-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S1BZhMS4s6Jv1A1bKYUpj5+IVj6LRXC8Y65S9yY5M03U999JU6CBC+jnCMDVCDMa vD3EKJPBSSagC2zLyzcezA== 0000950123-96-005619.txt : 19961016 0000950123-96-005619.hdr.sgml : 19961016 ACCESSION NUMBER: 0000950123-96-005619 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960930 ITEM INFORMATION: Changes in control of registrant ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19961015 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FRESENIUS NATIONAL MEDICAL CARE HOLDINGS INC CENTRAL INDEX KEY: 0000042872 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 133461988 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-03720 FILM NUMBER: 96643359 BUSINESS ADDRESS: STREET 1: ONE TOWN CENTER RD CITY: BOCA RATON STATE: FL ZIP: 33486-1010 BUSINESS PHONE: 4073622000 FORMER COMPANY: FORMER CONFORMED NAME: GRACE W R & CO /NY/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: GRACE W R & CO /CT/ DATE OF NAME CHANGE: 19900423 8-K 1 FRESENIUS NATIONAL MEDICAL CARE HOLDINGS, INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): September 30, 1996 FRESENIUS NATIONAL MEDICAL CARE HOLDINGS, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) New York ---------------------------------------------- (State or other jurisdiction of incorporation) 1-3720 13-3461988 (Commission File Number) (IRS Employer Identification No.) Reservoir Place, 1601 Trapelo Road Waltham, Massachusetts 02154 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (617) 466-9850 -------------- W. R. GRACE & CO. One Town Center Road, Boca Raton, Florida 33486-1010 ------------------------------------------------------------- (Former name or former address, if changed since last report) 2 ITEM 1. CHANGES IN CONTROL OF THE REGISTRANT On September 30, 1996 (the "Effective Date"), the Registrant completed the reorganization (the "Reorganization") described in the Joint Proxy Statement-Prospectus of Fresenius Medical Care Aktiengesellschaft ("Fresenius Medical Care"), the Registrant, and Fresenius USA, Inc. ("Fresenius USA") dated August 2, 1996 ("Proxy Statement-Prospectus"). The Reorganization was accomplished pursuant to the Agreement and Plan of Reorganization dated as of February 4, 1996, as amended (the "Reorganization Agreement"), among the Registrant, Fresenius AG and Fresenius USA. Stockholders of the Registrant approved the Reorganization on September 16, 1996. On September 27, 1996, pursuant to the Distribution Agreement, dated February 4, 1996, among the Registrant, W. R. Grace & Co. - Conn. ("Grace Chemicals") and Fresenius AG, the Registrant distributed to its common stockholders 100% of the capital stock of Grace Holding, Inc., a Delaware corporation and formerly a wholly owned subsidiary of the Registrant, which holds all of the assets and liabilities formerly held by Registrant, other than those of its wholly owned subsidiary, National Medical Care, Inc. ("NMC") (the "Distribution"). Immediately following the Distribution, (i) the Registrant was recapitalized so that each holder of shares of Grace Common Stock received one share of Grace Class D Special Dividend Preferred Stock ("Class D Preferred Stock") for each share of Grace Common Stock held of record as of the close of business on September 27, 1996 and (ii) the Registrant's name was changed to Fresenius National Medical Care Holdings, Inc. Thereafter, WRG Merger Sub Inc., a New York corporation and a wholly owned subsidiary of Fresenius Medical Care AG ("Fresenius Medical Care"), a German corporation, merged with and into the Registrant (the "FNMC Merger") with the Registrant the surviving corporation. As a result of the Reorganization, the Registrant became a subsidiary of Fresenius Medical Care. All of the capital stock of Fresenius USA will shortly be contributed to the Registrant by Fresenius Medical Care. Fresenius Medical Care now owns all of the common stock of the Registrant, par value $1.00 per share (the "FNMC Common Stock"). Fresenius Medical Care beneficially owns no shares of the outstanding 6% Preferred Stock, Class A Preferred Stock, Class B Preferred Stock and Class D Preferred Stock of the Registrant. In the FNMC Merger, shareholders of the Registrant (other than Fresenius AG and its respective subsidiaries) received 0.34969667 Ordinary Shares of Fresenius Medical Care, evidenced by American Depositary Shares represented by American Depositary Receipts, for each share of common stock of the Registrant held by them. The nature and amount of consideration issued to shareholders of the Registrant is described in the Proxy Statement-Prospectus under the caption "THE REORGANIZATION -- Consideration to Shareholders." The amount of such consideration was determined in the course of arm's length negotiations between Fresenius AG and the Registrant as described in the Proxy Statement-Prospectus under the caption "BACKGROUND AND REASONS -- Background of the Reorganization; Reasons for the Recommendation of the Grace Board". Prior to the closing under the Reorganization Agreement, NMC entered into the Credit Agreement dated as of September 27, 1996 by and among NMC, certain subsidiaries and affiliates, the lenders named therein, Nationsbank N.A., The Bank of Nova Scotia, The Chase Manhattan Bank and Dresdner Bank AG (the "NMC Credit Agreement"). The Reorganization 1 3 Agreement required that NMC make a payment (the "Distribution Payment") to Grace Chemicals prior to the Effective Date (as defined in the Reorganization Agreement) in the amount of approximately $2.1 billion, subject to adjustment. The source of funds for the Distribution Payment, the repayment of certain indebtedness of Grace Chemicals and the working capital needs of NMC is the NMC Credit Agreement. Accordingly, on September 27, 1996, NMC borrowed $2.5 billion under the NMC Credit Agreement. The NMC Credit Agreement required that the Registrant guarantee obligations thereunder. In addition, Grace Chemicals agreed to guarantee certain obligations thereunder. Under the terms of the NMC Credit Agreement, Grace Chemicals may be released from such guarantees if Fresenius Medical Care becomes a guarantor thereunder, and Registrant understands that Fresenius Medical Care intends to become a guarantor of the obligations under the NMC Credit Agreement, upon the occurrence of certain specified conditions, but not sooner than forty-six days after the Effective Date. In connection with Grace Chemicals' agreement to extend guarantees under the NMC Credit Agreement, to provide a significant inducement for the release of such guarantees as to $800 million on or prior to the 50th day following the Effective Date, Fresenius Medical Care and Grace Chemicals entered into a Letter Agreement dated September 27, 1996, generally providing that, if such Grace Chemicals guarantees have not been released as to $800 million prior to the close of business on the 50th day following the Effective Date, Fresenius Medical Care will, at such time, make a $300 million payment to W. R. Grace Foundation, Inc. (which contribution may not be used to satisfy any legal obligation of Grace Chemicals). In addition, Fresenius Medical Care agreed that (i) it would contribute the capital stock of Fresenius USA to Grace promptly following the Effective Date and (ii) until the earlier to occur of (A) the expiration of the 49-day period following the Effective Date and (B) such earlier date upon which the Grace Chemicals guarantees have been released as to $800 million, (a) it will not engage, or permit NMC to engage, in any settlement discussions regarding certain governmental investigatory matters without Grace Chemicals' participation and consent; (b) it will cause the respective businesses of NMC and Fresenius USA to be conducted in the ordinary course, without incurring additional debt (other than borrowings permitted under the NMC Credit Agreement), without relinquishing or modifying contracts with affiliates of Fresenius AG and without making cash distributions other than to a subsidiary of Grace and (c) no new loan, letter of credit, or other financial accommodation will be originated under the NMC Credit Agreement that would require the confirmation contemplated in Section 4.9(a)(iii) thereof. In connection with the above, Fresenius Medical Care also agreed that, during the 45-day period following the Effective Date, subject to certain exceptions, it will not (i) make a capital contribution to the Registrant (or its subsidiaries); (ii) provide any guarantee of any debt of the Registrant (or its subsidiaries), (iii) take any other action that has the effect, directly or indirectly, of subjecting the assets of Fresenius Medical Care (other than the Registrant (or its subsidiaries)) to secure or otherwise support the debt of NMC. 2 4 The Registrant knows of no arrangements, including any pledge by any person of securities of the Registrant or any of its parents, the operation of which may at a subsequent date result in a change in control of the Registrant. ITEM 5. OTHER EVENTS. Following the FNMC Merger, the New York Stock Exchange, Inc. ("NYSE") suspended trading, effective before the opening of business on September 30, 1996, in the FNMC Common Stock (NYSE:GRA) and terminated the listing of the FNMC Common Stock. The Registrant will continue to file reports, proxy statements and other information with the Commission under the Securities Exchange Act of 1934 with respect to the Class D Preferred Stock. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (a) Financial Statements of Businesses Acquired Not applicable. (b) Pro Forma Financial Information Not applicable. (c) Exhibits Exhibit 2.1 Agreement and Plan of Reorganization dated as of February 4, 1996, as amended, among the Registrant, Fresenius AG and Fresenius USA, Inc. (incorporated herein by reference to the Joint Proxy Statement-Prospectus of Fresenius Medical Care AG, the Registrant and Fresenius USA, Inc. dated August 2, 1996 and filed with the Commission on August 5, 1996). Exhibit 3.1 Certificate of Amendment of the Certificate of Incorporation of W. R. Grace & Co. under Section 805 of the Business Corporation Law dated September 27, 1996. Exhibit 3.2 Certificate of Amendment of the Certificate of Incorporation of W. R. Grace & Co. under Section 805 of the Business Corporation Law dated September 27, 1996. 3 5 Exhibit 3.3 By-laws of Fresenius National Medical Care Holdings, Inc., as amended. Exhibit 4.1 Credit Agreement dated as of September 27, 1996 by and among NMC, certain subsidiaries and affiliates, the lenders named therein, Nationsbank N.A., The Bank of Nova Scotia, The Chase Manhattan Bank and Dresdner Bank AG (incorporated herein by reference to the Form 6-K of Fresenius Medical Care Corporation filed with the Commission on October 15, 1996). Exhibit 4.2 Letter Agreement dated September 27, 1996 between W. R. Grace & Co.-Conn. and Fresenius Medical Care AG (incorporated herein by reference to the Form 6-K of Fresenius Medical Care Corporation filed with the Commission on October 15, 1996). Exhibit 99.1 The information in the Joint Proxy Statement-Prospectus of Fresenius USA, Inc. and Fresenius Medical Care AG dated August 2, 1996 set forth under the captions "BACKGROUND AND REASONS -- Background of the Reorganization; Reason for the Recommendation of the Grace Board" at pages 37-47 and "THE REORGANIZATION -- Consideration to Shareholders" at pages 60-61. 4 6 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ---------- FRESENIUS NATIONAL MEDICAL CARE HOLDINGS, INC. DATE: October 15, 1996 By: /s/ Dr. Ben J. Lipps -------------------------------- Name: Dr. Ben J. Lipps Title: President S-1 7 EXHIBIT INDEX Exhibit 2.1 Agreement and Plan of Reorganization dated as of February 4, 1996, as amended, among the Registrant, Fresenius AG and Fresenius USA, Inc. (incorporated herein by reference to the Joint Proxy Statement-Prospectus of Fresenius Medical Care AG, the Registrant and Fresenius USA, Inc. dated August 2, 1996 and filed with the Commission on August 5, 1996). Exhibit 3.1 Certificate of Amendment of the Certificate of Incorporation of W. R. Grace & Co. under Section 805 of the Business Corporation Law dated September 27, 1996. Exhibit 3.2 Certificate of Amendment of the Certificate of Incorporation of W. R. Grace & Co. under Section 805 of the Business Corporation Law dated September 27, 1996. Exhibit 3.3 By-laws of Fresenius National Medical Care Holdings, Inc., as amended. Exhibit 4.1 Credit Agreement dated as of September 27, 1996 by and among NMC, certain subsidiaries and affiliates, the lenders named therein, Nationsbank N.A., The Bank of Nova Scotia, The Chase Manhattan Bank and Dresdner Bank AG (incorporated herein by reference to the Form 6-K of Fresenius Medical Care Corporation filed with the Commission on October 15, 1996). Exhibit 4.2 Letter Agreement dated September 27, 1996 between W. R. Grace & Co.-Conn. and Fresenius Medical Care AG (incorporated herein by reference to the Form 6-K of Fresenius Medical Care Corporation filed with the Commission on October 15, 1996). Exhibit 99.1 The information in the Joint Proxy Statement-Prospectus of Fresenius USA, Inc. and Fresenius Medical Care AG dated August 2, 1996 set forth under the captions "BACKGROUND AND REASONS -- Background of the Reorganization; Reason for the Recommendation of the Grace Board" at pages 37-47 and "THE REORGANIZATION -- Consideration to Shareholders" at pages 60-61. EX-3.1 2 CERTIFICATE OF AMENDMENT 1 Exhibit 3.1 CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF W.R. GRACE & CO. UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW The undersigned, being the Vice President and the Secretary, respectively, of W.R. Grace & Co., hereby certify that: 1. The name of the corporation is W.R. GRACE & CO. (the "Corporation"). The Corporation was formed under the name W.R. Grace & Co.-New York. 2. The Certificate of Incorporation of the Corporation was filed by the Department of State on the 23rd day of March, 1988. 3. This Certificate of Amendment has been duly authorized, pursuant to Section 803 of the Business Corporation Law of the State of New York, by a vote of at least a majority of the members of the Board of Directors of the Corporation, followed by the vote of the holders of a majority of all outstanding shares entitled to vote thereon at a meeting of shareholders duly called for such purpose. 4. (i) The Certificate of Incorporation is amended to increase the authorized capital stock from 305,130,000 shares to 405,130,000 shares and to create a new class of preferred stock, Class D Preferred, consisting of 100,000,000 shares par value $.10 each. (ii) Article FOURTH, paragraphs (a) and (b) of the Certificate of Incorporation of the Corporation are hereby amended to be as follows: (a) The Corporation shall have authority to issue an aggregate of 405,130,000 shares of capital stock, divided into classes as set forth in this Article. (b) The designation of each class of shares which the Corporation shall be authorized to issue, the authorized number of shares of each class, and the par value thereof per share, shall be as follows:
AUTHORIZED PAR VALUE NUMBER OF DESIGNATION OF CLASS PER SHARE SHARES -------------------- --------- ---------- 6% Preferred $100 40,000 Class A Preferred $100 50,000 Class B Preferred $100 40,000 Class C Preferred $ 1 5,000,000 Class D Preferred $.10 100,000,000 Common $ 1 300,000,000
