EXHIBIT 10.1
FORM OF EMPLOYEE BENEFITS ALLOCATION AGREEMENT
This EMPLOYEE BENEFITS ALLOCATION AGREEMENT (this
"Agreement"), dated as of [ ], 1997, by and among W. R.
Grace & Co., a Delaware corporation ("Grace"), W. R. Grace &
Co.-Conn., a Connecticut corporation and a wholly owned subsid-
iary of Grace ("Grace-Conn."), and General Specialty Chemicals,
Inc. (to be renamed W. R. Grace & Co.), a Delaware corporation
and a wholly owned subsidiary of Grace ("New Grace").
RECITALS
A. The Merger Agreement. Grace and Sealed Air Cor-
poration, a Delaware corporation ("SAC"), have entered into an
Agreement and Plan of Merger, dated as of [ ], 1997
(the "Merger Agreement"), pursuant to which, at the Effective
Time (as defined therein), a wholly owned subsidiary of Grace
will merge with and into SAC, with SAC being the surviving cor-
poration (the "Merger"), and Grace being renamed Sealed Air
Corporation.
B. The Distribution Agreement. The Distribution
Agreement dated as of [ ], 1997, by and among Grace,
Grace-Conn. and New Grace (the "Distribution Agreement") and
the Other Agreements (as defined in the Distribution Agreement)
set forth certain transactions that SAC has required as a con-
dition to its willingness to consummate the Merger, and the
purpose of the Distribution Agreement is to make possible the
Merger by divesting Grace of the businesses and operations to
be conducted by New Grace and its subsidiaries, including New
Grace-Conn.
C. The Contribution. Prior to the Effective Time,
and subject to the terms and conditions set forth in the Dis-
tribution Agreement, Grace intends to cause the transfer to a
wholly owned subsidiary of Grace-Conn. ("Packco") of certain
assets and liabilities of Grace and its subsidiaries predomi-
nantly related to the Packaging Business (the "Contribution"),
as contemplated by the Distribution Agreement and the Other
Agreements.
D. The Distribution. Following the Contribution and
prior to the Effective Time, subject to the conditions set
forth in the Distribution Agreement, (i) the capital stock of
Packco will be distributed to Grace, (ii) the capital stock of
Grace-Conn. will be contributed to New Grace and (iii) all of
the issued and outstanding shares of the common stock of New
Grace (together with the New Grace Rights, "New Grace Common
Stock") will be distributed (the "Distribution") to the holders
as of the Record Date of the common stock of Grace, par value
$.01 per share ("Grace Common Stock"), other than shares held
in the treasury of Grace, on a pro rata basis.
E. This Agreement. This Agreement is one of the
Other Agreements contemplated by the Distribution Agreement,
and its purpose is to set forth the agreement of Grace, Grace-
Conn. and New Grace with respect to certain matters relating to
employees and employee benefit plans and compensation arrange-
ments;
NOW, THEREFORE, in consideration of the premises, and
of the representations, warranties, covenants and agreements
set forth herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 General. Capitalized terms used but
not defined herein shall have the meanings set forth in the
Distribution Agreement or the Merger Agreement, as applicable.
As used in this Agreement, the following terms shall have the
following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
Agreement: has the meaning assigned to it in the
preamble hereof.
ABO: has the meaning assigned to it in Section
4.01(b).
AICP: the Annual Incentive Compensation Program of
Grace.
Alternate Payee: an alternate payee under a domestic
relations order which qualifies under Section 414(p) of the
Code and Section 206(d) of ERISA and which creates or recog-
nizes an alternate payee's right to, or assigns to an alternate
payee, all or a portion of the benefits payable to a partici-
pant under any Plan, or an alternate recipient under a medical
child support order which qualifies under Section 609(a) of
ERISA and which creates or recognizes the existence of an al-
ternate recipient's right to, or assigns to an alternate re-
cipient the right to, receive benefits for which a participant
or beneficiary is eligible under any Plan.
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ASA: has the meaning assigned to it in Section
4.01(b).
Benefit Plan: any Plan established, sponsored or
maintained by any member of the Packco Group, any member of the
New Grace Group, or any predecessor or affiliate of any of the
foregoing, existing as of the Distribution Date or prior there-
to, to which any member of the Packco Group or the New Grace
Group contributes, has contributed, is required to contribute
or has been required to contribute, on behalf of any employee
of a member of the Packco Group or a member of the New Grace
Group, or under which any employee of a member of the Packco
Group or a member of the New Grace Group, former employee of a
member of the Packco Group or a member of the New Grace Group,
or any beneficiary or dependent thereof, is covered, is eli-
gible for coverage or has benefits rights.
Change in Control Severance Agreements: the agree-
ments listed on Schedule I hereto.
Change in Control Severance Plan: the Grace Change
in Control Severance Program for U.S. Employees (April 3, 1996-
April 3, 1998).
Current Performance Period: any three-year perfor-
mance period under the Grace LTIP that begins before and ends
after the Effective Time.
Current Plan Year: the plan year or fiscal year, to
the extent applicable with respect to any Plan, during which
the Distribution Date occurs.
Cypress 401(k) Plans: the Cypress Packaging, Inc.
Union Employees 401(k) Pension Plan and the Cypress Packaging,
Inc. 401(k) Retirement Plan.
Deferred Compensation Plan: the W. R. Grace & Co.
Deferred Compensation Program.
Distribution Agreement: has the meaning assigned to
it in the fourth paragraph hereof.
Employee: with respect to any entity, an individual
who is considered, according to the payroll and other records
of such entity, to be employed by such entity, regardless of
whether such individual is, at the relevant time, actively at
work or on leave of absence (including vacation, holiday, sick
leave, family and medical leave, disability leave, military
leave, jury duty, layoff with rights of recall, and any other
leave of absence or similar interruption of active employment
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that is not considered, according to the policies or practices
of such entity, to have resulted in a permanent termination of
such individual's employment), but excluding any individual who
is, as of the relevant time, on long-term disability leave.
