EXHIBIT 10.2
FORM OF TAX SHARING AGREEMENT
This TAX SHARING AGREEMENT (this "Agreement"), dated as
of __________, 1997, by and among W. R. Grace & Co., a Delaware
corporation ("Grace"), W. R. Grace & Co.-Conn., a Connecticut
corporation and a wholly owned subsidiary of Grace ("Grace-
Conn."), and Sealed Air Corporation, a Delaware corporation
("Sealed Air").
RECITALS
WHEREAS, Grace, Packco Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Grace, and Sealed
Air have entered into an Agreement and Plan of Merger (the
"Merger Agreement");
WHEREAS, Grace, Grace-Conn. and Grace Specialty
Chemicals, Inc., a Delaware corporation and a wholly owned
subsidiary of Grace ("New Grace"), have entered into the
Distribution Agreement;
AND WHEREAS, Grace, on behalf of itself and the Packco
Group, and Grace-Conn., on behalf of itself and the New Grace
Group, wish to provide for the allocation between the Packco
Group and the New Grace Group of all responsibilities,
liabilities and benefits relating to or affecting Taxes (as
hereinafter defined) paid or payable by either of them for all
taxable periods, whether beginning before, on or after the
Distribution Date (as hereinafter defined) and to provide for
certain other matters.
NOW, THEREFORE, in consideration of the premises, and
of the representations, warranties, covenants and agreements set
forth herein, the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
Capitalized terms used but not defined herein shall
have the respective meanings assigned to them in the Distribution
Agreement or the Merger Agreement. As used in this Agreement,
the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and the
plural forms of the terms defined):
"Action": as defined in Section 5.3(a).
"Active New Grace Businesses": as defined in Section
5.2(b).
"Active Packo Business": as defined in Section 5.1(b).
"Adjusted Item": as defined in Section 3.2(a)(v).
"Adjusted Party" means the party for the account of
which is an Adjusted Item.
"Affiliated Group" means the affiliated group of which
Grace is the common parent or any predecessor or successor
thereto.
"Code" means the Internal Revenue Code of 1986, as
amended, and shall include corresponding provisions of any
subsequently enacted federal tax laws.
"Conn Prepared Returns": as defined in Section 2.2(a).
"Conn Prior Payments": as defined in Section
3.2(c)(iii).
"Consistency/Basis Disagreement": as defined in
Section 2.2(b).
"Corresponding Item": as defined in Section 3.2(a)(v).
"Corresponding Party" means the party for the account
of which is a Corresponding Item.
"Del Prepared Returns": as defined in Section 2.2(a).
"Discontinued Businesses": shall mean (x) the can
sealing and coating portion of the New Grace Business which
portion is described in the proviso to the definition of the
Packaging Business and (y) certain other businesses currently
accounted for as discontinued operations.
"Distribution Date" means the date on which the
Distribution occurs. For purposes of this Agreement, the
Distribution shall be deemed effective as of the close of
business on the Distribution Date.
"Equity Securities" means any stock or other equity
securities treated as stock for tax purposes, or options,
warrants, rights, convertible debt, or any other instrument or
security that affords any Person the right, whether conditional
or otherwise, to acquire stock.
"Final Determination" means the final resolution of
liability for any Tax for a taxable period (i) by a duly executed
IRS Form 870 or 870-AD (or any successor forms thereto), on the
date such Form is effective, or by a comparable form under the
laws of other jurisdictions; except that a Form 870 or 870-AD or
comparable form that reserves (whether by its terms or by
operation of law) the right of the taxpayer to file a claim for
refund and/or the right of the taxing authority to assert a
further deficiency shall not constitute a Final Determination
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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
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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.
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"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,
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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
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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
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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,
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of the Tax or Hypothetical Pre-Distribution Tax, as the case may
be, if any, reflected in the Pre-Distribution Schedule relating
to such Tax Return attributable to the member or members of the
New Grace Group or the Packco Group included in such Return.
