaction values of the selected precedent transactions as a multiple of last 12 month (“LTM”) Adjusted EBITDA of the target company. Financial data for the relevant transactions were based on publicly available information relating to the relevant transaction.
The selected precedent transactions used in this analysis and their implied transaction value to LTM Adjusted EBITDA multiples are summarized in the following table:
Date Announced | | | Acquiror | | | Target | | | EV (in millions) | | | EV / LTM Adj. EBITDA |
March 2021 | | | DuPont De Nemours, Inc. | | | Laird PLC | | | $2,300 | | | 16.5x |
March 2021 | | | Cerberus Capital Management, L.P. and Koch Minerals & Trading, LLC | | | PQ Group Holdings Inc.’s Performance Chemicals business | | | $1,100 | | | 9.4x |
February 2021 | | | Bain Capital Private Equity & Cinven Group Ltd. | | | Lonza Specialty Ingredients | | | $4,671 | | | 13.0x |
October 2020 | | | Ardian SA and Ardian Holding SAS | | | Angus Chemical Company | | | $2,250 | | | 13.1x |
April 2019 | | | Merck KGaA | | | Versum Materials, Inc. | | | $6,499 | | | 14.3x |
August 2018 | | | Cabot Microelectronics Corporation | | | KMG Chemicals, Inc. | | | $1,566 | | | 13.2x |
March 2018 | | | Carlyle Group Inc. & GIC Pte. | | | Akzo Nobel N.V.’s Specialty Chemicals business | | | $12,524 | | | 9.8x |
December 2017 | | | W. R. Grace & Co. | | | Albemarle Corporation’s Polyolefin Catalysts business | | | $416 | | | 12.8x |
September 2017 | | | Kuraray Co., Ltd. | | | Calgon Carbon Corporation | | | $1,329 | | | 15.6x |
September 2017 | | | H.B. Fuller Company | | | Royal Adhesives & Sealants LLC | | | $1,575 | | | 11.4x |
December 2016 | | | Evonik Industries AG | | | J.M. Huber Corporation’s Silica business | | | $630 | | | 10.5x |
October 2016 | | | Carlyle Group Inc. | | | Atotech B.V. | | | $3,200 | | | 11.9x |
September 2016 | | | Lanxess AG | | | Chemtura Corporation | | | $2,563 | | | 9.5x |
June 2016 | | | BASF SE | | | Albemarle Corporation’s Chemetall Surface Treatment business | | | $3,200 | | | 15.3x |
May 2016 | | | Evonik Industries AG | | | Air Products & Chemicals, Inc.’s Performance Materials division | | | $3,800 | | | 15.8x |
November 2015 | | | Air Liquide S.A. | | | Airgas | | | $13,400 | | | 13.7x |
July 2015 | | | Solvay S.A. | | | Cytec Industries Incorporated. | | | $6,153 | | | 14.8x |
July 2015 | | | Platform Specialty Products Corporation | | | Alent plc | | | $2,254 | | | 13.1x |
June 2015 | | | Apollo Affiliated Funds | | | OM Group, Inc. | | | $1,100 | | | 11.4x |
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Date Announced | | | Acquiror | | | Target | | | EV (in millions) | | | EV / LTM Adj. EBITDA |
November 2014 | | | Golden Gate Capital | | | Angus Chemical Company | | | $1,200 | | | 11.2x |
September 2014 | | | Eastman Chemical Company | | | Taminco Corporation | | | $2,706 | | | 10.0x |
July 2014 | | | Albemarle Corporation | | | Rockwood Chemical Co. | | | $6,142 | | | 11.3x |
October 2013 | | | W. R. Grace & Co. | | | Dow Chemical Company’s Catalysts business | | | $500 | | | 11.1x |
October 2013 | | | Platform Specialty Products Corporation | | | MacDermid | | | $1,800 | | | 10.2x |
October 2013 | | | Solvay S.A. | | | Chemlogics Group | | | $1,345 | | | 10.8x |
June 2013 | | | Cinven Group Ltd. | | | CeramTec | | | $1,988 | | | 11.3x |
Mean | | | | | | | | | 12.4x | |||
Median | | | | | | | | | 11.7x |
In reviewing the characteristics of the selected precedent transactions for purposes of selecting its reference range to apply to Grace’s estimated financial metrics, Moelis noted that its reference range was informed by the mean and median of EV / LTM Adj. EBITDA multiples of selected precedent transactions after considering the selected precedent transactions at the high-end and low-end of the implied transaction multiples. Moelis also noted that its reference range was also informed by selected precedent transactions involving catalysts companies, including Grace’s acquisition of Albemarle Corporation’s Polyolefin Catalysts business at 12.8x EV / LTM Adjusted EBITDA and Grace’s acquisition of Dow Chemical Company’s Catalysts business at 11.1x EV / LTM Adjusted EBITDA. Moelis noted that these were smaller transactions in terms of EV and occurred during a meaningfully different market environment.
Based on the foregoing analysis and its professional judgment and experience, and given the nature of Grace’s operations, Moelis selected a reference range of 11.0x to 13.0x EV / LTM Adjusted EBITDA. Moelis then applied these multiples to Grace’s estimated pro forma Adjusted EBITDA for calendar year 2021 provided by Grace’s management. Moelis used Grace’s Adjusted EBITDA for calendar year 2021 to normalize for the effects of COVID-19 on Grace’s financial performance and included the estimated full-year run-rate impact of the FCS Acquisition. This analysis indicated an implied per share value range for the Grace common stock of $64.81 to $82.55 per share. Moelis compared the implied per share value range to the Merger Consideration of $70.00 per share.
For informational purposes only, Moelis then also applied these multiples to Grace’s estimated Adjusted EBITDA for calendar year 2021 provided by Grace’s management plus an estimated additional run-rate EBITDA of $50 million expected to result from increased capacity from recent capital investments that has not yet been fully realized due to COVID-19 and certain operating segment challenges. This analysis indicated an implied per share value range for the Grace common stock of $72.95 to $92.11 per share. Moelis did not utilize this analysis for purposes of its opinion given the uncertainty of projecting the timing of increased EBITDA resulting from the increased capacity in the current environment. In addition, given the lack of public information relating to adjustments for capital investments of target companies involved in the selected precedent transactions, Moelis noted that applying potential incremental EBITDA resulting from Grace’s increased capital investment to selected precedent information that may not have been adjusted in a consistent way could result in an implied per share value range that was not comparable for purposes of this analysis.
Discounted Cash Flow Analysis
Moelis performed a discounted cash flow analysis of Grace using the Management Projections and other information and data provided by Grace’s management to calculate the present value of the estimated future unlevered after-tax free cash flows projected to be generated by Grace and the present value of Grace’s estimated terminal value, taking into account the present value of Grace’s net operating losses and other tax credits. For purposes of the discounted cash flow analysis, Moelis calculated unlevered free cash flow as Adjusted EBITDA, less (i) taxes, (ii) capital expenditures, (iii) changes in net working capital, (iv) cash paid for environmental and other legacy liabilities and (v) other miscellaneous adjustments.
Moelis utilized a range of discount rates of 7.50% to 9.25% based on an estimated range of Grace’s weighted average cost of capital. The estimated weighted average cost of capital range reflected a cost of equity derived using the Capital Asset Pricing Model using (i) a risk-free rate based on 20-year U.S. government bonds,
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(ii) a selected range of unlevered betas and debt to total capitalization ratios informed by the selected publicly traded companies described above, (iii) an equity risk premium and (iv) a size premium based on publicly traded companies with similar equity values to Grace. Moelis used the foregoing range of discount rates to calculate the present values as of December 31, 2020 of (i) Grace’s estimated after-tax unlevered free cash flows for calendar years 2021 through 2025 (in each case, discounted using the mid-year discounting convention) and (ii) the estimated terminal values derived by applying a range of selected terminal multiples of 9.5x to 10.5x to Grace’s estimated terminal year Adjusted EBITDA.
For purposes of selecting the reference range to apply to Grace’s estimated terminal year Adjusted EBITDA, Moelis noted that the terminal multiple was informed most closely by (i) current and historical trading multiples for Grace, (ii) current and historical trading multiples for the selected publicly traded companies and (iii) headwinds in the refining industry, which are expected to drive multiple contraction over time. Based on the foregoing analysis and its professional judgment and experience, Moelis selected a multiple range of 9.5x to 10.5x estimated terminal year Adjusted EBITDA. Moelis then applied such multiple range to Grace’s estimated terminal year Adjusted EBITDA of $824 million provided by Grace’s management to calculate the estimated terminal values. Grace’s estimated terminal year Adjusted EBITDA reflects the impact of Grace’s management’s long-term, publicly disclosed view of expected lower demand for Grace’s FCC business within the Refining Technologies segment based on long-term secular trends in the refining industry.
In calculating the implied per share value ranges for the Grace common stock, Moelis separately valued Grace’s tax attributes including tax credits and net operating losses with the utilization based cash tax savings schedule for calendar years 2021 through 2030 provided by Grace’s management and using a cost of equity range of 8.5% to 12.5%.
Based on the foregoing, Moelis derived implied per share value ranges for the Grace common stock of $66.69 to $83.39. Moelis compared the implied per share value range to the Merger Consideration of $70.00 per share.
For informational purposes only, Moelis also performed a discounted cash flow analysis of Grace with a terminal year Adjusted EBITDA of $882 million based on Grace’s estimated Adjusted EBITDA for calendar year 2025, which was Grace’s terminal year projected Adjusted EBITDA prior to further adjustments by Grace to take into account the impact of the long-term secular trends in the refining industry on the FCC business within the Refining Technologies segment. This analysis indicated an implied per share value range for the Grace common stock of $71.93 to $89.62 per share. Moelis did not utilize this analysis for purposes of its opinion.
Subsequent to the April 25, 2021 presentation to the Board of Directors, Moelis discovered that in performing the foregoing discounted cash flow analysis, Moelis double counted $15.3 million of acquisition-related costs for the FCS Acquisition in Grace’s estimated future unlevered after-tax free cash flow calculation for 2021 and the projected December 31, 2020 balance sheet. Moelis recalculated Grace’s estimated future unlevered after-tax free cash flow for 2021 to remove the $15.3 million of these costs. This recalculation and the impact on the discounted cash flow analysis did not result in any change to Moelis’ ultimate fairness opinion. Moelis did, however, provide the Board of Directors with the revised discounted cash flow analysis, which indicated (i) an increase to the discounted cash flow analysis implied per share value range for the Grace common stock of approximately $0.22 per share, and (ii) an implied per share value range for the Grace common stock of $66.91 to $83.61 (as compared to $66.69 to $83.39 prior to the correction for the estimated future unlevered after-tax free cash flow for 2021). For informational purposes only, Moelis also recalculated its discounted cash flow analysis using the corrected estimated future unlevered after-tax free cash flow for 2021 and the terminal year Adjusted EBITDA of $882 million, which indicated an implied per share value range for the Grace common stock of $72.14 to $89.84 (as compared to $71.93 to $89.62 prior to the correction for the estimated future unlevered after-tax free cash flow for 2021).
Other Information
Moelis also noted for the Board of Directors the following additional factors that were not considered part of Moelis’ financial analyses with respect to its opinion, but were referenced for informational purposes: (i) an illustrative leverage buyout analysis for the Grace common stock that reviewed Grace using the Management Projections and other information and data provided by Grace’s management which, based on, among other things, a 6.0x leverage and a 15% to 25% internal revenue rate of return, reflected a range of implied share prices of $48.51 to $65.58, (ii) the historical intraday trading prices for the Grace common stock during the 52-week period ended April 23, 2021, which reflected low and high stock prices during such period of $38.70 and $65.17 per share, (iii) the one-year forward stock price targets for the Grace common stock in recently
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published, publicly available equity research analysts’ reports, which indicated undiscounted low and high stock price targets ranging from $65.00 to $75.00 per share, and (iv) the one-year forward stock price targets for the Grace common stock in recently published, publicly available equity research analysts’ reports, which was discounted for one year and indicated low and high stock price targets ranging from $58.82 to $67.87 per share.
Miscellaneous
The foregoing summary of the analyses undertaken by Moelis is not a complete description of Moelis’ opinion or the analyses underlying, and factors considered in connection with, Moelis’ opinion. The preparation of a fairness opinion is a complex analytical process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Moelis’ opinion. In arriving at its fairness determination, Moelis considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis. Rather, Moelis made its fairness determination on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the analyses described above is identical to Grace or the Merger. In addition, such analyses do not purport to be appraisals, nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by such analyses. Because the analyses described above are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, neither Grace nor Moelis or any other person assumes responsibility if future results are materially different from those forecast.
The Merger Consideration was determined through arm’s-length negotiations between Grace and Parent and was approved by the Board of Directors. Moelis did not recommend any specific consideration to Grace or the Board of Directors, or that any specific amount or type of consideration constituted the only appropriate consideration for the transaction. The Board of Directors selected Moelis as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the Merger. Pursuant to a letter agreement dated April 12, 2021, Moelis acted as financial advisor to Grace in connection with the Merger and will receive a fee for its services, estimated to be approximately $28 million in the aggregate based on the information available as of the date of announcement of the Merger, $3 million of which was earned in connection with the delivery of Moelis’ opinion dated April 26, 2021, in connection with the Board of Directors’ consideration of the Merger, regardless of the conclusion reached therein, and the remainder of which is contingent upon completion of the Merger. Furthermore, Grace has agreed to reimburse Moelis for certain expenses and to indemnify Moelis for certain liabilities, including liabilities under the federal securities laws, arising out of its engagement.
Moelis’ affiliates, employees, officers and partners may at any time own securities (long or short) of Grace and Parent. In the past two years, Moelis has not provided investment banking or other services to Grace or Parent. Moelis may, in the future, provide investment banking or other services to Grace, Parent or other parties involved in the Merger and may receive compensation for such services. Mr. Shlomo Yanai, a member of the Board of Directors, serves as a senior advisor to Moelis. Mr. Yanai did not participate in the preparation of the Moelis opinion described above or in the provision of financial advisory services by Moelis to the Board of Directors.
Summary of Management Projections
Except for a financial outlook with respect to the current fiscal quarter and year and, from time to time, certain future years, issued in connection with its ordinary course earnings announcements, Grace does not, as a matter of course, publicly disclose forecasts or projections as to future performance, earnings or other results due to the inherent unpredictability of the underlying assumptions, estimates and projections, especially over the longer term periods. However, Grace is including a summary of certain previously nonpublic, unaudited prospective financial information prepared by its management for the calendar years 2021-2025 (the “Management Projections”) in order to provide Grace Stockholders with access to information that was made available to, and approved by, the Board of Directors in connection with its evaluation of the Merger and the Merger Consideration. The Management Projections were also made available to Parent and Merger Sub at
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Parent’s request in connection with their due diligence review, and the Management Projections were made available to Goldman Sachs and Moelis in connection with the rendering of their respective opinions to the Board of Directors, as further described in the sections of this proxy statement captioned “—Opinion of Goldman Sachs & Co. LLC” and “—Opinion of Moelis & Company LLC.”
The following table presents a summary of the Management Projections. The Management Projections were developed by Grace management on a pro forma basis, giving effect to the proposed acquisition by Grace of the Fine Chemistry Services business of Albemarle Corporation for approximately $570 million, which was announced by Grace on February 26, 2021, prior to the date of the Merger Agreement, and which transaction is expected to close in the second quarter of 2021, subject to customary closing conditions (the “FCS Acquisition”). The Management Projections, however, do not give effect to the Merger and the other transactions contemplated by the Merger Agreement.
(in millions, except per share data) | | | 2021E | | | 2022E | | | 2023E | | | 2024E | | | 2025E |
Revenue | | | $2,039 | | | $2,288 | | | $2,405 | | | $2,525 | | | $2,648 |
Gross Margin | | | $812 | | | $941 | | | $1,004 | | | $1,058 | | | $1,111 |
Adjusted EBITDA(1) | | | $576 | | | $702 | | | $766 | | | $823 | | | $882 |
Adjusted EBIT(2) | | | $446 | | | $557 | | | $614 | | | $663 | | | $714 |
Marginal Tax Rate | | | 26.0% | | | 26.0% | | | 26.0% | | | 26.0% | | | 26.0% |
| | | | | | | | | | ||||||
Selected Cash Flow Adjustments | | | | | | | | | | | |||||
Depreciation & Amortization | | | $131 | | | $145 | | | $152 | | | $160 | | | $168 |
Change in Net Working Capital | | | $(78) | | | $(28) | | | $(22) | | | $(24) | | | $(24) |
Capital Expenditures | | | $(173) | | | $(193) | | | $(210) | | | $(210) | | | $(200) |
Cash Paid for Environmental and Other Legacy Liabilities | | | $(41) | | | $(43) | | | $(48) | | | $(41) | | | $(15) |
Other Misc. Adjustments | | | $38 | | | $(3) | | | $(3) | | | $(1) | | | $(2) |
(1) | “Adjusted EBITDA” is a non-GAAP financial measure which was calculated in the Management Projections as Adjusted EBIT adjusted for depreciation and amortization, and depreciation and amortization included in equity in earnings of unconsolidated affiliates. For purposes of the market-based financial multiples analysis performed by Goldman Sachs and Moelis, the Management Projections also included pro forma 2021E Adjusted EBITDA, giving effect to the FCS Acquisition as though it was completed prior to January 1, 2021, of $601 million. |
(2) | “Adjusted EBIT” is a non-GAAP financial measure which was calculated in the Management Projections as net income attributable to Grace Stockholders adjusted for interest income and expense; income taxes; costs related to legacy matters; restructuring and repositioning expenses and asset impairments; pension costs other than service and interest costs, expected returns on plan assets, and amortization of prior service costs/credits; gains and losses on sales and exits of businesses, product lines, and certain other investments; third-party acquisition-related costs and the amortization of acquired inventory fair value adjustment; gains and losses on modification or extinguishment of debt; the effects of these items on equity in earnings of unconsolidated affiliate; and certain other items that are not representative of underlying trends. |
Important Information Regarding the Management Projections
The Management Projections were developed by Grace management on a pro forma basis, giving effect to the proposed FCS Acquisition. The Management Projections, however, do not give effect to the Merger and the other transactions contemplated by the Merger Agreement. Furthermore, the Management Projections do not take into account the effect of any failure of the transactions contemplated by the Merger Agreement or the FCS Acquisition to be completed and should not be viewed as accurate or continuing in that context. Although the Management Projections are presented with numerical specificity, they were based on numerous estimates, variables and assumptions made by Grace management with respect to industry performance, general business, economic, regulatory, market and financial conditions and other future events, including the completion of the FCS Acquisition, as well as matters specific to Grace’s business, all of which are difficult or impossible to predict accurately and many of which are beyond Grace’s control.
The Management Projections constitute forward-looking information and are subject to many risks and uncertainties that could cause actual results to differ materially from the results forecasted in the Management Projections, including, but not limited to, Grace’s performance, industry performance, general business and economic conditions, customer requirements, staffing levels, competition, adverse changes in applicable laws, regulations or rules, the ability to successfully pursue and complete acquisitions, including the FCS Acquisition, and the various risks set forth in Grace’s reports filed with the SEC. For additional information on factors that
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may cause Grace’s future results to materially vary, see the section of this proxy statement captioned “Forward-Looking Statements.” There can be no assurance that the Management Projections will be realized or that actual results will not be significantly higher or lower than the Management Projections. The Management Projections cover several years, and such information by its nature becomes less reliable with each successive year. In addition, the Management Projections will be affected by Grace’s ability to achieve strategic goals, objectives and targets over the applicable periods, including the consummation of the FCS Acquisition. The Management Projections reflect assumptions as to certain business decisions that are subject to change and cannot, therefore, be considered a guarantee of future operating results, and this information should not be relied on as such. The inclusion of the Management Projections should not be regarded as an indication that Grace, Goldman Sachs, Moelis, their respective officers, directors, affiliates, advisors, or other representatives or anyone who received this information then considered, or now considers, them a reliable prediction of future events, and this information should not be relied upon as such. The inclusion of the Management Projections in this proxy statement should not be regarded as an indication that the Management Projections will be necessarily predictive of actual future events, including Grace’s ability to consummate the FCS Acquisition. No representation is made by Grace or any other person regarding the Management Projections or Grace’s ultimate performance compared to such information. The Management Projections should be evaluated, if at all, in conjunction with the historical financial statements and other information about Grace contained in Grace’s public filings with the SEC. For more information, please see the section of this proxy statement captioned “Where You Can Find More Information.” In light of the foregoing factors, and the uncertainties inherent in the Management Projections, stockholders are cautioned not to place undue, if any, reliance on the Management Projections.
The Management Projections were not prepared with a view toward public disclosure or with a view toward complying with the published guidelines of the SEC regarding projections or accounting principles generally accepted in the United States (“GAAP”), or the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information. Neither Grace’s independent auditor nor any other independent accountant has compiled, examined or performed any procedures with respect to the Management Projections, nor have they expressed any opinion or any other form of assurance on such information or its achievability.