Foreign Plan: has the meaning assigned to it in Sec-
tion 6.01.
Grace: has the meaning assigned to it in the first
paragraph hereof.
Grace Dependent Care Plan: the W. R. Grace & Co.
Dependent Care Plan.
Grace LTIP: the Grace Long Term Incentive Program.
Grace Medical Expense Plan: the W. R. Grace & Co.
Health Care Reimbursement Account Plan.
Grace Option: an option to purchase shares of Grace
Common Stock granted pursuant to any Grace Stock Incentive
Plan.
Grace Severance Pay Plan: the W. R. Grace & Co. Sev-
erance Pay Plan for Salaried Employees, as amended effective
July 1, 1996.
Grace Stock Incentive Plans: the Grace 1996 Stock
Incentive Plan, the Grace 1994 Stock Incentive Plan, the Grace
1989 Stock Incentive Plan, the Grace 1986 Stock Incentive Plan,
and the Grace 1981 Stock Incentive Plan.
Hourly Non-Union Retirement Plan: the W. R. Grace &
Co.-Conn. Retirement Plan for Non-Union Employees of Subsidiary
Corporations.
Hourly SIP: the W. R. Grace & Co. Hourly Employee
Savings and Investment Plan.
Insured Foreign Plan: a Foreign Plan that provides
retirement or pension benefits and that is funded through indi-
vidually allocated insurance contracts, each of which is iden-
tified as such in the Packaging Business Disclosure Letter to
the Merger Agreement.
IRS: the Internal Revenue Service.
Local Actuary: has the meaning assigned to it in
Section 6.01.
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LTIP Awards: has the meaning assigned to it in Sec-
tion 3(a) hereof.
Newco Ratio: the amount obtained by dividing (i) the
average of the arithmetic mean between the highest and lowest
sales prices of a share of Grace Common Stock on the New York
Stock Exchange Composite Tape on each of the five trading days
immediately preceding the ex-dividend date for the Distribu-
tion, by (ii) the average of the arithmetic mean between the
highest and lowest sales prices of a share of Newco Common
Stock on the New York Stock Exchange Composite Tape on each of
the five trading days beginning on the ex-dividend date for the
Distribution.
New Grace Benefit Plan: any Benefit Plan that is
sponsored or maintained by a member of the New Grace Group as
of the Distribution Date.
New Grace Employee: any Employee who is allocated to
the New Grace Group pursuant to Section 2.01 of this Agreement
and who is not hired by any member of the Packco Group pursuant
to Section 6.11(b) of the Merger Agreement.
New Grace Participant: any individual who is a New
Grace Employee or a beneficiary, dependent or Alternate Payee
of such an individual.
New Grace Ratio: the amount obtained by dividing (i)
the average of the arithmetic mean between the highest and low-
est sales prices of a share of Grace Common Stock on the New
York Stock Exchange Composite Tape on each of the five trading
days immediately preceding the ex-dividend date for the Distri-
bution by (ii) the average of the arithmetic mean between the
highest and lowest sales prices of a share of New Grace Common
Stock on the New York Stock Exchange Composite Tape on each of
the five trading days beginning on the ex-dividend date for the
Distribution.
Noninsured Foreign Pension Plan: a Foreign Plan that
is a defined benefit pension plan and is not an Insured Foreign
Plan, each Noninsured Foreign Pension Plan being identified as
such in the Packaging Business Disclosure Schedule to the
Merger Agreement.
Packco Benefit Plan: any Benefit Plan that is spon-
sored or maintained by a member of the Packco Group following
the Distribution Date.
Packco Employee: any Employee who is allocated to
the Packco Group pursuant to Section 2.01 of this Agreement or
who is hired by any member of the Packco Group pursuant to Sec-
tion 6.11(b) of the Merger Agreement.
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Packco Health Plan: the Blue Cross Blue Shield
Health Plan for Cryovac and Formpac Employees.
Packco Hourly Non-Union Retirement Plan: has the
meaning assigned to it in Section 4.01(d).
Packco Medical and Dependent Care Expense Plan: the
Health Care and Dependent Care Spending Account Plan for Cryo-
vac and Formpac Employees.
Packco Participant: any individual who is a Packco
Employee or a beneficiary, dependent or Alternate Payee of such
an individual.
Packco Savings Plan: a Qualified Plan designated by
Grace to receive a transfer of assets from the Hourly SIP
and/or the Salaried SIP pursuant to Section 4.02(b).
Pension Plan: any Benefit Plan that is an "employee
pension benefit plan" (within the meaning of section 3(2) of
ERISA), whether or not that Plan is a Qualified Plan.
Plan: any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock pur-
chase, stock option, stock ownership, stock appreciation
rights, phantom stock, company car, fringe benefit, leave of
absence, layoff, vacation, day or dependent care, legal ser-
vices, cafeteria, life, health, medical, accident, disability,
workman's compensation or other insurance, severance, separa-
tion or other employee benefit plan, practice, policy or other
arrangement of any kind (including, but not limited to, any
"employee benefit plan" (within the meaning of section 3(3) of
ERISA)).
Qualified Plan: any Benefit Plan that is an "em-
ployee pension benefit plan" (within the meaning of section
3(2) of ERISA) and which is intended to qualify under section
401(a) of the Code.
Salaried Retirement Plan: the W. R. Grace & Co. Re-
tirement Plan for Salaried Employees.
Salaried SIP: the W. R. Grace & Co. Salaried Employ-
ees Savings and Investment Plan.
Salary Protection Plan: the W.R. Grace & Co. Execu-
tive Salary Protection Plan.
Schurpack 401(k) Plan: the Schurpack Employees
401(k) Thrift Plan.
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SERP: the W. R. Grace & Co. Supplemental Executive
Retirement Plan.
Split Dollar Program: the W. R. Grace & Co. Execu-
tive Split Dollar Life Insurance Program.
Terminated Grace Employee: any individual who is, as
of the Distribution Date, a former Employee of any member of
the New Grace Group or the Packco Group.