Such payment shall be made, at Grace-Conn.'s discretion, either
in immediately available funds on the morning of the relevant
date when payment is due to the governmental authority in respect
of such Tax Return or, if not in immediately available funds, two
business days prior to such due date. Grace shall forward any
such payment that it receives from Grace-Conn. to the appropriate
taxing authority.
(ii) in the case of Del Prepared Returns for any
taxable period, on the relevant date on which payment is due (or
a refund is received) in respect of such Tax Return, Grace shall
pay Grace-Conn. the amount, if any, of the actual reduction in
Taxes, or the actual increase in the Tax refund, that would have
been payable or receivable with respect to such Tax Return but
for any Overall Tax Benefit (or Hypothetical Pre-Distribution Tax
Benefit) that is for the account of Grace-Conn. under Section
3.2(a)(iii), below. In the case of a payment by Grace in respect
of a reduction in Taxes, such payment shall be made in
immediately available funds on the morning of the relevant due
date or, if not in immediately available funds, two business days
prior to the due date.
(iii) the parties intend that, in implementing
this Section 3.1(a), payment and reimbursement between the
parties shall reflect the principles of Section 3.2(a).
(b) Notwithstanding anything to the contrary, any Tax
Item resulting from any act or omission not in the ordinary
course of business (other than transactions contemplated by this
Agreement, the Distribution Agreement, the Merger Agreement or
the Benefits Agreement) on the part of any member of the Packco
Group or any of the Sealed Air Parties occurring on the
Distribution Date after the Effective Time shall be deemed to
arise in a taxable period which begins after the Distribution
Date.
Section 3.2. Indemnities; Redetermined Tax
Liabilities. Except as otherwise provided in Article V:
(a) Indemnities.
(i) Grace-Conn. shall be responsible for (w) any
Tax for a Pre-Distribution Taxable Period (and any Hypothetical
Pre-Distribution Tax for a Straddle Period) of Grace, Grace-
Conn., Packco, any Foreign New Grace Subsidiary, any current or
former member of the Affiliated Group which was a member prior to
the Distribution Date or any current or former member of the
affiliated group for United States federal income tax purposes of
which W. R. Grace & Co., a New York corporation,
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was the common parent, (x) any Tax for a Pre-Distribution Taxable
Period (and any Hypothetical Pre-Distribution Tax for a Straddle
Period) of a Foreign Packco Subsidiary attributable to the
Packaging Business reflected on a Tax Return filed by such
Subsidiary on or before the Distribution Date or on a Pre-
Distribution Schedule, (y) any Tax of any member of the New Grace
Group or a Foreign Packco Subsidiary, in either case, to the
extent attributable to the New Grace Business and (z) 75% (or if
the Packco Group has borne an amount of Tax in respect of
adjustments to Foreign Packco Tax Items (and fees and expenses in
Proceedings relating to such adjustments) that exceeds the
Foreign Cap, then 100%) of any increase in Tax of a member of the
Packco Group attributable to an adjustment to a Foreign Packco
Tax Item.
(ii) Grace shall be responsible for any Taxes (x)
of any member of the Packco Group or otherwise relating to the
Packaging Business or the Packaging Assets (except to the extent
that Grace-Conn. is responsible for such Taxes pursuant to clause
(i) above) and (y) of any of the Sealed Air Parties, whether
arising before, on or after the Distribution Date.
(iii) Any Overall Tax Benefit (or Hypothetical
Pre-Distribution Overall Tax Benefit) shall be for the account of
Grace-Conn. to the extent that such Overall Tax Benefit (or
Hypothetical Pre-Distribution Overall Tax Benefit) is
attributable to (w) Grace, Grace-Conn., Packco, any Foreign New
Grace Subsidiary, any current or former member of the Affiliated
Group which was a member prior to the Distribution Date or any
current or former member of the affiliated group for United
States federal income tax purposes of which W. R. Grace & Co., a
New York corporation, was the common parent, in each case, for
the Pre-Distribution Period, (x) the Packaging Business of a
Foreign Packco Subsidiary for the Pre-Distribution Period
reflected on a Tax Return filed by such Subsidiary on or before
the Distribution Date or on a Pre-Distribution Schedule (other
than the Foreign NOLs), (y) a Pre-Distribution Period of any
member of the New Grace Group or a Foreign Packco Subsidiary, in
either case, to the extent attributable to the New Grace Business
(other than the Foreign NOLs) or (z) any adjustment to a Foreign
Packco Tax Item.