Adjusted EBITDA and Adjusted EBIT contained in the Management Projections summarized above are “non-GAAP financial measures,” which are financial performance measures that are not calculated in accordance with GAAP. The non-GAAP financial measures used in the Management Projections were relied upon by Goldman Sachs and Moelis for purposes of their respective opinions and by the Board of Directors in connection with its evaluation of the Merger. The SEC rules which would otherwise require a reconciliation of a non-GAAP financial measure to a GAAP financial measure do not apply to non-GAAP financial measures included in disclosures relating to a proposed business combination such as the Merger if the disclosure is included in a document such as this proxy statement. In addition, reconciliations of non-GAAP financial measures were not relied upon by Goldman Sachs or Moelis for purposes of their respective opinions or by the Board of Directors in connection with its evaluation of the Merger. Accordingly, Grace has not provided a reconciliation of the financial measures included in the Management Projections to the relevant GAAP financial measures. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by Grace may not be comparable to similarly titled amounts used by other companies. Furthermore, there are limitations inherent in non-GAAP financial measures because they exclude charges and credits that are required to be included in a GAAP presentation. Accordingly, these non-GAAP financial measures should be considered together with, and not as an alternative to, financial measures prepared in accordance with GAAP.
The summary of such information above is included solely to give stockholders access to the information that was made available to the Board of Directors, Goldman Sachs, Moelis, Parent and Merger Sub, and is not included in this proxy statement in order to influence any stockholder to make any investment decision with respect to the Merger, including whether or not to seek appraisal rights with respect to their shares of Grace common stock. In addition, the Management Projections have not been updated or revised to reflect information or results after the date they were prepared or as of the date of this proxy statement, and except as required by applicable securities laws, Grace does not intend to, and disclaims any obligation to, update or otherwise revise the Management Projections or the specific portions presented to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the underlying assumptions are shown to be in error.
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In considering the recommendation of the Board of Directors that the Grace Stockholders adopt the Merger Agreement, the Grace Stockholders should be aware that the executive officers and directors of Grace have certain interests in the Merger that may be different from, or in addition to, the interests of the Grace Stockholders generally. The Board of Directors was aware of these interests and considered them, among other matters, in approving the Merger Agreement and the transactions contemplated hereby, including the Merger, and in making their recommendation that the Grace Stockholders adopt the Merger Agreement.
For purposes of this disclosure,
the executive officers of Grace are:
Hudson La Force, President and Chief Executive Officer;
William C. Dockman, Senior Vice President and Chief Financial Officer;
Elizabeth C. Brown, Senior Vice President, Human Resources and Information Technology and Chief Human Resources Officer;
Keith N. Cole, Senior Vice President, Public Affairs and Environment, Health, Safety, and Chief Sustainability Officer;
Cherée H. Johnson, Senior Vice President, General Counsel and Secretary; and
Mark A. Shelnitz, Former Senior Vice President, General Counsel and Secretary
As disclosed in prior SEC filings, Mr. Shelnitz resigned his position as Senior Vice President, General Counsel and Secretary on December 31, 2020. Mr. Shelnitz is entitled to certain payments in respect of his outatanding and unvested Company Equity Awards in connection with the Merger but is not otherwise entitled to any payments or benefits in connection with the Merger.
Treatment of Company Equity Awards
The Merger Agreement provides that each Company Option and each Company SAR that is outstanding immediately prior to the Effective Time will vest at closing and be converted into the right to receive an amount in cash equal to the product of Merger Consideration (less the applicable exercise price) and the number of shares of Common Stock covered by such Company Option or Company SAR (without interest and less applicable withholding taxes). Payment of these cash amounts will be paid within three (3) business days after the Effective Time. Any Company Option or Company SAR that has a per share exercise price that is greater than or equal to the Merger Consideration will be cancelled at the Effective Time for no consideration or payment.
The Merger Agreement provides that each Company RSU Award and each Company Performance Share Award that is outstanding immediately prior to the Effective Time will be assumed and converted into the right to receive an amount in cash (without interest) equal to the product obtained by multiplying the Merger Consideration by the number of shares of Common Stock covered by such award immediately prior to the Effective Time, which converted cash award will be subject to continued service vesting and other terms as set forth in the Merger Agreement.
For an estimate of the value of unvested equity awards that would vest assuming that the Merger occurs on May 19, 2021and each of the named executive officers experiences a qualifying termination on that date, see “—Quantification of Payments and Benefits to Grace’s Named Executive Officers” below. We estimate that the value of unvested equity awards held by our executive officer who is not a named executive officer that would vest assuming that the Merger occurs on May 19, 2021and such executive officer experiences a qualifying termination on that date is $914,830. Grace’s non-employee directors do not hold equity awards that would vest in connection with the closing of the Merger.
Executive Change in Control Severance Agreements
Each of the Grace executive officers (other than Mr. Shelnitz) is party to a change in control severance agreement with Grace. Each change in control severance agreement provides that, in the event of a termination without “cause” or for “good reason” (in each case, as defined in the applicable change in control severance agreement) following a change in control, the executive officer will be entitled to (i) accrued base salary and
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employee benefits through the date of termination, (ii) an annual bonus for the year prior to termination payable at target levels, to the extent such bonus remains unpaid as of the date of the change in control, (iii) a prorated target bonus for the year of termination, (iv) severance equal to 300% of the sum of his or her annual base salary plus target annual bonus (subject to reduction if the executive is above age 62 at the time of termination), payable in a lump sum, and (v) continued payment by the Company of life and health insurance premiums for 24 months of coverage for the executive and, in the case of such health insurance coverage, his or her dependents, subject to reduction in the event an executive receives comparable benefits during such period following termination of employment, as well as outplacement services. In connection with the Merger, Grace expects to amend the change in control severance agreements with each of Messrs. Cole and Dockman to remove the reduction in severance payments if the executive is above age 62 at the time of termination. The change in control severance agreements provide that any payments and benefits payable to the executive officer will be reduced to the extent necessary to avoid any excise taxes on “excess parachute payments” that would otherwise be imposed under Section 280G and Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”).
For an estimate of the value of the severance payments described above that would be payable to Grace’s named executive officers upon a qualifying termination on May 19, 2021, see the section of this proxy statement captioned “—Quantification of Payments and Benefits to Grace’s Named Executive Officers” below. We estimate that the value of the severance payments described above that would be payable to Grace’s executive officer who is not a named executive officer upon a qualifying termination on May 19, 2021 is $2,145,863.
Treatment of Annual Bonuses
Under the terms of the Merger Agreement, if the Effective Time occurs during the Company’s 2021 or 2022 fiscal year, Grace will pay to each Grace employee who is actively employed as of the last day of Grace’s 2021 fiscal year and who is then participating in an applicable Grace annual bonus plan, a bonus based on performance at a level no less than target and otherwise in accordance with the terms of the applicable bonus plan.
Retention Program
Under the terms of the Merger Agreement, Grace may provide each of its executive officers (other than Mr. Shelnitz) with a retention bonus equal to 50% of the severance payment that would be payable under each such executive’s change in control severance agreement, which retention bonus will be payable subject to continued employment through the first anniversary of the closing of the Merger. In the event any such executive’s employment is terminated by Grace prior to the first anniversary of the closing, the executive will not be entitled to receive such retention bonus, but would remain eligible to receive a severance payment as set forth in the executive’s change in control severance agreement.
Penalty Tax Make-Whole Payments
Grace expects to provide each of its named executive officers (other than Mr. Shelnitz), as well as Grace’s executive officer who is not a named executive officer, with a payment that is intended to mitigate the impact of Sections 280G and 4999 of the Code on each such officers (a “Penalty Tax Make-Whole Payment”). These payments would be made if and when the excise tax under Section 4999 of the Code becomes due and payable, which payment dates could occur upon the closing of the Merger and/or on the date that the officer’s employment terminates under circumstances giving rise to severance payments and benefits under the change in control severance agreements. The estimated amount of the Penalty Tax Make-Whole Payment for each of the following individuals, if granted, is as follows:
Executive Officer | | | ($) |
Mr. La Force | | | 4,343,584 |
Mr. Dockman | | | 1,555,041 |
Ms. Brown | | | 1,165,888 |
Mr. Cole | | | 1,004,985 |
Ms. Johnson | | | 1,006,182 |
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Indemnification and Insurance
Pursuant to the terms of the Merger Agreement, Grace’s directors and executive officers will be entitled to certain ongoing indemnification and coverage for a period of six (6) years following the Company will suspend payment of its quarterly dividend duringEffective Time under directors’ and officers’ liability insurance policies from the pendencySurviving Corporation. This indemnification and insurance coverage is further described in the section captioned “Proposal 1: Adoption of the transaction.Merger Agreement—Indemnification and Insurance.”
The table below sets forth the amount of payments and benefits that each of Grace’s named executive officers would receive in connection with the Merger, assuming (i) that the Merger were consummated and each such named executive officer experienced a qualifying termination on May 19, 2021(which is consummated, the assumed date solely for purposes of this golden parachute compensation disclosure), (ii) a per share price of Grace common stock will be delistedof $70.00, (iii) that each named executive officer’s base salary rate and annual target bonus remain unchanged from those in effect as of the New York Stock Exchangedate of this proxy statement, and deregistered under(iv) equity awards that are outstanding as of May 19, 2021. The calculations in the Exchange Act.
For purposes of this discussion, “single trigger” refers to benefits that arise as a result of the completion of the Merger and “double trigger” refers to benefits that require two conditions, which are the completion of the Merger and a qualifying termination.
Golden Parachute Compensation
Named Executive Officer | | | Cash ($)(1) | | | Equity Awards ($)(2) | | | Perquisites/Benefits ($)(3) | | | Tax Reimbursement ($)(4) | | | Total ($) |
Hudson La Force | | | 6,059,204 | | | 9,243,203 | | | 53,269 | | | 4,343,584 | | | 19,699,260 |
William C. Dockman | | | 2,597,052 | | | 2,167,007 | | | 38,681 | | | 1,555,041 | | | 6,357,781 |
Elizabeth C. Brown | | | 2,343,282 | | | 1,469,424 | | | 50,690 | | | 1,165,888 | | | 5,029,284 |
Keith N. Cole | | | 2,038,591 | | | 1,208,755 | | | 49,152 | | | 1,004,985 | | | 4,301,483 |
Mark A. Shelnitz | | | 0 | | | 118,160 | | | 0 | | | 0 | | | 118,160 |
(1) | Cash Severance for Named Executive Officers. Each of the Grace named executive officers, with the exception of Mr. Shelnitz, is party to a change in control severance agreement with Grace. Each change in control severance agreement provides that, in the event of a termination without “cause” or for “good reason” following a change in control (i.e., “double trigger”), the named executive officer will be entitled to (i) accrued base salary and employee benefits through the date of termination, (ii) an annual bonus for the year prior to termination payable at target levels, to the extent such bonus remains unpaid as of the date of the change in control, (iii) a prorated target bonus for the year of termination, and (iv) severance equal to 300% of the sum of his or her annual base salary plus target annual bonus (for purposes of the foregoing table, this amount has not been reduced for Messrs. Cole or Dockman), payable in a lump sum. |
(2) | Company Equity Award Treatment. As described in more detail in “—Merger Consideration—Treatment of Company Equity Awards,” each Company Option and each Company SAR that is outstanding immediately prior to the Effective Time will vest at closing and be converted into the right to receive an amount in cash equal to the product of the Merger Consideration (less the applicable exercise price) and the number of shares of Grace common stock covered by such Company Option or Company SAR (without interest and less applicable withholding taxes), and each Company RSU Award and each Company Performance Share Award that is outstanding immediately prior to the Effective Time will be assumed and converted into the right to receive an amount in cash (without interest) equal to the product obtained by multiplying the Merger Consideration by the number of shares of Grace common stock covered by such award immediately prior to the Effective Time, which converted cash award will be subject to continued service vesting and other terms as set forth in the Merger Agreement. Amounts shown in respect of Mr. Shelnitz reflect the fact that Mr. Shelnitz holds Company Performance Share Awards that remain eligible to vest based on applicable performance criteria following his resignation from Grace effective December 31, 2020. |
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Set forth below are the values of each type of unvested Company Equity Award held by the named executive officers that would become vested upon the consummation of the Merger (i.e., “single trigger”) or a termination without “cause” or for “good reason” within two years after the Merger (i.e., “double trigger”).
Named Executive Officer | | | Company Options Outstanding as of May 19, 2021 (Single Trigger) ($) | | | Company SARs Outstanding as of May 19, 2021 (Single Trigger) ($) | | | Company RSU Awards Outstanding as of May 19, 2021 (Double Trigger) ($) | | | Company Performance Share Awards Outstanding as of May 19, 2021 (Double Trigger) ($) | | | Total ($) |
Hudson La Force | | | 814,853 | | | 0 | | | 3,644,900 | | | 4,783,450 | | | 9,243,203 |
William C. Dockman | | | 203,717 | | | 0 | | | 831,810 | | | 1,131,480 | | | 2,167,007 |
Elizabeth C. Brown | | | 140,054 | | | 0 | | | 576,870 | | | 752,500 | | | 1,469,424 |
Keith N. Cole | | | 114,585 | | | 0 | | | 478,450 | | | 615,720 | | | 1,208,755 |
Mark A. Shelnitz | | | 0 | | | 0 | | | 0 | | | 118,160 | | | 118,160 |
(3) | Health and Welfare Benefits for Named Executive Officers. Each change in control severance agreement with the Grace named executive officers provides that, in the event of a termination without “cause” or for “good reason” following the Merger prior to May 19, 2021 (i.e., “double trigger”), the named executive officer will be entitled to continued payment by the Company of life and health insurance premiums for 24 months of coverage for the executive and, in the case of such health insurance coverage, his or her dependents, subject to reduction in the event an executive receives comparable benefits during such period following termination of employment, as well as outplacement services. |
(4) | Penalty Tax Make-Whole Payments. Grace expects to provide each of its named executive officers (other than Mr. Shelnitz) with a Penalty Tax Make-Whole Payment. These payments would be made if and when the excise tax under Section 4999 of the Code becomes due and payable, which payment dates could occur upon the closing of the Merger and/or on the date that the officer’s employment terminates under circumstances giving rise to severance payments and benefits under the change in control severance agreements. |
We anticipate that the total amount of funds necessary to complete the Merger and the related transactions, and to pay the fees and expenses required to be paid at the closing of the Merger by Parent and Merger Sub under the Merger Agreement, will be approximately $7,151 million. This amount includes funds needed to: (i) pay Grace Stockholders the amounts due under the Merger Agreement for their Grace common stock, (ii) make payments in respect of our outstanding Company Equity Awards payable at closing of the Merger pursuant to the Merger Agreement, (iii) repay or refinance any outstanding indebtedness of Grace and its subsidiaries contemplated by, or required in connection with the transactions described in, the Merger Agreement or the Commitment Letters and (iv) pay any fees and expenses of or payable by Parent, Merger Sub or the Surviving Corporation at the closing of the Merger.
Parent and Merger Sub have obtained committed financing consisting of (i) equity to be provided by Standard Industries Holdings pursuant to the terms of the Equity Commitment Letter and (ii) debt financing to be provided pursuant to the Debt Commitment Letter by the lenders party thereto. In connection with the Merger Agreement, Parent and Merger Sub have delivered to Grace copies of the Commitment Letters. Notwithstanding anything in the Merger Agreement to the contrary, in no event will the receipt or availability of any funds or financing (including the financing contemplated by the Commitment Letters) by or to Parent or any of its affiliates or any other financing transaction be a condition to any of the obligations of Parent or Merger Sub under the Merger Agreement.
Equity Financing
Pursuant to the Equity Commitment Letter, Standard Industries Holdings has committed to contribute to Parent at the closing of the Merger an aggregate amount in cash equal to $3,516 million for the purpose of funding the Merger Amounts. The obligations of Standard Industries Holdings to provide the equity financing under the Equity Commitment Letter are subject to certain mutual closinga number of conditions, including, (1)but not limited to: (i) the adoptionexecution and delivery of the Merger Agreement by holders of a majority of the outstanding shares of Grace common stock, (2) the expiration or early termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and the approval of the Merger under certain other applicable antitrust laws, and (3) the absence of any order, injunction or law prohibiting the Merger. In the case of the Company, completion of the Merger is subject to certain additional closing conditions, including (A) the accuracy of Parent and Merger Sub’s representations and warranties, subject to certain materiality standards set forth in the Merger Agreement, and (B) the performance by Parent and Merger Sub in all material respects of their covenants and agreements under the Merger Agreement. In the case of Parent and Merger Sub, completion of the Merger is subject to certain additional closing conditions, including (X) the accuracy of the Company’s representations and warranties, subject to certain materiality standards set forth in the Merger Agreement, (Y) the performance by the Company in all material respects of its covenants and agreements under the Merger Agreement, and (Z) no Company Material Adverse Effect (as defined in the Merger Agreement) having occurred since the date of the Merger Agreement. The closing of the Merger is not subject to a financing condition. The parties expect the transaction to close in the fourth quarter of 2021.
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financing under the Equity Commitment Letter is funded at the closing of the Merger. We refer to the equity financing described in the preceding sentence as the “Equity Financing,” and we refer to the Equity Financing together with the Debt Financing (as defined below) as the “Financing.”
The obligation of Standard Industries Holdings to fund the equity commitment will automatically and immediately terminate upon the earliest to occur of: (i) the consummation of the closing of the Merger is not satisfied.
Grace is an express third-party beneficiary of the Equity Commitment Letter and may cause Standard Industries Holdings to perform its funding obligations under the Equity Commitment Letter subject to (i) the limitations and conditions set forth in the Equity Commitment Letter and (ii) the terms and conditions of the Merger Agreement. Standard Industries Holdings has committedannounced that the Equity Financing will be supported by (a) the available cash of its subsidiary, Standard Industries Inc., (b) up to capitalize Parent at$2,500 million in proceeds from a secured term loan and (c) a financing commitment of $600 million by certain investment funds affiliated with Apollo Global Management.
Debt Financing
The Debt Commitment Letter provides that the closing of the Merger with an aggregate equity contribution equal to $3,516 million onlenders party thereto will provide, upon the terms and subject to the conditions set forth in its equity commitment letter. Standard Industries Holdings has announced that its equity commitmentthe Debt Commitment Letter, in the aggregate up to $3,905 million in debt financing (not all of which is expected to be drawn at the closing of the Merger), consisting of the following:
$2.5 billion senior secured term loan B facility;
$450 million senior secured revolving credit facility; and
$955 million senior unsecured bridge credit facility.
We refer to the debt financing described above as the “Debt Financing.” The proceeds of the Debt Financing will be supportedused by Parent and Merger Sub (i) to effect the available cash of its subsidiary, Standard Industries Inc.,Merger and up to $2,500 million in proceeds from a secured term loan.
The obligations of the Lenderslenders party to the Debt Commitment Letter to provide debt financingthe Debt Financing under the debt commitment letterDebt Commitment Letter are subject to a number of customary conditions.conditions, including, but not limited to (as applicable):
the consummation in all material respects of the Merger in accordance with the Merger Agreement as in effect on April 26, 2021 (without any amendment, modification or waiver of any of the provisions thereof that would be materially adverse to the lenders in their capacity as such without the consent of the lead arrangers, such consent not to be unreasonably withheld, delayed or conditioned);
subject to certain limitations and exceptions, the accuracy in all material respects as of the closing of the Merger of certain specified representations and warranties in the Merger Agreement and certain specified representations and warranties in the loan documents;
the Equity Financing has occurred or, substantially concurrently with the initial funding of the Debt Financing, will occur; and
such lenders having been afforded a Marketing Period (as defined in the section of this proxy statement captioned “—Closing and Effective Time”) of at least 15 consecutive business days (subject to certain blackout dates) following receipt of certain required financial information regarding Grace.
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As of the date hereof, the documentation governing the Debt Financing contemplated by the Debt Commitment Letter has not been finalized and, accordingly, the actual terms of the Debt Financing may differ from those described in this proxy statement.
Guaranty
Pursuant to the Guaranty, Standard Industries Holdings has guaranteed paymentagreed to guarantee the discharge when due of Parent’s obligation to pay: (i) the Parent Termination Fee (as defined under the caption “Proposal 1: Adoption of the termination fee payable by Parent under certain circumstances, as well as certainMerger Agreement—Termination Fee”) pursuant and in accordance with the Merger Agreement; (ii) the reimbursement obligations that may be owedof Parent in connection with fees and expenses payable pursuant to and in accordance with the Merger Agreement; (iii) the reimbursement and indemnification obligations of Parent and Merger Sub in connection with debt financing; and (iv) any enforcement expenses due by Parent pursuant to legal proceedings as a result of certain defaults under the Merger Agreement. We refer to the obligations set forth in the preceding sentence as the “Guaranteed Obligations.” The obligations of Standard Industries Holdings under the Guaranty are subject to an aggregate cap equal to $290 million.