5. (i) The Certificate of Incorporation is amended to set forth the designation, relative rights, preference and limitations of the Class D Preferred Stock. (ii) Article FOURTH, paragraph (c) of the Certificate of Incorporation of the Corporation is hereby amended by the substitution of new subparagraphs (5) through (7), 2 replacing the current subparagraphs (5) through (7) and adding a new paragraph (8), to be as follows: (5.) CLASS D PREFERRED STOCK. SECTION 1. DESIGNATION; NUMBER; LIQUIDATION PREFERENCE. (a) The shares of Class D Preferred Stock shall also be known as the "Class D Special Dividend Preferred Stock". The number of shares authorized may be decreased (but not increased) by the Board of Directors without a vote of shareholders; provided, however, that such number may not be decreased below the number of then outstanding shares of Class D Special Dividend Preferred Stock. (b) Subject to Section 7, the Class D Special Dividend Preferred Stock shall have, with respect to rights on liquidation, dissolution or winding up, a liquidation preference of $.10 per share and with respect to dividend rights and rights on liquidation, dissolution or winding up, shall rank, subsequent to all shares of the 6% Preferred Stock, Class a Preferred Stock and Class B Preferred Stock of the Corporation issued and outstanding as of the Issue Date, and prior to all other shares of capital stock of the Corporation now or hereafter authorized including, without limitation, the Class C Preferred Stock and the Common Stock of the Corporation (collectively, the "Junior Stock"). SECTION 2. DIVIDENDS AND DISTRIBUTIONS. (a) The holders of shares of Class D Special Dividend Preferred Stock, in preference to holders of shares of Junior Stock, shall be entitled to receive, when, as and if declared by the Board of Directors, out of the assets of the Corporation at the time legally available therefor, a special dividend (the "Special Dividend") equal, in the aggregate with respect to all shares of Class D Special Dividend Preferred Stock, to the Special Dividend Amount ("Special Dividend Amount") determined pursuant to the formula set forth below. Upon such a declaration, and subject to paragraph (d) below, the Special Dividend shall be payable in cash in annual installments on October 1, 2002 and, thereafter, on October 1 in each of the following years, if applicable (each such date, a "Payment Date"); and the aggregate amount payable on any Payment Date shall be equal to the lesser of (i) $100 million or (ii) the amount of the Special Dividend Amount then remaining unpaid in accordance with the provisions hereof. Subject to the requirements of applicable law, the Special Dividend shall be declared in a single declaration irrespective of the number of installments in which it will be paid. The Special Dividend Amount shall be publicly announced by Fresenius Medical Care on or before May 1, 2002 (such announcement, the "Public Announcement"). (b) Calculation of the Special Dividend Amount. (i) The Special Dividend Amount shall be equal to the Target Face Amount plus the Special Differential, if the Special Differential is a positive number, and less the absolute value of the Special Differential, if the Special Differential is a negative number. (ii) The Special Differential shall be equal to (A) the Applicable Percentage of the excess of the cumulative actual Adjusted Cash Flow of Fresenius Medical Care on a consolidated basis for the five-year period beginning on January 1, 1997 and ending on December 31, 2001 (the "Dividend Accrual Period"), above $3.7 billion less (B) $200 million. -2- 3 (iii) The Adjusted Cash Flow of Fresenius Medical Care on a consolidated basis shall be equal to (A) net income to common shareholders (without regard to the Special Dividend), plus (B) depreciation and amortization, plus (C) non-cash restructuring charges, provisions for impairment in the value of long-term assets, and similar recorded reserves as of December 31, 2001, all as reflected on Fresenius Medical Care's consolidated audited financial statements prepared in accordance with U.S. GAAP, less (D) any after-tax cash expenditures paid to third parties incurred in connection with the matters underlying the investigations of NMC and its subsidiaries by the OIG referenced in the five subpoenas received by NMC from the OIG on October 17, 1995, to the extent such expenditures are not reflected in net income to common shareholders during the Dividend Accrual Period. (iv) The Applicable Percentage shall be 44.8%, which percentage shall be increased and decreased proportionately to reflect issuances or repurchases (to the extent that no Special Dividend is payable with respect to such repurchased shares) of Class D Special Dividend Preferred Stock following the Reorganization. (v) Accompanying payment of the Special Dividend shall be a Certificate of the Chief Financial Officer of Fresenius Medical Care certifying that the amount of the Special Dividend has been calculated in accordance with the provisions hereof, together with an opinion of Fresenius Medical Care's independent public accountant to the same effect. (c) The Special Dividend payable pursuant to Section 2(b) shall accrue on a quarterly and cumulative basis from January 1, 1997, whether or not declared; each such quarterly accrual shall increase or decrease the Special Dividend depending upon the quarterly increase or decrease of the Special Differential. Any payment of the Special Dividend made in an amount less than the total amount of such Special Dividend at the time payable shall be allocated pro rata on a share-by-share basis among all shares of Class D Special Dividend Preferred Stock at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Class D Special Dividend Preferred Stock entitled to receive payment of a dividend declared thereon, which record date shall be no more than 50 days or less than 10 days prior to the date fixed for the payment thereof. (d) The Special Dividend shall be paid in cash, except that if the Common Stock is listed on the NYSE or quoted on the Nasdaq Stock Market, the Special Dividend, or any portion thereof, may be paid, in the sole discretion of the Corporation, either (i) in cash, (ii) in Common Stock, based upon the Market Price as of the record date for such payment, or (iii) any combination of cash and Common Stock, based upon the Market Price as of the record date for such payment. All Common Stock issued as a dividend with respect to the Class D Special Dividend Preferred Stock shall thereupon be duly authorized, validly issued, fully paid and non-assessable. (e) If at any time after May 1, 2002 any portion of the Special Dividend is not declared, or is not paid on the applicable Payment Date, the Corporation shall not make any Restricted Payment. SECTION 3. ADJUSTMENTS. The Board of Directors of the Corporation, with the concurrence of all of the Independent Directors of Fresenius Medical Care, or a majority of such Independent Directors if there are three or more, shall make appropriate adjustments to the provisions of Section 2 hereof to preserve their intended economic effect, in the light of changes in capitalization, accounting policy and extraordinary transactions (including without limitation mergers, consolidations or - 3 - 4 sales of assets). No adjustments of such provisions on account of the foregoing or otherwise shall be made without the concurrence of a majority of the Independent Directors of Fresenius Medical Care. SECTION 4. VOTING RIGHTS. In addition to any voting rights provided by law, the holders of shares of Class D Special Dividend Preferred Stock shall have the following voting rights: (a) Except as otherwise required by applicable law, each share of Class D Special Dividend Preferred Stock shall entitle the holder thereof to vote, in person or by proxy, at each special or annual meeting of shareholders, on all matters voted on by holders of Common Stock voting together as a single class with other shares entitled to vote thereon. With respect to any such vote, each share of Class D Special Dividend Preferred Stock shall entitle the holder thereof to cast 1/10 (one-tenth) of a vote. (b) If on any date after the earlier of (x) the Public Announcement or (y) May 1, 2002, the Corporation shall have failed to declare, or shall have failed to pay on the applicable Payment Date, the full amount of the installment of the Special Dividend then payable on the Class D Special Dividend Preferred Stock (a "Trigger Event"), then the number of directors constituting the Board of Directors shall, without further action, be increased by two and the holders of shares of Class D Special Dividend Preferred Stock shall have, in addition to the other voting rights set forth herein with respect to the Class D Special Dividend Preferred Stock, the exclusive right, voting separately as a single class, to elect two directors of the Corporation to fill such newly created directorships, by written consent as provided herein, or at a special meeting of such holders called as provided herein. Any such additional directors shall continue as directors (subject to reelection or removal as provided in Section 4(c)(ii)) and the holders of Class D Special Dividend Preferred Stock shall have such additional voting rights until such time as all installments of the Special Dividend then payable on the Class D Special Dividend Preferred Stock shall have been declared and paid in full, at which time such additional directors shall cease to be directors, the number of directors constituting the Board of Directors shall be reduced by two and such additional voting rights of the holders of Class D Special Dividend Preferred Stock shall terminate, subject to revesting upon the occurrence of each and every subsequent Trigger Event. (c) (i) The foregoing right of holders of shares of Class D Special Dividend Preferred Stock to take any action as provided in Section 4(b) may be exercised at any annual or special meeting of shareholders in New York, or at a special meeting of holders of shares of Class D Special Dividend Preferred Stock in New York held for such purpose or at any adjournment thereof, or by the written consent, delivered to the Secretary of the Corporation, of the holders of the minimum number of shares required to take such action. So long as the right to vote provided for in Section 4(b) continues (and unless such right has been exercised by written consent of the minimum number of shares required to take such action), the President of the Corporation may call, and upon the written request of holders of record of at least 10% of the aggregate outstanding shares of Class D Special Dividend Preferred Stock addressed to the Secretary of the Corporation at the principal office of the Corporation, shall call, a special meeting of the holders of shares of Class D Special Dividend Preferred Stock. Such meeting shall be called within 30 days after delivery of such request to the Secretary, and held within 60 days of delivery after such request or as soon thereafter as practicable at the place and upon the notice provided by law and in the by-laws of the Corporation. - 4 - 5 (ii) At each meeting of shareholders at which the holders of shares of Class D Preferred Stock shall have the right, voting separately as a single class, to elect two directors of the Corporation as provided in Section 4(b) or to take any other action, the presence in person or by proxy of the holders of record of one-third of the aggregate number of shares of Class D Special Dividend Preferred Stock then outstanding and entitled to vote on the matter shall be necessary and sufficient to constitute a quorum. At any such meeting or at any adjournment thereof: (A) the absence of a quorum of the holders of shares of Class D Special Dividend Preferred Stock shall not prevent the election of directors other than those to be elected by the holders of shares of Class D Special Dividend Preferred Stock, and the absence of a quorum of the holders of shares of any other class or series of capital stock shall not prevent the election of directors to be elected by the holders of shares of Class D Special Dividend Preferred Stock or the taking of any action as provided in Section 4(b); and (B) in the absence of a quorum of the holders of shares of Class D Special Dividend Preferred Stock, a majority of the holders of such shares present in person or by proxy shall have the power to adjourn the meeting as to the actions to be taken by the holders of shares of Class D Special Dividend Preferred Stock from time to time and place to place, without notice other than announcement at the meeting, until a quorum shall be present. For taking of any action as provided in Section 4(b) by the holders of shares of Class D Special Dividend Preferred Stock each such holder shall have one vote for each share of such stock standing in his name on the transfer books of the Corporation as of any record date fixed for such purpose or, if no such date be fixed, at the close of business on the Business Day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the Business Day next preceding the day on which the meeting is held; provided, however, that shares of Class D Special Dividend Preferred Stock held by the Corporation or any Subsidiary of the Corporation shall not be deemed to be outstanding for purposes of taking any action as provided in this Section 4. Each director elected by the holders of shares of Class D Special Dividend Preferred Stock, as provided in Section 4(b) shall, unless his term shall expire earlier in accordance with the provisions thereof, or unless he shall be removed as provided in this Section 4(c)(ii), hold office until the next annual meeting of shareholders or until his successor, if any, is elected and qualified. If any director so elected by the holders of Class D Special Dividend Preferred Stock shall cease to serve as a director before his term shall expire (except by reason of the termination of voting rights in accordance with Section 4(b)), the holders of the Class D Special Dividend Preferred Stock then outstanding and entitled to vote for such director may, by vote or written consent as provided herein, elect a successor to hold office for the unexpired term of the director whose place shall be vacant. Any director elected pursuant to Section 4(b) may be removed from office with or without cause by the vote or written consent of the holders of a majority of the aggregate outstanding shares of Class D Special Dividend Preferred Stock at the time of removal. A special meeting of the holders of shares of Class D Special Dividend Preferred Stock for such purpose may be called in accordance with the procedures set forth in Section 4(c)(i). - 5 - 6 SECTION 5. OPTIONAL REDEMPTION. (a) (i) The Corporation shall not have any right to redeem any shares of Class D Special Dividend Preferred Stock prior to the Public Announcement. Thereafter, the Corporation shall have the right, at its sole option and election, to redeem (an "Optional Redemption") all or a portion of the shares of Class D Special Dividend Preferred Stock, on not more than 45 nor less than 30 days' notice of the date of redemption (any such date an "Optional Redemption Date"), at a price per share (the "Optional Redemption Price") equal to the greater of (A) the Liquidation Preference of such share, or (B) an amount per share equal to any unpaid portion of the Special Dividend, whether or not declared or payable, on the applicable Optional Redemption Date. The Optional Redemption Price shall be paid in cash, except that if the Common Stock is listed on the NYSE or quoted on the Nasdaq Stock Market, the Optional Redemption Price may be paid, in the sole discretion of the Corporation, either in (i) cash, (ii) Common Stock, based upon the Market Price as of the record date for such Optional Redemption, or (iii) any combination of cash and Common Stock, based upon the Market Price as of the record date for such Optional Redemption. All Common Stock issued as a redemption amount with respect to the Class D Special Dividend Preferred Stock shall thereupon be duly authorized, validly issued, fully paid and nonassessable. (ii) If the Corporation shall determine to redeem less than all the shares of Class D Special Dividend Preferred Stock then outstanding pursuant to Section 5(a)(i), the shares to be redeemed shall be selected pro rata (as nearly as may be) so that the number of shares redeemed from each holder shall be in the same proportion of all the shares to be redeemed that the total number of shares of Class D Special Dividend Preferred Stock then held by such holder bears to the total number of shares of Class D Special Dividend Preferred Stock then outstanding. (b) Notice of any Optional Redemption shall specify the Optional Redemption Date, the Optional Redemption Price, the place or places of payment, and that payment (including the amount and terms thereof) will be made upon presentation and surrender of shares of Class D Special Dividend Preferred Stock, and shall be given by publication in a newspaper of general circulation in the Borough of Manhattan, City of New York (if such publication shall be required by applicable law, rule, regulation or securities exchange requirement), not less than 30 nor more than 45 days prior to the Optional Redemption Date; and, in any case, a similar notice shall be mailed at least 30 but not more than 45 days prior to the Optional Redemption Date to each holder of shares of Class D Special Dividend Preferred Stock, at such holder's address as it appears on the transfer books of the Corporation. In order to facilitate the redemption of shares of Class D Special Dividend Preferred Stock, the Board of Directors may fix a record date for the determination of shares of Class D Special Dividend Preferred Stock to be redeemed, not more than 50 days nor less than 45 days prior to the Optional Redemption Date. (c) On the date of any Optional Redemption that is specified in a notice given pursuant to Section 5(b), the Corporation shall, and at any time after such notice shall have been mailed and before the Optional Redemption Date the Corporation may, deposit for the benefit of the holders of shares of Class D Special Dividend Preferred Stock the funds necessary for such redemption with a bank or trust company in the Borough of Manhattan, City of New York, having a capital and surplus of at least $100,000,000. Any funds so deposited by the Corporation and unclaimed at the end of two years from the Optional Redemption Date shall revert to the general funds of the Corporation. After such reversion, any such bank or trust company shall, upon demand, pay over to the Corporation such unclaimed amounts and, thereupon, such bank or trust company shall be relieved of all responsibility in respect thereto and any holder of shares of Class D Special Dividend Preferred Stock to be redeemed shall