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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):
August 14, 1997
W. R. GRACE & CO.
(Exact name of registrant as specified in its charter)
Delaware 1-12139 65-0654331
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
One Town Center Road, Boca Raton, Florida 33486-1010
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 561/362-2000
Item 5. Other Events.
On August 14, 1997, W. R. Grace & Co. ("Grace") and
Sealed Air Corporation ("Sealed Air") announced that they had
entered into an Agreement and Plan of Merger, dated as of
August 14, 1997 (the "Merger Agreement"), pursuant to which
Grace's packaging business ("Packaging") would combine with
Sealed Air (the "Merger") immediately following a spin-off of
Grace's specialty chemicals businesses (the "Spin-off").
In connection with the Spin-off and Merger, Grace
will contribute its specialty chemicals businesses to a newly
formed wholly owned subsidiary of Grace ("New Grace"), which
will become a publicly traded company that will retain the name
"W. R. Grace & Co." Prior to the Spin-off, New Grace will
receive approximately $1.2 billion from Packaging and Grace
(the "Contribution"). The indebtedness incurred in connection
with the Contribution will remain an obligation of New Sealed
Air (as defined below) and Packaging following the Merger.
In the Merger, a wholly owned subsidiary of Grace
will merge with and into Sealed Air to create a new publicly
owned company, to be called "Sealed Air Corporation" ("New
Sealed Air"). Immediately prior to the Merger, the outstanding
shares of Grace common stock, par value $.01 per share, will be
recapitalized into an aggregate of approximately 40.9 million
shares of common stock, par value $.10 per share, of New Sealed
Air ("New Sealed Air Common Stock") and 36 million shares of a
new series of convertible preferred stock, par value $.10 per
share, of New Sealed Air. In the Merger, Sealed Air shareholders
will receive one share of New Sealed Air Common Stock for each
share of Sealed Air common stock, par value $.01 per share, held
immediately prior to the Merger. On a fully-diluted basis and
immeditely after the Merger, former Grace shareholders will
own, in the aggregate, approximately 63% of the equity of New
Sealed Air and former Sealed Air shareholders will own the
remaining 37%.
Grace and Sealed Air have issued a joint press
release with respect to the foregoing, which is filed as an
exhibit hereto.
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The foregoing is qualified in its entirety by
reference to the Merger Agreement; the Form of Distribution
Agreement (the "Distribution Agreement") by and among Grace,
W. R. Grace & Co.-Conn. ("Grace-Conn.") and Grace Specialty
Chemicals, Inc. ("Grace Chemicals"); the Form of Benefits
Allocation Agreement by and among Grace, Grace-Conn. and Grace
Chemicals; and the Form of Tax Sharing Agreement by and among
Grace, Grace-Conn. and Sealed Air that are filed as exhibits
hereto and are incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
Exhibits. The following exhibits are filed with this
Report:
Exhibit No. Description
2.1 Agreement and Plan of Merger, dated
as of August 14, 1997 by and among
Grace, Sealed Air and Packco
Acquisition Corp.
2.2 Form of Distribution Agreement by
and among Grace, Grace-Conn. and
Grace Chemicals (Exhibit A to the
Merger Agreement)
10.1 Form of Employee Benefits Allocation
Agreement by and among Grace, Grace-
Conn. and Grace Chemicals (Exhibit A
to the Distribution Agreement)
10.2 Form of Tax Sharing Agreement by and
among Grace, Grace-Conn. and Sealed
Air (Exhibit B to the Distribution
Agreement)
99.1 Press release issued by Grace and
Sealed Air, dated August 14, 1997
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SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this
report to be signed by the undersigned, thereunto duly au-
thorized.
W. R. GRACE & CO.
(Registrant)
By /s/ Robert B. Lamm
Robert B. Lamm
Vice President and Secretary
Dated: August 18, 1997
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W. R. GRACE & CO.
Current Report on Form 8-K
Exhibit Index
Exhibit No. Description
2.1 Agreement and Plan of Merger, dated
as of August 14, 1997 by and among
Grace, Sealed Air and Packco
Acquisition Corp.
2.2 Form of Distribution Agreement by
and among Grace, Grace-Conn. and
Grace Chemicals (Exhibit A to the
Merger Agreement)
10.1 Form of Employee Benefits Allocation
Agreement by and among Grace, Grace-
Conn. and Grace Chemicals (Exhibit A
to the Distribution Agreement)
10.2 Form of Tax Sharing Agreement by and
among Grace, Grace-Conn. and Sealed
Air (Exhibit B to the Distribution
Agreement)
99.1 Press release issued by Grace and
Sealed Air, dated August 14, 1997
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF AUGUST 14, 1997
BY AND AMONG
W. R. GRACE & CO.,
PACKCO ACQUISITION CORP.
AND
SEALED AIR CORPORATION
TABLE OF CONTENTS
PAGE
RECITALS
A. Defined Terms...................................... 1
B. The Contribution................................... 1
C. The Distribution................................... 1
D. The Recapitalization............................... 1
E. The Merger......................................... 1
F. Intention of the Parties........................... 2
G. Approvals.......................................... 2
ARTICLE I
THE REORGANIZATION; CLOSING; EFFECTIVE TIME
Section 1.1. The Contribution, the Distribution, and the
Recapitalization............................ 2
Section 1.2. The Merger.................................... 2
Section 1.3. Effective Time................................ 2
Section 1.4. Closing....................................... 3
ARTICLE II
CERTIFICATE OF INCORPORATION AND BY-LAWS
Section 2.1. Certificates of Incorporation................. 3
Section 2.2. Surviving Corporation By-laws................. 3
ARTICLE III
DIRECTORS AND OFFICERS
Section 3.1. Newco Directors............................... 3
Section 3.2. Newco Officers................................ 3
Section 3.3. Surviving Corporation Directors............... 4
Section 3.4. Surviving Corporation Officers................ 4
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PAGE
ARTICLE IV
MERGER CONSIDERATION; CONVERSION OR
CANCELLATION OF SHARES IN THE MERGER
Section 4.1. Merger Consideration; Conversion or
Cancellation of Capital Stock of Sealed
Air and Merger Sub.......................... 4
Section 4.2. Exchange of Old Certificates for New
Certificates................................ 4
(a) Appointment of Exchange Agent............. 4
(b) Exchange Procedures....................... 5
(c) No Transfers.............................. 6
(d) No Liability.............................. 6
(e) Withholding Rights........................ 6
(f) Sealed Air Contingent Stock and Restricted
Stock Plans............................. 6
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.1. Representations and Warranties of Grace....... 7
(a) Capital Stock............................. 7
(b) Corporate Organization and Qualification.. 9
(c) Corporate Authority....................... 9
(d) Governmental Filings; No Violations....... 10
(e) SEC Documents; Financial Statements;
No Undisclosed Liabilities.............. 11
(f) Absence of Certain Events and Changes..... 11
(g) Takeover Statutes; Rights Plan............ 12
(h) Brokers and Finders....................... 12
(i) Contribution.............................. 12
(j) Tax Matters............................... 12
(k) Disclosure................................ 13
Section 5.2. Representations and Warranties for the
Packaging Business.......................... 13
(a) Corporate Organization and Qualification.. 13
(b) Corporate Authority....................... 13
(c) Capitalization............................ 14
(d) Financial Statements; No Undisclosed
Liabilities............................. 14
(e) Absence of Certain Events and Changes..... 15
(f) Compliance with Laws...................... 15
(g) Title to Assets........................... 16
(h) Litigation................................ 16
(i) Taxes..................................... 17
(j) Environmental Matters..................... 17
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PAGE
(k) Contracts and Commitments................. 18
(l) Employee Benefit Plans.................... 19
(m) Trademarks, Patents and Copyrights........ 22
Section 5.3. Representations and Warranties of Sealed Air.. 23
(a) Capital Stock............................. 23
(b) Corporate Organization and
Qualification........................... 24
(c) Corporate Authority....................... 24
(d) Governmental Filings; No Violations....... 25
(e) SEC Documents; Financial Statements; No
Undisclosed Liabilities................. 26
(f) Absence of Certain Events and Changes..... 26
(g) Compliance with Laws...................... 27
(h) Title to Assets........................... 27
(i) Litigation................................ 28
(j) Taxes..................................... 28
(k) Contracts and Commitments................. 29
(l) Employee Benefits......................... 29
(m) Environmental Matters..................... 32
(n) Takeover Statutes; Rights Plans........... 32
(o) Brokers and Finders....................... 32
(p) Trademarks, Patents and Copyrights........ 33
(q) Tax Matters............................... 33
(r) Disclosure................................ 33
ARTICLE VI
COVENANTS
Section 6.1. Interim Operations............................ 34
Section 6.2. Certain Transactions.......................... 36
Section 6.3. Acquisition Proposals......................... 36
Section 6.4. Information Supplied.......................... 38
Section 6.5. Shareholder Approvals......................... 38
Section 6.6. Filings; Other Actions........................ 39
Section 6.7. Audited Financial Statements; Comfort
Letters..................................... 40
Section 6.8. Access........................................ 40
Section 6.9. Notification of Certain Matters............... 41
Section 6.10. Publicity..................................... 41
Section 6.11. Employee Benefits; Headquarters Employees..... 41
Section 6.12. Expenses...................................... 42
Section 6.13. Antitakeover Statutes......................... 45
Section 6.14. Securities Act Compliance..................... 45
Section 6.15. Transaction Agreements........................ 45
Section 6.16. Tax Matters................................... 45
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PAGE
ARTICLE VII
CONDITIONS
Section 7.1. Conditions to Each Party's Obligation......... 46
(a) Shareholder Approval...................... 46
(b) Governmental and Regulatory Consents...... 46
(c) Third-Party Consents...................... 46
(d) Governmental Matters...................... 47
(e) Tax Opinions.............................. 47
(f) Registration Statements................... 47
(g) The Contribution, the Distribution and
the Recapitalization.................... 47
(h) Stock Exchange Listing.................... 47
Section 7.2. Conditions to Obligation of Grace............. 48
(a) Representations and Warranties............ 48
(b) Performance of Obligations................ 48
Section 7.3. Conditions to Obligation of Sealed Air........ 48
(a) Representations and Warranties............ 48
(b) Performance of Obligations................ 49
(c) Letter of Credit.......................... 49
(d) Solvency Opinion.......................... 49
ARTICLE VIII
TERMINATION
Section 8.1. Termination by Mutual Consent................. 49
Section 8.2. Termination by any Party Hereto............... 49
Section 8.3. Termination by Grace.......................... 50
Section 8.4. Termination by Sealed Air..................... 50
Section 8.5. Effect of Termination and Abandonment......... 51
ARTICLE IX
MISCELLANEOUS AND GENERAL
Section 9.1. Survival...................................... 51
Section 9.2. Modification or Amendment..................... 51
Section 9.3. Waiver of Conditions.......................... 51
Section 9.4. Counterparts.................................. 51
Section 9.5. Governing Law................................. 52
Section 9.6. Notices....................................... 52
Section 9.7. Entire Agreement; Assignment.................. 52
Section 9.8. Definition of "Subsidiary".................... 53
Section 9.9. Captions...................................... 53
Section 9.10. Specific Performance.......................... 53
Section 9.11. Severability.................................. 53
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PAGE
Section 9.12. Third-Party Beneficiaries..................... 54
Section 9.13. Further Assurances............................ 54
Annex A Defined Terms
Exhibit A Form of Distribution Agreement
Exhibit B Forms of Tax Matters Certificates
Exhibit C Form of Grace Tax Opinion
Exhibit D Form of Sealed Air Tax Opinion
Exhibit E Terms of Newco Convertible Preferred Stock
Exhibit F Terms of Newco Amendment
Grace Disclosure Letter
Packaging Business Disclosure Letter
Sealed Air Disclosure Letter
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AGREEMENT AND PLAN OF MERGER, dated as of August 14,
1997 (this "Agreement"), by and among W. R. GRACE & CO., a
Delaware corporation ("Grace"), Packco Acquisition Corp., a
Delaware corporation and a wholly-owned subsidiary of Grace
("Merger Sub"), and Sealed Air Corporation, a Delaware corpora-
tion ("Sealed Air").
RECITALS
A. Defined Terms. Certain capitalized terms used
herein shall have the meanings set forth in Annex A hereto.
B. The Contribution. Prior to the Effective Time,
and pursuant to the Distribution Agreement, a form of which is
attached hereto as Exhibit A (the "Distribution Agreement"),
Grace intends to contribute (the "Contribution") its worldwide
packaging business (other than the container business group) to
an indirect, newly-formed Delaware subsidiary of Grace
("Packco").
C. The Distribution. Prior to the Effective Time,
Grace, New Grace (as defined in the Distribution Agreement) and
W. R. Grace & Co.-Conn. ("Grace-Conn.") intend to consummate
the transactions contemplated by the Distribution Agreement,
including the distribution by Grace to the holders of Grace
Common Shares all of the common stock of New Grace (the "Dis-
tribution").
D. The Recapitalization. Immediately prior to the
Effective Time, but following the Distribution, Grace shall be
recapitalized (as defined in the Distribution Agreement, the
"Recapitalization") so that the holders of Grace Common Shares
shall thereafter hold Newco Common Shares and Newco Convertible
Preferred Shares, all as provided in the Distribution Agree-
ment.
E. The Merger. At the Effective Time, the parties
intend to effect a merger of Merger Sub with and into Sealed
Air, with Sealed Air being the surviving corporation (the
"Merger"), the Certificate of Incorporation of Sealed Air shall
be amended to change the name of Sealed Air to a different name
as determined by Sealed Air, and the Certificate of Incorpora-
tion of Grace shall be amended (the "Newco Amendment") to
change the name of Grace to "Sealed Air Corporation" (such cor-
poration, from and after the Effective Time, is sometimes here-
inafter referred to as "Newco") and to effect the other amend-
ments described in Exhibit F hereto.
F. Intention of the Parties. It is the intention of
the parties to this Agreement that, for United States federal
income tax purposes, the Distribution, Recapitalization and
related transactions shall be tax-free to Grace and its share-
holders under the Code and the Merger shall qualify as a "reor-
ganization" within the meaning of Section 368 of the Code and
the Merger will be tax-free under the Code to Grace, Sealed Air
and their respective shareholders.
G. Approvals. The Board of Directors of each party
hereto has determined that this Agreement is in the best inter-
ests of such party and its shareholders and has duly approved
this Agreement and authorized its execution and delivery.
NOW, THEREFORE, in consideration of the premises, and
of the representations, warranties, covenants and agreements
set forth herein, the parties hereto hereby agree as follows:
ARTICLE I
THE REORGANIZATION; CLOSING; EFFECTIVE TIME
SECTION 1.1. The Contribution, the Distribution, and
the Recapitalization. Subject to the terms and conditions of
the Distribution Agreement, prior to the Effective Time, the
parties thereto shall effect the various transactions contem-
plated thereby, including the Contribution, the Distribution
and the Recapitalization.
SECTION 1.2. The Merger. At the Effective Time,
Sealed Air and Merger Sub shall consummate the Merger in which
Merger Sub shall be merged with and into Sealed Air and the
separate corporate existence of Merger Sub shall thereupon
cease. Sealed Air shall be the surviving corporation of the
Merger (the "Surviving Corporation") and shall continue to be
governed by the laws of the State of Delaware.
SECTION 1.3. Effective Time. Provided that this
Agreement shall not have been terminated in accordance with its
terms, as promptly as practicable after all of the conditions
to the Merger shall have been satisfied or waived (or on such
later date as the parties hereto may agree in writing), the
parties hereto shall cause the Merger to be consummated by fil-
ing a certificate of merger (the "Merger Certificate") with the
Secretary of State of the State of Delaware in such form as
required by, and executed in accordance with, Section 251 of
the Delaware General Corporation Law (the "DGCL"). The Merger
shall become effective upon the date and at the time (the "Ef-
fective Time") on which the Merger Certificate has been duly
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filed with the Secretary of State of the State of Delaware, or
at such later date and time as set forth therein.
SECTION 1.4. Closing. The closing of the Reorgani-
zation (the "Closing") shall take place at the offices of Wach-
tell, Lipton, Rosen & Katz, New York, New York, at 10:00 A.M.
on the first business day on which all the conditions set forth
in Article VII can be fulfilled or are waived, or at such other
place and/or time as the parties hereto may agree. The date
upon which the Closing shall occur is herein called the "Clos-
ing Date."
ARTICLE II
CERTIFICATE OF INCORPORATION AND BY-LAWS
SECTION 2.1. Certificates of Incorporation. The
certificate of incorporation of Merger Sub, as in effect at the
Effective Time, shall be the certificate of incorporation of
the Surviving Corporation (the "S.C. Certificate of Incorpora-
tion"), until duly amended in accordance with the terms thereof
and the DGCL. At the Effective Time, the Certificate of Incor-
poration of Grace (the "Grace Certificate of Incorporation")
shall be amended as set forth in the Newco Amendment.
SECTION 2.2. Surviving Corporation By-laws. The By-
laws of Merger Sub, as in effect at the Effective Time, shall
be the By-laws of the Surviving Corporation until duly amended
in accordance with the terms thereof, the S.C. Certificate of
Incorporation and the DGCL.
ARTICLE III
DIRECTORS AND OFFICERS
SECTION 3.1. Newco Directors. Immediately after the
Effective Time, the directors of Newco shall be the seven di-
rectors of Sealed Air immediately prior to the Effective Time
and four independent directors selected by Grace from the ex-
isting Grace Board.
SECTION 3.2. Newco Officers. Immediately after the
Effective Time, the officers of Newco shall be the Chief Execu-
tive Officer of Sealed Air, the Chief Operating Officer of
Sealed Air, the current President of Grace Packaging and such
other officers as may be named in the Joint Proxy Statement or
duly appointed or elected by the Board of Directors of Newco.
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SECTION 3.3. Surviving Corporation Directors. Imme-
diately after the Effective Time, the directors of the Surviv-
ing Corporation shall be as designated by Newco.
SECTION 3.4. Surviving Corporation Officers. Imme-
diately after the Effective Time, the officers of Sealed Air
shall be the officers of the Surviving Corporation.
ARTICLE IV
MERGER CONSIDERATION; CONVERSION OR
CANCELLATION OF SHARES IN THE MERGER
SECTION 4.1. Merger Consideration; Conversion or
Cancellation of Capital Stock of Sealed Air and Merger Sub. At
the Effective Time, by virtue of the Merger and without any
action on the part of the holder of any capital stock of Sealed
Air or Merger Sub:
(a) Each Sealed Air Common Share issued and out-
standing immediately prior to the Effective Time (other
than any Sealed Air Common Share owned by Grace or its
subsidiaries or any Sealed Air subsidiary or held in
Sealed Air's treasury) shall be converted into and become
at the Effective Time one Newco Common Share.
(b) Each Newco Common Share and each Newco Convert-
ible Preferred Share issued and outstanding immediately
prior to the Effective Time shall remain issued and out-
standing and shall be unchanged by the Merger.
(c) All Sealed Air Common Shares shall cease to be
outstanding, shall be cancelled and retired and shall
cease to exist.
(d) Each Sealed Air Common Share issued and out-
standing immediately prior to the Effective Time and owned
by Grace or its subsidiaries or any Sealed Air subsidiary
or held in Sealed Air's treasury shall cease to be out-
standing, shall be cancelled and retired without payment
of any consideration therefor and shall cease to exist.
(e) Each share of Merger Sub Common Stock issued and
outstanding immediately prior to the Effective Time shall
be converted into and become one share of common stock of
the Surviving Corporation.
SECTION 4.2. Exchange of Old Certificates for New
Certificates. (a) Appointment of Exchange Agent. From and
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after the Effective Time until the end of the six-month period
following the Effective Time, Newco shall make available or
cause to be made available to an exchange agent appointed prior
to the Effective Time with the approval of each of Grace and
Sealed Air (the "Exchange Agent") Newco Certificates in amounts
sufficient to allow the Exchange Agent to make all deliveries
of Newco Certificates that are requested by holders of Old
Sealed Air Certificates in exchange for Old Sealed Air Certifi-
cates pursuant to this Article IV. In its discretion, Newco
may elect to evidence ownership of Newco Common Shares through
a book-entry transfer agent, in which case the Exchange Agent
shall deliver, upon compliance by a former Sealed Air share-
holder with the provisions of Section 4.2(b), a book-entry ac-
count statement evidencing the ownership of Newco Common Shares
(or, at the request of a former Sealed Air shareholder, a Newco
Certificate evidencing such ownership). In the event Newco so
elects, references herein to Newco Certificates shall be deemed
to include references to the book-entry account statements re-
lating to the ownership of Newco Common Shares.
(b) Exchange Procedures. Promptly after the Effec-
tive Time, Newco shall cause the Exchange Agent to mail or de-
liver to each person who was, at the Effective Time, a holder
of record of Sealed Air Common Shares a letter of transmittal
(the terms of which shall be mutually agreed upon by the par-
ties hereto prior to the Effective Time) containing instruc-
tions for use by holders of Sealed Air Common Shares who may,
in their discretion, desire to surrender their Old Sealed Air
Certificates in exchange for Newco Certificates pursuant to
this Article IV. Upon surrender to the Exchange Agent of an
Old Sealed Air Certificate for cancellation together with such
letter of transmittal, duly executed and completed in accor-
dance with the instructions thereto, the holder of such Old
Sealed Air Certificate shall be entitled to receive in exchange
therefor a Newco Certificate representing the Newco Common
Shares and the Old Sealed Air Certificate so surrendered shall
forthwith be cancelled. If any Newco Certificate is to be is-
sued in a name other than that in which the Old Sealed Air Cer-
tificate surrendered in exchange therefor is registered, it
shall be a condition of such exchange that the person request-
ing such exchange shall pay any transfer or other taxes re-
quired by reason of the issuance of such in a name other than
that of the registered holder of the Old Sealed Air Certificate
surrendered, or shall establish to the satisfaction of Newco
that any such taxes have been paid or are not applicable. Six
months after the Effective Time, Newco shall be entitled to
cause the Exchange Agent to deliver to it any applicable Newco
Certificates made available to the Exchange Agent that are un-
claimed by the former shareholders of Sealed Air. Any such
former shareholders who have not theretofore exchanged their
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Old Sealed Air Certificates for Newco Certificates pursuant to
this Article IV who desires to do so shall thereafter be en-
titled to look exclusively to Newco and only as general credi-
tors thereof to obtain Newco Certificates to which they become
entitled upon exchange of their Old Sealed Air Certificates
pursuant to this Article IV. Newco shall pay all applicable
charges and expenses in connection with the exchange of Newco
Certificates for Old Sealed Air Certificates as contemplated
hereby.
(c) No Transfers. At or after the Effective Time,
there shall be no transfers on the stock transfer books of the
Surviving Corporation of Sealed Air Common Shares which were
outstanding immediately prior to the Effective Time.
(d) No Liability. If any Old Sealed Air Certificate
shall have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming such Certifi-
cate to be lost, stolen or destroyed and, if required by Newco,
the posting by such person of a bond in such reasonable amount
as Newco may direct as indemnity against any claim that may be
made against it with respect to such Old Sealed Air Certifi-
cate, Newco shall, in exchange for such lost, stolen or de-
stroyed Old Sealed Air Certificates, issue or cause to be is-
sued the Newco Certificate deliverable in respect thereof pur-
suant to this Article IV. No party hereto, nor the Exchange
Agent, shall be liable to any holder of former Sealed Air Com-
mon Shares for any cash delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law.
(e) Withholding Rights. Newco shall be entitled to
deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of former Sealed Air
Common Shares such amounts as may be required to be deducted
and withheld with respect to the making of such payment under
the Code, or under any provision of state, local or foreign tax
law. To the extent that amounts are so withheld and paid over
to the appropriate taxing authority, such withheld amounts
shall be treated for all purposes of this Agreement as having
been paid to the holder of the former Sealed Air Common Shares
in respect of which such deduction and withholding was made.
(f) Sealed Air Contingent Stock and Restricted Stock
Plans. The Sealed Air Stock Plans shall be amended in accor-
dance with their terms and applicable law, with the effect that
as of the Effective Time, among other things, (i) all of the
rights and obligations of Sealed Air under the Sealed Air Stock
Plans, including with respect to awards outstanding at the Ef-
fective Time, shall be rights and obligations of Newco follow-
ing the Effective Time and (ii) each unexercised right granted
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under the Sealed Air Stock Plans to purchase a Sealed Air Com-
mon Share shall constitute a right to purchase a Newco Common
Share in accordance with the terms and conditions of the ap-
plicable Sealed Air Stock Plans, as amended from time to time.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.1. Representations and Warranties of
Grace. Grace hereby represents and warrants to Sealed Air
that, except as set forth in a letter delivered to Sealed Air
simultaneously with the execution and delivery of this Agree-
ment (the "Grace Disclosure Letter"):
(a) Capital Stock. (i) Grace. The authorized cap-
ital stock of Grace consists of 300,010,165 Grace Common
Shares, par value $.01 per share, of which 73,409,932 were
outstanding as of August 1, 1997, and 53,000,000 Grace
Preferred Shares, par value $.01 per share, of which, as
of August 1, 1997, none was outstanding. As of August 1,
1997, 6,224,234 Grace Common Shares were held in the trea-
sury of Grace. As of the Effective Time, there will be no
Grace Common Shares held in the treasury of Grace. As of
August 1, 1997, there were outstanding under the Grace
1996 Stock Incentive Plan, the Grace 1994 Stock Incentive
Plan, the Grace 1989 Stock Incentive Plan, the Grace 1986
Stock Incentive Plan, the Grace 1981 Stock Incentive Plan,
and the Grace 1997 Stock Retainer Plan for Nonemployee
Directors and any other plan for employees or directors of
Grace (collectively, the "Grace Stock Plans") options to
acquire an aggregate of 5,655,954 Grace Common Shares
(subject to adjustment on the terms set forth in the Grace
Stock Plans) at an average exercise price of $34.65 per
share (the "Grace Options"). Such Grace Options include
options to acquire an aggregate of 669,887 Grace Common
Shares at an average exercise price of $40.81 per share
held by Packco Employees (based on information regarding
the identity of such employees as of the date hereof and
as defined in the Benefits Agreement). As of August 1,
1997, there were no shares of capital stock of Grace re-
served for issuance, other than 3,000,000 Grace Preferred
Shares reserved for issuance in connection with the Grace
Rights and 12,189,285 Grace Common Shares reserved for
issuance under the Grace Stock Plans. All outstanding
Grace Common Shares have been duly authorized and validly
issued and are fully paid and nonassessable, and all Grace
Common Shares issuable under the Grace Stock Plans have
been duly authorized and will, upon issuance in accordance
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with the Grace Stock Plans and any agreements thereunder,
be validly issued, fully paid and nonassessable. Except
for the Grace Common Shares, Grace has outstanding no
bonds, debentures, notes or other obligations or securi-
ties the holders of which have the right to vote (or are
convertible or exchangeable into or exercisable for secu-
rities having the right to vote) with the shareholders of
Grace on any matter. Except as set forth above, except
for Grace Common Shares issued after August 1, 1997 pur-
suant to the terms of options, securities or plans re-
ferred to above and except in connection with the Transac-
tion Agreements, there are no shares of capital stock of
Grace authorized, issued or outstanding and there are no
preemptive rights or any outstanding subscriptions, op-
tions, puts, calls, warrants, rights, convertible or ex-
changeable securities or other agreements or commitments
of Grace or any of its subsidiaries of any character re-
lating to the issued or unissued capital stock or other
securities of Grace or any of its subsidiaries (including,
without limitation, the issuance, sale, purchase, redemp-
tion, conversion, exchange, redemption, voting or transfer
thereof). The Newco Common Shares to be issued in the
Recapitalization and the Merger or upon exercise of the
Grace Options after the Recapitalization and the Newco
Preferred Shares to be issued in the Recapitalization
will, upon such issuance, be duly authorized, fully paid,
validly issued and nonassessable.
(ii) Merger Sub. The authorized capital stock of
Merger Sub consists of 1,000 shares of common stock, par
value $.01 per share, of Merger Sub (the "Merger Sub Com-
mon Stock"). As of the date of this Agreement, 1,000
shares of Merger Sub Common Stock are issued and outstand-
ing, all of which are duly authorized, validly issued,
fully paid and nonassessable. Each issued and outstanding
share of Merger Sub Common Stock is owned by Grace, free
and clear of all liens, pledges, security interests,
claims, proxies, preemptive or subscriptive rights and or
other encumbrances or restrictions of any kind. No shares
of Merger Sub Common Stock are held in the treasury of
Merger Sub. There are no options, warrants or other
rights, agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock
of Merger Sub or obligating Grace or any of its subsidiar-
ies to issue or sell any shares of capital stock, or other
equity interest in, Merger Sub. As of the Effective Time,
all of the outstanding shares of capital stock of the Sur-
viving Corporation will be duly authorized, validly is-
sued, fully paid and nonassessable, and will be owned by
-8-
Grace, free and clear of all liens, pledges, security in-
terests, claims, proxies, preemptive or subscriptive
rights and or other encumbrances or restrictions of any
kind. Merger Sub was formed for the purpose of effecting
the Merger and has no other business activity.
(b) Corporate Organization and Qualification. Each
of Grace and Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of
Delaware and is in good standing (if recognized in such
jurisdiction, or, if not, duly qualified) as a foreign
corporation in each jurisdiction where the properties
owned, leased or operated, or the business conducted, by
it or its subsidiaries require such qualification, except
for any such failure so to qualify or be in good standing
which, when taken together with all other such failures,
is not reasonably likely to have a Material Adverse Effect
with respect to Grace. Each of Grace and Merger Sub has
the requisite corporate power and authority and all mate-
rial governmental licenses and approvals to carry on its
businesses as they are now being conducted. Grace has
made available to Sealed Air a complete and correct copy
of the Certificate of Incorporation and By-laws of Grace
and Merger Sub, each as amended to date and currently in
full force and effect.
(c) Corporate Authority. Subject only to the re-
ceipt of the requisite approval of its shareholders neces-
sary to consummate the Reorganization, each of Grace,
Merger Sub and each other subsidiary of Grace that is or
will be a party to a Transaction Agreement has the requi-
site corporate power and authority and has taken all cor-
porate action necessary in order to execute, deliver and
perform each Transaction Agreement to which it is a party
and to consummate the transactions contemplated hereby and
thereby, including, without limitation, the approval of
the Grace Board and the resolution of the Grace Board to
recommend, subject to their fiduciary duties, the trans-
actions contemplated hereby and thereby for approval by
Grace shareholders. Each Transaction Agreement to which
Grace, Merger Sub or any of Grace's subsidiaries is a
party is, or when executed and delivered shall be, a valid
and binding agreement of such person enforceable in ac-
cordance with its terms. The affirmative votes of the
holders of a majority of the outstanding Grace Common
Shares in favor of the Merger and related transactions
(including the amendments to the Grace Certificate of In-
corporation) and the Distribution are the only votes of
the holders of Grace's capital stock necessary in connec-
tion with the consummation of the Reorganization.
-9-
(d) Governmental Filings; No Violations. (i) Other
than as may be required under the HSR Act and similar
statutes in other countries, the Exchange Act, the Securi-
ties Act, state securities laws, no notices, reports or
other filings are required to be made by Grace or any
Grace subsidiary with, nor are any consents, registra-
tions, approvals, permits or authorizations required to be
obtained by it or any such subsidiary from, any govern-
mental or regulatory authority, agency, court, commission
or other entity, domestic or foreign ("Governmental Enti-
ty"), in connection with the execution, delivery or per-
formance of each Transaction Agreement to which it or any
such subsidiary is a party and the consummation by it or
any such subsidiary of the transactions contemplated
hereby and thereby, except for such matters as would not,
individually or in the aggregate, have a Material Adverse
Effect with respect to the New Grace Group or the Packco
Group or prevent or materially delay or enable any person
to enjoin consummation of the transactions contemplated
hereby and thereby.
(ii) The execution, delivery and performance by
Grace or any Grace subsidiary of each Transaction Agree-
ment to which it is a party does not or will not, and the
consummation by it of any of the transactions contemplated
hereby and thereby will not, constitute or result in (with
or without the giving of notice, the lapse of time or
both) (A) a breach or violation of, or a default under,
its certificate of incorporation or by-laws or comparable
governing instruments, or (B) a breach or violation of, or
a default under, or an acceleration or termination of or
change in the rights or obligations of any party under, or
the creation of a lien, pledge, security interest or other
encumbrance on any assets pursuant to, any provision of
any agreement, lease, contract, note, mortgage, indenture,
arrangement or other obligation or commitment ("Con-
tracts") of it or any of its subsidiaries or any law,
rule, ordinance or regulation or judgment, decree, order,
award or governmental or non-governmental permit or li-
cense to which it or any of its subsidiaries is subject,
except, in the case of clause (B) above, for such breach-
es, violations, defaults, accelerations or changes that
are disclosed in the Grace Disclosure Letter or, individu-
ally or in the aggregate, are not reasonably likely to
have a Material Adverse Effect with respect to the New
Grace Group or the Packco Group or prevent or materially
delay or enable any person to enjoin consummation of the
Reorganization.
-10-
(e) SEC Documents; Financial Statements; No Undis-
closed Liabilities. (i) Grace has filed all forms, re-
ports and documents required to be filed by it under the
Exchange Act or the Securities Act since December 31,
1994. As of its filing date, each SEC Document filed, and
each SEC Document that will be filed by it or its subsid-
iaries prior to the Effective Time, as amended or supple-
mented, if applicable, pursuant to the Exchange Act or the
Securities Act (A) complied or will comply in all material
respects with the applicable requirements of the Exchange
Act or the Securities Act and (B) did not or will not con-
tain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the
statements made therein, in the light of the circumstances
under which they were made, not misleading. Each of
Grace's consolidated balance sheets included in or incor-
porated by reference into its SEC Documents (including the
related notes and schedules) fairly presents in all mate-
rial respects the consolidated financial position of it
and its subsidiaries as of the dates set forth therein and
each of the consolidated statements of operations, cash
flows and shareholders' equity included in or incorporated
by reference into its SEC Documents (including any related
notes and schedules) fairly presents in all material re-
spects the consolidated results of operations, cash flows
and retained earnings, as the case may be, of it and its
subsidiaries for the periods set forth therein (subject,
in the case of unaudited statements, to normal year-end
audit adjustments), in each case in accordance with US
GAAP (applied on a consistent basis).
(ii) Except as disclosed in its SEC Documents filed
with the SEC prior to the date hereof, neither Grace nor
any of its subsidiaries has any liabilities of any kind
whatsoever, whether or not accrued, contingent or other-
wise, that, individually or in the aggregate, are reason-
ably likely to have a Material Adverse Effect with respect
to the Packco Group or the New Grace Group.
(f) Absence of Certain Events and Changes. Except
(i) as disclosed in its SEC Documents filed with the SEC
prior to the date hereof, and (ii) as contemplated by the
Transaction Agreements, since December 31, 1996, Grace and
its subsidiaries have conducted their respective busi-
nesses only in the ordinary and usual course of such busi-
nesses, and there has not been any change or development
or combination of changes or developments (including any
worsening of any condition currently existing) which, in-
dividually or in the aggregate, is reasonably likely to
-11-
result in a Material Adverse Effect with respect to the
New Grace Group.
(g) Takeover Statutes; Rights Plan. The execution,
delivery and performance of this Agreement and consumma-
tion of the transactions contemplated hereby will not
cause to be applicable to Grace, Section 203 of the DGCL
or any similar provision (a "Takeover Statute") (after
giving effect to any actions that will be taken prior to
the Effective Time). The Grace Board has taken, or prior
to the Effective Time will take, all requisite action in
order to amend the Grace Rights Agreement so as to render
the Grace Rights inapplicable to the Merger, the Recapi-
talization, and the Distribution and to terminate or re-
deem the Grace Rights at or prior to the Effective Time.
(h) Brokers and Finders. Neither Grace nor any of
its subsidiaries or any of their respective officers, di-
rectors or employees has employed any broker or finder or
incurred any liability for any brokerage fees, commissions
or finders' fees in connection with the transactions con-
templated herein, except pursuant to arrangements dis-
closed in writing to the other parties hereto prior to the
date hereof.
(i) Contribution. The Packco Assets represent the
worldwide Packaging Business of Grace and its subsidiaries
and all of their assets used or held for use in the con-
duct of Grace's worldwide Packaging Business as presently
conducted or as conducted at the Effective Time, as the
case may be.
(j) Tax Matters. Except as reflected in its SEC
Documents filed with the SEC prior to the date hereof and
except for such matters that, individually or in the ag-
gregate, are not reasonably likely to have a Material Ad-
verse Effect with respect to the Packco Group or the New
Grace Group: (i) all federal, state, local and foreign
tax returns required to be filed by or on behalf of Grace
or any of its subsidiaries have been timely filed, or re-
quests for extensions have been timely filed and have been
granted and have not expired, and all such filed returns
are complete and accurate in all respects; (ii) all taxes
shown as due and payable on returns filed by Grace or any
of its subsidiaries have been paid in full; (iii) there is
no outstanding audit examination, deficiency or refund
litigation with respect to any taxes of Grace; (iv) all
taxes, interest, additions, and penalties due with respect
to completed and settled examinations or concluded litiga-
tion relating to Grace have been paid in full or have been
-12-
recorded as a liability on its balance sheet (in accor-
dance with US GAAP); (v) neither Grace nor any of its sub-
sidiaries is a party to any tax sharing or similar agree-
ment pursuant to which it or any of its subsidiaries has
indemnified another party with respect to taxes; and (vi)
neither Grace nor any of its subsidiaries has waived any
applicable statute of limitations with respect to any
taxes. At the Effective Time, the representations set
forth in the Tax Matters Certificates of Grace-Conn.,
substantially in the form of Exhibit B (the "Grace Tax
Matters Certificate"), will be true and correct in all re-
spects, and such representations are hereby incorporated
herein by reference with the same effect as if set forth
herein in their entirety.
(k) Disclosure. The representations and warranties
of Grace contained in this Agreement or in any written
instrument, exhibit or certificate furnished or to be fur-
nished by Grace to Sealed Air pursuant hereto or in con-
nection herewith, do not contain any untrue statement of a
material fact or omit to state a material fact necessary
in order to make the statements contained therein not mis-
leading.
SECTION 5.2. Representations and Warranties for the
Packaging Business. Grace hereby represents and warrants to
Sealed Air that, except as set forth in a letter delivered to
Sealed Air simultaneously with the execution and delivery of
this Agreement (the "Packaging Business Disclosure Letter"):
(a) Corporate Organization and Qualification. At
the Effective Time, Packco and each Packco Subsidiary will
be duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization and
will be in good standing (if recognized in such juris-
diction, or, if not, duly qualified) as a foreign corpora-
tion in each jurisdiction where the properties owned,
leased or operated, or the business conducted, by Packco
or such Packco Subsidiary require such qualification, ex-
cept for any such failure so to qualify or be in good
standing which, when taken together with all other such
failures, is not reasonably likely to have a Material Ad-
verse Effect with respect to the Packco Group or the Pack-
aging Business. At the Effective Time, Packco and each
Packco Subsidiary will have the requisite corporate power
and authority and all material governmental licenses and
approvals to carry on its business as now being conducted.
(b) Corporate Authority. At the Effective Time,
Packco and each Packco Subsidiary will have the requisite
-13-
corporate power and authority and will have taken all cor-
porate action necessary in order to consummate the trans-
actions contemplated hereby and by the other Transaction
Agreements.
(c) Capitalization. All issued and outstanding
shares of capital stock of Packco and each Packco Subsid-
iary (except for an immaterial number of shares held by
officers and directors of Grace and its subsidiaries as
required by applicable law) will, as of the Effective
Time, be owned of record and beneficially by Grace, Packco
or another Packco Subsidiary, free and clear of all liens,
pledges, security interests, claims, proxies, preemptive
or subscriptive rights or other encumbrances or restric-
tions of any kind. There are no options, warrants or
other rights, agreements, arrangements or commitments of
any character relating to the issued or unissued capital
stock of Packco or any Packco Subsidiary or obligating
Packco or any Packco Subsidiary to issue or sell any
shares of capital stock of, or other equity interests in,
Packco or any Packco Subsidiary. There are no outstanding
contractual obligations of Packco or any Packco Subsidiary
to repurchase, redeem or otherwise acquire any capital
stock of Packco or any Packco Subsidiary or to provide
funds to make any investment (in the form of a loan, capi-
tal contribution or otherwise) in Packco or any Packco
Subsidiary or any other entity. As of the Effective Time,
each of the outstanding shares of capital stock of Packco,
and each Packco Subsidiary will be duly authorized, val-
idly issued, fully paid and nonassessable.
(d) Financial Statements; No Undisclosed Liabili-
ties. (i) Included in the Packaging Business Disclosure
Letter are unaudited special purpose consolidated and com-
bined balance sheets as of December 31, 1995 and 1996 and
June 30, 1997, and special purpose consolidated and com-
bined statements of earnings before interest and taxes for
the three years ended December 31, 1996 and the six months
ended June 30, 1997 for the Packaging Business (such fi-
nancial statements, the "Packaging Business Disclosure
Letter Financial Statements," and the balance sheet as of
December 31, 1996 included therein, the "Packaging Busi-
ness Disclosure Letter Balance Sheet"). The balance
sheets included in the Packaging Business Disclosure
Letter Financial Statements (including and subject to the
Basis of Presentation) fairly present in all material
respects, and the special purpose consolidated and com-
bined balance sheet to be included in the Packaging Busi-
ness Financial Statements (including any related notes and
schedules) shall fairly present in all material respects,
-14-
the consolidated financial position of the Packaging Busi-
ness, in each case as of the dates set forth therein; and
each of the special purpose consolidated and combined
statements of earnings before interest and taxes included
in the Packaging Business Disclosure Letter Financial
Statements (including and subject to the Basis of
Presentation) fairly presents in all material respects,
and each consolidated statement of operations, cash flows
and shareholders' equity to be included in the Packaging
Business Financial Statements (including any related notes
and schedules) shall fairly present in all material re-
spects, the consolidated results of operations, cash flows
and retained earnings, as the case may be, of the Pack-
aging Business for the periods set forth therein, in each
case in accordance with US GAAP applied on a consistent
basis (subject, in the case of interim financial state-
ments, to normal year-end adjustments).
(ii) Except as disclosed on the Packaging Business
Disclosure Letter Balance Sheet or in the Basis of Presen-
tation thereto, the Packco Group does not have any li-
abilities of any kind whatsoever, whether or not accrued,
contingent or otherwise, that, individually or in the ag-
gregate, are reasonably likely to have a Material Adverse
Effect with respect to the Packco Group or the Packaging
Business (other than liabilities to be incurred in connec-
tion with the Grace Credit Agreement).
(e) Absence of Certain Events and Changes. Except
(i) as disclosed in the Packaging Business Disclosure Let-
ter, and (ii) as contemplated by the Transaction Agree-
ments, since December 31, 1996, the Packaging Business has
been conducted only in the ordinary and usual course of
business and there has not been any change or development
or combination of changes or developments (including any
worsening of any condition currently existing) which, in-
dividually or in the aggregate, is reasonably likely to
result in a Material Adverse Effect with respect to the
Packco Group or the Packaging Business.
(f) Compliance with Laws. Grace and its subsidiar-
ies (with respect to the Packaging Business) have complied
with all applicable federal, state, local and foreign
statutes, laws, regulations, ordinances, rules, judgments,
orders or decrees applicable thereto, except where the
failure to comply is not reasonably likely, individually
and in the aggregate, to have a Material Adverse Effect
with respect to the Packco Group or the Packaging Busi-
ness. Grace and its subsidiaries (with respect to the
-15-
Packaging Business) have, and immediately after the Con-
tribution will have, all permits, licenses, certificates
of authority, orders, and approvals of, and has and will
have made all filings, applications, and registrations
with, federal, state, local, and foreign Governmental En-
tities that are required in order to permit the Packco
Group to carry on the Packaging Business as it is pres-
ently conducted by Grace and its subsidiaries, except for
such permits, licenses, certificates, orders, filings, ap-
plications and registrations, the failure to have or make
which, individually or in the aggregate, are not reason-
ably likely to have a Material Adverse Effect with respect
to the Packco Group or the Packaging Business.
(g) Title to Assets. Effective as of the Distribu-
tion Date and subject to the provisions of Article II of
the Distribution Agreement or as disclosed in the Packag-
ing Business Disclosure Letter, one or more members of the
Packco Group will:
(i) have good and valid title to the Packco
Assets (as defined in the Distribution Agreement)
(including, without limitation, all assets reflected
on the Packaging Business Disclosure Letter Balance
Sheet or Packco Assets acquired after December 31,
1996, except for such assets as were sold since De-
cember 31, 1996 in the ordinary course of business
and not in violation of this Agreement), free and
clear of any Liens; and
(ii) own or have adequate rights to use all as-
sets used or held for use in the Packaging Business
as conducted by Grace and its subsidiaries as of the
Distribution Date, and such rights are sufficient to
permit the Packco Group to continue to operate the
Packaging Business as conducted by Grace and its sub-
sidiaries as of the Distribution Date;
in each case except for such matters as would not, indi-
vidually or in the aggregate, have a Material Adverse Ef-
fect on the Packaging Business or the Packco Group. As
used herein, "Lien" shall mean, with respect to any asset,
any mortgage, lien, pledge, charge, security interest,
encumbrance or other adverse claim of any kind in respect
of such asset.