Subject to specified exceptions, the Guaranty will terminate upon the earliest to occur of:
the consummation of the closing of the Merger;
90 days following the valid termination of the Merger Agreement unless prior to such date (i) Grace has delivered a written notice with respect to the Guaranteed Obligations or (ii) Grace has commenced a legal proceeding against Standard Industries Holdings, Parent or Merger Sub alleging that any Guaranteed Obligations are due and owing, in which case the Guaranty will survive only with respect to such obligations and will terminate upon the final, non-appealable resolution of all such legal proceedings by a court of competent jurisdiction and the satisfaction by Standard Industries Holdings of any obligations finally determined to be owed by Standard Industries Holdings consistent with the terms of the Guaranty; and
the actual receipt in full by Grace of all Guaranteed Obligations (regardless of whether paid by Standard Industries Holdings or by Parent or an affiliate thereof), except to the extent that any payment to Grace in respect of any Guaranteed Obligations is rescinded or otherwise returned.
The closing of the Merger will take place (i) at 10:00 a.m., New York City time, on the third (3rd) business day following the satisfaction or waiver of all conditions to closing of the Merger (as described under the caption, “Proposal 1: Adoption of the Merger Agreement—Conditions to the Closing of the Merger”), other than conditions that by their terms are to be satisfied at the closing but subject to the termssatisfaction or waiver of such conditions at such time, unless the Marketing Period (as defined below) has not concluded at the time the closing would have otherwise been required to occur, in which case the closing will take place on the date following the satisfaction or waiver of the conditions to closing of the Merger that is the earliest to occur of (a) any business day during the Marketing Period specified by Parent on at least three (3) business days’ written notice to Grace and (b) the third (3rd) business day immediately following the last day of the Marketing Period (subject in each case to the satisfaction or waiver of all of the conditions to the closing of the Merger set forth in the Merger Agreement and a limited guarantee providedat or prior to such time (other than those conditions that by Standard Industries Holdingstheir terms are to be satisfied at the closing, but subject to the Company.
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Parent’s obligation to effect the Merger to fail to be satisfied assuming the closing would be scheduled at any time during such 15 consecutive business day period; provided that, for purposes of determining the Marketing Period, (a) if the Marketing Period has not ended by August 20, 2021, then the Marketing Period will not commence prior to September 9, 2021, (b) if the Marketing Period has not ended by December 17, 2021, then the Marketing Period will not commence prior to January 3, 2022 and (c) July 2, 2021, July 5, 2021, November 24, 2021 and November 26, 2021 will not be business days; provided, further, that if Grace in good faith reasonably believes that the Required Information has been delivered to Parent and the Required Information is compliant with the requirements in the Merger Agreement, it may deliver to Parent a written notice to that effect (stating that it believes that such delivery has been completed and the Required Information is compliant), in which case the Required Information will be deemed to have been provided and compliant (and, if the other conditions set forth in this definition have been met, the Marketing Period commenced) on the first business day following the date such notice is deemed to have been received pursuant to the Merger Agreement unless Parent in good faith reasonably believes the delivery of the Required Information has not been completed or is not compliant and, within two (2) business days of the delivery of such notice by Grace, delivers a written notice to Grace to that effect (stating with specificity which Required Information that Parent reasonably believes has not been delivered or is not compliant), in which case the Marketing Period will be deemed to have not commenced and will only commence beginning on the date of delivery to Parent of the Required Information that is compliant and the other conditions set forth in this definition having been met. Notwithstanding the foregoing, the Marketing Period will not commence and will be deemed not to have commenced if, on or prior to the completion of such 15 consecutive business day period, Grace indicates its intent to restate any financial statements or material financial information included in the Merger. The partiesRequired Information, in which case the Marketing Period will be deemed not to commence unless and until such restatement has been completed and the applicable Required Information has been amended or Grace has announced that it has concluded that no restatement will be required. If the Required Information is not compliant with the requirements in the Merger Agreement throughout and on the first and the last day of such period, then a new 15 consecutive business day period will commence upon Parent receiving updated Required Information that is compliant and the other conditions set forth in this definition having been met. Notwithstanding anything in the Merger Agreement to the contrary, the Marketing Period will be deemed to have agreedbeen completed on any date on which Parent or its subsidiaries obtains proceeds of a high yield financing in an amount sufficient to take all actions necessary to consummatereplace the merger, including cooperating to obtainbridge facilities contemplated by the regulatory approvals necessary to completeDebt Commitment Letter (including proceeds obtained in escrow) and completed syndication of the Merger.term loan and revolving credit facilities contemplated by the Debt Commitment Letter.
If the Merger is consummated, stockholders who continuously hold shares of Grace common stock through the Effective Time, who do not vote in favor of the adoption of the Merger Agreement doesand who properly demand appraisal of their shares and who do not purportwithdraw their demands or otherwise lose their rights of appraisal will be entitled to beseek appraisal of their shares in connection with the Merger under Section 262 of the DGCL (“Section 262”). The following discussion is not a complete statement of the law pertaining to appraisal rights under the DGCL and is subject to, and qualified in its entirety by the full text of Section 262, which is attached to this proxy statement as Annex D and incorporated herein by reference. The following summary does not constitute any legal or other advice and does not constitute a recommendation that stockholders exercise their appraisal rights under Section 262. All references in Section 262 and in this summary to a “stockholder” are to the record holder of shares of Grace common stock unless otherwise expressly noted herein. Only a holder of record of shares of Grace common stock is entitled to demand appraisal of the shares registered in that holder’s name. A person having a beneficial interest in shares of Grace common stock held of record in the name of another person, such as a bank, broker, trust or other nominee, must act promptly to cause the record holder to follow the steps summarized below properly and in a timely manner to perfect appraisal rights. If you hold your shares of Grace common stock through a bank, broker or other nominee and you wish to exercise appraisal rights, you should consult with your bank, broker or the other nominee.
Under Section 262, if the Merger is completed, holders of shares of Grace common stock who: (i) submit a written demand for appraisal of their shares; (ii) do not vote in favor of the adoption of the Merger Agreement; (iii) continuously are the record holders of such shares through the Effective Time; and (iv) otherwise exactly follow the procedures set forth in Section 262 may be entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of the shares of Grace common stock, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with
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interest to be paid on the amount determined to be fair value, if any, as determined by the court. However, after an appraisal petition has been filed, the Delaware Court of Chancery will dismiss appraisal proceedings as to all stockholders who have asserted appraisal rights unless (a) the total number of shares for which appraisal rights have been pursued and perfected exceeds 1% of the outstanding shares of Grace common stock as measured in accordance with subsection (g) of Section 262; or (b) the value of the aggregate Merger Consideration in respect of the shares of Grace common stock for which appraisal rights have been pursued and perfected exceeds $1 million (conditions (a) and (b) referred to as the “ownership thresholds”). Unless the Delaware Court of Chancery, in its discretion, determines otherwise for good cause shown, interest on an appraisal award will accrue and compound quarterly from the Effective Time through the date the judgment is paid at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during such period. However, at any time before the Delaware Court of Chancery enters judgment in the appraisal proceedings, the Surviving Corporation may voluntarily pay to each stockholder entitled to appraisal an amount in cash pursuant to subsection (h) of Section 262, in which case such interest will accrue after the time of such payment only on an amount that equals the difference, if any, between the amount so paid and the “fair value” of the shares as determined by the Delaware Court of Chancery, in addition to any interest accrued prior to the time of such voluntary cash payment, unless paid at such time. The Surviving Corporation is under no obligation to make such voluntary cash payment prior to such entry of judgment.
Under Section 262, where a Merger Agreement is to be submitted for adoption at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, must notify each of its stockholders who was such on the record date for notice of such meeting with respect to shares for which appraisal rights are available that appraisal rights are available and include in the notice a copy of Section 262. This proxy statement constitutes Grace’s notice to stockholders that appraisal rights are available in connection with the Merger, and the full text of Section 262 is attached to this proxy statement as Annex D. In connection with the Merger, any holder of shares of Grace common stock who wishes to exercise appraisal rights, or who wishes to preserve such holder’s right to do so, should review Annex D carefully. Failure to strictly comply with the requirements of Section 262 in a timely and proper manner may result in the loss of appraisal rights under the DGCL. A stockholder who loses his, her or its appraisal rights will be entitled to receive the Merger Consideration described in the Merger Agreement. Moreover, because of the complexity of the procedures for exercising the right to seek appraisal of shares of Grace common stock, Grace believes that if a stockholder considers exercising such rights, that stockholder should seek the advice of legal counsel.
Stockholders wishing to exercise the right to seek an appraisal of their shares of Grace common stock must do ALL of the following:
the stockholder must not vote in favor of the proposal to adopt the Merger Agreement;
the stockholder must deliver to Grace a written demand for appraisal before the vote on the Merger Agreement at the Special Meeting;
the stockholder must continuously hold the shares from the date of making the demand through the Effective Time (a stockholder will lose appraisal rights if the stockholder transfers the shares before the Effective Time); and
the stockholder (or any person who is the beneficial owner of shares of Grace common stock held either in a voting trust or by a nominee on behalf of such person) or the Surviving Corporation must file a petition in the Delaware Court of Chancery requesting a determination of the fair value of the shares within 120 days after the Effective Time. The Surviving Corporation is under no obligation to file any petition and has no intention of doing so.
In addition, one of the ownership thresholds must be met.
Because a proxy that does not contain voting instructions will, unless revoked, be voted in favor of the adoption of the Merger Agreement, a stockholder who votes by proxy and who wishes to exercise appraisal rights must vote against the adoption of the Merger Agreement, abstain or not vote its shares.
Filing Written Demand
Any holder of shares of Grace common stock wishing to exercise appraisal rights must deliver to Grace, before the vote on the adoption of the Merger Agreement at the Special Meeting at which the proposal to adopt the Merger Agreement will be submitted to stockholders, a written demand for the appraisal of the stockholder’s
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shares, and that stockholder must not vote or submit a proxy in favor of the adoption of the Merger Agreement. A holder of shares of Grace common stock exercising appraisal rights must hold of record the shares on the date the written demand for appraisal is made and must continue to hold the shares of record through the Effective Time. A proxy that is submitted and does not contain voting instructions will, unless revoked, be voted in favor of the adoption of the Merger Agreement, and it will constitute a waiver of the stockholder’s right of appraisal and will nullify any previously delivered written demand for appraisal. Therefore, a stockholder who submits a proxy and who wishes to exercise appraisal rights must submit a proxy containing instructions to vote against the adoption of the Merger Agreement or abstain from voting, or otherwise fail to vote, on the adoption of the Merger Agreement. Neither voting against the adoption of the Merger Agreement nor abstaining from voting or failing to vote on the proposal to adopt the Merger Agreement will, in and of itself, constitute a written demand for appraisal satisfying the requirements of Section 262. The written demand for appraisal must be in addition to and separate from any proxy or vote on the adoption of the Merger Agreement. A proxy or vote against the adoption of the Merger Agreement will not constitute a demand. A stockholder’s failure to make the written demand prior to the taking of the vote on the adoption of the Merger Agreement at the Special Meeting of Grace Stockholders will constitute a waiver of appraisal rights.
Only a holder of record of shares of Grace common stock is entitled to demand appraisal rights for the shares registered in that holder’s name. A demand for appraisal in respect of shares of Grace common stock must be executed by or on behalf of the holder of record, and must reasonably inform Grace of the identity of the holder and state that the person intends thereby to demand appraisal of the holder’s shares in connection with the Merger. If the shares are owned of record in a fiduciary or representative capacity, such as by a trustee, guardian or custodian, such demand must be executed by or on behalf of the record owner, and if the shares are owned of record by more than one (1) person, as in a joint tenancy and tenancy in common, the demand must be executed by or on behalf of all joint owners. An authorized agent, including an authorized agent for two (2) or more joint owners, may execute a demand for appraisal on behalf of a holder of record; however, the agent must identify the record owner or owners and expressly disclose that, in executing the demand, the agent is acting as agent for the record owner or owners.
STOCKHOLDERS WHO HOLD THEIR SHARES IN BROKERAGE OR BANK ACCOUNTS OR OTHER NOMINEE FORMS AND WHO WISH TO EXERCISE APPRAISAL RIGHTS SHOULD CONSULT WITH THEIR BANK, BROKER OR OTHER NOMINEES, AS APPLICABLE, TO DETERMINE THE APPROPRIATE PROCEDURES FOR THE BANK, BROKER OR OTHER NOMINEE TO MAKE A DEMAND FOR APPRAISAL OF THOSE SHARES. A PERSON HAVING A BENEFICIAL INTEREST IN SHARES HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A BANK, BROKER OR OTHER NOMINEE, MUST ACT PROMPTLY TO CAUSE THE RECORD HOLDER TO FOLLOW PROPERLY AND IN A TIMELY MANNER THE STEPS NECESSARY TO PERFECT APPRAISAL RIGHTS.
All written demands for appraisal pursuant to Section 262 should be mailed or delivered to:
W. R. Grace & Co.
Attention: Senior Vice President, General Counsel and Secretary
7500 Grace Drive
Columbia, Maryland 21044
Any holder of shares of Grace common stock who has delivered a written demand to Grace and who has not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw his, her or its demand for appraisal and accept the consideration offered pursuant to the Merger Agreement by delivering to Grace a written withdrawal of the demand for appraisal. However, any such attempt to withdraw the demand made more than 60 days after the Effective Time will require written approval of the Surviving Corporation. No appraisal proceeding in the Delaware Court of Chancery will be dismissed as to any stockholder without the approval of the Delaware Court of Chancery, and such approval may be conditioned upon such terms as the Delaware Court of Chancery deems just; provided, however, that this will not affect the right of any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such stockholder’s demand for appraisal and to accept the Merger Consideration within 60 days after the Effective Time. If an appraisal proceeding is commenced and Grace, as the Surviving Corporation, does not approve a request to withdraw a demand for appraisal when that approval is required, or, except with respect to any stockholder who withdraws such stockholder’s demand in accordance with the proviso in the immediately
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preceding sentence, if the Delaware Court of Chancery does not approve the dismissal of an appraisal proceeding with respect to a stockholder, the stockholder will be entitled to receive only the appraised value determined in any such appraisal proceeding, which value could be less than, equal to or more than the Merger Consideration being offered pursuant to the Merger Agreement.
Notice by the Surviving Corporation
If the Merger is completed, within 10 days after the Effective Time, the Surviving Corporation will notify each holder of shares of Grace common stock who has properly made a written demand for appraisal pursuant to Section 262, and who has not voted in favor of the adoption of the Merger Agreement, that the Merger has become effective and the effective date thereof.
Filing a Petition for Appraisal
Within 120 days after the Effective Time, but not thereafter, the Surviving Corporation or any holder of shares of Grace common stock who has complied with Section 262 and is entitled to seek appraisal under Section 262 (including for this purpose any beneficial owner of the relevant shares) may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery, with a copy served on the Surviving Corporation in the case of a petition filed by a stockholder (or beneficial owner), demanding a determination of the fair value of the shares held by all dissenting stockholders entitled to appraisal. The Surviving Corporation is under no obligation, and has no present intention, to file a petition, and stockholders should not assume that the Surviving Corporation will file a petition or initiate any negotiations with respect to the fair value of the shares of Grace common stock. Accordingly, any holders of shares of Grace common stock who desire to have their shares appraised should initiate all necessary action to perfect their appraisal rights in respect of their shares of Grace common stock within the time and in the manner prescribed in Section 262. The failure of a holder of Grace common stock to file such a petition within the period specified in Section 262 could nullify the stockholder’s previous written demand for appraisal.
Within 120 days after the Effective Time, any holder of shares of Grace common stock who has complied with the requirements of Section 262 and who is entitled to appraisal rights thereunder will be entitled, upon written request, to receive from the Surviving Corporation a statement setting forth the aggregate number of shares not voted in favor of the adoption of the Merger Agreement and with respect to which Grace has received demands for appraisal, and the aggregate number of holders of such shares. The Surviving Corporation must mail this statement to the requesting stockholder within 10 days after receipt by the Surviving Corporation of the written request for such a statement or within 10 days after the expiration of the period for delivery of demands for appraisal, whichever is later. A beneficial owner of shares of Grace common stock held either in a voting trust or by a nominee on behalf of such person may, in such person’s own name, file a petition seeking appraisal or request from the Surviving Corporation the foregoing statements. As noted above, however, the demand for appraisal can only be made by a stockholder of record.
If a petition for an appraisal is duly filed by a holder of shares of Grace common stock and a copy thereof is served upon the Surviving Corporation, the Surviving Corporation will then be obligated within 20 days after such service to file with the Delaware Register in Chancery a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached. Upon the filing of any such petition, the Delaware Court of Chancery may order that notice of the time and place fixed for the hearing on the petition be mailed to the Surviving Corporation and all of the stockholders shown on the written statement described above at the addresses stated therein. Such notice will also be published at least one (1) week before the day of the hearing in a newspaper of general circulation published in the City of Wilmington, Delaware, or in another publication determined by the court. The costs of these notices are borne by the Surviving Corporation. After notice to stockholders as required by the court, the Delaware Court of Chancery is empowered to conduct a hearing on the petition to determine those stockholders who have complied with Section 262 and who have become entitled to appraisal rights thereunder. The Delaware Court of Chancery may require the stockholders who demanded payment for their shares to submit their stock certificates (if any) to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings and, if any stockholder fails to comply with the direction, the Delaware Court of Chancery may dismiss that stockholder from the proceedings. The Delaware Court of Chancery will dismiss appraisal proceedings as to all stockholders who have asserted appraisal rights if neither of the ownership thresholds is met.
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Determination of Fair Value
After determining the holders of Grace common stock entitled to appraisal and that at least one of the ownership thresholds described above has been satisfied as to stockholders seeking appraisal rights, the appraisal proceeding will be conducted in accordance with the rules of the Delaware Court of Chancery, including any rules specifically governing appraisal proceedings. Through such proceeding, the Delaware Court of Chancery will determine the “fair value” of the shares of Grace common stock, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest, if any, to be paid upon the amount determined to be the fair value. In determining fair value, the Delaware Court of Chancery will take into account all relevant factors. Unless the court in its discretion determines otherwise for good cause shown, interest from the Effective Time through the date of payment of the judgment will be compounded quarterly and will accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the Effective Time and the date of payment of the judgment. However, at any time before the Delaware Court of Chancery enters judgment in the appraisal proceedings, the Surviving Corporation may pay to each stockholder entitled to appraisal an amount in cash, in which case such interest will accrue after the time of such payment only on an amount that equals the difference, if any, between the amount so paid and the “fair value” of the shares as determined by the Delaware Court of Chancery, in addition to any interest accrued prior to the time of such voluntary payment, unless paid at such time.
In Weinberger v. UOP, Inc., the Supreme Court of Delaware discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered, and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court stated that, in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts that could be ascertained as of the date of the Merger that throw any light on future prospects of the merged corporation. Section 262 provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the Merger.” In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Supreme Court of Delaware also stated that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the Merger and not the product of speculation, may be considered.” In addition, the Delaware courts have decided that the statutory appraisal remedy, depending on factual circumstances, may or may not be a dissenting stockholder’s exclusive remedy.
Stockholders considering seeking appraisal should be aware that the fair value of their shares as so determined by the Delaware Court of Chancery could be more than, the same as or less than the consideration they would receive pursuant to the Merger if they did not seek appraisal of their shares and that an opinion of an investment banking firm as to the fairness from a financial point of view of the consideration payable in a Merger is not an opinion as to, and does not in any manner address, fair value under Section 262. No representation is made as to the outcome of the appraisal of fair value as determined by the Delaware Court of Chancery, and stockholders should recognize that such an appraisal could result in a determination of a value higher or lower than, or the same as, the Merger Consideration. Neither Grace nor Parent anticipates offering more than the Merger Consideration to any stockholder exercising appraisal rights, and each of Grace and Parent reserves the rights to make a voluntary cash payment pursuant to subsection (h) of Section 262 and to assert, in any appraisal proceeding, that for purposes of Section 262, the “fair value” of a share of Grace common stock is less than the Merger Consideration. If a petition for appraisal is not timely filed, or if neither of the ownership thresholds described above has been satisfied as to stockholders seeking appraisal rights, then the right to an appraisal will cease. The costs of the appraisal proceedings (which do not include attorneys’ fees or the fees and expenses of experts) may be determined by the Delaware Court of Chancery and charged upon the parties as the Delaware Court of Chancery deems equitable under the circumstances. Upon application of a stockholder, the Delaware Court of Chancery may also order that all or a portion of the expenses incurred by a stockholder in connection with an appraisal proceeding, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts, be charged pro rata against the value of all the shares entitled to be appraised. In the absence of such determination or assessment, each party bears its own expenses.