look only to the Corporation for the payment of the Optional Redemption Price. - 6 - 7 (d) Notice of redemption having been given as aforesaid, upon the deposit of funds pursuant to Section 5(c) in respect of shares of Class D Special Dividend Preferred Stock to be redeemed pursuant to Section 5(a), notwithstanding that any certificates for such shares shall not have been surrendered for cancellation, from and after the Optional Redemption Date, (i) the shares represented thereby shall no longer be deemed outstanding, (ii) dividends thereon shall cease to accrue, and (iii) all rights of the holders of shares of Class D Special Dividend Preferred Stock to be redeemed shall cease and terminate, excepting only the right to receive the Optional Redemption Price therefor; provided, however, that, if the Corporation shall default in the payment of the Optional Redemption Price, the shares of Class D Special Dividend Preferred Stock shall thereafter be deemed to be outstanding and the holders thereof shall have all of the rights of a holder of Class D Special Dividend Preferred Stock until such time as such default shall no longer be continuing or shall have been waived by holders of at least 66-2/3% of the then outstanding shares of Class D Special Dividend Preferred Stock. (e) Any notice that is mailed as provided in this Section 5 shall be conclusively presumed to have been duly given, whether or not the holder of shares of Class D Special Dividend Preferred Stock receives such notice, and failure to give such notice by mail, or any defect in such notice, to the holders of any shares designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Class D Special Dividend Preferred Stock. On or after the Optional Redemption Date, each holder of the shares called for redemption shall surrender the certificate or certificates evidencing such shares to the Corporation at the place designated in such notice and shall thereupon be entitled to receive payment of the Optional Redemption Price. If less than all the shares evidenced by any such surrendered certificate are redeemed, a new certificate shall be issued evidencing the unredeemed shares. SECTION 6. ACQUIRED SHARES. Any shares of Class D Special Dividend Preferred Stock acquired by the Corporation or any of its Subsidiaries in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares of Class D Special Dividend Preferred Stock shall upon their cancellation become authorized but unissued shares of Preferred Stock of the Corporation. SECTION 7. LIQUIDATION, DISSOLUTION OR WINDING UP. (a) If the Corporation shall commence a voluntary case or proceeding under the United States bankruptcy laws or any applicable bankruptcy, insolvency or similar law of any state or other country, or consent to the entry of an order for relief in an involuntary case under any such law or to the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or make an assignment for the benefit of its creditors, or admit in writing its inability to pay its debts generally as they become due, or if a decree or order for relief or similar decree or order in respect of the Corporation shall be entered by a court having jurisdiction in the premises in an involuntary case under the United States bankruptcy laws or any applicable bankruptcy, insolvency or similar law of any other state or country, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and on account of any such event the Corporation shall liquidate, dissolve or wind up, or if the Corporation shall otherwise liquidate, dissolve or wind up, no distribution shall be made to the holders of shares of Junior Stock unless, prior thereto, the holders of shares of Class D Special Dividend Preferred Stock shall have received the Optional Redemption Price. (b) Neither the consolidation or merger of the Corporation with or into any other Person nor the sale or transfer of all or any part of the Corporation's assets for cash, securities - 7 - 8 or other property shall be deemed to be a liquidation, dissolution or winding up of the Corporation for purposes of this Section 7. SECTION 8. Definitions. For the purposes of the Article FOURTH, the following terms shall have the meanings indicated: "Adjusted Cash Flow" shall have the meaning ascribed to such term in Section 2(b)(iii). "Affiliate" shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. "Applicable Percentage" shall have the meaning ascribed to such term in Section 2(b)(iv). "Board of Directors" shall mean the Board of Directors of the Corporation. "Business Day" shall mean any day other than a Saturday, Sunday or other day on which commercial banks in the City of New York are authorized or required by law or executive order to close. "Common Stock" shall have the meaning ascribed to such term in Section 1(a) of this Article FOURTH. "Effective time"shall have the meaning ascribed to such term in the Reorganization Agreement. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Securities and Exchange Commission thereunder. "Fresenius Medical Care" shall mean Fresenius Medical Care AG, an Aktiengesellschaft organized under the laws of the Federal Republic of Germany. "Independent Directors" shall mean a Fresenius Medical Care director without a substantial business or professional relationship with either Fresenius Medical Care, Fresenius AG or any Affiliate of either of the foregoing, other than as a Fresenius Medical Care director. "Issue Date" shall mean the date of first issue of Class D Special Dividend Preferred Stock. "Junior Stock" shall have the meaning ascribed to such term in Section 1(b) of this Article FOURTH. "Liquidation Preference," with respect to a share of Class D Special Dividend Preferred Stock, shall mean $.10. "Market Price" shall mean, per share of Common Stock, on any date specified herein, the closing price per share of the Common Stock on such date published in The Wall Street Journal or, if no such closing price on such date is published in The Wall Street Journal, the average of the closing bid and asked prices on such date, as officially reported on the principal national securities exchange on which the Common Stock is then listed or admitted to trading, or, if the Common Stock is not then listed or admitted to trading on any national securities exchange, as quoted by the Nasdaq Stock market. -8- 9 "NASD" shall mean the National Association of Securities Dealers, Inc. "Nasdaq Stock Market" shall mean the National Market System of the National Association of Securities Dealers, Inc. Automated Quotations System. "NMC" shall mean National Medical Care, Inc., a Delaware corporation. "NYSE" shall mean the New York Stock Exchange. "OIG" shall mean the Office of the Inspector General of the United States Department of Health and Human Services. "Optional Redemption" shall have the meaning ascribed to such term in Section 5(a) of this Article FOURTH. "Optional Redemption Date" shall have the meaning ascribed to such term in Section 5(a) of this Article FOURTH. "Optional Redemption Price" shall have the meaning ascribed to such term in Section 5(a) of this Article FOURTH. "Payment Date" shall have the meaning ascribed to such term in Section 2(a) of this Article FOURTH. "Person" shall mean any individual, firm, corporation, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind, and shall include any successor (by merger or otherwise) of such entity. "Preferred Stock" shall mean any preferred stock of the Corporation. "Public Announcement" shall have the meaning ascribed to such term in Section 2(a) of this Article FOURTH. "Reorganization" shall have the meaning ascribed to such term in the Reorganization Agreement. "Reorganization Agreement" shall mean the Agreement and Plan of Reorganization dated as of February 4, 1996, as amended and supplemented, by and among the Corporation, Fresenius AG, a German corporation, and Fresenius USA, Inc., a Massachusetts corporation. "Restricted Payment" shall mean any dividend payment or other distribution of assets, properties, cash, rights, obligations or securities by the Corporation on account of any shares of Junior Stock or the purchase, redemption or other acquisition for value by the Corporation or any Subsidiary of the Corporation of any shares of Junior Stock, except for distributions or purchases paid exclusively in other Junior Stock. "Special Differential" shall have the meaning ascribed to such term in Section 2(b)(ii). "Special Dividend" shall have the meaning ascribed to such term in Section 2(a). "Special Dividend Amount" shall have the meaning ascribed to such term in Section 2(a). -9- 10 "Subsidiary" of any Person shall mean any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person. "Target Face Amount" shall mean the sum of $200 million, in the aggregate with respect to all shares of Class D Special Dividend Preferred Stock. "U.S. GAAP" shall mean United States Generally Accepted Accounting Principles. "Voluntary Liquidation Event" shall have the meaning ascribed to such term in Section 7(a). SECTION 9. PREEMPTIVE RIGHTS. The holders of Class D Special Dividend Preferred Stock shall not be entitled to any preemptive or subscription rights in respect of any securities of the Corporation. (6) In the event of the liquidation, dissolution or winding up (whether voluntary or involuntary) of the Corporation, after payment to the holders of the 6% Preferred Stock, the Class A Preferred Stock, the Class B Preferred Stock, the Class C Preferred Stock and the Class D Preferred Stock of the amounts to which such holders shall be entitled, the remaining assets of the Corporation shall be distributed ratably to the holders of the Common Stock. (7) Except as may be otherwise required by the laws of the State of New York, in voting upon all questions each holder of capital stock of the Corporation shall be entitled to one hundred sixty votes for every share of 6% Preferred Stock, sixteen votes for every share of Class A Preferred Stock, sixteen votes for every share of Class B Preferred Stock, 1/10 (one-tenth) of a vote for each share of Series D Preferred Stock and one vote for every share of Common Stock held by such holder, and except as may be otherwise required by such laws, or specified by the Board of Directors with respect to any series of the Class C Preferred Stock, all shares of stock shall vote as a single class. (8) Before any stock authorized under this Certificate of Incorporation but unissued is otherwise offered for sale, it shall first be offered to the shareholders of the Corporation as follows: holders of 6% Preferred Stock, Class A Preferred Stock and Class B Preferred Stock shall have the right to take at par in proportion to their holdings all such additional 6% Preferred Stock; any increase in Class A Preferred Stock shall be offered at the issue price to the holders of Class A Preferred Stock and to the holders of Class B Preferred Stock in proportion to their holdings; any increase in Class B Preferred Stock shall be offered at the issue price to the holders of Class A Preferred Stock and to the holders of Class B Preferred Stock in proportion to their holdings. No holder of any class of capital stock shall be entitled as a matter of right to be offered any shares of Class C Preferred Stock, Class D Preferred Stock or Common Stock, or any options, warrants or rights to acquire Class C Preferred Stock, Class D Preferred Stock or Common Stock, or any securities convertible into Class C Preferred Stock, Class D Preferred Stock or Common Stock, which the Corporation may propose to issue. - 10 - 11 IN WITNESS WHEREOF, we have signed this Certificate of Amendment on this 27th day of September, 1996 and we affirm the statements contained therein as true under penalties of perjury. /s/ Paul McMahon ------------------------------- Name: Paul McMahon Vice President /s/ Robert B. Lamm ------------------------------- Name: Robert B. Lamm Secretary - 11 - EX-3.2 3 CERTIFICATE OF AMENDMENT 1 Exhibit 3.2 CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF W. R. GRACE & CO. UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW The undersigned, being the Vice President and the Secretary, respectively, of W. R. Grace & Co., hereby certify that: 1. The name of the corporation is W. R. GRACE & CO. (the "Corporation"). The Corporation was formed under the name W. R. Grace & Co.-New York. 2. The Certificate of Incorporation of the Corporation was filed by the Department of State on the 23rd day of March, 1988. 3. This Certificate of Amendment has been duly authorized, pursuant to Section 803 of the Business Corporation Law of the State of New York, by a vote of at least a majority of the members of the Board of Directors of the Corporation, followed by the vote of the holders of a majority of all outstanding shares entitled to vote thereon at a meeting of shareholders duly called for such purpose. 4. (i) The Certificate of Incorporation is amended to change the name of the Corporation. (ii) Article FIRST of the Certificate of Incorporation of the Corporation is hereby amended to be as follows: FIRST: The name of the Corporation is FRESENIUS NATIONAL MEDICAL CARE HOLDINGS, INC. IN WITNESS WHEREOF, we have signed this Certificate of Amendment on this 27th day of September, 1996 and we affirm the statements contained therein as true under penalties of perjury. /s/ Paul McMahon -------------------------------- Name: Paul McMahon Vice President /s/ Robert B. Lamm --------------------------------- Name: Robert B. Lamm Secretary EX-3.3 4 BY-LAWS-FRESENIUS NATIONAL MEDICAL CARE HOLDINGS 1 BY-LAWS of FRESENIUS NATIONAL MEDICAL CARE HOLDINGS, INC. A New York Corporation (As Amended) ARTICLE I Meetings of Shareholders Section 1.1. Annual Meetings. An annual meeting of the shareholders of the Corporation, for the election of directors and the transaction of other business, shall be held annually (a) on the tenth day of May, or (b) if such day be a Saturday, Sunday or a holiday at the place where the meeting is to be held, on the last business day preceding or on the first business day after such tenth day of May, as may be fixed by the Board of Directors, or (c) on such other date as may be fixed by the Board of Directors. Section 1.2. Special Meetings. Except as otherwise expressly provided by law, a special meeting of the shareholders may be called only by the Board of Directors, by the Chairman or by the President at any time for such purpose or purposes and held on such date as may be specified in the notice thereof. Section 1.3. Place and Hour of Meeting. All meetings of shareholders shall be held at such place within or without the State of New York and at such hour as may be fixed by the Board of Directors or the officer calling the meeting. Section 1.4. Notice of Meeting. Except as otherwise expressly provided by law, a notice in writing of each meeting of shareholders shall be given by or at the direction of the Board of Directors or the officer calling the meeting to each shareholder of record, personally or by first class mail, directed to him at his address as it appears on the record of shareholders, not fewer than ten nor more than fifty days before the date of the meeting. Each notice shall state the place, date and hour of the meeting and, unless it is an annual meeting, shall indicate that it is being issued by or at the direction of the Board of Directors or the officer calling the meeting. If such notice relates to an annual meeting it need not state the purposes thereof unless otherwise required by law, the Certificate of Incorporation of the Corporation or these By-laws. If such notice relates to a special meeting, it shall state the purpose or purposes for which such meeting 2 has been called, and no other business shall be transacted at such special meeting. No notice of an adjourned meeting of shareholders need be given unless otherwise expressly required by law. At any adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally noticed. Notice of meeting need not be given to any shareholder who submits a signed waiver of notice, in person or by proxy, whether before or after the meeting. The attendance of any shareholder at a meeting, in person or by proxy, without protesting prior to the conclusion of the meeting the lack of notice of such meeting, shall constitute a waiver of notice by him. Section 1.5. Quorum. The holders of the shares constituting a majority in voting power entitled to vote, present in person or by proxy, shall constitute a quorum at any meeting of shareholders, but no action required by law, by the Certificate of Incorporation of the Corporation or by these By-laws to be authorized or taken by the holders of a designated proportion of the voting power of shares, of the shares of any particular class or series or of each class or series may be authorized or taken by a lesser proportion. Whether or not there is a quorum at any meeting of the shareholders, the shareholders present in person or by proxy entitled to cast a majority of the votes thereat may adjourn the meeting. Section 1.6. Voting. Except as otherwise expressly provided by law, every shareholder of record present in person or by proxy shall be entitled at