Terminated Grace Participant: a Terminated Grace Em-
ployee or a beneficiary, dependent or Alternate Payee of a Ter-
minated Grace Employee.
Termination Benefits: has the meaning assigned to it
in Section 2.02(a) hereof.
Union Retirement Plan: the Retirement Plan of W. R.
Grace & Co.-Conn. Chemical Group (Cedar Rapids Plant).
U.S. Welfare Plan: a Welfare Plan other than a Wel-
fare Plan that is maintained outside of the United States pri-
marily for the benefit of individuals substantially all of whom
are nonresident aliens with respect to the United States.
Welfare Plan: any Benefit Plan that is an "employee
welfare benefit plan" (within the meaning of section 3(1) of
ERISA).
ARTICLE II
TRANSFER OF EMPLOYEES; TERMINATION BENEFITS
SECTION 2.01 Transfer of Employees. (a) Grace and
New Grace shall take all steps necessary or appropriate so that
all of the Employees of Grace and its subsidiaries are allo-
cated between the New Grace Group and the Packco Group in ac-
cordance with the principles set forth in the Section 2.01(b),
and so that each individual who is so allocated to the Packco
Group is, as of the Distribution Date, an Employee of a member
of the Packco Group, and each other individual who is, as of
the Distribution Date, an Employee of Grace or any of its Sub-
sidiaries is an Employee of a member of the New Grace Group.
(b) In making the allocation provided for in Section
2.01, Grace and New Grace shall allocate each Employee who is
exclusively employed in the Packaging Business to the Packco
Group and each Employee who is exclusively employed in the New
Grace Business to the New Grace Group. All other Employees
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shall be allocated in a mutually agreeable manner that, to the
extent possible, takes into account the Employees' expertise,
experience and existing positions and duties and does not un-
reasonably disrupt either the Packaging Business or the New
Grace Business and maximizes the ability of each of the Packco
Group and the New Grace Group to manage and operate their re-
spective businesses after the Distribution Date, taking into
account the respective needs of such businesses as established
by past practice.
SECTION 2.02 Change of Control Benefits; Termination
Benefits. (a) No New Grace Employee and no Packco Employee
shall be deemed, as a result of the steps called for by Section
2.01 or otherwise as a result of the consummation of the trans-
actions contemplated by the Distribution Agreement and the
Merger, to have become entitled to any benefits under any Ben-
efit Plan, contract, agreement, statute, regulation or other
arrangement that provides for the payment of severance pay,
salary continuation, pay in lieu of notice, unused vacation
pay, or similar benefits in connection with actual or construc-
tive termination or alleged actual or constructive termination
of employment (collectively, "Termination Benefits"). Without
limiting the generality of the foregoing, none of the transac-
tions contemplated by the Distribution Agreement and the Merger
Agreement constitute a "change in control" for purposes of any
Benefit Plan. Grace shall take all steps necessary and ap-
propriate so that any Change in Control Severance Agreement
between Grace and any Packco Employee terminates before the
Distribution Date.
(b) All Liabilities (other than for Severance Costs
as defined in Section 8.04 of the Distribution Agreement) re-
lating to or arising out of claims made by or on behalf of New
Grace Participants or Packco Participants for, or with respect
to, Termination Benefits relating to the actual or constructive
termination or alleged actual or constructive termination of
employment of any New Grace Employee or Packco Employee with
any member of the Packco Group or the New Grace Group, which
claims arise as a result of the consummation of the transac-
tions contemplated by the Distribution Agreement, shall be con-
sidered other Transaction Costs that are governed by clause
(ii) of the first sentence of Section 8.04 of the Distribution
Agreement.
(c) Except as specifically provided otherwise in
Section 2.02(b) above and in Section 8.04 of the Distribution
Agreement, effective as of the Distribution Date, the New Grace
Group shall assume or retain, as appropriate, all Liabilities
relating to or arising out of claims made by or on behalf of
New Grace Participants for, or with respect to, Termination
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Benefits relating to the actual or constructive termination or
alleged actual or constructive termination of employment of any
New Grace Employee with any member of the Packco Group or the
New Grace Group, whether before, on or after the Distribution
Date. In addition, the New Grace Group shall assume or retain,
as appropriate, all Liabilities (including with respect to
Packco Employees) pursuant to the Change in Control Severance
Plan and the Change in Control Severance Agreements.
(d) Except as specifically provided otherwise in
Sections 2.02(b) and (c) above and in Section 8.04 of the Dis-
tribution Agreement, effective as of the Distribution Date, the
Packco Group shall assume or retain, as appropriate, all Li-
abilities relating to or arising out of claims made by or on
behalf of Packco Participants for, or with respect to, Termina-
tion Benefits relating to the actual or constructive termina-
tion or alleged actual or constructive termination of employ-
ment of any Packco Employee with any member of the Packco Group
or the New Grace Group, whether before (in the case of con-
structive termination), on or after the Distribution Date.
ARTICLE III
INCENTIVE PLANS
SECTION 3.01 Grace LTIP. (a) The contingent awards
for Current Performance Periods held by New Grace Participants
and Packco Participants (such contingent awards, the "LTIP
Awards") under the Grace LTIP shall be adjusted and paid in
cash by New Grace in accordance with such methodology as New
Grace determines in its sole discretion.
(b) Effective as of the Distribution Date, the New
Grace Group shall assume or retain, as appropriate, all Li-
abilities relating to or arising out of awards payable under
the Grace LTIP.
SECTION 3.02 Grace Options. (a) New Grace shall
assume and adopt, effective as of the Distribution Date, each
of the Grace Stock Incentive Plans, with such changes as may be
necessary to reflect the change in the issuer of awards there-
under and such other changes as New Grace shall, in its sole
discretion, determine. As soon as practicable after and effec-
tive as of the Distribution Date, all Grace Options that are
then outstanding shall be adjusted or replaced as set forth in
this Section 3.02, or in such other manner as the parties
hereto shall agree.