(h) Litigation. There are no civil, criminal or
administrative actions, suits, claims, hearings or pro-
ceedings pending or, to the knowledge of its executive
officers, threatened, or investigations pending, against
-16-
Grace or its subsidiaries with respect to the Packaging
Business, Packco or any Packco Subsidiary that, individu-
ally or in the aggregate, are reasonably likely to have a
Material Adverse Effect with respect to the Packco Group
or the Packaging Business. There are no judgments or out-
standing orders, writs, injunctions, decrees, stipulations
or awards (whether rendered or issued by a court or Gov-
ernmental Entity, or by arbitration) against Grace or its
subsidiaries with respect to the Packaging Business, Pack-
co or any Packco Subsidiary, or any of their respective
properties or businesses, which are reasonably likely,
individually or in the aggregate, to have a Material
Adverse Effect with respect to the Packco Group or the
Packaging Business.
(i) Taxes. Except as reflected in Grace's SEC Docu-
ments filed with the SEC prior to the date hereof and ex-
cept for such matters that, individually or in the aggre-
gate, are not reasonably likely to have a Material Adverse
Effect with respect to the Packco Group or the Packaging
Business: (i) all federal, state, local and foreign tax
returns required to be filed with respect to the Packaging
Business, Packco or any Packco Subsidiary have been timely
filed or requests for extensions have been timely filed
and any such extension shall have been granted and not
expired, and all such filed returns are complete and accu-
rate in all material respects; (ii) all taxes shown as due
and payable on returns filed with respect to the Packaging
Business, Packco or any Packco Subsidiary have been paid
in full; (iii) there is no outstanding audit examination,
deficiency or refund litigation with respect to any taxes
with respect to the Packaging Business, Packco or any
Packco Subsidiary; (iv) all taxes, interest, additions,
and penalties due with respect to completed and settled
examinations or concluded litigation with respect to the
Packaging Business, Packco or any Packco Subsidiary have
been paid in full or have been recorded as a liability on
the Packaging Business Disclosure Letter Balance Sheet (in
accordance with the Basis of Presentation set forth there-
in); (v) neither Grace, Packco nor any Packco Subsidiary
is a party to any tax sharing or similar agreement pursu-
ant to which the Packaging Business has indemnified an-
other party with respect to taxes; and (vi) neither Grace
(with respect to the Packaging Business), Packco nor any
of the Packco Subsidiaries has waived any applicable stat-
ute of limitations with respect to any taxes.
(j) Environmental Matters. Except as disclosed in
the Grace SEC Documents filed prior to the date hereof and
-17-
except for such matters that, individually and in the ag-
gregate, are not reasonably likely to have a Material Ad-
verse Effect with respect to the Packco Group or the Pack-
aging Business, (i) Grace and its subsidiaries, with re-
spect to the Packaging Business, Packco and the Packco
Subsidiaries are and have been in compliance with all ap-
plicable Environmental Laws; (ii) Grace and its subsidiar-
ies, with respect to the Packaging Business, Packco and
the Packco Subsidiaries hold and have held all permits
under any Environmental Law required for the operation of
the Packaging Business as presently conducted and are in
compliance with the terms of such permits; and (iii) nei-
ther Grace nor any of its subsidiaries, with respect to
the Packaging Business, Packco, nor any of the Packco Sub-
sidiaries has received any outstanding written notices,
demand letters, claims or requests for information, nor
has any complaint been filed, penalty assessed, nor is any
investigation, action, claim, suit, proceeding or review
pending (with respect to which Grace has been provided
notice), or, to the knowledge of the executive officers of
Grace, threatened by any Governmental Entity or any third
party that assert that Grace or any of its subsidiaries,
with respect to the Packaging Business, Packco, or any of
the Packco Subsidiaries may be in violation of, or liable
under, any Environmental Law (including as an indemnitor
in connection with any threatened or asserted claim by any
third party indemnitee, which indemnity claim may be a
Packco Liability (as defined in the Distribution Agree-
ment)), and none of Grace or any of its subsidiaries, with
respect to the Packaging Business, Packco, the Packco Sub-
sidiaries or its properties is subject to any citation,
court order, administrative order or decree arising under
any Environmental Law. None of the real property owned or
leased by Grace (with respect to the Packaging Business)
or any of its subsidiaries (with respect to any Packco
Asset), Packco or any Packco Subsidiary is listed on, or,
to the knowledge of the executive officers of Grace, pro-
posed for listing on the "National Priorities List" under
CERCLA, or any similar state, local or foreign list of
sites requiring investigation or cleanup.
(k) Contracts and Commitments. Except as set forth
in the Packaging Business Disclosure Letter, and except
for matters that would not, individually or in the aggre-
gate, have a Material Adverse Effect with respect to the
Packaging Business or the Packco Group, (i) Grace, Packco
and the Packco Subsidiaries will not, as of the Effective
Time, be parties to or bound by any Contract that materi-
ally limits the ability of Grace after the Merger, Packco,
-18-
the Surviving Corporation or any of their respective sub-
sidiaries to compete in any line of business or with any
person or in any geographic area, in each case with re-
spect to the Packaging Business or the business of Sealed
Air as presently conducted; (ii) neither Grace nor any of
its subsidiaries is (with or without the lapse of time or
the giving of notice, or both) in breach or default in any
material respect under any Contract that is material to
the operation of the Packaging Business; (iii) to the
knowledge of the executive officers of Grace, none of the
other parties to any Contract that is material to the op-
eration of the Packaging Business is (with or without the
lapse of time or the giving of notice, or both) in breach
or default in any material respect thereunder and (iv)
neither Grace nor any of its subsidiaries has received any
written notice of the intention of any party to terminate
any Contract whether as a termination for convenience or
for default of Grace or any of its subsidiaries thereun-
der.
(l) Employee Benefit Plans. (i) The Packaging
Business Disclosure Letter includes a complete list of all
material employee benefit plans, programs, policies, prac-
tices and other arrangements (regardless of whether they
are funded or unfunded or foreign or domestic, but exclud-
ing any such plans, programs, policies, practices and ar-
rangements mandated or sponsored by a Governmental Entity
with respect to foreign Packco Employees) providing bene-
fits to any current or former Packco Employee or benefi-
ciary or dependent thereof, sponsored or maintained by
Grace or any of its subsidiaries, with respect to the
Packaging Business, Packco or any of the Packco Subsidiar-
ies, or to which Grace or any of its subsidiaries, with
respect to the Packaging Business, Packco or any of the
Packco Subsidiaries contributes or is obligated to con-
tribute (the "Packaging Business Plans"). Without
limiting the generality of the foregoing, the term
"Packaging Business Plans" includes all employee welfare
benefit plans within the meaning of Section 3(1) of ERISA
and all employee pension benefit plans within the meaning
of Section 3(2) of ERISA; provided, that such list may not
be complete as of the date hereof as to Packaging Business
Plans providing benefits to foreign Packco Employees, but
such list shall be updated so as to be complete as to such
Packaging Business Plans promptly following the date here-
of. The Packaging Business Disclosure Letter also spe-
cifically identifies those Packaging Business Plans that
are sponsored, maintained or contributed to exclusively by
Packco or any of the Packco Subsidiaries exclusively for
-19-
the benefit of Packco Employees (the "Packaging Business-
Only Plans").
(ii) With respect to each Packaging Business Plan
providing benefits to U.S. Packco Employees, Grace has
delivered or made available to Sealed Air and, with re-
spect to each Packaging Business Plan providing benefits
to foreign Packco Employees, promptly following the date
hereof, Grace will deliver or make available to Sealed
Air, a true, correct and complete copy of each of the fol-
lowing: (A) all plan documents and the current summary
plan descriptions (if any); (B) all benefit schedules,
trust agreements and insurance contracts and other funding
vehicles, if any; (C) the most recent Annual Report (Form
5500 Series) and accompanying schedule, if any, or any
similar filing made with any foreign authority; (D) the
most recent annual financial report, if any; (E) the most
recent actuarial report, if any; and (F) the most recent
determination letter from the IRS or similar document is-
sued by any other taxing authority, if any. Except as
specifically provided in the foregoing documents delivered
or made available to Sealed Air, there are no amendments
to any Packaging Business Plan that have been adopted or
approved, nor has Grace or Packco undertaken to make any
such amendments.
(iii) The Packaging Business Disclosure Letter identi-
fies each Packaging Business Plan that is intended to be a
"qualified plan" within the meaning of Section 401(a) of
the Code (the "Packco Qualified Plans"). The IRS has is-
sued a favorable determination letter with respect to each
Packco Qualified Plan, in each case that has not been re-
voked, or an application for such a letter has been or
will be filed before the expiration of the remedial amend-
ment period, and Grace knows of no existing circumstances
nor any events that have occurred that could adversely
affect the qualified status of any such plan or the re-
lated trust. No Packaging Business-Only Plan is intended
to meet the requirements of Section 501(c)(9) of the Code.
(iv) Grace and its subsidiaries and Packco and the
Packco Subsidiaries have complied, and are now in compli-
ance, in all material respects, with all provisions of
ERISA, the Code and all other laws and regulations appli-
cable to the Packaging Business-Only Plans. There is not
now, nor do any circumstances exist that could give rise
-20-
to, any requirement for the posting of security with re-
spect to any Packaging Business-Only Plan or the imposi-
tion of any lien on the assets of Packco or a Packco Sub-
sidiary under ERISA or the Code. No prohibited transac-
tion (as defined in ERISA) has occurred with respect to
any Packaging Business-Only Plan.
(v) No Packaging Business-Only Plan is a "multi-
employer plan" within the meaning of Section 4001(a)(3) of
ERISA (a "Multiemployer Plan") or a plan that has two or
more contributing sponsors at least two of whom are not
under common control within the meaning of Section 4063 of
ERISA (a "Multiple Employer Plan"). There does not now
exist, nor do any circumstances exist that could result
in, any liability under (A) Title IV of ERISA, (B) Section
302 of ERISA, (C) Sections 412 and 4971 of the Code, (D)
the continuation coverage requirements of Section 601 et
seq. of ERISA and Section 4980B of the Code, or (E) cor-
responding or similar provisions of foreign laws or regu-
lations, that would be a liability of Newco, Packco or a
Packco Subsidiary following the Effective Time, other than
such liabilities that arise solely out of, or relate sole-
ly to, the Packaging Business-Only Plans.
(vi) All contributions required to be made to any
Packaging Business Plan by applicable law or regulation or
by any plan document or other contractual undertaking, and
all premiums due or payable with respect to insurance pol-
icies funding any Packaging Business Plan, have been time-
ly made or paid in full. Without limiting the generality
of the foregoing, all contributions to the Hourly SIP and
the Salaried SIP (each as defined in the Benefits Agree-
ment) have been timely made in accordance with past prac-
tice.
(vii) All Packaging Business Plans covering foreign
Packco Employees comply with applicable local law, except
when the failure to so comply, individually or in the ag-
gregate, would not have a Material Adverse Effect with
respect to the Packco Group or the Packaging Business.
(viii) Neither the execution and delivery of this
Agreement nor the consummation of the transactions contem-
plated hereby will (either alone or in conjunction with
any other event) result in, cause the accelerated vesting
or delivery of, or increase the amount or value of, any
payment or benefit to any Packco Employee. Without limit-
ing the generality of the foregoing, no amount paid or
payable in connection with the transactions contemplated
hereby (either solely as a result thereof or as a result
-21-
of such transactions in conjunction with any other event)
will be an "excess parachute payment" within the meaning
of Section 280G of the Code.
(ix) To the knowledge of the executive officers of
Grace, Grace has, and, after the Effective Time, Packco
will have, the right to amend or terminate any Packaging
Business Plan to the extent it provides post-retirement
medical and life insurance benefits under U.S. Welfare
Plans (as defined in the Benefits Agreement), other than
such benefits that the New Grace Group is responsible for
providing pursuant to the Benefits Agreement, and except
as may be required by any applicable collective bargaining
agreement.
(m) Trademarks, Patents and Copyrights. Grace,
Packco or a Packco Subsidiary owns or possesses adequate
licenses or other rights to use all patents, trademarks,
trade names, service marks, copyrights, licenses and prod-
uct licenses or registrations (including applications for
any of the foregoing), technology, know-how, tangible or
intangible proprietary intellectual property rights, in-
formation or material (whether conceived, reduced to prac-
tice or under development), formulae, inventions and new
and investigational applications (including all options or
other rights to acquire any of the foregoing) as are nec-
essary, used or held for use in connection with the Pack-
aging Business (the "Packaging Business Intellectual Prop-
erty"), the lack of which would reasonably be expected to
have a Material Adverse Effect with respect to the Packco
Group or the Packaging Business. None of Grace, Packco or
any of its subsidiaries has received any adverse claim by
any other person with respect to the Packaging Business
Intellectual Property or is aware, to the knowledge of the
executive officers of Grace, Packco and the Packco Subsid-
iaries, of any infringements with respect thereto, and
there is no infringement by Grace, Packco or any Packco
Subsidiary of the intellectual property rights of others,
which, in each case, would, individually or in the aggre-
gate, reasonably be expected to have a Material Adverse
Effect with respect to the Packco Group or the Packco
Business. Except for matters that would not, individually
or in the aggregate, have a Material Adverse Effect with
respect to the Packaging Business, immediately after the
Contribution, Grace, Packco or a Packco Subsidiary will
own or possess adequate licenses or other rights to use
(subject to the terms of the Distribution Agreement, on
substantially the same basis as currently owned or pos-
sessed by Grace and its Subsidiaries) all of the Packaging
Business Intellectual Property. Except as contemplated by
-22-
Section 2.01(d) of the Distribution Agreement, there are
no Contracts, agreements or licenses pursuant to which
Grace or any subsidiaries of Grace which are not a member
of the Packco Group will retain rights or interests of any
kind in or affecting the Packaging Business Intellectual
Property.
SECTION 5.3. Representations and Warranties of
Sealed Air. Sealed Air hereby represents and warrants to Grace
that, except as set forth in a letter delivered to Grace simul-
taneously with the execution and delivery of this Agreement
(the "Sealed Air Disclosure Letter"):
(a) Capital Stock. The authorized capital stock of
Sealed Air consists of 125,000,000 Sealed Air Common
Shares, par value $.01 per share, of which 42,624,246 were
outstanding as of August 14, 1997, and 1,000,000 Sealed
Air Preferred Shares, no par value, none of which was out-
standing as of such date. 157,858 Sealed Air Common
Shares were held in treasury by Sealed Air and its subsid-
iaries as of August 14, 1997. As of August 14, 1997,
there were outstanding under the Sealed Air Amended Con-
tingent Stock Plan and the Sealed Air Amended Restricted
Stock Plan for Non-Employee Directors and any other plan
for employees or directors of Sealed Air (collectively,
the "Sealed Air Stock Plans") no awards granting rights to
acquire Sealed Air Common Shares (subject to adjustment on
the terms set forth in the Sealed Air Stock Plans). As of
August 14, 1997, there are no shares of capital stock of
Sealed Air reserved for issuance, other than 547,050
Sealed Air Common Shares reserved for issuance pursuant to
the Sealed Air Stock Plans. All outstanding Sealed Air
Common Shares have been duly authorized and validly issued
and are fully paid and nonassessable. Except for the
Sealed Air Common Shares, Sealed Air has outstanding no
bonds, debentures, notes or other obligations the holders
of which have the right to vote (or are convertible or ex-
changeable into or exercisable for securities having the
right to vote) with the shareholders of Sealed Air on any
matter. Each of the outstanding shares of capital stock
of each of Sealed Air's subsidiaries has been duly autho-
rized and validly issued and is fully paid and nonassess-
able and, except for an immaterial number of shares held
by officers and directors of Sealed Air and its subsid-
iaries as required by applicable law, is owned, either
directly or indirectly, by Sealed Air free and clear of
all liens, pledges, security interests, claims, proxies,
preemptive or subscriptive rights or other encumbrances or
restrictions of any kind. Except as set forth above and
-23-
except for awards and Sealed Air Common Shares issued af-
ter August 14, 1997 pursuant to the terms of the Sealed
Air Profit Sharing Plan in accordance with Section 6.1(c),
there are no shares of capital stock of Sealed Air autho-
rized, issued or outstanding and there are no preemptive
rights or any outstanding subscriptions, options, puts,
calls, warrants, rights, convertible or exchangeable se-
curities or other agreements or commitments of Sealed Air
or any of its subsidiaries of any character relating to
the issued or unissued capital stock or other securities
of Sealed Air (including, without limitation, the issu-
ance, sale, purchase, redemption, conversion, exchange,
redemption, voting or transfer thereof). As of the
Effective Time, the number of Sealed Air Common Shares
outstanding (including any awards pursuant to the Sealed
Air Stock Plans) shall not exceed the number outstanding
as of August 14, 1997, except to the extent that such
excess is reflected in an adjustment to the Per Share
Common Consideration (as defined in the Distribution
Agreement) as provided in the definition thereof.
(b) Corporate Organization and Qualification. Each
of Sealed Air and its subsidiaries is a corporation duly
organized, validly existing and in good standing under the
laws of its or such subsidiary's jurisdiction of organiza-
tion and is in good standing (if recognized in such juris-
diction, or, if not, duly qualified) as a foreign corpo-
ration in each jurisdiction where the properties owned,
leased or operated, or the business conducted, by it or
such subsidiary require such qualification, except for any
such failure so to qualify or be in good standing which,
when taken together with all other such failures, is not
reasonably likely to have a Material Adverse Effect with
respect to Sealed Air. Each of Sealed Air and its subsid-
iaries has the requisite corporate power and authority and
all material governmental licenses and approvals to carry
on its businesses as they are now being conducted. Sealed
Air has made available to the other parties hereto a com-
plete and correct copy of its Certificate of Incorporation
and By-laws, each as amended to date and currently in full
force and effect.
(c) Corporate Authority. Subject only to the re-
ceipt of the requisite approval of its shareholders to
consummate the Merger, Sealed Air has the requisite cor-
porate power and authority and has taken all corporate
action necessary in order to execute, deliver and perform
each Transaction Agreement to which it is a party and to
consummate the transactions contemplated hereby and there-
by, including, without limitation, the approval of the
-24-
Sealed Air Board and the resolution of the Sealed Air
Board to recommend, subject to their fiduciary duties, the
transactions contemplated hereby and thereby for approval
by Sealed Air shareholders. Each Transaction Agreement to
which Sealed Air is a party is, or when executed and de-
livered shall be, a valid and binding agreement of Sealed
Air enforceable in accordance with its terms. The affir-
mative vote of the holders of a majority of outstanding
Sealed Air Common Shares in favor of the Merger is the
only vote of the holders of Sealed Air's capital stock
necessary in connection with the consummation of the Merg-
er.
(d) Governmental Filings; No Violations. (i) Other
than as may be required under the HSR Act and similar
statutes in other countries, the Exchange Act, the Securi-
ties Act, and state securities laws, no notices, reports
or other filings are required to be made by Sealed Air or
any of its subsidiaries with, nor are any consents, regis-
trations, approvals, permits or authorizations required to
be obtained by it or any such subsidiary from, any Govern-
mental Entity in connection with the execution, delivery
or performance of each Transaction Agreement to which
Sealed Air is a party and the consummation by Sealed Air
of the transactions contemplated hereby and thereby, ex-
cept for such matters as would not, individually or in the
aggregate, have a Material Adverse Effect with respect to
Sealed Air or prevent or materially delay or enable any
person to enjoin consummation of the transactions contem-
plated hereby and thereby.
(ii) The execution, delivery and performance by
Sealed Air of each Transaction Agreement to which it is a
party does not or will not, and the consummation by it of
any of the transactions contemplated hereby and thereby
will not, constitute or result in (with or without the
giving of notice, the lapse of time or both) (A) a breach
or violation of, or a default under, its Certificate of
Incorporation or By-laws, or (B) a breach or violation of,
or a default under, or an acceleration or termination of
or change in the rights or obligations of any party under,
or the creation of a lien, pledge, security interest or
other encumbrance on any assets pursuant to, any provision
of any Contracts of it or any of its subsidiaries or any
law, rule, ordinance or regulation or judgment, decree,
order, award or governmental or non-governmental permit or
license to which it or any of its subsidiaries is subject,
except, in the case of clause (B) above, for such breach-
es, violations, defaults, accelerations or changes that
are disclosed in the Sealed Air Disclosure Letter or,
-25-
individually and in the aggregate, are not reasonably
likely to have a Material Adverse Effect with respect to
Sealed Air or prevent or materially delay or enable any
person to enjoin consummation of the Reorganization.
(e) SEC Documents; Financial Statements; No Undis-
closed Liabilities. (i) Sealed Air has filed all forms,
reports and documents required to be filed by it under the
Exchange Act or the Securities Act since December 31,
1994. As of its filing date, each such SEC Document
filed, and each SEC Document that will be filed by Sealed
Air or its subsidiaries prior to the Effective Time, as
amended or supplemented, if applicable, pursuant to the
Exchange Act or the Securities Act (A) complied or will
comply in all material respects with the applicable re-
quirements of the Exchange Act or the Securities Act and
(B) did not or will not contain any untrue statement of a
material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light
of the circumstances under which they were made, not mis-
leading. Each of Sealed Air's consolidated balance sheets
included in or incorporated by reference into its SEC
Documents fairly presents in all material respects the
consolidated financial position of it and its subsidiaries
as of the dates set forth therein, and each of the con-
solidated statements of earnings, cash flows and share-
holders' equity included in or incorporated by reference
into its SEC Documents (including any related notes and
schedules) fairly presents in all material respects the
consolidated results of operations, cash flows and share-
holders' equity, as the case may be, of Sealed Air and its
subsidiaries for the periods set forth therein (subject,
in the case of unaudited statements, to normal year-end
audit adjustments), in each case in accordance with US
GAAP (applied on a consistent basis).
(ii) Except as disclosed in its SEC Documents filed
with the SEC prior to the date hereof, neither Sealed Air
nor any of its subsidiaries has any liabilities of any
kind whatsoever, whether or not accrued, contingent or
otherwise, that, individually or in the aggregate, are
reasonably likely to have a Material Adverse Effect with
respect to Sealed Air.
(f) Absence of Certain Events and Changes. Except
as disclosed in its SEC Documents filed with the SEC prior
to the date hereof, since December 31, 1996, Sealed Air
and its subsidiaries have conducted their respective busi-
nesses only in the ordinary course of such businesses, and
-26-
there has not been any change or development or combina-
tion of changes or developments (including any worsening
of any condition currently existing) which, individually
or in the aggregate, is reasonably likely to result in a
Material Adverse Effect with respect to Sealed Air.
(g) Compliance with Laws. Except as disclosed in
its SEC Documents filed with the SEC prior to the date
hereof, Sealed Air and its subsidiaries have complied with
all applicable federal, state, local and foreign statutes,
laws, regulations, ordinances, rules, judgments, orders or
decrees applicable thereto, except where the failure to
comply is not reasonably likely, individually and in the
aggregate, to have a Material Adverse Effect with respect
to Sealed Air. Sealed Air and its subsidiaries have, and,
immediately after the Merger, will have, all permits, li-
censes, certificates of authority, orders, and approvals
of, and has and will have made all filings, applications,
and registrations with, federal, state, local, and foreign
Governmental Entities that are required in order to permit
it or such subsidiary to carry on its business as it is
presently conducted, except for such permits, licenses,
certificates, orders, filings, applications and registra-
tions, the failure to have or make which, individually or
in the aggregate, are not reasonably likely to have a Ma-
terial Adverse Effect with respect to Sealed Air.
(h) Title to Assets. Except as disclosed in its SEC
Documents filed with the SEC prior to the date hereof,
Sealed Air or its subsidiaries have and, immediately after
the Merger, will:
(i) have good and valid title to its properties
and assets (including, without limitation, all assets
reflected on the audited 1996 balance sheet of Sealed
Air, except for such assets as were sold since Decem-
ber 31, 1996 in the ordinary course of business and
not in violation of this Agreement), free and clear
of any Liens; and
(ii) own or have adequate rights to use all
assets currently used or held for use by Sealed Air
and its subsidiaries, and such rights are sufficient
to permit Sealed Air to continue to operate Sealed
Air's business as currently conducted by Sealed Air
and its subsidiaries;
in each case except for such matters as would not, indi-
vidually or in the aggregate, have a Material Adverse Ef-
fect on Sealed Air.
-27-
(i) Litigation. Except as disclosed in Sealed Air's
SEC Documents filed with the SEC prior to the date hereof,
there are no civil, criminal or administrative actions,
suits, claims, hearings or proceedings pending or, to the
knowledge of its executive officers, threatened, or inves-
tigations pending, against Sealed Air or any of its sub-
sidiaries that, individually or in the aggregate, are rea-
sonably likely to have a Material Adverse Effect with re-
spect to Sealed Air. There are no judgments or outstand-
ing orders, writs, injunctions, decrees, stipulations or
awards (whether rendered or issued by a court or Govern-
mental Entity, or by arbitration) against Sealed Air or
any of its subsidiaries or their respective properties or
businesses, which are reasonably likely, individually or
in the aggregate, to have a Material Adverse Effect with
respect to Sealed Air.
(j) Taxes. Except as reflected in Sealed Air's SEC
Documents filed with the SEC prior to the date hereof, and
except for such matters that, individually or in the ag-
gregate, are not reasonably likely to have a Material Ad-
verse Effect with respect to Sealed Air, (i) all federal,
state, local and foreign tax returns required to be filed
by or on behalf of Sealed Air or any of its subsidiaries
have been timely filed, or requests for extensions have
been timely filed and have been granted and not expired,
and all such filed returns are complete and accurate; (ii)
all taxes shown as due and payable on returns filed by
Sealed Air or any of its subsidiaries have been paid in
full; (iii) there is no outstanding audit examination, de-
ficiency, or refund litigation with respect to any taxes
of Sealed Air or any of its subsidiaries; (iv) all taxes,
interest, additions and penalties due with respect to com-
pleted and settled examinations or concluded litigation
relating to Sealed Air or any of its subsidiaries have
been paid in full or have been recorded as a liability on
the balance sheet of Sealed Air (in accordance with US
GAAP); (v) neither Sealed Air nor any of its subsidiaries
is a party to a tax sharing or similar agreement or any
agreement pursuant to which it or any of its subsidiaries
has indemnified another party with respect to taxes; and
(vi) neither Sealed Air nor any of its subsidiaries has
waived any applicable statute of limitations with respect
to any taxes.
(k) Contracts and Commitments. Except as set forth
in the Sealed Air Disclosure Letter, and except for mat-
ters that would not, individually or in the aggregate,
have a Material Adverse Effect with respect to Sealed Air,
(i) Sealed Air and its subsidiaries will not, as of the
-28-
Effective Time, be parties to or bound by any Contract
that materially limits the ability of Grace after the
Merger, Packco, the Surviving Corporation or any of their
respective subsidiaries to compete in any line of business
or with any person or in any geographic area; (ii) neither
Sealed Air nor any of its subsidiaries is (with or without
the lapse of time or the giving of notice, or both) in
breach or default in any material respect under any Con-
tract that is material to the operation of Sealed Air;
(iii) none of the other parties to any Contract that is
material to the operation of Sealed Air is (with or with-
out the lapse of time or the giving of notice, or both) in
breach or default in any material respect thereunder; and
(iv) neither Sealed Air nor any of its subsidiaries has
received any written notice of the intention of any party
to terminate any such Contract whether as a termination
for convenience or for default of Sealed Air or any of its
subsidiaries thereunder.
(l) Employee Benefits. (i) The Sealed Air Disclo-
sure Letter includes a complete list of all material em-
ployee benefit plans, programs, policies, practices and
other arrangements (regardless of whether they are funded
or unfunded or foreign or domestic, but excluding any such
plans, programs, policies, practices and arrangements man-
dated or sponsored by a Governmental Entity with respect
to foreign employees) providing benefits to any current or
former employee of Sealed Air or any of its subsidiaries
(collectively, "Sealed Air Employees") or beneficiary or
dependent thereof, sponsored or maintained by Sealed Air
or any of its subsidiaries, or to which Sealed Air or any
of its subsidiaries contributes or is obligated to con-
tribute (the "Sealed Air Plans"); provided, that such list
may not be complete as of the date hereof as to Sealed Air
Plans providing benefits to foreign Sealed Air Employees,
but such list shall be updated so as to be complete as to
such Sealed Air Plans promptly following the date hereof.
Without limiting the generality of the foregoing, the term
"Sealed Air Plans" includes all employee welfare benefit
plans within the meaning of Section 3(1) of ERISA and all
employee pension benefit plans within the meaning of Sec-
tion 3(2) of ERISA.
(ii) With respect to each Sealed Air Plan providing
benefits to U.S. Sealed Air Employees, Sealed Air has de-
livered or made available to Grace, and with respect to
each Sealed Air Plan providing benefits to foreign Sealed
Air Employees, promptly following the date hereof, Sealed
Air will deliver or make available to Grace, a true, cor-
rect and complete copy of each of the following: (A) all
-29-
plan documents, (B) all benefit schedules, trust agree-
ments and insurance contracts and other funding vehicles,
and the current summary plan descriptions (if any); (C)
the most recent Annual Report (Form 5500 Series) and ac-
companying schedule, if any, or any similar filing made
with any foreign authority; (D) the most recent annual
financial report, if any; (E) the most recent actuarial
report, if any; and (F) the most recent determination let-
ter from the IRS or similar document issued by any other
taxing authority, if any. Except as specifically provided
in the foregoing documents delivered or made available to
each of the parties hereto, there are no amendments to any
Sealed Air Plan that have been adopted or approved, nor
has Sealed Air undertaken to make any such amendments.
(iii) The Sealed Air Disclosure Letter identifies each
Sealed Air Plan that is intended to be a "qualified plan"
within the meaning of Section 401(a) of the Code ("Sealed
Air Qualified Plans"). The IRS has issued a favorable
determination letter with respect to each Sealed Air Qual-
ified Plan, in each case that has not been revoked, or
application for such a letter has been or will be filed
before the expiration of the remedial amendment period,
and Sealed Air knows of no existing circumstances nor any
events that have occurred that could adversely affect the
qualified status of any such plan or the related trust.
No Sealed Air Plan is intended to meet the requirements of
Section 501(c)(9) of the Code.
(iv) Sealed Air and its subsidiaries have complied,
and are now in compliance, in all material respects with
all provisions of ERISA, the Code and all other laws and
regulations applicable to the Sealed Air Plans. There is
not now, nor do any circumstances exist that could give
rise to, any requirement for the posting of security with
respect to any Sealed Air Plan or the imposition of any
lien on the assets of Sealed Air under ERISA or the Code.
No prohibited transaction (as defined in ERISA) has oc-
curred with respect to any Sealed Air Plan.
(v) All contributions required to be made to any
Sealed Air Plan by applicable law or regulation or by any
plan document or other contractual undertaking, and all
premiums due or payable with respect to insurance policies
funding any Sealed Air Plan, have been timely made or paid
in full.
(vi) No Sealed Air Plan currently sponsored or main-
tained by Sealed Air, any of its subsidiaries or any of
their respective ERISA Affiliates is subject to Title IV
-30-
or Section 302 of ERISA or Section 412 or 4971 of the
Code. Without limiting the generality of the foregoing,
no Sealed Air Plan is a Multiemployer Plan or a Multiple
Employer Plan, nor has Sealed Air or any ERISA Affiliate
of Sealed Air, at any time since September 2, 1974, con-
tributed to or been obligated to contribute to any Multi-
employer Plan or Multiple Employer Plan. There does not
now exist, nor do any circumstances exist that could re-
sult in, any liability under (A) Title IV of ERISA,
(B) Section 302 of ERISA, (C) Sections 412 and 4971 of the
Code, (D) the continuation coverage requirements of Sec-
tion 601 et seq. of ERISA and Section 4980B of the Code,
or (E) corresponding or similar provisions of foreign laws
or regulations, that would be a liability of Sealed Air or
any of its subsidiaries following the Effective Time,
other than such liabilities that arise solely out of, or
relate solely to, the Sealed Air Plans.
(vii) Neither Sealed Air nor any of its subsidiaries
has any obligations for retiree health and life benefits
under any Sealed Air Plan.
(viii) All Sealed Air Plans covering foreign Sealed Air
Employees comply with applicable local law, except when
the failure to so comply, individually or in the aggre-
gate, would not have a Material Adverse Effect with
respect to Sealed Air.
(ix) Neither the execution and delivery of this
Agreement nor the consummation of the transactions contem-
plated hereby will (either alone or in conjunction with
any other event) result in, cause the accelerated vesting
or delivery of, or increase the amount or value of, any
payment or benefit to any Sealed Air Employee. Without
limiting the generality of the foregoing, no amount paid
or payable in connection with the transactions contem-
plated hereby (either solely as a result thereof or as a
result of such transactions in conjunction with any other
event) will be an "excess parachute payment" within the
meaning of Section 280G of the Code. Sealed Air and its
subsidiaries have not entered into any change-of-control
agreements under which Sealed Air will be obligated to
make change-of-control payments following the Merger.
(m) Environmental Matters. Except as disclosed in
its SEC Documents filed prior to the date hereof and ex-
cept for such matters that, individually and in the ag-
gregate, are not reasonably likely to have a Material Ad-
verse Effect with respect to Sealed Air, (i) Sealed Air
and its subsidiaries are and have been in compliance with
-31-
all applicable Environmental Laws; (ii) Sealed Air and its
subsidiaries hold and have held all permits under any En-
vironmental Law required for the operation of their re-
spective businesses as presently conducted and are in com-
pliance with the terms of such permits; and (iii) neither
Sealed Air nor any of its subsidiaries has received any
outstanding written notices, demand letters, claims or re-
quests for information, nor has any complaint been filed,
penalty assessed, nor is any investigation, action, claim,
suit, proceeding or review pending (with respect to which
Sealed Air has been provided notice), or, to the knowledge
of the executive officers of Sealed Air, threatened by any
Governmental Entity or any third party that assert that
Sealed Air or any of its subsidiaries may be in violation
of, or liable under, any Environmental Law (including as
an indemnitor in connection with any threatened or as-
serted claim by any third party indemnitee), and none of
Sealed Air, its subsidiaries or its properties is subject
to any citation, court order, administrative order or de-
cree arising under any Environmental Law. None of the
real property owned or leased by Sealed Air or any of its
subsidiaries is listed on, or, to the knowledge of Sealed
Air's executive officers, proposed for listing on the "Na-
tional Priorities List" under CERCLA, or any similar
state, local or foreign list of sites requiring inves-
tigation or cleanup.
(n) Takeover Statutes; Rights Plans. The execution,
delivery and performance of this Agreement and consumma-
tion of the transactions contemplated hereby will not
cause to be applicable to Sealed Air any Takeover Statute
(after giving effect to any actions that will be taken
prior to the Effective Time). Sealed Air does not have
any preferred share purchase rights plan or similar rights
plan in effect.
(o) Brokers and Finders. Neither Sealed Air nor any
of its subsidiaries or any of their respective officers,
directors or employees has employed any broker or finder
or incurred any liability for any brokerage fees, commis-
sions or finders' fees in connection with the transactions
contemplated herein, except pursuant to arrangements dis-
closed in writing to the other parties hereto prior to the
date hereof.
(p) Trademarks, Patents and Copyrights. Sealed Air
and its subsidiaries own or possess adequate licenses or
other rights to use all patents, trademarks, trade names,
service marks, copyrights, licenses and product licenses
or registrations (including applications for any of the
-32-
foregoing), technology, know-how, tangible or intangible
proprietary intellectual property rights, information or
material (whether conceived, reduced to practice or under
development), formulae, inventions and new and investiga-
tional applications (including all options or rights to
acquire any of the foregoing) as are necessary, used or
held for use in connection with its business (the "Sealed
Air Intellectual Property"), the lack of which would rea-
sonably be expected to have a Material Adverse Effect with
respect to Sealed Air. None of Sealed Air or any of its
subsidiaries has received any adverse claim by any other
person with respect to the Sealed Air Intellectual Prop-
erty or is aware, to the knowledge of the executive offic-
ers of Sealed Air and its subsidiaries, of any infringe-
ment with respect thereto, and there is no infringement by
Sealed Air or its subsidiaries of the intellectual prop-
erty rights of others, which, in each case, would, indi-
vidually or in the aggregate, reasonably be expected to
have a Material Adverse Effect with respect to Sealed Air.
Except for matters that would not, individually or in the
aggregate, have a Material Adverse Effect with respect to
Sealed Air, immediately after the Merger, the Surviving
Corporation and its subsidiaries will own or possess ad-
equate licenses or other rights to use (on substantially
the same basis as currently owned or possessed by Sealed
Air and its subsidiaries) all of the Sealed Air Intel-
lectual Property.
(q) Tax Matters. At the Effective Time, the repre-
sentations set forth in the Tax Matters Certificates of
Sealed Air, substantially in the form of Exhibit B (the
"Sealed Air Tax Matters Certificate"), will be true and
correct in all respects, and such representations are
hereby incorporated herein by reference with the same ef-
fect as if set forth herein in their entirety.
(r) Disclosure. The representations and warranties
of Sealed Air contained in this Agreement or in any writ-
ten instrument, exhibit or certificate furnished or to be
furnished by Sealed Air to Grace pursuant hereto or in
connection herewith do not contain any untrue statement of
a material fact or omit to state a material fact necessary
in order to make the statements contained therein not mis-
leading.
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ARTICLE VI
COVENANTS
SECTION 6.1. Interim Operations. Each of Grace and
Sealed Air covenants and agrees as to itself and its subsid-
iaries that, from and after the date hereof until the Effective
Time, except insofar as the other parties shall otherwise con-
sent or except as otherwise contemplated by this Agreement, the
Transaction Agreements or its Disclosure Letters (provided
that, as used in this Section, all references to Grace (and/or
its Affiliates) shall be deemed to refer to Grace and all of
the Subsidiaries of Grace (in each case only with respect to
the Packaging Business), the Packco Group and the Packaging
Business except as otherwise specifically provided):
(a) The business of it and its subsidiaries will be
conducted only in the ordinary and usual course and it and
its subsidiaries will use all reasonable efforts to pre-
serve their business organization intact and maintain
their existing relations with customers, suppliers, em-
ployees and business associates.
(b) It will not (i) sell or pledge or agree to sell
or pledge any stock owned, directly or indirectly, by it
in any of its subsidiaries, (ii) amend its Certificate of
Incorporation or By-laws (or similar organizational docu-
ment); (iii) split, combine or reclassify any outstanding
capital stock; or (iv) declare, set aside or pay any divi-
dend payable in stock or property with respect to any of
its capital stock (other than, in the case of Grace, regu-
lar quarterly cash dividends consistent with Grace's cur-
rent practice, and intercompany dividends).
(c) Neither it nor any of its subsidiaries will is-
sue, sell, pledge, dispose of or encumber, or authorize or
propose the issuance, sale, pledge, disposition or en-
cumbrance of, any shares of, or securities convertible or
exchangeable for, or options, puts, warrants, calls, com-
mitments or rights of any kind to acquire, any shares of
its capital stock of any class other than common shares
issuable pursuant to options, awards, warrants and other
convertible securities outstanding on the date hereof and
disclosed herein, provided that notwithstanding the fore-
going (A) Grace may grant options to acquire Grace Common
Shares so long as such options will not, after the Recapi-
talization, be or become options to purchase capital stock
or other securities of Newco or any of its subsidiaries,
and (B) in the ordinary course of business, Sealed Air may
grant awards to acquire Sealed Air Common Shares or make
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all or part of its contribution to the Sealed Air Profit
Sharing Plan in the form of Sealed Air Common Shares.
(d) Neither it nor any of its subsidiaries will (i)
other than in the ordinary course of business, transfer,
lease, license, guarantee, sell, mortgage, pledge or dis-
pose of any property or assets or encumber any property or
assets, or make any material acquisition of, or investment
in, assets, stock or other securities of any other person
or entity (other than its wholly-owned subsidiaries); or
(ii) transfer, license, sell, pledge or dispose of any
material Intellectual Property rights.
(e) Except as required or contemplated by agreements
or arrangements disclosed in its SEC Documents or its Dis-
closure Letter, neither it nor any of its subsidiaries
will grant any severance or termination pay to, or enter
into, extend or amend any employment, consulting, sever-
ance or other compensation agreement with, any director or
officer or, other than in the ordinary course of business
consistent with past practice, other employees, except
that the foregoing shall not prohibit Grace from entering
into any such agreement or arrangement that will not be
binding upon Newco or any of its subsidiaries after the
Reorganization.
(f) Except as may be required to satisfy contractual
obligations existing as of the date hereof (and disclosed
in its Disclosure Letter) and the requirements of appli-
cable law, and except in the ordinary and usual course of
business, neither it nor any of its subsidiaries will es-
tablish, adopt, enter into, make, amend or make any elec-
tions under any collective bargaining, bonus, profit shar-
ing, thrift, compensation, stock option, restricted stock,
pension, retirement, employee stock ownership, deferred
compensation, employment, termination, severance or other
plan, agreement, trust, fund, policy or arrangement for
the benefit of any directors, officers or employees that
would be binding on Newco or any of its subsidiaries after
the Reorganization.
(g) It will not implement any change in its account-
ing principles, practices or methods, other than as may be
required by US GAAP, and other than as may be necessary or
advisable in connection with the Reorganization.
(h) Neither Sealed Air nor Grace will adopt or pro-
pose any change in its certificate of incorporation or
bylaws.
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(i) Grace agrees to use its reasonable best efforts
to cause each person that holds any shares of a Packco
Subsidiary constituting directors qualifying shares to
deliver at the Effective Time such shares at the direction
of Sealed Air.
(j) Neither it nor any of its subsidiaries (includ-
ing in the case of Grace, all members of the New Grace
Group) shall intentionally take any action knowing that
such action would cause a breach of a representation or
warranty herein.
(k) It and its subsidiaries will conduct cash man-
agement operations (including the collection of accounts
receivable and realization of cash from other assets and
the payment of trade payables and other liabilities) only
in the ordinary and usual course of business, consistent
with past practices, and, except as contemplated by the
Transaction Agreements, all transactions between the Pack-
co Group or the Packaging Business, on the one hand, and
the New Grace Group or the New Grace Business, on the
other, shall only be in the ordinary and usual course of
business, consistent with the past practices.
(l) Neither it nor any of its subsidiaries will au-
thorize or enter into an agreement to take any of the ac-
tions referred to in paragraphs (a) through (k) above.
SECTION 6.2. Certain Transactions.
(a) It is understood and agreed by the parties here-
to that, pursuant to the Distribution Agreement, at the time of
the Reorganization and subject to Section 2.02 of the Distribu-
tion Agreement, neither Grace nor any member of the Packco
Group shall have cash or marketable securities, it being con-
templated that, in connection with the Reorganization, such
cash and marketable securities shall be provided to Grace-Conn.
(b) Prior to the Distribution, Grace shall cause
each of the parties to the Distribution Agreement, the Tax
Sharing Agreement and the Benefits Agreement to duly enter into
such agreements, which agreements shall not be amended without
the consent of Sealed Air, which will not be unreasonably with-
held.
SECTION 6.3. Acquisition Proposals. Each party
hereto agrees that neither it nor any of its subsidiaries nor
any of its respective officers and directors or the officers
and directors of its subsidiaries shall, and it shall each di-
rect and use its best efforts to cause its employees, agents
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and representatives (including, without limitation, any invest-
ment banker, attorney or accountant retained by it or any of
its subsidiaries) not to, initiate, solicit or encourage, di-
rectly or indirectly, any inquiries or the making or implemen-
tation of any proposal or offer with respect to a merger, ac-
quisition, consolidation, business combination, recapitaliza-
tion or similar transaction involving, or any purchase of all
or any significant portion of the assets or any equity securi-
ties of, it or any of its subsidiaries (any such proposal or
offer being hereinafter referred to as an "Acquisition Pro-
posal") or provide any confidential information or data to, or
have any discussions or engage in any negotiations with, any
person relating to an Acquisition Proposal; provided, however,
that the Grace Board or the Sealed Air Board may furnish or
cause to be furnished information (pursuant to confidentiality
arrangements) and may participate in such discussions and nego-
tiations directly or through its representatives if (i) the
failure to provide such information or participate in such ne-
gotiations and discussions would, in the opinion of its outside
counsel, cause the members of the Grace Board or the Sealed Air
Board, as the case may be, to breach their fiduciary duties
under applicable law or (ii) another person makes a written
offer or written proposal that was not solicited and did not
otherwise result from a breach of this Section 6.3 and which,
based upon the identity of the person making such offer or pro-
posal, the terms thereof and the availability of adequate fi-
nancing therefor, the Grace Board or the Sealed Air Board, as
the case may be, believes, in the good faith exercise of its
business judgment and based upon advice of its outside legal
and financial advisors, could reasonably be expected to be con-
summated and represents a transaction more favorable to its
shareholders than the Reorganization (a "Higher Offer"); pro-
vided further, however, that the term "Acquisition Proposal"
shall not include a proposal exclusively involving all or part
of the stock or assets of New Grace and the New Grace Business
so long as any such proposal (and the consummation thereof)
will not adversely affect the transactions contemplated hereby.
