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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
SEALED AIR CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
Delaware 1-7834 22-1682767
- ------------------------------ ------------------------ -------------------
(State or Other (Commission File Number) (IRS Employer
Jurisdiction of Incorporation) Identification No.)
Park 80 East
Saddle Brook, New Jersey 07663-5291
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(Address of Principal Executive Offices) (Zip Code)
(201) 791-7600
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(Registrant's telephone number, including area code)
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(Former Name or Former Address, if Changed Since Last Report)
ITEM 5. OTHER EVENTS.
On August 14, 1997, Sealed Air Corporation, a Delaware corporation
("Sealed Air"), W. R. Grace & Co., a Delaware corporation, ("Grace") and
Packco Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary
of Grace ("Merger Sub"), entered into an Agreement and Plan of Merger (the
"Merger Agreement"). Pursuant to the Merger Agreement and related agreements
and subject to the terms and conditions set forth therein, Grace will
contribute its specialty chemicals and other businesses (other than its
packaging business) to a newly formed wholly-owned subsidiary of Grace ("New
Grace"), which will be spun off to the shareholders of Grace (the "Spinoff"),
leaving Grace with only its packaging business ("Packaging"). Grace's
subsidiary, Merger Sub, will then merge with and into Sealed Air, with Sealed
Air to be the surviving corporation (the "Merger"). Immediately following the
Merger, Grace will be renamed "Sealed Air Corporation" to create a new
publicly owned company ("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
40.895 million shares of common stock, par value $.10 per share, of New Sealed
Air ("New Sealed Air Common Stock") (subject to adjustment in certain events)
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 immediately after the
Merger, former Sealed Air shareholders will own 37% of the equity of New
Sealed Air and former Grace shareholders will own, in the aggregate,
approximately 63%.
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 and Packaging following the Merger.
Sealed Air and Grace have issued a joint press release regarding the
foregoing, which is attached hereto as an exhibit.
The foregoing is qualified in its entirety by reference to the Merger
Agreement; the Form of the Distribution Agreement by and among Grace, W. R.
Grace & Co.-Conn. ("Grace-Conn.") and Grace Specialty Chemicals, Inc. ("Grace
Chemicals"); the Form of Employee Benefits Allocation Agreement by and among
Grace, Grace-Conn. and Grace Chemicals; and the Form of Tax Sharing Agreement
by and among Sealed Air, Grace and Grace-Conn. that are attached hereto as
exhibits and are incorporated by reference herein.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
Exhibit No. Description
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2.1 Agreement and Plan of Merger, dated as of August
14, 1997 by and among Grace, Packco Acquisition
Corp. and Sealed Air
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 Sealed Air and Grace,
dated August 14, 1997
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: August 18, 1997 SEALED AIR CORPORATION
By: /s/ Horst Tebbe
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Name: Horst Tebbe
Title: Vice President-
Finance and Chief
Financial Officer
EXHIBIT INDEX
Exhibit No. Exhibit Page
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2.1 Agreement and Plan of Merger, dated as of August 14, 1997
by and among Grace, Packco Acquisition Corp. and Sealed Air
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 Sealed Air and Grace, dated
August 14, 1997
Conformed Copy
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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
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TABLE OF CONTENTS
Page
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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
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
(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
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
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
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 corporation ("Sealed Air").
RECITALS
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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 "Distribution").
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 Agreement.
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 Incorporation of
Grace shall be amended (the "Newco Amendment") to change the name of Grace to
"Sealed Air Corporation" (such corporation, from and after the Effective Time,
is sometimes hereinafter referred to as "Newco") and to effect the other
amendments 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 shareholders under the Code and 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, 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 interests 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
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 contemplated thereby, including the Contribution, the
Distribution and the Recapitalization.
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.
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 filing 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 "Effective Time") on which
the Merger Certificate has been duly filed with the Secretary of State of the
State of Delaware, or at such later date and time as set forth therein.
1.4. Closing. The closing of the Reorganization (the "Closing")
shall take place at the offices of Wachtell, 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 "Closing Date."
ARTICLE II
CERTIFICATE OF INCORPORATION AND BY-LAWS
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 Incorporation"), until duly amended in accordance with the
terms thereof and the DGCL. At the Effective Time, the Certificate of
Incorporation of Grace (the "Grace Certificate of Incorporation") shall be
amended as set forth in the Newco Amendment.
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
3.1. Newco Directors. Immediately after the Effective Time, the
directors of Newco shall be the seven directors of Sealed Air immediately
prior to the Effective Time and four independent directors selected by Grace
from the existing Grace Board.
3.2. Newco Officers. Immediately after the Effective Time, the
officers of Newco shall be the Chief Executive 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.
3.3. Surviving Corporation Directors. Immediately after the
Effective Time, the directors of the Surviving Corporation shall be as
designated by Newco.
3.4. Surviving Corporation Officers. Immediately 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
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 outstanding
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 Convertible Preferred
Share issued and outstanding immediately prior to the Effective Time
shall remain issued and outstanding 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 outstanding
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 outstanding, 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.
4.2. Exchange of Old Certificates for New Certificates. (a)
Appointment of Exchange Agent. From and 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
Certificates 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 shareholder with the provisions of Section 4.2(b), a
book-entry account 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 relating to the ownership of Newco Common Shares.
(b) Exchange Procedures. Promptly after the Effective Time,
Newco shall cause the Exchange Agent to mail or deliver 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
parties hereto prior to the Effective Time) containing instructions 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 accordance 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 issued in a name other than that
in which the Old Sealed Air Certificate surrendered in exchange therefor is
registered, it shall be a condition of such exchange that the person
requesting such exchange shall pay any transfer or other taxes required 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 unclaimed by the former
shareholders of Sealed Air. Any such former shareholders who have not
theretofore exchanged their Old Sealed Air Certificates for Newco
Certificates pursuant to this Article IV who desires to do so shall thereafter
be entitled to look exclusively to Newco and only as general creditors 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 Certificate 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 Certificate, Newco shall, in
exchange for such lost, stolen or destroyed Old Sealed Air Certificates, issue
or cause to be issued the Newco Certificate deliverable in respect thereof
pursuant to this Article IV. No party hereto, nor the Exchange Agent, shall be
liable to any holder of former Sealed Air Common 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 accordance 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 Effective
Time, shall be rights and obligations of Newco following the Effective Time
and (ii) each unexercised right granted under the Sealed Air Stock Plans to
purchase a Sealed Air Common Share shall constitute a right to purchase a
Newco Common Share in accordance with the terms and conditions of the
applicable Sealed Air Stock Plans, as amended from time to time.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
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
Agreement (the "Grace Disclosure Letter"):
(a) Capital Stock. (i) Grace. The authorized capital 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 treasury 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 reserved 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 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
securities the holders of which have the right to vote (or are
convertible or exchangeable into or exercisable for securities 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 pursuant to the terms of options, securities or plans referred to
above and except in connection with the Transaction Agreements, there
are no shares of capital stock of Grace authorized, issued or
outstanding and there are no preemptive rights or any outstanding
subscriptions, options, puts, calls, warrants, rights, convertible or
exchangeable securities or other agreements or commitments of Grace or
any of its subsidiaries of any character relating to the issued or
unissued capital stock or other securities of Grace or any of its
subsidiaries (including, without limitation, the issuance, sale,
purchase, redemption, 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 Common Stock"). As of the date of
this Agreement, 1,000 shares of Merger Sub Common Stock are issued
and outstanding, 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 subsidiaries 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
Surviving Corporation will be duly authorized, validly issued, fully
paid and nonassessable, and will be 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. 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 material 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 receipt of the
requisite approval of its shareholders necessary 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
requisite corporate 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 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
transactions 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 accordance 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 Incorporation) and the Distribution are the only
votes of the holders of Grace's capital stock necessary in connection
with the consummation of the Reorganization.