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(b) Each such Grace Option that is held by a New
Grace Employee or a Terminated Grace Participant shall be re-
placed with an option (a "New Grace Option") to acquire a num-
ber of New Grace Common Shares that equals the number of shares
subject to such Grace Option immediately before such replace-
ment, times the New Grace Ratio (rounded up to the nearest
whole share), with a per-share exercise price that equals the
per-share exercise price of such Grace Option immediately be-
fore such replacement, divided by the New Grace Ratio (rounded
up to the nearest one hundredth of a cent). Each New Grace
Option shall otherwise have the same terms and conditions as
the Grace Option it replaces, except that references to employ-
ment by or termination of employment with Grace and its affili-
ates shall be changed to references to employment by or termi-
nation of employment with New Grace and its affiliates. Effec-
tive as of the Distribution Date, New Grace shall assume all
Liabilities relating to or arising under the New Grace Options
or the Grace Stock Incentive Plans.
(c) Each such Grace Option that is held by a Packco
Employee shall be adjusted so that the number of Newco Common
Shares subject to such Grace Option equals the number of shares
subject to such Grace Option immediately before such adjust-
ment, times the Newco Ratio (rounded down to the nearest whole
share), and the per-share exercise price equals the per-share
exercise price of such Grace Option immediately before such
adjustment, divided by the Newco Ratio (rounded up to the near-
est whole cent). Each Grace Option as so adjusted shall other-
wise have the same terms and conditions as were in effect be-
fore such adjustment. Effective as of the Distribution Date,
Grace shall retain all Liabilities relating to or arising under
the Grace Options held by Packco Employees.
SECTION 3.03 Annual Incentive Compensation Plan.
(a) New Grace shall pay, or cause to be paid by another member
of the New Grace Group, all bonuses earned by Packco Employees
and New Grace Employees for the 1997 calendar year under the
AICP, in accordance with the terms of the AICP as interpreted
by New Grace in its sole discretion. Effective as of the Dis-
tribution Date, the New Grace Group shall assume all Liabili-
ties relating to or arising under the AICP.
(b) Packco Employees shall not be eligible to earn
bonuses under the AICP for 1998 or any subsequent year. How-
ever, if the Distribution Date occurs later than March 31,
1998, then Grace and New Grace shall use reasonable best ef-
forts to develop and implement an annual incentive program for
Packco Employees, the cost of which will be shared between the
New Grace Group and the Packco Group in a manner relating to
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the relative portions of the 1998 calendar year that precede
and follow the Distribution Date.
ARTICLE IV
PENSION AND SAVINGS PLANS
SECTION 4.01 Retirement Plans and Supplemental Re-
tirement Plan. (a) Grace, New Grace and Grace-Conn. shall
take all steps necessary or appropriate so that, effective no
later than the Distribution Date: (i) one or more members of
the New Grace Group are the sole sponsors of the Salaried Re-
tirement Plan, the SERP and the Hourly Non-Union Retirement
Plan; and (ii) one or more members of the Packco Group are the
sole sponsors of the Union Retirement Plan. Such steps shall
include, without limitation, the appointment or reappointment
by New Grace (by action after the Distribution Date to approve
or ratify such appointment or reappointment) of all named fidu-
ciaries, trustees, custodians, recordkeepers and other fiducia-
ries and service providers to the Salaried Retirement Plan, the
SERP and the Hourly Non-Union Retirement Plan, and the appoint-
ment or reappointment by Grace of all named fiduciaries, trust-
ees, custodians, recordkeepers and other fiduciaries and ser-
vice providers to the Union Retirement Plan.
(b) Effective as of the Distribution Date, the
Packco Employees shall cease accruing benefits under the Sala-
ried Retirement Plan, the SERP and the Hourly Non-Union Retire-
ment Plan. As promptly as practicable following the Distribu-
tion Date, and effective as of the Distribution Date, Grace in-
tends to implement a program for Packco Employees who partici-
pated in the Salaried Retirement Plan before the Distribution
Date designed to substantially make up for any anticipated ma-
terial adverse impact on them resulting from the termination of
such participation as of the Distribution Date. Such program
will assume that each such Packco Participant works as an em-
ployee until normal retirement (age 65) and that he or she will
achieve a reasonable investment return on his or her account in
the Sealed Air Corporation Profit Sharing Plan. Upon the
implementation of such program by Grace, New Grace shall (i)
cause the Salaried Retirement Plan to be amended so that, ef-
fective immediately before the Distribution Date: (A) the ac-
crued benefit of each Packco Employee who is a participant
therein is increased by crediting such Packco Employee with an
additional year of service; (B) the accrued benefit of each
such Packco Employee who is at least 40 years old as of the
Distribution Date is also increased by an amount equal to the
lesser of (x) 13 percent of the amount of such accrued benefit
(after giving effect to the increase described in clause (A) of
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this sentence) or (y) the increase that results from crediting
such Packco Employee with an additional four years of service,
and (C) the accrued benefits of all such Packco Employees, as
so increased, shall be fully vested as of the Distribution
Date; or (ii) provide additional retirement benefits to such
Packco Employees as a group having, in the aggregate, a value
substantially equivalent to the increased benefits described in
clause (i); provided, that the aggregate expense associated
with the benefits described in clause (i) or (ii) (as ap-
plicable) shall be limited to the extent necessary so that the
Accrued Benefit Obligation, calculated in accordance with FAS
87 ("ABO"), of such benefits does not exceed $15 million. Such
ABO shall be determined by Actuarial Sciences Associates
("ASA") in accordance with the actuarial assumptions set forth
in Schedule II hereto and in a manner consistent with past
practice with respect to the Salaried Retirement Plan.
(c) Effective as of the Distribution Date, the New
Grace Group shall assume or retain (as applicable) all Li-
abilities relating to or arising under the Salaried Retirement
Plan and the SERP, including without limitation for benefits
payable thereunder to Packco Participants. Effective as of the
Distribution Date, the Packco Group shall assume or retain (as
applicable) all Liabilities relating to or arising under the
Union Retirement Plan.