Grace or Sealed Air, as the case may be, shall notify the other
party hereto as soon as practicable if any such inquiries or
proposals are received by, any such information is requested
from, or any such negotiations or discussions are sought to be
initiated or continued with it, which notice shall include the
identity of the interested person and the material terms and
conditions of any inquiry, request for information, offer or
proposal. Thereafter, the party giving the notice shall keep
the other reasonably informed of the status and details of any
such inquiry, request for information, offer or proposal, dis-
cussion or negotiations.
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SECTION 6.4. Information Supplied. Each of the par-
ties hereto agrees that none of the information supplied or to
be supplied by it for inclusion or incorporation by reference
in any Registration Statement, the Joint Proxy Statement or
Schedule 14A, or any amendment or supplement thereto, will, in
the case of a Registration Statement, at the time such Regis-
tration Statement and each amendment and supplement thereto
becomes effective under the Securities Act, or, in the case of
a Joint Proxy Statement or Schedule 14A, at the time such Joint
Proxy Statement or Schedule 14A and each amendment and supple-
ment thereto is filed in definitive form with the SEC or mailed
to shareholders and at the time of the applicable Meeting, con-
tain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein not misleading. All docu-
ments that either party is responsible for filing with the SEC
in connection with the Reorganization will comply as to form
and substance in all material respects with the applicable re-
quirements of the Exchange Act.
SECTION 6.5. Shareholder Approvals. Each of Grace
and Sealed Air agrees to take, in accordance with applicable
law and its Certificate of Incorporation and By-laws, all ac-
tion necessary to convene a meeting of holders of Grace Common
Shares and Sealed Air Common Shares, respectively, as promptly
as practicable after the Registration Statements are declared
effective, and the Joint Proxy Statement is cleared, by the
SEC, to consider and vote upon the approval of the transactions
contemplated by the Transaction Agreements (including, without
limitation, the Grace Amendment). Subject to the remainder of
this Section 6.5, each of the Grace Board and the Sealed Air
Board shall recommend such adoption and approval and shall take
all lawful action to solicit such approval by shareholders.
The Grace Board or the Sealed Air Board, as the case may be,
may fail to make such a recommendation, or withdraw, modify, or
change any such recommendation, or recommend another offer or
proposal, if (i) the making of such recommendation or failing
to withdraw, modify or change its recommendation or to recom-
mend another offer or proposal would, in the opinion of its
outside counsel, cause the members of the Grace Board or the
Sealed Air Board, as the case may be, to breach their fiduciary
duties under applicable law, or (ii) there is a Higher Offer.
In such event, notwithstanding anything contained in this
Agreement to the contrary, any such failure to recommend, with-
drawal, modification or change of recommendation or recommenda-
tion of such other offer or proposal, or the entering by Grace
or Sealed Air into an agreement with respect to a Higher Offer
(provided that Grace or Sealed Air, as the case may be, shall
have provided the other party with at least four days' prior
notice of its intention to enter into such agreement and the
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identity of the other party thereto and the material terms and
conditions of the agreement to be entered into with such per-
son), shall not constitute a breach of this Agreement by Grace
or Sealed Air, as the case may be.
SECTION 6.6. Filings; Other Actions. (a) Subject
to the obligations of consultation contained herein, Grace and
Sealed Air shall promptly prepare for filing the Grace Regis-
tration Statement and the Joint Proxy Statement to be mailed to
their shareholders, and Grace shall prepare the New Grace Reg-
istration Statement (and related prospectus forming a part
thereof to be mailed to the Grace shareholders), in each case
in connection with the Reorganization. In connection with the
foregoing, Grace shall prepare audited annual and unaudited
interim financial statements prepared in accordance with US
GAAP and in compliance with Regulation S-K under the Securities
Act for the Packaging Business (including Grace after giving
effect to the Distribution) and for the New Grace Business, and
such financial statements shall be included in the Registration
Statements and the Joint Proxy Statement as may be appropriate.
Each party hereto shall use its reasonable efforts, after con-
sultation with the other parties hereto, to respond promptly to
any comments made by the SEC with respect to such filings, to
have such filings declared effective or cleared, as the case
may be, and cause such filings to be mailed at the earliest
reasonably practicable time. Each party hereto and its counsel
shall be given a reasonable opportunity to review and comment
on each version of such filings prior to the filing thereof
with the SEC. Each party hereto also shall use its reasonable
efforts to obtain all necessary state securities law or blue
sky permits and approvals required to carry out the transac-
tions contemplated hereby and shall furnish all information as
may be reasonably requested in connection with any such action.
(b) Each party hereto shall cooperate with the other
parties hereto, subject to the terms and conditions set forth
herein, use its reasonable efforts promptly to prepare and file
all necessary documentation, to effect all necessary applica-
tions, notices, petitions, filings and other documents, and to
obtain as promptly as reasonably practicable all necessary per-
mits, consents, orders, approvals and authorizations of, or any
exemption by, all third parties and Governmental Entities nec-
essary or advisable to consummate the transactions contemplated
hereby. Each party hereto shall consult with the other parties
hereto with respect to the obtaining of all permits, consents,
approvals and authorizations of all third parties and Govern-
mental Entities necessary or advisable to consummate the trans-
actions contemplated hereby, and each party shall keep the
other parties hereto apprised of the status of matters relating
to completion of the transactions contemplated hereby.
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(c) Each party hereto shall, upon reasonable request
and except as otherwise may be required by applicable law, fur-
nish the other parties hereto with all information concerning
itself, its subsidiaries, directors, officers, shareholders and
other Affiliates and such other matters as may be reasonably
necessary or advisable in connection any statement, filing,
notice or application made by or on behalf of such other party
or any of its Affiliates to any Governmental Entity in con-
nection with any transactions contemplated by this Agreement.
(d) Each party hereto shall, subject to applicable
laws relating to the disclosure and exchange of information,
promptly furnish the other parties hereto with copies of writ-
ten communications received by each such party or any of its
subsidiaries, from, or delivered by any of the foregoing to,
any Governmental Entity in respect of the transactions contem-
plated hereby.
(e) Each party hereto shall cooperate with each oth-
er party hereto and shall use reasonable efforts to take or
cause to be taken all actions and do or cause to be done all
things reasonably necessary, proper or advisable to obtain fa-
vorable review of the proposed transaction under the HSR Act
and any foreign antitrust or competition laws.
SECTION 6.7. Audited Financial Statements; Comfort
Letters. (a) Grace shall prepare, as promptly as practicable,
audited annual and unaudited interim financial statements with
respect to each of the New Grace Group and the Packco Group, as
described in Section 6.6(a) hereto. Grace shall deliver to
Sealed Air copies of any such financial statements relating to
the Packaging Business, which shall be certified without quali-
fication by Price Waterhouse LLP or other nationally recognized
accounting firm reasonably acceptable to Sealed Air (the "Pack-
aging Business Financial Statements").
(b) Each of Grace and Sealed Air shall use all rea-
sonable efforts to cause to be delivered to the other party, as
appropriate, and its directors letters of its independent ac-
countants, dated (i) the date on which each Registration State-
ment shall become effective and (ii) a date shortly prior to
the Effective Time, and addressed to such other party and its
directors, in form and substance customary for "comfort" let-
ters delivered by independent accountants in connection with
registration statements.
SECTION 6.8. Access. Upon reasonable notice, and
except as may otherwise be required by applicable law, each
party hereto shall afford each other party's Representatives
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access, during normal business hours throughout the period un-
til the Effective Time, to its properties, books, Contracts and
records and, during such period, shall (and shall cause each of
its subsidiaries to) furnish promptly to the other party all
information concerning its business, properties and personnel
as may reasonably be requested; provided that no investigation
pursuant to this Section 6.8 shall affect or be deemed to mod-
ify any representation or warranty made by the party furnishing
such information; provided further that with respect to the
work papers of independent accountants or any other contract,
document, information or other material the provision of which
is not permitted without the consent of a third party, the pro-
vision of access shall be subject to the permission of such
independent accountants or such third party, and each party
hereto shall use reasonable efforts to secure such permission
for the other. Each party hereto shall not, and shall cause
its respective Representatives not to, use any information ob-
tained pursuant to this Section 6.8 for any purpose unrelated
to the consummation of the transactions contemplated by the
Transaction Agreements. All information obtained pursuant to
this paragraph shall be subject to the provisions of the writ-
ten confidentiality arrangements existing among the parties
hereto.
SECTION 6.9. Notification of Certain Matters. Each
party shall give prompt notice to the other party of (i) any
material inaccuracy in any representation or warranty made by
it in this Agreement, (ii) any material failure by it to comply
with any of its covenants or agreements under this Agreement
and (iii) any change or event that is reasonably likely to re-
sult in any Material Adverse Effect or to delay, in any sub-
stantial respect, or prevent consummation of the Reorganiza-
tion, in each case to the knowledge of the executive officers.
SECTION 6.10. Publicity. The initial press release
relating hereto shall be a joint press release and, thereafter,
each party hereto shall consult with each other party hereto
prior to issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby
and prior to making any filings with any Governmental Entity or
stock exchange with respect thereto; provided that, if a party
shall be advised by counsel that any such press release, state-
ment or filing is required by applicable law and it shall not
be practicable to consult with the other parties prior to the
time such press release, statement or filing is required, a
party may make such press release, statement or filing and
shall promptly notify the other parties thereof.
SECTION 6.11. Employee Benefits; Headquarters Em-
ployees. (a) Grace and Sealed Air covenant and agree that
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from and after the Effective Time, Grace, Packco and the Sur-
viving Corporation, as the case may be, shall maintain either
employee benefits plans and programs that are, in the aggre-
gate, at least substantially comparable to the plans and pro-
grams in effect with respect to Packco Employees at the Ef-
fective Time or other plans that are, in the aggregate, at
least substantially comparable to the plans and programs in
effect from time to time with respect to comparable Sealed Air
employees.
(b) As a result of the Merger, Sealed Air acknowl-
edges that it will need to add employees to its corporate staff
and related support services, including in the areas of legal,
tax, human resources, accounting, risk management, cash manage-
ment, investor relations, information systems and internal au-
dit. In seeking to fill these needs, Sealed Air shall work
with Grace to identify, prior to the Effective Time, appropri-
ate people located at Grace's Boca Raton headquarters and shall
give such individuals preferential consideration.
SECTION 6.12. Expenses. (a) Except as set forth in
paragraphs (b) and (c) below, Section 8.04 of the Distribution
Agreement and in the Other Agreements, all costs and expenses,
including without limitation, legal, investment banking,
financial, accounting and other professional fees and expenses,
incurred by Grace or its subsidiaries in connection with the
Transaction Agreements and the transactions contemplated
thereby shall be paid by New Grace (or if the Reorganization is
not consummated, Grace) and all such costs and expenses
incurred by Sealed Air or its subsidiaries shall be paid by
Newco (or if the Reorganization is not consummated, Sealed
Air); provided, however, that the costs and expenses of print-
ing and mailing the Joint Proxy Statement and the Grace Regis-
tration Statement, and all filing fees paid to the SEC in
connection therewith, shall be evenly divided between New Grace
(or if the Reorganization is not consummated, Grace) and Sealed
Air. The payments under this Section 6.12 shall not be in lim-
itation of the rights of the parties hereto under Sections 8.5
and 9.10 hereof.
(b) In the event that:
(i) this Agreement shall be terminated pursuant to:
(A) Section 8.2(iii) (due to a Higher Offer
with respect to Grace);
(B) Section 8.2(ii) if, after an Acquisition
Proposal with respect to Grace has been publicly dis-
closed or announced, the Grace shareholders do not
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approve the matters required by Section 7.1(a) and,
within one year after termination of this Agreement,
Grace consummates or enters into a written agreement
to consummate an Acquisition Proposal (except that,
for this purpose, the reference to "significant por-
tion" in the definition thereof in Section 6.3 shall
mean 20%) or any person (other than an employee stock
or similar plan for the benefit of Grace employees)
or group of affiliated persons shall acquire benefi-
cial ownership (as defined in Rule 13d-3 under the
Exchange Act) of at least 35% of the outstanding
Grace Common Shares;
(C) Section 8.4(ii) and, within one year after
termination of this Agreement, Grace consummates or
enters into a written agreement to consummate an Ac-
quisition Proposal (except that, for this purpose,
the reference to "significant portion" in the defini-
tion thereof in Section 6.3 shall mean 20%) or any
person (other than an employee stock or similar plan
for the benefit of Grace employees) or group of af-
filiated persons shall acquire beneficial ownership
(as defined in Rule 13d-3 under the Exchange Act) of
at least 35% of the outstanding Grace Common Shares;
or
(D) Section 8.2(ii) (due to a failure to obtain
Grace shareholder approval at the Grace Meeting other
than in the circumstances described in clause (B));
and
(ii) at the time of such termination, Sealed Air
shall not be in material breach of its covenants or agree-
ments contained in this Agreement;
then, Grace shall pay to Sealed Air, in exchange for a complete
release of any liabilities of Grace hereunder, the amount of
(1) $150 million plus actual out of pocket expenses incurred to
third parties in connection with the transactions contemplated
hereby after the date of this Agreement, in the case of an
event described in clauses (i)(A) or (i)(C) above, (2) in the
case of clause (i)(B), $25 million at the time of termination
and $125 million plus the expenses described above upon the
occurrence of the additional event described in clause (i)(B)
or (3) $25 million, in the event of termination described in
clause (i)(D) above. The amounts payable under this Section
shall be paid by wire transfer of immediately available funds
within 24 hours to the account specified by Sealed Air in writ-
ing.
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(c) In the event that:
(i) this Agreement shall be terminated pursuant to:
(A) Section 8.2(iii) (due to a Higher Offer
with respect to Sealed Air);
(B) Section 8.2(ii), if, after an Acquisition
Proposal with respect to Sealed Air has been publicly
disclosed or announced, the Sealed Air shareholders
do not approve the matters required by Section
7.1(a), and, within one year after termination of
this Agreement, Sealed Air consummates or enters into
a written agreement to consummate an Acquisition Pro-
posal (except that, for this purpose, the reference
to "significant portion" in the definition thereof in
Section 6.3 shall mean 20%) or any person (other than
an employee stock or similar plan for the benefit of
Sealed Air employees) or group of affiliated persons
shall acquire beneficial ownership (as defined in
Rule 13d-3 under the Exchange Act) of at least 35% of
the outstanding Sealed Air Common Shares;
(C) Section 8.3(ii) and, within one year after
termination of this Agreement, Sealed Air consummates
or enters into a written agreement to consummate an
Acquisition Proposal (except that, for this purpose,
the reference to "significant portion" in the defini-
tion thereof in Section 6.3 shall mean 20%) or any
person (other than an employee stock or similar plan
for the benefit of Sealed Air employees) or group of
affiliated persons shall acquire beneficial ownership
(as defined in Rule 13d-3 under the Exchange Act) of
at least 35% of the outstanding Sealed Air Common
Shares; or
(D) Section 8.2(ii) (due to a failure to obtain
Sealed Air shareholder approval at the Sealed Air
Meeting other than in the circumstances described in
clause (B)); and
(ii) at the time of such termination, Grace shall
not be in material breach of its covenants or agreements
contained in this Agreement;
then, Sealed Air shall pay to Grace, in exchange for a complete
release of any liabilities of Sealed Air hereunder, the amount
of (1) $75 million plus actual out of pocket expenses incurred
to third parties in connection with the transactions contem-
plated hereby after the date of this Agreement, in the case of
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an event described in clauses (i)(A) or (i)(C) above, (2) in
the case of clause (i)(B), $25 million at the time of termina-
tion and $50 million plus the expenses described above upon
occurrence of the additional event described in clause (i)(B)
or (3) $25 million, in the event of termination described in
clause (i)(D) above. The amounts payable under this Section
shall be paid by wire transfer of immediately available funds
within 24 hours to the account specified by Grace in writing.
SECTION 6.13. Antitakeover Statutes. If any Take-
over Statute is or may become applicable to the transactions
contemplated hereby, each of the parties hereto and the members
of its Board of Directors shall grant such approvals and take
such actions as are necessary so that the transactions contem-
plated by this Agreement may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise act
to eliminate or minimize the effects of any Takeover Statute on
any of the transactions contemplated by this Agreement.
SECTION 6.14. Securities Act Compliance. As soon as
practicable after the date of the Meetings, each party hereto
shall identify all persons who were, at the time of the Meet-
ings, possible Affiliates, shall use its reasonable efforts to
obtain a written agreement in the usual and customary form from
each person who is so identified as a possible Affiliate and
shall deliver such written agreements to Grace or Newco as soon
as practicable after the Meetings.
SECTION 6.15. Transaction Agreements. (a) Prior to
the Effective Time, the parties shall consummate any transac-
tions to be consummated prior to the Effective Time pursuant to
the Distribution Agreement or the Other Agreements.
(b) The parties shall not waive or amend any terms
of the Distribution Agreement or the Other Agreements without
the consent of the other parties hereto, which consent shall
not be unreasonably withheld.
SECTION 6.16. Tax Matters. Each party agrees to
report the Distribution as a tax-free distribution under the
Code and the Merger as a tax-free reorganization under the Code
on all tax returns and other filings, and take no position in-
consistent therewith, except where, in the opinion of nation-
ally recognized tax counsel to such party, there is not "sub-
stantial authority," as defined in Section 6662 of the Code, to
support such a position.
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ARTICLE VII
CONDITIONS
SECTION 7.1. Conditions to Each Party's Obligation.
The respective obligation of each party hereto to consummate
the Reorganization is subject to the fulfillment of each of the
following conditions:
(a) Shareholder Approval. To the extent required by
law or stock exchange regulations, the transactions con-
templated by the Transaction Agreements shall have been
duly approved by the shareholders of Sealed Air and Grace
in accordance with applicable law.
(b) Governmental and Regulatory Consents. The wait-
ing periods applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated;
and all filings required to be made prior to the Closing
by any party hereto or any of its respective subsidiaries
with, and all consents, approvals and authorizations re-
quired to be obtained prior to the Closing by any party
hereto or any of its respective subsidiaries from, any
Governmental Entity in connection with the execution, de-
livery and performance of this Agreement, the Distribution
Agreement and the Other Agreements and the consummation of
the transactions contemplated hereby and thereby (to the
extent such transactions are required to be consummated
prior to the Effective Time) shall have been made or ob-
tained, except where the failure to obtain such consents,
approvals and authorizations (i) is not reasonably likely
to have a Material Adverse Effect on (A) the New Grace
Group (with respect to the condition for Grace) or (B) the
Packco Group or Sealed Air (with respect to the condition
for Sealed Air), and (ii) could not reasonably be expected
to subject the parties hereto or their Affiliates or any
directors or officers of any of the foregoing to criminal
liability.
(c) Third-Party Consents. All consents or approvals
of all persons (other than Governmental Entities) required
for or in connection with the execution, delivery and per-
formance of this Agreement, the Distribution Agreement and
the Other Agreements and the consummation of the transac-
tions contemplated hereby and thereby shall have been ob-
tained and shall be in full force and effect, except for
those the failure of which to obtain would not have a Ma-
terial Adverse Effect with respect to (i) the New Grace
Group (with respect to the condition for Grace), or (ii)
-46-
the Packco Group or Sealed Air (with respect to the condi-
tion for Sealed Air).
(d) Governmental Matters. No Governmental Entity of
competent jurisdiction shall have enacted, issued, promul-
gated, enforced or entered any statute, rule, regulation,
judgment, decree, injunction or other order (whether tem-
porary, preliminary or permanent) which is in effect and
prohibits consummation of the transactions contemplated
hereby or by the Distribution Agreement or the Other
Agreements.
(e) Tax Opinions. Grace shall have received the
opinion of Wachtell, Lipton, Rosen & Katz, dated the date
of the Effective Time, substantially in the form of Ex-
hibit C hereto. In rendering such opinion, such firm may
receive and rely upon representations contained in cer-
tificates of Grace, Merger Sub and Sealed Air and others,
including, without limitation, the Grace Tax Matters Cer-
tificate and the Sealed Air Tax Matters Certificate.
Sealed Air shall have received the opinion of Davis Polk &
Wardwell, dated the date of the Effective Time, substan-
tially in the form of Exhibit D hereto. In rendering such
opinion, such firm may receive and rely upon representa-
tions contained in certificates of Grace, Merger Sub and
Sealed Air and others, including, without limitation, the
Grace Tax Matters Certificate and the Sealed Air Tax Mat-
ters Certificate.
(f) Registration Statements. The Registration
Statements shall have become effective under the Securi-
ties Act or Exchange Act (as applicable), and no stop or-
der suspending the effectiveness of the Registration
Statements shall have been issued and no proceedings for
that purpose shall have been initiated or threatened by
the SEC.
(g) The Contribution, the Distribution and the Re-
capitalization. The Contribution, the Distribution and
the Recapitalization shall have been consummated as pro-
vided in the Distribution Agreement, and the conditions to
consummation of such transactions set forth in Section
8.01 of the Distribution Agreement shall have been satis-
fied or, to the reasonable satisfaction of Sealed Air,
shall have been waived.
(h) Stock Exchange Listing. The Newco Common Shares
and Newco Convertible Preferred Shares to be issued in the
Recapitalization and the Merger shall have been authorized
-47-
for listing on the NYSE, subject to official notice of
issuance.
SECTION 7.2. Conditions to Obligation of Grace. The
obligation of Grace to consummate the Reorganization is also
subject to the fulfillment or waiver by Grace prior to the
Closing of each of the following conditions:
(a) Representations and Warranties. The representa-
tions and warranties of Sealed Air set forth in this
Agreement shall be true and correct in all material re-
spects as of the date of this Agreement, and such repre-
sentations and warranties shall be true and correct as of
the Closing Date as though made on and as of the Closing
Date (except that representations and warranties that by
their terms speak as of the date of this Agreement or some
other date shall be true and correct in all material re-
spects as of such date) disregarding with respect to the
Closing Date all qualifications and exceptions contained
therein relating to materiality or Material Adverse Ef-
fect, except for such matters as would not in the aggre-
gate reasonably be expected to have a Material Adverse
Effect with respect to Sealed Air, and Grace shall have
received a certificate signed on behalf of Sealed Air by
an officer to such effect.
(b) Performance of Obligations. Sealed Air shall
have performed in all material respects all obligations
required to be performed by it under this Agreement or the
other Transaction Agreements at or prior to the Closing
Date, and Grace shall have received a certificate signed
on behalf of Sealed Air by an officer to such effect.
SECTION 7.3. Conditions to Obligation of Sealed Air.
The obligation of Sealed Air to consummate the Reorganization
is also subject to the fulfillment or waiver by Sealed Air
prior to the Closing of each of the following conditions:
(a) Representations and Warranties. The representa-
tions and warranties of Grace set forth in this Agreement
shall be true and correct in all material respects as of
the date of this Agreement, and the representations and
warranties set forth in Section 5.1 shall be true and cor-
rect in all material respects as of the Closing Date as
though made on and as of the Closing Date (except that
representations and warranties that by their terms speak
as of the date of this Agreement or some other date shall
be true and correct in all material respects as of such
date), and the representations and warranties set forth in
Section 5.2 shall be true and correct as of the Closing
-48-
Date as though made on and as of the Closing Date (or in
the case of representations and warranties that speak of
some other date, as of such date), disregarding all qual-
ifications and exceptions contained therein relating to
materiality or Material Adverse Effect, except for such
matters as would not in the aggregate reasonably be ex-
pected to have a Material Adverse Effect with respect to
the Packaging Business or the Packco Group, and Sealed Air
shall have received a certificate signed on behalf of
Grace by an officer to such effect.
(b) Performance of Obligations. Grace shall have
performed in all material respects all obligations re-
quired to be performed by it under this Agreement or the
other Transaction Agreements at or prior to the Closing
Date, and Sealed Air shall have received a certificate
signed on behalf of Grace by an officer to such effect.
(c) Letter of Credit. New Grace or another member
of the New Grace Group shall have obtained the letter of
credit contemplated by Section 2.06(b) of the Distribution
Agreement (to the extent required thereby).
(d) Solvency Opinion. The Sealed Air Board shall
have received the opinion referred to in Section
8.01(a)(ix)(A) of the Distribution Agreement regarding New
Grace and Grace-Conn. and shall be entitled to rely on
such opinion as if it were addressed to it.
ARTICLE VIII
TERMINATION
SECTION 8.1. Termination by Mutual Consent. This
Agreement may be terminated, and the Reorganization may be
abandoned, at any time prior to the Effective Time, before or
after the approval by the shareholders of Grace and/or Sealed
Air, by the mutual consent of each party hereto, which consent
shall be effected by action of its Board of Directors.
SECTION 8.2. Termination by any Party Hereto. This
Agreement may be terminated, and the Reorganization may be
abandoned, by action of the Board of Directors of any party
hereto, if (i) the Reorganization shall not have been consum-
mated by April 30, 1998, provided that the right to terminate
-49-
this Agreement pursuant to this clause (i) shall not be avail-
able to any party whose breach of any provision of this Agree-
ment results in the failure of the Reorganization to be con-
summated by such date, (ii) at the Grace Meeting or at any ad-
journment thereof, the approval of Grace's shareholders re-
quired by Section 7.1(a), or, at the Sealed Air Meeting or any
adjournment thereof, the approval of Sealed Air's shareholders
required by Section 7.1(a) shall not have been obtained, or
(iii) Grace or Sealed Air shall have entered into an agreement
with respect to a Higher Offer in a manner permitted by Section
6.5.
SECTION 8.3. Termination by Grace. This Agreement
may be terminated and the Reorganization may be abandoned at
any time prior to the Effective Time, before or after the adop-
tion and approval by shareholders of Grace referred to in Sec-
tion 7.1(a), by action of the Grace Board, if (i) Sealed Air
shall have failed to comply in any material respect with any of
the covenants or agreements contained herein to be performed by
it at or prior to the time of termination, which failure (a) is
not capable of being cured prior to April 30, 1998 and with
respect to which Grace has provided 15 days' written notice; or
(b) is capable of being cured prior to such date but with re-
spect to such failure Sealed Air has not made, or has ceased to
make, diligent efforts to cure within 15 days of written notice
from Grace; (ii) the Sealed Air Board shall have failed to rec-
ommend to its shareholders the approval of the transactions
contemplated hereby or shall have withdrawn, modified or
changed in a manner materially adverse to Grace its approval or
recommendation of this Agreement; or (iii) the average closing
sales price of one Sealed Air Common Share for NYSE composite
transactions, as reported in The Wall Street Journal, for the
twenty trading days ending on the last trading day immediately
preceding the day of the Effective Time (but for this clause)
is less than $37.00 per share.
SECTION 8.4. Termination by Sealed Air. This Agree-
ment may be terminated and the Reorganization may be abandoned
at any time prior to the Effective Time, before or after the
adoption and approval by shareholders of Sealed Air referred to
in Section 7.1(a), by action of the Sealed Air Board, if (i)
Grace shall have failed to comply in any material respect with
any of the covenants or agreements contained herein to be per-
formed by it at or prior to the time of termination, which
failure (a) is not capable of being cured prior to April 30,
1998 and with respect to which Sealed Air has provided 15 days'
written notice; or (b) is capable of being cured prior to such
date but with respect to such failure Grace has not made, or
has ceased to make, diligent efforts to cure within 15 days of
written notice from Sealed Air; (ii) the Grace Board shall have
-50-
failed to recommend to its shareholders the approval of the
transactions contemplated hereby or shall have withdrawn, modi-
fied or changed in a manner materially adverse to Sealed Air
its approval or recommendation of this Agreement; or (iii) the
average closing sales price of one Grace Common Share for NYSE
composite transactions, as reported in The Wall Street Journal,
for the twenty trading days ending on the last trading day im-
mediately preceding the day of the Effective Time (but for this
clause) is less than $45.375 per share.
SECTION 8.5. Effect of Termination and Abandonment.
In the event of termination of this Agreement and the abandon-
ment of the Reorganization pursuant to this Article VIII, no
party hereto (or any of its directors or officers) shall have
any liability or further obligation to any other party, except
as set forth in Section 6.12 and except that nothing herein
will relieve any party from liability for any material and
willful breach of any covenant contained herein.
ARTICLE IX
MISCELLANEOUS AND GENERAL
SECTION 9.1. Survival. Only those agreements and
covenants of the parties which by their express terms apply in
whole or in part after the Effective Time shall survive the
Effective Time. All other representations, warranties, agree-
ments and covenants shall be deemed only to be conditions of
the Reorganization and shall not survive the Effective Time.
SECTION 9.2. Modification or Amendment. Subject to
the applicable provisions of the DGCL, at any time prior to the
Effective Time, the parties hereto may modify or amend this
Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties.
SECTION 9.3. Waiver of Conditions. The conditions
to each party's obligation to consummate the Reorganization and
the Merger are for the sole benefit of such party and may be
waived by such party in whole or in part to the extent permit-
ted by applicable law.
SECTION 9.4. Counterparts. For the convenience of
the parties hereto, this Agreement may be executed in any num-
ber of separate counterparts signed by one or more of the par-
ties hereto, each such counterpart being deemed to be an origi-
nal instrument, and all such counterparts shall together con-
stitute the same agreement.
-51-
SECTION 9.5. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of Delaware.
SECTION 9.6. Notices. All notices, requests,
claims, demands and other communications hereunder shall be in
writing and shall be given (and shall be deemed to have been
duly given upon receipt) by delivery in person, by cable, tele-
gram, telex or other standard form of telecommunications, or by
registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
(a) If to Grace or Merger Sub:
W. R. Grace & Co.
One Town Center Road
Boca Raton, Florida 33486-1010
Attention: Secretary
Fax: (561) 362-1970
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: Andrew R. Brownstein, Esq.
Fax: (212) 403-2000
(b) If to Sealed Air:
Sealed Air
Park 80 East
Saddle Brook, New Jersey 07663
Attention: President
Fax: (201) 703-4152
with a copy to:
Davis Polk & Wardwell
450 Lexington Ave.
New York, NY 10017
Attention: Christopher Mayer, Esq.
Fax: (212) 450-4800
or to such other address as any party hereto may have furnished
to the other parties by a notice in writing in accordance with
this Section.
SECTION 9.7. Entire Agreement; Assignment. This
Agreement (and the Exhibits and Disclosure Letters hereto) (a)
-52-
constitute the entire agreement, and supersede all other prior
agreements, understandings, representations and warranties,
both written and oral, among the parties, with respect to the
subject matter hereof other than the written confidentiality
arrangements existing among the parties hereto, which shall
survive, and (b) shall not be assignable by operation of law or
otherwise.
SECTION 9.8. Definition of "Subsidiary." When a
reference is made in this Agreement to a subsidiary of a party,
the term "subsidiary" means any corporation or other organiza-
tion whether incorporated or unincorporated of which at least a
majority of the securities or interests having by the terms
thereof ordinary voting power to elect at least a majority of
the board of directors or others performing similar functions
with respect to such corporation or other organization is di-
rectly or indirectly owned or controlled by such party or by
any one or more of its subsidiaries, or by such party and one
or more of its subsidiaries.
SECTION 9.9. Captions. The Article, Section and
paragraph captions herein are for convenience of reference
only, do not constitute part of this Agreement, and shall not
be deemed to limit or otherwise affect any of the provisions
hereof.
SECTION 9.10. Specific Performance. In the event of
any actual or threatened default in, or breach of, any of the
terms, conditions and provisions of this Agreement, the party
or parties who are or are to be thereby aggrieved shall have
the right of specific performance and injunctive relief giving
effect to its or their rights under this Agreement, in addition
to any and all other rights and remedies at law or in equity,
and all such rights and remedies shall be cumulative. The par-
ties agree that the remedies at law for any breach or threat-
ened breach, including monetary damages, are inadequate compen-
sation for any loss and that any defense in any action for spe-
cific performance that a remedy at law would be adequate is
waived.
SECTION 9.11. Severability. If any provision of
this Agreement or the application thereof to any person or cir-
cumstance is determined by a court of competent jurisdiction to
be invalid, void or unenforceable, the remaining provisions
hereof, or the application of such provision to persons or cir-
cumstances other than those as to which it has been held in-
valid or unenforceable, shall remain in full force and effect
-53-
and shall in no way be affected, impaired or invalidated there-
by, so long as the economic or legal substance of the transac-
tions contemplated hereby is not affected in any manner adverse
to any party.
SECTION 9.12. Third-Party Beneficiaries. Nothing
contained in this Agreement, expressed or implied, is intended
to confer upon any person or entity, other than the parties
hereto, any benefit, right or remedies.
SECTION 9.13. Further Assurances. In addition to
the actions specifically provided for elsewhere in this Agree-
ment, but subject to Section 9.1 hereof, each of the parties
hereto shall use reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things
reasonably necessary, proper or advisable under applicable
laws, regulations and agreements to consummate and make effec-
tive the transactions contemplated by this Agreement.
-54-
IN WITNESS WHEREOF, this Agreement has been duly ex-
ecuted and delivered by the duly authorized officers of the
parties hereto on the date first hereinabove written.
W. R. GRACE & CO.
By: /s/ Albert J. Costello
Name: Albert J. Costello
Title: Chairman, President and
Chief Executive Officer
SEALED AIR CORPORATION
By: /s/ T.J. Dermot Dunphy
Name: T.J. Dermot Dunphy
Title: Chairman of the Board
and Chief Executive
Officer
PACKCO ACQUISITION CORP.
By: /s/ Larry Ellberger
Name: Larry Ellberger
Title: President
-55-
ANNEX A
DEFINED TERMS
Acquisition Proposal: as defined in Section 6.3
hereof.
Affiliate: as defined in Rule 12b-2 under the Ex-
change Act.
Agreement: as defined in the Preamble hereof.
Benefits Agreement: the executed agreement in the
form of Exhibit A to the Distribution Agreement.
CERCLA: the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
Closing: as defined in Section 1.4 hereof.
Closing Date: as defined in Section 1.4 hereof.
Code: the Internal Revenue Code of 1986, as amended.
Contracts: as defined in Section 5.1(d)(ii).
Contribution: as defined in Recital B hereof.
DGCL: as defined in Section 1.3 hereof.
Disclosure Letters: the Sealed Air Disclosure Letter
and the Grace Disclosure Letter.
Distribution: as defined in Recital C hereof.
Distribution Agreement: as defined in Recital B
hereof.
Effective Time: as defined in Section 1.3 hereof.
Environmental Law: any federal, state, foreign or
local law, statute, ordinance, rule, regulation, code, license,
permit, authorization, approval, consent, common law, legal
doctrine, order, judgment, decree, injunction, requirement or
agreement with any government entity or other third party, (a)
relating to the pollution, protection, preservation, investiga-
tion or restoration of the environment (including, without lim-
itation, air, water vapor, surface water, groundwater, drinking
water supply, surface land, subsurface land, plant and animal
life or any other natural resource), or to human health or
safety, or (b) the exposure to, or the use, storage, recycling,
A-1
treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Hazardous
Substances.
ERISA: the Employee Retirement Income Security Act
of 1974, as amended, and the rules and regulations promulgated
thereunder.
ERISA Affiliate: with respect to any entity, trade
or business, any other entity, trade or business that is a mem-
ber of a group described in Section 414(b), (c), (m) or (o) of
the Code or Section 4001(b)(1) of ERISA that includes the first
entity, trade or business, or that is a member of the same
"controlled group" as the first entity, trade or business pur-
suant to Section 4001(a)(14) of ERISA.
Exchange Act: the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereun-
der.
Exchange Agent: as defined in Section 4.2(a) hereof.
Governmental Entity: as defined in Section 5.1(d)(i)
hereof.
Grace: as defined in the Preamble hereof.
Grace Board: the Board of Directors of Grace.
Grace Certificate of Incorporation: as defined in
Section 2.1 hereof.
Grace Common Shares: shares of common stock, par
value $.01 per share, of Grace (including the associated Grace
Rights).
Grace-Conn.: as defined in Recital C hereof.
Grace Credit Agreement: as defined in the Distribu-
tion Agreement.
Grace Disclosure Letter: as defined in Section 5.1
hereof.
Grace Meeting: a duly convened meeting of holders of
Grace Common Shares called to vote on and approve the transac-
tions contemplated hereby (including the transactions contem-
plated by the Distribution Agreement).
A-2
Grace Options: as defined in Section 5.1(a)(i) here-
of.
Grace Preferred Shares: shares of preferred stock,
par value $.01 per share, of Grace.
Grace Registration Statement: the registration
statement to be filed by Grace with the SEC in connection with
the issuance of Newco Common Shares and Newco Convertible Pre-
ferred Shares in the Merger and the Recapitalization, which
shall include therein the Joint Proxy Statement.
Grace Rights: the preferred share purchase rights of
Grace issued pursuant to the Grace Rights Agreement.
Grace Rights Agreement: the Rights Agreement, dated
as of September 25, 1996, by and between Grace and The Chase
Manhattan Bank, as Rights Agent.
Grace Savings Plan: the W.R. Grace & Co. Salaried
Employees Savings and Investment Plan.
Grace Stock Plans: as defined in Section 5.1(a)(i)
hereof.
Grace Tax Matters Certificate: as defined in Section
5.1(j) hereof.
Hazardous Substance: any substance, waste or mate-
rial listed, defined, designated or classified as a pollutant
or contaminant, or as ignitable, corrosive, reactive or hazard-
ous, toxic, radioactive or dangerous, or otherwise regulated
under any Environmental Law, whether by type or by quantity,
including any substance containing any such substance as a com-
ponent.
Higher Offer: as defined in Section 6.3 hereof.
HSR Act: the Hart-Scott-Rodino Antitrust Improve-
ments Act of 1976, as amended.
IRS: the United States Internal Revenue Service.
Joint Proxy Statement: the joint proxy statement
(including all proxy solicitation materials constituting a part
thereof) to be prepared by the parties hereto and mailed to the
Grace shareholders or Sealed Air shareholders, as the case may
be, in connection with the Reorganization.
A-3
knowledge of executive officers: shall mean, in the
case of Grace or Sealed Air, as the case may be, the knowledge
of each officer of such party subject to Section 16 of the Ex-
change Act pursuant to Rule 16a-2 under the Exchange Act.
Lien: as defined in Section 5.2(g) hereof.
material: with respect to any party, material to
such party and its subsidiaries, taken as a whole.
Material Adverse Effect: with respect to any party,
an effect which would be materially adverse to the properties,
business, financial condition, results of operations or pros-
pects of such party and its subsidiaries taken as a whole.
Meetings: the Grace Meeting and the Sealed Air Meet-
ing.
Merger: as defined in Recital E hereof.
Merger Certificate: as defined in Section 1.3 here-
of.
Merger Sub: as defined in the Preamble hereof.
Merger Sub Common Stock: as defined in Section
5.1(a)(ii) hereof.
Multiemployer Plan: as defined in Section 5.2(l)(v)
hereof.
Multiple Employer Plan: as defined in Section
5.2(l)(v) hereof.
Newco: as defined in Recital E hereto.
Newco Amendment: as defined in Recital E hereof, the
terms of which are attached hereto as Exhibit F.
Newco Certificate: a certificate evidencing Newco
Common Shares.
Newco Common Shares: the shares of common stock of
Newco, par value $.10 per share.
Newco Convertible Preferred Shares: the shares of
Series A Convertible Preferred Stock of Newco, par value $.10
per share, the terms of which are set forth in Exhibit E here-
to.
A-4
New Grace: as defined in the Distribution Agreement.
New Grace Business: as defined in the Distribution
Agreement.
New Grace Group: as defined in the Distribution
Agreement.
New Grace Registration Statement: the registration
statement to be filed with the SEC by New Grace in connection
with the Distribution.
NYSE: the New York Stock Exchange, Inc.
Old Sealed Air Certificate: a certificate evidencing
Sealed Air Common Shares.
Other Agreements: as defined in the Distribution
Agreement.
Packaging Business: as defined in the Distribution
Agreement.
Packaging Business Disclosure Letter: as defined in
Section 5.2 hereof.
Packaging Business Disclosure Letter Balance Sheet:
as disclosed in Section 5.2(d)(i) hereof.
Packaging Business Disclosure Letter Financial State-
ments: as defined in Section 5.2(d)(i) hereof.
Packaging Business Financial Statements: as defined
in Section 6.7(a) hereof.
Packaging Business Intellectual Property: as defined
in Section 5.2(m) hereof.
Packaging Business Plans: as defined in Section
5.2(l)(i) hereof.
Packaging Business-Only Plans: as defined in Section
5.2(l)(i) hereof.
Packco: as defined in Recital B hereof.
Packco Assets: as defined in the Distribution Agree-
ment.
A-5
Packco Employees: as defined in the Benefits Agree-
ment.
Packco Group: as defined in the Distribution Agree-
ment.
Packco Qualified Plans: as defined in Section
5.2(l)(iii) hereof.
Packco Subsidiary: as defined in the Distribution
Agreement.
Recapitalization: as defined in the Distribution
Agreement.
Registration Statements: the Grace Registration
Statement and the New Grace Registration Statement.
Reorganization: the Contribution, the Recapitaliza-
tion, the Distribution and the Merger and other transactions
contemplated by the Transaction Agreements.
Representatives: with respect to any party, such
party's officers, employees, counsel, accountants and other
authorized representatives.
S.C. Certificate of Incorporation: as defined in
Section 2.1 hereof.
Schedules 14A: the Schedule 14A to be filed by Grace
or Sealed Air, as the case may be, in connection with the Reor-
ganization, including the related Joint Proxy Statement.
Sealed Air: as defined in the Preamble hereof.
Sealed Air Board: the Board of Directors of Sealed
Air.
Sealed Air Common Shares: shares of common stock,
par value $.01 per share, of Sealed Air.
Sealed Air Disclosure Letter: as defined in Section
5.3 hereof.
Sealed Air Employees: as defined in Section
5.3(l)(i) hereof.
Sealed Air Intellectual Property: as defined in Sec-
tion 5.3(p) hereof.
A-6
Sealed Air Meeting: a duly convened meeting of hold-
ers of Sealed Air Common Shares called to vote on and approve
the transactions contemplated hereby.
Sealed Air Plans: as defined in Section 5.3(l)(i)
hereof.
Sealed Air Qualified Plans: as defined in Section
5.3(l)(iii).
Sealed Air Stock Plans: as defined in Section 5.3(a)
hereof.
Sealed Air Tax Matters Certificate: as defined in
Section 5.3(q) hereof.
SEC: the Securities and Exchange Commission.
SEC Documents: with respect to any party, all fil-
ings made by such party or its subsidiaries with the SEC since
December 31, 1994, including notes, schedules, amendments and
exhibits thereto.
Securities Act: the Securities Act of 1933, as amen-
ded, and the rules and regulations promulgated thereunder.
subsidiary: as defined in Section 9.8 hereof.
Surviving Corporation: as defined in Section 1.2
hereof.
Takeover Statute: as defined in Section 5.1(g) here-
of.
Tax Sharing Agreement: the executed agreement in the
form of Exhibit B to the Distribution Agreement.
Transaction Agreements: this Agreement, the Distri-
bution Agreement and the Other Agreements.
US GAAP: United States generally accepted accounting
principles consistently applied.
A-7
EXHIBIT 2.2
FORM OF
DISTRIBUTION AGREEMENT
BY AND AMONG
W. R. GRACE & CO.
W. R. GRACE & CO.-CONN,
AND
GRACE SPECIALTY CHEMICALS, INC.
(to be renamed "W. R. Grace & Co.")