If any stockholder who demands appraisal of his, her or its shares of Grace common stock under Section 262 fails to perfect, or effectively loses or withdraws, such holder’s right to appraisal, the stockholder’s
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shares of Grace common stock will be deemed to have been converted at the Effective Time into the right to receive the Merger Consideration. A stockholder will fail to perfect, or effectively lose or withdraw, the holder’s right to appraisal if no petition for appraisal is filed within 120 days after the Effective Time, if neither of the ownership thresholds described above has been satisfied as to stockholders seeking appraisal rights or if the stockholder delivers to the Surviving Corporation a written withdrawal of the holder’s demand for appraisal and an acceptance of the Merger Consideration in accordance with Section 262.
From and after the Effective Time, no stockholder who has demanded appraisal rights will be entitled to vote such shares of Grace common stock for any purpose or to receive payment of dividends or other distributions on the stock, except dividends or other distributions on the holder’s shares of Grace common stock, if any, payable to stockholders as of a time prior to the Effective Time. If no petition for an appraisal is filed, if neither of the ownership thresholds described above has been satisfied as to the stockholders seeking appraisal rights, or if the stockholder delivers to the Surviving Corporation a written withdrawal of the demand for an appraisal and an acceptance of the Merger, either within 60 days after the Effective Time or thereafter with the written approval of the Surviving Corporation, then the right of such stockholder to an appraisal will cease. Once a petition for appraisal is filed with the Delaware Court of Chancery, however, the appraisal proceeding may not be dismissed as to any stockholder without the approval of the court, and such approval may be conditioned upon such terms as the court deems just; provided, however, that the foregoing will not affect the right of any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such stockholder’s demand for appraisal and to accept the terms offered upon the Merger within 60 days after the Effective Time.
Failure to comply strictly with all of the procedures set forth in Section 262 may result in the loss of a stockholder’s statutory appraisal rights. Consequently, any stockholder wishing to exercise appraisal rights is encouraged to consult legal counsel before attempting to exercise those rights.
The following discussion is a summary of certain material U.S. federal income tax consequences of the Merger that may be relevant to U.S. Holders (as defined below) of shares of Grace common stock whose shares are converted into the right to receive cash pursuant to the Merger. This discussion is limited to Grace Stockholders who hold their shares of Grace common stock as “capital assets” within the meaning of Section 1221 of the Code (generally, property held for investment purposes). This discussion is based upon the Code, Treasury Regulations promulgated under the Code, rulings and other published positions of the Internal Revenue Service (the “IRS”) and judicial decisions, all as in effect on the date of this proxy statement and all of which are subject to change or differing interpretations at any time, possibly with retroactive effect. Any such change or differing interpretation could affect the accuracy of the statements and conclusions set forth in this discussion. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax considerations described in this discussion. No advance ruling has been or will be sought from the IRS regarding any matter discussed below.
This discussion is for general information purposes only and does not purport to be a complete analysis of all of the U.S. federal income tax considerations that may be relevant to particular holders in light of their particular facts and circumstances, or to Grace Stockholders subject to special rules under the U.S. federal income tax laws, including, for example, but not limited to:
banks and other financial institutions;
mutual funds;
insurance companies;
brokers or dealers in securities, currencies or commodities;
dealers or traders in securities subject to a mark-to-market method of accounting with respect to shares of Grace common stock (by vote or value);
regulated investment companies and real estate investment trusts;
retirement plans, individual retirement and other deferred accounts;
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tax-exempt organizations, governmental agencies, instrumentalities or other governmental organizations and pension funds;
holders that are holding shares of Grace common stock as part of a “straddle,” hedge, constructive sale, or other integrated transaction or conversion transaction or similar transactions;
U.S. Holders whose functional currency is not the U.S. dollar;
partnerships, other entities classified as partnerships for U.S. federal income tax purposes, “S corporations,” or any other pass-through entities for U.S. federal income tax purposes (or investors in such entities);
expatriated entities subject to Section 7874 of the Code;
holders that are required to accelerate the recognition of any item of gross income as a result of such income being recognized on an “applicable financial statement”;
persons subject to the alternative minimum tax;
U.S. expatriates and former citizens or long-term residents of the United States;
grantor trusts;
controlled foreign corporations, passive foreign investment companies, and corporations that accumulate earnings to avoid U.S. federal income tax;
holders that received their shares of Grace common stock in a compensatory transaction, through a tax qualified retirement plan or pursuant to the exercise of options or warrants;
holders that own an equity interest in Parent following the Merger;
holders that hold their Grace common stock through a bank, financial institution or other entity, or a branch thereof, located, organized or resident outside the United States;
holders that own or have owned (directly, indirectly or constructively) five (5) percent or more of Grace common stock (by vote or value);
holders that are not U.S. Holders; and
holders that do not vote in favor of the Merger and that properly demand appraisal of their shares under Section 262 of the DGCL.
This discussion does not address any U.S. federal tax considerations other than those pertaining to the income tax (such as estate, gift or other non-income tax consequences) or any state, local or foreign income or non-income tax considerations. In addition, this discussion does not address any considerations arising under the unearned income Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of 2010, or any considerations in respect of any withholding required pursuant to the Foreign Account Tax Compliance Act of 2010 (including the Treasury Regulations promulgated thereunder and intergovernmental agreements entered into in connection therewith and any laws, regulations or practices adopted in connection with any such agreement).
If a partnership (including an entity or arrangement, domestic or non-U.S., treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of shares of Grace common stock, the U.S. federal income tax treatment of a partner in such partnership generally will depend upon the status of the partner, the activities of the partner and the partnership and certain determinations made at the partner level. Accordingly, partners in partnerships holding shares of Grace common stock should consult their tax advisors as to the particular tax consequences to them of the Merger.
THE U.S. FEDERAL INCOME TAX TREATMENT OF THE TRANSACTIONS DISCUSSED HEREIN TO ANY PARTICULAR STOCKHOLDER WILL DEPEND ON THE STOCKHOLDER’S PARTICULAR TAX CIRCUMSTANCES. WE URGE YOU TO CONSULT YOUR TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO YOU IN CONNECTION WITH THE MERGER IN LIGHT OF YOUR OWN PARTICULAR CIRCUMSTANCES, INCLUDING U.S. FEDERAL, STATE, LOCAL AND NON-U.S. INCOME AND OTHER TAX CONSEQUENCES.
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This section applies to “U.S. Holders.” For purposes of this discussion, a “U.S. Holder” means a beneficial owner of shares of Grace common stock that is for U.S. federal income tax purposes:
an individual who is a citizen or resident of the United States;
a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or any state thereof or the District of Columbia;
an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
a trust, if (i) a court within the United States is able to exercise primary supervision over the administration of such trust and one (1) or more “United States persons” (within the meaning of the Code) have the authority to control all substantial decisions of the trust or (ii) the trust validly elected to be treated as a United States person for U.S. federal income tax purposes.
The receipt of cash by a U.S. Holder in exchange for shares of Grace common stock pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. In general, a U.S. Holder will recognize capital gain or loss in an amount equal to the difference, if any, between the amount of cash received and the U.S. Holder’s adjusted tax basis in the shares of Grace common stock surrendered pursuant to the Merger. A U.S. Holder’s adjusted tax basis generally will equal the amount that such U.S. Holder paid for the shares of Grace common stock. A U.S. Holder’s gain or loss on the disposition of shares of Grace common stock generally will be characterized as capital gain or loss. Any such gain or loss will be long-term capital gain or loss if such U.S. Holder’s holding period in such shares is more than one (1) year on the date of the Merger. A preferential tax rate on capital gain generally will apply to long-term capital gain of a non-corporate U.S. Holder (including individuals). The deductibility of capital losses is subject to limitations. U.S. Holders who hold different blocks of Grace common stock (shares of Grace common stock purchased or acquired on different dates or at different prices) should consult their tax advisor to determine how the above rules apply to them.
Information Reporting and Backup Withholding
Generally, information reporting requirements may apply in connection with payments made to U.S. Holders in connection with the Merger.
Backup withholding (currently, at a rate of 24%) generally will apply to the proceeds received by a U.S. Holder pursuant to the Merger, unless the U.S. Holder provides the applicable withholding agent with a properly completed and executed IRS Form W-9 providing such U.S. Holder’s correct taxpayer identification number and certifying that such holder is not subject to backup withholding, or otherwise establishes an exemption, and otherwise complies with the backup withholding rules.
Backup withholding is not an additional tax. The amount of any backup withholding from a payment to a U.S. Holder generally will be allowed as a credit against such holder’s U.S. federal income tax liability, if any, and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.
THE DISCUSSION ABOVE IS BASED ON CURRENT LAW. LEGISLATIVE, ADMINISTRATIVE OR JUDICIAL CHANGES OR INTERPRETATIONS, WHICH CAN APPLY RETROACTIVELY, COULD AFFECT THE ACCURACY OF THE STATEMENTS SET FORTH THEREIN. THIS DISCUSSION IS FOR GENERAL INFORMATION PURPOSES ONLY. IT DOES NOT ADDRESS TAX CONSIDERATIONS THAT MAY VARY WITH, OR ARE CONTINGENT ON, YOUR INDIVIDUAL CIRCUMSTANCES OR THE APPLICATION OF ANY U.S. NON-INCOME TAX LAWS OR THE LAWS OF ANY STATE, LOCAL OR NON-U.S. JURISDICTION AND HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING SUCH MATTERS AND THE TAX CONSEQUENCES OF THE MERGER TO THEM IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.
General
Grace and Parent have agreed to take all actions necessary or advisable to comply with all regulatory notification requirements and, subject to certain limitations, to obtain all regulatory approvals required to consummate the Merger and the other transactions contemplated by the Merger Agreement. These approvals include approval under the HSR Act and the antitrust laws of certain specified foreign jurisdictions.
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HSR Act and U.S. Antitrust Matters
Under the HSR Act and the rules promulgated thereunder, the Merger may not be completed until Grace and Parent each files a Notification and Report Form with the Antitrust Division of the U.S. Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”), and the applicable waiting period has expired or been terminated. A transaction notifiable under the HSR Act may not be completed until the expiration of a 30-calendar-day waiting period following the parties’ filings of their respective HSR Act notification and report forms or the early termination of that waiting period. If the FTC or the DOJ issues a request for additional information and documents (which we refer to as the “Second Request”) prior to the expiration of the initial waiting period, the parties must observe a second 30-day waiting period, which would begin to run only after both parties have substantially complied with the Second Request, unless the waiting period is terminated earlier or the parties otherwise agree to extend the waiting period.
Grace and Parent each filed a Notification and Report Form with respect to the Merger with the FTC and the DOJ on May 10, 2021.
At any time before or after consummation of the Merger, notwithstanding the termination or expiration of the waiting period under the HSR Act, the FTC or the DOJ could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the completion of the Merger, seeking divestiture of substantial assets of the parties, or requiring the parties to license or hold separate assets or terminate existing relationships and contractual rights. At any time before or after the completion of the Merger, any state could take such action under the antitrust laws as it deems necessary or desirable in the public interest. Such action could include seeking to enjoin the completion of the Merger or seeking divestiture of substantial assets of the parties. Private parties may also seek to take legal action under the antitrust laws under certain circumstances. We cannot be certain that a challenge to the Merger will not be made or that, if a challenge is made, we will prevail.
Other Regulatory Approvals
The Merger is also subject to clearance or approval by the antitrust authorities in certain specified foreign jurisdictions. The Merger cannot be completed until Grace and Parent obtain approval, consent, waiver or clearance to consummate the Merger or the applicable waiting periods have expired or been terminated in such jurisdictions.
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The following summary describes the material provisions of the Merger Agreement. The descriptions of the Merger Agreement in this summary and elsewhere in this proxy statement are not complete and are qualified in their entirety by reference to the Merger Agreement, a copy of which has been filed withis attached to this proxy statement as Annex A and incorporated into this proxy statement by reference. You should carefully read and consider the SEC.
The representations, warranties, covenants and covenants containedagreements described below and included in the Merger Agreement (i) were made only for purposes of the Merger Agreement and as of the specific dates therein,dates; (ii) were made solely for the benefit of the parties to the Merger Agreement,Agreement; and (iii) may be subject to important qualifications, limitations and supplemental information agreed uponto by Grace, Parent and Merger Sub in connection with negotiating the contracting parties, including being qualified by confidential disclosures madeterms of the Merger Agreement. In addition, the representations and warranties have been included in the Merger Agreement for the purposespurpose of allocating contractual risk among the partiesbetween Grace, Parent and Merger Sub rather than to the Merger Agreement instead of establishing theseestablish matters as facts, and may be subject to standards of materiality applicable to the contractingsuch parties that differ from those applicable to investors. InvestorsStockholders are not third-party beneficiaries under the Merger Agreement and should not rely on the representations, warranties, covenants and covenantsagreements or any descriptions thereof as characterizations of the actual state of facts or condition of the parties theretoGrace, Parent or Merger Sub or any of their respective subsidiariesaffiliates or affiliates.businesses. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or mayAgreement. In addition, you should not be reflectedrely on the covenants in the Company’s public disclosures.Merger Agreement as actual limitations on the respective businesses of Grace, Parent and Merger Sub, because the parties may take certain actions that are either expressly permitted in the confidential disclosure schedules to the Merger Agreement or as otherwise consented to by the appropriate party, which consent may be given without prior notice to the public. The Merger Agreement is described below, and included as Annex A, only to provide you with information regarding its terms and conditions, and not to provide any other factual information regarding Grace, Parent, Merger Sub or their respective businesses. Accordingly, the representations, warranties, covenants and other agreements in the Merger Agreement should not be read alone, butand you should instead be read the information provided elsewhere in conjunctionthis document and in our filings with the SEC regarding Grace and our business.
The Merger Agreement provides that, subject to the terms and conditions of the Merger Agreement, and in accordance with the DGCL, at the Effective Time: (i) Merger Sub will be merged with and into Grace, with Grace becoming a wholly owned subsidiary of Parent; (ii) the separate corporate existence of Merger Sub will thereupon cease; and (iii) Grace will continue as the Surviving Corporation. From and after the Effective Time, the Surviving Corporation will possess all property, rights, privileges, powers and franchises of Grace and Merger Sub, and all of the debts, liabilities and duties of Grace and Merger Sub will become the debts, liabilities and duties of the Surviving Corporation.
At the Effective Time, the certificate of incorporation of the Surviving Corporation will be amended and restated to be the same as the certificate of incorporation of Merger Sub as in effect immediately prior to the Effective Time, except that the name of the Surviving Corporation will be “W. R. Grace & Co.” At the Effective Time, the bylaws of the Surviving Corporation will be amended and restated to the same as the bylaws of Merger Sub as in effect immediately prior to the Effective Time, except that the name of the Surviving Corporation will be “W. R. Grace & Co.”
The individuals holding positions as directors of Merger Sub immediately prior to the Effective Time will become the initial directors of the Surviving Corporation. The individuals holding positions as officers of Grace immediately prior to the Effective Time will become the initial officers of the Surviving Corporation.
The closing of the Merger will take place (i) at 10:00 a.m., New York City time, on the third (3rd) business day following the satisfaction or waiver of all conditions to closing of the Merger (described below under the caption, “—Conditions to the Closing of the Merger”) (other than conditions that by their terms are to be
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satisfied at the closing but subject to the satisfaction or waiver of such conditions at such time, and subject to the sentence that immediately follows), or (ii) at another date and time mutually agreed upon in writing between Grace and Parent. However, if the Marketing Period has not concluded at the time of the satisfaction or waiver of all conditions to closing of the Merger (other than those conditions to be satisfied at the closing of the Merger), the closing of the Merger will then occur on the date that is the earliest of (a) any business day during such Marketing Period specified by Parent to Grace on no fewer than three (3) business days’ notice to Grace and (b) the third (3rd) business day after the final day of such Marketing Period (subject in each case to the satisfaction or waiver of all of the conditions to the closing of the Merger set forth in the Merger Agreement at or prior to such time (other than those conditions that by their terms are to be satisfied at the closing, but subject to the satisfaction or waiver of those conditions at such time)). The date on which the closing of the Merger occurs is herein referred to as the “Closing Date.” On the Closing Date, the parties will file a certificate of merger with the Secretary of State for the State of Delaware as provided under the DGCL. The time at which the Merger will become effective will occur at the Effective Time.
Grace common stock
At the Effective Time, and without any action required by any stockholder, each share of Grace common stock (other than Excluded Shares, which include, for example, shares of Grace common stock owned by stockholders who have properly and validly exercised their statutory rights of appraisal under Section 262 of the DGCL) outstanding as of immediately prior to the Effective Time will be cancelled and retired and automatically converted into the right to receive the Merger Consideration, without interest and less any applicable withholding taxes.
Treatment of Company Equity Awards
Treatment of Company Options and Company SARs. The Merger Agreement provides that each Company Option and each Company SAR that is outstanding immediately prior to the Effective Time will vest at closing and be converted into the right to receive an amount in cash equal to the product of Merger Consideration (less the applicable exercise price) and the number of shares of Common Stock covered by such Company Option or Company SAR (without interest and less applicable withholding taxes). Payment of these cash amounts will be paid within three (3) business days after the Effective Time. Any Company Option or Company SAR that has a per share exercise price that is greater than or equal to the Merger Consideration will be cancelled at the Effective Time for no consideration or payment.
Treatment of Company RSU Awards and Company Performance Share Awards. The Merger Agreement provides that each Company RSU Award and each Company Performance Share Award that is outstanding immediately prior to the Effective Time will be assumed and converted into the right to receive an amount in cash (without interest) equal to the product obtained by multiplying the Merger Consideration by the number of shares of Common Stock covered by such award immediately prior to the Effective Time, which converted cash award will be subject to continued service vesting and other information regardingterms as set forth in the Company,Merger Agreement.
Prior to the Effective Time, Parent and Grace will mutually agree upon, and Parent will appoint, a bank or trust company to act as paying agent to make payments of the Merger Consideration to Grace Stockholders. Prior to the Effective Time, Parent will deposit (or cause to be deposited) with the paying agent, in trust for the benefit of holders of Grace common stock, cash sufficient to pay the aggregate Merger Consideration.
Promptly (but no later than two (2) business days) after the Effective Time, Parent will cause the paying agent to mail to each holder of record of a certificate that immediately prior to the Effective Time represented outstanding shares of Grace common stock (other than Excluded Shares) (i) a letter of transmittal and (ii) instructions for effecting the surrender of such certificates to the paying agent in exchange for payment of the Merger Consideration (without interest and subject to required withholding taxes). Upon surrender to the paying agent of certificates, together with the letter of transmittal, duly completed and validly executed in accordance with the instructions, and such other documents as may reasonably be required, the holder of such certificates will be entitled to receive payment of the Merger Consideration which the holder is entitled to pursuant to the Merger Agreement in respect of each share formerly represented by such certificate (without interest and after giving effect to any required tax withholding).
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No holder of book-entry shares of Grace common stock will be required to deliver a certificate or letter of transmittal to the paying agent to receive the Merger Consideration (without interest and subject to required withholding taxes). In lieu thereof, the registered holder of each book-entry share of Grace common stock will automatically upon the Effective Time be entitled to receive, and Parent will cause the paying agent to pay and deliver in exchange therefor as promptly as reasonably practicable, the Merger Consideration (without interest and after giving effect to any required tax withholding).
If any cash deposited with the paying agent is not claimed within one (1) year following the Effective Time, such cash will be returned to the Surviving Corporation, upon demand, and any holders of Grace common stock who have not complied with the exchange procedures in the Merger Agreement may thereafter look only to the Surviving Corporation and Parent for payment of the Merger Consideration (without interest and after giving effect to any required tax withholding).
The Merger Agreement contains representations and warranties of Grace, Parent and Merger SubSub.