every meeting of shareholders to vote, in accordance with and subject to the provisions of the Certificate of Incorporation of the Corporation, each and every share of stock of the Corporation standing in his name on the record of shareholders at the record date fixed as provided in Section 6.3 of these Bylaws or, if no such record date shall have been fixed, then at the time provided by law. Except as otherwise expressly provided by law or by the Certificate of Incorporation of the Corporation, the vote, at a meeting of the shareholders duly held and at which a quorum is present, of a majority of the votes cast at such meeting by the holders of shares entitled to vote shall be the act of the shareholders. Section 1.7. Business to be Transacted at Annual Meetings. No business shall be transacted at any annual meeting of the shareholders, except as may be (a) specified in the notice of the meeting given by or at the direction of the Board of Directors (including, - 2 - 3 if so specified, any shareholder proposal submitted pursuant to the rules and regulations of the Securities and Exchange Commission), (b) otherwise brought before the meeting by or at the direction of the Board of Directors or (c) otherwise brought before the meeting, in accordance with the procedure set forth in the following paragraph, by a shareholder of record of the Corporation entitled to vote at such meeting. For business to be brought before an annual meeting by a shareholder pursuant to clause (c) above, the shareholder must have given written notice thereof to the Secretary of the Corporation, such notice to be delivered or mailed to, and received at, the principal executive offices of the Corporation not less than 60 days nor more than 90 days prior to the date of the meeting, unless the meeting is to take place on a date other than that specified in clause (a) or (b) of Section 1.1 of these By-laws, in which event such notice must be received at the principal executive offices of the Corporation not later than the close of business on the tenth day following the day on which the Corporation's notice of the date of the meeting is first given or made to the shareholders or disclosed to the general public (which disclosure may be effected by means of a publicly available filing with the Securities and Exchange Commission). A shareholder's notice to the Secretary shall set forth, as to each matter the shareholder proposes to bring before the annual meeting, (a) a brief description of the business proposed to be brought before the annual meeting and of the reasons for bringing such business before the annual meeting (including, but not limited to, the reasons why the shareholder deems such business to be beneficial to the Corporation) and, if such business includes a proposal to amend either the Certificate of Incorporation of the Corporation or these By-laws, the text of the proposed amendment; (b) the name and address of the shareholder proposing such business, of any beneficial owners of shares of stock of the Corporation which are held of record by such shareholder and of any other shareholders (including beneficial owners) known by such shareholder to support such proposal; (c) the number of shares of each class of stock of the Corporation that are held of record and beneficially owned by the shareholder, any beneficial owners of its shares and any such other shareholders; (d) a representation that the shareholder is or will be a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at such meeting to propose such business; and (e) any material interest of the shareholder, any beneficial owner of its shares or any such other shareholders in such business (other than any interest as shareholders of the Corporation). No business shall be conducted at any annual meeting of the shareholders (a) except as specified in this Section 1.7 or (b) unless, pursuant to the law of the State of New York or any rule or regulation - 3 - 4 of the Securities and Exchange Commission, such business may properly be brought before the meeting. If it is determined that any business brought before an annual meeting of the shareholders is not properly brought before the meeting, the presiding officer at such meeting shall so declare to the meeting, in which event such business shall not be acted upon. ARTICLE II Directors Section 2.1. Management of Business; Qualifications. Except as otherwise provided by law or the Certificate of Incorporation of the Corporation, the business, property and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. Section 2.2. Number, Election and Term of Office. The number of directors constituting the entire Board of Directors shall be such number, not less than nine nor more than fifty, as may be fixed by a majority of the entire Board of Directors. No person shall be nominated for election as a director if such person will have attained the age of 70 prior to the expiration of his or her term of office*. The directorships shall be divided into three classes, designated Class I, Class II and Class III, and directors shall be elected and serve in the manner provided in the Certificate of Incorporation and in these By-laws. No person shall be nominated for election as a director, except as may be (a) approved by the Board of Directors or (b) nominated by a shareholder of record of the Corporation entitled to vote at the meeting at which such person is to be nominated in accordance with the procedure set forth in the following paragraph. A shareholder may nominate a person or persons for election as directors only if the shareholder has given written notice of its intent to make such nomination to the Secretary of the Corporation,such notice to be delivered or mailed to, and received at, the principal executive offices of the Corporation (a) with respect to an annual meeting of the shareholders, not less than 60 days nor more than 90 days prior to the date of the meeting, unless the meeting is to take place on a date other than that specified in clause (a) or (b) of Section 1.1 of these By-laws, in which event - ------------- *This sentence shall be effective immediately after the 1995 Annual Meeting of Shareholders of the Corporation. - 4 - 5 such notice must be received at the principal executive offices of the Corporation not later than the close of business on the tenth day following the day on which the Corporation's notice of the date of the meeting is first given or made to the shareholders or disclosed to the general public (which disclosure may be effected by means of a publicly available filing with the Securities and Exchange Commission); or (b) with respect to an election to be held at a special meeting of the shareholders, not later than the close of business on the tenth day following the day on which the Corporation's notice of the date of the meeting is first given or made to the shareholders or disclosed to the general public (which disclosure may be effected by means of a publicly available filing with the Securities and Exchange Commission). A shareholder's notice to the Secretary shall set forth (a) the name and address of the shareholder who intends to make such nomination, of any beneficial owners of shares of stock of the Corporation which are held of record by such shareholder and of any other shareholders (including beneficial owners) known by such shareholder to support such nomination; (b) the name, age, business and residence addresses and principal occupation of each person to be nominated, the class of directorship to which each such person is to be nominated and the nominee, if any, against whom each such person is to run; (c) the number of shares of each class of stock of the Corporation that are held of record and beneficially owned by the shareholder, any beneficial owners of its shares and any such other shareholders; (d) a representation that the shareholder is or will be a holder of record of stock of the Corporation entitled to vote with respect to the election of directors at such meeting and intends to appear in person or by proxy at such meeting to nominate such proposed nominee(s); (e) a description of all material arrangements, relationships and understandings between the shareholder, any beneficial owners of its shares or any such other shareholders and each proposed nominee and between proposed nominees; (f) such other information regarding each proposed nominee as the Corporation would be required to include in a proxy statement filed pursuant to the rules and regulations of the Securities and Exchange Commission; and (g) the written consent of each proposed nominee to serve as a director of the Corporation if elected, together with an undertaking, signed by each proposed nominee, to furnish to the Corporation any information it may request upon the advice of counsel for the purpose of determining such proposed nominee's eligibility to serve as a director. No person may be nominated by a shareholder for election as a director of the Corporation (a) if, pursuant to applicable law or any provision of these By-laws, such person would be ineligible to serve as a director or (b) if the election of such person would violate, or subject the Corporation to liability under, any applicable law. - 5 - 6 If it is determined that the nomination of any person at any meeting of the shareholders is not in compliance with this Section 2.2, the presiding officer at such meeting shall so declare to the meeting, in which event such nomination shall not be acted upon. Section 2.3. Meetings. The Board of Directors shall hold an annual organization meeting immediately after each annual meeting of shareholders, at the place where such meeting of shareholders was held (or at such other place as the Board of Directors shall have designated), for the purpose of electing officers and for the transaction of such other business as may properly come before such meeting. The Board of Directors may provide for the holding of regular meetings and may fix the time and place of such meetings. Special meetings may be called by the Chairman, by the President or by a majority of the directors then in office. Except as hereinabove provided with respect to the annual organization meeting, the Board of Directors shall hold its meetings at the principal executive offices of the Corporation in New York, New York, or at such other place, within or without the State of New York, as the Board of Directors from time to time may determine, or as may be designated by waivers of notice thereof signed by all the directors. Section 2.4. Notice of Meeting. Notice need not be given with respect to the annual organization meeting of the Board of Directors (unless such meeting is to be held at a place other than where the annual meeting of shareholders is to be held) or with respect to any adjourned meeting of the Board of Directors. Notice of any regular meeting of the Board of Directors need not be given unless there is a change in the time or place of such meeting. Notice of any change in the place of the annual organization meeting or in the time or place of any regular meeting, and notice of the time and place of any special meeting of the Board of Directors (a) shall be sent to each director by first class mail at least three days before the date on which the meeting is to be held, or (b) shall be sent to each director by telegram, cablegram, telex or other written form of telecommunication, or delivered or telephoned to him, at least 24 hours before the time at which such meeting is to be held. Any notice in writing shall be addressed to the director at his residence or usual place of business, or at such other address as he may have designated in a written request filed with the Secretary. Any notice by telephone shall be communicated to the director or his representative or answering machine at the telephone number of his residence or his usual place of business or at such other telephone number as he may have so designated. - 6 - 7 Notice of a meeting of the Board of Directors need not state the purpose thereof, except as otherwise expressly provided by law. Notice of meeting need not be given to any director who submits a signed waiver of notice, whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to him. Section 2.5. Quorum and Manner of Acting. A majority of the entire Board of Directors shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, except that one-third of the entire Board of Directors shall constitute a quorum for the transaction of any business relating to any recommendation made by, or other action of, the Salary, Incentive Compensation and Employee Benefits Committee of the Board of Directors or the Stock Incentive Committee of the Board of Directors or any successor to either of such Committees. Except as otherwise expressly provided by law or by these By-laws, the act of the majority of the directors present at the time of a vote, if a quorum is present at such time, shall be the act of the Board of Directors. Any one or more members of the Board of Directors may participate in a meeting of the Board of Directors by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at a meeting. Whether or not there is a quorum at any meeting, a majority of the directors who are present may adjourn the meeting to another time or place. At any such adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called. On any question, the names of those directors voting each way and those directors abstaining shall be entered in the minutes if any director shall so request. Section 2.6. Action in Lieu of Meeting. If all the directors consent in writing to the adoption of a resolution authorizing any action to be taken by the Corporation, such action shall be as valid corporate action as though it had been authorized at a meeting of the Board of Directors. Such resolution and the written consents thereto by the directors shall be filed with the minutes of the proceedings of the Board of Directors. Section 2.7. Resignation and Removal. A director may resign at any time by giving written notice to the Board of Directors, the Chairman, the President or the Secretary. Such resignation shall - 7 - 8 take effect at the time specified therein or, if no time is specified, immediately upon its receipt by the Corporation. The acceptance of such resignation shall not be necessary to make it effective unless otherwise specified therein. A director may be removed as provided in the Certificate of Incorporation of the Corporation. Section 2.8. Vacancies. Any vacancy in the Board of Directors that results from an increase in the number of directorships may be filled by the vote of directors constituting a majority of the entire Board of Directors prior to such increase, and any other vacancy in the Board of Directors may be filled by the vote of a majority of the directors then in office, even though the number of directors is less than a quorum, or by the sole remaining director. Any director elected by the Board of Directors shall hold office until the next annual meeting of shareholders. ARTICLE III Executive Committee and Other Committees Section 3.1. Appointment and Powers of Committee. The Board of Directors, by resolution adopted by a majority of the entire Board of Directors, may designate from its members one or more committees, each consisting of three or more members. Subject to any limitations imposed by law or by the Certificate of Incorporation of the Corporation, each committee shall have such authority as the Board of Directors shall confer, which may include all the authority of the Board of Directors (including, but not limited to, that provided for in the Certificate of Incorporation of the Corporation or these By-laws); provided, however, that no committee shall have authority as to (a) the submission to shareholders of any action that needs shareholders' approval under applicable law, (b) the filling of vacancies in the Board of Directors or any committee or the designation of a committee, (c) the fixing of compensation of the directors for serving on the Board of Directors or any committee, (d) the amendment or repeal of these By-laws or the adoption of new by-laws or (e) the amendment or repeal of any resolution of the Board of Directors which by its terms shall not be so amendable or repealable. Any reference in these By-laws to action taken or authorized by the Board of Directors shall include action taken or authorized by a committee duly designated by the Board of Directors and authorized to act pursuant to such designation and this Section 3.l. Section 3.2. Committee on Officers' Compensation. Pursuant to Section 3.1 of these By-laws, the Board of Directors shall designate a committee to evaluate the performance of, and to recommend - 8 - 9 the appropriate level of compensation for, officers of the Corporation. Such committee shall have access to an advisor not otherwise serving the Corporation. Each member of such committee (other than any person who was a member of the Salary, Incentive Compensation and Employee Benefits Committee of the Board of Directors on March 7, 1991) shall be an "independent director", as that term is defined in the following