DATED AS OF [ ], 1997
TABLE OF CONTENTS
PAGE
I. Definitions...................................... 2
1.01 General................................. 2
1.02 References to Time...................... 17
II. Certain Transactions Prior to the
Distribution Date.............................. 18
2.01 Transfer of Packco Assets; Assumption
of Packco Liabilities................. 18
2.02 Certain Foreign Transfers............... 20
2.03 Certificate of Incorporation;
By-laws; Rights Plan.................. 23
2.04 Issuance of Stock....................... 23
2.05 Other Agreements; Shared Facilities .... 23
2.05 Financing............................... 24
2.06 Grace Recapitalization.................. 26
2.07 Registration and Listing................ 27
2.09 Grace and New Grace Boards.............. 28
2.10 Transfers Not Effected Prior to the
Distribution; Transfers Deemed
Effective as of the Distribution
Date.................................. 28
2.11 Intercompany Accounts and
Distribution Payments................. 29
III. The Distribution................................. 29
3.01 Record Date and Distribution Date....... 29
3.02 The Agent............................... 29
3.03 Delivery of Share Certificates to the
Agent................................. 29
3.04 The Distribution........................ 30
IV. Survival and Indemnification..................... 30
4.01 Survival of Agreements.................. 30
4.02 Indemnification......................... 30
4.03 Procedures for Indemnification for
Third-Party Claims.................... 31
4.04 Remedies Cumulative..................... 33
TABLE OF CONTENTS (CONTINUED)
V. Certain Additional Covenants..................... 34
5.01 Notices to Third Parties................ 34
5.02 Licenses and Permits.................... 34
5.03 Intercompany Agreements................. 34
5.04 Guarantee Obligations................... 35
5.05 Further Assurances...................... 36
5.06 Environmental Claims Cooperation........ 36
VI. Access to Information............................ 36
6.01 Provision of Corporate Records.......... 36
6.02 Access to Information................... 37
6.03 Production of Witnesses................. 39
6.04 Retention of Records.................... 39
6.05 Confidentiality......................... 40
6.06 Cooperation with Respect to
Government Reports and Filings........ 40
VII. No Representations or Warranties................. 41
7.01 No Representations or Warranties........ 41
VIII. Miscellaneous.................................... 42
8.01 Conditions to Obligations............... 42
8.02 Use of Grace Name and Mark.............. 43
8.03 Complete Agreement...................... 44
8.04 Expenses................................ 44
8.05 Governing Law........................... 45
8.06 Notices................................. 45
8.07 Amendment and Modification.............. 46
8.08 Successors and Assigns; No Third-Party
Beneficiaries......................... 46
8.09 Counterparts............................ 46
8.10 Interpretation.......................... 46
8.11 Severability............................ 47
8.12 References; Construction................ 47
8.13 Termination............................. 47
8.14 SAC Reasonable Consent.................. 47
SIGNATURES.............................................. 48
Schedules to Distribution Agreement
Exhibit A Form of Employee Benefits Allocation Agreement
-ii-
Exhibit B Form of Tax Sharing Agreement
Exhibit C Form of New Grace Certificate of Incorporation
[to be provided prior to signing of this
Agreement]
Exhibit D Form of New Grace Bylaws [to be provided prior
to signing of this Agreement]
Exhibit E Form of New Grace Preferred Share Purchase
Rights Plan [to be provided prior to signing
of this Agreement]
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT (this "Agreement"),
dated as of [ ], 1997, by and among W. R. Grace &
Co., a Delaware corporation ("Grace"), W. R. Grace & Co.-
Conn., a Connecticut corporation and a wholly owned
subsidiary of Grace ("Grace-Conn.") and Grace Specialty
Chemicals, Inc., a Delaware corporation and a wholly owned
subsidiary of Grace ("New Grace").
RECITALS
A. The Merger Agreement. Grace and Sealed Air
Corporation, a Delaware corporation ("SAC"), have entered
into an Agreement and Plan of Merger, dated as of August 14,
1997 (the "Merger Agreement"), pursuant to which, at the Ef-
fective Time (as defined therein), a wholly owned subsidiary
of Grace will merge with and into SAC, with SAC being the
surviving corporation (the "Merger"), and Grace being renamed
"Sealed Air Corporation".
B. The Distribution Agreement. This Agreement
and the Other Agreements (as defined herein) set forth
certain transactions that SAC has required as a condition to
its willingness to consummate the Merger, and the purpose of
this Agreement is to make possible the Merger by divesting
Grace of the businesses and operations to be conducted by New
Grace and its subsidiaries, including Grace-Conn.
C. The Contribution. Prior to the Effective
Time, and subject to the terms and conditions set forth in
this Agreement, Grace intends to cause the transfer to a
wholly owned subsidiary of Grace-Conn. ("Packco") of certain
assets and liabilities of Grace and its subsidiaries
predominantly related to the Packaging Business (the
"Contribution"), as contemplated by this Agreement and the
Other Agreements.
D. Financing. It is the intention of the
parties hereto that, prior to the Distribution: (i) Grace
and/or Packco shall enter into new financing arrangements and
shall make, or cause to be made, the New Grace Capital
Contribution (as defined herein); and (ii) the parties shall
cooperate with one another with respect to the foregoing.
E. The Distribution. Following the Contribution
and prior to the Effective Time, subject to the conditions
set forth in this Agreement, (i) the capital stock of Packco
will
be distributed to Grace (the "Intragroup Spinoff"), (ii) the
capital stock of Grace-Conn. will be contributed to New Grace
and (iii) all of the issued and outstanding shares of the
common stock of New Grace (together with the New Grace
Rights, "New Grace Common Stock") will be distributed on a
pro rata basis (the "Distribution") to the holders as of the
Record Date of the common stock of Grace, par value $.01 per
share ("Grace Common Stock"), other than shares held in the
treasury of Grace.
F. The Recapitalization. Following the
Distribution and immediately prior to the Effective Time,
Grace intends to consummate the Recapitalization in which
each holder of a share of Grace Common Stock shall hold,
immediately thereafter, the Per Share Common Consideration
and the Per Share Preferred Consideration.
G. Intention of the Parties. It is the
intention of the parties (i) to this Agreement that, for
United States federal income tax purposes, the Contribution
and associated transactions shall qualify as a tax-free
transaction under Section 351 of the Internal Revenue Code of
1986, as amended (the "Code"), the Contribution and the
Intragroup Spinoff (and associated transactions) shall
qualify as a tax-free transaction under Sections 355 and 368
of the Code, the Distribution and associated transactions
shall qualify as a tax-free transaction under Sections 355
and 368 of the Code, and the Recapitalization shall be tax-
free to Grace and its shareholders under the Code, and (ii)
to this Agreement and the Merger Agreement that the Merger
shall qualify as a "reorganization" within the meaning of
Section 368 of the Code and the Merger will be tax free under
the Code to Grace, SAC and their respective shareholders.
NOW, THEREFORE, in consideration of the premises, and
of the representations, warranties, covenants and agreements
set forth herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 GENERAL. As used in this Agreement,
the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plu-
ral forms of the terms defined):
Adjusted Foreign Transfer Taxes: as defined in Sec-
tion 2.02(c) hereof.
- 2 -
Affiliate: with respect to any specified Person, a
Person that directly, or indirectly through one or more in-
termediaries, controls, is controlled by, or is under common
control with, such specified Person; provided, however, that,
for purposes of this Agreement, no member of either Group shall
be deemed to be an Affiliate of any member of the other Group.
Agent: the distribution agent to be appointed by
Grace to distribute the shares of New Grace Common Stock pursu-
ant to the Distribution.
Agreement: as defined in the preamble to this Agree-
ment.
Asset: any and all assets and properties, tangible
or intangible, including, without limitation, the following:
(i) cash, notes and accounts and notes receivable (whether cur-
rent or non-current); (ii) certificates of deposit, banker's
acceptances, stock, debentures, evidences of indebtedness, cer-
tificates of interest or participation in profit-sharing agree-
ments, collateral-trust certificates, preorganization certifi-
cates or subscriptions, transferable shares, investment con-
tracts, voting-trust certificates, fractional undivided inter-
ests in oil, gas or other mineral rights, puts, calls, strad-
dles, options and other securities of any kind; (iii) intan-
gible property rights, inventions, discoveries, know-how, Unit-
ed States and foreign patents and patent applications, trade
secrets, confidential information, registered and unregistered
trademarks, service marks, service names, trade styles and
trade names and associated goodwill; statutory, common law and
registered copyrights; applications for any of the foregoing,
rights to use the foregoing and other rights in, to and under
the foregoing; (iv) rights under leases, contracts, licenses,
permits, distribution arrangements, sales and purchase agree-
ments, other agreements and business arrangements; (v) real
estate and buildings and other improvements thereon; (vi)
leasehold improvements, fixtures, trade fixtures, machinery,
equipment (including transportation and office equipment),
tools, dies and furniture; (vii) office supplies, production
supplies, spare parts, other miscellaneous supplies and other
tangible property of any kind; (viii) computer equipment and
software; (ix) raw materials, work-in-process, finished goods,
consigned goods and other inventories; (x) prepayments or pre-
paid expenses; (xi) claims, causes of action, choses in action,
rights under express or implied warranties, rights of recovery
and rights of setoff of any kind; (xii) the right to receive
mail, payments on accounts receivable and other communications;
(xiii) lists of customers, records pertaining to customers and
accounts, personnel records, lists and records pertaining to
customers, suppliers and agents, and books, ledgers, files and
- 3 -
business records of every kind; (xiv) advertising materials and
other printed or written materials; (xv) goodwill as a going
concern and other intangible properties; (xvi) employee con-
tracts, including any rights thereunder to restrict an employee
from competing in certain respects; and (xvii) licenses and
authorizations issued by any governmental authority.
Benefits Agreement: the Employee Benefits Allocation
Agreement to be entered into prior to the Distribution between
Grace and New Grace, substantially in the form of Exhibit A
hereto, with such changes as are acceptable to Grace, New
Grace, Grace-Conn. and SAC.
Business: the New Grace Business or the Packaging
Business.
Code: as defined in the Recitals to this Agreement.
Contribution: as defined in the Recitals to this
Agreement.
Debt Costs: as defined in Section 2.06(b) hereof.
Deemed Foreign Tax Credits: as defined in Section
2.02(c) hereof.
Deemed Repatriations: as defined in Section 2.02(c)
hereof.
Distribution: as defined in the Recitals to this
Agreement.
Distribution Date: the date as of which the Dis-
tribution shall be effected, to be determined by, or under the
authority of, the Board of Directors of Grace consistent with
this Agreement and the Merger Agreement.
Effective Time: as defined in the Merger Agreement.
Environmental Law: as defined in the Merger Agree-
ment.
Excess Short-Term Payables: as defined in Section
2.02(c) hereof.
Excess Shares: as defined in Section 2.07(b) hereof.
Exchange Act: the Securities Exchange Act of 1934,
as amended, together with the rules and regulations promulgated
thereunder.
- 4 -
Exchange Agent: the exchange agent to be retained in
connection with effecting the Recapitalization (which may also
be the Exchange Agent with respect to the Merger and/or the
Agent).
Foreign Exchange Rate: with respect to any currency
other than United States dollars as of any date, the rate on
such date at which such currency may be exchanged for United
States dollars as quoted in The Wall Street Journal.
Foreign New Grace Subsidiaries: as defined in the
Tax Sharing Agreement.
Foreign NOLs: as defined in Section 2.02(c) hereof.
Foreign Packco Subsidiaries: as defined in the Tax
Sharing Agreement.
Foreign Tax Credits: as defined in Section 2.02(c)
hereof.
Foreign Transfer Taxes: as defined in Section
2.02(c) hereof.
Foreign Transfers: as defined in Section 2.02(a)
hereof.
Grace: as defined in the preamble to this Agreement.
Grace Certificate of Incorporation: as defined in
the Merger Agreement.
Grace Common Stock: as defined in the Recitals to
this Agreement.
Grace-Conn.: as defined in the preamble to this
Agreement.
Grace-Conn. Assets: all of the Assets owned by Grace
or its Subsidiaries immediately prior to the Distribution, oth-
er than any Packco Assets.
Grace-Conn. Liabilities: all of the Liabilities of
Grace or its Subsidiaries immediately prior to the Distribu-
tion, other than Packco Liabilities.
Grace-Conn. Public Debt: (i) the outstanding indebt-
edness of Grace-Conn. under its 8.0% Notes Due 2004, 7.4% Notes
Due 2000 and 7.75% Notes Due 2002 (other than any such indebt-
edness owned by Grace-Conn. or another member of the New Grace
- 5 -
Group) and (ii) with respect to any indebtedness described in
clause (i), any amendments, modifications, refinancings, exten-
sions, renewals, refundings or replacements of, or indebtedness
exchanged for, such indebtedness which in each case is guaran-
teed by Grace (other than any such indebtedness owned by Grace-
Conn. or another member of the New Grace Group).
Grace Credit Agreement: the credit agreement or oth-
er financing agreements or arrangements to be entered into by
Grace and/or Packco prior to the Distribution Date to fund the
New Grace Capital Contribution and fees and expenses of Packco
(or Grace) in connection with the transactions contemplated
hereby and to provide Packco with working capital.
Group: the Packco Group or the New Grace Group.
Indemnifiable Losses: all losses, Liabilities, dam-
ages, claims, demands, judgments or settlements of any nature
or kind, including all reasonable costs and expenses (legal,
accounting or otherwise as such costs are incurred) relating
thereto, suffered (and not actually reimbursed by insurance
proceeds) by an Indemnitee, including any reasonable costs or
expenses of enforcing any indemnity hereunder.
Indemnifying Party: a Person who or which is obli-
gated under this Agreement to provide indemnification.
Indemnitee: a Person who or which may seek indem-
nification under this Agreement.
Indemnity Payment: an amount that an Indemnifying
Party is required to pay to or in respect of an Indemnitee pur-
suant to Article IV.
Information: all records, books, contracts, instru-
ments, computer data and other data and information.
Intragroup Spinoff: as defined in Recital E to this
Agreement.
Joint Proxy Statement: as defined in the Merger
Agreement.
Liabilities: all debts, liabilities and obligations,
whether absolute or contingent, matured or unmatured, liqui-
dated or unliquidated, accrued or unaccrued, known or unknown,
whenever arising, and whether or not the same would properly be
reflected on a balance sheet.
- 6 -
Litigation Matters: actual, threatened or future
litigations, investigations, claims or other legal matters that
have been or may be asserted against, or otherwise adversely
affect, Grace and/or New Grace (or members of either Group).
Merger: as defined in the Recitals to this Agree-
ment.
Merger Agreement: as defined in the Recitals to this
Agreement.
Net Benefit Amount: the amount (whether positive or
negative) equal to (i) minus (ii), where (i) is the sum of the
U.S. Plan Assets and the Foreign Plan Assets (each as defined
below) and (ii) is the sum of the U.S. Benefit Plan Liabilities
and the Foreign Benefit Plan Liabilities (each as defined be-
low).
"U.S. Plan Assets" means the aggregate fair market
value, as of the Distribution Date, of the assets of the
Union Retirement Plan (as defined in the Benefits Agree-
ment) and the assets that will be transferred to the
Packco Hourly Non-Union Retirement Plan (as defined in the
Benefits Agreement) pursuant to Section 4.01(d) of the
Benefits Agreement, in each case as reasonably determined
by Actuarial Sciences Associates ("ASA"). "Foreign Plan
Assets" means the aggregate fair market value, as of the
Distribution Date, of the assets that will be, pursuant to
the Foreign Plans Agreement (as defined in the Benefits
Agreement), transferred from a Noninsured Foreign Pension
Plan (as defined in the Benefits Agreement) that is a New
Grace Benefit Plan (as defined in the Benefits Agreement)
(a "Transferring New Grace Foreign Plan") to a Packco Ben-
efit Plan or retained by a Noninsured Foreign Pension Plan
that is a Packco Benefit Plan (a "Retained Grace Foreign
Plan"), in each case as reasonably determined by the Local
Actuary (as defined in the Benefits Agreement) for the
relevant Transferring New Grace Foreign Plan or Retained
Grace Foreign Plan.
"U.S. Benefit Plan Liabilities" means the sum of
the Accrued Benefit Obligation, calculated in accordance
with FAS 87 ("ABO"), for (i) benefits of Packco Partici-
pants (as defined in the Benefits Agreement) under the
Union Retirement Plan and (ii) benefits of Packco Partici-
pants under the Hourly Non-Union Retirement Plan (as de-
fined in the Benefits Agreement) that are assumed by the
Packco Hourly Non-Union Retirement Plan pursuant to Sec-
tion 4.01(d) of the Benefits Agreement. "Foreign Benefit
Plan Liabilities" means the greater of (i) the sum of the
- 7 -
ABOs for the Assumed Foreign Benefits (as defined below)
plus $10 million and (ii) the sum of the Projected Benefit
Obligations, calculated in accordance with FAS 87 ("PBO"),
for the Assumed Foreign Benefits. The "Assumed Foreign
Benefits" means the aggregate amount of the retirement
benefits of Packco Participants under each Noninsured For-
eign Pension Plan that are, pursuant to the Foreign Bene-
fits Agreement, either assumed by a Packco Benefit Plan
from a Transferring New Grace Foreign Plan or retained by
a Retained Grace Foreign Plan.
The determination of U.S. Benefit Plan Liabilities
shall be made by ASA in accordance with the actuarial and other
assumptions set forth on Schedule 1.01(f). The determination
of the ABOs and PBOs for the Assumed Foreign Benefits shall in
each case be made by AON Consulting ("AON") as of the Distribu-
tion Date based upon the actuarial and other assumptions used
by AON to determine the ABO or PBO (as applicable) of the rel-
evant Transferring New Grace Foreign Plan or Retained Grace
Foreign Plan for purposes of Grace's fiscal 1996 year-end fi-
nancial disclosures, if such ABO or PBO is reported thereon,
which actuarial and other assumptions are set forth on Schedule
1.01(f), provided, in the case of the assumptions relating to
each Noninsured Foreign Pension Plan, that such assumptions are
reasonable. To the extent that the ABO or PBO for a particular
Transferring New Grace Foreign Plan or Retained Grace Foreign
Plan was not so reported, such assumptions shall be reasonable
assumptions developed by AON in the manner most typically used
by AON to develop assumptions for determining ABO or PBO for
FAS 87 purposes for substantially similar plans in the appli-
cable jurisdiction.
ASA, the Local Actuaries and AON (collectively, the
"Actuaries") shall initially make the determinations called for
by this definition on a good-faith estimated basis not later
than December 31, 1997 or such other date as the parties hereto
shall request. In making such initial determinations, the lo-
cal Actuaries shall be entitled to rely upon the advice of
Grace and New Grace with respect to the anticipated terms and
conditions of the Foreign Plans Agreement (if it has not yet
been signed) and the manner in which its terms and conditions
will be implemented. Final determinations shall be made by the
Actuaries as and when the asset transfers and assumptions of
liabilities contemplated by the Foreign Plans Agreement and
Section 4.01(d) of the Benefits Agreement are completed, and
the New Grace Capital Contribution shall be adjusted as neces-
sary to reflect the Net Benefit Amount as so finally deter-
mined. Grace and New Grace agree to cooperate in supplying the
Actuaries with all information reasonably requested by them in
connection with making such determinations, including, without
- 8 -
limitation, information concerning Plan participants, assets
and benefits. Grace, New Grace and SAC shall be entitled to
review and comment on the Actuaries' analyses as the Actuaries
are in the process of making their determinations.
New Grace: as defined in the preamble to this Agree-
ment.
New Grace Business: all of the businesses and opera-
tions conducted by Grace and its Subsidiaries at any time,
whether prior to, on or after the Distribution Date, other than
the Packaging Business.
New Grace Capital Contribution: the capital contri-
bution, distribution or other transfer to be received by Grace-
Conn. at or shortly prior to the Distribution, in the aggregate
amount of:
(a) $1,200,000,000;
plus (b) the aggregate amount of cash held by Packco or
any Packco Subsidiaries immediately prior to the
Distribution;
minus (c) the amount by which
(i) the aggregate amount of (x) withholding
Taxes that would be imposed by foreign ju-
risdictions on a deemed distribution to
Packco by each Foreign Packco Subsidiary
immediately following the Distribution, of
an amount of cash equal to the excess of
(I) the amount of cash held by such Foreign
Packco Subsidiary immediately prior to the
Distribution over (II) the sum of (A) the
amount of debt that may be repaid without
penalty plus current accrued but unpaid
Taxes of such Subsidiary as of the Distri-
bution Date and (B) Excess Short-Term Pay-
ables of such Subsidiary; provided, how-
ever, that such amount of cash shall be
determined taking into account the prin-
ciples, as applied to Packco, set forth in
the proviso in Section 2.02(c)(v), and (y)
Taxes that would be imposed by the United
States or any political subdivision thereof
in excess of the Foreign Tax Credits of
Packco in respect of Taxes paid by Packco
or deemed paid by Packco as a result of
such deemed distributions of such cash;
- 9 -
exceeds (ii) the aggregate amount of Packco Repatriation
Tax Costs;
plus (d) the Net Benefit Amount; and
plus (e) the aggregate amount of Transaction Costs, if
any, payable by Grace to New Grace pursuant to
Section 8.04 of this Agreement, as of the Dis-
tribution Date.
New Grace Common Stock: as defined in the Recitals
to this Agreement.
New Grace Group: New Grace, Grace-Conn. and the oth-
er New Grace Subsidiaries.
New Grace Group Excess Cash: as defined in Section
2.02(c) hereof.
New Grace Indemnitees: New Grace, each Affiliate of
Grace-Conn. (other than members of the Packco Group) and each
of their respective Representatives and each of the heirs, ex-
ecutors, successors and assigns of any of the foregoing.
New Grace Repatriation Tax Costs: as defined in Sec-
tion 2.02(c) hereof.
New Grace Rights: the preferred share purchase
rights of New Grace.
New Grace Subsidiaries: all direct and indirect Sub-
sidiaries of Grace, including foreign subsidiaries of Grace-
Conn. to be formed pursuant to the Tax Sharing Agreement or
Section 2.02 hereof, other than Packco and any Packco Subsid-
iary.
Newco Common Stock: the shares of common stock, par
value $.10 per share, of Grace.
Newco Convertible Preferred Stock: the Series A Con-
vertible Preferred Stock of Grace, par value $.10 per share,
the terms of which are described in Exhibit E to the Merger
Agreement.
NYSE: New York Stock Exchange, Inc.
Other Agreements: the Benefits Agreement, the Tax
Sharing Agreement, an insurance procedures agreement, an intel-
lectual property license agreement, an interim services agree-
ment, the shared facilities agreements and the other agreements
- 10 -
entered into or to be entered into in connection with the Dis-
tribution as contemplated by Article II of this Agreement.
Packaging Business: all of the worldwide packaging
businesses, operations and investments conducted or owned by
Grace and its Subsidiaries at any time, whether prior to, on or
after the Distribution Date, including Cryovac Registered
flexible plastic packaging systems, Omicron Registered rigid
plastic cups and tubs for dairy foods and Formpac Registered
foam trays for supermarket and institutional food service,
provided that the Packaging Business shall not include the
worldwide businesses, operations and investments at or prior to
the Distribution Date conducted or owned by Grace and its Sub-
sidiaries of its container business group (which was, until
1996, operated as a separate business unit known as Grace Con-
tainer Products and any extensions of such former business unit
since such time and through the Distribution Date), including,
without limitation, Darex Registered container sealants and
coatings.
Packco: as defined in the Recitals to this Agree-
ment.
Packco Assets: collectively and except as otherwise
provided in any of the Other Agreements, (i) all of the right,
title and interest immediately prior to the time of the Distri-
bution of Grace and its Subsidiaries in all Assets that are
predominantly used or held for use in or predominantly relating
to or to the extent arising from the Packaging Business; (ii)
the rights to use shared Assets as provided in Article II;
(iii) all other Assets of Grace and its Subsidiaries to the
extent specifically assigned to or retained by any member of
the Packco Group pursuant to this Agreement or any Other Agree-
ment; (iv) the capital stock of Packco and all Packco Subsid-
iaries; and (v) the Assets set forth on Schedule 1.01(a)
hereto; provided that
(a) all cash and marketable securities held by
any member of the Packco Group immediately prior to
the Distribution shall be Grace-Conn. Assets;
(b) intellectual property rights shall be Pack-
co Assets in the form and to the extent provided in
Section 2.01(d);
(c) with respect to leased or owned real prop-
erty included in the Packco Assets that is not used
exclusively by the Packaging Business, Packco Assets
shall include only real property used or held for use
in the Packaging Business as of the Distribution Date
- 11 -
and shall not include any vacant or unoccupied prop-
erty otherwise owned or leased by Grace or any of its
Subsidiaries (except in the case of vacant or unoc-
cupied property (I) on a site that is engaged pre-
dominantly in the Packaging Business, to provide a
reasonable buffer area for such operations, to the
extent practicable or (II) that is used or held for
use in the Packaging Business);
(d) other than as provided herein or in the
Other Agreements, Packco Assets shall not include any
general corporate or corporate service operations of
Grace conducted in its Boca Raton, Florida headquar-
ters and the other locations set forth on Schedule
1.01(b) hereto;
(e) all right, title and interest of Grace and
its Subsidiaries in the real property identified on
Schedule 1.01(a) shall be Packco Assets; and
(f) Packco Assets shall not include (I) the
Woburn, MA Grace facility or the Scuffletown Rd.,
South Carolina facility previously used by the Pack-
aging Business (or any Assets located at or relating
to such facilities); (II) Assets relating to any di-
vested business or product line of Grace or any of
its Subsidiaries (including rights to payment and
indemnification thereunder, but Packco Assets shall
include rights to indemnification relating to amounts
paid by the Packco Group pursuant to clause (a)(II)
of the definition of Packco Liabilities); (III) any
interim service or tolling agreements entered into in
connection with any divestiture by Grace or any of
its Subsidiaries prior to the Distribution Date; and
(IV) the Assets set forth on Schedule 1.01(c).
Packco Group: Grace, Packco and the Packco Subsid-
iaries.
Packco Group Excess Cash: as defined in Section
2.02(c) hereof.
Packco Indemnitees: Grace, Packco, each Affiliate of
Packco and each of their respective Representatives and each of
the heirs, executors, successors and assigns of any of the
foregoing.
Packco Liabilities: collectively, and in each case
except to the extent otherwise provided in any Other Agreement,
(i) all Liabilities of Grace and its Subsidiaries to the extent
- 12 -
relating to or arising from the Packaging Business or the
Packco Assets; (ii) all Liabilities of Grace and its Subsid-
iaries to the extent assigned to or assumed by Grace and Packco
under this Agreement or any Other Agreement; (iii) all Liabil-
ities of Grace and/or Packco under the Grace Credit Agreement;
and (iv) all Liabilities set forth on Schedule 1.01(d) hereto,
provided that Packco Liabilities shall not, in any event, in-
clude:
(a) Liabilities of Grace and its Subsidiaries
(I) arising under any Environmental Law relating to
any facility or Asset that was used or held for use
in the Packaging Business prior to but not on or af-
ter the Distribution Date (including formerly owned
or leased facilities and former offsite disposal fa-
cilities) or (II) relating to any business or product
line that was part of, or any facility or Asset that
was used or held for use in, the Packaging Business
that, in each case, has been divested prior to the
Distribution Date; provided that, except as otherwise
provided below, 25% of such Liabilities described in
this clause not to exceed $10 million in the aggre-
gate shall be Packco Liabilities;
(b) Liabilities arising under any Environmental
Law relating to or arising from the Woburn, MA Grace
facility or the Scuffletown Road, SC facility;
(c) Liabilities for any indebtedness, other
than indebtedness under the Grace Credit Agreement
and indebtedness to unaffiliated persons outstanding
on the date hereof;
(d) Liabilities of Grace or any of its Subsid-
iaries relating to or arising from any interim ser-
vice or tolling agreements entered into in connection
with any divestiture by Grace or any of its Subsid-
iaries;
(e) Liabilities, whether such Liabilities re-
late to events, occurrences or circumstances occur-
ring or existing, or whether such Liabilities arise,
before, on or after the Distribution Date, relating
to asbestos or asbestos-containing materials manufac-
tured and/or sold (collectively, "Asbestos Activi-
ties") by Grace, Grace-Conn. or any of their respec-
tive Subsidiaries, affiliates or predecessors (but
this clause shall not include such Liabilities to the
extent relating to Asbestos Activities, if any, con-
ducted after the Distribution Date of any member of
- 13 -
the Packco Group or any of their Affiliates after the
Distribution Date);
(f) Liabilities relating to or arising from any
violation or alleged violation on or prior to the
Distribution Date by Grace, Grace-Conn. or any of
their respective Subsidiaries, affiliates or prede-
cessors of any federal, state or foreign securities
laws; and
(g) Liabilities relating to or arising from any
breach or alleged breach of fiduciary duties by any
director or executive officer of Grace, Grace-Conn.
or any of their respective Subsidiaries, affiliates
or predecessors prior to the Distribution Date.
Packco Repatriation Tax Costs: as defined in Section
2.02(c) hereof.
Packco Subsidiaries: all direct and indirect Sub-
sidiaries of Grace to be transferred to or formed by Packco in
connection with the Contribution or the Foreign Transfers (in-
cluding any such Subsidiary to be formed pursuant to the Tax
Sharing Agreement or Section 2.02).
Per Share Common Consideration: the shares (or frac-
tion of a share) of Newco Common Stock issuable in the Recapi-
talization per share of Grace Common Stock outstanding as of
the Record Date, such amount to be determined by dividing (a)
the amount equal to (I) 40,895,000, increased by the product,
if any, of (x) 1.7027 and (y) the net increase in outstanding
Sealed Air Common Shares between August 14, 1997 and the Dis-
tribution Date, minus (II) the Net Option Number, by (b) the
aggregate number of shares of Grace Common Stock outstanding as
of the Record Date, the result being rounded to the nearest
one-thousandth (or, in the event there is no nearest number,
rounded up to the next one-thousandth). "Net Option Number"
means
(i) the aggregate number of shares of Newco
Common Stock into which all outstanding
options to purchase shares of Grace Common
Stock outstanding as of the Distribution
Date and held by Packco Employees are or
may be exercisable (whether or not then
exercisable) immediately after the Effec-
tive Time (such number calculated as pro-
vided in the Benefits Agreement, the "Newco
Options"), multiplied by the amount by
which:
- 14 -
(I) the average of the arithmetic mean
between the highest and lowest sales
prices of a share of Newco Common
Stock on the New York Stock Exchange
Composite Tape on each of the five
trading days beginning on the ex-
dividend date for the Distribution
(the "SAC Stock Price")
exceeds (II) the weighted average per-share exer-
cise price for the Newco Options, cal-
culated as provided in the Benefits
Agreement;
divided by (ii) the SAC Stock Price.
Fractional shares otherwise issuable to a Grace shareholder
shall be treated as provided in Section 2.07(b). In the event
that shares of Grace Common Stock are issued between the Record
Date and the Effective Time, including pursuant to the exercise
of stock options granted by Grace (but not including issuances
in the Recapitalization), such Consideration shall be appro-
priately adjusted.
Per Share Preferred Consideration: the shares (or
fraction of a share) of Newco Convertible Preferred Stock issu-
able in the Recapitalization per share of Grace Common Stock
outstanding as of the Record Date, such amount to be calculated
by dividing 36,000,000 by the aggregate number of shares of
Grace Common Stock outstanding as of the Record Date, the re-
sult being rounded to the nearest one-thousandth (or, in the
event there is no nearest number, rounded up to the next one-
thousandth). Fractional shares otherwise issuable to a Grace
shareholder shall be treated as provided in Section 2.07(b).
In the event that shares of Grace Common Stock are issued be-
tween the Record Date and the Effective Time, including pursu-
ant to the exercise of stock options granted by Grace (but not
including issuances in the Recapitalization), such Consider-
ation shall be appropriately adjusted.
Person: an individual, a partnership, a joint ven-
ture, a corporation, a limited liability company, a trust, an
unincorporated organization or a government or any department
or agency thereof.
Pre-Distribution Period: as defined in the Tax Shar-
ing Agreement.
Privileged Information: with respect to either
Group, Information regarding a member of such Group, or any of
- 15 -
its operations, Assets or Liabilities (whether in documents or
stored in any other form or known to its employees or agents)
that is or may be protected from disclosure pursuant to the
attorney-client privilege, the work product doctrine or other
applicable privileges, that a member of the other Group may
come into possession of or obtain access to pursuant to this
Agreement or otherwise.
Recapitalization: as defined in Section 2.07 hereof.
Record Date: the close of business on the date to be
determined by the Board of Directors of Grace as the record
date for determining shareholders of Grace entitled to receive
the Distribution and the Recapitalization, which date shall be
the day of, or the business day immediately preceding the day
of, the Effective Time.
Registration Statements: a registration statement on
Form 10 (or, if such form is not appropriate, the appropriate
form pursuant to the Securities Act) to be filed by New Grace
with the SEC to effect the registration of the New Grace Common
Stock and the New Grace Rights pursuant to the Exchange Act
(or, if applicable, pursuant to the Securities Act) and the
registration statement to be filed by Grace with the SEC in
connection with the Recapitalization and the Merger pursuant to
the Securities Act.
Representative: with respect to any Person, any of
such Person's directors, officers, employees, agents, consult-
ants, advisors, accountants, attorneys and representatives.
SAC: as defined in the Recitals to this Agreement.
SEC: the Securities and Exchange Commission.
Securities Act: the Securities Act of 1933, as
amended, together with the rules and regulations promulgated
thereunder.
Severance Costs: as defined in Section 8.04 hereof.
Shared Facilities: other than Shared Regional Head-
quarters, any production, manufacturing, sales office or other
facility (whether owned or leased) of Grace or any of its sub-
sidiaries in which operations of both the Packaging Business
and the New Grace Business are conducted as of the Distribution
Date, including the facilities listed on Schedule 1.01(e) here-
to.
- 16 -
Shared Regional Headquarters: regional headquarters
of Grace in which services are provided, as of the Distribution
Date, to both the Packaging Business and the New Grace Busi-
ness.
Subsidiary: with respect to any specified Person,
any corporation or other legal entity of which such Person or
any of its subsidiaries controls or owns, directly or indi-
rectly, more than 50% of the stock or other equity interest
entitled to vote on the election of members to the board of
directors or similar governing body.
Subsidiary Excess Cash: as defined in Section
2.02(c) hereof.
Tax: as defined in the Tax Sharing Agreement.
Tax Benefit: as defined in the Tax Sharing Agree-
ment.
Tax Sharing Agreement: the Tax Sharing Agreement to
be entered into prior to the Distribution between Grace and New
Grace, substantially in the form of Exhibit B hereto, with such
changes as are acceptable to Grace, New Grace, Grace-Conn. and
SAC.
Third-Party Claim: any claim, suit, derivative suit,
arbitration, inquiry, proceeding or investigation by or before
any court, any governmental or other regulatory or adminis-
trative agency or commission or any arbitration tribunal as-
serted by a Person who or which is neither a party hereto nor
an Affiliate of a party hereto.
Transaction Agreements: as defined in the Merger
Agreement.
Transaction Costs: as defined in Section 8.04
hereof.
Withholding Taxes: as defined in Section 2.02(c)
hereof.
SECTION 1.02 REFERENCES TO TIME. All references in
this Agreement to times of the day shall be to New York City
time.
- 17 -
ARTICLE II
CERTAIN TRANSACTIONS PRIOR TO THE DISTRIBUTION DATE
SECTION 2.01 TRANSFER OF PACKCO ASSETS; ASSUMPTION
OF PACKCO LIABILITIES. (a) Prior to the Distribution Date but
subject to Section 2.02, Grace shall transfer, or cause to be
transferred to Packco or, at Packco's option, to a Packco Sub-
sidiary effective as of the Distribution Date all of the Packco
Assets. Immediately prior to the Distribution, the capital
stock of Packco shall be distributed to Grace. Grace shall
also transfer, or cause to be transferred, the capital stock of
any Subsidiary such that, as of the Distribution Date, the
Packco Subsidiaries shall be wholly owned (except for shares
held by directors or officers to comply with applicable law) by
a member of the Packco Group and the New Grace Subsidiaries
shall be wholly owned (except for shares held by directors or
officers to comply with applicable law) by a member of the New
Grace Group. Effective as of the Distribution Date, the trans-
fers described in this Section will result in Packco or another
member of the Packco Group obtaining all of the rights, title
and interests of Grace and its Subsidiaries in the Packco As-
sets, subject to Sections 2.05 and 2.10.
(b) Effective as of the Distribution Date and sub-
ject to Section 2.02, Packco shall, or shall cause a Packco
Subsidiary to, assume, pay, perform, and discharge in due
course all of the Packco Liabilities.
(c) Separation of Assets. The Packco Assets and
Grace-Conn. Assets (including Assets that are, or are contained
in, the Shared Facilities) shall, to the extent reasonably
practicable (including taking into account the costs of any
actions taken), be severed, divided or otherwise separated from
each other so that a member of the respective Group will own
and control their respective Assets as of the Distribution
Date, provided that neither Grace nor New Grace shall be obli-
gated to make significant expenditures to effect such separa-
tion prior to the Distribution Date. Actions taken and expen-
ditures incurred to separate the Shared Facilities shall be
subject to the agreement of Grace, New Grace and SAC. Such
separation may include subdivision of real property, subleasing
or other division of shared buildings or premises and alloca-
tion of shared working capital, equipment and other Assets.
Such separation shall be effected in a manner that does not
unreasonably disrupt either the Packaging Business or the New
Grace Business and minimizes, to the extent practicable, cur-
rent and future costs (and losses of tax or other economic ben-
efits) of the respective Businesses. With respect to any Asset
that cannot reasonably be separated or otherwise allocated as
- 18 -
provided above, (i) all right, title and interest of Grace and
its Subsidiaries shall be allocated to the Group as to which
such Asset is predominantly used or held for use or predomi-
nantly relates and (ii) the other Group shall have a right to
use such Assets in its Business in a manner consistent with
past practice for a period which is coterminous with the life
of the Asset described in (i) (and the coextensive obligation
to pay its allocable share of any costs or expenses related to
such Asset pursuant to the last sentence of this Section
2.01(c)). To the extent the separation of Assets cannot be
achieved in a reasonably practicable manner, the parties will
enter into appropriate arrangements regarding the shared Asset.
Any costs related to the use of a shared Asset that is not sep-
arated as of the Distribution Date shall be allocated, with
respect to the two-year period beginning immediately after the
Distribution Date, based on the methodology historically used
by Grace, and, for any period thereafter, using such reasonable
manner as agreed by New Grace and Grace.
(d) Intellectual Property. Notwithstanding the
foregoing or anything else contained herein, any intellectual
property rights of Grace or any of its Subsidiaries that are
Packco Assets shall be licensed to or transferred to Packco, as
the case may be, as follows. With respect to intellectual
property rights used or held for use solely in connection with
the Packaging Business, Packco shall have full ownership (to
the extent of Grace's rights therein) of such rights. Except
as otherwise provided in Schedule 2.01(d), with respect to in-
tellectual property rights that are used or held for use in
both the Packaging Business and the New Grace Business, title
to such rights shall be owned by the New Grace Group and the
Packco Group shall have an exclusive, worldwide, fully paid,
perpetual, royalty-free license to use the intellectual prop-
erty rights for the field of use described in the next sentence
hereof. The field of use shall be (i) the businesses engaged
in by Packco and the Packco Group as of the Distribution Date
and the businesses of SAC as of the Distribution Date, includ-
ing, in each case, reasonable extensions thereof, provided,
however, that such field of use shall not include the field
described in the proviso to the definition of "Packaging Busi-
ness" as well as (to the extent not described in such proviso)
the business of (A) closures, closure sealant compositions and
multifunctional can ends which are used on or with rigid con-
tainers and (B) coatings, sealants, compositions and equipment
used or held for use in the manufacture of cans and other rigid
containers, in each case including reasonable extensions
thereof; and (ii) notwithstanding (i), with respect to reason-
able extensions referred to in the first part of clause (i)
that overlap with the reasonable extensions described in the
proviso in clause (i), the field of use shall include such
- 19 -
overlap but the license therefor shall be non-exclusive and the
New Grace Group shall also have title to use such intellectual
property in the area of overlap. Such licenses shall not un-
duly restrict the subsequent transfer or license (within the
applicable field of use) of the intellectual property. Such
arrangements shall not restrict or limit in any way the rights
of SAC to use any intellectual property that is not a Packco
Asset.
(e) The costs (and other out-of-pocket losses) at-
tributable to the separation of the Assets, including, without
limitation, the Shared Facilities, shall be allocated pursuant
to Section 8.04.
SECTION 2.02 CERTAIN FOREIGN TRANSFERS. (a) Prior
to the Distribution Date, Grace shall use its reasonable best
efforts to effect the legal separation of the Packco Assets and
Packco Liabilities, on the one hand, from the Grace-Conn. As-
sets and Grace-Conn. Liabilities, on the other hand, that are
located in jurisdictions outside the United States. Such sepa-
ration may include asset transfers, stock transfers, spin-offs,
mergers, reorganizations, consolidations or other transfers
which may be effected before, simultaneously with or after the
Distribution (collectively, the "Foreign Transfers"). Any For-
eign Transfer that occurs after the Distribution shall be ef-
fected pursuant to a binding commitment in existence prior to
the Distribution Date.
(b) The Adjusted Foreign Transfer Taxes shall be
allocated between the New Grace Group and the Packco Group as
provided in Section 8.04. Each party shall reimburse the other
to the extent that such other party pays Foreign Transfer Taxes
in excess of the amount of Adjusted Foreign Transfer Taxes al-
locable to such other party pursuant to Section 8.04. Such
payment shall, for Tax purposes, be characterized as an adjust-
ment of the New Grace Capital Contribution.
(c) (i) "Adjusted Foreign Transfer Taxes" shall
mean the excess, if any, of (I) the sum of the Foreign Transfer
Taxes, Packco Repatriation Tax Costs and New Grace Repatriation
Tax Costs over (II) the present value using a discount rate of
5% (or, in the case of value added taxes, the gross value) of
any Tax Benefits (including foreign tax credits for United
States federal income tax purposes ("Foreign Tax Credits")
other than Foreign Tax Credits attributable to Foreign Transfer
Taxes or Withholding Taxes that in the aggregate do not exceed
the Tax imposed by the United States and any political subdivi-
sion thereof on the Deemed Repatriation) that may or would
arise as a result of the Foreign Transfers, the payment of the
Foreign Transfer Taxes or the Deemed Repatriations. Such Tax
- 20 -
Benefits shall be presumed to be utilized in the first year in
which they arise (or are deemed to arise). All amounts relat-
ing to the calculation of Adjusted Foreign Transfer Taxes and
the amount calculated pursuant to clause (c) of the definition
of "New Grace Capital Contribution" shall be calculated in lo-
cal currency and translated into U.S. Dollars at the Foreign
Exchange Rate for such currency as of the Distribution Date.
(ii) "Foreign Transfer Taxes" shall mean net Taxes
that may be imposed by any jurisdiction other than the United
States or any political subdivision thereof in connection with
the Foreign Transfers (and any Tax net of associated foreign
tax credits imposed by the United States or a political
subdivision thereof on the Foreign Transfer in Venezuela) on
any member of the New Grace Group or the Packco Group;
provided, however, that the Foreign NOLs shall be taken into
account in calculating the amount of Foreign Transfer Taxes.
(iii) "Packco Repatriation Tax Costs" and "New Grace
Repatriation Tax Costs", respectively, shall mean the sum of
the (I) withholding Taxes that would be imposed by a foreign
jurisdiction on a deemed distribution of Packco Group Excess
Cash to Packco or of New Grace Group Excess Cash to New Grace,
respectively (the "Deemed Repatriations"), on the day immedi-
ately following the Distribution ("Withholding Taxes") and (II)
Taxes that would be imposed by the United States or any politi-
cal subdivision thereof on a Deemed Repatriation (without tak-
ing into account any net operating loss or other deduction) in
excess of the Foreign Tax Credits of Packco or Grace-Conn.,
respectively, in respect of Taxes paid or deemed paid by Packco
or Grace-Conn., respectively, as a result of such Deemed Repa-
triation ("Deemed Foreign Tax Credits").
(iv) "Packco Group Excess Cash" and "New Grace Group
Excess Cash", respectively, shall mean the sum of the amount of
Subsidiary Excess Cash for all Foreign Packco Subsidiaries or
Foreign New Grace Subsidiaries.
(v) "Subsidiary Excess Cash" shall mean the cash
transferred to a Foreign Packco Subsidiary or Foreign New Grace
Subsidiary pursuant to a Foreign Transfer in excess of the sum
of (I) the amount of debt that may be repaid without penalty
plus current accrued unpaid Taxes of such Subsidiary as of the
Distribution Date and (II) the excess of trade and other short-
term payables over trade and other short-term receivables of
such Subsidiary ("Excess Short-Term Payables"); provided, how-
ever, that each party shall take steps (including causing the
Subsidiary to loan cash to an Affiliate organized in a foreign
jurisdiction to the extent that such Affiliate can use such
cash to repay its debt or to pay current accrued unpaid Taxes
- 21 -
and Excess Short-Term Payables) and cooperate in good faith to
minimize the amount of Subsidiary Excess Cash, taking into ac-
count Tax and financial considerations as if each party were
bearing the full amount of its respective Repatriation Tax
Cost.