(iv) For purposes of determining the amount for
which Grace or Grace-Conn. is responsible for paying the other
party, or entitled to receive from the other party, in the event
of any adjustment, including a Final Determination, of a Tax Item
of a Foreign Packaging Subsidiary (other than a Tax Item that
arises as a result of a Foreign Transfer), Tax Items that are
clearly attributable to the Packaging Business or the New Grace
Business, respectively, shall be allocated to such Business and
Tax Items that are not so attributable shall be allocated in the
proportion that the earnings from operations of such Business
operated by such Subsidiary bears to the total earnings from
operations of such Subsidiary, as reflected in audited financial
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statements for the most recent, as of the end of such taxable
period, full-year accounting period. Tax Items so allocated
shall be treated for all purposes of this Agreement as
attributable to the Business to which they are allocated.
(v) Timing Adjustments. In the event of any
adjustment, including a Final Determination, of a Tax Item (the
"Adjusted Item") which results in a Tax Benefit or Tax Detriment
for the account of one party and a corresponding Tax Detriment or
Tax Benefit (the "Corresponding Item") for the account of the
other party, then (I) if the Corresponding Item is a Tax Benefit,
the Corresponding Party shall pay the Adjusted Party and (II) if
the Corresponding Item is a Tax Detriment, the Adjusted Party
shall pay the Corresponding Party, in either case, for each
taxable period in which a member of the Group of the party
entitled to payment under this Section 3.2(a)(v) actually
realizes the Tax Benefit, in the case of (I), or the Tax
Detriment, in the case of (II), by reason of the adjustment, an
amount equal to such realized Tax Benefit, in the case of (I), or
realized Tax Detriment, in the case of (II), including interest
(computed at a 5% annual rate) from the original due date
(without extensions) for filing of the Return for such taxable
period through the date of payment under this Section 3.2(a)(v).
(b) Final Determinations. In the case of any Final
Determination regarding a Tax Return, any Tax Deficiency shall be
paid to the appropriate taxing authority by, and any Tax Refund
received from the appropriate taxing authority shall be paid to,
the party which filed such Return; provided, however, that
whether or not there is a Tax Deficiency or Tax Refund and
whether or not a payment is required to or from the appropriate
taxing authority, Grace shall make payments to, or receive
payments from, Grace-Conn. based upon the following principles:
(i) Grace-Conn. shall make a payment to Grace in
an amount equal to (x) any increase in the Tax of any of the
Sealed Air Parties or any member of the Packco Group resulting
from any adjustment to a New Grace Tax Item and (y) 75% (or, if
the Packco Group has borne an amount of Tax in respect of
adjustments to Foreign Packco Tax Items (and fees and expenses in
Proceedings relating to such adjustments) that exceeds the
Foreign Cap, then 100%) of any increase in the Tax of any of the
Sealed Air Parties or any member of the Packco Group resulting
from any adjustment to a Foreign Packco Tax Item, in either case
(x) or (y), together with any Interest relating thereto that is
or has been imposed by the relevant taxing authority (or would
have been imposed but for an offsetting Packaging Tax Item).
(ii) Grace shall pay to Grace-Conn. an amount
equal to (x) any decrease in the Tax of any of the Sealed Air
Parties or any member of the Packco Group resulting from any
adjustment to a New Grace Tax Item and (y) any decrease in the
Tax of any of the Sealed Air Parties or any member of the Packco
Group resulting from any adjustment to a Foreign Packco Tax Item,
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in either case (x) or (y), together with any Interest relating
thereto that is or has been paid by the relevant taxing authority
(or would have been paid but for an offsetting Packaging Tax
Item).