sentence. For purposes of this Section 3.2, an "independent director" shall mean a person who (a) has not been employed by the Corporation within the past five years; (b) is not, and is not affiliated with, a firm that is an advisor or consultant to the Corporation; (c) is not affiliated with any customer or supplier of the Corporation whose purchases from and/or sales to the Corporation exceed 3% of the sales and revenues of such customer or supplier for its most recently completed fiscal year; (d) has no personal services contract with the Corporation; (e) is not affiliated with a tax-exempt entity, not otherwise affiliated with the Corporation, that receives contributions from the Corporation that exceed 3% of such entity's gross contributions for its most recently completed fiscal year; and (f) is not a member of the "immediate family" (as defined in Item 404(a) of Securities and Exchange Commission Regulation S-K) of any person described in clauses (a) through (e). Section 3.3. Meetings. Except as otherwise provided in these By-laws or by resolution of the Board of Directors, each committee may adopt its own rules governing the time and place of holding and the method of calling its meetings and the conduct of its proceedings. Unless otherwise provided by such rules or by resolution of the Board of Directors, notice of the time and place of each meeting of a committee shall be mailed, sent or given to each member of such committee when, and in the same manner as, required in Section 2.4 of these By-laws with respect to notices of meetings of the Board of Directors. Section 3.4. Quorum and Manner of Acting. Except as otherwise specified by the Board of Directors, a majority of the members of each committee shall constitute a quorum for the transaction of business at any meeting of such committee, and the act of a majority of the members present at the time of a vote, if a quorum is present at such time, shall be the act of such committee. The members of each committee shall act only as a committee, and the individual members shall have no power as such. Any one or more members of a committee may participate in a meeting of such committee by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at a meeting. - 9 - 10 If all the members of a committee consent in writing to the adoption of a resolution authorizing any action to be taken by the Corporation, such action shall be as valid as though it had been authorized at a meeting of such committee. Such resolution and the written consents thereto by the members of such committee shall be filed with the proceedings of such committee. Section 3.5. Term of Office, Resignations, Removals and Vacancies. The term of office of a committee member shall be as provided in the resolution of the Board of Directors designating him but shall not exceed his term as a director. If prior to the end of his term, a committee member should cease to be a director, he shall cease to be a committee member. Any member of a committee may resign at any time by giving written notice to the Board of Directors, the Chairman, the President or the Secretary. Such resignation shall take effect as provided in Section 2.7 of these By-laws in the case of resignations by directors. Any member of a committee may be removed from such committee, either with or without cause, at any time, by resolution adopted by a majority of the entire Board of Directors. Any vacancy in a committee shall be filled by the Board of Directors in the manner prescribed by these By-laws for the original designation of the members of such committee. ARTICLE IV Officers Section 4.1. Election, Term of Office and Qualifications. The officers of the Corporation shall consist of a Chairman, a Chairman of the Executive Committee, one or more Vice Chairmen, a President, one or more Executive Vice Presidents, one or more Senior Vice Presidents, one or more Vice Presidents, a Secretary, a Treasurer and a Controller. The foregoing officers shall be elected, and one or more assistant officers may also be elected, by the Board of Directors at its annual organization meeting. Each of such officers and assistant officers shall hold office until the next annual election and until his successor is elected and qualified, or until his earlier death, resignation, disqualification or removal. Assistant officers may also be appointed by the President, the Chairman of the Executive Committee or any Vice Chairman and shall hold office for such term, which may be indefinite, as the person appointing them shall determine. The Chairman and the President shall be chosen from among the Board of Directors, but the other officers need not be directors. One person may hold and perform the duties of any two, but not more - 10 - 11 than two, offices, except that neither the Chairman nor the President may hold the office of Secretary. Section 4.2. Powers and Duties. In addition to any powers and duties prescribed by other provisions of these By-laws, the officers and assistant officers shall have such powers and duties as are usually incident to their respective offices, with such additions and limitations thereto as may from time to time be prescribed by the Board of Directors or by their respective superior officers. Section 4.3. Resignations, Removals and Vacancies. Any officer or assistant officer may resign at any time by giving written notice to the Board of Directors, the Chairman, the President or the Secretary. Such resignation shall take effect at the time specified therein or, if no time is specified, immediately upon its receipt by the Corporation. The acceptance of such resignation shall not be necessary to make it effective unless otherwise specified therein. Any officer or assistant officer may be removed at any time, with or without cause, by the Board of Directors or by the person or persons who appointed him to his office or position, but without prejudice to any applicable contract rights. A vacancy in any office or position arising from any cause may be filled for the unexpired portion of the term by the Board of Directors or by the person or persons authorized to appoint such officer or assistant officer. Section 4.4. Compensation. Subject to Section 3.2 of these By-laws, the compensation of officers and, to the extent the Board of Directors shall deem advisable, the compensation of all other employees, agents and representatives of the Corporation, shall be determined by the Board of Directors or in accordance with regulations or procedures adopted by it. Compensation may be contingent or measured in whole or in part upon the profits of the Corporation or a segment thereof. Provision may also be made for bonuses and other extra compensation, for the deferment of compensation in whole or in part and for pension and other retirement benefits. Subject to Section 3.2 of these By-laws, the Board of Directors may delegate the authority contained in this Section 4.4 to such officers, employees or agents of the Corporation as the Board of Directors deems advisable, except that any profit sharing, extra or deferred compensation, pension and other similar plans or arrangements of general application shall be approved by the Board of Directors. Section 4.5. The Chairman. The Chairman shall preside at all meetings of the shareholders and the Board of Directors at which he shall be present. - 11 - 12 Section 4.6. The President. The President shall be the chief executive officer of the Corporation and shall have general charge and supervision of the business of the Corporation and over its several officers, subject, however, to the control of the Board of Directors. In the absence of the Chairman, the President shall preside at all meetings of the shareholders and the Board of Directors at which he shall be present. Section 4.7. The Chairman of the Executive Committee. The Chairman of the Executive Committee shall preside at all meetings of the Executive Committee at which he shall be present and shall perform such other duties as from time to time may be assigned to him by the President or by the Board of Directors. Section 4.8. Vice Chairmen. A Vice Chairman shall perform such duties as from time to time may be assigned to him by the President or by the Board of Directors. Section 4.9. Vice Presidents. An Executive Vice President, Senior Vice President or Vice President shall perform such duties as from time to time may be assigned to him by the President or by the Board of Directors. Section 4.10. The Secretary. The Secretary shall keep or cause to be kept a record in books provided for that purpose of all the meetings and proceedings of the Board of Directors and the shareholders. He shall notify the directors and shareholders of their respective meetings and shall have charge and custody of the Corporation's seal. Section 4.11. The Treasurer. The Treasurer shall have charge and custody of, and be responsible for, all funds and securities of the Corporation and shall deposit all such funds in the name of the Corporation in such depositaries as shall be selected in accordance with the provisions of Section 5.1 of these By-laws. He shall, subject to the direction of the Board of Directors or of a superior officer, pay out or cause to be paid out, and shall supervise the disbursement of, moneys of the Corporation. Section 4.12. The Controller. The Controller shall have general control, charge and supervision of the accounts of the Corporation. He shall see that proper accounts are maintained and that all accounts are properly audited from time to time. He shall prepare or cause to be prepared the financial statements of the Corporation. ARTICLE V - 12 - 13 Deposits, Checks, etc. Section 5.1. Deposits. Funds of the Corporation may be deposited from time to time to the credit of the Corporation with such depositaries as may be selected by the Board of Directors or by any officer or officers or agent or agents of the Corporation to whom such power may be delegated from time to time by the Board of Directors. Section 5.2. Checks, etc. All checks and other orders for the payment of money and promissory notes and other evidences of indebtedness are to be signed by such officer or officers, employee or employees or agent or agents of the Corporation, and in such manner, as are authorized by the Board of Directors, or as are authorized by any officer or officers or employee or employees of the Corporation to whom such power is delegated from time to time by the Board of Directors. To the extent authorized by the Board of Directors, such signature or signatures may be facsimiles. ARTICLE VI Stock and Stock Records Section 6.1. Certificates Representing Shares. Subject to any applicable law, the shares of the Corporation shall be represented by certificates in such form as the Board of Directors may from time to time approve, shall be signed by the Chairman, a Vice Chairman, the President or a Vice President and by the Secretary or an Assistant Secretary and shall be sealed with the seal or facsimile seal of the Corporation. Subject to applicable law, the signature of any of the abovementioned officers or assistant officers may be a facsimile. If any officer or assistant officer who has signed or whose facsimile signature has been placed on any certificate ceases to serve the Corporation in the capacity as to which his signature was so used before such certificate is issued, the certificate may nevertheless be issued with the same effect as if he were such officer or assistant officer at the date of issue. Section 6.2. Lost Certificates. Subject to any applicable law, when any certificate of stock is alleged to have been lost, destroyed or wrongfully taken, and when the Corporation has received no notice that the certificate has been acquired by a bona fide purchaser, the Corporation shall issue a new certificate if the owner so requests and gives the Corporation sufficient indemnity bond and satisfies any other reasonable requirements imposed by the Corporation. The Board of Directors may waive the requirement of any such indemnity bond. - 13 - 14 Section 6.3. Fixing Record Date. For the purpose of determining the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any distribution, or for any other proper purpose, the Board of Directors may fix, in advance, a date as the record date for any such determination of shareholders, such date to be not more than fifty days, and, in case of a meeting of shareholders, not less than ten days, prior to the action requiring such determination of shareholders. When a record date is so fixed and except as otherwise expressly provided by law, such shareholders and only such shareholders as shall be shareholders of record on the date so fixed shall be entitled to notice of or to vote at such meeting and any adjournment thereof, or to receive the distribution or otherwise participate in respect of the action to which the date relates. ARTICLE VII Indemnification Section 7.1. Indemnification. The Corporation shall indemnify to the fullest extent permitted, and in the manner provided, in the indemnification provisions of the Business Corporation Law of the State of New York, as the same may be amended from time to time, such persons as are described therein. Section 7.2. Insurance. The Corporation may procure and maintain insurance for the indemnification of such persons providing greater indemnification than that authorized hereinabove. Section 7.3. Nonexclusivity. The rights of indemnification under this Article shall not be exclusive of other rights to which such persons may be entitled as a matter of law. ARTICLE VIII Amendment and Repeal of By-laws Section 8.1. By Shareholders. These By-laws may be amended or repealed by the affirmative vote of the holders of a majority of the voting power of shares entitled to vote in the election of directors. Section 8.2. By the Board of Directors. These By-laws may be amended or repealed by (a) the Board of Directors, at any meeting, by a majority of the directors present at the time of a vote, if a - 14 - 15 quorum is present at that time, or (b) the unanimous written consent of the directors. - 15 - EX-99.1 5 EXCERPTS FROM THE JOINT PROXY STATEMENT-PROSPECTUS 1 EXHIBIT 99.1 BACKGROUND AND REASONS BACKGROUND OF THE REORGANIZATION; REASONS FOR THE RECOMMENDATION OF THE GRACE BOARD On May 4, 1995, Mr. Albert J. Costello, the President and Chief Executive Officer of Grace, was advised by Dr. Constantine L. Hampers, the Chief Executive Officer of NMC, that, in order to solve certain management issues (such as the desire for greater independence by NMC management, and NMC management's concern that, as part of a diversified conglomerate, NMC's abilities to achieve its potential could be constrained) at NMC, Grace should undertake a 100% spin-off or sale of NMC and offered that NMC management would be willing to buy NMC for $3.5 billion if a sale were to be considered. Grace management, together with its financial and legal advisors, evaluated Dr. Hampers' proposals in light of other alternatives available with respect to NMC. On June 14, 1995, the Grace Board met to consider Grace's options regarding NMC. Following presentations by Grace's management and its financial and legal advisors, the Grace Board authorized management to proceed with a plan pursuant to which Grace would spin off NMC to Grace shareholders on a one-share-for-one-share basis. In connection with its review and determination that the spin-off of NMC was the best alternative for Grace and its shareholders, the Grace Board considered, among other things, a proposal by Vivra Incorporated ("Vivra") that NMC be merged with Vivra in a stock-for-stock transaction in connection with a proposed NMC spin-off. Vivra proposed that such merger would offer an unspecified premium to Vivra shareholders over the current market price and would result in certain operational synergies. The Grace Board had reservations about the achievability of the operational synergies Vivra suggested, given Vivra's relatively small size. Moreover, the Grace Board felt that the proposal contained contingencies and uncertainties not present in a pure spin-off, and considered that Vivra itself had recognized that the bulk of the value created through the Vivra proposal would be through the spin-off, and not through the merger with Vivra. Since the Vivra proposal would add, at best, a marginal benefit to the spin-off transaction, the Grace Board felt that it would not be prudent to jeopardize the spin-off to pursue that possible marginal benefit. In addition, the Grace Board considered that NMC would not be precluded from pursuing any synergistic transactions, such as a merger with Vivra, after the spin-off. The Grace Board took into account that Grace's financial advisors had made discrete solicitations of interest in NMC and that, despite such solicitations and the publicized nature of the transaction, no third party other than Vivra had made a proposal for NMC. During the summer and early fall of 1995, Grace management, together with Grace's financial and legal advisors, took steps toward the consummation of the spin-off. On October 17, 1995, NMC received five subpoenas from the OIG, the United States Attorney's Office for the District of Massachusetts and others, as discussed herein under ""BUSINESS OF FRESENIUS MEDICAL CARE -- Regulatory and Legal Matters -- Legal and Regulatory Proceedings -- OIG Investigation." On October 18, 1995, Grace announced that, in light of the subpoenas, completion of the previously announced spin-off of NMC was expected to occur in the first quarter of 1996, rather than in the fourth quarter of 1995. In the fall of 1995, representatives of Fresenius AG notified representatives of Grace that Fresenius AG was interested in pursuing a transaction in which NMC would be combined with Fresenius Worldwide Dialysis and were advised by Grace representatives that, as a result of the delay in the proposed spin-off, Grace might be receptive to alternatives to the previously announced spin-off. On October 20, 1995, Grace and Fresenius AG entered into a confidentiality agreement (which included standstill provisions) and began to exchange certain information in connection with their evaluation of a transaction. More advanced discussions respecting a possible transaction began in late November 1995. At the onset of such discussions, Grace informed Fresenius AG that its primary objective was to maximize the value of NMC for the benefit of the Grace shareholders, and that it also had a strong preference for a transaction structure in which (i) Grace could separate its non-health care businesses from NMC in a tax-free spin-off, simultaneously combining NMC with another dialysis business through a merger; (ii) there would be a substantial tax-free distribution of cash (or assumption of debt) for the benefit of Grace Chemicals and (iii) NMC would be responsible for all of its liabilities, including any regulatory liabilities, Grace Chemicals would be responsible only for non-health care liabilities, and each party would indemnify the other with respect to its respective liabilities. Fresenius AG indicated that, subject to its completion of due diligence, it was willing to pursue a transaction structured in this manner. Discussions with Fresenius AG continued through the remainder of 1995 and January 1996. 