Some of the representations and warranties in the Merger Agreement made by Grace are qualified as to “materiality” or “Company Material Adverse Effect.” For purposes of the Merger Agreement, “Company Material Adverse Effect” means any fact, circumstance, effect, change, event or development that, individually or in the aggregate, has or would reasonably be expected to have a material adverse effect on the business, properties, assets, liabilities, financial condition or results of operations of Grace and its subsidiaries, taken as a whole, except that no fact, circumstance, effect, change, event or development resulting from or arising out of any of the following, individually or in the aggregate, will constitute or be taken into account when determining whether a Company Material Adverse Effect has occurred:
any change generally affecting the industries in which Grace and its subsidiaries operate in the United States or elsewhere (including changes in commodity prices or general market prices generally affecting such industries and changes in the global demand environment generally affecting such industries);
any change generally affecting any economic, legislative or political condition (including trade wars and sanctions) or any change generally affecting any securities, credit, financial, commodities or capital markets condition, in each case in the United States or elsewhere;
any failure in and of itself by Grace or any of its subsidiaries to meet any internal or public projection, budget, forecast, estimate or prediction in respect of revenues, earnings or other financial or operating metrics or measures for any period (provided that the changes and effects giving rise to or contributing to such failure may (to the extent not otherwise excluded by the definition of Company Material Adverse Effect) constitute or be taken into account in determining whether a Company Material Adverse Effect has occurred);
any change resulting from the announcement, execution or delivery of the Merger Agreement, including (i) the failure of Grace or its subsidiaries to take any action if Parent’s prior consent is required hereunder and Parent unreasonably withholds consent to taking of such action after receipt of the written request therefor from Grace; (ii) any stockholder litigation related to the Merger Agreement or the transactions contemplated by the Merger Agreement (but not any finally adjudicated breach of fiduciary duty or any violation of law itself); (iii) any action taken by Parent or any affiliate thereof to obtain any required statutory approval from any governmental entity or satisfy any condition to the consummation of the Merger and the result of such actions; (iv) any change to the extent that arises out of or relates to the identity of Parent or any of its affiliates as the acquirer of Grace; or (v) the impact of the announcement, execution or delivery on relationships with employees and labor unions, customers, suppliers, distributors, governmental entities and other persons (provided that this bullet will not apply with respect to Grace’s representations or warranties regarding required consents, approvals and regulatory filings in connection with the Merger Agreement and performance thereof and the absence of certain violations (or any condition to any party’s obligation to consummate the Merger relating to such representation and warranty));
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any change in the market price or trading volume of shares of Grace common stock on the NYSE (provided that the changes and effects giving rise to or contributing to any such change may (if not otherwise excluded by the definition of Company Material Adverse Effect) constitute or be taken into account in determining whether a Company Material Adverse Effect has occurred);
any change in applicable law, regulation or GAAP (or authoritative interpretation thereof);
any applicable quarantine, “shelter in place,” “stay at home,” workforce reduction, social distancing, shut down, closure, sequester, safety or similar laws, promulgated by any governmental entity, including the Centers for Disease Control and Prevention and the World Health Organization, in each case, in connection with or in response to COVID-19 (“COVID-19 Measures”);
any geopolitical conditions, the outbreak or escalation of hostilities, any act of war, sabotage or purported terrorism, or any escalation or worsening of any such act of war, sabotage or purported terrorism;
any change or effect arising from any hurricane, strong winds, ice event, fire, tornado, tsunami, flood, earthquake, pandemics (including SARS-CoV-2 or COVID-19, any evolutions or mutations thereof or related or associated epidemics, pandemics or disease outbreaks (“COVID-19”)), epidemics or other outbreaks of diseases, or other natural disaster or extreme weather-related event, circumstance or development (or escalation or worsening of any such events or occurrences, including, as applicable, second or subsequent wave(s));
any change or effect arising from any requirements imposed by any governmental entity as a condition to obtaining the required statutory approvals;
except that any fact, circumstance, effect, change, event or development set forth in bullets 1, 2, 6, 8 and 9 above may be taken into account to the extent that such change or effect has a disproportionate adverse effect on Grace and its subsidiaries, taken as a whole, as compared to other participants in the industries in which Grace and its subsidiaries operate (in which case only the incremental disproportionate impact may be taken into account in determining whether there has been, or would be, a Company Material Adverse Effect).
In the Merger Agreement, Grace has made customary representations and warranties to Parent and Merger Sub that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement. These representations and warranties relate to, among other things:
due organization, valid existence, good standing and power to do business;
subsidiaries;
capitalization;
corporate power and authority relating to execution, delivery and performance of the Merger Agreement;
required consents, approvals and regulatory filings in connection with the Merger Agreement and performance thereof and the absence of certain violations;
the reports, schedules, forms, statements and other documents required to be furnished or filed with the SEC, compliance of the consolidated financial statements of Grace included in such documents, the absence of undisclosed liabilities, the establishment and maintenance of certain disclosure controls and procedures and internal control over financial reporting, the absence of material complaints, allegations, assertions or claims regarding Grace’s accounting practices;
the absence of certain changes or events;
tax matters;
employee benefit plans and other agreements, plans and policies with or concerning employees;
labor matters;
litigation;
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compliance with applicable laws and validity of permits;
compliance with applicable anti-bribery, anti-corruption and anti-money laundering laws;
compliance with applicable economic sanctions and export control laws;
the inapplicability of takeover statutes to the Merger and the absence of anti-takeover agreements and plans;
environmental matters;
material contracts;
real property matters;
intellectual property, information technology assets and data privacy;
suppliers and customers;
insurance matters;
product warranties;
product liability;
affiliate party transactions;
brokers’ fees and expenses; and
the opinions of Grace’s financial advisors.
In the Merger Agreement, Parent and Merger Sub have made customary representations and warranties to Grace that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement. These representations and warranties relate to, among other things:
due organization, valid existence, good standing and power to do business;
power and authority relating to execution, delivery and performance of the Merger Agreement;
consents and approvals relating to the execution, delivery and performance of the Merger Agreement and the absence of certain violations;
litigation;
compliance with applicable laws;
the executed Equity Commitment Letter and Debt Commitment Letter providing for a commitment to provide Equity Financing and Debt Financing, respectively, to Parent, and the sufficiency of the proceeds to be disbursed under the Commitment Letters, together with other sources of financing available to Parent, to pay the aggregate Merger Consideration and the other amounts payable under the Merger Agreement, and the enforceability of the Commitment Letters;
the limited guaranty delivered by the Guarantor guaranteeing certain obligations of Parent in connection with the Merger Agreement;
brokers’ fees and expenses;
capitalization of Merger Sub;
the absence of any required consent of shareholders of Parent and the sufficiency of Parent’s vote, as sole stockholder of Merger Sub, on behalf of Merger Sub;
the absence of beneficial ownership of Grace common stock by Parent and its subsidiaries and affiliates, except as publicly disclosed prior to the date of the Merger Agreement;
the solvency of Parent and its subsidiaries as of the Effective Time and immediately after giving effect to the transactions contemplated by the Merger Agreement; and
the absence of certain arrangements between the Parent or Merger Sub, on the one hand, and any (i) director or officer of Grace relating to Grace or any of its businesses or subsidiaries or (ii) any other stockholder of Grace, on the other hand.
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Some of the representations and warranties in the Merger Agreement made by Parent and Merger Sub are qualified as to “materiality” or “Parent Material Adverse Effect.” For purposes of the Merger Agreement, “Parent Material Adverse Effect” means any fact, circumstance, effect, change, event or development that, individually or in the aggregate, would reasonably be expected to prevent Parent’s or Merger Sub’s consummation of the transactions contemplated by the Merger Agreement prior to the End Date.
The representations and warranties contained in the Merger Agreement will not survive the consummation of the Merger.
The Merger Agreement provides that, except: (i) for matters set forth in the confidential disclosure schedules to the Merger Agreement, (ii) as required or expressly contemplated by the Merger Agreement; (iii) as mandated by a governmental entity or required by applicable law; (iv) for any actions that Grace reasonably determines are necessary to comply with COVID-19 Measures or to respond to COVID-19 in a manner consistent with past practice, except that, prior to taking any actions pursuant to such clause (iv) which would otherwise be prohibited by the Merger Agreement, Grace must use commercially reasonable efforts to provide advance notice to and consult with Parent (if reasonably practicable) with respect thereto; or (v) with the prior written consent of Parent (which consent will not be unreasonably withheld, conditioned or delayed, and which consent will be containeddeemed to have been given if Parent does not respond within five (5) business days (subject to extension if Parent requests additional information, in which case Parent will have three (3) business days to provide a decision after Grace furnishes the requested information)), during the period of time between the date of the signing of the Merger Agreement and the first to occur of the Effective Time and the termination of the Merger Agreement (the “Interim Period”), Grace will and will cause each of its subsidiaries to:
use reasonable best efforts to conduct its business in the ordinary course of business in all material respects; and
use commercially reasonable efforts to preserve intact its current business organization and goodwill and to preserve its relationship with employees, customers, suppliers, licensors, licensees, distributors, lessors and others having material business dealings with Grace or attachedits subsidiaries.
In addition, Grace has also agreed that, except: (i) for matters set forth in the confidential disclosure schedules to the Merger Agreement; (ii) as required or expressly contemplated by the Merger Agreement; (iii) as mandated by a governmental entity or required by applicable law; (iv) for any actions that Grace reasonably determines are necessary to comply with COVID-19 Measures or to respond to COVID-19 in a manner consistent with past practice, except that, prior to taking any actions pursuant to such clause (iv) which would otherwise be prohibited by the Merger Agreement, Grace must use commercially reasonable efforts to provide advance notice to and consult with Parent (if reasonably practicable) with respect thereto; or (v) with the prior written consent of Parent (which consent will not be unreasonably withheld, conditioned or delayed, and which consent will be deemed to have been given if Parent does not respond within five (5) business days (subject to extension if Parent requests additional information, in which case Parent will have three (3) business days to provide a decision after Grace furnishes the requested information)), during the Interim Period, Grace will not, and will cause each of its subsidiaries not to, among other things (and subject to certain exceptions):
declare, set aside or pay any dividend or make any other distribution in respect of any of its capital stock, equity interests or other voting securities;
amend any of Grace’s organizational documents;
other than in the case of wholly owned subsidiaries, split, combine, consolidate, subdivide, or reclassify the capital stock of Grace, or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for its capital stock, other equity interests or voting securities, except for any issuances of compensatory equity awards relating to Grace common stock in the ordinary course consistent with past practice (except that Grace may grant time-vesting restricted stock units in lieu of stock options and performance-based units) or issuances of Grace common stock pursuant to the due exercise, vesting and/or settlement of Company Equity Awards outstanding as of the date of the Merger Agreement in accordance with their terms;
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repurchase, redeem or acquire any capital stock or voting securities of Grace, other than (i) in connection with the exercise, vesting or settlement, as applicable, of Company Equity Awards outstanding as of the date of the Merger Agreement or granted in accordance with the Merger Agreement and (ii) transactions between Grace and its wholly owned subsidiaries or between Grace’s wholly owned subsidiaries;
grant to any key personnel any material increase in compensation or benefits, or grant to all other Grace personnel material increases, in the aggregate, in cash compensation and benefits or any increases not in the ordinary course consistent with past practice;
grant to any Grace personnel any new material rights to, or materially increase any existing rights to, change-in-control, severance, retention or termination pay;
enter into or materially amend any change-in-control, severance, retention or termination agreement with any key personnel or, for other Grace personnel, other than in the ordinary course consistent with past practice;
establish, adopt, enter into, amend in any material respect or terminate any Grace benefit plan;
take any action to accelerate the time of vesting, funding or payment of any compensation or benefits under any Grace benefit plan;
hire any key personnel without Parent’s consent, not to be unreasonably withheld or delayed;
terminate the employment of any key personnel other than for cause;
make any material change in financial accounting methods, principles, policies or practices, except insofar as may be required by applicable law or GAAP or by any governmental entity (including the SEC or the Public Company Accounting Oversight Board);
make any acquisitions or dispositions of a material asset or business (including by merger, consolidation or acquisition of stock or assets), except for (i) an annexacquisition for consideration that is individually not in excess of $10,000,000 and in the aggregate not in excess of $20,000,000, (ii) any disposition (other than intellectual property) for consideration that is individually not in excess of $10,000,000 and in the aggregate not in excess of $20,000,000, (iii) transactions between Grace and any of its direct or indirect wholly owned subsidiaries or between direct or indirect wholly owned Grace subsidiaries in the ordinary course of business, (iv) any disposition of obsolete or worn-out equipment (other than intellectual property) in the ordinary course of business, (v) purchases of raw materials, inventory or equipment in the ordinary course of business, (vi) sales to customers of products or services of Grace (other than intellectual property) in the ordinary course of business and (vii) any capital expenditures permitted by the applicable restriction on capital expenditures described below;
sell, assign, lease, license, encumber, divest, cancel, abandon, transfer, or otherwise dispose of any material intellectual property of Grace, other than the grant of non-exclusive licenses in the ordinary course of business;
redeem, repurchase or prepay (other than prepayment of revolving loans), or incur, assume, endorse, guarantee or otherwise become liable for or modify the terms of any indebtedness, excluding (i) indebtedness, guarantees and other credit support incurred in the ordinary course of business consistent with past practice or between Grace and its wholly owned subsidiaries or between its wholly owned subsidiaries, (ii) as reasonably necessary to finance any capital expenditures permitted under this section, (iii) as reasonably necessary to finance any acquisitions permitted under this section, (iv) indebtedness in replacement of, and on terms no less favorable in the aggregate to Grace than, existing indebtedness (subject to certain exceptions pursuant to this clause (iv) for indebtedness in excess of $100 million), (v) guarantees by Grace of existing indebtedness of any of its wholly owned subsidiaries and (vi) borrowings under existing revolving credit facilities (or replacements thereof on terms no less favorable in the aggregate to Grace) or existing commercial paper programs in the ordinary course of business;
other than in the ordinary course of business (including renewals consistent with the terms thereof) (i) modify or amend in any material respect, terminate, or waive any material right under, any material
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contract of Grace (other than modifications or amendments of contracts with material customers or suppliers of Grace that are no less favorable in the aggregate to Grace than the terms in force on the date of the Merger Agreement) or (ii) enter into any contract that would have been a material contract had it been entered into prior to the date of the Merger Agreement (other than material customer or supplier contracts);
other than in the ordinary course of business, (i) make any tax election that is material to Grace and its subsidiaries taken as a whole, on any material tax return filed after the date of the Merger Agreement, which election is inconsistent with past practice, (ii) change any method of accounting for tax purposes in a manner that is material to Grace and its subsidiaries taken as a whole, (iii) amend any U.S. federal or other material tax return in any material respect in a manner that is material to Grace and its Subsidiaries taken as a whole or (iv) settle or resolve any tax controversy that is material to Grace and its subsidiaries for an amount materially in excess of the amount reserved therefor;
institute, waive, release, assign, settle or compromise any material claim other than in the ordinary course of business or waivers or releases that (i) require Grace and its subsidiaries to pay amounts (in excess of insurance proceeds) that do not exceed (a) the amount with respect thereto reflected on Grace’s publicly filed financial statements (including the notes thereto) plus (b) $5,000,000 individually or $10,000,000 in the aggregate and (ii) with respect to any nonmonetary terms and conditions thereof, would not have or would not reasonably be expected to have a material restrictive impact on the operations of Grace or any of its subsidiaries;
dissolve or liquidate any existing direct or indirect Grace subsidiary, other than in the ordinary course of business, or establish any new direct or indirect Grace subsidiary;
take any action (other than an accounting action required by GAAP, the preparation or filing of investigatory or similar reports or studies in the ordinary course consistent with past practice, or the payment of filing fees, similar ministerial costs and customary advisory fees and expenses) that would reasonably be expected to cause Grace or any of its subsidiaries to incur or assume any expenditure or liability arising out of any environmental law, environmental permit or environmental claim associated with (i) the Libby, Montana mine site and surrounding area or (ii) any other current or former property of Grace or its subsidiaries in an amount which, in the case of clause (ii) of this bullet point, is materially in excess of Grace’s publicly disclosed reserves as of the date of the Merger Agreement;
terminate or fail to renew any material insurance policy of Grace, reduce the coverage provided by any material insurance policy or materially expand any director and officer insurance and indemnification policies;
authorize, make or enter into any commitment for any capital expenditures, other than capital expenditures that, in the aggregate, do not exceed by more than 10% the aggregate capital expenditure budgets identified in the confidential disclosure schedules to the Merger Agreement; or
announce any intention, resolve, or commit to enter into any contract to do any of the foregoing.
Except as permitted by the Merger Agreement, Grace must not, and must cause its subsidiaries not to, and must use reasonable best efforts to cause its affiliates and its and their respective officers, directors, principals, partners, managers, members, attorneys, accountants, agents, employees, consultants, financial advisors or other authorized representatives not to, directly or indirectly:
solicit, initiate or knowingly encourage, induce or facilitate any Company Takeover Proposal (as defined below) or any inquiry or proposal that would reasonably be expected to lead to a Company Takeover Proposal, in each case, except for the Merger Agreement and the transactions contemplated thereby; or
continue, enter into, maintain, participate or engage in any discussions or negotiations with any person (except for Grace’s affiliates and its and their respective representatives or Parent and Parent’s affiliates and its and their respective representatives) regarding, furnish to any such person any nonpublic information with respect to, any Company Takeover Proposal or any inquiry or proposal that would reasonably be expected to lead to a Company Takeover Proposal.
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Existing Discussions or Negotiations
Pursuant to the Merger Agreement, Grace must, and must cause its affiliates and its and their respective representatives to, immediately:
cease and cause to be terminated all existing discussions, solicitations or negotiations with or of any person (except for Parent and Parent’s affiliates and its and their respective representatives) conducted prior to the date of the Merger Agreement with respect to any Company Takeover Proposal, or any inquiry or proposal that would reasonably be expected to lead to a Company Takeover Proposal; and
request the prompt return or destruction of all confidential information previously furnished and terminate all physical and electronic data room access previously granted to any such person or its representatives.
Receipt of Company Takeover Proposal
Notwithstanding these restrictions, at any time prior to obtaining the Grace stockholder approval, in response to the receipt of a bona fide, written Company Takeover Proposal made after the date of the Merger Agreement that does not result from a material breach of Grace’s non-solicitation obligations described above, and that the Board of Directors determines in good faith (after consultation with its outside legal counsel and financial advisors) constitutes or could reasonably be expected to lead to a Superior Company Proposal (as defined below), Grace and its representatives may:
furnish information with respect to Grace and its subsidiaries to the person making such Company Takeover Proposal (and its representatives) (provided that all such information has previously been provided to Parent or is provided to Parent substantially concurrently with the provision of such information to such person) pursuant to a confidentiality agreement containing confidentiality restrictions substantially not less favorable to Grace than the 2021 Confidentiality Agreement; and
participate in discussions regarding the terms of such Company Takeover Proposal, including terms of a Company Acquisition Agreement (as defined below) with respect thereto, and the negotiation of such terms with the person making such Company Takeover Proposal (and such person’s representatives);
but, in each case, if and only if, (i) the Board of Directors determines in good faith (after consultation with its outside legal counsel and financial advisors) that the failure to take such action would reasonably be expected to be inconsistent with its fiduciary duties to stockholders under applicable law and (ii) Grace has delivered to Parent prior written notice advising Parent that it intends to take the foregoing actions.
Notwithstanding the foregoing restrictions, Grace may grant a waiver, amendment or release under any confidentiality or standstill agreement solely to the extent necessary to allow a confidential Company Takeover Proposal to be made to Grace or the Board of Directors.
Additionally, Grace has agreed to promptly (and in any event within 24 hours) advise Parent orally and in writing of:
any Company Takeover Proposal, any request outside the ordinary course of business for material non-public information relating to Grace or any of its subsidiaries or for access to the business, properties, assets, books or records of Grace or any of its subsidiaries by any third party (other than by any governmental entity or in connection with obtaining the required statutory approvals) which request could reasonably be expected to lead to a Company Takeover Proposal, the material terms and conditions of any such Company Takeover Proposal or request (including any changes thereto) and the identity of the person making any such Company Takeover Proposal or request; and
any Company Intervening Event (as defined in the section of this proxy statement captioned “—Company Board Recommendation; Company Adverse Recommendation Change”) or any facts and circumstances that would reasonably be expected to lead to a Company Intervening Event.
Grace must also keep Parent informed in all material respects on a reasonably current basis of the material terms and status (including any change to the material terms thereof) of any Company Takeover Proposal or request and, in the case of a Company Intervening Event, keep Parent informed in all material respects on a current basis of the facts and circumstances related to such Company Intervening Event.
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Termination of the Merger Agreement for a Superior Company Proposal
Prior to the adoption of the Merger Agreement by the Grace Stockholders, the Board of Directors may terminate the Merger Agreement if Grace receives a bona fide, written Company Takeover Proposal that does not result from a material breach of Grace’s non-solicitation obligations described above and the Board of Directors determines in good faith (after consultation with its outside legal counsel and financial advisors and after taking into account any changes to the terms of the Merger Agreement proposed by Parent during the period referred to in the third bullet point below) that such Company Takeover Proposal constitutes a Superior Company Proposal, unless Grace complies with the following procedures:
the Board of Directors has provided five (5) business days’ prior written notice to Parent that it is prepared to terminate the Merger Agreement pursuant to the applicable termination right (as described in greater detail in the section of this proxy statement captioned “—Termination of the Merger Agreement”), which written notice must include the material terms and conditions of such Company Takeover Proposal;
if requested by Parent, during the five (5) business day period after delivery of such written notice, Grace and its representatives negotiate in good faith with Parent and its representatives regarding any revisions to the Merger Agreement committed to in writing by Parent; and
at the end of such five (5) business day period and taking into account any changes to the terms of the Merger Agreement committed to in writing by Parent (provided that if there has been any subsequent amendment to any material term of such Superior Company Proposal, the Board of Directors must provide a new written notice and an additional three (3) business day period from the date of such written notice will apply), the Board of Directors determines in good faith (after consultation with its outside legal counsel and financial advisors) that the failure to terminate the Merger Agreement as a result of such Superior Company Proposal would be inconsistent with the Board of Director’s fiduciary duties under applicable law.