(iii) The parties intend that, in implementing
this Section 3.2(b), payment and reimbursement between the
parties shall reflect the principles of Section 3.2(a).
(iv) Payments otherwise required to be made under
this Section 3.2(b) with respect to a single Final Determination
shall be netted and offset against each other so that either
Grace shall make a payment to Grace-Conn. or Grace-Conn. shall
make a payment to Grace, but not both.
(c) Calculation and Payment of Amounts.
(i) All calculations and determinations required
to be made pursuant to this Article III shall initially be made
by the party obligated to make such payment (the "Payor") in its
good faith. If the party entitled to receive a payment (the
"Payee") so requests, the Payor shall present its calculations
and determinations to the Payee in writing. The Payee shall be
deemed to consent to such calculations and determinations unless
the Payee notifies the Payor in writing within 30 days of
receiving such calculations and determinations. If the Payee
disagrees with the Payor's calculations and determinations, the
parties shall attempt in good faith mutually to resolve the
disagreement. In the event that they cannot so resolve the
disagreement, it shall be resolved promptly pursuant to Section
6.7 hereof.
(ii) For all tax purposes, the parties hereto
agree to treat, and to cause their respect affiliates to treat,
(x) any payment required to be paid to a member of the other
Group by this Agreement as an adjustment to the portion of the
New Grace Capital Contribution that is contributed from Grace to
New Grace and (ii) any payment of interest or Taxes (other than
U.S. Federal income taxes) by or to a taxing authority as taxable
or deductible, as the case may be, to the party entitled under
this Agreement to retain such payment or required under this
Agreement to make such payment, in either case except as
otherwise mandated by the law or a Final Determination. In the
event of such a Final Determination, the payment in question
shall be adjusted to place the parties in the same after-tax
position that they would have enjoyed absent such Final
Determination. Any payment required by this Agreement that is
not made on or before the date required hereunder shall bear
interest, from and after such date through the date of payment,
at the appropriate market interest rate.
(iii) Payment of any amount required to be made
pursuant to this Article III as a result of a Final
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Determination shall become due and payable after such Final
Determination has been made within ten business days of the
receipt of written notice from the party entitled to receive such
payment to the party required to make such payment. Any amounts
required to be paid in respect of Taxes or Overall Tax Benefits
pursuant to this Article III shall be adjusted to avoid
duplication of payments and to take into account the sum of any
payments previously made by any member of the Packco Group on or
prior to the Distribution Date or by Grace-Conn. or any other
member of the New Grace Group at any time in respect of such
Taxes or Overall Tax Benefits (the "Conn Prior Payments") and the
sum of any payments previously made by any member of the Packco
Group after the Distribution Date in respect of such Taxes or
Overall Tax Benefits (the "Packco Prior Payments"). Appropriate
payments will be made between the parties in the event that the
Conn Prior Payments or the Packco Prior Payments, respectively,
exceed the amounts for which Grace-Conn. or Packco, respectively,
is responsible under the principles of Section 3.2(a).
(d) Other Tax Liabilities and Refunds. Any Tax or Tax
refund that is not otherwise covered by Section 3.1 or 3.2(b)
shall be allocated, and payment shall be made by Grace-Conn. or
Grace, using the principles of Sections 3.2(a); provided,
however, that any Tax refund (whether or not governed by Section
3.1 or 3.2(b)) arising as a result of an adjustment of a Foreign
Packco Tax Item shall be allocated in the same manner and to the
same extent as Taxes and expenses in respect of adjustments of
Foreign Packco Tax Items have been borne (it being agreed and
understood that to the extent that the Foreign Cap has been
exceeded, such refund shall be entirely for the benefit of Grace-
Conn. and to the extent that refunds are shared 75% by Grace-
Conn. and 25% by Grace the Foreign Cap shall be increased by the
amount refunded to Grace). Any Tax refund received by one party
that is for the account of the other party shall be paid to such
other party promptly upon receipt thereof. Any Tax paid by one
party that is the responsibility of the other party shall be
reimbursed promptly by the other party.