37 2 By mid-January 1996, Fresenius AG informed Grace that its preliminary due diligence investigation had been completed and asked that both parties focus their efforts in an attempt to reach closure with respect to open issues. Grace management determined that discussions with respect to a transaction with Fresenius AG had significantly advanced and could likely be reduced to definitive agreements. Therefore, on January 13, 1996, Grace and Fresenius AG agreed that, until February 4, 1996, Grace would negotiate exclusively with Fresenius AG with a view toward entering into definite agreements respecting a transaction along the lines of Grace's preferred structure, provided that if any third party submitted a proposal to Grace, Grace would be free to consider and evaluate such proposal (including by way of discussions with such third party and its representatives). If Grace management believed that such proposal would reasonably be expected to be more attractive to Grace and its shareholders, Grace agreed to offer Fresenius AG the opportunity to improve its proposal reasonably promptly to be satisfactory to Grace; and, if Grace management determined that Fresenius AG had not sufficiently improved its proposal, it would so advise Fresenius AG and Grace could then negotiate with such third party. However, Fresenius AG agreed that Grace would not be precluded in any way from making (or not making) any recommendation to the Grace Board or from accepting any proposal for NMC that it considered to be in the best interest of Grace and its shareholders. Negotiations between Grace and Fresenius AG proceeded intensively thereafter on the basis of this agreement. Dr. Hampers played virtually no role in Grace's negotiations with Fresenius AG. Such negotiations involved a structure in which, following the Reorganization, New Grace would retain its interests in GN Holdings, Inc. and the Amicon filtration business, which historically were managed, but only partly owned, by NMC, with the remainder owned by Grace Chemicals. Although such businesses had a reporting relationship to NMC, the revenues of such businesses were immaterial to NMC, and NMC believes that such assets are not integral to its business. The decision to exclude such assets was made by Grace and Fresenius AG as part of the negotiation of the debt and equity levels and the Distribution Payment, resulting from the Reorganization. On January 31, 1996, Baxter International, Inc. ("Baxter") sent Grace a proposal involving a spin-off of NMC and a subsequent merger with a Baxter subsidiary that Baxter valued at $3.8 billion. Baxter had indicated interest in NMC on a sporadic basis during the fall and winter of 1995-96, had met with Grace management and its advisors on several occasions and had made various proposals to Grace for investments in NMC coupled with supply arrangements. Baxter had been unwilling to sign a confidentiality agreement with Grace containing terms similar to those agreed to by Fresenius AG and, therefore, was not provided with confidential information regarding NMC. Under Baxter's January 31 proposal, NMC would borrow $1.275 billion and dividend such amount, together with a $300 million pay-in-kind note (the payment of which would be due in full on completion of the subsequent merger) to Grace; Baxter would guarantee $450 million of such borrowing if the subsequent merger occurred or, otherwise, commit to purchase $450 million of NMC stock; NMC would enter into a long-term supply agreement with Baxter; and Grace would spin off NMC to Grace's shareholders. Following 35 days of public trading in NMC stock after the spin-off, NMC shareholders would vote on a merger of NMC with a Baxter subsidiary in which NMC shareholders would receive $1.8 billion of Baxter stock. Following such merger, Grace would be responsible for all governmental and regulatory liabilities or undisclosed liabilities of NMC in excess of $100 million. Baxter's proposal stated that it was subject to the negotiation of definitive agreements and due diligence. Baxter's proposal also stated that consummation of the merger would be subject to certain conditions and that Baxter would be entitled to a termination fee of 3% of the total transaction value (which Baxter had stated was $3.8 billion) in the event that the transaction was not consummated. Grace management, together with its legal and financial advisors, evaluated Baxter's January 31 proposal and concluded that the proposal was less attractive to Grace and its shareholders than the Fresenius AG proposal in several respects: (a) the total transaction value was lower than the estimated Fresenius AG proposal; (b) Grace Chemicals would be responsible for any regulatory and other liabilities of NMC in excess of $100 million following the spin-off, which could create uncertainty over the valuation of Grace Chemicals and frustrate the separation of the businesses on an ongoing basis; (c) the proposal presented a risk that the long-term supply agreement; (which, together with the 3% termination fee, might deter other buyers of NMC) and the spin-off might be consummated without certainty that the subsequent merger would be consummated, thereby depriving the Grace shareholders of the opportunity to achieve maximum value; and (d) the structure outlined in the proposal was more novel from a tax perspective than the "Morris Trust" structure 38 3 contemplated by the Fresenius AG proposal. In addition, the Fresenius AG proposal under discussion (a) was close to final agreement and (b) was on terms which did not preclude termination to enter a more favorable transaction with another party. On February 2, 1996, Baxter publicly announced that it had made the January 31 proposal. In December 1995, representatives of Vivra informed representatives of Grace that Vivra was still interested in a transaction substantially the same as the transaction proposed in June 1995. In addition, Grace was aware that at this time other dialysis companies even smaller than Vivra were willing to pursue such a transaction. However, no such transactions were pursued because Grace believed, and was advised by its financial advisors, that greater value would be available from a transaction with Fresenius AG or Baxter. At a meeting of the Grace Board held on February 4, 1996, the Grace Board considered the Reorganization and the proposed agreements relating thereto as well as the January 31 Baxter proposal. At the meeting, Grace's management and its legal and financial advisors made detailed presentations concerning the proposed transaction. The Grace Board concluded that a transaction with a third party was preferable at the time to the previously proposed spin-off of NMC, which involved execution risks in light of the difficulties in obtaining financing during the pendency of the OIG Investigation. As noted above, the Grace Board was advised that the most likely third-party candidates for a transaction were Baxter and Fresenius AG. The Grace Board concluded that the Fresenius AG proposal (which, as described in detail under "-Presentation by Grace Financial Advisors - Comparison of Baxter Proposal," the Grace Financial Advisors estimated provided between approximately $3.675 billion and approximately $3.975 billion of value to Grace on a tax-free basis plus entitled Grace to retain certain cash flows of NMC prior to the Reorganization and provided for the issuance of the New Preferred Shares) was preferable to the January 31 Baxter proposal (which Baxter had stated was valued at $3.8 billion) for the reasons described in the third preceding paragraph. After such presentations, and taking into account the alternatives available the Grace Board unanimously determined that the Reorganization and the proposed agreements relating thereto were fair to and in the best interests of Grace and its shareholders, authorized Grace to enter into the agreements and to consummate the transactions contemplated thereby, and resolved to recommend that Grace shareholders approve such agreements and the transactions contemplated thereby. In connection with its approval and recommendation, the Grace Board considered, among other things, the following factors: (a) the terms of the proposed transactions and the proposed agreements relating thereto, including, among other things, the requirement for Grace shareholder approval and the other conditions to consummation, the circumstances under which the agreements could be terminated and the termination fees payable in connection therewith; (b) the "Morris Trust" structure and the tax treatment of the transaction; (c) other available alternatives, including the Baxter proposal, and the ability to enter into an agreement respecting a higher offer under certain circumstances under the Fresenius AG transaction; (d) the presentation by representatives of CS First Boston and Merrill Lynch which included, among other things, valuation analyses with respect to Fresenius Medical Care and NMC and each such firm's opinion that the Distribution Payment and the Grace Merger, taken together, were fair, from a financial point of view, to holders of Grace Common Stock, such opinion and presentations being based on certain assumptions and subject to certain limitations (see"-Financial Advisors to Grace"); (e) the business rationales for the transaction, including that the combination of NMC and Fresenius Worldwide Dialysis had the potential to enhance shareholder value through operating synergies as an integrated dialysis products and services company, although there can be no assurance that synergies will be achieved or as to the amount thereof, and that Fresenius Medical Care could take advantage of unique marketplace strengths in the U.S. and other markets, notwithstanding the competitive and other risks associated with combining a products company and a services company. 39 4 (f) the operating and financial strength of the combined entity, although the Grace Board did consider the substantial goodwill charges which would be associated with the Reorganization; (g) the impact of the transaction on Grace's remaining specialty chemicals businesses, including that the transaction would result in the payment of a significant amount of cash to Grace Chemicals and enable Grace Chemicals (or New Grace) to use such cash to reduce debt, repurchase stock and/or invest in core specialty chemical operations; (h) the retention by NMC of all health care liabilities, including any regulatory liability relating to the governmental investigations, the indemnity to be provided to Grace's specialty chemicals businesses with respect to such liabilities and the concern that such liabilities would impact the valuation of Fresenius Medical Care which might affect the trading market for FMC Ordinary Shares; and (i) the arrangements which had been made with respect to corporate governance of Fresenius Medical Care and related issues; and (j) the unfamiliarity of Fresenius Worldwide Dialysis to U.S. investors. The foregoing discussion of the information and factors considered and given weight by the Grace Board is not intended to be exhaustive but includes all material factors considered by the Grace Board. In addition, in reaching the determination to approve and recommend the Reorganization, the Grace Board did not assign any relative or specific weights to the foregoing factors. THE GRACE BOARD RECOMMENDS THAT GRACE SHAREHOLDERS VOTE FOR APPROVAL OF THE REORGANIZATION AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY. FINANCIAL ADVISORS TO GRACE CS First Boston and Merrill Lynch were retained to act as the Grace Financial Advisors in connection with Grace's exploration of strategic alternatives for NMC. CS First Boston and Merrill Lynch were selected by Grace because of their familiarity with Grace and NMC and their respective businesses and their qualifications and expertise in providing advice to companies in the businesses in which Grace and NMC are engaged, as well as their reputations as internationally recognized investment banking firms. Each of CS First Boston and Merrill Lynch has consented to the reprinting of its fairness opinion and the summary of such firm's activities included herein. Opinions of Grace Financial Advisors. At the request of the Grace Board, on February 4, 1996, each of CS First Boston and Merrill Lynch delivered a written opinion to the Grace Board that, based upon and subject to the matters set forth in its written opinion, as of such date, the terms of the Distribution Payment and the Grace Merger, taken together, were fair, from a financial point of view, to the holders of Grace Common Stock. In preparing these opinions, these firms performed a variety of financial and comparative analyses and made a detailed presentation to the Grace Board with respect to, among other things, the valuations of Fresenius Medical Care and NMC. The Grace Board, in accepting the opinions of the Grace Financial Advisors, was aware that the Grace Financial Advisors relied upon certain financial information, projections and other information provided by Grace management and that the opinions of such firms relied, in part, on certain assumptions and are subject to certain limitations. While the Grace Board did not perform an independent review of the financial information, projections and other information provided to the Grace Financial Advisors, the Grace Financial Advisors and management did review certain financial information and projections with the Grace Board. The Grace Board relied on the Grace Financial Advisors, whom it considered to be experts in such matters, to select the appropriate methodologies to determine fairness. No updates of such opinions have been requested because such opinions were provided solely in connection with the decisions of the Grace Board taken on February 4, 1996. While the pro forma financial information included herein was not available on February 4, 1996, Grace believes that such pro forma financial information is not materially different from the information available on February 4, 1996 so as to impact on fairness. 