(d) (i) Effective immediately after the Effective
Time, Grace shall establish, cause to be established or desig-
nate a defined benefit pension plan (the "Packco Hourly Non-
Union Retirement Plan") to provide benefits and assume liabil-
ities and accept a transfer of assets from the Hourly Non-Union
Retirement Plan, as provided for in this Section 4.01(d).
(ii) As soon as practicable after the Effective
Time, following (A) the receipt by New Grace of a copy of a
favorable determination letter or Grace's certification to New
Grace, in a manner reasonably acceptable to New Grace, that the
Packco Hourly Non-Union Retirement Plan is qualified under Sec-
tion 401(a) of the Code and the related trust is exempt from
taxation under Section 501(a) of the Code, and (B) the receipt
by Grace of a copy of a favorable determination letter or New
Grace's certification to Grace, in a manner reasonably accept-
able to Grace, that the Hourly Non-Union Retirement Plan is
qualified under Section 401(a) of the Code and the related
trust is exempt from taxation under Section 501(a) of the Code,
New Grace shall direct the trustee of the trust funding the
Hourly Non-Union Retirement Plan to transfer to the trustee of
the trust established to fund the Packco Hourly Non-Union Re-
tirement Plan the amount described in Section 4.01(d)(iii) be-
low. Such transfer shall be in cash unless otherwise agreed by
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Grace and New Grace. As of the date of such transfer, and ef-
fective immediately after the Effective Time, the Packco Group
and the Packco Hourly Non-Union Retirement Plan shall assume
all Liabilities for benefits payable to Packco Participants
under the Hourly Non-Union Retirement Plan, and the New Grace
Group and the Hourly Non-Union Retirement Plan shall retain no
Liabilities for such benefits.
(iii) The amount transferred pursuant to this
Section 4.01(d) shall be an amount equal to (A) less (B), as
adjusted by (C); where (A) equals a portion of the assets of
the Hourly Non-Union Retirement Plan having a fair market value
equal to the ABO as of the Distribution Date attributable to
Packco Participants; where (B) equals the aggregate payments
made from the trust funding the Hourly Non-Union Retirement
Plan in respect of Packco Participants from the Effective Time
through the date the transfer occurs; and where (C) equals the
amount of the net earnings or losses, as the case may be, from
the Effective Time through the date the transfer occurs, on the
average of the daily balances of the foregoing and based upon
the actual rate of return earned by the Hourly Non-Union Re-
tirement Plan during such period. All of the foregoing calcu-
lations shall be made by ASA in accordance with the assumptions
set forth on Schedule III hereto. Grace shall be entitled to
review and comment on such calculations as ASA is in the pro-
cess of performing them. Notwithstanding the foregoing, how-
ever, in no event shall the amount so transferred be less than
the amount necessary to comply with, nor more than the maximum
amount permitted by, Section 414(l) of the Code and the reg-
ulations promulgated thereunder, as determined by ASA.
(iv) Grace, New Grace and Grace-Conn. shall, in
connection with the transfer described in this Section 4.01(d),
cooperate in making any and all appropriate filings required
under the Code or ERISA, and the regulations thereunder and any
applicable securities laws, and take all such action as may be
necessary and appropriate to cause such transfers to take place
as soon as practicable after the Effective Time. New Grace and
Grace-Conn. agree, during the period ending with the date of
the transfer of assets to the Packco Hourly Non-Union Retire-
ment Plan, to cause distributions in respect of Packco Par-
ticipants to be made in the ordinary course from the Hourly
Non-Union Retirement Plan in accordance with applicable law and
pursuant to plan provisions.
SECTION 4.02 Savings Plans. (a) Grace, New Grace
and Grace-Conn. shall take all steps necessary or appropriate
so that, effective no later than the Distribution Date: (i)
one or more members of the New Grace Group are the sole spon-
sors of the Hourly SIP and the Salaried SIP; and (ii) one or
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more members of the Packco Group are the sole sponsors of the
Cypress 401(k) Plans and the Schurpack 401(k) Plan. Effective
as of the Distribution Date, the Packco Group shall assume all
Liabilities relating to or arising under the Cypress 401(k)
Plans and the Schurpack 401(k) Plan. Such steps shall include,
without limitation, the appointment or reappointment by New
Grace (by action after the Distribution Date to approve or
ratify such appointment or reappointment) of all named fiducia-
ries, trustees, custodians, recordkeepers and other fiduciaries
and service providers to the Hourly SIP and the Salaried SIP,
and the appointment or reappointment by Grace of all named fi-
duciaries, trustees, custodians, recordkeepers and other fidu-
ciaries and service providers to the Cypress 401(k) Plans and
the Schurpack 401(k) Plan.
(b) Each of the transfers provided for in this Sec-
tion 4.02(b) shall be implemented only if both Grace and New
Grace so agree after the Distribution Date.
(i) Grace, New Grace and Grace-Conn. shall take
all steps necessary or appropriate in order to transfer to a
Packco Savings Plan and the related trust, as soon as practi-
cable after the Effective Time, all account balances (including
the pre-tax, after-tax and rollover account balances) under
each of the Hourly SIP and the Salaried SIP of all Packco Par-
ticipants. Such assets shall be transferred in kind, to the
extent elected by New Grace with the consent of Grace (which
consent shall not be unreasonably withheld), and otherwise
shall be made in cash; provided, that in any event, unless the
parties agree otherwise, any outstanding participant loans and
FMC American Depositary Receipts shall be transferred in kind.
It is the intention of Grace, New Grace and Grace-Conn. to
carry out such transfer so as to preserve, to the extent prac-
ticable, the investment elections of participants as in effect
immediately before the transfer, unless the parties agree oth-
erwise.