(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 Securities 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, registrations, approvals, permits
or authorizations required to be obtained by it or any such subsidiary
from, any governmental or regulatory authority, agency, court,
commission or other entity, domestic or foreign ("Governmental Entity"),
in connection with the execution, delivery or performance 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 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 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 ("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 breaches, violations, defaults, accelerations or changes
that are disclosed in the Grace Disclosure Letter or, individually 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.
(e) SEC Documents; Financial Statements; No Undisclosed
Liabilities. (i) Grace 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 SEC Document
filed, and each SEC Document that will be filed by it 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 requirements 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 misleading.
Each of Grace's consolidated balance sheets included in or incorporated
by reference into its SEC Documents (including the related notes and
schedules) 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 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 respects 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 otherwise, that, individually or in the aggregate, are
reasonably 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 businesses only in the ordinary and usual course of such
businesses, and there has not been any change or development or
combination 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 the New Grace Group.
(g) Takeover Statutes; Rights Plan. The execution, delivery and
performance of this Agreement and consummation 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
Recapitalization, and the Distribution and to terminate or redeem 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, directors 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 contemplated herein, except pursuant to arrangements
disclosed 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 conduct 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 aggregate, are not reasonably likely to have a
Material Adverse 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 requests 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 litigation relating to
Grace have been paid in full or have been recorded as a liability on
its balance sheet (in accordance with US GAAP); (v) neither Grace nor
any of its subsidiaries is a party to any tax sharing or similar
agreement 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 respects, 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 furnished by Grace to Sealed Air 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 misleading.
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
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 Packco or such Packco 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 the
Packco Group or the Packaging 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 corporate power and authority
and will have taken all corporate action necessary in order to
consummate the transactions contemplated hereby and by the other
Transaction Agreements.
(c) Capitalization. All issued and outstanding shares of capital
stock of Packco and each Packco Subsidiary (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 restrictions 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, capital 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, validly issued, fully paid and
nonassessable.
(d) Financial Statements; No Undisclosed Liabilities. (i)
Included in the Packaging Business Disclosure Letter are unaudited
special purpose consolidated and combined balance sheets as of December
31, 1995 and 1996 and June 30, 1997, and special purpose consolidated
and combined 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 financial statements, the
"Packaging Business Disclosure Letter Financial Statements," and the
balance sheet as of December 31, 1996 included therein, the "Packaging
Business 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 combined
balance sheet to be included in the Packaging Business Financial
Statements (including any related notes and schedules) shall fairly
present in all material respects, the consolidated financial position
of the Packaging Business, 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 respects, the consolidated results of
operations, cash flows and retained earnings, as the case may be, of the
Packaging 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 statements, to normal year-end adjustments).
(ii) Except as disclosed on the Packaging Business Disclosure
Letter Balance Sheet or in the Basis of Presentation thereto, the
Packco Group does not have 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 the Packco Group or the Packaging Business
(other than liabilities to be incurred in connection with the Grace
Credit Agreement).
(e) Absence of Certain Events and Changes. Except (i) as
disclosed in the Packaging Business Disclosure Letter, and (ii) as
contemplated by the Transaction Agreements, 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, individually 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 subsidiaries (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 Business. Grace and
its subsidiaries (with respect to the Packaging Business) have, and
immediately after the Contribution 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 Entities that are required in
order to permit the Packco Group to carry on the Packaging Business as
it is presently conducted by Grace and its subsidiaries, except for such
permits, licenses, certificates, orders, filings, applications and
registrations, the failure to have or make which, individually or in the
aggregate, are not reasonably 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 Distribution Date and
subject to the provisions of Article II of the Distribution Agreement or
as disclosed in the Packaging 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
December 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 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 subsidiaries as
of the Distribution Date;
in each case except for such matters as would not, individually or in
the aggregate, have a Material Adverse Effect 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 proceedings
pending or, to the knowledge of its executive officers, threatened,
or investigations pending, against Grace or its subsidiaries with
respect to the Packaging Business, Packco or any Packco Subsidiary
that, individually 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 outstanding orders,
writs, injunctions, decrees, stipulations or awards (whether rendered
or issued by a court or Governmental Entity, or by arbitration)
against Grace or its subsidiaries with respect to the Packaging
Business, Packco 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 Documents filed
with the SEC prior to the date hereof and except for such matters that,
individually or in the aggregate, 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 accurate 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 therein); (v) neither Grace, Packco nor any
Packco Subsidiary is a party to any tax sharing or similar agreement
pursuant to which the Packaging Business has indemnified another 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 statute 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 except for such matters
that, individually and in the aggregate, are not reasonably likely to
have a Material Adverse Effect with respect to the Packco Group or the
Packaging Business, (i) Grace and its subsidiaries, with respect to the
Packaging Business, Packco and the Packco Subsidiaries are and have been
in compliance with all applicable Environmental Laws; (ii) Grace and its
subsidiaries, 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) neither Grace nor any of its subsidiaries, with
respect to the Packaging Business, Packco, nor any of the Packco
Subsidiaries 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 Agreement)), and none of Grace or any of
its subsidiaries, with respect to the Packaging Business, Packco, the
Packco Subsidiaries 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, proposed 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 aggregate, 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 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, in each case with respect
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 operation 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
thereunder.
(l) Employee Benefit Plans. (i) The Packaging Business
Disclosure Letter includes a complete list of all material employee
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 mandated or sponsored by a Governmental Entity with
respect to foreign Packco Employees) providing benefits to any current
or former Packco Employee or beneficiary 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 Subsidiaries, 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 contribute (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 hereof. The Packaging Business Disclosure Letter also
specifically identifies those Packaging Business Plans that are
sponsored, maintained or contributed to exclusively by Packco or any of
the Packco Subsidiaries exclusively for 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 respect 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
following: (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 issued 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 identifies 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 issued a favorable determination
letter with respect to each Packco Qualified Plan, in each case that
has not been revoked, or an application for such a letter has been or
will be filed before the expiration of the remedial amendment 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 related 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 compliance, in all
material respects, with all provisions of ERISA, the Code and all
other laws and regulations applicable to the Packaging Business-Only
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 Packaging Business-Only Plan or the imposition of any
lien on the assets of Packco or a Packco Subsidiary under ERISA or
the Code. No prohibited transaction (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) corresponding or similar provisions of foreign laws or
regulations, 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 solely 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 policies funding any Packaging Business
Plan, have been timely 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 Agreement) have
been timely made in accordance with past practice.
(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 aggregate, 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 contemplated 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 limiting
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 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 product licenses or registrations (including applications
for any of the 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 investigational applications (including all
options or other rights to acquire any of the foregoing) as are
necessary, used or held for use in connection with the Packaging
Business (the "Packaging Business Intellectual Property"), 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 Subsidiaries, 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 aggregate, 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 possessed by Grace and its Subsidiaries) all of the Packaging
Business Intellectual Property. Except as contemplated by 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.
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 simultaneously 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
outstanding as of such date. 157,858 Sealed Air Common Shares were held
in treasury by Sealed Air and its subsidiaries as of August 14, 1997.