Section 3.3. Carrybacks and Refund Claims. (a) Any
Tax refund resulting from the carryback by any member of the New
Grace Group of any Tax Item arising after the Distribution Date
to a Pre-Distribution Taxable Period or a Straddle Period shall
be for the account of Grace-Conn., and Grace shall promptly pay
over to Grace-Conn. any such Tax refund that it receives. In the
event that a member of the New Grace Group, on the one hand, and
a member of the Packco Group or a Sealed Air Party, on the other
hand, are each entitled to carryback a Tax Item to a Pre-
Distribution Taxable Period or a Straddle Period, the respective
Tax Items shall be utilized under the rules of applicable law
(which shall be, in the case of carrybacks to such periods of the
Affiliated Group and carrybacks under foreign or State law with
respect to which there is no applicable rule regarding the
priority of such utilization, the rules contained in Treasury
Regulation Section 1.1502-21T). Any election affecting the
carryback
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or carryforward of any Tax Item of any member of the New Grace
Group, or a payment to or by such a member under this Agreement
in respect of a carryback or carryforward, including the
elections under Section 172(b)(3) of the Code and Treasury
Regulation Sections 1.1502-21T(b)(3) and 1.172-13(c) with respect
to the taxable years of the Affiliated Group that begin on each
of January 1, 1997, and January 1, 1998, shall not be made
without the consent of Grace-Conn. and shall be made if Grace-
Conn. so requests.
(b) Grace-Conn. shall be permitted to file, and Grace
shall fully cooperate with Grace-Conn. in connection with, any
refund claim. To the extent that such a refund claim (other than
a claim arising from a carryback) does not result in a Tax refund
(or would not result in a refund if a claim were filed) as the
result of an offsetting Packaging Tax Item (including a Packaging
Tax Item carried back to a Pre-Distribution Taxable Period or a
Straddle Period), Grace shall remit to Grace-Conn. the amount of
any decrease in Tax that results or would have resulted from such
refund claim.
Section 3.4. Liability for Taxes with Respect to Post-
Distribution Periods. Unless otherwise specifically provided in
this Agreement or the Distribution Agreement, the New Grace Group
shall pay all Taxes and shall be entitled to receive and retain
all refunds of Taxes with respect to periods beginning after the
Distribution Date which are attributable to the New Grace
Business. Unless otherwise provided in this Agreement, the
Packco Group shall pay all Taxes and shall be entitled to receive
and retain all refunds of Taxes with respect to periods beginning
after the Distribution Date which are attributable to the
Packaging Business.
ARTICLE IV.
INDEMNITY, COOPERATION AND EXCHANGE OF INFORMATION
Section 4.1. Breach. Grace-Conn. shall be liable for
and shall indemnify, defend and hold harmless the Packco
Indemnitees from and against, and Grace shall be liable for and
shall indemnify, defend and hold harmless the New Grace
Indemnitees from and against, any payment required to be made as
a result of the breach by a member of the New Grace Group or the
Packco Group, respectively, of any obligation under this
Agreement. If any member of the Packco Group or the New Grace
Group, fails to comply in any respect whatsoever with any of its
responsibilities under this Agreement relating to promptly
forwarding to any member of the other Group (the "Recipient
Group") any communications with and refunds received from any
taxing authority ("Forwarding Responsibilities"), then Grace or
Grace-Conn., as the case may be, (the "Forwarding Party") shall
be liable for and shall indemnify and hold the New Grace
Indemnitees or the Packco Indemnitees, as the case may be,
harmless from and against any costs or expenses (including,
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without limitation, Taxes and reasonably incurred lawyers' and
accountants' fees) ("Indemnified Amount") incurred by or imposed
upon any member of the Recipient Group arising out of, in
connection with or relating to such communication; provided,
however, that the liability of the Forwarding Party with respect
to any one such failure shall be equal to that portion of the
Indemnified Amount that a member of the Recipient Group
demonstrates is caused (directly or indirectly) by such failure.