(ii) Grace, New Grace and Grace-Conn. shall co-
operate in making all appropriate filings required under the
Code or ERISA, and the regulations thereunder and any applica-
ble securities laws, implementing all appropriate communica-
tions with participants, maintaining and transferring appro-
priate records, and taking all such other actions as may be
necessary and appropriate to implement the provisions of this
Section 4.02(b) and to cause the transfers of assets pursuant
to this Section 4.02(b) to take place as soon as practicable
after the Effective Time; provided, that each of such transfers
shall take place only after (A) the receipt by New Grace of a
favorable determination letter or Grace's certification, in a
manner reasonably acceptable to New Grace, that the relevant
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Packco Savings Plan is qualified under Section 401(a) of the
Code and the related trust is exempt from taxation under Sec-
tion 501(a) of the Code, and (B) the receipt by Grace of a fa-
vorable determination letter or New Grace's certification, in a
manner reasonably acceptable to Grace, that the Hourly SIP or
the Salaried SIP, as applicable, is qualified under Section
401(a) of the Code and the related trust is exempt from taxa-
tion under Section 501(a) of the Code.
(c) If Grace and New Grace agree to implement the
transfers provided for in Section 4.02(b), subject to the com-
pletion of such transfer and effective as of the Distribution
Date, the members of the Packco Group and the SAC Savings Plan
shall assume all Liabilities to or relating to Packco Partici-
pants relating to or arising under the Hourly SIP and the Sala-
ried SIP. Effective as of the Distribution Date, the New Grace
Group shall assume or retain (as applicable) all Liabilities
relating to or arising under the Hourly SIP and the Salaried
SIP, including without limitation for benefits payable thereun-
der to Packco Participants, that are not assumed by the Packco
Group and the relevant Packco Savings Plan pursuant to the pre-
ceding sentence.
SECTION 4.03 Qualification of Plans. The New Grace
Group shall be responsible for all Liabilities incurred by the
Packco Group as a result of the failure of any of the Hourly
Non-Union Retirement Plan, the Union Retirement Plan, the
Hourly SIP, the Salaried SIP, the Cypress 401(k) Plans or the
Schurpack 401(k) Plan to be qualified under Section 401(a) of
the Code on or before the date assets are transferred from such
Plan to a Packco Benefit Plan, or the date sponsorship of such
Plan is assumed by any member of the Packco Group, as ap-
plicable. The Packco Group shall be responsible for all Li-
abilities incurred by the New Grace Group as a result of the
failure of the Packco Hourly Non-Union Retirement Plan or any
Packco Savings Plan to be qualified under Section 401(a) of the
Code on or before the date assets are transferred to such Plan
from a New Grace Benefit Plan. The parties hereto agree that
to the extent any of them becomes aware that any such Plan
fails or may fail to be so qualified, it shall notify the other
parties and the parties shall cooperate and use best efforts to
avoid such disqualification, including using the Internal Rev-
enue Service's Voluntary Compliance Resolution program or simi-
lar programs, and taking any steps available pursuant to such
program to avoid disqualification, as determined by the party
who is made responsible under this Section 4.03 for the Li-
abilities that would result from such disqualification (and the
Liabilities for which such party is responsible shall include
all costs and expenses resulting from such steps, including
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fines, penalties, contributions, attorneys' fees and expenses
and administrative expenses).
ARTICLE V
WELFARE AND OTHER BENEFITS
SECTION 5.01 Benefits for Active Employees. (a)
Grace, New Grace and Grace-Conn. shall take all steps necessary
or appropriate so that, effective no later than the Distribu-
tion Date, one or more members of the Packco Group are the sole
sponsors of the Packco Health Plan. Such steps shall include,
without limitation, the appointment or reappointment by Grace
of all named fiduciaries, trustees, custodians, recordkeepers
and other fiduciaries and service providers to the Packco
Health Plan, to the extent such appointments or reappointments
are necessary.
(b) Effective as of the Distribution Date, the New
Grace Group shall assume or retain (as applicable) all Liabil-
ities relating to or arising out of claims for benefits under
U.S. Welfare Plans by New Grace Participants and Terminated
Grace Participants, whenever such claims are incurred, and (ii)
by Packco Participants to the extent such claims are incurred
before the Distribution Date and reported within 365 days
thereafter. Effective as of the Distribution Date, the Packco
Group shall assume or retain (as applicable) all Liabilities
relating to or arising out of all other claims for benefits
under U.S. Welfare Plans by Packco Participants, except as spe-
cifically provided in Section 5.02.
SECTION 5.02 Retiree Welfare Benefits. Effective as
of the Distribution Date, the New Grace Group shall assume all
Liabilities for providing post-retirement medical and life in-
surance benefits under U.S. Welfare Plans sponsored by Grace or
any of its subsidiaries before the Distribution Date or any
members of the New Grace Group on or after the Distribution
Date, to: (i) Terminated Grace Participants; (ii) Packco Par-
ticipants who would have been eligible to receive such benefits
if they had retired at any time on or before the first anniver-
sary of the Distribution Date (regardless of when they actually
do retire); and (iii) any New Grace Participants who become
eligible for such benefits after the Distribution Date pursuant
to the Grace Severance Pay Plan as a result of a termination of
employment as of the Distribution Date. Effective as of the
Distribution Date, the Packco Group shall provide Packco Par-
ticipants who retire after the Distribution Date for whom the
New Grace has not assumed Liabilities for providing post-
retirement medical and life insurance benefits pursuant to the
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preceding sentence with such benefits pursuant to one or more
group insurance or group self-insured programs; provided, that
the Packco Group may require such Packco Participants to bear
the entire cost of such benefits, together with a reasonable
fee for their allocable share of the Packco Group's costs of
administering such programs.
SECTION 5.03 Severance. The Packco Group shall
adopt, effective as of the Distribution Date, and shall main-
tain in effect without amendment adverse to participants, at
least through the first anniversary of the Distribution Date, a
severance plan providing Packco Employees with severance ben-
efits as outlined in Exhibit A hereto.
SECTION 5.04 Split Dollar Plan; Deferred Compensa-
tion Plan; Salary Protection Plan. Effective as of the Distri-
bution Date, each Packco Employee who participates in the Split
Dollar Plan, the Deferred Compensation Plan or the Salary Pro-
tection Plan shall be treated as a terminated participant under
such Plan, and shall have the same options with respect to such
Plan as are available to any other participant in such Plan
upon termination of employment, in accordance with the terms of
such Plan as in effect immediately before the Distribution
Date. Effective as of the Distribution Date, the New Grace
Group shall assume all Liabilities relating to or arising under
the Split Dollar Plan, the Deferred Compensation Plan and the
Salary Protection Plan.