As of August 14, 1997, there were outstanding under the Sealed Air
Amended Contingent 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 exchangeable 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 authorized and validly
issued and is fully paid and nonassessable and, except for an immaterial
number of shares held by officers and directors of Sealed Air and its
subsidiaries 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
except for awards and Sealed Air Common Shares issued after 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 authorized, issued or outstanding and there are no preemptive
rights or any outstanding subscriptions, options, puts, calls, warrants,
rights, convertible or exchangeable securities 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 issuance, 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 organization 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 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 subsidiaries 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 complete 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 receipt of the
requisite approval of its shareholders to consummate the Merger, Sealed
Air has the requisite corporate 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 thereby, including, without
limitation, the approval of the 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 delivered shall be, a valid and binding
agreement of Sealed Air enforceable in accordance with its terms. The
affirmative 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 Merger.
(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 Securities 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, registrations,
approvals, permits or authorizations required to be obtained by it or
any such subsidiary from, any Governmental 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, except 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
contemplated 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 breaches, violations,
defaults, accelerations or changes that are disclosed in the Sealed Air
Disclosure Letter or, 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 Undisclosed
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
requirements 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 misleading. 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 consolidated statements of earnings, 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 respects the consolidated results of operations, cash flows and
shareholders' 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 businesses only in the ordinary course of such businesses,
and there has not been any change or development or combination 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, 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 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 registrations, the
failure to have or make which, individually or in the aggregate, are not
reasonably likely to have a Material 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 December 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, individually or in
the aggregate, have a Material Adverse Effect on Sealed Air.
(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 investigations pending, against Sealed Air or any of its
subsidiaries that, individually or in the aggregate, are reasonably
likely to have a Material Adverse Effect with respect to Sealed Air.
There are no judgments or outstanding orders, writs, injunctions,
decrees, stipulations or awards (whether rendered or issued by a court
or Governmental 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 aggregate, are not reasonably likely to
have a Material Adverse 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, deficiency, 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 completed 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 matters 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 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 Contract 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 without 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 Disclosure Letter
includes a complete list of all material employee 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
mandated 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 contribute (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 Section 3(2) of ERISA.
(ii) With respect to each Sealed Air Plan providing benefits to
U.S. Sealed Air Employees, Sealed Air has delivered 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, correct and complete copy of each of the following:
(A) all plan documents, (B) all benefit schedules, trust agreements
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 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 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 Qualified 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 occurred 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 maintained by
Sealed Air, any of its subsidiaries or any of their respective ERISA
Affiliates is subject to Title IV 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, contributed to or been
obligated to contribute to any Multiemployer Plan or 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) 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 aggregate, 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 contemplated 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 contemplated 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 except for such matters
that, individually and in the aggregate, are not reasonably likely to
have a Material Adverse Effect with respect to Sealed Air, (i) Sealed
Air and its subsidiaries are and have been in compliance with all
applicable Environmental Laws; (ii) Sealed Air and its subsidiaries hold
and have held all permits under any Environmental Law required for the
operation of their respective businesses as presently conducted and are
in compliance 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 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
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
asserted 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 decree 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 "National Priorities
List" under CERCLA, or any similar state, local or foreign list of sites
requiring investigation or cleanup.
(n) Takeover Statutes; Rights Plans. The execution, delivery and
performance of this Agreement and consummation 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, commissions or finders' fees in connection with the
transactions contemplated herein, except pursuant to arrangements
disclosed 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 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 investigational 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 reasonably 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 Property
or is aware, to the knowledge of the executive officers of Sealed Air
and its subsidiaries, of any infringement with respect thereto, and
there is no infringement by Sealed Air or its subsidiaries of the
intellectual property rights of others, which, in each case, would,
individually 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
adequate 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 Intellectual Property.
(q) Tax Matters. At the Effective Time, the representations 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 effect as if set forth
herein in their entirety.
(r) Disclosure. The representations and warranties of Sealed Air
contained in this Agreement or in any written 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 misleading.
ARTICLE VI
COVENANTS
6.1. Interim Operations. Each of Grace and Sealed Air covenants
and agrees as to itself and its subsidiaries that, from and after the date
hereof until the Effective Time, except insofar as the other parties shall
otherwise consent 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 preserve their business organization
intact and maintain their existing relations with customers, suppliers,
employees 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 document); (iii) split, combine or reclassify any
outstanding capital stock; or (iv) declare, set aside or pay any
dividend payable in stock or property with respect to any of its capital
stock (other than, in the case of Grace, regular quarterly cash
dividends consistent with Grace's current practice, and intercompany
dividends).
(c) Neither it nor any of its subsidiaries will issue, sell,
pledge, dispose of or encumber, or authorize or propose the issuance,
sale, pledge, disposition or encumbrance of, any shares of, or
securities convertible or exchangeable for, or options, puts, warrants,
calls, commitments 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 foregoing (A) Grace may grant options to acquire Grace Common Shares
so long as such options will not, after the Recapitalization, 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
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 dispose 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 Disclosure 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, severance 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 applicable law, and except in the ordinary and
usual course of business, neither it nor any of its subsidiaries will
establish, adopt, enter into, make, amend or make any elections under
any collective bargaining, bonus, profit sharing, 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 accounting
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 propose any change
in its certificate of incorporation or bylaws.
(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 (including 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 management
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 Packco 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 authorize or
enter into an agreement to take any of the actions referred to in
paragraphs (a) through (k) above.
6.2. Certain Transactions.
(a) It is understood and agreed by the parties hereto that,
pursuant to the Distribution Agreement, at the time of the Reorganization and
subject to Section 2.02 of the Distribution Agreement, neither Grace nor any
member of the Packco Group shall have cash or marketable securities, it being
contemplated 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 withheld.
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 direct and use its best efforts to cause its employees, agents and
representatives (including, without limitation, any investment banker, attorney
or accountant retained by it or any of its subsidiaries) not to, initiate,
solicit or encourage, directly or indirectly, any inquiries or the making or
implementation of any proposal or offer with respect to a merger, acquisition,
consolidation, business combination, recapitalization or similar transaction
involving, or any purchase of all or any significant portion of the assets or
any equity securities of, it or any of its subsidiaries (any such proposal or
offer being hereinafter referred to as an "Acquisition Proposal") 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 negotiations directly or through
its representatives if (i) the failure to provide such information or
participate in such negotiations 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 proposal,
the terms thereof and the availability of adequate financing 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 consummated
and represents a transaction more favorable to its shareholders than the
Reorganization (a "Higher Offer"); provided 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, discussion or
negotiations.
6.4. Information Supplied. Each of the parties 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 Registration 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
supplement thereto is filed in definitive form with the SEC or mailed to
shareholders and at the time of the applicable Meeting, contain 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 documents 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 requirements of the
Exchange Act.
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 action 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 recommend 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, withdrawal, modification or change of
recommendation or recommendation 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 identity of the other party
thereto and the material terms and conditions of the agreement to be entered
into with such person), shall not constitute a breach of this Agreement by
Grace or Sealed Air, as the case may be.
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 Registration Statement and the Joint Proxy Statement to be
mailed to their shareholders, and Grace shall prepare the New Grace
Registration 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
consultation 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
transactions 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 applications, notices, petitions, filings and other
documents, and to obtain as promptly as reasonably practicable all necessary
permits, consents, orders, approvals and authorizations of, or any exemption
by, all third parties and Governmental Entities necessary 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
Governmental Entities necessary or advisable to consummate the transactions
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.
(c) Each party hereto shall, upon reasonable request and except
as otherwise may be required by applicable law, furnish 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 connection 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 written 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
contemplated hereby.
(e) Each party hereto shall cooperate with each other 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 favorable review of the proposed transaction under the HSR
Act and any foreign antitrust or competition laws.
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 qualification by Price
Waterhouse LLP or other nationally recognized accounting firm reasonably
acceptable to Sealed Air (the "Packaging Business Financial Statements").