If Grace terminates the Merger Agreement prior to the adoption of the Merger Agreement by Grace Stockholders for the purpose of entering into an agreement in respect of a Superior Company Proposal, Grace must pay a Company Termination Fee of $141 million to Parent as further described in the sections of this proxy statement captioned “—Termination of the Merger Agreement” and “—Termination Fee.”
For purposes of this proxy statement:
“Company Acquisition Agreement” means any letter of intent, memorandum of understanding, agreement, agreement in principle, undertaking or commitment constituting, or that would reasonably be expected to lead to, any Company Takeover Proposal or requiring Grace to abandon or terminate the Merger Agreement.
“Company Takeover Proposal” means any proposal, indication, interest or offer (whether or not in writing) from any person (other than Parent and its subsidiaries) involving a (i) merger, consolidation, share exchange, consolidation, joint venture, other business combination, recapitalization, liquidation, dissolution or similar transaction involving (a) Grace or (b) any of its subsidiaries whose revenues, net income or assets, taken together, constitute more than 15% of the consolidated revenues, net income or assets of Grace and its subsidiaries, taken as a whole, (ii) sale, lease, license, contribution or other disposition, directly or indirectly (including by way of merger, consolidation, share exchange, other business combination, partnership, joint venture, sale of capital stock of or other equity interests in a Grace subsidiary or otherwise) of any business or assets of Grace or its subsidiaries representing more than 15% of the consolidated revenues, net income or assets of Grace and its subsidiaries, taken as a whole, (iii) issuance, sale or other disposition, directly or indirectly, to any person (or the stockholders of any person) or group of securities (or options, rights or warrants to purchase, or securities convertible into or exchangeable for, such securities) representing more than 15% of the voting power of Grace, (iv) transaction (including any tender offer or exchange offer) in which any person (or the stockholders of any person) or group would acquire, if consummated, directly or indirectly, beneficial ownership or the right to acquire beneficial ownership, or formation of any group that beneficially owns or has the right to acquire beneficial ownership of more than 15% of any class of capital stock of Grace, or (v) any combination of the foregoing.
“Superior Company Proposal” means a bona fide written Company Takeover Proposal (provided that for purposes of this definition, the applicable percentage in the definition of Company Takeover Proposal will be
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“50%” rather than “15%”), that did not result from, or arise in connection with, any material breach of Grace’s non-solicitation obligations described above, that the Board of Directors determines in good faith, after consultation with its outside legal counsel and financial advisors, and taking into account the legal, financial, regulatory and other aspects of such Company Takeover Proposal, the conditionality of and contingencies related to such proposal, the expected timing and risk of completion, the identity of the person making such proposal and such other factors that are deemed relevant by the Board of Directors, is (i) reasonably capable of being completed on the terms proposed and (ii) is more favorable to the holders of Grace common stock from a financial point of view than the transactions contemplated by the Merger Agreement (after taking into account any proposed revisions to the terms of the Merger Agreement that are committed to in writing by Parent).
As described above, and subject to the provisions described below, the Board of Directors has made the recommendation that the holders of shares of Grace common stock vote “FOR” the proposal to adopt the Merger Agreement and the consummation of the transactions contemplated thereby (the “Company Board Recommendation”).
Except as expressly permitted by the Merger Agreement and described below, neither the Board of Directors nor any committee thereof may (any such action, a “Company Adverse Recommendation Change”):
withdraw, change, qualify, withhold or modify in any manner adverse to Parent or to the prompt consummation of the Merger, or propose publicly to withdraw, change, qualify, withhold or modify in any manner adverse to Parent or to the prompt consummation of the Merger, the Company Board Recommendation;
adopt, approve or recommend, or propose publicly to adopt, approve or recommend, any Company Takeover Proposal;
fail to include the Company Board Recommendation in this proxy statement;
take any formal action or make any recommendation or public statement in connection with a tender offer or exchange offer that constitutes a Company Takeover Proposal (except for either a recommendation against such offer or a “stop, look and listen” communication of the type contemplated by Rule 14d-9(f) under the Exchange Act); or
resolve or agree to take any of the foregoing actions.
Additionally, except as expressly permitted in the Merger Agreement, neither the Board of Directors nor any committee thereof may permit, authorize, approve or recommend to the Grace Stockholders, or propose publicly to permit, authorize, approve or recommend to the Grace Stockholders, or allow Grace or any of its affiliates to execute or enter into a Company Acquisition Agreement.
For the avoidance of doubt, none of the restrictions described in this section of the proxy statement on Schedule 14Aand in the section of this proxy statement captioned “—Company Takeover Proposals; No Solicitation” will prohibit Grace from: (i) complying with Rule 14d-9 and Rule 14e-2 promulgated under the Exchange Act or (ii) making any disclosure to the Grace Stockholders if, in the good-faith judgment of the Board of Directors (after consultation with outside legal counsel), failure to so disclose would reasonably be expected to be inconsistent with its obligations under applicable law (provided, that if any such disclosure or communication has the effect of withdrawing, qualifying or modifying the Company Board Recommendation in a manner adverse to Parent, such disclosure or communication will constitute a Company Adverse Recommendation Change), or (iii) responding to any unsolicited proposal or inquiry solely by advising the person making such proposal or inquiry of the restrictions described in this section of the proxy statement and in the section of this proxy statement captioned “—Company Takeover Proposals; No Solicitation.”
Notwithstanding the restrictions described above, prior to the adoption of the Merger Agreement by Grace Stockholders, the Board of Directors may make a Company Adverse Recommendation Change if: (i) a Company Intervening Event has occurred; or (ii) Grace has received a Superior Company Proposal that does not result from a material breach of Grace’s non-solicitation obligations and, in each case, if the Board of Directors determines in good faith (after consultation with its outside legal counsel and financial advisors and after taking into account any changes to the terms of the Merger Agreement proposed by Parent during the period referred to in the third bullet point below) that the failure to effect a Company Adverse Recommendation Change as a result
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of the occurrence of such Company Intervening Event or in response to the receipt of such Superior Company Proposal, as the case may be, would be inconsistent with the Board of Director’s fiduciary duties under applicable law. The Board of Directors may only effect a Company Adverse Recommendation Change if it complies with the following procedural requirements:
the Board of Directors has provided five (5) business days’ prior written notice to Parent that it is prepared to effect a Company Adverse Recommendation Change in response to the occurrence of a Company Intervening Event or the receipt of a Superior Company Proposal, which written notice must, in the case of a Company Adverse Recommendation Change as a result of a Company Intervening Event, describe such Company Intervening Event in reasonable detail and, in the case of a Company Adverse Recommendation Change in response to the receipt of a Superior Company Proposal, include the material terms and conditions of such Superior Company Proposal;
if requested by Parent, during the five (5) business day period after delivery of such written notice, Grace and its representatives negotiate in good faith with Parent and its representatives regarding revisions to the Merger Agreement committed to in writing; and
at the end of such five (5) business day period and taking into account any changes to the terms of the Merger Agreement committed to in writing by Parent (provided that if there has been any subsequent amendment to any material term of such Superior Company Proposal, the Board of Directors will fileprovide a new written notice and an additional three (3) business day period from the date of such notice will apply), the Board of Directors determines in good faith (after consultation with its outside legal counsel and financial advisors) that the failure to make such a Company Adverse Recommendation Change would be inconsistent with its fiduciary duties to stockholders under applicable law.
For purposes of this proxy statement, a “Company Intervening Event” means a material change or effect relating to Grace that is unknown and not reasonably foreseeable to the Board of Directors as of the date of the Merger Agreement, or if known or reasonably foreseeable to the Board of Directors as of the date of the Merger Agreement, the material consequences of which were not known or reasonably foreseeable to the Board of Directors as of the date of the Merger Agreement; provided that in no event will any of the following be deemed to constitute a Company Intervening Event: (i) the receipt, existence or terms of a Company Takeover Proposal or a Superior Company Proposal or any inquiry or communications or matters relating thereto; (ii) any event, change or effect that results from the announcement or pendency of the Merger Agreement or the transactions contemplated by the Merger Agreement or any actions required to be taken or to be refrained from being taken pursuant to the Merger Agreement (including the timing of any consent, registration, approval, permit or authorization to be obtained from any governmental entity or any other actions by or in respect of any governmental entity with respect to the transactions contemplated by the Merger Agreement); (iii) any event, change or effect that results from a breach of the Merger Agreement by Grace; (iv) the fact that Grace meets or exceeds any internal or analysts’ expectations or projections (provided that the facts and occurrences giving rise or contributing to such changes may be taken into account to the extent not otherwise excluded by this definition); or (v) any change after the execution and delivery of the Merger Agreement in the market price or trading volume of Grace common stock on the NYSE (provided that the facts and occurrences giving rise or contributing to such changes may be taken into account to the extent not otherwise excluded by this definition).
Grace has agreed to duly call, give notice of, convene and hold the Special Meeting as soon as practicable following the mailing of this proxy statement for the purpose of obtaining the affirmative vote of the holders of a majority of the outstanding shares of Grace common stock entitled to vote at the Special Meeting that is required to adopt the Merger Agreement; provided, that Grace may postpone or adjourn the Special Meeting (i) with Parent’s written consent (which may not be unreasonably withheld, conditioned or delayed), (ii) in the absence of a quorum or if additional time is necessary to solicit proxies in favor of the adoption of the Merger Agreement and the consummation of the transactions contemplated thereby, (iii) to the extent necessary to ensure that any necessary supplement or amendment to this proxy statement is provided to Grace Stockholders sufficiently in advance of a vote on the Merger Agreement, or (iv) if required by applicable law.
Subject to the Board of Directors’ right to make a change of recommendation, as described in the section of this proxy statement captioned “—Company Board Recommendation; Company Adverse Recommendation
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Change,” the Company must use its reasonable best efforts to solicit from Grace Stockholders proxies in favor of the adoption of the Merger Agreement to secure the requisite stockholder approval. The Company is required to keep Parent and Merger Sub updated with respect to proxy solicitation results as reasonably requested by Parent or Merger Sub.
Under the Merger Agreement, during the period commencing at the Effective Time and for 12 months thereafter (the “Continuation Period”), Parent will generally provide the Company employees who remain employed after the Effective Time with (i) a base salary or wage rate that is no less favorable than that provided to the Company employee immediately prior to the Effective Time, (ii) target annual cash incentive compensation opportunities that are no less favorable to those target annual cash incentive compensation opportunities provided to the Company employee immediately prior to the Effective Time, (iii) solely for key personnel, target equity-based incentive compensation opportunities that are no less in dollar amount than those target equity-based incentive compensation opportunities provided to the key personnel immediately prior to the Effective Time, and (iv) employee benefits that are substantially comparable, in the aggregate, to those provided to the Company employees immediately prior to the Effective Time. In addition, Parent will continue to maintain the Company Retirement Plan for Salaried Employees, as in effect on the date of the Merger Agreement, without modification, through December 31, 2024, and will maintain certain Company benefit plans. During the Continuation Period, Parent will generally provide each Company employee who experiences a termination of employment with the Surviving Corporation, Parent or any of their subsidiaries with a certain level of severance benefits.
With respect to any Company employees who are covered by a collective bargaining agreement or who are based outside of the United States, Parent will honor all terms, conditions and requirements of each such collective bargaining agreement.
Each Company employee’s service prior to the Effective Time will generally be treated as service with Parent for all purposes under Parent’s benefit plans, including determining eligibility to participate, level of benefits, vesting and benefit accruals, subject to certain customary exceptions.
With respect to any Parent benefit plan in which Company employees are eligible to participate following the Effective Time and that provides medical, dental or vision insurance benefits, for the plan year in which such Company employee is first eligible to participate, Parent will use commercially reasonable efforts to generally waive any preexisting condition limitations or eligibility waiting periods and credit each Company employee for any co-payments or deductibles incurred by such Company employee in such plan year for purposes of any applicable deductible and annual out-of-pocket expense requirements under any such plan. Such credited expenses will also count toward any annual or lifetime limits, treatment or visit limits or similar limitations that apply under the terms of the applicable plan.
Under the Merger Agreement, Parent hereby acknowledges that a “change of control” (or similar phrase) within the meaning of the Company benefit plans will occur at or prior to the Effective Time, as applicable.
Under the Merger Agreement, Parent, Merger Sub and Grace agreed to, and agreed to cause their respective affiliates (and, in the case of Parent, Standard Industries Holdings and their affiliates) to, take, or cause to be taken, all actions, and to do, or to cause to be done, and to assist and cooperate with the other in doing all things necessary or advisable to cause the conditions to the closing of the Merger to be satisfied as promptly as reasonably practicable and to effect the closing of the Merger as promptly as reasonably practicable and in any event prior to the End Date, including (i) making all necessary filings with governmental entities or third parties, (ii) obtaining the required consents and all other third party consents necessary to consummate the Merger, (iii) obtaining the required statutory approvals and all other consents of governmental entities necessary to consummate the Merger and (iv) executing and delivering any additional instruments necessary to consummate the Merger. Parent will control and lead all communications and strategy relating to obtaining the required approvals from governmental entities, except that Parent is required to keep Grace reasonably informed on a current basis, consult with and consider in good faith the views and comments of Grace in connection with such communications and strategy.
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Each of Parent and Grace must, and must cause their respective affiliates (and, in the case of Parent, Standard Industries Holdings and its affiliates) to:
make or cause to be made, in consultation and cooperation with the other, as promptly as reasonably practicable after the date of the Merger Agreement and in any event within ten (10) business days after the date of the Merger Agreement, an appropriate filing of a Notification and Report Form pursuant to the HSR Act relating to the Merger;
make or cause to be made, as promptly as reasonably practicable after the date of the Merger Agreement, all necessary filings with other governmental entities relating to the Merger, including any such filings necessary to obtain any required statutory approvals;
furnish to the other all assistance, cooperation and information reasonably required for any such filing;
unless prohibited by applicable law or a governmental entity, give the other reasonable prior notice of any such filing and, to the extent reasonably practicable, of any substantive communication with any governmental entity relating to the Merger and, to the extent reasonably practicable, permit the other to review and discuss in advance, and consider in good faith the views of, and secure the participation of, the other in connection with any such filing or substantive communication;
respond as promptly as reasonably practicable under the circumstances to any requests received from any governmental entity enforcing applicable antitrust laws for additional information or documentary material in connection with antitrust, competition or similar matters (including any “Second Request” under the HSR Act) and not agree to extend any waiting period under the HSR Act or enter into any agreement with any such governmental entity or other authorities that, in either case, would reasonably be expected to extend the Closing Date beyond the End Date; and
unless prohibited by applicable law or a governmental entity, (i) not participate in or attend any meeting (whether in person, via telephone, or otherwise) with any governmental entity in respect of the Merger without the other party, (ii) keep the other party apprised with respect to any meeting or conversation with any governmental entity in respect of the Merger, (iii) cooperate in the filing of any memoranda, white papers, filings, material correspondence or other material written communications explaining or defending this Merger Agreement or the Merger, articulating any regulatory or competitive argument or responding to requests or objections made by any governmental entity, and (iv) furnish the other party with copies of all material correspondence, filings and substantive communications (and memoranda setting forth the substance thereof) between it and its affiliates and their respective representatives on the one hand, and any governmental entity or members of any governmental entity’s staff, on the other hand, with respect to the Merger Agreement or the Merger; provided that the parties or their respective counsel will be permitted to designate information “for outside counsel only” and to redact any correspondence, filing or communication (a) to the extent such correspondence, filing or communication contains commercially sensitive information, trade secrets, confidential information of third parties, personal identifying information, or references concerning the valuation of Grace, any Grace subsidiaries or the Merger, or (b) to prevent the loss of any attorney-client or other legal privilege.
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Additionally, Parent must not, and must cause its affiliates (and Standard Industries Holdings and its affiliates) not to, and Grace must not, and must cause its affiliates not to, take any action, including acquiring, or agreeing to acquire, any asset, property, business or person (by way of merger, consolidation, share exchange, investment, other business combination, asset, stock or equity purchase, or otherwise), or entering into any contract, that could reasonably be expected to adversely affect or delay obtaining or making any consent or filing, including any required statutory approval or the timely receipt thereof. In furtherance of and without limiting any of Parent’s covenants and agreements under the Merger Agreement, Parent must, and must cause its affiliates to, take all actions necessary, proper or advisable to avoid or eliminate each and every impediment, including any judgment, that may be asserted by a governmental entity pursuant to any antitrust law with respect to the Merger or in connection with granting any required statutory approval or other consent of a governmental entity so as to enable the closing to occur as soon as reasonably possible (and in each case, sufficiently before the End Date in order to allow closing by the End Date), and, in furtherance thereof, must:
in the case of any civil, criminal or administrative action, suit, litigation, arbitration, proceeding or investigation that is instituted (or threatened to be instituted) challenging the consummation of the Merger or any other transaction contemplated by the Merger Agreement as violative of any antitrust law, take any and all steps not prohibited by applicable law to avoid the entry of, or to have vacated, lifted, reversed or overturned any order that would restrain, prevent or delay the closing on or before the End Date, including defending through litigation on the merits, including appeals, any claim asserted in any court or other proceeding by any person, including any governmental entity, with respect to the Merger or the Merger Agreement that seeks to or would reasonably be expected to prevent or prohibit or impede, interfere with or delay the consummation of the closing;
propose, negotiate, commit to and effect, by consent decree, hold separate order or otherwise, the sale, divestiture, licensing or disposition of any assets, properties or businesses of Parent or its affiliates or Grace or its subsidiaries, including by entering into customary ancillary agreements relating to any such sale, divestiture, licensing or disposition in order to avoid the entry of, or to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order, whether temporary, preliminary or permanent, that would prevent the consummation of the transactions contemplated by the Merger Agreement as soon as practicable (and in each case, sufficiently before the End Date in order to allow closing by the End Date);
agree to any limitation on the conduct of Parent or its affiliates (including, after the closing, the Surviving Corporation and Grace’s subsidiaries) proposed by a governmental entity enforcing applicable laws; and
agree to take any other action as may be required by a governmental entity in order to effect each of the following: (i) obtaining all required statutory approvals as soon as reasonably possible and in any event before the End Date; (ii) avoiding the entry of, or having vacated, lifted, dissolved, reversed or overturned any judgment, whether temporary, preliminary or permanent, that is in effect that prohibits, prevents or restricts consummation of, or impedes, interferes with or delays, the closing; and (iii) effecting the expiration or termination of any waiting period, which would otherwise have the effect of preventing, prohibiting or restricting consummation of the closing or impeding, interfering with or delaying the closing.
Grace is required to provide such reasonable assistance as Parent may reasonably request in connection with Parent effectuating any of the transactions or restrictions contemplated by the provisions of the Merger Agreement described in the foregoing paragraph, provided that such transactions or restrictions are subject to, conditioned upon and effective only after the closing. Unless prohibited by applicable law or by a governmental entity, Parent must keep Grace reasonably informed on a current basis of, and must permit Grace to review and discuss in advance, any plans, proposals, discussions, negotiations or other actions (including the agreement to or effectuation of any transactions or restrictions) contemplated by the provisions of the Merger Agreement described in the foregoing paragraph, and Parent must consider in good faith the views of Grace in connection therewith.
Pursuant to the Merger Agreement, Parent and Merger Sub must use reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to arrange,
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consummate and obtain the financing on the terms and subject only to the conditions described in the Commitment Letters (including, as necessary, the “flex” provisions contained in any related fee letter).
Pursuant to the Merger Agreement, if any portion of the Financing becomes unavailable, regardless of the reason therefor, Parent will (i) use reasonable best efforts as promptly as practicable following the occurrence of such event to obtain alternative financing (in an amount sufficient, when taken together with the available portion of the Financing and available cash and marketable securities of the Company, to pay the Merger Consideration and the other Merger Amounts) from the same or other source(s) (a) which does not include any conditions to the consummation of such alternative financing that are more onerous than the conditions set forth in the Commitment Letters as of the date of the Merger Agreement (or on other terms acceptable to Parent, subject to certain prohibited financing modifications) and (b) that would not otherwise reasonably be expected to materially delay or prevent closing of the Merger and (ii) promptly notify the Company of such unavailability and the reason therefor.