SECTION 5.05 Dependent Care and Medical Expense
Plans. (a) Grace, New Grace and Grace-Conn. shall take all
steps necessary or appropriate so that, effective no later than
the Distribution Date, one or more members of the New Grace
Group are the sole sponsors of the Grace Dependent Care Plan
and the Grace Medical Expense Plan, and the New Grace Group
shall assume all Liabilities under such Plans. Such steps
shall include, without limitation, the appointment or reap-
pointment by New Grace (by action after the Distribution Date
to approve or ratify such appointment or reappointment) of all
named fiduciaries, trustees, custodians, recordkeepers and
other fiduciaries and service providers to such Plans, to the
extent such appointments or reappointments are necessary.
(b) Grace, New Grace and Grace-Conn. shall take all
steps necessary or appropriate so that, effective no later than
the Distribution Date, one or more members of the Packco Group
are the sole sponsors of the Packco Medical and Dependent Care
Expense Plan, and the Packco Group shall assume all Liabilities
under such Plan. Such steps shall include, without limitation,
the appointment or reappointment by Grace of all named fiducia-
ries, trustees, custodians, recordkeepers and other fiduciaries
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and service providers to such Plan, to the extent such appoint-
ments or reappointments are necessary. No employer contribu-
tions to such Plan shall be made or promised with respect to
the 1998 plan year unless the parties otherwise agree.
ARTICLE VI
NON-U.S. PLANS
SECTION 6.01 Non-U.S. Plans Generally. As soon as
practicable after the date of this Agreement, the parties here-
to shall enter into one or more agreements or memoranda of un-
derstanding (collectively, the "Foreign Plans Agreement") re-
garding the treatment and allocation of Liabilities relating to
or arising under Benefit Plans (the "Foreign Plans") for Em-
ployees located outside the United States, including without
limitation expatriates, and to expatriate employees located in
the United States. The Foreign Plans Agreement shall provide
for the treatment of each Foreign Plan, which treatment may
include (without limitation) (i) the retention or assumption of
such Foreign Plan by the Packco Group, (ii) the retention or
assumption of such Foreign Plan by the New Grace Group, or
(iii) an allocation of the liabilities and assets (if any) of
the Foreign Plan between a Plan (which may include the Foreign
Plan) that is intended to be maintained by the New Grace Group
and a Plan (which may include the Foreign Plan) that is in-
tended to be maintained by the Packco Group, after the Distri-
bution Date; provided, that the insurance contracts funding
each Insured Foreign Pension Plan (and any assets related
thereto) shall be divided between the appropriate Packco Ben-
efit Plan and New Grace Benefit Plan by the insurer in accor-
dance with applicable law, regulation and practice. Any trans-
fers of assets or liabilities from a Noninsured Foreign Pension
Plan shall be made on the basis of reasonable methods and as-
sumptions determined by the local actuarial firm that is, as of
the date of this Agreement, serving as the actuary for such
Noninsured Foreign Pension Plan (or another actuarial firm if
the parties hereto so agree) (the "Local Actuary"), in ac-
cordance with applicable legal and regulatory requirements,
local practice and the past practice of Grace; provided, that
each of Grace, Grace-Conn. and New Grace shall be entitled to
review such methods and assumptions and object to them if they
are unreasonable, and to review all calculations and determina-
tions of the Local Actuary for accuracy. It is the intention
of the parties hereto that the Packco Group will assume or re-
tain Liabilities for Packco Employees under Foreign Plans and
that to the extent permitted and practicable under legal and
regulatory requirements and local practice, assets transferred
from Noninsured Foreign Pension Plans pursuant to the Foreign
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Plans Agreement shall equal the Projected Benefit Obligation,
calculated in accordance with FAS 87, for the liabilities as-
sumed by Packco Benefit Plans pursuant to the Foreign Plans
Agreement.
ARTICLE VII
GENERAL
SECTION 7.01 Preservation of Rights to Amend or Ter-
minate Plans and to Terminate or Change Terms of Employment.
No provision of this Agreement shall be construed as a limita-
tion on the rights of any member of the Packco Group or the New
Grace Group to amend or terminate any Benefit Plan or other
plan, program or arrangement relating to employees. No provi-
sion of this Agreement shall be construed to create a right in
any employee or former employee or beneficiary or dependent of
such employee or former employee under a Benefit Plan which
such employee or former employee or beneficiary would not oth-
erwise have under the terms of the Benefit Plan itself. Noth-
ing contained in this Agreement shall confer upon any indi-
vidual the right to remain an employee of any member of the
Packco Group or the New Grace Group or restrain any member of
the Packco Group or the New Grace Group from changing the terms
and conditions of employment of any individual at any time fol-
lowing the Distribution Date, except as provided in Section
5.03 of this Agreement.
SECTION 7.02 Other Liabilities; Guarantee of Obliga-
tions. Effective as of the Distribution Date, the New Grace
Group shall assume or retain (as applicable) all Liabilities
relating to or arising out of claims for compensation and ben-
efits made by or on behalf of any New Grace Participant, in-
cluding salary, wages, bonuses, incentive compensation, sever-
ance benefits, separation pay, accrued sick, holiday, vacation,
health, dental or retirement benefits, or other compensation
under applicable law or otherwise, relating to or arising out
of employment by Grace or any of its subsidiaries before the
Distribution Date or employment by any member of the New Grace
Group on or after the Distribution Date. Effective as of the
Distribution Date, the Packco Group shall assume or retain (as
applicable) responsibility for all Liabilities relating to or
arising out of claims for compensation and benefits made by or
on behalf of any Packco Participant, including salary, wages,
bonuses, incentive compensation, severance benefits, separation
pay, accrued sick, holiday, vacation, health, dental or re-
tirement benefits, or other compensation under applicable law
or otherwise, relating to or arising out of employment by Grace
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or any of its subsidiaries before the Distribution Date or em-
ployment by any member of the Packco Group on or after the Dis-
tribution Date. Notwithstanding the foregoing, this Section
7.02 shall not apply to any Liability that is specifically pro-
vided for elsewhere in this Agreement.