(b) Each of Grace and Sealed Air shall use all reasonable efforts
to cause to be delivered to the other party, as appropriate, and its directors
letters of its independent accountants, dated (i) the date on which each
Registration Statement 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" letters delivered by independent
accountants in connection with registration statements.
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 access, during normal business hours throughout the
period until 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 modify 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 provision 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 obtained 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 written confidentiality arrangements
existing among the parties hereto.
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 result in
any Material Adverse Effect or to delay, in any substantial respect, or
prevent consummation of the Reorganization, in each case to the knowledge of
the executive officers.
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, statement 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.
6.11. Employee Benefits; Headquarters Employees. (a) Grace and
Sealed Air covenant and agree that from and after the Effective Time, Grace,
Packco and the Surviving Corporation, as the case may be, shall maintain
either employee benefits plans and programs that are, in the aggregate, at
least substantially comparable to the plans and programs in effect with
respect to Packco Employees at the Effective 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 acknowledges 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 management, investor relations, information systems and
internal audit. In seeking to fill these needs, Sealed Air shall work with
Grace to identify, prior to the Effective Time, appropriate people located at
Grace's Boca Raton headquarters and shall give such individuals preferential
consideration.
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 printing and mailing the Joint Proxy
Statement and the Grace Registration 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 limitation 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 disclosed or announced, the
Grace shareholders do not 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 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 Grace 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 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 Acquisition Proposal (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
Grace 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 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 agreements 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 writing.
(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 Proposal (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
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;
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 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 $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.
6.13. Antitakeover Statutes. If any Takeover 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 contemplated
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.
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 Meetings, 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.
6.15. Transaction Agreements. (a) Prior to the Effective Time,
the parties shall consummate any transactions 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.
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 inconsistent therewith, except where, in the opinion of nationally
recognized tax counsel to such party, there is not "substantial authority,"
as defined in Section 6662 of the Code, to support such a position.
ARTICLE VII
CONDITIONS
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 contemplated 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 waiting 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
required 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, delivery 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 obtained, 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 performance of this Agreement, the
Distribution Agreement and the Other Agreements and the consummation of
the transactions contemplated hereby and thereby shall have been
obtained and shall be in full force and effect, except for those the
failure of which to obtain would not have a Material Adverse Effect with
respect to (i) the New Grace Group (with respect to the condition for
Grace), or (ii) the Packco Group or Sealed Air (with respect to the
condition for Sealed Air).
(d) Governmental Matters. No Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, judgment, decree, injunction or
other order (whether temporary, 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 Exhibit C hereto. In rendering such
opinion, such firm may receive and rely upon representations 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 Matters Certificate. Sealed Air shall have received the
opinion of Davis Polk & Wardwell, dated the date of the Effective Time,
substantially in the form of Exhibit D hereto. In rendering such
opinion, such firm may receive and rely upon representations 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 Matters Certificate.
(f) Registration Statements. The Registration Statements shall
have become effective under the Securities Act or Exchange Act (as
applicable), and no stop order 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 Recapitalization.
The Contribution, the Distribution and the Recapitalization shall have
been consummated as provided 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 satisfied 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 for listing on the NYSE, subject
to official notice of issuance.
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 representations and
warranties of Sealed Air set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement, and
such representations 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 respects as of such date) disregarding with respect to the
Closing Date all qualifications and exceptions contained therein
relating to materiality or Material Adverse Effect, except for such
matters as would not in the aggregate 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.
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 representations 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 correct 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 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 qualifications and exceptions contained therein
relating to materiality or Material Adverse Effect, except for such
matters as would not in the aggregate reasonably be expected 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 required 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
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.
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
consummated by April 30, 1998, provided that the right to terminate this
Agreement pursuant to this clause (i) shall not be available to any party
whose breach of any provision of this Agreement results in the failure of the
Reorganization to be consummated by such date, (ii) at the Grace Meeting or at
any adjournment thereof, the approval of Grace's shareholders required 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.
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 adoption and approval by shareholders of Grace referred to
in Section 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 respect 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 recommend 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.
8.4. Termination by Sealed Air. This Agreement 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 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 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 failed to recommend to its shareholders the approval of the
transactions contemplated hereby or shall have withdrawn, modified 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 immediately
preceding the day of the Effective Time (but for this clause) is less than
$45.375 per share.
8.5. Effect of Termination and Abandonment. In the event of
termination of this Agreement and the abandonment 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
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, agreements and covenants shall be deemed only to be conditions of
the Reorganization and shall not survive the Effective Time.
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.
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 permitted by applicable law.
9.4. Counterparts. For the convenience of the parties hereto,
this Agreement may be executed in any number of separate counterparts signed
by one or more of the parties hereto, each such counterpart being deemed to be
an original instrument, and all such counterparts shall together constitute
the same agreement.
9.5. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
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,
telegram, 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.
9.7. Entire Agreement; Assignment. This Agreement (and the
Exhibits and Disclosure Letters hereto) (a) 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.
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 organization 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 directly 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.
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.
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 parties agree that the remedies
at law for any breach or threatened breach, including monetary damages, are
inadequate compensation for any loss and that any defense in any action for
specific performance that a remedy at law would be adequate is waived.
9.11. Severability. If any provision of this Agreement or the
application thereof to any person or circumstance 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
circumstances 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.
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.
9.13. Further Assurances. In addition to the actions
specifically provided for elsewhere in this Agreement, 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 effective the transactions contemplated
by this Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed 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
Annex A
DEFINED TERMS
Acquisition Proposal: as defined in Section 6.3 hereof.
Affiliate: as defined in Rule 12b-2 under the Exchange 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, investigation
or restoration of the environment (including, without limitation, 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, 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 member 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 pursuant to
Section 4001(a)(14) of ERISA.
Exchange Act: the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
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 Distribution 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 transactions contemplated hereby
(including the transactions contemplated by the Distribution Agreement).
Grace Options: as defined in Section 5.1(a)(i) hereof.
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 Preferred 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 material listed,
defined, designated or classified as a pollutant or contaminant, or as
ignitable, corrosive, reactive or hazardous, 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 component.
Higher Offer: as defined in Section 6.3 hereof.
HSR Act: the Hart-Scott-Rodino Antitrust Improvements 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.
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 Exchange 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 prospects of such party and its
subsidiaries taken as a whole.
Meetings: the Grace Meeting and the Sealed Air Meeting.
Merger: as defined in Recital E hereof.
Merger Certificate: as defined in Section 1.3 hereof.
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 hereto.
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 Statements: 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 Agreement.
Packco Employees: as defined in the Benefits Agreement.
Packco Group: as defined in the Distribution Agreement.
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 Recapitalization, 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 Reorganization, 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 Section 5.3(p)
hereof.
Sealed Air Meeting: a duly convened meeting of holders 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 filings 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 amended, 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) hereof.
Tax Sharing Agreement: the executed agreement in the form of
Exhibit B to the Distribution Agreement.
Transaction Agreements: this Agreement, the Distribution
Agreement and the Other Agreements.
US GAAP: United States generally accepted accounting principles
consistently applied.
Exhibit A to Merger Agreement
Form of Distribution Agreement
------------------------------
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
2.06 Financing...................................... 24
2.07 Grace Recapitalization......................... 26
2.08 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
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
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 Effective 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 plural forms of the terms defined):
Adjusted Foreign Transfer Taxes: as defined in Section 2.02(c)
hereof.
Affiliate: with respect to any specified Person, a Person that
directly, or indirectly through one or more intermediaries, 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 pursuant to the Distribution.
Agreement: as defined in the preamble to this Agreement.