Section 4.2. Contests. (a) Whenever a party hereto
(the "Indemnitee") becomes aware of the existence of an issue
that could increase the liability for any Tax, or decrease the
amount of any refund, of the other party hereto or any member of
its Group or require a payment hereunder (an "Indemnity Issue"),
the Indemnitee shall in good faith promptly give notice to such
other party (the "Indemnitor") of such Indemnity Issue. The
failure of any Indemnitee to give such notice shall not relieve
any Indemnitor of its obligations under this Agreement, except to
the extent that such Indemnitor or its affiliate is actually
materially prejudiced by such failure to give notice.
(b) The Indemnitor and its representatives, at the
Indemnitor's expense, shall be entitled to participate (i) in all
conferences, meetings or proceedings with any taxing authority,
the subject matter of which is or includes an Indemnity Issue in
respect of a Pre-Distribution Period and (ii) in all appearances
before any court, the subject matter of which is or includes an
Indemnity Issue in respect of a Pre-Distribution Period.
(c) Except as provided in Section 4.2(d), Grace-Conn.
shall have the right to decide as between the parties hereto how
any Indemnity Issue for a Pre-Distribution Taxable Period is to
be dealt with and finally resolved with the appropriate taxing
authority and shall control all Proceedings relating thereto.
Grace agrees to cooperate with Grace-Conn. in the settlement of
any such Indemnity Issue; provided, however, that Grace-Conn.
shall act in good faith in the conduct of such Proceedings and
shall keep Grace reasonably informed of any developments which
can reasonably be expected to affect adversely Grace. Such
cooperation shall include permitting Grace-Conn. to litigate or
otherwise resolve any such Indemnity Issue. It is expressly the
intention of the parties to this Agreement to take, and the
parties shall take, all actions necessary to establish Grace-
Conn. as the sole agent for Tax purposes of each member of the
Affiliated Group, as if Grace-Conn. were the common parent of the
Affiliated Group, with respect to all combined, consolidated and
unitary Tax Returns of the Affiliated Group for the Pre-
Distribution Taxable Periods.
(d) The parties jointly shall represent the interests
of (i) the Affiliated Group in any Proceeding relating to any
Straddle Period and (ii) any Foreign Packco Subsidiary in any
Proceeding relating to any taxable period that involves an
Indemnity Issue. Neither party shall settle any dispute relating
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to any such period without the consent of the other party (which
consent shall not be unreasonably withheld); provided, however,
that if either party proposes a settlement and the other party
does not consent thereto, the nonconsenting party shall assume
control of the Proceeding (and bear all subsequently incurred
costs, fees and expenses relating thereto) and the respective
liabilities of the parties shall be determined pursuant to
Section 6.7 based on the magnitude and likelihood of success of
the issues involved in the Proceeding, the reasonableness of the
settlement offer, the expense of continuing the Proceeding and
other relevant factors. Any other disputes regarding the conduct
or resolution of any such Proceeding shall be resolved pursuant
to Section 6.7. All costs, fees and expenses paid to third
parties in the course of such Proceeding shall be borne by the
parties in the same ratio as the ratio in which, pursuant to the
terms of this Agreement, the parties would share the
responsibility for payment of the Taxes asserted by the taxing
authority in its claim or assessment if such claim or assessment
were sustained in its entirety; provided, however, that in the
event that any party hereto retains its own advisors or experts
in connection with any Proceeding, the costs and expenses thereof
shall be borne solely by such party.
Section 4.3. Cooperation and Exchange of Information.