40 5 THE FULL TEXTS OF THE WRITTEN OPINIONS OF CS FIRST BOSTON AND MERRILL LYNCH ARE SET FORTH IN APPENDIX C TO THIS JOINT PROXY STATEMENT-PROSPECTUS AND DESCRIBE THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN. THE OPINIONS OF CS FIRST BOSTON AND MERRILL LYNCH WERE FURNISHED FOR THE INFORMATION OF THE GRACE BOARD IN CONNECTION WITH ITS CONSIDERATION OF THE REORGANIZATION, AND DO NOT CONSTITUTE A RECOMMENDATION TO ANY GRACE SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE ON THE REORGANIZATION. GRACE SHAREHOLDERS ARE URGED TO READ THE OPINIONS IN THEIR ENTIRETY. Opinion of CS First Boston. In connection with its opinion, CS First Boston reviewed certain publicly available business and financial information relating to Grace, NMC and Fresenius Worldwide Dialysis, as well as the Reorganization Agreement, the Contribution Agreement and the Distribution Agreement (collectively, the "Transaction Agreements"). CS First Boston also reviewed certain other information, including financial forecasts and certain information with respect to potential synergies which may result from the Reorganization, provided to CS First Boston by Grace and Fresenius AG, and met with the managements of Grace, Fresenius AG and Fresenius USA to discuss the business and prospects of NMC, Fresenius Worldwide Dialysis and Fresenius USA. CS First Boston also considered certain financial data of NMC, Fresenius Worldwide Dialysis and Fresenius USA and compared that data with similar data for other publicly held companies in businesses similar to those of NMC, Fresenius Worldwide Dialysis and Fresenius USA and considered the financial terms of certain other business combinations and other transactions. CS First Boston also considered such other information, financial studies, analyses and investigations and financial, economic and market criteria which it deemed relevant. In connection with its review, CS First Boston did not assume any responsibility for independent verification of any of the foregoing information and relied on its being complete and accurate in all material respects. With respect to the financial forecasts, CS First Boston assumed that such forecasts were reasonably prepared on bases reflecting the best currently available estimates and judgments of Grace's and Fresenius AG's managements as to the future financial performance of NMC and Fresenius Worldwide Dialysis. CS First Boston also relied upon the views of Grace's and Fresenius AG's managements concerning the business, operational and strategic benefits and implications of the Reorganization, including financial forecasts provided to CS First Boston by Grace and Fresenius AG relating to synergistic benefits to Fresenius Worldwide Dialysis and NMC. CS First Boston did not make an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of NMC or Fresenius Worldwide Dialysis, nor was CS First Boston furnished with any such evaluations or appraisals. CS First Boston's opinion was necessarily based upon financial, economic, market and other conditions as they existed and could be evaluated on the date of its opinion. CS First Boston did not express any opinion as to what the value of the ADSs actually would be when issued to holders of Grace Common Stock or the prices at which the ADSs would trade subsequent to the Reorganization. In addition, CS First Boston understood that NMC was the target of certain governmental and regulatory investigations relating to the conduct of its business, which could result in substantial liabilities and obligations being incurred by NMC in the future, the amount of which the management of Grace was unable to predict. CS First Boston also understood that the financial statements, pro forma financial statements and registration statement of Fresenius Medical Care had not yet been prepared. CS First Boston assumed, with Grace's consent, that the transactions contemplated by the Transaction Agreements would comply with applicable U.S., foreign, federal and state laws, including without limitation, laws relating to the payment of dividends, bankruptcy, insolvency, reorganization, fraudulent conveyance, fraudulent transfer or other similar laws affecting creditors' rights generally. CS First Boston assumed, with Grace's consent, that receipt of the ADSs would be tax-free for federal income tax purposes to holders of Grace Common Stock and that none of Grace, NMC, Fresenius Worldwide Dialysis, Fresenius USA and Fresenius Medical Care would recognize income, gain or loss as a result of the transactions contemplated by the Transaction Agreements. In addition, CS First Boston assumed, with Grace's consent, that Grace Chemicals and Fresenius AG would perform their respective indemnification obligations which may arise under the Distribution Agreement and the Contribution Agreement in accordance with their respective terms. 41 6 Based upon and subject to the foregoing, CS First Boston rendered its opinion that, as of the date of such opinion, the terms of the Distribution Payment and the Grace Merger, taken together, were fair, from a financial point of view, to the holders of Grace Common Stock. Opinion of Merrill Lynch. In connection with its opinion, Merrill Lynch reviewed Grace's Annual Reports, Forms 10-K and related financial information for the five fiscal years ended December 31, 1994 and its Forms 10-Q and the related unaudited financial information for the quarterly periods ending March 31, 1995, June 30, 1995 and September 30, 1995; reviewed certain historical financial information with respect to NMC furnished to Merrill Lynch by Grace and reviewed NMC's Form 10 filed with the Commission on September 25, 1995 which included audited financial information for the three fiscal years ended December 31, 1994 and unaudited financial information for the six month periods ending June 30, 1995 and June 30, 1994; reviewed certain historical financial information with respect to Fresenius AG and Fresenius Worldwide Dialysis furnished to Merrill Lynch by Fresenius AG and reviewed Fresenius USA's Annual Reports, Forms 10-K and related financial information for the five fiscal years ended December 31, 1994 and its Forms 10-Q and the related unaudited financial information for the quarterly periods ending March 31, 1995, June 30, 1995 and September 30, 1995; reviewed certain information, including financial forecasts, relating to the business, earnings, cash flow, assets and prospects of NMC, Fresenius Worldwide Dialysis and Fresenius USA, furnished to Merrill Lynch by Grace, Fresenius AG and Fresenius USA, including certain information with respect to potential synergies which may result from the Reorganization; conducted discussions with members of senior management of Grace and NMC, and with Fresenius AG and Fresenius USA, with respect to the businesses, operations and prospects of NMC, Fresenius Worldwide Dialysis and Fresenius USA, respectively; compared the results of operations of NMC and Fresenius Worldwide Dialysis with those of certain other companies which Merrill Lynch deemed to be reasonably similar to NMC and Fresenius Worldwide Dialysis; considered certain terms of the documents which govern the rights of stockholders of Fresenius Medical Care, including certain governance provisions applicable to Fresenius AG and Fresenius Medical Care; compared the proposed financial terms of the Reorganization with the financial terms of certain other mergers and acquisitions which Merrill Lynch deemed relevant; reviewed the financial terms and conditions of the proposed forms of the Transaction Agreements; reviewed the terms of the letter from Baxter to Grace dated January 31, 1996, setting forth a proposal for the acquisition by Baxter of NMC; and reviewed such other financial studies and analyses and performed such other investigations and took into account such other matters as Merrill Lynch deemed necessary. In preparing its opinion, Merrill Lynch relied on the accuracy and completeness of all information supplied or otherwise made available to it by Grace and Fresenius AG, and did not independently verify such information or undertake an independent appraisal of the assets of Grace or Fresenius Worldwide Dialysis. With respect to the financial forecasts furnished by Grace and Fresenius AG, Merrill Lynch assumed that such forecasts were reasonably prepared and reflected the best currently available estimates and judgments of the managements of Grace and NMC or Fresenius AG as to the expected future financial performance of Grace, NMC or Fresenius Worldwide Dialysis, as the case may be. Merrill Lynch also relied upon the views of Grace's and Fresenius AG's managements concerning the business, operational and strategic benefits and implications of the Reorganization, including financial forecasts provided to Merrill Lynch by Grace and Fresenius AG relating to synergistic benefits to Fresenius Worldwide Dialysis and NMC. Merrill Lynch's opinion was necessarily based upon financial, economic, market and other conditions as they existed and could be evaluated on the date of such opinion. Merrill Lynch did not express any opinion as to what the value of the ADSs actually would be when issued to Grace shareholders pursuant to the Reorganization or the prices at which the ADSs would trade subsequent to the Reorganization. In addition, Merrill Lynch understood that NMC was the target of certain governmental and regulatory investigations relating to the conduct of its business, which could result in substantial liabilities and obligations being incurred by NMC in the future, the amount of which management of Grace was unable to predict. Merrill Lynch also understood that the financial statements, pro forma financial statements and registration statement of Fresenius Medical Care had not yet been prepared. Merrill Lynch assumed, with Grace's consent, that the transactions contemplated by the Transaction Agreements would comply with applicable U.S., foreign, federal and state laws, including, without limitation, 42 7 laws relating to the payment of dividends, bankruptcy, insolvency, reorganization, fraudulent conveyance, fraudulent transfer or other similar laws affecting creditors' rights generally. Merrill Lynch assumed, with Grace's consent, that receipt of the ADSs would be tax-free for federal income tax purposes to the shareholders of Grace and that none of Grace, NMC, Fresenius Worldwide Dialysis, Fresenius USA and Fresenius Medical Care would recognize income, gain or loss as a result of the transactions contemplated by the Transaction Agreements. In addition, Merrill Lynch assumed, with Grace's consent, that Grace Chemicals and Fresenius AG would perform their respective indemnification obligations which may arise under the Distribution Agreement and the Contribution Agreement in accordance with their respective terms. Based upon and subject to the foregoing, Merrill Lynch rendered its opinion that, as of the date of such opinion, the terms of the Distribution Payment and the Grace Merger, taken together, were fair, from a financial point of view, to the holders of Grace Common Stock. In preparing their opinions to the Grace Board, the Grace Financial Advisors performed a variety of financial and comparative analyses, including those described under "-- Presentation by Grace Financial Advisors." The summary of the Grace Financial Advisors' analyses set forth below does not purport to be a complete description of the analyses underlying the Grace Financial Advisors' opinions, but includes a summary of all material valuation methodologies performed by the Grace Financial Advisors. The preparation of a fairness opinion is a complex analytic process involving various determinations as to the most appropriate and relevant methods of financial analyses and the application of those methods to the particular circumstances and, therefore, such an opinion is not readily susceptible to summary description. In arriving at their opinions, the Grace Financial Advisors made qualitative judgments as to the significance and relevance of each analysis and factor considered by it. Accordingly, the Grace Financial Advisors believe that their analyses must be considered as a whole and that selecting portions of their analyses and factors, without considering all analyses and factors, could create a misleading or incomplete view of the processes underlying such analyses and their opinions. In their analyses, the Grace Financial Advisors made numerous assumptions with respect to Grace, NMC, Fresenius Worldwide Dialysis, Fresenius USA and Fresenius Medical Care, industry performance, regulatory, general business, economic, market and financial conditions and other matters, many of which are beyond the control of Grace, NMC, Fresenius Worldwide Dialysis, Fresenius USA and Fresenius Medical Care. No company, transaction or business used in such analyses as a comparison is identical to Grace, NMC, Fresenius Worldwide Dialysis, Fresenius USA and Fresenius Medical Care or the Reorganization, nor is an evaluation of the results of such analyses entirely mathematical; rather, it involves complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the companies, business segments or transactions being analyzed. The estimates contained in such analyses and the ranges of valuations resulting from any particular analysis are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by such analyses. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold. Accordingly, because such estimates are inherently subject to substantial uncertainty, none of Grace, NMC, Fresenius Worldwide Dialysis, Fresenius USA, Fresenius Medical Care, the Grace Financial Advisors or any other person assumes responsibility for their accuracy. PRESENTATION BY GRACE FINANCIAL ADVISORS At the meeting of the Grace Board on February 4, 1996, the Grace Financial Advisors made a presentation to the Grace Board of their analyses as of such date delivered in connection with their opinions, a summary of which appears below. The following quantitative information, to the extent it is based on market data, is based on market data as it existed at February 4, 1996, and is not necessarily indicative of current market conditions. Historical and Pro Forma Financial Data. The Grace Financial Advisors reviewed historical revenues, EBITDA and earnings before interest and taxes ("EBIT") of each of NMC and Fresenius Worldwide Dialysis and analyzed pro forma revenues, EBITDA, EBIT and net income of Fresenius Medical Care based on certain forecasted-financial information and certain information with regard to possible synergies resulting 43 8 from the Reorganization provided by management of Grace, NMC, Fresenius USA and Fresenius Worldwide Dialysis. Assuming that the closing of the Reorganization occurred on January 1, 1996, such analysis indicated that, on a pro forma basis, for the year ending December 31, 1996, Fresenius Medical care would have revenues of approximately $3.415 billion, EBITDA of approximately $794.1 million, EBIT of approximately $525.6 million and net income of approximately $156.3 million. The Grace Financial Advisors also analyzed certain pro forma credit statistics for Fresenius Medical Care giving effect to the Reorganization, based upon certain forecasted financial information and certain information with regard to possible synergies resulting from the Reorganization provided by management of Grace, NMC, Fresenius USA and Fresenius Worldwide Dialysis. These credit statistics consisted of ratio of EBIT to net interest expense, ratio of EBITDA to net interest expense, total debt as a percentage of capitalization, ratio of total debt to EBITDA, total debt, shareholders' equity and total capitalization. Assuming that the closing of the Reorganization occurred on January 1, 1996, such analysis indicated that, on a pro forma basis, as of and for the year ending December 31, 1996, such credit statistics for Fresenius Medical Care would be as follows: ratio of EBIT to net interest expense, 2.8x; ratio of EBITDA to net interest expense, 4.2x; total debt as a percentage of capitalization, 52.7%; ratio of total debt to EBITDA, 3.1x; total debt, approximately $2.425 billion; shareholders' equity, approximately $2.173 billion; and total capitalization, approximately $4.598 billion. Comparable Company Analysis. The Grace Financial Advisors analyzed the ratio of stock price to estimated 1996 earnings for six renal care companies, consisting of Fresenius USA, Fresenius AG, Gambro AB, Vivra, Total Renal Care Inc. and Renal Treatment Centers Inc. (the "Comparable Companies"). The price/estimated 1996 earnings ratios for the Comparable Companies were 20.5x, 25.4x, 19.5x, 18.5x, 35.0x and 28.1x, respectively. The Grace Financial Advisors estimated that the FMC Ordinary Shares would trade at a price/estimated 1996 earnings ratio ranging from 19.0x to 23.0x. Valuation of Distribution Payment and Grace Merger. The Grace Financial Advisors analyzed the value to Grace shareholders of the Grace Merger assuming estimated pro forma 1996 net income of Fresenius Medical Care of $156.3 million and a stock price to estimated 1996 earnings ratio for Fresenius Medical Care of 19.0x to 23.0x. Based upon the foregoing assumptions, the Grace Financial Advisors estimated that the total equity trading value of Fresenius Medical Care would range from approximately $2.97 billion to approximately $3.595 billion (of which Grace shareholders' ownership interest would be 44.8% or between approximately $1.331 billion and approximately $1.611 billion). In addition, the Grace Financial Advisors noted that NMC would retain or assume approximately $2.263 billion of indebtedness, resulting in an aggregate value to Grace shareholders of between approximately $3.594 billion and $3.874 billion. Further, the Grace Financial Advisors noted that NMC would distribute to New Grace its Amicon Bioseparations Division ("Amicon") and other assets, with an estimated value of between $75 million and $100 million, and that Grace Chemicals would be entitled to retain certain cash flows of NMC prior to the Reorganization, which Grace management estimated would range from approximately $150 million to approximately $200 million. Accordingly, the Grace Financial Advisors estimated that the aggregate value to be received in connection with the Distribution Payment and the Grace Merger ranged from approximately $3.819 billion to approximately $4.174 billion. The Grace Financial Advisors also noted that holders of Grace Common Stock would also receive the New Preferred Shares in the Recapitalization which would remain outstanding following the Grace Merger and that, under certain circumstances, the holders of the New Preferred Shares could receive certain special dividend payments in the future. See "DESCRIPTION OF NEW PREFERRED SHARES." Discounted Cash Flow Analysis of Fresenius Medical Care. The Grace Financial Advisors analyzed the discounted cash flow value of the equity of Fresenius Medical Care using discount rates ranging from 12.5% to 13.5% and terminal EBITDA multiples ranging from 7.5x to 8.5x. Based upon the foregoing, the Grace Financial Advisors estimated that the discounted cash flow value of the equity of Fresenius Medical Care ranged from approximately $3.742 billion to approximately $4.792 billion (as compared with the trading valuation of the equity of Fresenius Medical Care of between approximately $2.97 billion and approximately $3.595 billion described under "--Valuation of Distribution Payment and Grace Merger"). 