Asset: any and all assets and properties, tangible or intangible,
including, without limitation, the following: (i) cash, notes and accounts
and notes receivable (whether current or non-current); (ii) certificates of
deposit, banker's acceptances, stock, debentures, evidences of indebtedness,
certificates of interest or participation in profit-sharing agreements,
collateral-trust certificates, preorganization certificates or subscriptions,
transferable shares, investment contracts, voting-trust certificates,
fractional undivided interests in oil, gas or other mineral rights, puts,
calls, straddles, options and other securities of any kind; (iii) intangible
property rights, inventions, discoveries, know-how, United 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 agreements, 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 prepaid 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 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 contracts, 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 Distribution 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 Agreement.
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.
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, other than any Packco
Assets.
Grace-Conn. Liabilities: all of the Liabilities of Grace or its
Subsidiaries immediately prior to the Distribution, other than Packco
Liabilities.
Grace-Conn. Public Debt: (i) the outstanding indebtedness 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 indebtedness owned by Grace-Conn. or another
member of the New Grace Group) and (ii) with respect to any indebtedness
described in clause (i), any amendments, modifications, refinancings,
extensions, renewals, refundings or replacements of, or indebtedness exchanged
for, such indebtedness which in each case is guaranteed 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 other 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, damages, 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 obligated under this
Agreement to provide indemnification.
Indemnitee: a Person who or which may seek indemnification under
this Agreement.
Indemnity Payment: an amount that an Indemnifying Party is
required to pay to or in respect of an Indemnitee pursuant to Article IV.
Information: all records, books, contracts, instruments, 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, liquidated or unliquidated,
accrued or unaccrued, known or unknown, whenever arising, and whether or not
the same would properly be reflected on a balance sheet.
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 Agreement.
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 below).
"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 Agreement) 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 Benefit 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 Participants (as defined in the Benefits
Agreement) under the Union Retirement Plan and (ii) benefits of Packco
Participants under the Hourly Non-Union Retirement Plan (as defined in
the Benefits Agreement) that are assumed by the Packco Hourly Non-Union
Retirement Plan pursuant to Section 4.01(d) of the Benefits Agreement.
"Foreign Benefit Plan Liabilities" means the greater of (i) the sum of
the 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
Foreign Pension Plan that are, pursuant to the Foreign Benefits
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 Distribution Date based upon the actuarial and other assumptions used by
AON to determine the ABO or PBO (as applicable) of the relevant Transferring
New Grace Foreign Plan or Retained Grace Foreign Plan for purposes of Grace's
fiscal 1996 year-end financial 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 applicable 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 local 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 necessary to reflect the Net Benefit Amount as so finally
determined. 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 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 Agreement.
New Grace Business: all of the businesses and operations
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 contribution,
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 jurisdictions
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 Distribution Date and (B)
Excess Short-Term Payables of such Subsidiary;
provided, however, that such amount of cash
shall be determined taking into account the
principles, 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;
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 Distribution Date.
New Grace Common Stock: as defined in the Recitals to this
Agreement.
New Grace Group: New Grace, Grace-Conn. and the other 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, executors, successors and assigns of
any of the foregoing.
New Grace Repatriation Tax Costs: as defined in Section 2.02(c)
hereof.
New Grace Rights: the preferred share purchase rights of New
Grace.
New Grace Subsidiaries: all direct and indirect Subsidiaries 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 Subsidiary.
Newco Common Stock: the shares of common stock, par value $.10
per share, of Grace.
Newco Convertible Preferred Stock: the Series A Convertible
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 intellectual property license
agreement, an interim services agreement, the shared facilities agreements and
the other agreements entered into or to be entered into in connection with
the Distribution 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 Subsidiaries of its
container business group (which was, until 1996, operated as a separate
business unit known as Grace Container 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 Agreement.
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 Distribution 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 Agreement; (iv) the capital stock of
Packco and all Packco Subsidiaries; 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 Packco Assets in
the form and to the extent provided in Section 2.01(d);
(c) with respect to leased or owned real property 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
and shall not include any vacant or unoccupied property otherwise
owned or leased by Grace or any of its Subsidiaries (except in the
case of vacant or unoccupied property (I) on a site that is engaged
predominantly 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 headquarters 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 Packaging Business (or any Assets located
at or relating to such facilities); (II) Assets relating to any
divested 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 Subsidiaries.
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 relating to or arising from the Packaging
Business or the Packco Assets; (ii) all Liabilities of Grace and its
Subsidiaries to the extent assigned to or assumed by Grace and Packco under
this Agreement or any Other Agreement; (iii) all Liabilities 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, include:
(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 after the Distribution Date (including formerly owned
or leased facilities and former offsite disposal facilities) 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 aggregate 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 Subsidiaries
relating to or arising from any interim service or tolling
agreements entered into in connection with any divestiture by
Grace or any of its Subsidiaries;
(e) Liabilities, whether such Liabilities relate to
events, occurrences or circumstances occurring or existing, or
whether such Liabilities arise, before, on or after the
Distribution Date, relating to asbestos or asbestos-containing
materials manufactured and/or sold (collectively, "Asbestos
Activities") by Grace, Grace-Conn. or any of their respective
Subsidiaries, affiliates or predecessors (but this clause shall
not include such Liabilities to the extent relating to Asbestos
Activities, if any, conducted after the Distribution Date of any
member of 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 predecessors 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 Subsidiaries of
Grace to be transferred to or formed by Packco in connection with the
Contribution or the Foreign Transfers (including any such Subsidiary to be
formed pursuant to the Tax Sharing Agreement or Section 2.02).
Per Share Common Consideration: the shares (or fraction of a
share) of Newco Common Stock issuable in the Recapitalization 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 Distribution 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 Effective Time (such number
calculated as provided in the Benefits Agreement, the
"Newco Options"), multiplied by the amount by which:
(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 exercise price
for the Newco Options, calculated 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 appropriately
adjusted.
Per Share Preferred Consideration: the shares (or fraction of a
share) of Newco Convertible Preferred Stock issuable 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 result 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 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 appropriately adjusted.
Person: an individual, a partnership, a joint venture, 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 Sharing Agreement.
Privileged Information: with respect to either Group, Information
regarding a member of such Group, or any of 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, consultants, 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 Headquarters, any
production, manufacturing, sales office or other facility (whether owned or
leased) of Grace or any of its subsidiaries 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) hereto.
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 Business.
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 indirectly, 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 Agreement.
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 administrative agency or commission or any arbitration
tribunal asserted 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.
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 Subsidiary 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 transfers 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 Assets,
subject to Sections 2.05 and 2.10.
(b) Effective as of the Distribution Date and subject 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 obligated to make significant expenditures to effect such
separation prior to the Distribution Date. Actions taken and expenditures
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
allocation 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, current and future costs (and losses of tax or other
economic benefits) of the respective Businesses. With respect to any Asset
that cannot reasonably be separated or otherwise allocated as 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 predominantly 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 separated 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 intellectual 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 property 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, including, 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
Business" 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 containers 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 reasonable 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
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 unduly 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) attributable 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. Assets and Grace-Conn. Liabilities, on the other hand,
that are located in jurisdictions outside the United States. Such separation
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 Foreign Transfer that occurs after the Distribution
shall be effected 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 allocable to such other party pursuant to Section 8.04. Such payment
shall, for Tax purposes, be characterized as an adjustment 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
subdivision 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 Benefits shall be presumed to be utilized
in the first year in which they arise (or are deemed to arise). All amounts
relating 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 local 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 immediately following
the Distribution ("Withholding Taxes") and (II) Taxes that would be imposed by
the United States or any political subdivision thereof on a Deemed Repatriation
(without taking 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 Repatriation ("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, however, 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 and Excess
Short-Term Payables) and cooperate in good faith to minimize the amount of
Subsidiary Excess Cash, taking into account 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 income tax purposes of any other Foreign
Packco Subsidiary, attributable 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 Benefit), calculated without
regard to any Tax Item arising on the Foreign Transfer involving such
Subsidiary, that does not exceed the amount of income or gain arising, for
purposes of the applicable foreign income tax, on the Foreign Transfer
involving such Subsidiary.