(vi) The "Foreign NOLs" shall mean net operating
losses for German income tax purposes of Grace GmbH and Grace
Multiflex GmbH, and net operating losses for other foreign in-
come tax purposes of any other Foreign Packco Subsidiary, at-
tributable to the Pre-Distribution Period to the extent, in
either case, that such net operating losses would be an Overall
Tax Benefit (or Hypothetical Pre-Distribution Overall Tax Ben-
efit), calculated without regard to any Tax Item arising on the
Foreign Transfer involving such Subsidiary, that does not ex-
ceed the amount of income or gain arising, for purposes of the
applicable foreign income tax, on the Foreign Transfer involv-
ing such Subsidiary.
(d) In connection with the Foreign Transfers, cer-
tain Assets (including cash) or Liabilities that, without the
agreement of the parties as required by this Section 2.02(d),
would be Grace-Conn. Assets or Grace-Conn. Liabilities, as the
case may be, may be retained by Packco or a Packco Subsidiary
(or Assets or Liabilities that, without the agreement of the
parties as required by this Section 2.02(d), would be Packco
Assets or Packco Liabilities, may be retained by New Grace or a
New Grace Subsidiary) if agreed between Grace and New Grace and
reasonably satisfactory to SAC.
(e) Neither SAC nor any member of the Packco Group
or the New Grace Group shall take any action, or fail or omit
to take any action where the taking of such action or the fail-
ure or omission to take such action would disturb the tax
treatment assumed by the parties in calculating the Foreign
Transfer Taxes and cause any Indemnifiable Loss to a member of
the other Group, including an increase in the amount of Ad-
justed Foreign Transfer Taxes borne by the other Group. Grace
agrees to indemnify and hold the Grace-Conn. Indemnitees harm-
less, and Grace-Conn. agrees to indemnify and hold the Packco
Indemnitees harmless, from and against any such Indemnifiable
Loss without regard to any limitation contained in Section
8.04.
(f) Adjusted Foreign Transfer Taxes shall be recal-
culated upon any audit adjustment, Final Determination or any
other change (i) of a Foreign Transfer Tax or another foreign
Tax or Tax Item that would change the amount of Deemed Foreign
Tax Credit or otherwise alter Packco Repatriation Tax Costs or
New Grace Repatriation Tax Costs or (ii) that changes the
- 22 -
amount of a Foreign NOL. Appropriate payment shall be made
between the parties such that Foreign Transfer Taxes, as so
redetermined, and Adjusted Foreign Transfer Taxes, as so recal-
culated, are shared according to the principles of Section
2.02(b).
SECTION 2.03 CERTIFICATE OF INCORPORATION; BY-LAWS;
RIGHTS PLAN. (a) Prior to the Distribution Date, Grace shall
contribute the capital stock of Grace-Conn. to New Grace, as
well as the capital stock of any other Subsidiary of Grace
formed in connection with the Foreign Transfers that is not a
Packco Subsidiary. In addition, prior to the Distribution
Date, the parties hereto shall take all action necessary so
that, at the Distribution Date, New Grace's name shall be
"W. R. Grace & Co."
(b) Prior to the Distribution Date, Grace and New
Grace shall take all action necessary so that the certificate
of incorporation and by-laws of New Grace and the preferred
share purchase rights plan of New Grace shall be in effect as
specified by New Grace, each in the form of Exhibits C, D and E
hereto, respectively (with such changes as Grace and New Grace
may find appropriate).
(c) Prior to the Distribution Date, Grace and Packco
shall take all action necessary so that the certificate of in-
corporation and by-laws of Packco shall be substantially simi-
lar to the customary form of certificate of incorporation and
by-laws for a wholly owned Delaware subsidiary and reasonably
acceptable to SAC.
SECTION 2.04 ISSUANCE OF STOCK. Prior to the Dis-
tribution Date, the parties hereto shall take all steps neces-
sary so that the number of shares of New Grace Common Stock
outstanding and held by Grace shall equal the number of shares
of Grace Common Stock outstanding on the Record Date.
SECTION 2.05 OTHER AGREEMENTS; SHARED FACILITIES.
(a) Each of Grace and New Grace shall, prior to the Distribu-
tion Date, enter into, or cause the appropriate members of the
Group of which it is a member to enter into, the Other Agree-
ments in connection with the Distribution, including, without
limitation, agreements with respect to (i) insurance proce-
dures, (ii) interim services (including, without limitation,
services to be provided by the Shared Regional Headquarters
consistent with current operations of the respective Busi-
nesses, and services to be provided by country organizations to
operations of the other Business consistent with past prac-
tice), which shall be charged at allocated cost based on
Grace's historical methodology, subject to applicable tax laws
- 23 -
in any jurisdiction, (iii) intellectual property licenses as
contemplated by Section 2.01, (iv) and other matters as may be
advisable. The Other Agreements (or, in the case of the forms
of agreement attached hereto, any amendments thereto) shall be
on terms reasonably acceptable to Grace, New Grace and SAC.
Agreements regarding interim services (including country ser-
vices) shall generally have a term not to exceed 24 months
(subject to earlier termination on six months' notice (or such
shorter period as does not impose additional costs on the pro-
viding party) by the party receiving the services) and will
provide, in the case of agreements pursuant to which Packco is
to provide services to New Grace, for services at least as ex-
tensive as any obligations contained in interim service and
tolling agreements entered into prior to the Distribution Date
between Grace and a third party. Such Agreements regarding
interim services (including country services) will also provide
that any value added taxes imposed on such services shall be
paid and borne, as between the parties, by the party receiving
such services. The parties shall use reasonable efforts to
conclude the Other Agreements prior to the time the other con-
ditions to the Distribution have been satisfied.
(b) The parties acknowledge and agree that operation
by members of the Packco Group or New Grace Group of the Shared
Facilities after the Distribution Date may continue to require
the joint occupation or use by the parties of certain related
premises or facilities (such as waste disposal, utilities, se-
curity and other matters). The parties shall enter into ap-
propriate arrangements regarding cost allocation and service
provision with respect to these matters, which allocation shall
be as described in Section 2.01(c) and 2.05(a), as applicable.
The agreements described in this paragraph (b) shall be in-
cluded in the Other Agreements.
SECTION 2.06 FINANCING. (a) Prior to the Distri-
bution Date, Grace and/or Packco shall enter into the Grace
Credit Agreement, which shall be on terms reasonably acceptable
to Grace and SAC, and Grace and/or Packco shall contribute, or
cause to be contributed, the New Grace Capital Contribution to
Grace-Conn., all as described in this Section. No member of
the New Grace Group shall have any Liability or obligation with
respect to the Grace Credit Agreement. At the election of New
Grace and subject to the consent of Grace and SAC, which will
not be unreasonably withheld, a portion of the New Grace Capi-
tal Contribution may be contributed to foreign Subsidiaries of
New Grace. It is contemplated that the New Grace Capital Con-
tribution shall be effected as follows; provided, however, that
Packco shall not borrow an amount in excess of the tax basis,
for U.S. federal income tax purposes, of Grace-Conn. in the
stock of Packco: (i) each of Grace and Packco shall borrow
- 24 -
agreed-upon amounts; (ii) Packco distributes a portion of the
New Grace Capital Contribution to Grace-Conn. which uses such
funds to pay creditors; (iii) the Intragroup Spinoff occurs;
(iv) Grace contributes the remaining amount of the New Grace
Capital Contribution to New Grace as well as the capital stock
of Grace-Conn.; and (v) New Grace loans the amount described in
clause (iv) to Grace-Conn. in the form of a security.
(b) Prior to the Distribution, Grace-Conn. may con-
summate a cash tender offer in accordance with applicable secu-
rities laws for any and all Grace-Conn. Public Debt. Grace-
Conn. may also elect, in its discretion, to defease or other-
wise acquire any portion of the Grace-Conn. Public Debt. To
the extent that upon consummation of the Distribution, there
remains outstanding (other than to the extent owned by Grace-
Conn. or New Grace) in excess of $50 million in principal
amount of the Grace-Conn. Public Debt, New Grace or Grace-Conn.
shall obtain an "evergreen" letter of credit, with an initial
expiration date no sooner than 364 days after the Effective
Time, from a financial institution or group of financial insti-
tutions reasonably acceptable to Grace and SAC for the benefit
of Grace with respect to such outstanding amount from time to
time in excess of $50 million.
The letter of credit shall be in form and substance
reasonably acceptable to SAC and shall entitle Grace to draw
thereunder if Grace shall be required to make (and makes) any
payment pursuant to the terms of its guarantee of any Grace-
Conn. Public Debt. The expiration date of such letter of
credit shall be automatically extended for successive 364-day
periods, with an absolute expiration date on the date that is
the 91st day after the date on which the outstanding principal
amount of the Grace-Conn. Public Debt shall have been reduced
to no more than $50 million, unless, prior to such 91st day,
any payments shall have been made that are subject to avoidance
pursuant to a bankruptcy or similar proceeding, in which case
such letter of credit shall be extended (with respect to the
applicable payments) until such payments are no longer subject
to such avoidance, unless notice of termination is given by the
issuing bank or banks, in which case Grace shall be entitled to
draw thereunder (whether or not any demand for payment in re-
spect of its guarantee shall have been made), provided that, to
the extent such funds are not used to make payments on the
Grace-Conn. Public Debt, Grace shall hold such proceeds sepa-
rate in an interest-bearing escrow account with a financial
institution and pursuant to escrow arrangements reasonably ac-
ceptable to Grace-Conn. To the extent that the amount held in
such escrow account is greater than (i) the outstanding Grace-
Conn. Public Debt minus (ii) $50 million, Grace shall remit
such excess amount to Grace-Conn. The amount of the letter of
- 25 -
credit may be reduced from time to time, but shall not at any
time be less than the amount by which the outstanding principal
amount of the Grace-Conn. Public Debt (other than such debt
owned by a member of the New Grace Group) exceeds $50 million.
"Debt Costs" shall mean the costs incurred by Grace
or Grace-Conn. in connection with a tender offer, defeasance,
retirement or other acquisition of Grace-Conn. Public Debt,
which costs shall consist of (i) any incremental costs, fees,
expenses and payments incurred in connection with such action,
and in the case of a tender offer shall include all costs,
fees, expenses and payments incurred in connection with a ten-
der offer that are, in the aggregate, in excess of the out-
standing principal amount and accrued interest of the Grace-
Conn. Public Debt so acquired; plus (ii) any costs associated
with terminating or re-negotiating any related interest rate
swap agreements with respect to the amount of Grace-Conn. Pub-
lic Debt acquired, defeased or retired; and plus (iii) the
costs of the letter of credit described above.
SECTION 2.07 GRACE RECAPITALIZATION. (a) Imme-
diately prior to the Effective Time, Grace shall consummate a
recapitalization of the Grace Common Stock, such that each
share of Grace Common Stock outstanding as of the Record Date
shall be exchanged for the Per Share Common Consideration and
the Per Share Preferred Consideration (the "Recapitalization").
Options to purchase shares of Grace Common Stock previously
granted by Grace or a predecessor and outstanding as of the
time of the Recapitalization shall be treated as provided in
the Benefits Agreement. In connection with the Recapitaliza-
tion and the Merger, the Grace Certificate of Incorporation
shall be amended so that the par value of the Newco Common
Stock will be $.10 per share, as well as otherwise provided in
the Merger Agreement. Grace shall retain an Exchange Agent or
transfer agent as appropriate and take other appropriate ac-
tions to effect the Recapitalization, including customary pro-
cedures with respect to the exchange of share certificates.
(b) No fractional shares of Newco Common Stock or
Newco Convertible Preferred Stock shall be issued in the Re-
capitalization. In lieu of any such fractional shares, each
person who would otherwise have been entitled to a fraction of
a share of Newco Common Stock or Newco Convertible Preferred
Stock upon surrender of former shares of Grace Common Stock for
exchange pursuant to the Recapitalization shall be paid an
amount in cash (without interest) equal to such holder's pro-
portionate interest in the net proceeds from the sale or sales
in the open market by the Exchange Agent, on behalf of all such
holders, of the aggregate fractional shares of Newco Common
Stock or Newco Convertible Preferred Stock issued pursuant to
- 26 -
this paragraph. As soon as practicable following the Distribu-
tion Date, the Exchange Agent shall determine the excess of (i)
the number of full shares of Newco Common Stock or Newco Con-
vertible Preferred Stock, as the case may be, delivered to the
Exchange Agent over (ii) the aggregate number of full shares of
Newco Common Stock or Newco Convertible Preferred Stock to be
distributed in respect of Grace Common Shares (such excess, the
"Excess Shares"), and the Exchange Agent, as agent for the
former holders of such Grace Common Shares, shall sell the Ex-
cess Shares at the prevailing prices on the open market. The
sale of the Excess Shares by the Exchange Agent shall be ex-
ecuted on a public exchange through one or more firms and shall
be executed in round lots to the extent practicable. Grace
shall pay all commissions, transfer taxes and other out-of-
pocket transaction costs, including the expenses and compensa-
tion of the Exchange Agent, incurred in connection with such
sale of Excess Shares. Until the net proceeds of such sale or
sales have been distributed, the Exchange Agent shall hold such
proceeds in trust for such former stockholders. As soon as
practicable after the determination of the amount of cash to be
paid in lieu of any fractional interests, the Exchange Agent
shall make available in accordance with this Agreement such
amounts to such former stockholders.
SECTION 2.08 REGISTRATION AND LISTING. Prior to the
Distribution Date:
(a) The parties shall take such efforts regarding
the Registration Statements and the Joint Proxy Statement as is
provided in the Merger Agreement. After such Registration
Statements become effective, Grace shall cause the Joint Proxy
Statement and the information statement (or prospectus, as the
case may be) for the New Grace Common Stock forming a part of
the Registration Statement for New Grace to be delivered to all
holders of record of Grace Common Stock as of the record date
for the meeting of Grace shareholders to which the Joint Proxy
Statement relates.
(b) The parties hereto shall use reasonable efforts
to take all such action as may be necessary or appropriate un-
der state securities and blue sky laws in connection with the
transactions contemplated by this Agreement.
(c) New Grace and Grace shall prepare, and New Grace
and Grace shall file and seek to make effective, an application
for the listing of the New Grace Common Stock on the NYSE, and
an application for the listing on the NYSE of the Newco Common
Stock and the Newco Convertible Preferred Stock to be issued in
connection with the Recapitalization and the Merger, in each
case subject to official notice of issuance.
- 27 -
(d) The parties hereto shall cooperate in preparing,
filing with the SEC and causing to become effective any regis-
tration statements or amendments thereto which are necessary or
appropriate in order to effect the transactions contemplated
hereby or to reflect the establishment of, or amendments to,
any employee benefit plans contemplated hereby or by the Em-
ployee Benefits Agreement requiring registration under the Se-
curities Act.
SECTION 2.09 GRACE AND NEW GRACE BOARDS. The par-
ties hereto shall take all steps necessary so that, effective
immediately after the Distribution, the Board of Directors of
each of Grace and New Grace, so long as the common stock of
such company is registered under Section 12 of the Exchange
Act, shall at all times be comprised of a majority of indepen-
dent directors (other than due to temporary vacancies).
SECTION 2.10 TRANSFERS NOT EFFECTED PRIOR TO THE
DISTRIBUTION; TRANSFERS DEEMED EFFECTIVE AS OF THE DISTRIBUTION
DATE. To the extent that any transfers contemplated by this
Article II shall not have been consummated on the Distribution
Date, including, without limitation, any Foreign Transfers, the
parties shall cooperate to effect such transfers as promptly
following the Distribution Date as shall be practicable. Noth-
ing herein shall be deemed to require the transfer of any As-
sets or the assumption of any Liabilities which by their terms
or operation of law cannot be transferred or assumed; provided,
however, that Grace and New Grace and their respective Subsid-
iaries shall cooperate to obtain any necessary consents or ap-
provals for the transfer of all Assets and Liabilities con-
templated to be transferred pursuant to this Article II. In
the event that any such transfer of Assets or Liabilities has
not been consummated, effective as of and after the Distribu-
tion Date, the party retaining such Asset or Liability shall
thereafter hold such Asset in trust for the use and benefit of
the party entitled thereto (at the expense of the party enti-
tled thereto) and retain such Liability for the account of the
party by whom such Liability is to be assumed pursuant hereto,
and take such other action as may be reasonably requested by
the party to which such Asset is to be transferred, or by whom
such Liability is to be assumed, as the case may be, in order
to place such party, insofar as reasonably possible, in the
same position as would have existed had such Asset or Liability
been transferred as contemplated hereby. As and when any such
Asset or Liability becomes transferable, such transfer shall be
effected forthwith. The parties agree that, as of the Distri-
bution Date, each party hereto shall be deemed to have acquired
complete and sole beneficial ownership over all of the Assets,
together with all rights, powers and privileges incident there-
to, and shall be deemed to have assumed in accordance with the
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terms of this Agreement all of the Liabilities, and all duties,
obligations and responsibilities incident thereto, which such
party is entitled to acquire or required to assume pursuant to
the terms of this Agreement.
SECTION 2.11 INTERCOMPANY ACCOUNTS AND DISTRIBUTION
PAYMENTS. After the Distribution Date, the parties shall be
obligated to pay only those intercompany accounts between mem-
bers of the New Grace Group and members of the Packco Group
that arose in connection with transfers of goods and services
in the ordinary course of business, consistent with past prac-
tices (which the parties shall use reasonable efforts to settle
prior to the Distribution Date), and all other intercompany
accounts shall be settled without transfer of non-financial
assets as of the Distribution Date.
ARTICLE III
THE DISTRIBUTION
SECTION 3.01 RECORD DATE AND DISTRIBUTION DATE.
Subject to the satisfaction of the conditions set forth in Sec-
tion 8.01(a), the Board of Directors of Grace, in its sole dis-
cretion and consistent with the Merger Agreement, shall estab-
lish the Record Date and the Distribution Date and any appro-
priate procedures in connection with the Distribution.
SECTION 3.02 THE AGENT. Prior to the Distribution
Date, New Grace shall enter into an agreement with the Agent
providing for, among other things, the payment of the Distri-
bution to the holders of Grace Common Stock in accordance with
this Article III.
SECTION 3.03 DELIVERY OF SHARE CERTIFICATES TO THE
AGENT. Prior to the Distribution Date, Grace shall deliver to
the Agent a share certificate representing (or authorize the
related book-entry transfer of) all of the outstanding shares
of New Grace Common Stock to be distributed in connection with
the payment of the Distribution. After the Distribution Date,
upon the request of the Agent, New Grace shall provide all cer-
tificates for shares (or book-entry transfer authorizations) of
New Grace Common Stock that the Agent shall require in order to
effect the Distribution.
SECTION 3.04 THE DISTRIBUTION. Subject to the terms
and conditions of this Agreement, New Grace shall instruct the
Agent to distribute, as of the Distribution Date, one share of
New Grace Common Stock in respect of each share of Grace Common
- 29 -
Stock held by holders of record of Grace Common Stock on the
Record Date.
ARTICLE IV
SURVIVAL AND INDEMNIFICATION
SECTION 4.01 SURVIVAL OF AGREEMENTS. All covenants
and agreements of the parties hereto contained in this Agree-
ment shall survive the Distribution Date.
SECTION 4.02 INDEMNIFICATION. (a) Except as spe-
cifically otherwise provided in the Other Agreements, the New
Grace Group shall indemnify, defend and hold harmless the Pack-
co Indemnitees from and against (i) all Indemnifiable Losses
arising out of or due to the failure or alleged failure of any
member of the New Grace Group (x) to pay any Grace-Conn. Lia-
bilities (including, without limitation, all Liabilities spe-
cifically excluded from the definition of Packco Liabilities
herein), whether such Indemnifiable Losses relate to events,
occurrences or circumstances occurring or existing, or whether
such Indemnifiable Losses are asserted, before or after the
Distribution Date, or (y) to perform any of its obligations
under this Agreement (including the obligation to effect the
transfers as provided in the last sentence of Section 2.01(a));
(ii) all Indemnifiable Losses arising out of or based upon any
untrue statement or alleged untrue statement of a material
fact, or omission or alleged omission to state a material fact
required to be stated, in the Registration Statements or the
Joint Proxy Statement or any preliminary or final form thereof
or any amendment thereto, or necessary to make the statements
therein not misleading, except that such indemnifications shall
not apply to any Indemnifiable Losses that arise out of or are
based upon any statement or omission, or alleged statement or
omission, in any of the portions of the Registration Statements
or the Joint Proxy Statement, or any preliminary or final form
thereof or any amendment thereto, solely with respect to infor-
mation relating to SAC supplied by SAC specifically for use in
the preparation thereof or relating to Newco after the Merger;
and (iii) all Indemnifiable Losses arising from or relating to
all existing litigation brought by pre-Merger shareholders of
Grace acting in such capacity and all litigation to be brought
by pre-Merger shareholders of Grace acting in such capacity and
relating to any events or transactions occurring prior to the
Effective Time or to the transactions contemplated by the
Transaction Agreements.
(b) Except as specifically otherwise provided in the
Other Agreements, the Packco Group shall indemnify, defend and
- 30 -
hold harmless the New Grace Indemnitees from and against (i)
all Indemnifiable Losses arising out of or due to the failure
or alleged failure of any member of the Packco Group to pay any
Packco Liabilities or to perform any of its obligations under
this Agreement after the Distribution Date; and (ii) all Indem-
nifiable Losses arising out of or based upon any untrue state-
ment or alleged untrue statement of a material fact, or omis-
sion or alleged omission to state a material fact required to
be stated, in any portion of the Registration Statements or the
Joint Proxy Statement (or any preliminary or final form thereof
or any amendment thereto) solely with respect to information
relating to SAC supplied by SAC specifically for use in the
preparation thereof or relating to Newco after the Merger (in-
cluding the pro forma financial information relating to Newco
contained in the Registration Statements (other than the his-
torical information relating to Grace and the Packaging Busi-
ness)), or necessary to make the statements therein not mis-
leading.
(c) If any Indemnity Payment required to be made
hereunder or under any Other Agreement is denominated in a cur-
rency other than United States dollars, such payment shall be
made in United States dollars and the amount thereof shall be
computed using the Foreign Exchange Rate for such currency de-
termined as of the date on which such Indemnity Payment is
made.
(d) Notwithstanding anything to the contrary set
forth herein, indemnification relating to any arrangements be-
tween any member of the Packco Group and any member of the New
Grace Group for the provision after the Distribution of goods
and services in the ordinary course shall be governed by the
terms of such arrangements and not by this Section or as other-
wise set forth in this Agreement and the Other Agreements.
SECTION 4.03 PROCEDURES FOR INDEMNIFICATION FOR
THIRD-PARTY CLAIMS. (a) Grace shall, and shall cause the oth-
er Packco Indemnitees to, notify New Grace in writing promptly
after learning of any Third-Party Claim for which any Packco
Indemnitee intends to seek indemnification from New Grace under
this Agreement. New Grace shall, and shall cause the other New
Grace Indemnitees to, notify Grace in writing promptly after
learning of any Third-Party Claim for which any New Grace In-
demnitee intends to seek indemnification from Grace under this
Agreement. The failure of any Indemnitee to give such notice
shall not relieve any Indemnifying Party of its obligations
under this Article except to the extent that such Indemnifying
Party or its Affiliate is actually prejudiced by such failure
to give notice. Such notice shall describe such Third-Party
- 31 -
Claim in reasonable detail considering the Information provided
to the Indemnitee.
(b) Except as otherwise provided in paragraph (c) of
this Section, an Indemnifying Party may, by notice to the In-
demnitee and to Grace, if New Grace is the Indemnifying Party,
or to the Indemnitee and New Grace, if Grace is the Indemnify-
ing Party, at any time after receipt by such Indemnifying Party
of such Indemnitee's notice of a Third-Party Claim, undertake
(itself or through another member of the Group of which the
Indemnifying Party is a member) the defense or settlement of
such Third-Party Claim. If an Indemnifying Party undertakes
the defense of any Third-Party Claim, such Indemnifying Party
shall thereby admit its obligation to indemnify the Indemnitee
against such Third-Party Claim, and such Indemnifying Party
shall control the investigation and defense or settlement
thereof, and the Indemnitee may not settle or compromise such
Third-Party Claim, except that such Indemnifying Party shall
not (i) require any Indemnitee, without its prior written con-
sent, to take or refrain from taking any action in connection
with such Third-Party Claim, or make any public statement,
which such Indemnitee reasonably considers to be against its
interests, nor (ii) without the prior written consent of the
Indemnitee and of Grace, if the Indemnitee is a Packco Indemni-
tee, or the Indemnitee and of New Grace, if the Indemnitee is a
New Grace Indemnitee, consent to any settlement that does not
include as a part thereof an unconditional release of the In-
demnitees from liability with respect to such Third-Party Claim
or that requires the Indemnitee or any of its Representatives
or Affiliates to make any payment that is not fully indemnified
under this Agreement or to be subject to any non-monetary rem-
edy; and subject to the Indemnifying Party's control rights, as
specified herein, the Indemnitees may participate in such in-
vestigation and defense, at their own expense. Following the
provision of notices to the Indemnifying Party, until such time
as an Indemnifying Party has undertaken the defense of any
Third-Party Claim as provided herein, such Indemnitee shall
control the investigation and defense or settlement thereof,
without prejudice to its right to seek indemnification here-
under.
(c) If an Indemnitee reasonably determines that
there may be legal defenses available to it that are different
from or in addition to those available to its Indemnifying Par-
ty which make it inappropriate for the Indemnifying Party to
undertake the defense or settlement thereof, then such Indemni-
fying Party shall not be entitled to undertake the defense or
settlement of such Third-Party Claim; and counsel for the In-
demnifying Party shall be entitled to conduct the defense of
- 32 -
such Indemnifying Party and counsel for the Indemnitee (se-
lected by the Indemnitee) shall be entitled to conduct the de-
fense of such Indemnitee, it being understood that both such
counsel shall cooperate with each other to conduct the defense
or settlement of such action as efficiently as possible. The
above provisions of this paragraph (c) shall not apply to
Third-Party Claims relating to asbestos claims described in the
proviso to the definition of Packco Liabilities. Rather, with
respect to such asbestos claims, with the consent of Grace-
Conn., which shall not be unreasonably withheld, counsel for
the Indemnifying Party shall be entitled to conduct the defense
of such Third-Party Claim to the extent the legal defenses
available to the Indemnifying Party and the Indemnitee are sub-
stantially similar, but counsel for the Indemnitee shall be
entitled to assert and conduct its own defense to the extent,
but only to the extent, of any additional legal defenses avail-
able to it.
(d) In no event shall an Indemnifying Party be li-
able for the fees and expenses of more than one counsel for all
Indemnitees (in addition to its own counsel, if any) in connec-
tion with any one action, or separate but similar or related
actions, in the same jurisdiction arising out of the same gen-
eral allegations or circumstances.
(e) New Grace shall, and shall cause the other New
Grace Indemnitees to, and Grace shall, and shall cause the
other Packco Indemnitees to, make available to each other,
their counsel and other Representatives, all information and
documents reasonably available to them which relate to any
Third-Party Claim, and otherwise cooperate as may reasonably be
required in connection with the investigation, defense and set-
tlement thereof, subject to the terms and conditions of a mutu-
ally acceptable joint defense agreement. Any joint defense
agreement entered into by New Grace or Grace with any third
party relating to any Third-Party Claim shall provide that New
Grace or Grace may, if requested, provide information obtained
through any such agreement to the New Grace Indemnitees and/or
the Packco Indemnitees.
SECTION 4.04 REMEDIES CUMULATIVE. The remedies pro-
vided in this Article IV shall be cumulative and shall not pre-
clude assertion by any Indemnitee of any other rights or the
seeking of any other remedies against any Indemnifying Party.
However, the procedures set forth in Section 4.03 shall be the
exclusive procedures governing any indemnity action brought
under this Agreement, except as otherwise specifically provided
in any of the Other Agreements.
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ARTICLE V
CERTAIN ADDITIONAL COVENANTS
SECTION 5.01 NOTICES TO THIRD PARTIES. In addition
to the actions described in Section 5.02, the members of the
Packco Group and the members of the New Grace Group shall coop-
erate to make all other filings and give notice to and obtain
consents from all third parties that may reasonably be required
to consummate the transactions contemplated by this Agreement,
the Merger Agreement and the Other Agreements.
SECTION 5.02 LICENSES AND PERMITS. Each party here-
to shall cause the appropriate members of its Group to prepare
and file with the appropriate licensing and permitting authori-
ties applications for the transfer or issuance, as may be nec-
essary or advisable in connection with the transactions contem-
plated by this Agreement, the Other Agreements and the Merger
Agreement, to its Group of all material governmental licenses
and permits required for the members of its Group to operate
its Business after the Distribution Date. The members of the
New Grace Group and the members of the Packco Group shall coop-
erate and use all reasonable efforts to secure the transfer or
issuance of the licenses and permits.
SECTION 5.03 INTERCOMPANY AGREEMENTS. All con-
tracts, licenses, agreements, commitments or other arrange-
ments, formal or informal, between any member of the Packco
Group, on the one hand, and any member of the New Grace Group,
on the other hand, in existence as of the Distribution Date,
pursuant to which any member of either Group makes payments in
respect of Taxes to any member of the other Group or provides
to any member of the other Group goods or services (including,
without limitation, management, administrative, legal, finan-
cial, accounting, data processing, insurance or technical sup-
port), or the use of any Assets of any member of the other
Group, or the secondment of any employee, or pursuant to which
rights, privileges or benefits are afforded to members of ei-
ther Group as Affiliates of the other Group, shall terminate as
of the close of business on the day prior to the Distribution
Date, except as specifically provided herein or in the Other
Agreements. From and after the Distribution Date, no member of
either Group shall have any rights under any such contract,
license, agreement, commitment or arrangement with any member
of the other Group, except as specifically provided herein or
in the Other Agreements.
SECTION 5.04 GUARANTEE OBLIGATIONS. (a) Grace and
New Grace shall cooperate, and shall cause their respective
Groups to cooperate, to terminate, or to cause a member of the
- 34 -
Packco Group to be substituted in all respects for any member
of the New Grace Group in respect of, all obligations of any
member of the New Grace Group under any Packco Liabilities for
which such member of the New Grace Group may be liable, as
guarantor, original tenant, primary obligor or otherwise. If
such a termination or substitution is not effected by the Dis-
tribution Date, (i) Grace shall indemnify and hold harmless the
New Grace Indemnitees for any Indemnifiable Loss arising from
or relating thereto, and (ii) without the prior written consent
of the Chief Financial Officer, Treasurer or any Assistant
Treasurer of New Grace, from and after the Distribution Date,
Grace shall not, and shall not permit any member of the Packco
Group or any of its Affiliates to, renew or extend the term of,
increase its obligations under, or transfer to a third party,
any loan, lease, contract or other obligation for which any
member of the New Grace Group is or may be liable unless all
obligations of the New Grace Group with respect thereto are
thereupon terminated by documentation reasonably satisfactory
in form and substance to the Chief Financial Officer, Treasurer
or any Assistant Treasurer of New Grace, provided that the lim-
itations in clause (ii) shall not apply in the event that a
member of the Packco Group obtains a letter of credit from a
financial institution reasonably acceptable to New Grace and
for the benefit of New Grace with respect to such obligation of
the New Grace Group.
(b) Grace and New Grace shall cooperate, and shall
cause their respective Groups to cooperate, to terminate, or to
cause a member of the New Grace Group to be substituted in all
respects for any member of the Packco Group in respect of, all
obligations of any member of the Packco Group under any Grace-
Conn. Liabilities for which such member of the Packco Group may
be liable, as guarantor, original tenant, primary obligor or
otherwise. The foregoing sentence does not apply to the Grace-
Conn. Public Debt, which is governed by Section 2.06. If such
a termination or substitution is not effected by the Distribu-
tion Date, (i) New Grace shall indemnify and hold harmless the
Packco Indemnitees for any Indemnifiable Loss arising from or
relating thereto, and (ii) without the prior written consent of
the Chief Financial Officer, Treasurer or any Assistant Trea-
surer of Grace, from and after the Distribution Date, New Grace
shall not, and shall not permit any member of the New Grace
Group to, renew or extend the term of, increase its obligations
under, or transfer to a third party, any loan, lease, contract
or other obligation for which any member of the Packco Group is
or may be liable unless all obligations of the Packco Group
with respect thereto are thereupon terminated by documentation
reasonably satisfactory in form and substance to the Chief Fi-
nancial Officer, Treasurer or any Assistant Treasurer of Grace,
provided that the limitations contained in clause (ii) shall
- 35 -
not apply in the event that a member of the New Grace Group
obtains a letter of credit from a financial institution rea-
sonably acceptable to Grace and for the benefit of Grace with
respect to such obligation of the Packco Group.
SECTION 5.05 FURTHER ASSURANCES. In addition to the
actions specifically provided for elsewhere in this Agreement,
each of the parties hereto shall use reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to
be done, all things reasonably necessary, proper or advisable
under applicable laws, regulations and agreements to consummate
and make effective the transactions contemplated by this Agree-
ment. Without limiting the foregoing, each party hereto shall
cooperate with the other party, and execute and deliver, or use
reasonable efforts to cause to be executed and delivered, all
instruments, and to make all filings with, and to obtain all
consents, approvals or authorizations of, any governmental or
regulatory authority or any other Person under any permit, li-
cense, agreement, indenture or other instrument, and take all
such other actions as such party may reasonably be requested to
take by any other party hereto from time to time, consistent
with the terms of this Agreement, the Merger Agreement and the
Other Agreements, in order to effectuate the provisions and
purposes of this Agreement.
SECTION 5.06 ENVIRONMENTAL CLAIMS COOPERATION. With
respect to claims relating to Environmental Laws described in
clause (a) of the definition of Packco Liabilities, the New
Grace Group and the Packco Group shall cooperate to minimize
the costs incurred in connection with such claims and shall
generally cooperate and provide appropriate information to the
other party with respect to such claims. Notwithstanding any
other provision of this Agreement, including Article IV, Grace
shall be entitled to participate in the defense of any such
claims but New Grace shall control the resolution of any such
claims; provided that New Grace shall not consent to entry of
any judgment or enter into any settlement without the approval
of Grace, which approval shall not be unreasonably withheld.
ARTICLE VI
ACCESS TO INFORMATION
SECTION 6.01 PROVISION OF CORPORATE RECORDS. Prior
to or as promptly as practicable after the Distribution Date,
Grace shall retain complete and accurate copies but shall de-
liver to New Grace all corporate books and records of the New
Grace Group in its possession and copies of the relevant por-
tions of all corporate books and records of the Packco Group
- 36 -
relating directly and predominantly to the Grace-Conn. Assets,
the New Grace Business, or the Liabilities of the New Grace
Group, including, in each case, all active agreements, active
litigation files and government filings. Grace shall also re-
tain complete and accurate copies but deliver to New Grace all
corporate board and committee minute books of Grace. From and
after the Distribution Date, all such books, records and copies
shall be the property of New Grace. Prior to or as promptly as
practicable after the Distribution Date, New Grace shall de-
liver to Grace all corporate books and records of the Packco
Group in its possession and copies of the relevant portions of
all corporate books and records of the New Grace Group relating
directly and predominantly to the Packco Assets, the Packaging
Business, or the Liabilities of the Packco Group, including, in
each case, all active agreements, active litigation files and
government filings. From and after the Distribution Date, all
such books, records and copies shall be the property of Grace.
The costs and expenses incurred in the provision of records or
other information to a party shall be paid for (including reim-
bursement of costs incurred by the providing party) by the re-
questing party.
SECTION 6.02 ACCESS TO INFORMATION. From and after
the Distribution Date, each of Grace and New Grace shall afford
to the other and to the other's Representatives reasonable ac-
cess and duplicating rights during normal business hours to all
Information within the possession or control of such party's
Group relating to the other party's Group's pre-Distribution
business, Assets or Liabilities or relating to or arising in
connection with the relationship between the Groups on or prior
to the Distribution Date, insofar as such access is reasonably
required for a reasonable purpose, subject to the provisions
below regarding Privileged Information. Without limiting the
foregoing, Information may be requested under this Section 6.02
for audit, accounting, claims, litigation and Tax purposes, as
well as for purposes of fulfilling disclosure and reporting
obligations.
In furtherance of the foregoing:
(a) Each party hereto acknowledges that: (i) Each
of Grace and New Grace (and the members of the Packco
Group and the New Grace Group, respectively) has or may
obtain Privileged Information; (ii) there are a number of
Litigation Matters affecting each or both of Grace and New
Grace; (iii) both Grace and New Grace have a common legal
interest in Litigation Matters, in the Privileged Informa-
tion and in the preservation of the confidential status of
the Privileged Information, in each case relating to the
pre-Distribution business of the Packco Group or the New
- 37 -
Grace Group or relating to or arising in connection with
the relationship between the Groups on or prior to the
Distribution Date; and (iv) both Grace and New Grace in-
tend that the transactions contemplated hereby and by the
Merger Agreement and the Other Agreements and any transfer
of Privileged Information in connection therewith shall
not operate as a waiver of any potentially applicable
privilege.
(b) Each of Grace and New Grace agrees, on behalf of
itself and each member of the Group of which it is a mem-
ber, not to disclose or otherwise waive any privilege at-
taching to any Privileged Information relating to the pre-
Distribution business of the New Grace Group or the Packco
Group, respectively, or relating to or arising in connec-
tion with the relationship between the Groups on or prior
to the Distribution Date, without providing prompt written
notice to and obtaining the prior written consent of the
other, which consent shall not be unreasonably withheld
and shall not be withheld if the other party certifies
that such disclosure is to be made in response to a likely
threat of suspension or debarment or similar action; pro-
vided, however, that Grace and New Grace may make such
disclosure or waiver with respect to Privileged Informa-
tion if such Privileged Information relates solely to the
pre-Distribution business of the Packco Group in the case
of Grace or the New Grace Group in the case of New Grace.
In the event of a disagreement between any member of the
Packco Group and any member of the New Grace Group con-
cerning the reasonableness of withholding such consent, no
disclosure shall be made prior to a resolution of such
disagreement by a court of competent jurisdiction, pro-
vided that the limitations in this sentence shall not ap-
ply in the case of disclosure required by law and so cer-
tified as provided in the first sentence of this para-
graph.
(c) Upon any member of the Packco Group or any mem-
ber of the New Grace Group receiving any subpoena or other
compulsory disclosure notice from a court, other govern-
mental agency or otherwise which requests disclosure of
Privileged Information, in each case relating to pre-Dis-
tribution business of the New Grace Group or the Packco
Group, respectively, or relating to or arising in connec-
tion with the relationship between the Groups on or prior
to the Distribution Date, the recipient of the notice
shall promptly provide to the other Group (following the
notice provisions set forth herein) a copy of such notice,
the intended response, and all materials or information
relating to the other Group that might be disclosed. In
- 38 -
the event of a disagreement as to the intended response or
disclosure, unless and until the disagreement is resolved
as provided in paragraph (b) of this Section, the parties
shall cooperate to assert all defenses to disclosure
claimed by either party's Group, and shall not disclose
any disputed documents or information until all legal de-
fenses and claims of privilege have been finally deter-
mined.
SECTION 6.03 PRODUCTION OF WITNESSES. Subject to
Section 6.02, after the Distribution Date, each of Grace and
New Grace shall, and shall cause each member of the Packco
Group and the New Grace Group, respectively, to make available
to New Grace or Grace or any member of the New Grace Group or
of the Packco Group, as the case may be, upon written request,
such Group's directors, officers, employees and agents as wit-
nesses to the extent that any such Person may reasonably be
required in connection with any Litigation Matters, adminis-
trative or other proceedings in which the requesting party may
from time to time be involved and relating to the pre-Distri-
bution business of the Packco Group or the New Grace Group or
relating to or in connection with the relationship between the
Groups on or prior to the Distribution Date.
SECTION 6.04 RETENTION OF RECORDS. Except as other-
wise agreed in writing, or as otherwise provided in the Other
Agreements, each of Grace and New Grace shall, and shall cause
the members of the Group of which it is a member to, retain all
Information in such party's Group's possession or under its
control relating directly and predominantly to the pre-Distri-
bution business, Assets or Liabilities of the other party's
Group until such Information is at least ten years old or until
such later date as may be required by law, except that if, pri-
or to the expiration of such period, any member of either par-
ty's Group wishes to destroy or dispose of any such Information
that is at least three years old, prior to destroying or dis-
posing of any of such Information, (a) the party whose Group is
proposing to dispose of or destroy any such Information shall
provide no less than 30 days' prior written notice to the other
party, specifying the Information proposed to be destroyed or
disposed of, and (b) if, prior to the scheduled date for such
destruction or disposal, the other party requests in writing
that any of the Information proposed to be destroyed or dis-
posed of be delivered to such other party, the party whose
Group is proposing to dispose of or destroy such Information
promptly shall arrange for the delivery of the requested In-
formation to a location specified by, and at the expense of,
the requesting party.
- 39 -
SECTION 6.05 CONFIDENTIALITY. Subject to Section
6.02, which shall govern Privileged Information, from and after
the Distribution Date, each of Grace and New Grace shall hold,
and shall use reasonable efforts to cause its Affiliates and
Representatives to hold, in strict confidence all Information
concerning the other party's Group obtained by it prior to the
Distribution Date or furnished to it by such other party's
Group pursuant to this Agreement or the Other Agreements and
shall not release or disclose such Information to any other
Person, except its Affiliates and Representatives, who shall be
bound by the provisions of this Section 6.05, and each party
shall be responsible for a breach by any of its Affiliates or
Representatives; provided, however, that any member of the
Packco Group or the New Grace Group may disclose such Informa-
tion to the extent that (a) disclosure is compelled by judicial
or administrative process or, in the opinion of such Person's
counsel, by other requirements of law, or (b) such party can
show that such Information was (i) available to such Person on
a nonconfidential basis (other than from a member of the other
party's Group) prior to its disclosure by the other party's
Group, (ii) in the public domain through no fault of such Per-
son or (iii) lawfully acquired by such Person from another
source after the time that it was furnished to such Person by
the other party's Group, and not acquired from such source sub-
ject to any confidentiality obligation on the part of such
source known to the acquiror. Notwithstanding the foregoing,
each of Grace and New Grace shall be deemed to have satisfied
its obligations under this Section 6.05 with respect to any
Information (other than Privileged Information) if it exercises
the same care with regard to such Information as it takes to
preserve confidentiality for its own similar Information.
SECTION 6.06 COOPERATION WITH RESPECT TO GOVERNMENT
REPORTS AND FILINGS. Grace, on behalf of itself and each mem-
ber of the Packco Group, agrees to provide any member of the
New Grace Group, and New Grace, on behalf of itself and each
member of the New Grace Group, agrees to provide any member of
the Packco Group, with such cooperation and Information as may
be reasonably requested by the other in connection with the
preparation or filing of any government report or other govern-
ment filing contemplated by this Agreement or in conducting any
other government proceeding relating to the pre-Distribution
business of the Packco Group or the New Grace Group, Assets or
Liabilities of either Group or relating to or in connection
with the relationship between the Groups on or prior to the
Distribution Date. Such cooperation and Information shall in-
clude, without limitation, promptly forwarding copies of appro-
priate notices and forms or other communications received from
or sent to any government authority which relate to the Packco
Group, in the case of the New Grace Group, or the New Grace
- 40 -
Group, in the case of the Packco Group. Each party shall make
its employees and facilities available during normal business
hours and on reasonable prior notice to provide explanation of
any documents or Information provided hereunder.
ARTICLE VII
NO REPRESENTATIONS OR WARRANTIES
SECTION 7.01 NO REPRESENTATIONS OR WARRANTIES. Ex-
cept as expressly set forth herein or in any other Transaction
Agreement (including Article II and Sections 4.01, 4.02 and
5.05), New Grace and Grace-Conn. understand and agree that no
member of the Packco Group is, in this Agreement or in any
other agreement or document, representing or warranting to New
Grace or any member of the New Grace Group in any way as to the
Grace-Conn. Assets, the New Grace Business or the Grace-Conn.
Liabilities, it being agreed and understood that New Grace and
each member of the New Grace Group shall take all of the Grace-
Conn. Assets "as is, where is." Except as expressly set forth
herein or in any other Transaction Agreement and subject to
Sections 4.01, 4.02 and 5.05, New Grace and each member of the
New Grace Group shall bear the economic and legal risk that the
Grace-Conn. Assets shall prove to be insufficient or that the
title of any member of the New Grace Group to any Grace-Conn.
Assets shall be other than good and marketable and free from
encumbrances. Except as expressly set forth herein or in any
other Transaction Agreement (including Article II and Sections
4.01, 4.02 and 5.05), Grace understands and agrees that no mem-
ber of the New Grace Group is, in this Agreement or in any
other agreement or document, representing or warranting to
Grace or any member of the Packco Group in any way as to the
Packco Assets, the Packaging Business or the Packco Liabili-
ties, it being agreed and understood that Grace, Packco and
each other member of the Packco Group shall take all of the
Packco Assets "as is, where is." Except as expressly set forth
herein or in any other Transaction Agreement and subject to
Sections 4.01, 4.02 and 5.05, Grace and each member of the
Packco Group shall bear the economic and legal risk that the
Packco Assets shall prove to be insufficient or that the title
of any member of the Packco Group to any Packco Assets shall be
other than good and marketable and free from encumbrances. The
foregoing shall be without prejudice to any rights under Ar-
ticle II, Section 4.01, Section 4.02 or Section 5.05 or to the
covenants otherwise contained in this Agreement or any other
Transaction Agreement.