SECTION 7.03 Assumption of Plans; Termination of
Participation. Except as specifically provided otherwise in
this Agreement, Grace, New Grace and Grace-Conn. shall take all
steps necessary or appropriate so that, effective no later than
the Distribution Date, one or more members of the New Grace
Group are the sole sponsors of all Benefit Plans that are, as
of the date of this Agreement, sponsored by Grace, and the New
Grace Group shall assume or retain (as applicable) all Li-
abilities relating to or arising under such Benefit Plans.
Such steps shall include, without limitation and where ap-
propriate, the appointment or reappointment by New Grace (by
action after the Distribution Date to approve or ratify such
appointment or reappointment) of all named fiduciaries, trust-
ees, custodians, recordkeepers and other fiduciaries and ser-
vice providers to such Benefit Plans. Except as specifically
provided otherwise in this Agreement or in the agreement pro-
vided for in Section 6.01 of this Agreement, the accrual of
benefits by Packco Participants in any New Grace Benefit Plan
shall cease not later than the Distribution Date.
SECTION 7.04 Information. The parties hereto shall,
before the Distribution Date or as soon as practicable thereaf-
ter, provide each other with all information as may reasonably
be requested and necessary to administer each Benefit Plan ef-
fectively in compliance with applicable law. Such information
shall be provided in the form requested if, at the time of such
request, it exists in such form or can readily be converted to
such form. If a request would require a party providing infor-
mation to incur any expenses in order to receive advice from
any actuary, consultant or consulting firm, the information
need not be provided unless the requesting party reimburses the
party providing the information for all such expenses.
SECTION 7.05 Complete Agreement; Coordination with
Tax Sharing Agreement. (a) This Agreement, the Exhibits and
Schedules hereto and the agreements and other documents re-
ferred to herein, shall constitute the entire agreement between
the parties hereto with respect to the subject matter hereof
(other than the Distribution Agreement, the Merger Agreement
and the schedules and exhibits thereto) and shall supersede all
previous negotiations, commitments and writings with respect to
such subject matter.
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(b) This Agreement, and not the Tax Sharing Agree-
ment, constitutes the sole agreement of the parties regarding
responsibility for any excise taxes, penalties or similar lev-
ies that may be imposed by any taxing authority on, or with
respect to, any Benefit Plan, except as otherwise specifically
provided in the Tax Sharing Agreement with respect to payroll
taxes.
SECTION 7.06 Governing Law. This Agreement shall be
governed by and construed and enforced in accordance with the
laws of the State of Delaware (other than the laws regarding
choice of laws and conflict of laws that would apply the sub-
stantive laws of any other jurisdiction) as to all matters, in-
cluding matters of validity, construction, effect, performance
and remedies, except to the extent preempted by federal law.
SECTION 7.07 Notices. All notices, requests,
claims, demands and other communications hereunder shall be in
writing and shall be given as provided in the Distribution
Agreement.
SECTION 7.08 Successors and Assigns; No Third-Party
Beneficiaries. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties
hereto and their successors and permitted assigns, but neither
this Agreement nor any of the rights, interests and obligations
hereunder shall be assigned by any party hereto without the
prior written consent of the other party (which consent shall
not be unreasonably withheld). Without limiting the generality
of the foregoing, it is expressly acknowledged that at the Ef-
fective Time, the Certificate of Incorporation of Grace will be
amended (the "Newco Amendment") to change the name of Grace to
"Sealed Air Corporation" and that references herein to "Grace"
include, from and after the Effective Time, such corporation
(which is also referred to in the Merger Agreement as Newco).
Accordingly, to the extent this Agreement calls for the agree-
ment of "Grace" or of "the parties" from and after the Effec-
tive Time, the agreement of Newco (as defined in the Merger
Agreement) will be required. This Agreement is solely for the
benefit of the parties hereto and their Subsidiaries and is not
intended to confer, nor shall it confer, upon any other Persons
(including New Grace Participants and Packco Participants) any
rights or remedies hereunder.
SECTION 7.09 Amendment and Modification. This
Agreement may be amended, modified or supplemented only by a
written agreement signed by all of the parties hereto.
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SECTION 7.10 Counterparts. This Agreement may be
executed in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
SECTION 7.11 Interpretation. The Article and Sec-
tion headings contained in this Agreement are solely for the
purpose of reference, are not part of the agreement of the par-
ties hereto and shall not in any way affect the meaning or in-
terpretation of this Agreement.
SECTION 7.12 Indemnity Procedures. The provisions
of Article IV of the Distribution Agreement shall apply with
respect to Liabilities allocated under this Agreement.
SECTION 7.13 Severability. If any provision of this
Agreement or the application thereof to any person or circum-
stance is determined by a court of competent jurisdiction to be
invalid, void or unenforceable, the remaining provisions here-
of, or the application of such provision to persons or circum-
stances other than those as to which it has been held invalid
or unenforceable, shall remain in full force and effect and
shall in no way be affected, impaired or invalidated thereby,
so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to
any party.
SECTION 7.14 References; Construction. References
to any "Article," "Exhibit," "Schedule" or "Section," without
more, are to Articles, Exhibits, Schedules and Sections to or
of this Agreement. Unless otherwise expressly stated, clauses
beginning with the term "including" set forth examples only and
in no way limit the generality of the matters thus exemplified.
SECTION 7.15 SAC Reasonable Consent. The parties
hereto agree that any actions to be taken by Grace, Grace-Conn.
or New Grace to implement the terms of this Agreement that are
not specifically required herein that relate to Packco or the
Packaging Business, and any actions that are to be taken pursu-
ant to this Agreement only by agreement of the parties, must be
reasonably satisfactory to SAC.
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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:
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