(d) In connection with the Foreign Transfers, certain 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 failure 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 Adjusted Foreign Transfer Taxes
borne by the other Group. Grace agrees to indemnify and hold the Grace-Conn.
Indemnitees harmless, 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 recalculated 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 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 recalculated, 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 incorporation and by-laws of
Packco shall be substantially similar 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 Distribution Date,
the parties hereto shall take all steps necessary 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 Distribution Date, enter into, or
cause the appropriate members of the Group of which it is a member to enter
into, the Other Agreements in connection with the Distribution, including,
without limitation, agreements with respect to (i) insurance procedures, (ii)
interim services (including, without limitation, services to be provided by
the Shared Regional Headquarters consistent with current operations of the
respective Businesses, and services to be provided by country organizations
to operations of the other Business consistent with past practice), which
shall be charged at allocated cost based on Grace's historical methodology,
subject to applicable tax laws 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 services) 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 providing
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 extensive 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 conditions 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, security and other matters). The parties shall enter into
appropriate 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 included in the Other Agreements.
SECTION 2.06 Financing. (a) Prior to the Distribution 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 Capital Contribution may be contributed to foreign
Subsidiaries of New Grace. It is contemplated that the New Grace Capital
Contribution 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 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 consummate a cash
tender offer in accordance with applicable securities laws for any and all
Grace-Conn. Public Debt. Grace-Conn. may also elect, in its discretion, to
defease or otherwise 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 institutions 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 respect 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
separate in an interest-bearing escrow account with a financial institution
and pursuant to escrow arrangements reasonably acceptable 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 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 tender offer that are, in the
aggregate, in excess of the outstanding 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. Public Debt acquired, defeased or
retired; and plus (iii) the costs of the letter of credit described above.
SECTION 2.07 Grace Recapitalization. (a) Immediately 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
Recapitalization 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 actions to effect the Recapitalization, including customary
procedures 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 Recapitalization. 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 proportionate 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 this paragraph.
As soon as practicable following the Distribution Date, the Exchange Agent
shall determine the excess of (i) the number of full shares of Newco Common
Stock or Newco Convertible 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 Excess Shares at the prevailing prices on the open market. The sale of
the Excess Shares by the Exchange Agent shall be executed 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 compensation 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 under 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.
(d) The parties hereto shall cooperate in preparing, filing with
the SEC and causing to become effective any registration 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
Employee Benefits Agreement requiring registration under the Securities Act.
SECTION 2.09 Grace and New Grace Boards. The parties 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 independent
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. Nothing herein shall
be deemed to require the transfer of any Assets 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
Subsidiaries shall cooperate to obtain any necessary consents or approvals for
the transfer of all Assets and Liabilities contemplated 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
Distribution 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 entitled 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 Distribution
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 thereto, and shall be deemed to have assumed in
accordance with the 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 members 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 practices (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 Section 8.01(a), the Board of
Directors of Grace, in its sole discretion and consistent with the Merger
Agreement, shall establish the Record Date and the Distribution Date and any
appropriate 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 Distribution 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 certificates 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 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 Agreement shall survive the
Distribution Date.
SECTION 4.02 Indemnification. (a) Except as specifically
otherwise provided in the Other Agreements, the New Grace Group shall
indemnify, defend and hold harmless the Packco 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.
Liabilities (including, without limitation, all Liabilities specifically
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 information 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 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 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 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 (including the pro forma financial information relating to
Newco contained in the Registration Statements (other than the historical
information relating to Grace and the Packaging Business)), or necessary to
make the statements therein not misleading.
(c) If any Indemnity Payment required to be made hereunder or
under any Other Agreement 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 on which such Indemnity Payment is made.
(d) Notwithstanding anything to the contrary set forth herein,
indemnification relating to any arrangements between 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 otherwise 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 other 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 Indemnitee 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 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 Indemnitee and to Grace,
if New Grace is the Indemnifying Party, or to the Indemnitee and New Grace, if
Grace is the Indemnifying 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 consent, 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 Indemnitee, 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 Indemnitees 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 remedy;
and subject to the Indemnifying Party's control rights, as specified herein,
the Indemnitees may participate in such investigation 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 hereunder.
(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 Party which make it inappropriate for the
Indemnifying Party to undertake the defense or settlement thereof, then such
Indemnifying Party shall not be entitled to undertake the defense or
settlement of such Third-Party Claim; and counsel for the Indemnifying Party
shall be entitled to conduct the defense of such Indemnifying Party and
counsel for the Indemnitee (selected by the Indemnitee) shall be entitled to
conduct the defense 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 substantially 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 available to it.
(d) In no event shall an Indemnifying Party be liable for the
fees and expenses of more than one counsel for all Indemnitees (in addition to
its own counsel, if any) in connection with any one action, or separate but
similar or related actions, in the same jurisdiction arising out of the same
general 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 settlement thereof, subject to
the terms and conditions of a mutually 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 provided in this
Article IV shall be cumulative and shall not preclude 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.
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 cooperate 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 hereto shall cause
the appropriate members of its Group to prepare and file with the appropriate
licensing and permitting authorities applications for the transfer or
issuance, as may be necessary or advisable in connection with the transactions
contemplated 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
cooperate and use all reasonable efforts to secure the transfer or issuance of
the licenses and permits.
SECTION 5.03 Intercompany Agreements. All contracts, licenses,
agreements, commitments or other arrangements, 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,
financial, accounting, data processing, insurance or technical support), 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 either 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 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 Distribution 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 limitations 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 Distribution 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 Treasurer 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 Financial Officer, Treasurer or any Assistant Treasurer of Grace,
provided that the limitations contained in clause (ii) shall not apply in the
event that a member of the New Grace Group obtains a letter of credit from a
financial institution reasonably 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 Agreement.
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, license, 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 deliver to New Grace all corporate
books and records of the New Grace Group in its possession and copies of the
relevant portions of all corporate books and records of the Packco Group
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 retain 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 deliver 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 reimbursement of costs incurred by the
providing party) by the requesting 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 access 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 Information 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 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 intend 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 member, not to disclose or
otherwise waive any privilege attaching 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 connection 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; provided, however, that Grace
and New Grace may make such disclosure or waiver with respect to
Privileged Information 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 concerning the reasonableness of withholding such
consent, no disclosure shall be made prior to a resolution of such
disagreement by a court of competent jurisdiction, provided that the
limitations in this sentence shall not apply in the case of disclosure
required by law and so certified as provided in the first sentence of
this paragraph.
(c) Upon any member of the Packco Group or any member of the New
Grace Group receiving any subpoena or other compulsory disclosure notice
from a court, other governmental agency or otherwise which requests
disclosure of Privileged Information, in each case relating to
pre-Distribution business of the New Grace Group or the Packco Group,
respectively, or relating to or arising in connection 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 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 defenses and claims of
privilege have been finally determined.
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 witnesses to the extent that any
such Person may reasonably be required in connection with any Litigation
Matters, administrative or other proceedings in which the requesting party may
from time to time be involved and relating to the pre-Distribution 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 otherwise 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-Distribution
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, prior to the expiration of such period, any
member of either party's Group wishes to destroy or dispose of any such
Information that is at least three years old, prior to destroying or disposing
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 disposed 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
Information to a location specified by, and at the expense of, the requesting
party.
