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EXHIBIT 10.9
Albert J. Costello
Chairman, President and
Chief Executive Officer
W. R. Grace & Co.
One Town Center Road
Boca Raton, FL 33486-1010
September 23, 1996
Mr. Donald H. Kohnken
W. R. Grace & Co.
One Town Center Road
Boca Raton, FL 33486
Dear Don:
This letter outlines the arrangements relating to your resignation and
retirement as Executive Vice President of W. R. Grace & Co. ("Company") and
your resignation from all positions you hold with the subsidiaries and
affiliates of the Company.
1. You will resign your position as Executive Vice President of the Company
on September 30, 1996, and retire effective that date.
2. Following your retirement on September 30, 1996, you will be entitled to
the compensation and benefits set forth below in accordance with and
subject to the following terms:
A. You will receive severance pay, equal to $493,553 (a total of 65.155
weeks' severance pay) paid in the form of a lump sum in October 1996.
B. Incentive Compensation
You will be considered for a prorated annual incentive compensation award
for 1996 based on the financial performance of the Company and your
individual performance. Your 1996 award, which is subject to Board
approval, will be paid to you in March 1997.
C. Executive Salary Protection Plan and Split-Dollar Life Insurance Plan
Your death benefit coverage under the Executive Salary Protection Plan
shall cease on October 31, 1996, while your disability coverage under that
Plan will cease on September 30, 1996, in accordance with the terms of
that Plan. Your participation in the Split-Dollar Life Insurance Plan
will cease on November 30, 1996, although you may purchase the policy by
reimbursing the Company for the premiums paid by the Company for that
policy on your behalf through the date of your retirement. Estimated
premiums paid by the Company through November 30, 1996 are expected to
total approximately $323,000 for five policy years with estimated cash
value of approximately $270,000. Your death benefit coverage is
$1,000,000 under the split dollar policy and $560,000 under the
Company-paid group basic life plan.
D. Long-Term Incentive Plan
Your participation in the Company's Long-Term Incentive Plan for the
1994-96, 1995-97 and 1996 -98 Performance Periods will vest and be paid to
you at the same time as other
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participants. Your awards for 1994-96, 1995-97 and 1996-98 will be
prorated as of your September 30, 1996 retirement date.
E. Stock Options
Your November 5, 1987, October 4, 1990, December 5, 1991, December 3, 1992,
November 4, 1993, April 7, 1994 and March 2, 1995 stock option grants are
fully vested. Subject to SEC requirements and restrictions (as to which
you should consult Bob Lamm), you will be free to exercise your stock
options and to sell the shares acquired on exercise following your
resignation as an officer of the Company on September 30, 1996. After your
retirement, you will have a three-year grace period during which you may
exercise your options, except for the November 5, 1987 grant which will
expire on its existing expiration date of November 4, 1997.
F. Stock Swap Arrangement
The 12,676 shares of restricted stock granted to you under the August 1,
1991 "Stock Swap Arrangement" are scheduled to have the restrictions lapse
in five equal installments during the five-year period beginning January
31, 1997 and ending with the restrictions lapsing on the last installment
on January 31, 2001. The 49,000 stock options you received under that
arrangement are scheduled to vest in five equal annual installments
beginning January 31, 1997 through January 31, 2001. Notwithstanding this
schedule, as a result of your retirement on September 30, 1996, all such
stock options will vest, to the extent not already vested, on March 31,
1999 (30 months following your retirement) and you will have until
September 30, 1999 to exercise such options during the six month remainder
of the three-year grace period following your retirement. The Compensation
Committee of the Board at its May 1996 meeting consented to your retirement
so that the restrictions on the restricted shares will be lifted upon your
retirement, and so that the 30-month waiting period will be eliminated with
respect to the stock options.
G. Savings and Investment Plan
Following your retirement, you may elect to take a lump sum distribution
under the Savings and Investment Plan, defer your distribution until age 70
1/2 or elect to begin receiving installment payments over a period of up to
10 years, in accordance with the terms of the Plan. Your S&I balance as of
September 17, 1996 was $981,675. In March 1997 you will be eligible to
receive your Savings & Investment Replacement payment for 1996 in an amount
estimated to be $16,183.
H. Deferred Compensation
Your deferred compensation balances, estimated at $1,062,763 as of August
31, 1996, will be paid to you in accordance with the distribution elections
you have previously made.
I. Post-Retirement Life and Medical Coverage
You may participate in the Company's post-retirement life (with reinstated
coverage of $5,000 if you do not purchase your split dollar policy) and
medical plans in accordance with their terms following your retirement on
September 30, 1996. Of course, should the Company amend or terminate these
plans for all other similarly situated employees, such amendment or
termination would apply to you.
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J. Pensions
Under the Company's Retirement Plan for Salaried Employees and the
Supplemental Retirement Plan, assuming continuous service through September
30, 1996, your estimated annual benefit, on a straight life basis, would be
$267,694 beginning October 1, 1996. You may, of course, elect any other
payment option that is available under the Plans. Of course, should the
Company amend or terminate these plans for all other similarly situated
retirees, such amendment or termination would apply to you.
K. Perquisites
You may continue to use your Company-provided leased car and Company
provided financial counseling through September 30, 1996. The Company will
arrange for you to purchase your leased car on September 30, 1996 at the
then "fair market value."
L. Unused Vacation Payment
You are entitled to paid vacation aggregating not less than five weeks
during 1996. You will be entitled to payment for any unused vacation time
in accordance with Company policy at the time you retire on September 30,
1996.
This letter sets forth the entire agreement and understanding between you
and the Company concerning the compensation and benefit arrangements covered by
this letter, and it supersedes all prior agreements and understandings, if any,
concerning such subject matter between you and the Company. No representation
or promise concerning such subject matter has been made by the Company that is
not set forth in this letter.
Also, this letter supersedes the letter that I previously sent to you
regarding the matters addressed herein, dated June 3, 1996, and the amendment
to that letter, dated June 14, 1996 (collectively, the "Prior Letters"), and
the Prior Letters shall be of no effect.
Please confirm your agreement with the foregoing by signing a copy of this
letter where indicated below and returning it to me.
Sincerely,
Accepted and agreed to
this ___ day of September 1996
_________________________
Donald H. Kohnken