Pursuant to the Merger Agreement, prior to the Closing Date, the Company must use its reasonable best efforts to provide, and must use its reasonable efforts to cause its representatives to provide, in each case at Parent’s sole cost and expense, such cooperation as is customary and reasonably requested by Parent in connection with the arrangement of the Debt Financing (provided that such requested cooperation does not unreasonably interfere with the ongoing operations of the Company or any of the Company’s subsidiaries), including by using reasonable best efforts to (subject to certain exceptions in the Merger Agreement):
make management (with appropriate seniority and expertise to participate) of the Company available to participate in a reasonable number of meetings, presentations, road shows, due diligence sessions and sessions with rating agencies, including a reasonable and limited number of customary one-on-one meetings and calls with prospective lenders and purchasers of the Financing, in each case, at reasonable times and with reasonable advance notice;
facilitate the pledging of collateral and granting of security interests in connection with the Debt Financing, effective no earlier than the Closing Date;
execute and deliver any credit agreement, indenture, purchase agreement, guarantees, pledge and security documents, and other definitive financing documents, closing certificates and other certificates and documents as may be reasonably requested by Parent, in each case contemplated in connection with the Debt Financing (provided that (i) none of such documents or agreements contemplated by this bullet point will be executed and/or delivered except in connection with the closing of the Merger, (ii) the effectiveness thereof will be conditioned upon, or become operative after, the occurrence of the closing of the Merger and (iii) no liability will be imposed on the Company or any of its subsidiaries or any of their respective officers or employees involved prior to the Closing Date with respect to such matters);
furnish Parent and the lenders as promptly as reasonably practicable certain required information (the “Required Information”) that is compliant with certain requirements in the Merger Agreement and update any Required Information provided to Parent or the lenders as may be reasonably necessary so that such Required Information remains compliant (provided, that for the avoidance of doubt, there will not be more than one Marketing Period);
assist Parent with the preparation by Parent or the lenders of (i) offering documents, marketing documents and similar documents for any portion of the Debt Financing and (ii) materials for rating agency presentations;
cooperate with the lenders in performing their due diligence as reasonably requested by Parent;
assist Parent in obtaining credit ratings in connection with the Debt Financing;
cause the Company’s independent auditors, to the extent consistent with customary practice, to provide reasonable and customary assistance and cooperation in connection with the Debt Financing, including (i) rendering customary “comfort letters” and (ii) providing consents for use of their reports, as reasonably requested by Parent and/or lenders; and
furnish no later than three (3) business days prior to the Closing Date all documentation and other information relating to the Company and its subsidiaries that is reasonably requested by Parent and
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required by bank regulatory authorities under applicable “know-your-customer,” beneficial ownership and anti-money laundering laws, including the PATRIOT Act (provided, that none of the Company or its subsidiaries will be responsible for including in any such certificate information relating to the post-closing ownership of the Company or its subsidiaries).
Parent must, promptly upon request by the Company, reimburse the Company for all reasonable, documented and invoiced out-of-pocket costs incurred by the Company or its subsidiaries or their respective representatives in connection with the cooperation contemplated by the financing cooperation section of the Merger Agreement and must indemnify and hold harmless the Company and its subsidiaries and their respective representatives from and against any and all losses suffered or incurred by them in connection with the Debt Financing, any action taken by them pursuant to the financing cooperation section of the Merger Agreement and the provision of any information used in connection therewith (other than information provided by the Company or its subsidiaries specifically in connection with its obligations pursuant to the financing cooperation section of the Merger Agreement), except to the extent such losses arise out of the gross negligence, bad faith, fraud or wilful misconduct of the Company, its subsidiaries or their respective representatives.
Pursuant to the Merger Agreement, if and to the extent Parent or Merger Sub elects to prepay, redeem, terminate or otherwise discharge any of the existing notes of the Company (the “Existing Notes”), the Company must use reasonable best efforts to assist Parent or Merger Sub, at Parent’s or Merger Sub’s request, in certain transactions with respect to the Existing Notes, including redemptions, satisfaction and discharges and/or consent solicitations, in each case subject to certain exceptions and qualifications. In addition, the Company must use its reasonable best efforts to obtain and deliver to Parent, at least one business day prior to the Closing Date, an executed pay-off letter in customary form reasonably acceptable to Parent with respect to the Company’s existing credit agreement.
From and after the Effective Time, Parent will, and will cause the Surviving Corporation to, to the fullest extent permitted under applicable law, (i) indemnify, defend and hold harmless, to the fullest extent permitted under applicable law, each present and former director, officer or employee of Grace of any of its subsidiaries (each, a “Company Indemnified Party”) from and against any costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, claims, damages, penalties, liabilities and amounts paid in settlement (including, in each case, any interest or assessments thereon) in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, to the extent such claim, action, suit, proceeding or investigation arises out of or pertains to any action or omission or alleged action or omission in such Company Indemnified Party’s capacity as a director, officer or employee of Grace or any Grace subsidiary prior to the Effective Time and (ii) pay (including by advancement) the expenses (including reasonable attorneys’ fees) of any Company Indemnified Party incurred in connection with any such claim, action, suit, proceeding or investigation upon receipt of an undertaking by or on behalf of such Company Indemnified Party to repay such advances if it is ultimately determined by final adjudication that such person is not entitled to indemnification.
For a period of six (6) years after the Effective Time, Parent is required, unless otherwise prohibited by applicable law, to cause the certificate of incorporation and bylaws of the Surviving Corporation to contain provisions no less favorable to the Company Indemnified Parties with respect to exculpation, indemnification and rights to advancement of expenses for periods at or prior to the Effective Time than those set forth as of the date of the Merger Agreement in the certificate of incorporation and bylaws of Grace, and not to amend or modify those provisions in a manner that would adversely affect the rights of any Company Indemnified Party.
In addition, prior to the Effective Time, Grace must (and if Grace is unable to, Parent must cause the Surviving Corporation to) obtain six (6)-year “tail” insurance and indemnification policies that are not less favorable than Grace’s existing policies. If the Company fails to obtain such tail policies prior to the Effective Time, Parent and the Surviving Corporation must cause to be maintained in effect for such six (6)-year period the current Grace insurance and indemnification policies for the Company Indemnified Parties that provide coverage for events occurring at or prior to the Effective Time. Notwithstanding the foregoing, in no event will the aggregate cost of obtaining such tail policies exceed an amount agreed between Grace and Parent, and, if the aggregate cost of such insurance coverage exceeds such maximum amount, Parent or the Surviving Corporation will only be required to obtain policies which, in its good faith determination, provide the greatest coverage available for a cost not exceeding such maximum amount. Any renewed policies must have coverage terms not materially more expansive than Grace’s insurance policies in place as of January 1, 2021.
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Employment Discussions
Except as approved by the Board of Directors, from the date of the Merger Agreement and until the earlier to occur of the termination of the Merger Agreement pursuant to the terms thereof and the Effective Time, Parent and Merger Sub generally will not authorize, make or enter into, or commit or agree to enter into, any formal or informal arrangements or other understandings (whether or not binding) with any Grace officer or employee (i) pursuant to which any such individual would be entitled to receive consideration of a different amount or nature than the Merger Consideration in respect of such holder’s shares of Grace common stock; or (ii) pursuant to which such individual would agree to provide, directly or indirectly, equity investment to Parent, Merger Sub or the Company to finance any portion of the Merger.
Transaction Litigation
Each of Grace and Parent will: (i) promptly notify the other party of any stockholder litigation or other litigation or proceedings arising from the Merger Agreement or the Merger that is brought against such party or any of its affiliates or directors; and (ii) keep the other party sufficiently informed on a reasonably current basis with respect to the status thereof (including by promptly furnishing to the other party and its representatives such information relating to such litigation as may be reasonably requested). In addition, Grace will give Parent the opportunity to participate in the defense and settlement of any such litigation. Grace may not compromise or settle (in full or partially) any such litigation without Parent’s prior written consent.
Access
Subject to certain exceptions and limitations, from and after the date of the Merger Agreement and prior to the Effective Time or earlier termination of the Merger Agreement, Grace is required to, and required to cause its subsidiaries to, afford to Parent and its representatives reasonable access (at Parent’s sole cost and expense), upon reasonable advance notice and during normal business hours, to Grace’s properties, offices, personnel and records, and to make available reasonably promptly to Parent all information concerning its business, properties and personnel as Parent may reasonably request, except that Grace may withhold: (i) information that Grace reasonably believes is subject to the terms of any confidentiality agreement with a third person entered into prior to the date of the Merger Agreement, (ii) information subject to attorney-client privilege or (iii) information the disclosure of which would violate applicable law (provided that Grace is required to use reasonable best efforts to make appropriate substitute arrangements to permit reasonable disclosure which would not result in the effects in the foregoing clauses (i) through (iii)).
The obligations of Parent and Merger Sub, on the one hand, and Grace, on the other hand, to consummate the Merger are subject to the satisfaction or waiver of each of the following conditions:
the adoption of the Merger Agreement by the requisite affirmative vote of stockholders;
the expiration or termination of the applicable waiting period under the HSR Act and the receipt of approvals, consents, waivers or clearances under the antitrust laws of certain specified foreign jurisdictions; and
the absence of any laws or judgments issued by a governmental entity of competent jurisdiction making the Merger illegal or otherwise prohibiting the Merger.
In addition, the obligations of Parent and Merger Sub to consummate the Merger are subject to the satisfaction or waiver of each of the following additional conditions:
the representations and warranties of Grace relating to organization, good standing, corporate power, capital structure, authority, execution and enforceability, the absence of a Company Material Adverse Effect from December 31, 2020 until the date of the Merger Agreement, anti-takeover laws, brokers and the fairness opinions being true and correct in all respects as of the date of the Merger Agreement and as of the Closing Date as if made as of such date (except to the extent expressly made as of an earlier date, in which case as of such earlier date), in each case except for any de minimis failures to be so true and correct;
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the other representations and warranties of Grace set forth in the Merger Agreement being true and correct (without giving effect to any limitation as to “materiality” or “Company Material Adverse Effect”) as of the date of the Merger Agreement and as of the Closing Date as if made as of such date (except to the extent expressly made as of an earlier date, in which case as of such earlier date), except for such failures to be true and correct (without giving effect to any limitation as to “materiality” or “Company Material Adverse Effect”) that, individually or in the aggregate, has not had or would not reasonably be expected to have a Company Material Adverse Effect;
Grace having performed in all material respects all covenants and agreements of the Merger Agreement required to be performed by Grace;
no Company Material Adverse Effect having occurred since the date of Merger Agreement; and
the receipt by Parent of a certificate of Grace signed on behalf of Grace by an executive officer thereof, certifying that the conditions described in the preceding four (4) bullets have been satisfied.
In addition, the obligation of Grace to consummate the Merger is subject to the satisfaction or waiver of each of the following additional conditions:
the representations and warranties of Parent and Merger Sub set forth in the Merger Agreement being true and correct (without giving effect to any limitation as to “materiality” or “Parent Material Adverse Effect” set forth therein) as of the date of the Merger Agreement and as of the Closing Date as if made as of such date (except to the extent expressly made as of an earlier date, in which case as of such earlier date), except for any failure to be so true and correct (without giving effect to any limitation as to “materiality” or “Parent Material Adverse Effect” set forth therein), individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect;
Parent and Merger Sub having performed in all material respects all covenants and agreements of the Merger Agreement required to be performed by Parent or Merger Sub at or prior to the closing of the Merger; and
the receipt by Grace of a certificate of Parent signed on behalf of Parent by an executive officer thereof, certifying that the conditions described in the preceding two (2) bullets have been satisfied.
The Merger Agreement may be terminated at any time prior to the Effective Time, whether before or after the adoption of the Merger Agreement by Grace Stockholders, in the following ways:
by mutual written consent of Grace and Parent;
by either Grace or Parent if:
• | the Merger has not been consummated by 5:00 p.m., New York City time, on January 26, 2022, which we refer to in this proxy statement as the “End Date” (which will automatically be extended to (i) 5:00 p.m., New York City time, on April 26, 2022 if the required regulatory approvals have not been obtained by the End Date but all other conditions to the closing of the Merger have been satisfied or waived (other than those conditions that by their terms are to be satisfied at the closing, but which are capable of being satisfied at such time) and (ii) 5:00 p.m., New York City time, on the tenth (10th) business day after the last day of the Marketing Period described above (but in no event to a date later than 5:00 p.m., New York City time, on April 26, 2022) if the conditions to the closing of the Merger have been satisfied or waived (other than those conditions that by their terms are to be satisfied at the closing, but which are capable of being satisfied at such time) but the Marketing Period has not been completed at the time of the End Date); provided that the right to terminate the Merger Agreement pursuant to the termination provision referred to in this bullet point will not be available to a party if the failure of the Merger to have been completed on or before the End Date was primarily caused by the material breach of such party of its obligations under the Merger Agreement; |
a law or judgment by a court or other governmental entity of competent jurisdiction permanently restraining, enjoining or otherwise prohibiting the completion of the Merger has become final and non-appealable; provided that the right to terminate the Merger Agreement pursuant to the
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termination provision referred to in this bullet point will not be available to a party if a failure of such party to comply with its obligations pursuant to Section 6.02 of the Merger Agreement was a principal cause of the enactment, issuance, promulgation, enforcement or entry of such order, or the order becoming final and non-appealable; or
the Special Meeting has been duly held and the Grace Stockholders fail to adopt the Merger Agreement at such Special Meeting or any adjournment or postponement thereof.
by Parent if:
prior to the adoption of the Merger Agreement by the Grace Stockholders, the Board of Directors effects a Company Adverse Recommendation Change; or
Grace has breached or failed to perform any of its covenants or agreements set forth in the Merger Agreement, or if any of its respective representations or warranties fails to be true and correct, which, in either case would give rise to a failure of the conditions to completion of the Merger relating to the accuracy of Grace’s representations and warranties or performance of Grace’s covenants and is not reasonably capable of being cured by the End Date or, if capable of being cured, is not cured within 30 calendar days following Parent’s delivery of written notice of such breach or failure; provided that Parent will not have the right to terminate the Merger Agreement pursuant to this bullet point if Parent is then in breach of any covenant or agreement set forth therein or if any of its representations or warranties then fails to be true and correct, which, in either case would give rise to a failure of the conditions to completion of the Merger relating to the accuracy of Parent and Merger Sub’s representations and warranties or performance of Parent and Merger Sub’s covenants.
by Grace if:
prior to the adoption of the Merger Agreement by the Grace Stockholders, Grace enters into a definitive agreement with respect to a Superior Company Proposal in accordance with the terms of the Merger Agreement and as further described in the section of this proxy statement captioned “—Company Takeover Proposals; No Solicitation,” so long as (i) Grace has not willfully and materially breached its non-solicitation obligations and (ii) Grace pays to Parent the Company Termination Fee of $141 million prior to or concurrently with such termination;
prior to the Effective Time, Parent or Merger Sub has breached or failed to perform any of its respective covenants or agreements set forth in the Merger Agreement, or if any of its respective representations or warranties fails to be true and correct, which, in either case would give rise to a failure of the conditions to completion of the Merger relating to the accuracy of Parent and Merger Sub’s representations and warranties or performance of Parent and Merger Sub’s covenants and is not reasonably capable of being cured by the End Date or, if capable of being cured, is not cured within 30 calendar days following Grace’s delivery of written notice of such breach or failure; provided that Grace will not have the right to terminate the Merger Agreement pursuant to this bullet point if Grace is then in breach of any covenant or agreement set forth therein or if any of its representations or warranties then fails to be true and correct which, in either case would give rise to a failure of the conditions to completion of the Merger relating to the accuracy of Grace’s representations and warranties or performance of Grace’s covenants; or
prior to the Effective Time, (i) the conditions to the obligations of Parent and Merger Sub to consummate the Merger have been satisfied (other than those conditions that by their nature are to be satisfied at the closing, but which are capable of being satisfied at such time); (ii) Parent and Merger Sub have failed to consummate the Merger in the time set forth in the Merger Agreement; (iii) Grace has irrevocably confirmed to Parent in writing that Grace is ready, willing and able to consummate the Merger; and (iv) Parent and Merger Sub fail to consummate the Merger on or prior to the date that is three (3) business days after the delivery by Grace to Parent of such confirmation and Grace stood ready, willing and able to complete the closing through the end of such three (3) business day period.
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Company Termination Fee
Parent will be entitled to receive the Company Termination Fee of $141 million from Grace (the “Company Termination Fee”) if the Merger Agreement is terminated:
by Grace prior to the adoption of the Merger Agreement by the Grace Stockholders to enter into a definitive agreement in respect of a Superior Company Proposal;
by Parent prior to the adoption of the Merger Agreement by the Grace Stockholders because the Board of Directors has effected a Company Adverse Recommendation Change;
by either Grace or Parent because the Grace Stockholders have failed to adopt the Merger Agreement at the Special Meeting or any adjournment or postponement thereof and, at the time of such termination, Parent would have been entitled to terminate the Merger Agreement because the Board of Directors has effected a Company Adverse Recommendation Change; or
(i) (a) by either Grace or Parent because the Merger has not been consummated by the End Date, (b) by either Grace or Parent because the Grace Stockholders have failed to adopt the Merger Agreement at the Special Meeting or any adjournment or postponement thereof, or (c) by Parent because Grace has breached or failed to perform any of its covenants or agreements set forth in the Merger Agreement or if any of its representations or warranties fails to be true and correct, which, in either case would give rise to a failure of the conditions to completion of the Merger relating to the accuracy of its representations and warranties or performance of its covenants and is not reasonably capable of being cured by the End Date or, if capable of being cured, is not cured within 30 calendar days following Parent’s delivery of written notice of such breach or failure; (ii) after the execution of the Merger Agreement and prior to the date of termination, the Company has received a bona fide Company Takeover Proposal or a bona fide Company Takeover Proposal has been publicly disclosed and not withdrawn at least five (5) business days prior to such termination; and (iii) within six (6) months of the date of termination described in preceding clause (i)(a) or twelve (12) months of the date of termination described in preceding clauses (i)(b) or (i)(c), Grace enters into a definitive agreement with respect to, or consummates, any Company Takeover Proposal (provided that, for purposes of the termination fee, all references to “15%” in the definition of “Company Takeover Proposal” are deemed to be references to “50%”).
Upon Grace’s entry into a definitive agreement with respect to, or the consummation of, the Company Takeover Proposal referred to in clause (iii) of the immediately preceding bullet point, Grace must provide Parent with prompt notice of such fact whereupon Parent will have the right, subject to certain exceptions, for a period of 15 business days to elect to irrevocably waive any right to receive the Company Termination Fee and instead seek monetary damages from Grace in respect of Grace’s willful and material breach of any covenant set forth in the Merger Agreement prior to the termination. If Parent does not so waive its right to receive the Company Termination Fee, upon payment of the Company Termination Fee in full, Parent’s right to receive the Company Termination Fee will be the sole and exclusive remedy of Parent and its affiliates for any loss suffered as a result of any breach of the Merger Agreement or the failure of the closing to be consummated.
Parent Termination Fee
Grace will be entitled to receive the Parent Termination Fee of $281 million from Parent if the Merger Agreement is terminated:
by Grace if Parent or Merger Sub has breached or failed to perform any of its respective covenants or agreements set forth in the Merger Agreement, or if any of its respective representations or warranties fails to be true and correct, which, in either case would give rise to a failure of the conditions to completion of the Merger relating to the accuracy of Parent and Merger Sub’s representations and warranties or performance of Parent and Merger Sub’s covenants, and is not reasonably capable of being cured by the End Date or, if capable of being cured, is not cured within 30 calendar days following Grace’s delivery of written notice of such breach or failure;
by Grace if prior to the Effective Time, (i) the conditions to the obligations of Parent and Merger Sub to consummate the Merger have been satisfied (other than those conditions that by their nature are to
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be satisfied at the closing, but which are capable of being satisfied at such time); (ii) Parent and Merger Sub have failed to consummate the Merger in the time set forth in the Merger Agreement; (iii) Grace has irrevocably confirmed to Parent in writing that Grace is ready, willing and able to consummate the Merger; and (iv) Parent and Merger Sub fail to consummate the Merger on or prior to the date that is three (3) business days after the delivery by Grace to Parent of such confirmation and Grace stood ready, willing and able to complete the closing through the end of such three (3) business day period; or
by Parent because the Merger has not been consummated by the End Date and at such time, Grace would have been entitled to terminate pursuant to either of the prior two bullets above.
In no event will either Grace or Parent, as applicable, be required to pay the Company Termination Fee or the Parent Termination Fee, as applicable, on more than one occasion. While a party may pursue both a grant of specific performance and the payment of the Company Termination Fee or Parent Termination Fee, as applicable, in no event will a party be permitted or entitled to receive both a grant of specific performance that results in the closing of the Merger and payment of the applicable fee.