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 Information 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 Person
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 subject 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 member 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 government 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 include, without limitation, promptly
forwarding copies of appropriate 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 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. Except 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 member 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 Liabilities, 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 Article 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.
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 shareholders;
(ii) all conditions to the Merger set forth in the Merger
Agreement (other than that the Distribution be consummated) shall have
been satisfied or waived;
(iii) all third-party consents and governmental approvals required
in connection with the transactions contemplated 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, financial 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 Distribution;
(v) the shares of New Grace Common Stock to be issued in the
Distribution, and the shares of Newco Common Stock and the Newco
Convertible Preferred Stock to be issued 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 elected;
(vii) the Registration Statements shall have been declared
effective under the Exchange Act or the Securities Act, as the case may
be, by the SEC and no stop order suspending 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 Article 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 Distribution Date) and (B) the financial condition
of each of Grace and Grace-Conn. satisfies the requirements of Section
170 of the Delaware General Corporation Law and Section 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 Distribution 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 securities 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 acknowledges 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 to, cease all other use of the "Grace" name and
logo and related tradenames and marks, provided that Grace may use inventory
including any such name, logo, tradenames or marks in existence 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 practice and as Grace reasonably believes is appropriate, and during
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 material shall be used by the Packco Group
after the six-month anniversary 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 agreement between the parties hereto with respect
to the subject matter hereof (other than the Merger Agreement and the
schedules 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 specifically 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 "Transaction Costs")
in connection with the transactions contemplated by this Agreement and the
Other Agreements (including the Contribution (and the related transfers,
separations and/or allocations 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 connection with the Grace Credit Agreement. "Severance
Costs" means the costs associated with the termination in connection with the
transactions contemplated hereby (including the Merger) 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 in respect of
Adjusted Foreign Transfer Taxes on the Distribution Date so that Adjusted
Foreign Transfer Taxes are borne in the proportions described above in this
Section 8.04. Appropriate 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 Section
6.12(a) of the Merger Agreement. Any amount paid by one party to the other
under this Agreement in respect of Transaction Costs shall be treated, for tax
purposes, as an adjustment to the portion of the New Grace Capital
Contribution contributed 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, addressed 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
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 subject 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 Agreement 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 parties hereto and shall not in any way
affect the meaning or interpretation of this Agreement.
(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 transaction, and all provisions of this Agreement shall be so
interpreted. The parties hereto do not intend to submit the Distribution 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 circumstance 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
circumstances 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 provision 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 approval 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 reason 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.
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:
Exhibit A to Distribution Agreement
Form of Employee Benefits Allocation Agreement
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 subsidiary 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 Corporation, 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
corporation (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 condition 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 Distribution 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 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
arrangements;
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 recognizes an alternate payee's right to, or
assigns to an alternate payee, all or a portion of the benefits payable to a
participant 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 alternate recipient's right to, or assigns
to an alternate recipient the right to, receive benefits for which a
participant or beneficiary is eligible under any Plan.
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 thereto, 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 eligible for coverage
or has benefits rights.
Change in Control Severance Agreements: the agreements 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 performance 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 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 Section 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. Severance 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 individually allocated insurance
contracts, each of which is identified 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.
LTIP Awards: has the meaning assigned to it in Section 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
Distribution, 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 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
Distribution 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 sponsored 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 Section 6.11(b) of the Merger Agreement.
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 Cryovac 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 purchase, stock option, stock
ownership, stock appreciation rights, phantom stock, company car, fringe
benefit, leave of absence, layoff, vacation, day or dependent care, legal
services, cafeteria, life, health, medical, accident, disability, workman's
compensation or other insurance, severance, separation 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 "employee 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. Retirement Plan
for Salaried Employees.
Salaried SIP: the W. R. Grace & Co. Salaried Employees Savings
and Investment Plan.
Salary Protection Plan: the W.R. Grace & Co. Executive Salary
Protection Plan.
Schurpack 401(k) Plan: the Schurpack Employees 401(k) Thrift Plan.
SERP: the W. R. Grace & Co. Supplemental Executive Retirement
Plan.
Split Dollar Program: the W. R. Grace & Co. Executive 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 Employee or a
beneficiary, dependent or Alternate Payee of a Terminated 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 Welfare Plan that
is maintained outside of the United States primarily 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 allocated between the New Grace Group and the
Packco Group in accordance 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 Subsidiaries 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 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 unreasonably 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
respective 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 transactions contemplated by the Distribution Agreement
and the Merger, to have become entitled to any benefits under any Benefit
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 constructive termination or alleged actual or constructive termination of
employment (collectively, "Termination Benefits"). Without limiting the
generality of the foregoing, none of the transactions 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 appropriate 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) relating 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 transactions contemplated by the Distribution Agreement,
shall be considered 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 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 Distribution Agreement,
effective as of the Distribution Date, the Packco Group shall assume or
retain, as appropriate, all Liabilities relating to or arising out of claims
made by or on behalf of 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 Packco
Employee with any member of the Packco Group or the New Grace Group, whether
before (in the case of constructive 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 Liabilities 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 thereunder and such other changes as New Grace shall,
in its sole discretion, determine. As soon as practicable after and effective
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.
(b) Each such Grace Option that is held by a New Grace Employee
or a Terminated Grace Participant shall be replaced with an option (a "New
Grace Option") to acquire a number of New Grace Common Shares that equals the
number of shares subject to such Grace Option immediately before such
replacement, 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 before 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 employment by or termination of
employment with Grace and its affiliates shall be changed to references to
employment by or termination of employment with New Grace and its affiliates.
Effective 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 adjustment, 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 nearest whole cent). Each Grace
Option as so adjusted shall otherwise have the same terms and conditions as
were in effect before 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
Distribution Date, the New Grace Group shall assume all Liabilities 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. However, if the Distribution Date
occurs later than March 31, 1998, then Grace and New Grace shall use
reasonable best efforts 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 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 Retirement 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
Retirement 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
fiduciaries, trustees, custodians, recordkeepers and other fiduciaries and
service providers to the Salaried Retirement Plan, the SERP and the Hourly
Non-Union Retirement Plan, and the appointment or reappointment by Grace of
all named fiduciaries, trustees, custodians, recordkeepers and other
fiduciaries and service providers to the Union Retirement Plan.
(b) Effective as of the Distribution Date, the Packco Employees
shall cease accruing benefits under the Salaried Retirement Plan, the SERP and
the Hourly Non-Union Retirement Plan. As promptly as practicable following the
Distribution Date, and effective as of the Distribution Date, Grace intends to
implement a program for Packco Employees who participated in the Salaried
Retirement Plan before the Distribution Date designed to substantially make up
for any anticipated material 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 employee 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, effective
immediately before the Distribution Date: (A) the accrued 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 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 applicable) 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 Liabilities 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 designate a defined benefit
pension plan (the "Packco Hourly Non-Union Retirement Plan") to provide
benefits and assume liabilities 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 Section 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 acceptable 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 Retirement Plan the amount described in Section 4.01(d)(iii) below.
Such transfer shall be in cash unless otherwise agreed by Grace and New
Grace. As of the date of such transfer, and effective 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 Retirement Plan during such
period. All of the foregoing calculations 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 process
of performing them. Notwithstanding the foregoing, however, 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 regulations 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 Retirement Plan, to cause distributions
in respect of Packco Participants 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 sponsors of the Hourly SIP and the Salaried SIP; and (ii) one or 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 fiduciaries, 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 fiduciaries,
trustees, custodians, recordkeepers and other fiduciaries and service
providers to the Cypress 401(k) Plans and the Schurpack 401(k) Plan.