- 41 -
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 CONDITIONS TO OBLIGATIONS. (a) The
obligations of the parties hereto to consummate the payment of
the Distribution are subject to the satisfaction of each of the
following conditions:
(i) the transactions contemplated hereby (including
the Distribution, the Recapitalization, the Merger, the
amendment to the Grace Certificate of Incorporation and
otherwise as required by applicable law and stock exchange
regulations) shall have been duly approved by Grace share-
holders;
(ii) all conditions to the Merger set forth in the
Merger Agreement (other than that the Distribution be con-
summated) shall have been satisfied or waived;
(iii) all third-party consents and governmental ap-
provals required in connection with the transactions con-
templated hereby shall have been received, except where
the failure to obtain such consents or approvals would not
have a material adverse effect on either (A) the ability
of the parties to consummate the transactions contemplated
by this Agreement, the Other Agreements or the Merger
Agreement or (B) the business, assets, liabilities, finan-
cial condition or results of operations of Grace-Conn. or
Packco and their respective subsidiaries, taken as a
whole;
(iv) the transactions contemplated by Article II
shall have been consummated in all material respects, to
the extent required to be consummated prior to the Distri-
bution;
(v) the shares of New Grace Common Stock to be is-
sued in the Distribution, and the shares of Newco Common
Stock and the Newco Convertible Preferred Stock to be is-
sued in the Recapitalization and the Merger, as the case
may be, shall have been authorized for listing on the
NYSE, in each case subject to official notice of issuance;
(vi) the Board of Directors of New Grace, composed as
contemplated by Section 2.09, shall have been duly elect-
ed;
(vii) the Registration Statements shall have been de-
clared effective under the Exchange Act or the Securities
- 42 -
Act, as the case may be, by the SEC and no stop order sus-
pending the effectiveness of either of the Registration
Statements shall have been issued by the SEC and, to the
knowledge of Grace and New Grace, no proceeding for that
purpose shall have been instituted by the SEC;
(viii) the applicable parties shall have entered into
each of the Other Agreements;
(ix) (A) the Board of Directors of Grace shall have
received customary opinions of a nationally recognized
investment banking or appraisal firm in form and substance
reasonably satisfactory to such Board to the effect that,
after giving effect to the transactions set forth in Ar-
ticle II hereof, neither Grace nor New Grace and Grace--
Conn. will be insolvent (such opinions to be dated as of
the date of the Merger Agreement, the date the Board of
Directors of Grace declares the Distribution and the Dis-
tribution Date) and (B) the financial condition of each of
Grace and Grace-Conn. satisfies the requirements of Sec-
tion 170 of the Delaware General Corporation Law and Sec-
tion 33-687 of the Connecticut Business Corporation Act,
respectively, such that the distribution of the common
stock of Packco to Grace by Grace-Conn. and the Distribu-
tion may be effected without violating such Sections, and
the Board of Directors of Grace and the Board of Directors
of Grace-Conn. shall in good faith have determined that
such requirements have been satisfied; and
(x) the transactions contemplated hereby shall be in
compliance with all applicable federal and state securi-
ties laws.
(b) Any determination made by the Board of Directors
of Grace or Grace-Conn. on behalf of such party hereto prior to
the Distribution Date concerning the satisfaction or waiver of
any or all of the conditions set forth in this Section shall be
conclusive.
SECTION 8.02 USE OF GRACE NAME AND MARK. Grace ac-
knowledges that Grace-Conn. shall own all rights in the "Grace"
name and logo and related tradenames and marks. Effective at
the Distribution Date, Grace shall change its name to a name
that does not use the word "Grace" or any variation thereof and
shall itself, and shall cause each member of the Packco Group
to, cease all use of the "Grace" name as part of any corporate
name. As promptly as practicable after the Distribution Date,
Grace shall, and shall cause each member of the Packco Group
- 43 -
to, cease all other use of the "Grace" name and logo and re-
lated tradenames and marks, provided that Grace may use inven-
tory including any such name, logo, tradenames or marks in ex-
istence as of the Distribution Date. Grace shall cause the
Packco Group to use such names, logos and marks during such
transition period only to the extent consistent with past prac-
tice and as Grace reasonably believes is appropriate, and dur-
ing the period of such usage Grace shall cause the Packco Group
to maintain the same standards of quality with respect to such
names, logos and marks as previously exercised. No such mate-
rial shall be used by the Packco Group after the six-month an-
niversary of the Distribution Date.
SECTION 8.03 COMPLETE AGREEMENT. This Agreement,
the Exhibits and Schedules hereto and the agreements and other
documents referred to herein shall constitute the entire agree-
ment between the parties hereto with respect to the subject
matter hereof (other than the Merger Agreement and the sched-
ules and exhibits thereto) and shall supersede all previous
negotiations, commitments and writings with respect to such
subject matter.
SECTION 8.04 EXPENSES. Except as otherwise specifi-
cally provided herein or in any other Transaction Agreement,
New Grace shall bear all costs and expenses (including all Debt
Costs, Adjusted Foreign Transfer Taxes, Severance Costs and
losses of benefits) incurred by Grace, New Grace and/or any
members of their respective Groups (collectively, the "Transac-
tion Costs") in connection with the transactions contemplated
by this Agreement and the Other Agreements (including the Con-
tribution (and the related transfers, separations and/or al-
locations of Assets and Liabilities), the Intragroup Spinoff,
the Distribution and the Recapitalization)); provided that
Grace (for the account of Newco after the Merger) agrees to
bear: (i) the lesser of $50 million and 37% of the aggregate
amount of all Debt Costs, Adjusted Foreign Transfer Taxes and
Severance Costs; (ii) the lesser of $10 million and 37% of all
other Transaction Costs (excluding any Debt Costs, Adjusted
Foreign Transfer Taxes, Severance Costs and costs and expenses
payable by New Grace or Grace pursuant to Section 6.12 of the
Merger Agreement) and (iii) the fees and costs incurred in con-
nection with the Grace Credit Agreement. "Severance Costs"
means the costs associated with the termination in connection
with the transactions contemplated hereby (including the Merg-
er) of employment of employees of Grace and Grace-Conn. located
at the Grace corporate headquarters. To the extent Transaction
Costs are not included in the New Grace Capital Contribution,
Newco or New Grace shall promptly pay its share of any such
costs upon receipt of reasonable documentation relating to such
costs. Appropriate payment shall be made between the parties
- 44 -
in respect of Adjusted Foreign Transfer Taxes on the Distribu-
tion Date so that Adjusted Foreign Transfer Taxes are borne in
the proportions described above in this Section 8.04. Ap-
propriate payment shall be made between the parties in respect
of Adjusted Foreign Transfer Taxes and the amount calculated
pursuant to clause (c) of the definition of "New Grace Capital
Contribution" to the extent that such amounts estimated as of
the Distribution Date may be recalculated in a more accurate
manner. New Grace agrees that it shall pay, or cause Grace-
Conn. to pay, all amounts payable by New Grace pursuant to Sec-
tion 6.12(a) of the Merger Agreement. Any amount paid by one
party to the other under this Agreement in respect of Transac-
tion Costs shall be treated, for tax purposes, as an adjustment
to the portion of the New Grace Capital Contribution contrib-
uted from Grace to New Grace.
SECTION 8.05 GOVERNING LAW. This Agreement shall be
governed by and construed in accordance with the laws of the
State of Delaware (other than the laws regarding choice of laws
and conflicts of laws that would apply the substantive laws of
any other jurisdiction) as to all matters, including matters of
validity, construction, effect, performance and remedies.
SECTION 8.06 NOTICES. All notices, requests,
claims, demands and other communications hereunder shall be in
writing and shall be given (and shall be deemed to have been
duly given upon receipt) by delivery in person, by standard
form of telecommunications, by courier, or by registered or
certified mail, postage prepaid, return receipt requested, ad-
dressed as follows:
If to Grace or any member of the Packco Group:
Sealed Air Corporation
Park 80 East
Saddle Brook, New Jersey 07663
Attention: President
Fax: (201) 703-4152
and
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Attention: Christopher Mayer, Esq.
Fax: (212) 450-4800
- 45 -
If to New Grace or any member of the New Grace Group:
W. R. Grace & Co.
One Town Center Road
Boca Raton, Florida 33486
Attention: Secretary
Fax: (561) 362-1970
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Andrew R. Brownstein, Esq.
Fax: (212) 403-2000
or to such other address as any party hereto may have furnished
to the other parties by a notice in writing in accordance with
this Section.
SECTION 8.07 AMENDMENT AND MODIFICATION. This
Agreement may be amended, modified or supplemented only by a
written agreement signed by all of the parties hereto and sub-
ject to the reasonable consent of SAC.
SECTION 8.08 SUCCESSORS AND ASSIGNS; NO THIRD-PARTY
BENEFICIARIES. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties
hereto and their successors and permitted assigns, but neither
this Agreement nor any of the rights, interests and obligations
hereunder shall be assigned by any party hereto without the
prior written consent of the other parties. Except for the
provisions of Sections 4.02 and 4.03 relating to indemnities,
which are also for the benefit of the Indemnitees, this Agree-
ment is solely for the benefit of the parties hereto and their
Subsidiaries and Affiliates and is not intended to confer upon
any other Persons any rights or remedies hereunder.
SECTION 8.09 COUNTERPARTS. This Agreement may be
executed in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
SECTION 8.10 INTERPRETATION. (a) The Article and
Section headings contained in this Agreement are solely for the
purpose of reference, are not part of the agreement of the par-
ties hereto and shall not in any way affect the meaning or in-
terpretation of this Agreement.
- 46 -
(b) The parties hereto intend that the Distribution
shall be a distribution pursuant to the provisions of Section
355 of the Code, so that no gain or loss shall be recognized
for federal income tax purposes as a result of such transac-
tion, and all provisions of this Agreement shall be so inter-
preted. The parties hereto do not intend to submit the Distri-
bution to the Internal Revenue Service for a private letter
ruling with respect to such nonrecognition, and any ultimate
ruling or decision that any gain or loss should be recognized
for federal income tax purposes shall not permit a rescission
or reformation of this Agreement or transactions contemplated
hereby.
SECTION 8.11 SEVERABILITY. If any provision of this
Agreement or the application thereof to any person or circum-
stance is determined by a court of competent jurisdiction to be
invalid, void or unenforceable, the remaining provisions here-
of, or the application of such provision to persons or circum-
stances other than those as to which it has been held invalid
or unenforceable, shall remain in full force and effect and
shall in no way be affected, impaired or invalidated thereby,
so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to
any party.
SECTION 8.12 REFERENCES; CONSTRUCTION. References
to any "Article," "Exhibit," "Schedule" or "Section," without
more, are to Articles, Exhibits, Schedules and Sections to or
of this Agreement. Unless otherwise expressly stated, clauses
beginning with the term "including" set forth examples only and
in no way limit the generality of the matters thus exemplified.
SECTION 8.13 TERMINATION. Notwithstanding any pro-
vision hereof, following termination of the Merger Agreement,
this Agreement may be terminated and the Distribution abandoned
at any time prior to the Distribution Date by and in the sole
discretion of the Board of Directors of Grace without the ap-
proval of any other party hereto or of Grace's shareholders.
In the event of such termination, no party hereto or to any
Other Agreement shall have any Liability to any Person by rea-
son of this Agreement or any Other Agreement.
SECTION 8.14 SAC REASONABLE CONSENT. The parties
hereto agree that any actions to be taken by Grace or New Grace
under this Agreement that are not specifically required herein
and that relate to Packco or the Packaging Business (including,
without limitation, the transactions described in Article II)
must be reasonably satisfactory to SAC.
- 47 -
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed as of the date first above
written.
W. R. GRACE & CO.
By:_______________________________
Name:
Title:
W. R. GRACE & CO.-CONN.
By:_______________________________
Name:
Title:
GRACE SPECIALTY CHEMICALS, INC.
(to be renamed W. R. Grace & Co.)
By:_______________________________
Name:
Title:
- 48 -
EXHIBIT 10.1
FORM OF EMPLOYEE BENEFITS ALLOCATION AGREEMENT
This EMPLOYEE BENEFITS ALLOCATION AGREEMENT (this
"Agreement"), dated as of [ ], 1997, by and among W. R.
Grace & Co., a Delaware corporation ("Grace"), W. R. Grace &
Co.-Conn., a Connecticut corporation and a wholly owned subsid-
iary of Grace ("Grace-Conn."), and General Specialty Chemicals,
Inc. (to be renamed W. R. Grace & Co.), a Delaware corporation
and a wholly owned subsidiary of Grace ("New Grace").
RECITALS
A. The Merger Agreement. Grace and Sealed Air Cor-
poration, a Delaware corporation ("SAC"), have entered into an
Agreement and Plan of Merger, dated as of [ ], 1997
(the "Merger Agreement"), pursuant to which, at the Effective
Time (as defined therein), a wholly owned subsidiary of Grace
will merge with and into SAC, with SAC being the surviving cor-
poration (the "Merger"), and Grace being renamed Sealed Air
Corporation.
B. The Distribution Agreement. The Distribution
Agreement dated as of [ ], 1997, by and among Grace,
Grace-Conn. and New Grace (the "Distribution Agreement") and
the Other Agreements (as defined in the Distribution Agreement)
set forth certain transactions that SAC has required as a con-
dition to its willingness to consummate the Merger, and the
purpose of the Distribution Agreement is to make possible the
Merger by divesting Grace of the businesses and operations to
be conducted by New Grace and its subsidiaries, including New
Grace-Conn.
C. The Contribution. Prior to the Effective Time,
and subject to the terms and conditions set forth in the Dis-
tribution Agreement, Grace intends to cause the transfer to a
wholly owned subsidiary of Grace-Conn. ("Packco") of certain
assets and liabilities of Grace and its subsidiaries predomi-
nantly related to the Packaging Business (the "Contribution"),
as contemplated by the Distribution Agreement and the Other
Agreements.
D. The Distribution. Following the Contribution and
prior to the Effective Time, subject to the conditions set
forth in the Distribution Agreement, (i) the capital stock of
Packco will be distributed to Grace, (ii) the capital stock of
Grace-Conn. will be contributed to New Grace and (iii) all of
the issued and outstanding shares of the common stock of New
Grace (together with the New Grace Rights, "New Grace Common
Stock") will be distributed (the "Distribution") to the holders
as of the Record Date of the common stock of Grace, par value
$.01 per share ("Grace Common Stock"), other than shares held
in the treasury of Grace, on a pro rata basis.
E. This Agreement. This Agreement is one of the
Other Agreements contemplated by the Distribution Agreement,
and its purpose is to set forth the agreement of Grace, Grace-
Conn. and New Grace with respect to certain matters relating to
employees and employee benefit plans and compensation arrange-
ments;
NOW, THEREFORE, in consideration of the premises, and
of the representations, warranties, covenants and agreements
set forth herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 General. Capitalized terms used but
not defined herein shall have the meanings set forth in the
Distribution Agreement or the Merger Agreement, as applicable.
As used in this Agreement, the following terms shall have the
following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
Agreement: has the meaning assigned to it in the
preamble hereof.
ABO: has the meaning assigned to it in Section
4.01(b).
AICP: the Annual Incentive Compensation Program of
Grace.
Alternate Payee: an alternate payee under a domestic
relations order which qualifies under Section 414(p) of the
Code and Section 206(d) of ERISA and which creates or recog-
nizes an alternate payee's right to, or assigns to an alternate
payee, all or a portion of the benefits payable to a partici-
pant under any Plan, or an alternate recipient under a medical
child support order which qualifies under Section 609(a) of
ERISA and which creates or recognizes the existence of an al-
ternate recipient's right to, or assigns to an alternate re-
cipient the right to, receive benefits for which a participant
or beneficiary is eligible under any Plan.
-2-
ASA: has the meaning assigned to it in Section
4.01(b).
Benefit Plan: any Plan established, sponsored or
maintained by any member of the Packco Group, any member of the
New Grace Group, or any predecessor or affiliate of any of the
foregoing, existing as of the Distribution Date or prior there-
to, to which any member of the Packco Group or the New Grace
Group contributes, has contributed, is required to contribute
or has been required to contribute, on behalf of any employee
of a member of the Packco Group or a member of the New Grace
Group, or under which any employee of a member of the Packco
Group or a member of the New Grace Group, former employee of a
member of the Packco Group or a member of the New Grace Group,
or any beneficiary or dependent thereof, is covered, is eli-
gible for coverage or has benefits rights.
Change in Control Severance Agreements: the agree-
ments listed on Schedule I hereto.
Change in Control Severance Plan: the Grace Change
in Control Severance Program for U.S. Employees (April 3, 1996-
April 3, 1998).
Current Performance Period: any three-year perfor-
mance period under the Grace LTIP that begins before and ends
after the Effective Time.
Current Plan Year: the plan year or fiscal year, to
the extent applicable with respect to any Plan, during which
the Distribution Date occurs.
Cypress 401(k) Plans: the Cypress Packaging, Inc.
Union Employees 401(k) Pension Plan and the Cypress Packaging,
Inc. 401(k) Retirement Plan.
Deferred Compensation Plan: the W. R. Grace & Co.
Deferred Compensation Program.
Distribution Agreement: has the meaning assigned to
it in the fourth paragraph hereof.
Employee: with respect to any entity, an individual
who is considered, according to the payroll and other records
of such entity, to be employed by such entity, regardless of
whether such individual is, at the relevant time, actively at
work or on leave of absence (including vacation, holiday, sick
leave, family and medical leave, disability leave, military
leave, jury duty, layoff with rights of recall, and any other
leave of absence or similar interruption of active employment
-3-
that is not considered, according to the policies or practices
of such entity, to have resulted in a permanent termination of
such individual's employment), but excluding any individual who
is, as of the relevant time, on long-term disability leave.
Foreign Plan: has the meaning assigned to it in Sec-
tion 6.01.
Grace: has the meaning assigned to it in the first
paragraph hereof.
Grace Dependent Care Plan: the W. R. Grace & Co.
Dependent Care Plan.
Grace LTIP: the Grace Long Term Incentive Program.
Grace Medical Expense Plan: the W. R. Grace & Co.
Health Care Reimbursement Account Plan.
Grace Option: an option to purchase shares of Grace
Common Stock granted pursuant to any Grace Stock Incentive
Plan.
Grace Severance Pay Plan: the W. R. Grace & Co. Sev-
erance Pay Plan for Salaried Employees, as amended effective
July 1, 1996.
Grace Stock Incentive Plans: the Grace 1996 Stock
Incentive Plan, the Grace 1994 Stock Incentive Plan, the Grace
1989 Stock Incentive Plan, the Grace 1986 Stock Incentive Plan,
and the Grace 1981 Stock Incentive Plan.
Hourly Non-Union Retirement Plan: the W. R. Grace &
Co.-Conn. Retirement Plan for Non-Union Employees of Subsidiary
Corporations.
Hourly SIP: the W. R. Grace & Co. Hourly Employee
Savings and Investment Plan.
Insured Foreign Plan: a Foreign Plan that provides
retirement or pension benefits and that is funded through indi-
vidually allocated insurance contracts, each of which is iden-
tified as such in the Packaging Business Disclosure Letter to
the Merger Agreement.
IRS: the Internal Revenue Service.
Local Actuary: has the meaning assigned to it in
Section 6.01.
-4-
LTIP Awards: has the meaning assigned to it in Sec-
tion 3(a) hereof.
Newco Ratio: the amount obtained by dividing (i) the
average of the arithmetic mean between the highest and lowest
sales prices of a share of Grace Common Stock on the New York
Stock Exchange Composite Tape on each of the five trading days
immediately preceding the ex-dividend date for the Distribu-
tion, by (ii) the average of the arithmetic mean between the
highest and lowest sales prices of a share of Newco Common
Stock on the New York Stock Exchange Composite Tape on each of
the five trading days beginning on the ex-dividend date for the
Distribution.
New Grace Benefit Plan: any Benefit Plan that is
sponsored or maintained by a member of the New Grace Group as
of the Distribution Date.
New Grace Employee: any Employee who is allocated to
the New Grace Group pursuant to Section 2.01 of this Agreement
and who is not hired by any member of the Packco Group pursuant
to Section 6.11(b) of the Merger Agreement.
New Grace Participant: any individual who is a New
Grace Employee or a beneficiary, dependent or Alternate Payee
of such an individual.
New Grace Ratio: the amount obtained by dividing (i)
the average of the arithmetic mean between the highest and low-
est sales prices of a share of Grace Common Stock on the New
York Stock Exchange Composite Tape on each of the five trading
days immediately preceding the ex-dividend date for the Distri-
bution by (ii) the average of the arithmetic mean between the
highest and lowest sales prices of a share of New Grace Common
Stock on the New York Stock Exchange Composite Tape on each of
the five trading days beginning on the ex-dividend date for the
Distribution.
Noninsured Foreign Pension Plan: a Foreign Plan that
is a defined benefit pension plan and is not an Insured Foreign
Plan, each Noninsured Foreign Pension Plan being identified as
such in the Packaging Business Disclosure Schedule to the
Merger Agreement.
Packco Benefit Plan: any Benefit Plan that is spon-
sored or maintained by a member of the Packco Group following
the Distribution Date.
Packco Employee: any Employee who is allocated to
the Packco Group pursuant to Section 2.01 of this Agreement or
who is hired by any member of the Packco Group pursuant to Sec-
tion 6.11(b) of the Merger Agreement.
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Packco Health Plan: the Blue Cross Blue Shield
Health Plan for Cryovac and Formpac Employees.
Packco Hourly Non-Union Retirement Plan: has the
meaning assigned to it in Section 4.01(d).
Packco Medical and Dependent Care Expense Plan: the
Health Care and Dependent Care Spending Account Plan for Cryo-
vac and Formpac Employees.
Packco Participant: any individual who is a Packco
Employee or a beneficiary, dependent or Alternate Payee of such
an individual.
Packco Savings Plan: a Qualified Plan designated by
Grace to receive a transfer of assets from the Hourly SIP
and/or the Salaried SIP pursuant to Section 4.02(b).
Pension Plan: any Benefit Plan that is an "employee
pension benefit plan" (within the meaning of section 3(2) of
ERISA), whether or not that Plan is a Qualified Plan.
Plan: any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock pur-
chase, stock option, stock ownership, stock appreciation
rights, phantom stock, company car, fringe benefit, leave of
absence, layoff, vacation, day or dependent care, legal ser-
vices, cafeteria, life, health, medical, accident, disability,
workman's compensation or other insurance, severance, separa-
tion or other employee benefit plan, practice, policy or other
arrangement of any kind (including, but not limited to, any
"employee benefit plan" (within the meaning of section 3(3) of
ERISA)).
Qualified Plan: any Benefit Plan that is an "em-
ployee pension benefit plan" (within the meaning of section
3(2) of ERISA) and which is intended to qualify under section
401(a) of the Code.
Salaried Retirement Plan: the W. R. Grace & Co. Re-
tirement Plan for Salaried Employees.
Salaried SIP: the W. R. Grace & Co. Salaried Employ-
ees Savings and Investment Plan.
Salary Protection Plan: the W.R. Grace & Co. Execu-
tive Salary Protection Plan.
Schurpack 401(k) Plan: the Schurpack Employees
401(k) Thrift Plan.
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SERP: the W. R. Grace & Co. Supplemental Executive
Retirement Plan.
Split Dollar Program: the W. R. Grace & Co. Execu-
tive Split Dollar Life Insurance Program.
Terminated Grace Employee: any individual who is, as
of the Distribution Date, a former Employee of any member of
the New Grace Group or the Packco Group.
Terminated Grace Participant: a Terminated Grace Em-
ployee or a beneficiary, dependent or Alternate Payee of a Ter-
minated Grace Employee.
Termination Benefits: has the meaning assigned to it
in Section 2.02(a) hereof.
Union Retirement Plan: the Retirement Plan of W. R.
Grace & Co.-Conn. Chemical Group (Cedar Rapids Plant).
U.S. Welfare Plan: a Welfare Plan other than a Wel-
fare Plan that is maintained outside of the United States pri-
marily for the benefit of individuals substantially all of whom
are nonresident aliens with respect to the United States.
Welfare Plan: any Benefit Plan that is an "employee
welfare benefit plan" (within the meaning of section 3(1) of
ERISA).
ARTICLE II
TRANSFER OF EMPLOYEES; TERMINATION BENEFITS
SECTION 2.01 Transfer of Employees. (a) Grace and
New Grace shall take all steps necessary or appropriate so that
all of the Employees of Grace and its subsidiaries are allo-
cated between the New Grace Group and the Packco Group in ac-
cordance with the principles set forth in the Section 2.01(b),
and so that each individual who is so allocated to the Packco
Group is, as of the Distribution Date, an Employee of a member
of the Packco Group, and each other individual who is, as of
the Distribution Date, an Employee of Grace or any of its Sub-
sidiaries is an Employee of a member of the New Grace Group.
(b) In making the allocation provided for in Section
2.01, Grace and New Grace shall allocate each Employee who is
exclusively employed in the Packaging Business to the Packco
Group and each Employee who is exclusively employed in the New
Grace Business to the New Grace Group. All other Employees
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shall be allocated in a mutually agreeable manner that, to the
extent possible, takes into account the Employees' expertise,
experience and existing positions and duties and does not un-
reasonably disrupt either the Packaging Business or the New
Grace Business and maximizes the ability of each of the Packco
Group and the New Grace Group to manage and operate their re-
spective businesses after the Distribution Date, taking into
account the respective needs of such businesses as established
by past practice.
SECTION 2.02 Change of Control Benefits; Termination
Benefits. (a) No New Grace Employee and no Packco Employee
shall be deemed, as a result of the steps called for by Section
2.01 or otherwise as a result of the consummation of the trans-
actions contemplated by the Distribution Agreement and the
Merger, to have become entitled to any benefits under any Ben-
efit Plan, contract, agreement, statute, regulation or other
arrangement that provides for the payment of severance pay,
salary continuation, pay in lieu of notice, unused vacation
pay, or similar benefits in connection with actual or construc-
tive termination or alleged actual or constructive termination
of employment (collectively, "Termination Benefits"). Without
limiting the generality of the foregoing, none of the transac-
tions contemplated by the Distribution Agreement and the Merger
Agreement constitute a "change in control" for purposes of any
Benefit Plan. Grace shall take all steps necessary and ap-
propriate so that any Change in Control Severance Agreement
between Grace and any Packco Employee terminates before the
Distribution Date.
(b) All Liabilities (other than for Severance Costs
as defined in Section 8.04 of the Distribution Agreement) re-
lating to or arising out of claims made by or on behalf of New
Grace Participants or Packco Participants for, or with respect
to, Termination Benefits relating to the actual or constructive
termination or alleged actual or constructive termination of
employment of any New Grace Employee or Packco Employee with
any member of the Packco Group or the New Grace Group, which
claims arise as a result of the consummation of the transac-
tions contemplated by the Distribution Agreement, shall be con-
sidered other Transaction Costs that are governed by clause
(ii) of the first sentence of Section 8.04 of the Distribution
Agreement.
(c) Except as specifically provided otherwise in
Section 2.02(b) above and in Section 8.04 of the Distribution
Agreement, effective as of the Distribution Date, the New Grace
Group shall assume or retain, as appropriate, all Liabilities
relating to or arising out of claims made by or on behalf of
New Grace Participants for, or with respect to, Termination
-8-
Benefits relating to the actual or constructive termination or
alleged actual or constructive termination of employment of any
New Grace Employee with any member of the Packco Group or the
New Grace Group, whether before, on or after the Distribution
Date. In addition, the New Grace Group shall assume or retain,
as appropriate, all Liabilities (including with respect to
Packco Employees) pursuant to the Change in Control Severance
Plan and the Change in Control Severance Agreements.
(d) Except as specifically provided otherwise in
Sections 2.02(b) and (c) above and in Section 8.04 of the Dis-
tribution Agreement, effective as of the Distribution Date, the
Packco Group shall assume or retain, as appropriate, all Li-
abilities relating to or arising out of claims made by or on
behalf of Packco Participants for, or with respect to, Termina-
tion Benefits relating to the actual or constructive termina-
tion or alleged actual or constructive termination of employ-
ment of any Packco Employee with any member of the Packco Group
or the New Grace Group, whether before (in the case of con-
structive termination), on or after the Distribution Date.
ARTICLE III
INCENTIVE PLANS
SECTION 3.01 Grace LTIP. (a) The contingent awards
for Current Performance Periods held by New Grace Participants
and Packco Participants (such contingent awards, the "LTIP
Awards") under the Grace LTIP shall be adjusted and paid in
cash by New Grace in accordance with such methodology as New
Grace determines in its sole discretion.
(b) Effective as of the Distribution Date, the New
Grace Group shall assume or retain, as appropriate, all Li-
abilities relating to or arising out of awards payable under
the Grace LTIP.
SECTION 3.02 Grace Options. (a) New Grace shall
assume and adopt, effective as of the Distribution Date, each
of the Grace Stock Incentive Plans, with such changes as may be
necessary to reflect the change in the issuer of awards there-
under and such other changes as New Grace shall, in its sole
discretion, determine. As soon as practicable after and effec-
tive as of the Distribution Date, all Grace Options that are
then outstanding shall be adjusted or replaced as set forth in
this Section 3.02, or in such other manner as the parties
hereto shall agree.
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(b) Each such Grace Option that is held by a New
Grace Employee or a Terminated Grace Participant shall be re-
placed with an option (a "New Grace Option") to acquire a num-
ber of New Grace Common Shares that equals the number of shares
subject to such Grace Option immediately before such replace-
ment, times the New Grace Ratio (rounded up to the nearest
whole share), with a per-share exercise price that equals the
per-share exercise price of such Grace Option immediately be-
fore such replacement, divided by the New Grace Ratio (rounded
up to the nearest one hundredth of a cent). Each New Grace
Option shall otherwise have the same terms and conditions as
the Grace Option it replaces, except that references to employ-
ment by or termination of employment with Grace and its affili-
ates shall be changed to references to employment by or termi-
nation of employment with New Grace and its affiliates. Effec-
tive as of the Distribution Date, New Grace shall assume all
Liabilities relating to or arising under the New Grace Options
or the Grace Stock Incentive Plans.
(c) Each such Grace Option that is held by a Packco
Employee shall be adjusted so that the number of Newco Common
Shares subject to such Grace Option equals the number of shares
subject to such Grace Option immediately before such adjust-
ment, times the Newco Ratio (rounded down to the nearest whole
share), and the per-share exercise price equals the per-share
exercise price of such Grace Option immediately before such
adjustment, divided by the Newco Ratio (rounded up to the near-
est whole cent). Each Grace Option as so adjusted shall other-
wise have the same terms and conditions as were in effect be-
fore such adjustment. Effective as of the Distribution Date,
Grace shall retain all Liabilities relating to or arising under
the Grace Options held by Packco Employees.
SECTION 3.03 Annual Incentive Compensation Plan.
(a) New Grace shall pay, or cause to be paid by another member
of the New Grace Group, all bonuses earned by Packco Employees
and New Grace Employees for the 1997 calendar year under the
AICP, in accordance with the terms of the AICP as interpreted
by New Grace in its sole discretion. Effective as of the Dis-
tribution Date, the New Grace Group shall assume all Liabili-
ties relating to or arising under the AICP.
(b) Packco Employees shall not be eligible to earn
bonuses under the AICP for 1998 or any subsequent year. How-
ever, if the Distribution Date occurs later than March 31,
1998, then Grace and New Grace shall use reasonable best ef-
forts to develop and implement an annual incentive program for
Packco Employees, the cost of which will be shared between the
New Grace Group and the Packco Group in a manner relating to
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the relative portions of the 1998 calendar year that precede
and follow the Distribution Date.
ARTICLE IV
PENSION AND SAVINGS PLANS
SECTION 4.01 Retirement Plans and Supplemental Re-
tirement Plan. (a) Grace, New Grace and Grace-Conn. shall
take all steps necessary or appropriate so that, effective no
later than the Distribution Date: (i) one or more members of
the New Grace Group are the sole sponsors of the Salaried Re-
tirement Plan, the SERP and the Hourly Non-Union Retirement
Plan; and (ii) one or more members of the Packco Group are the
sole sponsors of the Union Retirement Plan. Such steps shall
include, without limitation, the appointment or reappointment
by New Grace (by action after the Distribution Date to approve
or ratify such appointment or reappointment) of all named fidu-
ciaries, trustees, custodians, recordkeepers and other fiducia-
ries and service providers to the Salaried Retirement Plan, the
SERP and the Hourly Non-Union Retirement Plan, and the appoint-
ment or reappointment by Grace of all named fiduciaries, trust-
ees, custodians, recordkeepers and other fiduciaries and ser-
vice providers to the Union Retirement Plan.
(b) Effective as of the Distribution Date, the
Packco Employees shall cease accruing benefits under the Sala-
ried Retirement Plan, the SERP and the Hourly Non-Union Retire-
ment Plan. As promptly as practicable following the Distribu-
tion Date, and effective as of the Distribution Date, Grace in-
tends to implement a program for Packco Employees who partici-
pated in the Salaried Retirement Plan before the Distribution
Date designed to substantially make up for any anticipated ma-
terial adverse impact on them resulting from the termination of
such participation as of the Distribution Date. Such program
will assume that each such Packco Participant works as an em-
ployee until normal retirement (age 65) and that he or she will
achieve a reasonable investment return on his or her account in
the Sealed Air Corporation Profit Sharing Plan. Upon the
implementation of such program by Grace, New Grace shall (i)
cause the Salaried Retirement Plan to be amended so that, ef-
fective immediately before the Distribution Date: (A) the ac-
crued benefit of each Packco Employee who is a participant
therein is increased by crediting such Packco Employee with an
additional year of service; (B) the accrued benefit of each
such Packco Employee who is at least 40 years old as of the
Distribution Date is also increased by an amount equal to the
lesser of (x) 13 percent of the amount of such accrued benefit
(after giving effect to the increase described in clause (A) of
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this sentence) or (y) the increase that results from crediting
such Packco Employee with an additional four years of service,
and (C) the accrued benefits of all such Packco Employees, as
so increased, shall be fully vested as of the Distribution
Date; or (ii) provide additional retirement benefits to such
Packco Employees as a group having, in the aggregate, a value
substantially equivalent to the increased benefits described in
clause (i); provided, that the aggregate expense associated
with the benefits described in clause (i) or (ii) (as ap-
plicable) shall be limited to the extent necessary so that the
Accrued Benefit Obligation, calculated in accordance with FAS
87 ("ABO"), of such benefits does not exceed $15 million. Such
ABO shall be determined by Actuarial Sciences Associates
("ASA") in accordance with the actuarial assumptions set forth
in Schedule II hereto and in a manner consistent with past
practice with respect to the Salaried Retirement Plan.
(c) Effective as of the Distribution Date, the New
Grace Group shall assume or retain (as applicable) all Li-
abilities relating to or arising under the Salaried Retirement
Plan and the SERP, including without limitation for benefits
payable thereunder to Packco Participants. Effective as of the
Distribution Date, the Packco Group shall assume or retain (as
applicable) all Liabilities relating to or arising under the
Union Retirement Plan.
(d) (i) Effective immediately after the Effective
Time, Grace shall establish, cause to be established or desig-
nate a defined benefit pension plan (the "Packco Hourly Non-
Union Retirement Plan") to provide benefits and assume liabil-
ities and accept a transfer of assets from the Hourly Non-Union
Retirement Plan, as provided for in this Section 4.01(d).
(ii) As soon as practicable after the Effective
Time, following (A) the receipt by New Grace of a copy of a
favorable determination letter or Grace's certification to New
Grace, in a manner reasonably acceptable to New Grace, that the
Packco Hourly Non-Union Retirement Plan is qualified under Sec-
tion 401(a) of the Code and the related trust is exempt from
taxation under Section 501(a) of the Code, and (B) the receipt
by Grace of a copy of a favorable determination letter or New
Grace's certification to Grace, in a manner reasonably accept-
able to Grace, that the Hourly Non-Union Retirement Plan is
qualified under Section 401(a) of the Code and the related
trust is exempt from taxation under Section 501(a) of the Code,
New Grace shall direct the trustee of the trust funding the
Hourly Non-Union Retirement Plan to transfer to the trustee of
the trust established to fund the Packco Hourly Non-Union Re-
tirement Plan the amount described in Section 4.01(d)(iii) be-
low. Such transfer shall be in cash unless otherwise agreed by
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Grace and New Grace. As of the date of such transfer, and ef-
fective immediately after the Effective Time, the Packco Group
and the Packco Hourly Non-Union Retirement Plan shall assume
all Liabilities for benefits payable to Packco Participants
under the Hourly Non-Union Retirement Plan, and the New Grace
Group and the Hourly Non-Union Retirement Plan shall retain no
Liabilities for such benefits.
(iii) The amount transferred pursuant to this
Section 4.01(d) shall be an amount equal to (A) less (B), as
adjusted by (C); where (A) equals a portion of the assets of
the Hourly Non-Union Retirement Plan having a fair market value
equal to the ABO as of the Distribution Date attributable to
Packco Participants; where (B) equals the aggregate payments
made from the trust funding the Hourly Non-Union Retirement
Plan in respect of Packco Participants from the Effective Time
through the date the transfer occurs; and where (C) equals the
amount of the net earnings or losses, as the case may be, from
the Effective Time through the date the transfer occurs, on the
average of the daily balances of the foregoing and based upon
the actual rate of return earned by the Hourly Non-Union Re-
tirement Plan during such period. All of the foregoing calcu-
lations shall be made by ASA in accordance with the assumptions
set forth on Schedule III hereto. Grace shall be entitled to
review and comment on such calculations as ASA is in the pro-
cess of performing them. Notwithstanding the foregoing, how-
ever, in no event shall the amount so transferred be less than
the amount necessary to comply with, nor more than the maximum
amount permitted by, Section 414(l) of the Code and the reg-
ulations promulgated thereunder, as determined by ASA.
(iv) Grace, New Grace and Grace-Conn. shall, in
connection with the transfer described in this Section 4.01(d),
cooperate in making any and all appropriate filings required
under the Code or ERISA, and the regulations thereunder and any
applicable securities laws, and take all such action as may be
necessary and appropriate to cause such transfers to take place
as soon as practicable after the Effective Time. New Grace and
Grace-Conn. agree, during the period ending with the date of
the transfer of assets to the Packco Hourly Non-Union Retire-
ment Plan, to cause distributions in respect of Packco Par-
ticipants to be made in the ordinary course from the Hourly
Non-Union Retirement Plan in accordance with applicable law and
pursuant to plan provisions.
SECTION 4.02 Savings Plans. (a) Grace, New Grace
and Grace-Conn. shall take all steps necessary or appropriate
so that, effective no later than the Distribution Date: (i)
one or more members of the New Grace Group are the sole spon-
sors of the Hourly SIP and the Salaried SIP; and (ii) one or
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more members of the Packco Group are the sole sponsors of the
Cypress 401(k) Plans and the Schurpack 401(k) Plan. Effective
as of the Distribution Date, the Packco Group shall assume all
Liabilities relating to or arising under the Cypress 401(k)
Plans and the Schurpack 401(k) Plan. Such steps shall include,
without limitation, the appointment or reappointment by New
Grace (by action after the Distribution Date to approve or
ratify such appointment or reappointment) of all named fiducia-
ries, trustees, custodians, recordkeepers and other fiduciaries
and service providers to the Hourly SIP and the Salaried SIP,
and the appointment or reappointment by Grace of all named fi-
duciaries, trustees, custodians, recordkeepers and other fidu-
ciaries and service providers to the Cypress 401(k) Plans and
the Schurpack 401(k) Plan.
(b) Each of the transfers provided for in this Sec-
tion 4.02(b) shall be implemented only if both Grace and New
Grace so agree after the Distribution Date.
(i) Grace, New Grace and Grace-Conn. shall take
all steps necessary or appropriate in order to transfer to a
Packco Savings Plan and the related trust, as soon as practi-
cable after the Effective Time, all account balances (including
the pre-tax, after-tax and rollover account balances) under
each of the Hourly SIP and the Salaried SIP of all Packco Par-
ticipants. Such assets shall be transferred in kind, to the
extent elected by New Grace with the consent of Grace (which
consent shall not be unreasonably withheld), and otherwise
shall be made in cash; provided, that in any event, unless the
parties agree otherwise, any outstanding participant loans and
FMC American Depositary Receipts shall be transferred in kind.
It is the intention of Grace, New Grace and Grace-Conn. to
carry out such transfer so as to preserve, to the extent prac-
ticable, the investment elections of participants as in effect
immediately before the transfer, unless the parties agree oth-
erwise.
(ii) Grace, New Grace and Grace-Conn. shall co-
operate in making all appropriate filings required under the
Code or ERISA, and the regulations thereunder and any applica-
ble securities laws, implementing all appropriate communica-
tions with participants, maintaining and transferring appro-
priate records, and taking all such other actions as may be
necessary and appropriate to implement the provisions of this
Section 4.02(b) and to cause the transfers of assets pursuant
to this Section 4.02(b) to take place as soon as practicable
after the Effective Time; provided, that each of such transfers
shall take place only after (A) the receipt by New Grace of a
favorable determination letter or Grace's certification, in a
manner reasonably acceptable to New Grace, that the relevant
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Packco Savings Plan is qualified under Section 401(a) of the
Code and the related trust is exempt from taxation under Sec-
tion 501(a) of the Code, and (B) the receipt by Grace of a fa-
vorable determination letter or New Grace's certification, in a
manner reasonably acceptable to Grace, that the Hourly SIP or
the Salaried SIP, as applicable, is qualified under Section
401(a) of the Code and the related trust is exempt from taxa-
tion under Section 501(a) of the Code.
(c) If Grace and New Grace agree to implement the
transfers provided for in Section 4.02(b), subject to the com-
pletion of such transfer and effective as of the Distribution
Date, the members of the Packco Group and the SAC Savings Plan
shall assume all Liabilities to or relating to Packco Partici-
pants relating to or arising under the Hourly SIP and the Sala-
ried SIP. Effective as of the Distribution Date, the New Grace
Group shall assume or retain (as applicable) all Liabilities
relating to or arising under the Hourly SIP and the Salaried
SIP, including without limitation for benefits payable thereun-
der to Packco Participants, that are not assumed by the Packco
Group and the relevant Packco Savings Plan pursuant to the pre-
ceding sentence.
SECTION 4.03 Qualification of Plans. The New Grace
Group shall be responsible for all Liabilities incurred by the
Packco Group as a result of the failure of any of the Hourly
Non-Union Retirement Plan, the Union Retirement Plan, the
Hourly SIP, the Salaried SIP, the Cypress 401(k) Plans or the
Schurpack 401(k) Plan to be qualified under Section 401(a) of
the Code on or before the date assets are transferred from such
Plan to a Packco Benefit Plan, or the date sponsorship of such
Plan is assumed by any member of the Packco Group, as ap-
plicable. The Packco Group shall be responsible for all Li-
abilities incurred by the New Grace Group as a result of the
failure of the Packco Hourly Non-Union Retirement Plan or any
Packco Savings Plan to be qualified under Section 401(a) of the
Code on or before the date assets are transferred to such Plan
from a New Grace Benefit Plan. The parties hereto agree that
to the extent any of them becomes aware that any such Plan
fails or may fail to be so qualified, it shall notify the other
parties and the parties shall cooperate and use best efforts to
avoid such disqualification, including using the Internal Rev-
enue Service's Voluntary Compliance Resolution program or simi-
lar programs, and taking any steps available pursuant to such
program to avoid disqualification, as determined by the party
who is made responsible under this Section 4.03 for the Li-
abilities that would result from such disqualification (and the
Liabilities for which such party is responsible shall include
all costs and expenses resulting from such steps, including
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fines, penalties, contributions, attorneys' fees and expenses
and administrative expenses).
ARTICLE V
WELFARE AND OTHER BENEFITS
SECTION 5.01 Benefits for Active Employees. (a)
Grace, New Grace and Grace-Conn. shall take all steps necessary
or appropriate so that, effective no later than the Distribu-
tion Date, one or more members of the Packco Group are the sole
sponsors of the Packco Health Plan. Such steps shall include,
without limitation, the appointment or reappointment by Grace
of all named fiduciaries, trustees, custodians, recordkeepers
and other fiduciaries and service providers to the Packco
Health Plan, to the extent such appointments or reappointments
are necessary.