Under the Merger Agreement, each of the parties has agreed that it will bring any action or proceeding in respect of any claim arising out of or relating to the Merger Agreement or the transactions contemplated by the Merger Agreement exclusively in the Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware or, if the Delaware Court of Chancery lacks or declines to accept jurisdiction, another federal or state court located in the State of Delaware. However, each of the parties has agreed that it will not bring or support any action or claim against the lenders party to the Debt Commitment Letter or their representatives arising out of or relating to the Merger Agreement or any of the transactions contemplated by the Merger Agreement in any forum other than any state or federal court sitting in the Borough of Manhattan in the City of New York.
Parent, Merger Sub and Grace have agreed that irreparable damage for which monetary damages, even if available, would not be an adequate remedy would occur in the event that the parties do not perform the provisions of the Merger Agreement (including any party failing to take such actions as are required of it in order to consummate the Merger Agreement). Parent, Merger Sub and Grace acknowledged and agreed that the parties will be entitled, in addition to any other remedy to which they are entitled at law or in equity, to an injunction, specific performance and other equitable relief to prevent breaches (or threatened breaches) of the Merger Agreement and to enforce specifically the terms and provisions thereof, without proof of actual damages (and each party waived any requirement for the securing or posting of any bond in connection with such remedy). Parent, Merger Sub and Grace agree not to assert that a remedy of specific performance is unenforceable, invalid, contrary to law or inequitable or inappropriate for any reason, nor to assert that a remedy of monetary damages would provide an adequate remedy for any such breach.
Notwithstanding the foregoing, it is explicitly agreed that the right of Grace to seek an injunction, specific performance or other equitable remedies in connection with enforcing Parent’s and Merger Sub’s obligations to consummate the Merger will be subject to the requirements that (i) Parent has failed to consummate the Merger as required under the Merger Agreement, (ii) all of the conditions to Parent and Merger Sub’s obligations to consummate the Merger, in each case, have been satisfied or waived by Parent (other than those conditions that by their nature are to be satisfied at the closing, but which are capable of being satisfied at such time), (iii) the Debt Financing (or any alternative financing under the Merger Agreement) has been funded or will be funded at the closing if the Equity Financing is funded at the closing and (iv) Grace has irrevocably confirmed in writing that if specific performance is granted and the Equity Financing and Debt Financing are funded, then the Company stands ready, willing and able to consummate the closing of the Merger and will take such actions that are required by Grace under the Merger Agreement to cause the closing to occur.
In the event of the termination of the Merger Agreement in accordance with the provisions described in the section of this proxy statement captioned “—Termination of the Merger Agreement,” the Merger Agreement will become void and of no effect with no liability to any person on the part of Grace, Parent or Merger Sub or their respective affiliates, directors, officers, employees or stockholders, except that no such termination will relieve
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(i) Grace of any liability to pay the Company Termination Fee or Parent of any liability to pay the Parent Termination Fee, in each case to the extent required pursuant to the Merger Agreement, or (ii) Grace of any liability for any willful and material breach of the Merger Agreement prior to such termination, subject to certain exceptions and limitations set forth in the Merger Agreement. In addition, certain sections of the Merger Agreement, including among others, sections relating to termination, termination fees and expenses, will survive termination.
The maximum aggregate liability of Parent, Merger Sub and the lenders who have committed to provide Debt Financing under the Debt Commitment Letter, collectively, for any losses, damages, costs or expenses related to the failure of the closing of the Merger to occur or a breach under the Merger Agreement will not exceed, in the aggregate, an amount equal to $281 million plus any enforcement expenses payable pursuant to the Merger Agreement and the amount of any reimbursements to which Grace is entitled pursuant to the Merger Agreement. Notwithstanding any such limitations on liability for monetary damages, Parent, Merger Sub and Grace may be entitled to an injunction, specific performance or other equitable relief as provided in the Merger Agreement.
Except in specified circumstances, whether or not the Merger is completed, Grace, on the one hand, and Parent and Merger Sub, on the other hand, are each responsible for all of their respective costs and expenses incurred in connection with the Merger and the other transactions contemplated by the Merger Agreement. All filing fees incurred to obtain regulatory approvals in connection with the transactions contemplated by the Merger Agreement as well as in the other filings that the Company will makebe borne by Parent, and all fees, costs and expenses (subject to certain exceptions) associated with the SEC.preparation, filing and mailing of this proxy statement will be borne by Grace.
The Merger Agreement may be amended by the parties in an executed written instrument at any time before or after adoption of the Merger Agreement by the Grace Stockholders. However, after adoption of the Merger Agreement by the Grace Stockholders, no amendment that requires further approval by such stockholders pursuant to the DGCL may be made without such approval.
The Merger Agreement is governed by Delaware law, except that any claim by Grace involving the lenders party to the Debt Commitment Letter is governed by New York law.
Subject to certain exceptions, the Merger Agreement remains in effect. 40 North andSupporting Stockholder may not transfer its affiliates collectively own 9,865,008 shares (whether owned of Grace common stock asrecord or beneficially) of the date hereof, representing approximately 14.9% of the total outstanding Grace common stock.
The foregoing description of the Voting Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Voting Agreement, a copy of which has been filed with the SEC.
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Fee Description | 2020 | 2019 | ||||||||||||
Audit Fees | $ | 2,635,000 | $ | 2,564,000 | ||||||||||
Audit-Related Fees | 178,000 | 55,000 | ||||||||||||
Tax Fees | 6,000 | 203,000 | ||||||||||||
All Other Fees | 5,000 | 5,000 | ||||||||||||
Total Fees | $ | 2,824,000 | $ | 2,827,000 |
Under Section 14A of the Exchange Act our shareholders are entitledand the applicable SEC rules issued thereunder, Grace is required to vote onsubmit a proposal to our stockholders to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Grace’s named executive officers that is based on or otherwise relates to the Merger Agreement and the transactions contemplated by the Merger Agreement. This compensation is summarized in the section captioned “The Merger—Interests of Executive Officers and Directors of Grace in the Merger.” The Board of Directors encourages you to review carefully the named executive officers set forthofficer merger-related compensation information disclosed in the Summary Compensation Table set forth in “Executive Compensation—Compensation Tables.” This votethis proxy statement. Accordingly, Grace is generally referred to as a “Say on Pay” vote. Accordingly, we are asking shareholdersyou to approve the following resolution:
“RESOLVED, that the stockholders of Grace approve, on ana non-binding, advisory basis, the following resolution:
The vote on this Compensation Proposal is a vote separate and apart from the vote on the proposal to adopt the Merger Agreement. Accordingly, you may vote to approve the proposal to adopt the Merger Agreement and vote not to approve this Compensation Proposal and vice versa. Because the vote on the Compensation DiscussionProposal is advisory only, it will not be binding on Grace. Accordingly, if the Merger Agreement is adopted and Analysis,the Merger is completed, the compensation tableswill be payable, subject only to the conditions applicable thereto, regardless of the outcome of the vote on this Compensation Proposal.
Vote Required and narrative discussion,Board of Directors Recommendation
Approval, on an advisory (non-binding) basis, of the Compensation Proposal requires the affirmative vote of the outstanding shares of Grace common stock representing a majority of the outstanding shares present at the Special Meeting in person or by proxy, provided a quorum is hereby APPROVED.present. Assuming a quorum is present, (i) a failure to vote in person or by proxy at the Special Meeting will have no effect on the outcome of the Compensation Proposal, (ii) abstentions will be treated as votes cast and, therefore, will have the same effect as a vote against the Compensation Proposal and (iii) broker “non-votes” (if any) will have no effect on the outcome of the Compensation Proposal. Shares of Grace common stock represented by properly executed, timely received and unrevoked proxies will be voted in accordance with the instructions indicated thereon. If a Grace Stockholder returns a signed proxy card without indicating voting preferences on such proxy card, the shares of Grace common stock represented by that proxy will be counted as present for purposes of determining the presence of a quorum for the Special Meeting and all of such shares will be voted as recommended by the Board of Directors.
The Board of Directors unanimously recommends that you vote “FOR” this proposal.
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We doare asking you to approve a proposal to adjourn the Special Meeting to a later date or dates if necessary or appropriate to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting. If stockholders approve the Adjournment Proposal, we could adjourn the Special Meeting and any adjourned session of the Special Meeting and use the additional time to solicit additional proxies, including soliciting proxies from Grace Stockholders that have previously returned properly executed proxies voting against adoption of the Merger Agreement. Among other things, approval of the Adjournment Proposal could mean that, even if we had received proxies representing a sufficient number of votes against adoption of the Merger Agreement such that the proposal to adopt the Merger Agreement would be defeated, we could adjourn the Special Meeting without a vote on the adoption of the Merger Agreement and seek to convince the holders of those shares to change their votes to votes in favor of adoption of the Merger Agreement. Additionally, we may seek to adjourn the Special Meeting if a quorum is not intendpresent or otherwise at the discretion of the chairman of the Special Meeting.
The Board of Directors unanimously recommends that you vote “FOR” this vote address any specific itemsproposal.
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The following table sets forth information regarding ownership of compensation, but ratherour common stock by:
each person or group of affiliated persons known by us to be the overall compensationbeneficial owner of more than 5% of our outstanding common stock;
each of our directors;
each of our named executive officers (each, an “NEO”); and
all directors and the policiesexecutive officers as a group.
The amounts for our NEOs and procedures describedexecutive officers and directors as a group and our significant stockholders are as of May 13, 2021 unless otherwise indicated in a footnote below (and in that case are based upon SEC filings made on behalf of such owners). Beneficial ownership in this Proxy Statement. This votetable is advisory and not binding on Grace,determined in accordance with the Compensation Committee, or our Board. However, as the vote is an expression of our shareholders’ views on a significant matter, the Compensation Committee will consider the outcomerules of the vote when making future executive compensation decisions. We currently hold such advisory voteSEC, and does not necessarily indicate beneficial ownership for any other purpose. Beneficial ownership generally includes voting or investment power with respect to securities. Except as noted, to our knowledge, each yearperson or group has sole voting and would expect to hold another advisory vote at our 2022 Annual Meeting of Shareholders (if held), pendinginvestment power over the shareholder vote under Proposal Four set forthshares shown in this Proxy Statement.
Named Executive Officer | Base Salary Rate as of 12/31/2020 ($) | Base Salary Rate as of 12/31/2019 ($) | Percentage Increase in Base Salary Rate (%) | ||||||||||||||||||||||||||
Hudson La Force | 925,000 | 850,000 | 8.8 | ||||||||||||||||||||||||||
William C. Dockman | 470,004 | 415,000 | 13.3 | ||||||||||||||||||||||||||
Elizabeth C. Brown | 420,000 | 420,000 | — | ||||||||||||||||||||||||||
Keith N. Cole | 380,004 | 370,000 | 2.7 | ||||||||||||||||||||||||||
Mark A. Shelnitz | 462,000 | 450,000 | 2.7 |
Named Executive Officer | AICP Target as Percentage of Base Salary in 2020 (%) | AICP Target as Percentage of Base Salary in 2019 (%) | ||||||||||||
Hudson La Force | 100 | 100 | ||||||||||||
William C. Dockman | 70 | 70 | ||||||||||||
Elizabeth C. Brown | 70 | 70 | ||||||||||||
Keith N. Cole | 70 | 70 | ||||||||||||
Mark A. Shelnitz | 70 | 70 |
Percentage Funded in Adjusted EBIT Pool (%)* | Grace Performance as a Percentage of Adjusted EBIT Target (%) | Grace Adjusted EBIT Target (in millions $) | ||||||||||||
200 | 120 or above | 624 | ||||||||||||
150 | 110 | 572 | ||||||||||||
100 | 100 | 515-520 | ||||||||||||
75 | 93 | 476 | ||||||||||||
50 | 85 | 438 | ||||||||||||
— | Below 85 | Below 438 |
Percentage Funded in Adjusted Free Cash Flow Pool (%)* | Grace Performance as a Percentage of Adjusted Free Cash Flow Target (%) | Grace Adjusted Free Cash Flow Target (in millions $) | ||||||||||||
200 | 120 or above | 330 | ||||||||||||
150 | 110 | 303 | ||||||||||||
100 | 100 | 265-275 | ||||||||||||
75 | 93 | 245 | ||||||||||||
50 | 85 | 225 | ||||||||||||
— | Below 85 | Below 225 |
Percentage Funded in Adjusted Net Sales Pool (%)* | Grace Performance as a Percentage of Adjusted Net Sales Target (%) | Grace Adjusted Net Sales Target (in millions $) | ||||||||||||
200 | 110 or above | 2,217 | ||||||||||||
150 | 105 | 2,116 | ||||||||||||
100 | 100 | 2,015 | ||||||||||||
75 | 95 | 1,914 | ||||||||||||
50 | 90 | 1,814 | ||||||||||||
— | Below 90 | Below 1,814 |
2020 Result (in millions $) | Funding Level (percentage of target) | Weight | AICP Incentive Pool Contribution | ||||||||||||||
2020 AICP Adjusted EBIT | 312.2 | 0% | 50% | 0% | |||||||||||||
2020 AICP Adjusted Free Cash Flow | 236.9 | 65% | 25% | 16% | |||||||||||||
2020 AICP Adjusted Net Sales | 1,734.5 | 0% | 25% | 0% | |||||||||||||
Total | 16% |
Name | Target Payout ($) | Calculated AICP Incentive Pool Funding (%) | Calculated AICP Funding ($)(a) | Individual Performance Adjustment ($)(b) | Final Payout ($) | Final Payout as Percentage of Target (%) | ||||||||||||||||||||
Hudson La Force | 906,353 | 16 | 145,016 | 398,795 | 543,811 | 60 | ||||||||||||||||||||
William C. Dockman | 319,430 | 16 | 51,109 | 140,549 | 191,658 | 60 | ||||||||||||||||||||
Elizabeth C. Brown | 294,000 | 16 | 47,040 | 157,584 | 204,624 | 70 | ||||||||||||||||||||
Keith N. Cole | 264,262 | 16 | 42,282 | 116,276 | 158,558 | 60 | ||||||||||||||||||||
Mark A. Shelnitz | 321,312 | 16 | 51,410 | 108,603 | 160,013 | 50 |
Percentage of PBU Award Funded per Adjusted EPS Performance (%)* | Grace Performance as a Percentage of Adjusted EPS Target (%) | Grace Adjusted EPS Target ($) | ||||||||||||
200 | 120 | 6.61 | ||||||||||||
150 | 110 | 6.06 | ||||||||||||
100 | 100 | 5.51 | ||||||||||||
83 | 95 | 5.23 | ||||||||||||
67 | 90 | 4.96 | ||||||||||||
50 | 85 | 4.68 | ||||||||||||
0 | Below 85 | Below 4.68 |
Percentage of PBU Award Funded per Adjusted EPS Performance (%)* | Grace Performance as a Percentage of Adjusted EPS Target (%) | Grace Adjusted EPS Target ($) | ||||||||||||
200 | 120 | 5.70 | ||||||||||||
150 | 110 | 5.23 | ||||||||||||
100 | 100 | 4.75 | ||||||||||||
83 | 95 | 4.51 | ||||||||||||
67 | 90 | 4.28 | ||||||||||||
50 | 85 | 4.04 | ||||||||||||
0 | Below 85 | 4.04 |
Threshold | Target | Maximum | Actual | |||||||||||
Performance | < 25th Percentile | 25th – 75th Percentile | > 75th Percentile | 24th Percentile | ||||||||||
Modifier | 75% | 100% | 125% | 75% |
Name | Target PBU Payout (Units) | Adjusted EPS Funding for 2018-2020(a) | Relative TSR Modifier Factor for 2018-2020 | Final PBU Payout as Percentage of Target | Final PBU Payout (Shares) | Actual Value of 2018-2020 PBU Payout(b) ($) | ||||||||||||||||||||
Hudson. La Force | 9,653 | 73% | 75% | 55% | 5,310 | 314,671 | ||||||||||||||||||||
William C. Dockman | 1,768 | 73% | 75% | 55% | 973 | 57,660 | ||||||||||||||||||||
Elizabeth C. Brown | 3,713 | 73% | 75% | 55% | 2,043 | 121,068 | ||||||||||||||||||||
Keith N. Cole | 3,342 | 73% | 75% | 55% | 1,839 | 108,979 | ||||||||||||||||||||
Mark A. Shelnitz | 4,084 | 73% | 75% | 55% | 2,247 | 133,157 |
Name and Address of Beneficial Owner(1) | | | Number of Shares Beneficially Held | | | Percentage of Shares Beneficially Owned |
5% Stockholders | | | | | ||
40 North Management LLC(2) | | | 9,865,008 | | | 14.9% |
The Vanguard Group, Inc.(3) | | | 5,669,493 | | | 8.6% |
Named Executive Officers and Directors | | | | | ||
Robert F. Cummings | | | 20,823(4) | | | * |
Julie Fasone Holder | | | 8,474 | | | * |
Diane H. Gulyas | | | 14,823 | | | * |
Hudson La Force | | | 224,439(5) | | | * |
Henry R. Slack | | | 5,495 | | | * |
Christopher J. Steffen | | | 25,887 | | | * |
Mark E. Tomkins | | | 24,823 | | | * |
Shlomo Yanai | | | 6,973 | | | * |
William C. Dockman | | | 35,801(5) | | | |
Elizabeth C. Brown | | | 54,054(5) | | | * |
Keith N. Cole | | | 45,148(5) | | | * |
Mark A. Shelnitz | | | 112,593(4)(5) | | | * |
All current executive officers and directors as a group (12 people)(6) | | | 466,740(4)(5) | | | 0.7% |
(1) | The address of
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(2) | 40 North Management LLC (“40 North Management”), 40 North Latitude Fund LP (“40 North Latitude Feeder”), 40 North GP III LLC (“40 North GP III”), 40 North Latitude Master Fund Ltd. (“40 North Latitude Master”), David S. Winter and David J. Millstone, beneficially owns 9,865,008 shares of Grace common stock (the “40 North Shares”). Each of 40 North Management, 40 North Latitude Feeder, 40 North GP III, 40 North Latitude Master, Mr. Winter and Mr. Millstone may be |
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investments, including the 40 North Shares. Mr. Winter and Mr. Millstone serve as the sole members and principals of each of 40 North Management and 40 North GP III, and as the sole directors of 40 North Latitude Master. The ownership information set forth is based on materials contained in the Schedule 13D/A filed with the SEC by 40 North Management on April 26, 2021.
(3) | The Vanguard Group, Inc. (“VGI”) beneficially owns in the |
(4) | Includes shares owned by trusts and other entities as to which the person has the power to direct voting and/or investment. |
(5) | Includes shares of Grace common stock to be voting power will vest within 60 days after May 13, 2021. Pursuant to
98 If the Merger is completed, we will have no public stockholders and there will be no public participation in any future meetings of Grace Stockholders. However, if the Merger is not completed, stockholders will continue to be entitled to attend and participate in stockholder meetings. If the Merger is completed, Grace does not expect to hold a 2022 annual meeting of its stockholders. However, if the Merger is not completed, Grace will hold a 2022 annual meeting of its stockholders. As described in our annual proxy statement for the 2021 annual meeting of stockholders, filed with the SEC on May 24, 2021, Grace Stockholders have the opportunity to submit proper proposals for inclusion in our proxy statement and for consideration at the annual meeting of stockholders to be held in 2022 by submitting their proposals in writing to our Corporate Secretary in a timely manner by January 24, 2022 and otherwise complying with the requirements of Rule 14a-8 of the Exchange Act. In addition, our bylaws establish an advance notice procedure with regard to business to be brought before an annual meeting, including stockholder proposals not included in our proxy statement. For director nominations or other business to be properly brought before our 2022 annual meeting by a stockholder, such stockholder must deliver written notice to our Corporate Secretary at our principal executive offices no later than April 8, 2022, and no earlier than March 9, 2022. If the date of our 2022 annual meeting is advanced by more than 30 calendar days or delayed by more than 60 calendar days from the anniversary date of the 2021 annual meeting, notice of a proposal will be timely if it is received by our Corporate Secretary at our principal executive offices no earlier than the close of business on the 120th day prior to the 2022 annual meeting and not later than the later of the close of business on (i) the 90th day before the 2022 annual meeting or (ii) if the first public announcement of the date of the 2022 annual meeting is less than 100 days prior to the date of the 2022 annual meeting, the tenth day following the day on which we first make a public announcement of the date of the 2022 annual meeting. Additional information regarding the procedures to submit a stockholder proposal at the 2022 annual meeting, if one will be held, is included in Grace’s proxy statement for its 2021 annual meeting of stockholders, filed with the SEC on May 24, 2021. 99 The SEC allows us to “incorporate by reference” information into this proxy statement, which means that we can disclose important information to you by referring you to other documents filed separately with the SEC. The information incorporated by reference is deemed to be part of this proxy statement, except for any information superseded by information in this proxy statement or incorporated by reference subsequent to the date of this proxy statement. This proxy statement incorporates by reference the documents set forth below that we have previously filed with the SEC. These documents contain important information about us and our financial condition and are incorporated by reference into this proxy statement. The following Grace filings with the SEC are incorporated by reference:
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