44 9 NMC Stand-Alone Valuation. The Grace Financial Advisors performed analyses of the enterprise value of NMC on a stand-alone basis (excluding the value of Amicon and other assets to be transferred to or retained by New Grace) based upon the trading values of the Comparable Companies, comparable acquisition transactions and discounted cash flow (using discount rates ranging from 12.5% to 13.5% and terminal EBITDA multiples ranging from 7.0x to 8.0x). Such analyses resulted in the following ranges of enterprise value for NMC on a stand-alone basis: comparable company analysis--between approximately $3.175 billion and approximately $3.5 billion; comparable acquisitions analysis--between approximately $3.35 billion and approximately $4.0 billion; and discounted cash flow analysis--between approximately $3.15 billion and approximately $3.725 billion (as compared with the estimated total value of the Grace shareholders' interest in the equity of Fresenius Medical Care and the Distribution Payment of between approximately $3.594 billion and approximately $3.875 billion described under "--Valuation of Distribution Payment and Grace Merger"). Comparison of Baxter Proposal. The Grace Financial Advisors compared the terms of the Distribution Payment and the Grace Merger with the proposal letter received by Grace from Baxter on January 31, 1996. The Grace Financial Advisors noted that the Fresenius AG transaction was a fully negotiated transaction with limited conditions to closing which provided, in their opinion, between approximately $3.675 billion and approximately $3.975 billion of value to Grace on a tax-free basis, that Grace Chemicals would be entitled to retain certain cash flows of NMC prior to the Reorganization, estimated by Grace management to be between approximately $150 million and approximately $200 million, that holders of Grace Common Stock would also receive the New Preferred Shares, and that financing commitments for the Fresenius AG transaction had been received. Furthermore, NMC would retain all liabilities, if any, arising out of the OIG Investigation. See "BUSINESS OF FRESENIUS MEDICAL CARE--Regulatory and Legal Matters--Legal and Regulatory Proceedings--OIG Investigation." The Grace Financial Advisors noted that the Baxter proposal stated that it provided $3.8 billion of value on a tax-free basis (although the Grace Financial Advisors understood, based upon the advice of counsel to Grace, that some of such consideration could potentially be deemed taxable consideration unless Baxter were to accept the "Morris Trust" structure agreed to by Fresenius AG or otherwise modify the form of its proposed transaction). The Grace Financial Advisors also noted that, under the terms of its proposal, Baxter would assume undisclosed liabilities, including any liability related to the OIG Investigation only up to $100 million. Moreover, the Baxter proposal was subject to negotiation, due diligence and documentation. New Preferred Shares. In the Reorganization, holders of Grace Common Stock will receive the New Preferred Shares, which shares will remain outstanding following the Grace Merger. As described under "DESCRIPTION OF NEW PREFERRED SHARES," holders of the New Preferred Shares may receive certain Special Dividend payments beginning in 2002, based upon the adjusted cash flow of Fresenius Medical Care for the five-year period from January 1, 1997 to December 31, 2001. Apart from such Special Dividend rights, the New Preferred Shares have no dividend rights, and such shares have a Liquidation Preference of $.10 per share. Because there is substantial uncertainty whether any Special Dividend payments will become payable on the New Preferred Shares, the Grace Financial Advisors valued the New Preferred Shares at zero for the purpose of their analyses. Accordingly, any amounts ultimately realized by holders of Grace Common Stock in respect of the New Preferred Shares held by them would represent additional value above the value taken into account by the Grace Financial Advisors in rendering their opinions as to the fairness of the Distribution Payment and the Grace Merger. OIG Investigation. As described under "BUSINESS OF FRESENIUS MEDICAL CARE--Regulatory and Legal Matters--Legal and Regulatory Proceedings--OIG Investigation," NMC is the target of certain governmental and regulatory investigations relating to the conduct of its business, which could result in substantial liabilities and obligations being incurred by NMC in the future. The Grace Financial Advisors took into account the uncertainty regarding such investigations in their estimate of the range of price/earnings ratios for the FMC Ordinary Shares described under "--Comparable Company Analysis" and "--Valuation of Distribution Payment and Grace Merger." In their analyses described under "--Discounted Cash Flow Analysis of Fresenius Medical Care" and "--NMC Stand-Alone Valuation," the Grace Financial Advisors took into account, solely for the purpose of their analyses, payments to the federal government in connection 45 10 with previous settlements of regulatory investigations of companies in the health care industry. This did not, and was not intended to, reflect a judgment as to the potential outcome of the investigations, the comparability of the NMC investigations to said previous investigations or the merits of any aspect of such investigations. The Grace Financial Advisors were advised by management of Grace and NMC that management was unable to predict the amount of liabilities and obligations which may be incurred by NMC arising out of the foregoing investigations. The Grace Financial Advisors noted that, depending upon the actual amount of liabilities and obligations incurred by NMC, the resolution of these issues could have a material adverse impact on NMC in the future (although, by reason of the Reorganization, only 44.8% of such impact would be borne by Grace shareholders). The foregoing is a summary of the material terms of the presentation by the Grace Financial Advisors to the Grace Board on February 4, 1996, and does not purport to be a complete description of such presentation. The analyses by the Grace Financial Advisors in connection with such presentation do not purport to be appraisals or necessarily reflect the prices at which businesses or securities actually may be sold. As described above, the opinions of the Grace Financial Advisors and their presentation to the Grace Board were one of a number of factors considered by the Grace Board in connection with its approval of the Reorganization. FINANCIAL ADVISORY FEES For their financial advisory services in connection with the Reorganization, each of CS First Boston and Merrill Lynch will receive a fee equal to 0.225% of the Aggregate Consideration in connection with the Reorganization. For this purpose, "Aggregate Consideration" means the total fair market value (at the time of closing) of all consideration (including cash, securities, property, all debt for borrowed money remaining on NMC's financial statements at closing and any other form of consideration) paid or payable, or otherwise to be distributed, directly or indirectly, to Grace, NMC or Grace's shareholders in connection with the Reorganization. In addition, since September 1, 1995, each of CS First Boston and Merrill Lynch has been receiving a financial advisory fee of $500,000, payable on a quarterly basis in arrears, which will be fully creditable against the fee described above. Grace has also agreed to reimburse each of CS First Boston and Merrill Lynch for its reasonable out-of-pocket expenses, including the fees and expenses of legal counsel and any other advisors retained by them, and to indemnify each of CS First Boston and Merrill Lynch and certain of their related persons against certain liabilities in connection with their engagement, including certain liabilities under the federal securities laws. Based upon the aggregate value to be received in connection with the Distribution Payment and the Grace Merger (between approximately $3.819 billion and approximately $4.174 billion, as estimated by the Grace Financial Advisors as of February 4, 1996 and described under "-- Valuation of Distribution Payment and Grace Merger"), the "Aggregate Consideration" for purposes of calculating the fee payable to each of the Grace Financial Advisors would be between approximately $3.819 billion and approximately $4.174 billion and the fee payable to each of the Grace Financial Advisors would be between approximately $8,592,750 and approximately $9,391,500, against which the quarterly financial advisory fees of $500,000 received by each of the Grace Financial Advisors beginning September 1, 1995 would be credited. The foregoing is provided solely as an illustration and does not constitute an estimate with respect to either the actual value to be received by Grace or the holders of Grace Common Stock in connection with the Distribution Payment and the Merger or the actual amount of the fees payable to the Grace Financial Advisors. The actual amount of the Aggregate Consideration can only be calculated by reference to the actual date of consummation of the Reorganization and will be based upon, among other things, closing market prices for the FMC Ordinary Shares over a 20-trading day period beginning with the commencement of regular-way trading. In addition, there may be material changes with respect to Fresenius Medical Care and NMC and financial market, industry and general economic conditions between February 4, 1996 and the date of the Reorganization. For these reasons, the actual amount of the Aggregate Consideration and the fees payable to the Grace Financial Advisors may be materially greater or less than the amounts described in the foregoing illustration. In the ordinary course of their respective businesses, CS First Boston and Merrill Lynch may actively trade in the debt and equity securities of Grace, Fresenius AG and Fresenius USA (and, after the Reorganization, Fresenius Medical Care) for their own account or for the accounts of their customers and, 46 11 accordingly, may at any time hold long or short positions in such securities. In addition, CS First Boston is currently in discussions with Fresenius Medical Care to act as an underwriter of securities of Fresenius Medical Care, the proceeds of which may be used to refinance a portion of NMC's bank debt following consummation of the Reorganization. See "FINANCING -- Refinancing." 12 CONSIDERATION TO SHAREHOLDERS In the Reorganization, Fresenius AG and shareholders of Grace and Fresenius USA will receive the following consideration: Fresenius AG - Fresenius Worldwide Dialysis, including all Fresenius USA Common Stock held by Fresenius AG or its subsidiaries, will be contributed to Fresenius Medical Care in exchange for 35,210,000 FMC Ordinary Shares representing approximately 50.3% of all FMC Ordinary Shares outstanding on a fully diluted basis, immediately following the Reorganization. Grace Common Shareholders - The closing price of Grace Common Stock in NYSE composite trading on August 1, 1996 was $63 1/4 per share. - Each holder of Grace Common Stock issued and outstanding at the Time of Distribution will receive one share of New Grace Common Stock in the Distribution. - Each holder of Grace Common Stock issued and outstanding after the Time of Distribution will receive one New Preferred Share. - Holders of shares of Grace Common Stock issued and outstanding immediately prior to the Effective Time (other than any shares of Grace Common Stock owned by Fresenius AG or its subsidiaries, Fresenius USA or its subsidiaries or any Grace subsidiary, any shares of Grace Common Stock held in Grace's treasury or any shares of Grace Common Stock dissenting from the Reorganization) and options with respect to Grace Common Stock held by employees of NMC will be allocated 44.8% of the FMC Ordinary Shares outstanding on a fully diluted basis. As of July 15, 1996, there were outstanding 92,001,176 shares of Grace Common Stock, and options with respect to 231,006 shares of Grace Common Stock held by employees of NMC (none of whom is an officer or director of Grace). On this basis, assuming that there are no Grace Common Dissenting Shareholders and that each option with respect to Grace Common Stock held by employees of NMC is converted to an option with respect to 3.7 ADSs, each share of Grace Common Stock will be converted in the Grace Merger into the right to receive approximately 1.013 ADSs, each such ADS representing one-third of an FMC Ordinary Share. Grace Preferred Stockholders - Each share of Grace Preferred Stock and each New Preferred Share issued and outstanding immediately prior to the Effective Time and will remain issued and outstanding as FNMC stock. Fresenius USA Common Stockholders - The closing price of Fresenius USA Common Stock in AMEX composite trading on August 1, 1996 was $19 per share. - Each share of Fresenius USA Common Stock issued and outstanding immediately prior to the Effective Time (other than any shares of Fresenius USA Common Stock owned by Grace or its subsidiaries or by Fresenius AG or its subsidiaries, any shares of Fresenius USA Common Stock held in Fresenius USA's treasury or any shares of Fresenius USA Common Stock dissenting from the Reorganization) will be converted in the Fresenius USA Merger into the right to receive approximately 1.112 ADSs, each such ADS representing one-third of an FMC Ordinary Share, and each holder of options or warrants to purchase Fresenius USA Common Stock (other than Grace or its subsidiaries or Fresenius AG or its subsidiaries) will receive options or warrants to purchase approximately 1.112 ADSs for each share of Fresenius USA Common Stock issuable upon exercise of such options or warrants. As of July 29, 1996, there were outstanding 26,374,218 shares of Fresenius USA Common Stock and options or warrants with respect to 2,636,626 shares of Fresenius USA Common Stock. On this basis, assuming that there are no Fresenius USA Dissenting 60 13 Stockholders and that each option with respect to Fresenius USA Common Stock is converted into an option with respect to FMC Ordinary Shares, and that Fresenius USA effects certain securities repurchases (see "-- Additional Agreements of Fresenius USA"), holders of shares of (and options and warrants with respect to) Fresenius USA Common Stock will be allocated approximately 4.9% of the FMC Ordinary Shares. GENERAL - In lieu of fractional FMC Ordinary Shares or ADSs, each person who would otherwise have been entitled to a fraction of an FMC Ordinary Share or ADS will be paid an amount in cash (without interest) equal to such holder's proportionate interest in the net proceeds from the sale in the open market by the Exchange Agent appointed by Fresenius Medical Care with the approval of Grace and Fresenius AG, on behalf of all such holders, of the aggregate fractional FMC Ordinary Shares or ADSs issued. - Each share of Grace Common Stock owned by Fresenius AG or its subsidiaries, Fresenius USA or its subsidiaries or any Grace subsidiary, or held in Grace's treasury, will be cancelled and retired without payment of any consideration thereof and will cease to exist. As of July 26, 1996, Fresenius USA owned one share of Grace Common Stock. - Each share of Fresenius USA Common Stock owned by Grace or its subsidiaries, Fresenius AG or its subsidiaries, or any Fresenius USA subsidiary, or held in Fresenius USA's treasury, will be cancelled and retired without payment of any consideration therefor (except for the consideration set forth above) and will cease to exist. As of July 15, 1996, Grace owned no shares of Fresenius USA Common Stock. -----END PRIVACY-ENHANCED MESSAGE-----