(b) Effective as of the Distribution Date, the New
Grace Group shall assume or retain (as applicable) all Liabil-
ities relating to or arising out of claims for benefits under
U.S. Welfare Plans by New Grace Participants and Terminated
Grace Participants, whenever such claims are incurred, and (ii)
by Packco Participants to the extent such claims are incurred
before the Distribution Date and reported within 365 days
thereafter. Effective as of the Distribution Date, the Packco
Group shall assume or retain (as applicable) all Liabilities
relating to or arising out of all other claims for benefits
under U.S. Welfare Plans by Packco Participants, except as spe-
cifically provided in Section 5.02.
SECTION 5.02 Retiree Welfare Benefits. Effective as
of the Distribution Date, the New Grace Group shall assume all
Liabilities for providing post-retirement medical and life in-
surance benefits under U.S. Welfare Plans sponsored by Grace or
any of its subsidiaries before the Distribution Date or any
members of the New Grace Group on or after the Distribution
Date, to: (i) Terminated Grace Participants; (ii) Packco Par-
ticipants who would have been eligible to receive such benefits
if they had retired at any time on or before the first anniver-
sary of the Distribution Date (regardless of when they actually
do retire); and (iii) any New Grace Participants who become
eligible for such benefits after the Distribution Date pursuant
to the Grace Severance Pay Plan as a result of a termination of
employment as of the Distribution Date. Effective as of the
Distribution Date, the Packco Group shall provide Packco Par-
ticipants who retire after the Distribution Date for whom the
New Grace has not assumed Liabilities for providing post-
retirement medical and life insurance benefits pursuant to the
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preceding sentence with such benefits pursuant to one or more
group insurance or group self-insured programs; provided, that
the Packco Group may require such Packco Participants to bear
the entire cost of such benefits, together with a reasonable
fee for their allocable share of the Packco Group's costs of
administering such programs.
SECTION 5.03 Severance. The Packco Group shall
adopt, effective as of the Distribution Date, and shall main-
tain in effect without amendment adverse to participants, at
least through the first anniversary of the Distribution Date, a
severance plan providing Packco Employees with severance ben-
efits as outlined in Exhibit A hereto.
SECTION 5.04 Split Dollar Plan; Deferred Compensa-
tion Plan; Salary Protection Plan. Effective as of the Distri-
bution Date, each Packco Employee who participates in the Split
Dollar Plan, the Deferred Compensation Plan or the Salary Pro-
tection Plan shall be treated as a terminated participant under
such Plan, and shall have the same options with respect to such
Plan as are available to any other participant in such Plan
upon termination of employment, in accordance with the terms of
such Plan as in effect immediately before the Distribution
Date. Effective as of the Distribution Date, the New Grace
Group shall assume all Liabilities relating to or arising under
the Split Dollar Plan, the Deferred Compensation Plan and the
Salary Protection Plan.
SECTION 5.05 Dependent Care and Medical Expense
Plans. (a) Grace, New Grace and Grace-Conn. shall take all
steps necessary or appropriate so that, effective no later than
the Distribution Date, one or more members of the New Grace
Group are the sole sponsors of the Grace Dependent Care Plan
and the Grace Medical Expense Plan, and the New Grace Group
shall assume all Liabilities under such Plans. Such steps
shall include, without limitation, the appointment or reap-
pointment by New Grace (by action after the Distribution Date
to approve or ratify such appointment or reappointment) of all
named fiduciaries, trustees, custodians, recordkeepers and
other fiduciaries and service providers to such Plans, to the
extent such appointments or reappointments are necessary.
(b) Grace, New Grace and Grace-Conn. shall take all
steps necessary or appropriate so that, effective no later than
the Distribution Date, one or more members of the Packco Group
are the sole sponsors of the Packco Medical and Dependent Care
Expense Plan, and the Packco Group shall assume all Liabilities
under such Plan. Such steps shall include, without limitation,
the appointment or reappointment by Grace of all named fiducia-
ries, trustees, custodians, recordkeepers and other fiduciaries
-17-
and service providers to such Plan, to the extent such appoint-
ments or reappointments are necessary. No employer contribu-
tions to such Plan shall be made or promised with respect to
the 1998 plan year unless the parties otherwise agree.
ARTICLE VI
NON-U.S. PLANS
SECTION 6.01 Non-U.S. Plans Generally. As soon as
practicable after the date of this Agreement, the parties here-
to shall enter into one or more agreements or memoranda of un-
derstanding (collectively, the "Foreign Plans Agreement") re-
garding the treatment and allocation of Liabilities relating to
or arising under Benefit Plans (the "Foreign Plans") for Em-
ployees located outside the United States, including without
limitation expatriates, and to expatriate employees located in
the United States. The Foreign Plans Agreement shall provide
for the treatment of each Foreign Plan, which treatment may
include (without limitation) (i) the retention or assumption of
such Foreign Plan by the Packco Group, (ii) the retention or
assumption of such Foreign Plan by the New Grace Group, or
(iii) an allocation of the liabilities and assets (if any) of
the Foreign Plan between a Plan (which may include the Foreign
Plan) that is intended to be maintained by the New Grace Group
and a Plan (which may include the Foreign Plan) that is in-
tended to be maintained by the Packco Group, after the Distri-
bution Date; provided, that the insurance contracts funding
each Insured Foreign Pension Plan (and any assets related
thereto) shall be divided between the appropriate Packco Ben-
efit Plan and New Grace Benefit Plan by the insurer in accor-
dance with applicable law, regulation and practice. Any trans-
fers of assets or liabilities from a Noninsured Foreign Pension
Plan shall be made on the basis of reasonable methods and as-
sumptions determined by the local actuarial firm that is, as of
the date of this Agreement, serving as the actuary for such
Noninsured Foreign Pension Plan (or another actuarial firm if
the parties hereto so agree) (the "Local Actuary"), in ac-
cordance with applicable legal and regulatory requirements,
local practice and the past practice of Grace; provided, that
each of Grace, Grace-Conn. and New Grace shall be entitled to
review such methods and assumptions and object to them if they
are unreasonable, and to review all calculations and determina-
tions of the Local Actuary for accuracy. It is the intention
of the parties hereto that the Packco Group will assume or re-
tain Liabilities for Packco Employees under Foreign Plans and
that to the extent permitted and practicable under legal and
regulatory requirements and local practice, assets transferred
from Noninsured Foreign Pension Plans pursuant to the Foreign
-18-
Plans Agreement shall equal the Projected Benefit Obligation,
calculated in accordance with FAS 87, for the liabilities as-
sumed by Packco Benefit Plans pursuant to the Foreign Plans
Agreement.
ARTICLE VII
GENERAL
SECTION 7.01 Preservation of Rights to Amend or Ter-
minate Plans and to Terminate or Change Terms of Employment.
No provision of this Agreement shall be construed as a limita-
tion on the rights of any member of the Packco Group or the New
Grace Group to amend or terminate any Benefit Plan or other
plan, program or arrangement relating to employees. No provi-
sion of this Agreement shall be construed to create a right in
any employee or former employee or beneficiary or dependent of
such employee or former employee under a Benefit Plan which
such employee or former employee or beneficiary would not oth-
erwise have under the terms of the Benefit Plan itself. Noth-
ing contained in this Agreement shall confer upon any indi-
vidual the right to remain an employee of any member of the
Packco Group or the New Grace Group or restrain any member of
the Packco Group or the New Grace Group from changing the terms
and conditions of employment of any individual at any time fol-
lowing the Distribution Date, except as provided in Section
5.03 of this Agreement.
SECTION 7.02 Other Liabilities; Guarantee of Obliga-
tions. Effective as of the Distribution Date, the New Grace
Group shall assume or retain (as applicable) all Liabilities
relating to or arising out of claims for compensation and ben-
efits made by or on behalf of any New Grace Participant, in-
cluding salary, wages, bonuses, incentive compensation, sever-
ance benefits, separation pay, accrued sick, holiday, vacation,
health, dental or retirement benefits, or other compensation
under applicable law or otherwise, relating to or arising out
of employment by Grace or any of its subsidiaries before the
Distribution Date or employment by any member of the New Grace
Group on or after the Distribution Date. Effective as of the
Distribution Date, the Packco Group shall assume or retain (as
applicable) responsibility for all Liabilities relating to or
arising out of claims for compensation and benefits made by or
on behalf of any Packco Participant, including salary, wages,
bonuses, incentive compensation, severance benefits, separation
pay, accrued sick, holiday, vacation, health, dental or re-
tirement benefits, or other compensation under applicable law
or otherwise, relating to or arising out of employment by Grace
-19-
or any of its subsidiaries before the Distribution Date or em-
ployment by any member of the Packco Group on or after the Dis-
tribution Date. Notwithstanding the foregoing, this Section
7.02 shall not apply to any Liability that is specifically pro-
vided for elsewhere in this Agreement.
SECTION 7.03 Assumption of Plans; Termination of
Participation. Except as specifically provided otherwise in
this Agreement, Grace, New Grace and Grace-Conn. shall take all
steps necessary or appropriate so that, effective no later than
the Distribution Date, one or more members of the New Grace
Group are the sole sponsors of all Benefit Plans that are, as
of the date of this Agreement, sponsored by Grace, and the New
Grace Group shall assume or retain (as applicable) all Li-
abilities relating to or arising under such Benefit Plans.
Such steps shall include, without limitation and where ap-
propriate, the appointment or reappointment by New Grace (by
action after the Distribution Date to approve or ratify such
appointment or reappointment) of all named fiduciaries, trust-
ees, custodians, recordkeepers and other fiduciaries and ser-
vice providers to such Benefit Plans. Except as specifically
provided otherwise in this Agreement or in the agreement pro-
vided for in Section 6.01 of this Agreement, the accrual of
benefits by Packco Participants in any New Grace Benefit Plan
shall cease not later than the Distribution Date.
SECTION 7.04 Information. The parties hereto shall,
before the Distribution Date or as soon as practicable thereaf-
ter, provide each other with all information as may reasonably
be requested and necessary to administer each Benefit Plan ef-
fectively in compliance with applicable law. Such information
shall be provided in the form requested if, at the time of such
request, it exists in such form or can readily be converted to
such form. If a request would require a party providing infor-
mation to incur any expenses in order to receive advice from
any actuary, consultant or consulting firm, the information
need not be provided unless the requesting party reimburses the
party providing the information for all such expenses.
SECTION 7.05 Complete Agreement; Coordination with
Tax Sharing Agreement. (a) This Agreement, the Exhibits and
Schedules hereto and the agreements and other documents re-
ferred to herein, shall constitute the entire agreement between
the parties hereto with respect to the subject matter hereof
(other than the Distribution Agreement, the Merger Agreement
and the schedules and exhibits thereto) and shall supersede all
previous negotiations, commitments and writings with respect to
such subject matter.
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(b) This Agreement, and not the Tax Sharing Agree-
ment, constitutes the sole agreement of the parties regarding
responsibility for any excise taxes, penalties or similar lev-
ies that may be imposed by any taxing authority on, or with
respect to, any Benefit Plan, except as otherwise specifically
provided in the Tax Sharing Agreement with respect to payroll
taxes.
SECTION 7.06 Governing Law. This Agreement shall be
governed by and construed and enforced in accordance with the
laws of the State of Delaware (other than the laws regarding
choice of laws and conflict of laws that would apply the sub-
stantive laws of any other jurisdiction) as to all matters, in-
cluding matters of validity, construction, effect, performance
and remedies, except to the extent preempted by federal law.
SECTION 7.07 Notices. All notices, requests,
claims, demands and other communications hereunder shall be in
writing and shall be given as provided in the Distribution
Agreement.
SECTION 7.08 Successors and Assigns; No Third-Party
Beneficiaries. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties
hereto and their successors and permitted assigns, but neither
this Agreement nor any of the rights, interests and obligations
hereunder shall be assigned by any party hereto without the
prior written consent of the other party (which consent shall
not be unreasonably withheld). Without limiting the generality
of the foregoing, it is expressly acknowledged that at the Ef-
fective Time, the Certificate of Incorporation of Grace will be
amended (the "Newco Amendment") to change the name of Grace to
"Sealed Air Corporation" and that references herein to "Grace"
include, from and after the Effective Time, such corporation
(which is also referred to in the Merger Agreement as Newco).
Accordingly, to the extent this Agreement calls for the agree-
ment of "Grace" or of "the parties" from and after the Effec-
tive Time, the agreement of Newco (as defined in the Merger
Agreement) will be required. This Agreement is solely for the
benefit of the parties hereto and their Subsidiaries and is not
intended to confer, nor shall it confer, upon any other Persons
(including New Grace Participants and Packco Participants) any
rights or remedies hereunder.
SECTION 7.09 Amendment and Modification. This
Agreement may be amended, modified or supplemented only by a
written agreement signed by all of the parties hereto.
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SECTION 7.10 Counterparts. This Agreement may be
executed in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
SECTION 7.11 Interpretation. The Article and Sec-
tion headings contained in this Agreement are solely for the
purpose of reference, are not part of the agreement of the par-
ties hereto and shall not in any way affect the meaning or in-
terpretation of this Agreement.
SECTION 7.12 Indemnity Procedures. The provisions
of Article IV of the Distribution Agreement shall apply with
respect to Liabilities allocated under this Agreement.
SECTION 7.13 Severability. If any provision of this
Agreement or the application thereof to any person or circum-
stance is determined by a court of competent jurisdiction to be
invalid, void or unenforceable, the remaining provisions here-
of, or the application of such provision to persons or circum-
stances other than those as to which it has been held invalid
or unenforceable, shall remain in full force and effect and
shall in no way be affected, impaired or invalidated thereby,
so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to
any party.
SECTION 7.14 References; Construction. References
to any "Article," "Exhibit," "Schedule" or "Section," without
more, are to Articles, Exhibits, Schedules and Sections to or
of this Agreement. Unless otherwise expressly stated, clauses
beginning with the term "including" set forth examples only and
in no way limit the generality of the matters thus exemplified.
SECTION 7.15 SAC Reasonable Consent. The parties
hereto agree that any actions to be taken by Grace, Grace-Conn.
or New Grace to implement the terms of this Agreement that are
not specifically required herein that relate to Packco or the
Packaging Business, and any actions that are to be taken pursu-
ant to this Agreement only by agreement of the parties, must be
reasonably satisfactory to SAC.
-22-
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed as of the date first above
written.
W. R. GRACE & CO.
By:------------------------------
Name:
Title:
W. R. GRACE & CO.-CONN.
By:------------------------------
Name:
Title:
GENERAL SPECIALTY CHEMICALS, INC.
By:------------------------------
Name:
Title:
-23-
EXHIBIT 10.2
FORM OF TAX SHARING AGREEMENT
This TAX SHARING AGREEMENT (this "Agreement"), dated as
of __________, 1997, by and among W. R. Grace & Co., a Delaware
corporation ("Grace"), W. R. Grace & Co.-Conn., a Connecticut
corporation and a wholly owned subsidiary of Grace ("Grace-
Conn."), and Sealed Air Corporation, a Delaware corporation
("Sealed Air").
RECITALS
WHEREAS, Grace, Packco Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Grace, and Sealed
Air have entered into an Agreement and Plan of Merger (the
"Merger Agreement");
WHEREAS, Grace, Grace-Conn. and Grace Specialty
Chemicals, Inc., a Delaware corporation and a wholly owned
subsidiary of Grace ("New Grace"), have entered into the
Distribution Agreement;
AND WHEREAS, Grace, on behalf of itself and the Packco
Group, and Grace-Conn., on behalf of itself and the New Grace
Group, wish to provide for the allocation between the Packco
Group and the New Grace Group of all responsibilities,
liabilities and benefits relating to or affecting Taxes (as
hereinafter defined) paid or payable by either of them for all
taxable periods, whether beginning before, on or after the
Distribution Date (as hereinafter defined) and to provide for
certain other matters.
NOW, THEREFORE, in consideration of the premises, and
of the representations, warranties, covenants and agreements set
forth herein, the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
Capitalized terms used but not defined herein shall
have the respective meanings assigned to them in the Distribution
Agreement or the Merger Agreement. As used in this Agreement,
the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and the
plural forms of the terms defined):
"Action": as defined in Section 5.3(a).
"Active New Grace Businesses": as defined in Section
5.2(b).
"Active Packo Business": as defined in Section 5.1(b).
"Adjusted Item": as defined in Section 3.2(a)(v).
"Adjusted Party" means the party for the account of
which is an Adjusted Item.
"Affiliated Group" means the affiliated group of which
Grace is the common parent or any predecessor or successor
thereto.
"Code" means the Internal Revenue Code of 1986, as
amended, and shall include corresponding provisions of any
subsequently enacted federal tax laws.
"Conn Prepared Returns": as defined in Section 2.2(a).
"Conn Prior Payments": as defined in Section
3.2(c)(iii).
"Consistency/Basis Disagreement": as defined in
Section 2.2(b).
"Corresponding Item": as defined in Section 3.2(a)(v).
"Corresponding Party" means the party for the account
of which is a Corresponding Item.
"Del Prepared Returns": as defined in Section 2.2(a).
"Discontinued Businesses": shall mean (x) the can
sealing and coating portion of the New Grace Business which
portion is described in the proviso to the definition of the
Packaging Business and (y) certain other businesses currently
accounted for as discontinued operations.
"Distribution Date" means the date on which the
Distribution occurs. For purposes of this Agreement, the
Distribution shall be deemed effective as of the close of
business on the Distribution Date.
"Equity Securities" means any stock or other equity
securities treated as stock for tax purposes, or options,
warrants, rights, convertible debt, or any other instrument or
security that affords any Person the right, whether conditional
or otherwise, to acquire stock.
"Final Determination" means the final resolution of
liability for any Tax for a taxable period (i) by a duly executed
IRS Form 870 or 870-AD (or any successor forms thereto), on the
date such Form is effective, or by a comparable form under the
laws of other jurisdictions; except that a Form 870 or 870-AD or
comparable form that reserves (whether by its terms or by
operation of law) the right of the taxpayer to file a claim for
refund and/or the right of the taxing authority to assert a
further deficiency shall not constitute a Final Determination
-2-
with respect to the right so reserved; (ii) by a decision,
judgment, decree, or other order by a court of competent
jurisdiction, which has become final and unappealable; (iii) by a
closing agreement or accepted offer in compromise under Section
7121 or 7122 of the Code, or comparable agreements under the laws
of other jurisdictions; (iv) by any allowance of a refund or
credit in respect of an overpayment of Tax, but only after the
expiration of all periods during which such refund may be
recovered (including by way of offset) by the jurisdiction
imposing Tax; or (v) by any other final disposition, including by
reason of the expiration of the applicable statute of limitations
or by mutual agreement of the parties.
"Foreign Cap" shall mean $3 million.
"Foreign Packco Subsidiary" means a Packco Subsidiary
organized in a foreign jurisdiction.
"Foreign Packco Tax Item" means a Tax Item of a Foreign
Packco Subsidiary arising in the Pre-Distribution Period
attributable to the Packaging Business conducted by such
Subsidiary other than any Tax Item of a Foreign Packco Subsidiary
arising as a result of a Foreign Transfer.
"Foreign New Grace Subsidiary" means a New Grace
Subsidiary organized in a foreign jurisdiction.
"Forwarding Party": as defined in Section 4.1.
"Forwarding Responsibilities": as defined in Section
4.1.
"Hypothetical Pre-Distribution Tax": as defined in
Section 2.2(d).
"Hypothetical Pre-Distribution Overall Tax Benefit":
as defined in Section 2.2(d).
"Indemnified Amount": as defined in Section 4.1.
"Indemnitee": as defined in Section 4.2(a).
"Indemnitor": as defined in Section 4.2(a).
"Indemnity Issue": as defined in Section 4.2(a).
"Interest": as defined under "Taxes" below.
"IRS" means the Internal Revenue Service.
"New Grace Tax Item" means a Tax Item arising in the
Pre-Distribution Period attributable to (i) New Grace, Grace-
Conn., Packco, any Foreign New Grace Subsidiary, any member of
the Affiliated Group which was a member prior to the Distribution
-3-
Date or any member of the affiliated group for United States
federal income tax purposes of which W. R. Grace & Co., a New
York corporation, was the common parent or (ii) the New Grace
Business conducted by any Foreign Packco Subsidiary.
"Overall Tax Benefit" shall mean, for any taxable
period, the net operating loss, unused credits (taking into
account foreign tax credits when realized regardless of the
period for which the associated earnings and profits were earned)
and any other aggregate net unused Tax Benefit not used to reduce
Taxes for the period.
"Packco Prior Payments": as defined in Section
3.2(c)(iii).
"Packaging Tax Item" means a Tax Item attributable to
Sealed Air, any member of the Packco Group or otherwise relating
to the Packaging Business or the Packaging Assets that is not a
New Grace Tax Item or a Foreign Packco Tax Item.
"Payee": as defined in Section 3.2(c).
"Payor": as defined in Section 3.2(c).
"Post-Distribution Period" means the Post-Distribution
Taxable Periods and the portion of any Straddle Period beginning
on the date after the Distribution Date.
"Post-Distribution Taxable Period" means any taxable
period beginning after the Distribution Date.
"Pre-Distribution Period" means the Pre-Distribution
Taxable Periods and the portion of any Straddle Period ending on
the Distribution Date.
"Pre-Distribution Schedules": as defined in Section
2.2(b).
"Pre-Distribution Taxable Period" means any taxable
period ending on or before the Distribution Date
"Proceeding" shall mean any audit or other examination,
judicial or administrative proceeding relating to liability for
or refunds or adjustments with respect to Taxes.
"Recipient Group": as defined in Section 4.1.
"Restriction Period" means the period beginning on the
date hereof and ending on the two-year anniversary of the
Effective Time.
"Reviewing Party": as defined in Section 5.3(c).
"Ruling/Opinion Exception": as defined in Section 5.1.
-4-
"Sealed Air Parties" means Sealed Air and each of its
past, present or future Affiliates, other than any member of the
Packco Group.
"Straddle Period" means a taxable period that includes,
but does not end on, the Distribution Date.
"Substantial Authority": as defined in Section 2.1.
"Tax Benefit" means any item of loss, deduction, credit
or any other Tax Item which decreases Taxes paid or payable.
"Tax Deficiency" means an assessment of Taxes, as a
result of a Final Determination.
"Tax Detriment" means any item of income, gain,
recapture of credit or any other Tax Item which increases Taxes
paid or payable.
"Tax-Free Status" means the qualification of the
Distribution (i) as a transaction described in Section 355(a)(1)
of the Code, (ii) as a transaction in which the stock distributed
thereby is qualified property for purposes of Section 355(c)(2)
of the Code and (iii) as a transaction in which each of Grace,
Grace-Conn., Packco, New Grace and each member of the New Grace
Group recognizes no income or gain.
"Tax Item" means any item of income, gain, loss,
deduction, credit, recapture of credit or any other item which
increases or decreases Taxes paid or payable, including an
adjustment under Code Section 481 resulting from a change in
accounting method.
"Tax Opinions" shall mean the Grace Tax Opinion and the
Sealed Air Tax Opinion.
"Tax Refund" means a refund of Taxes as the result of a
Final Determination.
"Tax Return" means any return, filing, questionnaire,
information return or other document required to be filed,
including requests for extensions of time, filings made with
estimated tax payments, claims for refund and amended returns
that may be filed, for any period with any taxing authority
(whether domestic or foreign) in connection with any Tax or Taxes
(whether or not a payment is required to be made with respect to
such filing).
"Taxes" means all forms of taxation, whenever created
or imposed, and whether of the United States or elsewhere, and
whether imposed by a local, municipal, governmental, state,
foreign, federation or other body, and, without limiting the
generality of the foregoing, shall include income, sales, use, ad
valorem, gross receipts, trade, license, value added, franchise,
-5-
transfer, recording, withholding, payroll, employment, excise,
occupation, unemployment insurance, social security, business
license, business organization, stamp, environmental, premium and
property taxes, together with any related interest, penalties and
additions to any such tax, or additional amounts imposed by any
taxing authority (domestic or foreign) (such interest, penalties,
additions and additional amounts, "Interest").
"Transaction Party": as defined in Section 5.3(c).
ARTICLE II.
FILING OF TAX RETURNS
Section 2.1. Manner of Filing. All Tax Returns filed
after the Distribution Date and the Pre-Distribution Schedules
shall be prepared on a basis which is consistent with the
consummation of the transactions as set forth in the Distribution
Agreement, the Grace Tax Matters Certificate, the Sealed Air Tax
Matters Certificate, the Tax Opinions and any opinions, rulings,
agreements or written advice relating to Foreign Transfers (in
the absence of a controlling change in law or circumstances) and
shall be filed on a timely basis (including extensions) by the
party responsible for such filing under this Agreement. The Pre-
Distribution Schedules and all Tax Returns in respect of a Pre-
Distribution Taxable Period or portion, ending on the
Distribution Date of any Straddle Period, that include any member
of the New Grace Group or the Packco Group shall be prepared on
the basis of substantial authority or on a reasonable basis with
(if applicable) appropriate disclosure (each, "Substantial
Authority"); provided, however, that such Schedules and Returns
shall be prepared on a basis consistent with the elections (other
than elections relating to carrybacks and carryforwards described
in Section 3.3(a)), accounting methods, conventions and
principles of taxation used for the most recent taxable periods
of members of the New Grace Group for which Tax Returns involving
similar Tax Items have been filed, to the extent that a failure
to do so would result in a Tax Detriment, or a reduction in a Tax
Benefit, to a member of the Packco Group, as long as such
consistent position has Substantial Authority. All Tax Returns
in respect of a Post-Distribution Taxable Period or portion,
beginning after the Distribution Date, of any Straddle Period,
shall be prepared with Substantial Authority; provided, however,
that such Returns shall be prepared on a basis consistent with
the elections (other than elections relating to carrybacks and
carryforwards described in Section 3.3(a)), accounting methods,
conventions and principles of taxation used for the most recent
taxable periods of members of the New Grace Group for which Tax
Returns involving similar Tax Items have been filed, to the
extent that a failure to do so would result in a Tax Detriment,
or a reduction in a Tax Benefit, to a member of the other Group,
as long as such consistent position has Substantial Authority.
In the event of a conflict with respect to a Straddle Period
between the requirements of the immediately preceding sentence
-6-
and the second preceding sentence, the second preceding sentence
shall prevail. Subject to the provisions of this Agreement, all
decisions relating to the preparation of Tax Returns shall be
made in the sole discretion of the party responsible under this
Agreement for such preparation. Grace shall provide Grace-Conn.
with copies of all Tax Returns filed after the Distribution Date
that relate to any member of the New Grace Group. Grace-Conn.
shall provide Grace with a copy of any portion of a Tax Return
necessary to confirm Grace-Conn.'s entitlement to payment
hereunder in respect of a carryback or refund.
Section 2.2. Pre-Distribution and Straddle Period Tax
Returns.
(a) Grace shall prepare and file, or cause to be
prepared and filed, any Tax Returns required to be filed by a
member or members of the New Grace Group or the Packco Group for
any Pre-Distribution Taxable Period and any Straddle Period;
provided, however, that Grace-Conn. shall prepare and file, or
cause to be prepared and filed, any Tax Returns relating solely
to a member or members of the New Grace Group or their respective
assets or businesses (such Tax Returns to be prepared and filed,
or caused to be prepared and filed, by Grace, the "Del Prepared
Returns", and by Grace-Conn., the "Conn Prepared Returns",
respectively).
(b) With respect to any Del Prepared Return that has
not been filed as of the Distribution Date and relates to a Pre-
Distribution Taxable Period or a Straddle Period, Grace-Conn.
shall, 25 calendar days before the due date (including
extensions) for such Return, provide Grace with a schedule
(collectively, the "Pre-Distribution Schedules") detailing the
computation of (i) in the case of a Pre-Distribution Taxable
Period, the Tax and/or Overall Tax Benefit and (ii) in the case
of a Straddle Period, the Hypothetical Pre-Distribution Tax and/
or Hypothetical Pre-Distribution Overall Tax Benefit, in either
case, attributable to the member or members of the New Grace
Group or the Packco Group included in such Return. Any Pre-
Distribution Schedule relating to a Pre-Distribution Taxable
Period shall be delivered to Grace in the form of a completed,
but unexecuted Tax Return. If Grace so requests, Grace-Conn.
shall discuss with Grace the preparation of, and allow Grace
periodically to review major issues with respect to, any Pre-
Distribution Schedule. In the event that Grace disagrees with
any Tax Item reflected (or anticipated to be reflected) on a Pre-
Distribution Schedule and demonstrates (by means of a written
explanation in sufficient detail to permit such conclusion to be
verified) its conclusion that Grace-Conn. has failed to comply
with the requirements of the second sentence of Section 2.1
hereof (a "Consistency/Basis Disagreement"), Grace-Conn. shall
explain its calculation of such Tax Item within 14 days of
receipt of Grace's written explanation. The parties shall
attempt in good faith mutually to resolve any Consistency/Basis
-7-
Disagreements prior to the due date for filing the relevant Tax
Return.
(c) Whether or not any Consistency/Basis Disagreements
or any other disagreements relating to a Tax Item on a Pre-
Distribution Schedule have been resolved by the applicable due
date, Grace shall (i) prepare the Del Prepared Returns on the
basis of, and in a manner consistent with, the Pre-Distribution
Schedules, (ii) provide Grace-Conn. with a copy of each Del
Prepared Return 14 calendar days before such Return is filed and
reflect any comments thereon provided in good faith by Grace-
Conn. and (iii) provide Grace-Conn. with a copy of each Del
Prepared Return two business days after such Return is filed. In
the event that any Consistency/Basis Disagreements relating to a
Pre-Distribution Schedule have not been resolved prior to the
filing of the relevant Tax Return, such disagreements shall be
promptly resolved pursuant to Section 6.7 hereof.
(d) The "Hypothetical Pre-Distribution Tax" shall mean
the Tax that would have been due for the taxable period ending on
the Distribution Date if the Distribution Date were the last day
of the taxable period. The "Hypothetical Pre-Distribution
Overall Tax Benefit" shall mean the Overall Tax Benefit that
would have arisen in the taxable period ending on the
Distribution Date if the Distribution Date were the last day of
the taxable period. Such Tax or Overall Tax Benefit shall be
computed by determining items of income, expense, deduction, loss
and credit on a "closing of the books" basis, reflecting tax
accounting principles as of the close of business on the
Distribution Date.
Section 2.3. Post-Distribution Tax Returns. Any Tax
Return for a Post-Distribution Taxable Period shall be the
responsibility of the New Grace Group if such Tax Return relates
solely to a member or members of the New Grace Group or their
respective assets or businesses, and shall be the responsibility
of the Packco Group if such Tax Return relates solely to a member
or members of the Packco Group or Sealed Air or their respective
assets or businesses.
ARTICLE III.
PAYMENT OF TAXES
Section 3.1. Allocation of Tax Liabilities With
Respect to Unfiled Returns.
(a) All Taxes shall be paid by the party responsible
under this Agreement for filing the Tax Return pursuant to which
such Taxes are due; provided, however, that
(i) in the case of Taxes due with respect to Del
Prepared Returns for Pre-Distribution Taxable Periods or Straddle
Periods, Grace-Conn. shall pay Grace the amount, if any,
-8-
of the Tax or Hypothetical Pre-Distribution Tax, as the case may
be, if any, reflected in the Pre-Distribution Schedule relating
to such Tax Return attributable to the member or members of the
New Grace Group or the Packco Group included in such Return.
Such payment shall be made, at Grace-Conn.'s discretion, either
in immediately available funds on the morning of the relevant
date when payment is due to the governmental authority in respect
of such Tax Return or, if not in immediately available funds, two
business days prior to such due date. Grace shall forward any
such payment that it receives from Grace-Conn. to the appropriate
taxing authority.
(ii) in the case of Del Prepared Returns for any
taxable period, on the relevant date on which payment is due (or
a refund is received) in respect of such Tax Return, Grace shall
pay Grace-Conn. the amount, if any, of the actual reduction in
Taxes, or the actual increase in the Tax refund, that would have
been payable or receivable with respect to such Tax Return but
for any Overall Tax Benefit (or Hypothetical Pre-Distribution Tax
Benefit) that is for the account of Grace-Conn. under Section
3.2(a)(iii), below. In the case of a payment by Grace in respect
of a reduction in Taxes, such payment shall be made in
immediately available funds on the morning of the relevant due
date or, if not in immediately available funds, two business days
prior to the due date.
(iii) the parties intend that, in implementing
this Section 3.1(a), payment and reimbursement between the
parties shall reflect the principles of Section 3.2(a).
(b) Notwithstanding anything to the contrary, any Tax
Item resulting from any act or omission not in the ordinary
course of business (other than transactions contemplated by this
Agreement, the Distribution Agreement, the Merger Agreement or
the Benefits Agreement) on the part of any member of the Packco
Group or any of the Sealed Air Parties occurring on the
Distribution Date after the Effective Time shall be deemed to
arise in a taxable period which begins after the Distribution
Date.
Section 3.2. Indemnities; Redetermined Tax
Liabilities. Except as otherwise provided in Article V:
(a) Indemnities.
(i) Grace-Conn. shall be responsible for (w) any
Tax for a Pre-Distribution Taxable Period (and any Hypothetical
Pre-Distribution Tax for a Straddle Period) of Grace, Grace-
Conn., Packco, any Foreign New Grace Subsidiary, any current or
former member of the Affiliated Group which was a member prior to
the Distribution Date or any current or former member of the
affiliated group for United States federal income tax purposes of
which W. R. Grace & Co., a New York corporation,
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was the common parent, (x) any Tax for a Pre-Distribution Taxable
Period (and any Hypothetical Pre-Distribution Tax for a Straddle
Period) of a Foreign Packco Subsidiary attributable to the
Packaging Business reflected on a Tax Return filed by such
Subsidiary on or before the Distribution Date or on a Pre-
Distribution Schedule, (y) any Tax of any member of the New Grace
Group or a Foreign Packco Subsidiary, in either case, to the
extent attributable to the New Grace Business and (z) 75% (or if
the Packco Group has borne an amount of Tax in respect of
adjustments to Foreign Packco Tax Items (and fees and expenses in
Proceedings relating to such adjustments) that exceeds the
Foreign Cap, then 100%) of any increase in Tax of a member of the
Packco Group attributable to an adjustment to a Foreign Packco
Tax Item.
(ii) Grace shall be responsible for any Taxes (x)
of any member of the Packco Group or otherwise relating to the
Packaging Business or the Packaging Assets (except to the extent
that Grace-Conn. is responsible for such Taxes pursuant to clause
(i) above) and (y) of any of the Sealed Air Parties, whether
arising before, on or after the Distribution Date.
(iii) Any Overall Tax Benefit (or Hypothetical
Pre-Distribution Overall Tax Benefit) shall be for the account of
Grace-Conn. to the extent that such Overall Tax Benefit (or
Hypothetical Pre-Distribution Overall Tax Benefit) is
attributable to (w) Grace, Grace-Conn., Packco, any Foreign New
Grace Subsidiary, any current or former member of the Affiliated
Group which was a member prior to the Distribution Date or any
current or former member of the affiliated group for United
States federal income tax purposes of which W. R. Grace & Co., a
New York corporation, was the common parent, in each case, for
the Pre-Distribution Period, (x) the Packaging Business of a
Foreign Packco Subsidiary for the Pre-Distribution Period
reflected on a Tax Return filed by such Subsidiary on or before
the Distribution Date or on a Pre-Distribution Schedule (other
than the Foreign NOLs), (y) a Pre-Distribution Period of any
member of the New Grace Group or a Foreign Packco Subsidiary, in
either case, to the extent attributable to the New Grace Business
(other than the Foreign NOLs) or (z) any adjustment to a Foreign
Packco Tax Item.
(iv) For purposes of determining the amount for
which Grace or Grace-Conn. is responsible for paying the other
party, or entitled to receive from the other party, in the event
of any adjustment, including a Final Determination, of a Tax Item
of a Foreign Packaging Subsidiary (other than a Tax Item that
arises as a result of a Foreign Transfer), Tax Items that are
clearly attributable to the Packaging Business or the New Grace
Business, respectively, shall be allocated to such Business and
Tax Items that are not so attributable shall be allocated in the
proportion that the earnings from operations of such Business
operated by such Subsidiary bears to the total earnings from
operations of such Subsidiary, as reflected in audited financial
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statements for the most recent, as of the end of such taxable
period, full-year accounting period. Tax Items so allocated
shall be treated for all purposes of this Agreement as
attributable to the Business to which they are allocated.
(v) Timing Adjustments. In the event of any
adjustment, including a Final Determination, of a Tax Item (the
"Adjusted Item") which results in a Tax Benefit or Tax Detriment
for the account of one party and a corresponding Tax Detriment or
Tax Benefit (the "Corresponding Item") for the account of the
other party, then (I) if the Corresponding Item is a Tax Benefit,
the Corresponding Party shall pay the Adjusted Party and (II) if
the Corresponding Item is a Tax Detriment, the Adjusted Party
shall pay the Corresponding Party, in either case, for each
taxable period in which a member of the Group of the party
entitled to payment under this Section 3.2(a)(v) actually
realizes the Tax Benefit, in the case of (I), or the Tax
Detriment, in the case of (II), by reason of the adjustment, an
amount equal to such realized Tax Benefit, in the case of (I), or
realized Tax Detriment, in the case of (II), including interest
(computed at a 5% annual rate) from the original due date
(without extensions) for filing of the Return for such taxable
period through the date of payment under this Section 3.2(a)(v).
(b) Final Determinations. In the case of any Final
Determination regarding a Tax Return, any Tax Deficiency shall be
paid to the appropriate taxing authority by, and any Tax Refund
received from the appropriate taxing authority shall be paid to,
the party which filed such Return; provided, however, that
whether or not there is a Tax Deficiency or Tax Refund and
whether or not a payment is required to or from the appropriate
taxing authority, Grace shall make payments to, or receive
payments from, Grace-Conn. based upon the following principles:
(i) Grace-Conn. shall make a payment to Grace in
an amount equal to (x) any increase in the Tax of any of the
Sealed Air Parties or any member of the Packco Group resulting
from any adjustment to a New Grace Tax Item and (y) 75% (or, if
the Packco Group has borne an amount of Tax in respect of
adjustments to Foreign Packco Tax Items (and fees and expenses in
Proceedings relating to such adjustments) that exceeds the
Foreign Cap, then 100%) of any increase in the Tax of any of the
Sealed Air Parties or any member of the Packco Group resulting
from any adjustment to a Foreign Packco Tax Item, in either case
(x) or (y), together with any Interest relating thereto that is
or has been imposed by the relevant taxing authority (or would
have been imposed but for an offsetting Packaging Tax Item).
(ii) Grace shall pay to Grace-Conn. an amount
equal to (x) any decrease in the Tax of any of the Sealed Air
Parties or any member of the Packco Group resulting from any
adjustment to a New Grace Tax Item and (y) any decrease in the
Tax of any of the Sealed Air Parties or any member of the Packco
Group resulting from any adjustment to a Foreign Packco Tax Item,
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in either case (x) or (y), together with any Interest relating
thereto that is or has been paid by the relevant taxing authority
(or would have been paid but for an offsetting Packaging Tax
Item).
(iii) The parties intend that, in implementing
this Section 3.2(b), payment and reimbursement between the
parties shall reflect the principles of Section 3.2(a).
(iv) Payments otherwise required to be made under
this Section 3.2(b) with respect to a single Final Determination
shall be netted and offset against each other so that either
Grace shall make a payment to Grace-Conn. or Grace-Conn. shall
make a payment to Grace, but not both.
(c) Calculation and Payment of Amounts.
(i) All calculations and determinations required
to be made pursuant to this Article III shall initially be made
by the party obligated to make such payment (the "Payor") in its
good faith. If the party entitled to receive a payment (the
"Payee") so requests, the Payor shall present its calculations
and determinations to the Payee in writing. The Payee shall be
deemed to consent to such calculations and determinations unless
the Payee notifies the Payor in writing within 30 days of
receiving such calculations and determinations. If the Payee
disagrees with the Payor's calculations and determinations, the
parties shall attempt in good faith mutually to resolve the
disagreement. In the event that they cannot so resolve the
disagreement, it shall be resolved promptly pursuant to Section
6.7 hereof.
(ii) For all tax purposes, the parties hereto
agree to treat, and to cause their respect affiliates to treat,
(x) any payment required to be paid to a member of the other
Group by this Agreement as an adjustment to the portion of the
New Grace Capital Contribution that is contributed from Grace to
New Grace and (ii) any payment of interest or Taxes (other than
U.S. Federal income taxes) by or to a taxing authority as taxable
or deductible, as the case may be, to the party entitled under
this Agreement to retain such payment or required under this
Agreement to make such payment, in either case except as
otherwise mandated by the law or a Final Determination. In the
event of such a Final Determination, the payment in question
shall be adjusted to place the parties in the same after-tax
position that they would have enjoyed absent such Final
Determination. Any payment required by this Agreement that is
not made on or before the date required hereunder shall bear
interest, from and after such date through the date of payment,
at the appropriate market interest rate.
(iii) Payment of any amount required to be made
pursuant to this Article III as a result of a Final
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Determination shall become due and payable after such Final
Determination has been made within ten business days of the
receipt of written notice from the party entitled to receive such
payment to the party required to make such payment. Any amounts
required to be paid in respect of Taxes or Overall Tax Benefits
pursuant to this Article III shall be adjusted to avoid
duplication of payments and to take into account the sum of any
payments previously made by any member of the Packco Group on or
prior to the Distribution Date or by Grace-Conn. or any other
member of the New Grace Group at any time in respect of such
Taxes or Overall Tax Benefits (the "Conn Prior Payments") and the
sum of any payments previously made by any member of the Packco
Group after the Distribution Date in respect of such Taxes or
Overall Tax Benefits (the "Packco Prior Payments"). Appropriate
payments will be made between the parties in the event that the
Conn Prior Payments or the Packco Prior Payments, respectively,
exceed the amounts for which Grace-Conn. or Packco, respectively,
is responsible under the principles of Section 3.2(a).
(d) Other Tax Liabilities and Refunds. Any Tax or Tax
refund that is not otherwise covered by Section 3.1 or 3.2(b)
shall be allocated, and payment shall be made by Grace-Conn. or
Grace, using the principles of Sections 3.2(a); provided,
however, that any Tax refund (whether or not governed by Section
3.1 or 3.2(b)) arising as a result of an adjustment of a Foreign
Packco Tax Item shall be allocated in the same manner and to the
same extent as Taxes and expenses in respect of adjustments of
Foreign Packco Tax Items have been borne (it being agreed and
understood that to the extent that the Foreign Cap has been
exceeded, such refund shall be entirely for the benefit of Grace-
Conn. and to the extent that refunds are shared 75% by Grace-
Conn. and 25% by Grace the Foreign Cap shall be increased by the
amount refunded to Grace). Any Tax refund received by one party
that is for the account of the other party shall be paid to such
other party promptly upon receipt thereof. Any Tax paid by one
party that is the responsibility of the other party shall be
reimbursed promptly by the other party.
Section 3.3. Carrybacks and Refund Claims. (a) Any
Tax refund resulting from the carryback by any member of the New
Grace Group of any Tax Item arising after the Distribution Date
to a Pre-Distribution Taxable Period or a Straddle Period shall
be for the account of Grace-Conn., and Grace shall promptly pay
over to Grace-Conn. any such Tax refund that it receives. In the
event that a member of the New Grace Group, on the one hand, and
a member of the Packco Group or a Sealed Air Party, on the other
hand, are each entitled to carryback a Tax Item to a Pre-
Distribution Taxable Period or a Straddle Period, the respective
Tax Items shall be utilized under the rules of applicable law
(which shall be, in the case of carrybacks to such periods of the
Affiliated Group and carrybacks under foreign or State law with
respect to which there is no applicable rule regarding the
priority of such utilization, the rules contained in Treasury
Regulation Section 1.1502-21T). Any election affecting the
carryback
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or carryforward of any Tax Item of any member of the New Grace
Group, or a payment to or by such a member under this Agreement
in respect of a carryback or carryforward, including the
elections under Section 172(b)(3) of the Code and Treasury
Regulation Sections 1.1502-21T(b)(3) and 1.172-13(c) with respect
to the taxable years of the Affiliated Group that begin on each
of January 1, 1997, and January 1, 1998, shall not be made
without the consent of Grace-Conn. and shall be made if Grace-
Conn. so requests.
(b) Grace-Conn. shall be permitted to file, and Grace
shall fully cooperate with Grace-Conn. in connection with, any
refund claim. To the extent that such a refund claim (other than
a claim arising from a carryback) does not result in a Tax refund
(or would not result in a refund if a claim were filed) as the
result of an offsetting Packaging Tax Item (including a Packaging
Tax Item carried back to a Pre-Distribution Taxable Period or a
Straddle Period), Grace shall remit to Grace-Conn. the amount of
any decrease in Tax that results or would have resulted from such
refund claim.