(b) Each of the transfers provided for in this Section 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 practicable 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
Participants. 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 practicable, the investment elections of
participants as in effect immediately before the transfer, unless the parties
agree otherwise.
(ii) Grace, New Grace and Grace-Conn. shall cooperate
in making all appropriate filings required under the Code or ERISA, and the
regulations thereunder and any applicable securities laws, implementing all
appropriate communications with participants, maintaining and transferring
appropriate 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 Packco Savings 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, and (B) the receipt by Grace of a favorable
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 taxation 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 completion 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
Participants relating to or arising under the Hourly SIP and the Salaried 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
thereunder to Packco Participants, that are not assumed by the Packco Group
and the relevant Packco Savings Plan pursuant to the preceding 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 applicable. The Packco Group shall be
responsible for all Liabilities 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 Revenue Service's
Voluntary Compliance Resolution program or similar 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 Liabilities 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 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 Distribution 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 Liabilities 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 specifically
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 insurance 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
Participants who would have been eligible to receive such benefits if they had
retired at any time on or before the first anniversary 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 Participants 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
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 maintain 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
benefits as outlined in Exhibit A hereto.
SECTION 5.04 Split Dollar Plan; Deferred Compensation Plan; Salary
Protection Plan. Effective as of the Distribution Date, each Packco Employee
who participates in the Split Dollar Plan, the Deferred Compensation Plan or
the Salary Protection 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 reappointment 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
fiduciaries, trustees, custodians, recordkeepers and other fiduciaries and
service providers to such Plan, to the extent such appointments or
reappointments are necessary. No employer contributions 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 hereto shall enter into one or
more agreements or memoranda of understanding (collectively, the "Foreign
Plans Agreement") regarding the treatment and allocation of Liabilities
relating to or arising under Benefit Plans (the "Foreign Plans") for Employees
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 intended to be
maintained by the Packco Group, after the Distribution Date; provided, that
the insurance contracts funding each Insured Foreign Pension Plan (and any
assets related thereto) shall be divided between the appropriate Packco
Benefit Plan and New Grace Benefit Plan by the insurer in accordance with
applicable law, regulation and practice. Any transfers of assets or
liabilities from a Noninsured Foreign Pension Plan shall be made on the basis
of reasonable methods and assumptions 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 accordance 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 determinations of the Local
Actuary for accuracy. It is the intention of the parties hereto that the
Packco Group will assume or retain 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 Plans Agreement shall equal the
Projected Benefit Obligation, calculated in accordance with FAS 87, for the
liabilities assumed by Packco Benefit Plans pursuant to the Foreign Plans
Agreement.
ARTICLE VII
GENERAL
SECTION 7.01 Preservation of Rights to Amend or Terminate Plans
and to Terminate or Change Terms of Employment. No provision of this
Agreement shall be construed as a limitation 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 provision 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
otherwise have under the terms of the Benefit Plan itself. Nothing contained
in this Agreement shall confer upon any individual 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 following the
Distribution Date, except as provided in Section 5.03 of this Agreement.
SECTION 7.02 Other Liabilities; Guarantee of Obligations.
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 benefits made by or on behalf of any New Grace Participant,
including salary, wages, bonuses, incentive compensation, severance 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 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 Packco Group on or after the Distribution
Date. Notwithstanding the foregoing, this Section 7.02 shall not apply to any
Liability that is specifically provided 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 Liabilities relating to or arising under
such Benefit Plans. Such steps shall include, without limitation and where
appropriate, 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, trustees, custodians, recordkeepers and other
fiduciaries and service providers to such Benefit Plans. Except as
specifically provided otherwise in this Agreement or in the agreement provided
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 thereafter, provide each other
with all information as may reasonably be requested and necessary to
administer each Benefit Plan effectively 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 information 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 referred 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.
(b) This Agreement, and not the Tax Sharing Agreement,
constitutes the sole agreement of the parties regarding responsibility for any
excise taxes, penalties or similar levies 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 substantive laws of any other jurisdiction) as to all
matters, including 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 Effective 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 agreement of "Grace" or of "the parties" from and after the
Effective 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.
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 Section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties hereto and shall not in any way affect
the meaning or interpretation 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 circumstance 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
circumstances 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 pursuant to this Agreement only by agreement of the parties, must be
reasonably satisfactory to SAC.
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:
Exhibit B to Distribution
Agreement
Form of Tax Sharing
Agreement
FORM OF
TAX SHARING AGREEMENT
by and among
W. R. GRACE & CO.,
W. R. GRACE & CO.-CONN.
and
SEALED AIR CORPORATION
Dated as of [ ], 1997
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 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 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.
"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,
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 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
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, 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,
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 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, 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 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 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, 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 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
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
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, 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 con-
solidated 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.
(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 reorganization. The foregoing sentence
shall not apply to transactions in which Packco acquires another
corporation, limited liability company, limited partnership, general
partnership 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 conduc11zt 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, 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 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 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.
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-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 headings 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 Governing Law. 6.12. This Agreement shall be governed
by the laws of the State of Delaware.
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:
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.
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 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.
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
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 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.
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
o The transaction will be tax-free to both Grace and Sealed Air and
their respective shareholders
o 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
o Sealed Air shareholders will own 37% on a fully diluted basis of the
new Sealed Air packaging company
o Transaction value to Grace shareholders of approximately $5 billion:
o $1.9 billion in common stock of the new Sealed Air (40.9 million
common shares of the new Sealed Air)
o $1.8 billion in new convertible preferred stock (36.0 million
convertible preferred shares, convertible into approximately 31.8
million common shares)
o $1.2 billion cash contribution to the new Grace, to be used to pay
down substantially all of its debt
o Excluding the effect of transaction and integration costs, the
transaction is expected to be accretive to Sealed Air's earnings per
share going forward.
o 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.
o Achieved record sales and earnings in each of its core businesses in
1996.
o Divested noncore businesses, including National Medical Care,
Dearborn, Grace Cocoa, Grace's TEC metal catalysts business, Grace
Specialty Polymers, Amicon and Agracetus.
o Significantly improved the capital structure of Grace by using more
than $3.5 billion in investment proceeds to significantly reduce debt
and repurchase shares.
o Repurchased 28 million shares of Grace common stock in 1996 and 1997.
o Reduced annual costs by more than $100 million and instituted
rigorous financial and working capital controls.
GRACE DAVISON
o Announced plans to commercialize a new catalyst in 1997 to reduce
nitrogen dioxide emissions from refineries.
o 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.
o Started up new Kuantan, Malaysia silicas plant to provide regional
silica products manufacturing capability in the Asia Pacific region.
GRACE CONSTRUCTION PRODUCTS
o Achieved record three-fold improvement in pretax operating income and
10% sales growth in 1996.
o 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.
o Introduced innovative Eclipse7 shrinkage-reducing concrete
admixture to minimize concrete cracking.
o Introduced Polarset7 noncorrosive set accelerator to
enable customers to pour and work concrete in cold temperatures without
using corrosion-causing chemicals.
o Introduced Vycor UltraJ self-adhered roofing underlayment
for commericial use to protect against ice dams and wind-driven rain.
o Trained 100% of its workforce in quality management techniques.
DAREX CONTAINER PRODUCTS
o Introduced patented oxygen-scavenging technology worldwide for beer
bottle crowns.
o Acquired Bayem S.A. de C.V. in Mexico, providing greater access to the
rapidly growing Latin American can closure and sealants market.
o Formed joint venture with Shalimar Paints Ltd. in India to produce and
market container coatings, closures and can sealing compounds.