Section 3.4. Liability for Taxes with Respect to Post-
Distribution Periods. Unless otherwise specifically provided in
this Agreement or the Distribution Agreement, the New Grace Group
shall pay all Taxes and shall be entitled to receive and retain
all refunds of Taxes with respect to periods beginning after the
Distribution Date which are attributable to the New Grace
Business. Unless otherwise provided in this Agreement, the
Packco Group shall pay all Taxes and shall be entitled to receive
and retain all refunds of Taxes with respect to periods beginning
after the Distribution Date which are attributable to the
Packaging Business.
ARTICLE IV.
INDEMNITY, COOPERATION AND EXCHANGE OF INFORMATION
Section 4.1. Breach. Grace-Conn. shall be liable for
and shall indemnify, defend and hold harmless the Packco
Indemnitees from and against, and Grace shall be liable for and
shall indemnify, defend and hold harmless the New Grace
Indemnitees from and against, any payment required to be made as
a result of the breach by a member of the New Grace Group or the
Packco Group, respectively, of any obligation under this
Agreement. If any member of the Packco Group or the New Grace
Group, fails to comply in any respect whatsoever with any of its
responsibilities under this Agreement relating to promptly
forwarding to any member of the other Group (the "Recipient
Group") any communications with and refunds received from any
taxing authority ("Forwarding Responsibilities"), then Grace or
Grace-Conn., as the case may be, (the "Forwarding Party") shall
be liable for and shall indemnify and hold the New Grace
Indemnitees or the Packco Indemnitees, as the case may be,
harmless from and against any costs or expenses (including,
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without limitation, Taxes and reasonably incurred lawyers' and
accountants' fees) ("Indemnified Amount") incurred by or imposed
upon any member of the Recipient Group arising out of, in
connection with or relating to such communication; provided,
however, that the liability of the Forwarding Party with respect
to any one such failure shall be equal to that portion of the
Indemnified Amount that a member of the Recipient Group
demonstrates is caused (directly or indirectly) by such failure.
Section 4.2. Contests. (a) Whenever a party hereto
(the "Indemnitee") becomes aware of the existence of an issue
that could increase the liability for any Tax, or decrease the
amount of any refund, of the other party hereto or any member of
its Group or require a payment hereunder (an "Indemnity Issue"),
the Indemnitee shall in good faith promptly give notice to such
other party (the "Indemnitor") of such Indemnity Issue. The
failure of any Indemnitee to give such notice shall not relieve
any Indemnitor of its obligations under this Agreement, except to
the extent that such Indemnitor or its affiliate is actually
materially prejudiced by such failure to give notice.
(b) The Indemnitor and its representatives, at the
Indemnitor's expense, shall be entitled to participate (i) in all
conferences, meetings or proceedings with any taxing authority,
the subject matter of which is or includes an Indemnity Issue in
respect of a Pre-Distribution Period and (ii) in all appearances
before any court, the subject matter of which is or includes an
Indemnity Issue in respect of a Pre-Distribution Period.
(c) Except as provided in Section 4.2(d), Grace-Conn.
shall have the right to decide as between the parties hereto how
any Indemnity Issue for a Pre-Distribution Taxable Period is to
be dealt with and finally resolved with the appropriate taxing
authority and shall control all Proceedings relating thereto.
Grace agrees to cooperate with Grace-Conn. in the settlement of
any such Indemnity Issue; provided, however, that Grace-Conn.
shall act in good faith in the conduct of such Proceedings and
shall keep Grace reasonably informed of any developments which
can reasonably be expected to affect adversely Grace. Such
cooperation shall include permitting Grace-Conn. to litigate or
otherwise resolve any such Indemnity Issue. It is expressly the
intention of the parties to this Agreement to take, and the
parties shall take, all actions necessary to establish Grace-
Conn. as the sole agent for Tax purposes of each member of the
Affiliated Group, as if Grace-Conn. were the common parent of the
Affiliated Group, with respect to all combined, consolidated and
unitary Tax Returns of the Affiliated Group for the Pre-
Distribution Taxable Periods.
(d) The parties jointly shall represent the interests
of (i) the Affiliated Group in any Proceeding relating to any
Straddle Period and (ii) any Foreign Packco Subsidiary in any
Proceeding relating to any taxable period that involves an
Indemnity Issue. Neither party shall settle any dispute relating
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to any such period without the consent of the other party (which
consent shall not be unreasonably withheld); provided, however,
that if either party proposes a settlement and the other party
does not consent thereto, the nonconsenting party shall assume
control of the Proceeding (and bear all subsequently incurred
costs, fees and expenses relating thereto) and the respective
liabilities of the parties shall be determined pursuant to
Section 6.7 based on the magnitude and likelihood of success of
the issues involved in the Proceeding, the reasonableness of the
settlement offer, the expense of continuing the Proceeding and
other relevant factors. Any other disputes regarding the conduct
or resolution of any such Proceeding shall be resolved pursuant
to Section 6.7. All costs, fees and expenses paid to third
parties in the course of such Proceeding shall be borne by the
parties in the same ratio as the ratio in which, pursuant to the
terms of this Agreement, the parties would share the
responsibility for payment of the Taxes asserted by the taxing
authority in its claim or assessment if such claim or assessment
were sustained in its entirety; provided, however, that in the
event that any party hereto retains its own advisors or experts
in connection with any Proceeding, the costs and expenses thereof
shall be borne solely by such party.
Section 4.3. Cooperation and Exchange of Information.
(a) Grace shall, and shall cause each appropriate
member of the Packco Group to, prepare and submit to Grace-Conn.,
as soon as practicable, but in no event later than the date that
is 30 days after a request from Grace-Conn. (i) all information
as Grace-Conn. shall reasonably request to enable Grace-Conn. to
file any Conn Prepared Return or prepare any Pre-Distribution
Schedule (which information shall be provided in the form and of
the quality in which comparable information was provided prior to
the Distribution) and (ii) any Del Prepared Return (including any
amended return) for any year within the carryback or carryforward
period for an Overall Tax Benefit or Hypothetical Pre-
Distribution Overall Tax Benefit that is for the account of
Grace-Conn. or for any year with respect to which Grace is
entitled to a payment under Section 3.2(a)(v). Grace-Conn. shall
bear any out-of-pocket marginal expense paid by any member of the
Packco Group in preparing and submitting such information in
respect of a Pre-Distribution Schedule relating to a Pre-
Distribution Taxable Period, and the parties shall share equally
any such expenses in respect of a Pre-Distribution Schedule
relating to a Straddle Period.
(b) Each party on behalf of itself and each member of
its Group, agrees to provide the other party and the members of
such party's Group with such cooperation and information as the
second party or its Group members shall reasonably request in
connection with the preparation or filing of any Tax Return, Pre-
Distribution Schedule or claim for refund not inconsistent with
this Agreement or in conducting any Proceeding in respect of
Taxes. Such cooperation and information shall include, without
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limitation, (i) execution and delivery of a power of attorney by
Grace or any other member of the Packco Group to Grace-Conn. or
another member of the New Grace Group or designation of an
officer of Grace-Conn. or another member of the New Grace Group
as an officer of Grace or any other member of the Packco Group
for the purpose of signing Tax Returns, cashing refund checks and
conducting Proceedings if Grace Conn. could not otherwise
exercise its rights under this Agreement with respect to such
Returns, refunds or Proceedings, (ii) promptly forwarding copies
of appropriate notices and forms or other communications received
from or sent to any taxing authority which relate to the
Affiliated Group, the Packaging Business or the New Grace
Business and (iii) providing copies of all relevant portions of
Tax Returns, accompanying schedules, related workpapers,
documents relating to rulings or other determinations by taxing
authorities, including, without limitation, foreign taxing
authorities, and records concerning the ownership and Tax basis
of property, which either party may possess. Each party shall
make, and shall cause the members of the Packco Group to make,
their employees and facilities available on a mutually convenient
basis to provide explanation of any documents or information
provided hereunder.
(c) Grace and Grace-Conn. agree to retain all Tax
Returns, related schedules and workpapers, and all material
records and other documents as required under Section 6001 of the
Code and the regulations promulgated thereunder relating thereto
existing on the date hereof or created through the Distribution
Date, until the expiration of the statute of limitations
(including extensions) of the taxable years to which such Tax
Returns and other documents relate and until the Final
Determination of any payments which may be required in respect of
such years under this Agreement. Grace-Conn. and Grace agree to
advise each other promptly of any such Final Determination. Any
information obtained under this Section shall be kept
confidential, except as may be otherwise necessary in connection
with the filing of Tax Returns or claims for refund or in
conducting any audit or other proceeding.
(d) If (i) any member of the Packco Group fails to
provide any information requested pursuant to this Section 4.3(a)
by the dates and in the manner specified in Section 4.3(a) hereof
or (ii) with respect to information not requested pursuant to
Section 4.3(a) hereof, any member of either Group fails to
provide any information requested pursuant to this Section 4.3,
within a reasonable period, then the requesting party shall have
the right to engage a "Big Six" public accounting firm of its
choice to gather such information. Each party agrees upon two
business days' notice, in the case of a failure to provide
information pursuant to Section 4.3 hereof to permit any such
"Big Six" public accounting firm full access to all appropriate
records or other information in the possession of any member of
the party's Group during reasonable business hours, and promptly
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to reimburse or pay directly all costs and expenses in connection
with the engagement of such public accountants.
(e) If any member of either Group supplies information
pursuant to this Agreement and an officer of any member of the
other Group signs a statement or other document under penalties
of perjury in reliance upon the accuracy of such information and
so requests, then a duly authorized officer of the member
supplying such information shall certify, under penalties of
perjury, the accuracy and completeness of the information so
supplied. Grace agrees to indemnify and hold harmless each New
Grace Indemnitee, and Grace-Conn. agrees to indemnify and hold
harmless each Packco Indemnitee, from and against any cost, fine,
penalty or other expense of any kind attributable to the gross
negligence or willful misconduct of a member of the Packco Group,
or New Grace Group, as the case may be, in supplying a member of
the other Group with inaccurate or incomplete information.
ARTICLE V.
CERTAIN POST-DISTRIBUTION TRANSACTIONS
Section 5.1 Sealed Air and Packco Group Covenants.
Unless, in the case of any of Sections 5.1(a) through
(f) below, Grace has obtained a ruling letter from the IRS or an
opinion of nationally recognized counsel to Grace, in either
case, to the effect that, without material qualification, such
act or omission will not adversely affect the federal income tax
consequences of the Distribution to any of Grace, Grace-Conn. or
the stockholders of Grace-Conn., as set forth in the Tax
Opinions, and the substance of, and basis for, such conclusion in
such ruling or opinion is reasonably satisfactory to Grace-Conn.
in its good faith solely with regard to preserving the Tax-Free
Status of the Distribution (the "Ruling/Opinion Exception"):
(a) No Sealed Air Party at any time nor any member of
the Packco Group at any time after the Effective Time shall take
any action, or fail or omit to take any action, that would cause
any representation made in the Sealed Air Tax Matters Certificate
or the Grace Tax Matters Certificate to be untrue in a manner
that would have an adverse effect on the Tax-Free Status of the
Distribution.
(b) Until the first day after the Restriction Period,
the Packco Group shall continue the active conduct of the
Packaging Business (the "Active Packco Business"). The Packco
Group shall not liquidate, dispose of, or otherwise discontinue
the conduct of any material portion of the Active Packco
Business. The Packco Group shall continue the active conduct of
the Packaging Business primarily through officers and employees
of the Packco Group (and not through independent contractors).
(c) Until the first day after the Restriction Period,
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no Sealed Air Party nor any member of the Packco Group shall sell
or otherwise issue to any Person, or redeem or otherwise acquire
from any Person (other than any member of the Packco Group), any
Equity Securities of Grace or any other member of the Packco
Group; provided, however, that purchases that, in the aggregate,
meet the requirements of Section 4.05(1)(b) of Revenue Procedure
96-30 shall not constitute a redemption or acquisition of stock
of Grace for purposes of this Section 5.1(c).
(d) Until the first day after the Restriction Period,
no Sealed Air Party nor any member of the Packco Group shall (i)
solicit any Person to make a tender offer for, or otherwise
acquire or sell, the Equity Securities of Grace, (ii) participate
in or support any unsolicited tender offer for, or other
acquisition or disposition of, the Equity Securities of Grace or
(iii) approve or otherwise permit any proposed business
combination or any transaction which, in the case of (i), (ii) or
(iii), individually or in the aggregate, together with the
transactions contemplated under the Distribution Agreement, the
Merger Agreement, the Benefits Agreement and this Agreement,
results in one or more Persons acquiring (other than in
acquisitions not taken into account for purposes of Section
355(e)) directly or indirectly stock representing a 50 percent or
greater interest (within the meaning of Section 355(e) of the
Code) in Grace. In addition, no Sealed Air Party nor any member
of the Packco Group shall at any time, whether before or
subsequent to the expiration of the Restriction Period, engage in
any action described in clauses (i), (ii) or (iii) of the
preceding sentence if it is pursuant to an arrangement negotiated
(in whole or in part) prior to the Distribution, even if at the
time of the Distribution it is subject to various conditions, nor
shall any such Party or member take any action, or fail or omit
to take any action, that would cause Section 355(d) or (e) to
apply to the Distribution.
(e) Until the first day after the Restriction Period,
no Sealed Air Party nor the members of the Packco Group shall
sell, transfer, or otherwise dispose of or agree to dispose of
assets (including, for such purpose, any shares of capital stock
of a Subsidiary) that, in the aggregate, constitute more than 60%
of the gross assets of Packco, nor shall they sell, transfer, or
otherwise dispose of or agree to dispose of assets (including,
for such purpose, any shares of capital stock of a Subsidiary)
that, in the aggregate, constitute more than 60% of the
consolidated gross assets of the Packco Group. The foregoing
sentence shall not apply to sales, transfers, or dispositions of
assets in the ordinary course of business. The percentages of
gross assets or consolidated gross assets of Packco or the Packco
Group, as the case may be, sold, transferred, or otherwise
disposed of, shall be based on the fair market value of the gross
assets of Packco and the Packco Group as of the Effective Time,
and for this purpose, the values set forth in the Packaging
Business Disclosure Letter Balance Sheet shall be conclusive.
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(f) Until the first day after the Restriction Period,
neither Packco nor its Subsidiaries shall voluntarily dissolve or
liquidate or engage in any merger, consolidation or other re-
organization. The foregoing sentence shall not apply to
transactions in which Packco acquires another corporation,
limited liability company, limited partnership, general
partner-ship or joint venture solely for cash or other
consideration that is not Equity Securities. Reorganizations of
Packco with its Affiliates, and liquidations of Packco's
Affiliates, are not subject to Section 5.1(b) or this Section
5.1(f) to the extent not inconsistent with the structure
necessary for the Distribution to qualify for Tax-Free Status.
(g) Until the first day after the Restriction Period,
Grace shall furnish Grace-Conn. with a copy of any ruling request
that Sealed Air, Grace or any of their Affiliates may file with
the IRS and any opinion received that relates to or otherwise
reasonably could be expected to have an effect on the Tax-Free
Status of the Distribution.
Section 5.2 New Grace Covenants.
Unless, in the case of any of Sections 5.2(a) through
(e) below, Grace-Conn. has obtained a ruling letter from the IRS
or an opinion of nationally recognized counsel to Grace-Conn., in
either case, to the effect that, without material qualification,
such act or omission will not adversely affect the federal income
tax consequences of the Distribution to any of Grace, Grace-Conn.
or the stockholders of Grace-Conn., as set forth in the Tax
Opinions, and the substance of, and basis for, such conclusion in
such ruling or opinion is reasonably satisfactory to Grace in its
good faith solely with regard to preserving the Tax-Free Status
of the Distribution:
(a) No member of the New Grace Group shall take any
action, or fail or omit to take any action, that would cause any
representation made in the Sealed Air Tax Matters Certificate or
the Grace Tax Matters Certificate to be untrue in a manner that
would have an adverse effect on the Tax-Free Status of the
Distribution.
(b) Until the first day after the Restriction Period,
the New Grace Group shall continue the active conduct of one of
the Active New Grace Businesses. "Active New Grace Businesses"
shall mean each of the Grace Davison business and the Grace
Construction Business. The New Grace Group may dispose of,
liquidate or discontinue the conduct of the Grace Davison
business or the Grace Construction Products business if it
actively continues the conduct of the other. The New Grace Group
shall continue the active conduct of at least one of the Active
New Grace Businesses primarily through officers and employees of
the New Grace Group (and not through independent contractors).
(c) Until the first day after the Restriction Period,
-20-
no member of the New Grace Group shall sell or otherwise issue to
any Person, or redeem or otherwise acquire from any Person (other
than any member of the New Grace Group), any Equity Securities of
New Grace or any other member of the New Grace Group; provided,
however, that purchases that, in the aggregate, meet the
requirements of Section 4.05(1)(b) of Revenue Procedure 96-30
shall not constitute a redemption or acquisition of stock of New
Grace for purposes of this Section 5.2(c).
(d) Until the first day after the Restriction Period,
no member of the New Grace Group shall (i) solicit any Person to
make a tender offer for, or otherwise acquire or sell, the Equity
Securities of New Grace, (ii) participate in or support any
unsolicited tender offer for, or other acquisition or disposition
of, the Equity Securities of New Grace or (iii) approve or
otherwise permit any proposed business combination or any
transaction which, in the case of (i), (ii) or (iii),
individually or in the aggregate, together with the transactions
contemplated under the Distribution Agreement, the Merger
Agreement, the Benefits Agreement and this Agreement, results in
one or more Persons acquiring (other than in acquisitions not
taken into account for purposes of Section 355(e)) directly or
indirectly stock representing a 50 percent or greater interest
(within the meaning of Section 355(e) of the Code) in New Grace.
In addition, no member of the New Grace Group shall at any time,
whether before or subsequent to the expiration of the Restriction
Period, engage in any action described in clauses (i), (ii) or
(iii) of the preceding sentence if it is pursuant to an
arrangement negotiated (in whole or in part) prior to the
Distribution, even if at the time of the Distribution it is
subject to various conditions, nor shall any such member take any
action, or fail or omit to take any action, that would cause
Section 355(d) or (e) of the Code to apply to the Distribution.
(e) Until the first day after the Restriction Period,
no member of the New Grace Group shall sell, transfer, or
otherwise dispose of or agree to dispose of assets (including,
for such purpose, any shares of capital stock of a Subsidiary)
that, in the aggregate, constitute more than 60% of the gross
assets of New Grace, nor shall they sell, transfer, or otherwise
dispose of or agree to dispose of assets (including, for such
purpose, any shares of capital stock of a Subsidiary) that, in
the aggregate, constitute more than 60% of the consolidated gross
assets of the New Grace Group. The foregoing sentence shall not
apply to sales, transfers, or dispositions of assets in the
ordinary course of business or to a sale, transfer or disposition
of any or all of the Discontinued Businesses and either of the
Active New Grace Businesses; provided, however, that in the event
of a sale, transfer or disposition of one of the Active New Grace
Businesses, the retained Active New Grace Business shall be
conducted by a member of the New Grace Group at substantially the
same level as on the Distribution Date. The percentages of gross
assets or consolidated gross assets of New Grace or the New Grace
Group, as the case may be, sold, transferred, or otherwise
-21-
disposed of, shall be based on the fair market value of the gross
assets of New Grace and the New Grace Group as of the Effective
Time, and for this purpose, the values set forth in the
[Registration Statements] shall be conclusive.
(f) Until the first day after the Restriction Period,
Grace-Conn. shall furnish Grace with a copy of any ruling request
that Grace-Conn. or any of its Affiliates may file with the IRS
and any opinion received that relates to or otherwise reasonably
could be expected to have an effect on the Tax-Free Status of the
Distribution.
Section 5.3. Responsibility for Taxes.
(a) Sealed Air and Grace agree to indemnify and hold
the Grace-Conn. Indemnitees harmless from and against all
Indemnifiable Losses resulting from (x) any Action which causes
the Distribution to fail to have Tax-Free Status or (y) the
Merger failing to qualify as a reorganization under Section 368
of the Code. An "Action" shall mean any act or omission which
fails to comply with any of the representations in the Sealed Air
Tax Matters Certificate or the covenants in Section 5.1 and any
act or omission which would fail to comply with any of the
covenants in Section 5.1 but for compliance with the Ruling/
Opinion Exception. An "Action" shall also include an action or
omission which would be a breach of the covenant contained in the
first sentence of Section 5.1(d), if such covenant were in effect
until the day which is five years after the Effective Time
instead of until the first day after the Restriction Period.
(b) Grace-Conn. agrees to indemnify and hold the
Packco Indemnitees harmless from and against any Tax resulting
from the failure of the Distribution to have Tax-Free Status,
except where such failure is attributable to an Action.
(c) For purposes of Sections 5.1 and 5.2 hereof, when
a tax opinion or ruling of one party (the "Transaction Party") is
required to be reasonably satisfactory to the other party (the
"Reviewing Party"), the Reviewing Party at the request of the
Transaction Party shall designate nationally recognized counsel
to review such opinion or ruling without revealing the substance
of the underlying transaction to the Reviewing Party and the
concurrence of such outside counsel to the sufficiency of such
opinion or ruling shall constitute "reasonable satisfaction" to
the Reviewing Party for purposes of this Agreement.
Section 5.4. Injunction. The parties hereto agree
that the payment of monetary compensation would not be an
adequate remedy for a breach of the obligations contained in
Article V hereof, and each party consents to the issuance and
entry of an injunction against the taking of any action by it or
a member of its Group that would constitute such a breach;
provided, however, that the foregoing shall be without prejudice
-22-
to and shall not constitute a waiver of any other remedy either
party may be entitled to at law or at equity hereunder.
ARTICLE VI.
MISCELLANEOUS
Section 6.1. Expenses. Unless otherwise expressly
provided in this Agreement, the Distribution Agreement or the
Merger Agreement, each party shall bear any and all expenses that
arise from their respective obligations under this Agreement.
Section 6.2. Foreign Transfer Taxes. Adjusted Foreign
Transfer Taxes shall be shared by the parties as provided in the
Distribution Agreement. Audit adjustments and Final
Determinations of such Taxes shall be governed by the
Distribution Agreement. This Agreement governs responsibilities
of the parties with respect to filing Tax Returns relating to
Foreign Transfer Taxes, paying Foreign Transfer Taxes reflected
on such Tax Returns to the applicable governmental authority and
conducting Proceedings relating to Foreign Transfer Taxes. For
purposes of determining indemnity and reimbursement obligations
of the parties under this Agreement, Tax Items arising as a
result of the Foreign Transfers (but not Tax Items arising from
any actual distribution of Subsidiary Excess Cash) shall be
disregarded, and the Pre-Distribution Schedules shall not reflect
such Tax Items.
Section 6.3. Payments Paid or Received on Behalf of
Indemnitees; Right to Designate Payee. Each of Grace-Conn. and
Grace shall be entitled to designate an Affiliate of such party
as payee with respect to any payment that would otherwise be made
to Grace-Conn. or Grace, respectively, under this Agreement. Any
payment received by Grace-Conn. or Grace, respectively, or its
respective designees shall be received on behalf of the relevant
Grace-Conn. Indemnitees or Packco Indemnitees.
Section 6.4. Foreign Exchange Rate. If any amount
required to be paid hereunder is determined by reference to a
Tax, Tax refund, Tax Benefit or Tax Detriment that is denominated
in a currency other than United States dollars, such payment
shall be made in United States dollars and the amount thereof
shall be computed using the Foreign Exchange Rate for such
currency determined as of the date that such Tax is paid, such
Tax refund is received or such Tax Benefit or Tax Detriment
reduces or increases the amount of Tax or Tax refund that would
otherwise be paid or received.
Section 6.5. Amendment. This Agreement may not be
amended except by an agreement in writing, signed by the parties
hereto. Anything in this Agreement or the Distribution Agreement
to the contrary notwithstanding, in the event and to the extent
that there shall be a conflict between the provisions of this
Agreement and the Distribution Agreement, the provisions of this
Agreement shall control.
-23-
Section 6.6. Notices. All notices and other
communications hereunder shall be in writing and shall be
delivered by hand including overnight business courier or mailed
by registered or certified mail (return receipt requested) to the
parties at the following addresses (or at such other addresses
for a party as shall be specified by like notice) and shall be
deemed given on the date on which such notice is received:
(a) To Grace-Conn. or any member of the New Grace
Group:
W. R. Grace & Co.-Conn.
One Town Center Road
Boca Raton, Florida 33486-1010
Attention: Secretary
Fax: (561) 362-1635
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Andrew R. Brownstein, Esq.
Fax: (212) 403-2000
(b) To Grace or any member of the Packco Group:
care of Sealed Air
Park 80 East
Saddle Brook, New Jersey 07663
Attention: [ ]
Fax: [ ]
with a copy to:
Davis Polk & Wardwell
450 Lexington Ave.
New York, New York 10017
Attention: Christopher Mayer, Esq.
Fax: (212) 450-4800
Section 6.7. Resolution of Disputes. Any disputes
between the parties with respect to this Agreement regarding the
practice and preparation of returns or the calculation of amounts
shall be resolved by a "Big Six" public accounting firm whose
determination shall be conclusive and binding on the parties.
The fees and expenses of such firm shall be shared equally by
Grace-Conn. and Grace, except as otherwise provided herein. Any
other disputes shall be resolved by a "Big Six" public accounting
firm or a law firm or by any other procedure that the parties may
choose.
Section 6.8. Application to Present and Future
Subsidiaries. This Agreement is being entered into by Grace-
-24-
Conn. and Grace on behalf of themselves and each member of the
New Grace Group and Packco Group, respectively. This Agreement
shall constitute a direct obligation of each such member. Grace-
Conn. and Grace hereby guarantee the performance of all actions,
agreements and obligations provided for under this Agreement of
each member of the New Grace Group and the Packco Group,
respectively. Grace-Conn. and Grace shall, upon the written
request of the other, cause any of their respective Group members
formally to execute this Agreement. This Agreement shall be
binding upon, and shall inure to the benefit of, the successors
and assigns of any of the corporations bound hereby.
Section 6.9. Term. This Agreement shall commence on
the date of execution indicated below and shall continue in
effect until otherwise agreed to in writing by Grace-Conn. and
Grace, or their successors.
Section 6.10. Titles and Headings. Titles and head-
ings to Sections herein are inserted for the convenience of
reference only and are not intended to be a part or to affect the
meaning or interpretation of this Agreement.
Section 6.11. Legal Enforceability. Any provision of
this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction. Without prejudice to any rights or remedies
otherwise available to any party hereto, each party hereto
acknowledges that damages would be an inadequate remedy for any
breach of the provisions of this Agreement and agrees that the
obligations of the parties hereunder shall be specifically
enforceable.
Section 6.12. Governing Law. This Agreement shall be
governed by the laws of the State of Delaware.
-25-
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the __ day of ___________, 1997.
W. R. GRACE & CO.
By: ____________________________
Name:
Title:
W. R. GRACE & CO.-CONN.
By: ____________________________
Name:
Title:
SEALED AIR CORPORATION
By: ____________________________
Name:
Title:
-26-
EXHIBIT 99.1
Contacts:
For W. R. Grace & Co.: For Sealed Air Corporation:
Mary Lou Kromer Mary Coventry
W. R. Grace & Co. Sealed Air Corporation
561-362-2600 201-791-7600
Ruth Pachman Harry Savage
Kekst and Company Robert Marston & Associates
212-521-4800 212-371-2200
For Immediate Release
GRACE TO MERGE CRYOVAC (REGISTERED) BUSINESS WITH SEALED AIR IN
TAX-FREE TRANSACTION CREATING TWO NEW PUBLIC COMPANIES
NEW SEALED AIR, LED BY T.J. DERMOT DUNPHY, WILL BE WORLD'S
LEADING PROTECTIVE AND SPECIALTY PACKAGING COMPANY
GRACE SHAREHOLDERS TO OWN 63% OF NEW PACKAGING COMPANY AND
RETAIN 100% OWNERSHIP OF NEW GRACE SPECIALTY CHEMICALS COMPANY
TRANSACTION VALUE TO GRACE AND ITS SHAREHOLDERS IS
APPROXIMATELY $5 BILLION, INCLUDING $1.2 BILLION CASH
CONTRIBUTION TO THE NEW GRACE
BOCA RATON, FL AND SADDLE BROOK, NJ, August 14,1997 -- W.
R. Grace & Co. (NYSE: GRA) and Sealed Air Corporation (NYSE:
SEE) today announced they have entered into a definitive
agreement to combine Grace's packaging business with Sealed Air
to create a new publicly owned company, to be called Sealed
Air, that will be the world's leading protective and specialty
packaging company, with annual sales in excess of $2.5 billion.
The transaction, tax-free to both companies and their
shareholders, is
expected to be completed in early 1998. Prior to the merger,
Grace's specialty chemicals businesses will become a new
publicly traded company that will be spun off to Grace
shareholders. The new company will consist of Grace Davison,
Grace Construction Products and DAREX Container Products, have
annual sales of approximately $1.5 billion and retain the Grace
name. The transaction will be preceded by a $1.2 billion
capital contribution to the new Grace specialty chemicals
company, which will use the cash to pay down substantially all
of its debt.
Grace shareholders will receive approximately 40.9 million
common shares and 36 million new convertible preferred shares
in the new Sealed Air. The convertible preferred shares will
have a stated value of $1.8 billion, be convertible into
approximately 31.8 million common shares of the new Sealed Air
at a per share conversion price of $56.525 and will pay
dividends at a four percent annual rate. On a fully diluted
basis, Grace shareholders and current Sealed Air shareholders
will own 63 percent and 37 percent, respectively, of the new
Sealed Air.
Based on Sealed Air's stock price at the close on August
13, the merger has an estimated value to Grace and Grace
shareholders of approximately $5 billion, including $1.9
billion of Sealed Air common stock, $1.8 billion face amount of
the convertible preferred shares and the $1.2 billion cash
contribution to Grace at the time of the merger.
Excluding the effect of transaction and integration costs,
the transaction is expected to be accretive to Sealed Air's
earnings per share going forward.
2
Albert J. Costello, chairman, president and chief
executive officer of Grace, will continue to be chairman,
president and chief executive officer of the new Grace
specialty chemicals company, and T.J. Dermot Dunphy, chairman
and chief executive officer of Sealed Air, will be chairman and
chief executive officer of the new Sealed Air.
Mr. Costello said, "This transaction provides Grace
shareholders with an immediate premium for Grace's packaging
business, the opportunity to continue to participate in the
future value of an even stronger packaging company with
excellent growth prospects, and an ongoing stake in what will
now be a highly focused and strong specialty chemicals company.
It represents another significant achievement in our ongoing
mission to deliver substantial value to Grace shareholders,
both from operational improvements and creative transactions."
THE NEW SEALED AIR
Mr. Dunphy said, "The combination of Sealed Air and Grace
Packaging will create an outstanding protective and specialty
packaging company that will serve the needs of a broad range of
customers throughout the world. The rationale behind the
merger of these two packaging businesses, both leaders in
technological innovation and marketing effectiveness, is
clearly evident."
Mr. Dunphy continued, "The combined packaging company will
have global reach and will be well positioned to grow at above-
average rates in the rapidly changing global marketplace, to
penetrate new geographic markets with its full range of
products, and to seek out additional strategic alliances that
will
3
further strengthen its global position. We expect that the
combined company will benefit from a broad range of operating
synergies."
On a pro forma basis, the new Sealed Air would have sales
in excess of $2.5 billion and, based on Sealed Air's current
stock price, a total market capitalization, including debt and
preferred stock, of approximately $7 billion.
The new Sealed Air will be headquartered in Saddle Brook,
New Jersey. In addition to Mr. Dunphy, other key executives
will include William V. Hickey, president and chief operating
officer of Sealed Air, and J. Gary Kaenzig, Jr., president of
Grace Packaging. All current officers of Sealed Air as well as
several executives of the current Grace packaging organization
will be officers of the new Sealed Air.
The board of the new Sealed Air will consist of the seven
current Sealed Air directors as well as several non-management
directors from the current board of Grace, who will resign from
the Grace board upon transaction completion.
Grace's packaging business, best known by the Cryovac
(Registered) brand, is the world's leader in packaging
materials and systems to preserve perishable foods. Cryovac
(Registered) provides value-added packaging systems, including
packaging materials, equipment, technical support and graphical
design, for a global customer base in the food, consumer goods
and industrial products industries. Other product lines
include Omicron (Trademark) rigid plastic cups and tubs for
dairy foods and Formpac (Trademark) foam trays for supermarkets
and institutional food service.
4
Sealed Air is a global leader in protective and specialty
packaging materials and systems. Sealed Air's wide range of
protective and specialty packaging materials and systems
include Instapak (Registered) polyurethane foam packaging
systems, engineered polyethylene foams, Bubble Wrap
(Registered) air cellular cushioning materials, Cell-Aire
(Registered) polyethylene foam, a wide range of protective and
durable mailers, including mailers sold under the widely
recognized Jiffy (Trademark) trademark, and Dri-Loc (Registered)
absorbent pads used for retail packaging of meat, fish and
poultry.
Certain Cryovac (Registered) products, such as vacuum-
sealed food packaging, are used by customers in conjunction
with Sealed Air products, such as Dri-Loc (Registered)
absorbent pads.
THE NEW GRACE SPECIALTY CHEMICALS COMPANY
"I am enthusiastic about the future growth opportunities
for the new Grace specialty chemicals company," said Mr.
Costello. "Our new Grace specialty chemicals company will be
financially strong, and will continue to build upon its market
leadership, technological strengths, and global presence. At
the same time, we will continue our aggressive cost reduction
and capital management efforts which have proven so successful
over the past few years, leading to consistent operating margin
improvements. Furthermore, our new financial position will
allow added flexibility to invest in new product development,
geographic expansion and strategic acquisitions."
The new Grace specialty chemicals company will maintain
its headquarters in Boca Raton, Florida. Grace Davison is the
world's leading
5
supplier of fluid cracking catalysts, silica-based polyolefin
catalysts and silica gels. Grace Construction Products is a
leading global supplier of specialty products to the
construction industry, including concrete additives, structural
waterproofing and fireproofing products. DAREX Container
Products is a leading supplier of container sealants and
coatings.
OTHER HIGHLIGHTS OF THE TRANSACTION
The definitive agreement is subject to customary
conditions, including approval of both companies' shareholders
and certain regulatory approvals.
The historic liabilities of Grace, including asbestos and
environmental liabilities of the non-packaging business, will
remain with the specialty chemicals company.
The shares of both the new Sealed Air and the new Grace
specialty chemicals company are expected to be listed on the
New York Stock Exchange.
COMPANY PROFILES
Grace is a leading global supplier of flexible packaging
and specialty chemicals with annual sales of approximately $3.5
billion. The company operates in more than 100 countries. To
view more information about Grace online via the World Wide
Web, visit Grace's page at http://www.prnewswire.com.
Sealed Air is engaged primarily in the manufacture and
sale of a complementary line of protective and specialty
packaging materials and systems and selected food packaging
products, and has operations in 27 countries. Sealed Air's
annual sales, which have grown over the last 20 years at an
6
average annual rate of 19%, exceed $800 million. To view
Sealed Air's latest financial news online via the World Wide
Web, visit http://www.cfonews.com/see.
Safe Harbor Statement Under the Private Securities
Litigation Reform Act of 1995: The statements contained in
this release which are not historical facts, such as those
concerning future financial performance and growth, are forward
looking statements that are subject to change based on various
factors which may be beyond Sealed Air's and Grace's control.
Accordingly, the future performance and financial results of
Sealed Air and/or Grace and their respective businesses may
differ materially from those expressed or implied in any such
forward looking statements. Such factors include, but are not
limited to, those described in Grace's and Sealed Air's filings
with the Securities and Exchange Commission, as well as various
factors related to the transaction described in this release,
including the costs of integrating the businesses of Sealed Air
and Cryovac (Registered) and the realization of synergies
anticipated with respect to the transaction.
7
W.R. GRACE AND SEALED AIR CORPORATION CONFERENCE CALL
FRIDAY, AUGUST 15,1997
8:30 A.M. (EASTERN)
You are cordially invited to participate in a conference call
scheduled by W. R. Grace & Co. (NYSE: GRA) and Sealed Air
Corporation (NYSE:SEE).
The conference call will take place in three parts:
8:30A.M. PART ONE: A DISCUSSION OF THE TRANSACTION
9:00 A.M. PART TWO: A DISCUSSION OF THE NEW SEALED AIR - A
HIGHLY DIVERSIFIED GLOBAL PACKAGING
COMPANY
10:00 A.M. BREAK
10:20 A.M. PART THREE: A DISCUSSION OF THE NEW GRACE SPECIALTY
CHEMICALS COMPANY
During part one, the management of the two companies will first
discuss the details of the transaction in which Grace's
packaging business will be merged with Sealed Air.
During part two, management will discuss the new packaging
company, which will be the world's leading protective and
specialty packaging enterprise. The management presentation
will be followed by a question and answer session.
During part three, which will begin at approximately 10:20
a.m., Grace's management will discuss the new Grace specialty
chemicals businesses. The management presentation will be
followed by a question and answer session.
There will be a break between parts two and three from
approximately 10:00 a.m. until 10:20 a.m., during which time
you may either place the call on hold or hang up and call in
again approximately 10 minutes prior to the start of the third
part of the call.
THE CONFERENCE CALL WILL BEGIN AT
8:30 A.M. (EASTERN TIME) ON FRIDAY, AUGUST 15,1997.
TO PARTICIPATE, PLEASE CALL (719) 448-2040
APPROXIMATELY 10 MINUTES PRIOR TO THE START OF THE CALL.
A replay of the call will be available from 3:00 p.m. (eastern)
August 15, 1997 through 8:00 p.m. (eastern) August 19, 1997 by
dialing (402) 222-9907.
If you have any questions regarding the conference call, please
contact Andrea Bergofin, Kekst and Company, (212) 521-4800.
Editor's note: The following is supplemental information
related to a news release issued earlier today about the Grace
and Sealed Air transaction.
TRANSACTION FACT SHEET
THE TRANSACTION
The Transaction has two components:
1. Prior to the merger, Grace's specialty chemicals
operations, comprised of Grace Davison, Grace Construction
Products and DAREX Container Products will be spun off to
Grace shareholders. The specialty chemicals operations
will become a separate company, which will retain the
Grace name and is expected to be listed on the New York
Stock Exchange. In addition, the transaction will be
preceded by a $1.2 billion capital contribution to the new
Grace specialty chemicals company, which will use the cash
to pay down substantially all of its debt.
2. Grace's packaging business will be merged with Sealed Air
to create the world's leading protective and specialty
packaging company. This company will be named Sealed Air,
and its shares are expected to be listed on the New York
Stock Exchange.
KEY TRANSACTION POINTS
The transaction will be tax-free to both Grace and Sealed
Air and their respective shareholders
Grace shareholders will own 63% on a fully diluted basis
of the new Sealed Air and will retain ownership of 100% of
the new Grace specialty chemicals company
Sealed Air shareholders will own 37% on a fully diluted
basis of the new Sealed Air packaging company
Transaction value to Grace shareholders of approximately
$5 billion:
$1.9 billion in common stock of the new Sealed Air
(40.9 million common shares of the new Sealed Air)
$1.8 billion in new convertible preferred stock (36.0
million convertible preferred shares, convertible
into approximately 31.8 million common shares)
$1.2 billion cash contribution to the new Grace, to
be used to pay down substantially all of its debt
Excluding the effect of transaction and integration costs,
the transaction is expected to be accretive to Sealed
Air's earnings per share going forward.
The new Grace specialty chemicals company will be a
substantially debt-free company.
Editor's note: The following is supplemental information
related to a news release issued earlier today about the Grace
and Sealed Air transaction.
THE NEW GRACE SPECIALTY CHEMICALS COMPANY
Chairman, President and CEO: Albert J. Costello
Pro Forma Revenues: Approximately $1.5 billion
Employees: 6,000 worldwide
Headquarters: Boca Raton, Florida
The new Grace specialty chemicals company will consist of Grace
Davison, a leading global supplier of fluid cracking catalysts,
silica-based polyolefin catalysts and silica gels; Grace
Construction Products, a leading global supplier of specialty
products to the construction industry; and DAREX Container
Products, a leading supplier of container sealants and
coatings.
GRACE DAVISON CATALYSTS AND SILICA PRODUCTS - Annual sales of
more than $730 million. Headquartered in Baltimore, Maryland,
employs 2,700 people worldwide.
Grace Davison is the world's leading supplier of petroleum
fluid cracking catalysts used to refine crude oil into
transportation fuels and other petroleum-based products. It
also is expanding its market position in hydroprocessing
catalysts used to remove impurities from crude oil prior to the
use of petroleum cracking catalysts. Grace Davison's
polyolefin catalysts are critical in the manufacture of
polyethylene resins for plastic film, gas distribution pipe and
household containers. More than one-third of the world's
polyethylene production relies on Grace Davison polyolefin
catalysts.
Grace Davison also is a leading global supplier of silica
products and zeolite adsorbents, which are used to improve the
performance of plastic films, coatings, pharmaceuticals,
cosmetics, multi-pane window systems, dentifrices, powdered
foods, edible oils and high-quality papers.
Grace Davison technology focuses on innovations in polymeric
systems, catalysis, silica-based systems and environmentally
compatible fluid cracking catalysts for cleaner-burning fuels.
GRACE CONSTRUCTION PRODUCTS - Annual sales of more than $450
million. Headquartered in Cambridge, Massachusetts, employs
1,900 people worldwide.
Grace Construction Products manufactures and sells construction
products worldwide to meet critical performance requirements.
Its concrete admixtures, cement additives, masonry products,
fire protection products and waterproofing materials perform
some of construction's most vital jobs - they strengthen
concrete, fight corrosion, prevent water damage and protect
structural steel against collapse in the event of fire.
Research and development efforts focus on designing products
that add measurable
value by significantly enhancing performance, for example,
enhancers that create higher strength concrete.
DAREX CONTAINER PRODUCTS -- Annual revenues of approximately
$320 million. Headquartered in Lexington, Massachusetts,
employs approximately 1,400 employees worldwide.
DAREX Container Products is the world leader in can sealing and
bottle crown technology. DAREX container sealants are vital to
the safety and sealing integrity of more that 450 billion cans
and bottles each year. Grace's innovative oxygen-absorbing
technology maintains food and beverage quality - without
preservatives - and increases shelf life to help customers
reduce product rotation and distribution costs.
RECENT HIGHLIGHTS
Grace has implemented numerous changes over the past two years
that have enabled the Company to enhance performance while
focusing on profitably growing its global businesses, including
the packaging business being merged with Sealed Air.
Prior to this transaction, Grace has emerged as an integrated,
global operating company, dedicated to continuously improving
its product portfolio and its financial performance.
Achieved record sales and earnings in each of its core
businesses in 1996.
Divested noncore businesses, including National Medical
Care, Dearborn, Grace Cocoa, Grace's TEC metal catalysts
business, Grace Specialty Polymers, Amicon and Agracetus.
Significantly improved the capital structure of Grace by
using more than $3.5 billion in investment proceeds to
significantly reduce debt and repurchase shares.
Repurchased 28 million shares of Grace common stock in
1996 and 1997.
Reduced annual costs by more than $100 million and
instituted rigorous financial and working capital
controls.
GRACE DAVISON
Announced plans to commercialize a new catalyst in 1997 to
reduce nitrogen dioxide emissions from refineries.
Increased hydroprocessing catalyst production capabilities
by expanding Curtis Bay, Maryland facility in 1996; also
began construction of new Lake Charles, Louisiana,
scheduled to begin operation in 1998.
Started up new Kuantan, Malaysia silicas plant to provide
regional silica products manufacturing capability in the
Asia Pacific region.
GRACE CONSTRUCTION PRODUCTS
Achieved record three-fold improvement in pretax operating
income and 10% sales growth in 1996.
Increased sales of new and enhanced products nearly 35% in
1996, representing over 25% of total construction products
sales.
Acquired the cement additives business of Imporextran
Quimica S.A. of Barcelona, Spain, and the concrete
admixtures manufacturing assets of CSR Limited in
Australia.
Introduced innovative Eclipse (Registered) shrinkage-
reducing concrete admixture to minimize concrete cracking.
Introduced Polarset (Registered) noncorrosive set
accelerator to enable customers to pour and work concrete
in cold temperatures without using corrosion-causing
chemicals.
Introduced Vycor Ultra (Trademark) self-adhered roofing
underlayment for commericial use to protect against ice
dams and wind-driven rain.
Trained 100% of its workforce in quality management
techniques.
DAREX CONTAINER PRODUCTS
Introduced patented oxygen-scavenging technology worldwide
for beer bottle crowns.
Acquired Bayem S.A. de C.V. in Mexico, providing greater
access to the rapidly growing Latin American can closure
and sealants market.
Formed joint venture with Shalimar Paints Ltd. in India to
produce and market container coatings, closures and can
sealing compounds.