(a) Grace shall, and shall cause each appropriate
member of the Packco Group to, prepare and submit to Grace-Conn.,
as soon as practicable, but in no event later than the date that
is 30 days after a request from Grace-Conn. (i) all information
as Grace-Conn. shall reasonably request to enable Grace-Conn. to
file any Conn Prepared Return or prepare any Pre-Distribution
Schedule (which information shall be provided in the form and of
the quality in which comparable information was provided prior to
the Distribution) and (ii) any Del Prepared Return (including any
amended return) for any year within the carryback or carryforward
period for an Overall Tax Benefit or Hypothetical Pre-
Distribution Overall Tax Benefit that is for the account of
Grace-Conn. or for any year with respect to which Grace is
entitled to a payment under Section 3.2(a)(v). Grace-Conn. shall
bear any out-of-pocket marginal expense paid by any member of the
Packco Group in preparing and submitting such information in
respect of a Pre-Distribution Schedule relating to a Pre-
Distribution Taxable Period, and the parties shall share equally
any such expenses in respect of a Pre-Distribution Schedule
relating to a Straddle Period.
(b) Each party on behalf of itself and each member of
its Group, agrees to provide the other party and the members of
such party's Group with such cooperation and information as the
second party or its Group members shall reasonably request in
connection with the preparation or filing of any Tax Return, Pre-
Distribution Schedule or claim for refund not inconsistent with
this Agreement or in conducting any Proceeding in respect of
Taxes. Such cooperation and information shall include, without
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limitation, (i) execution and delivery of a power of attorney by
Grace or any other member of the Packco Group to Grace-Conn. or
another member of the New Grace Group or designation of an
officer of Grace-Conn. or another member of the New Grace Group
as an officer of Grace or any other member of the Packco Group
for the purpose of signing Tax Returns, cashing refund checks and
conducting Proceedings if Grace Conn. could not otherwise
exercise its rights under this Agreement with respect to such
Returns, refunds or Proceedings, (ii) promptly forwarding copies
of appropriate notices and forms or other communications received
from or sent to any taxing authority which relate to the
Affiliated Group, the Packaging Business or the New Grace
Business and (iii) providing copies of all relevant portions of
Tax Returns, accompanying schedules, related workpapers,
documents relating to rulings or other determinations by taxing
authorities, including, without limitation, foreign taxing
authorities, and records concerning the ownership and Tax basis
of property, which either party may possess. Each party shall
make, and shall cause the members of the Packco Group to make,
their employees and facilities available on a mutually convenient
basis to provide explanation of any documents or information
provided hereunder.
(c) Grace and Grace-Conn. agree to retain all Tax
Returns, related schedules and workpapers, and all material
records and other documents as required under Section 6001 of the
Code and the regulations promulgated thereunder relating thereto
existing on the date hereof or created through the Distribution
Date, until the expiration of the statute of limitations
(including extensions) of the taxable years to which such Tax
Returns and other documents relate and until the Final
Determination of any payments which may be required in respect of
such years under this Agreement. Grace-Conn. and Grace agree to
advise each other promptly of any such Final Determination. Any
information obtained under this Section shall be kept
confidential, except as may be otherwise necessary in connection
with the filing of Tax Returns or claims for refund or in
conducting any audit or other proceeding.
(d) If (i) any member of the Packco Group fails to
provide any information requested pursuant to this Section 4.3(a)
by the dates and in the manner specified in Section 4.3(a) hereof
or (ii) with respect to information not requested pursuant to
Section 4.3(a) hereof, any member of either Group fails to
provide any information requested pursuant to this Section 4.3,
within a reasonable period, then the requesting party shall have
the right to engage a "Big Six" public accounting firm of its
choice to gather such information. Each party agrees upon two
business days' notice, in the case of a failure to provide
information pursuant to Section 4.3 hereof to permit any such
"Big Six" public accounting firm full access to all appropriate
records or other information in the possession of any member of
the party's Group during reasonable business hours, and promptly
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to reimburse or pay directly all costs and expenses in connection
with the engagement of such public accountants.
(e) If any member of either Group supplies information
pursuant to this Agreement and an officer of any member of the
other Group signs a statement or other document under penalties
of perjury in reliance upon the accuracy of such information and
so requests, then a duly authorized officer of the member
supplying such information shall certify, under penalties of
perjury, the accuracy and completeness of the information so
supplied. Grace agrees to indemnify and hold harmless each New
Grace Indemnitee, and Grace-Conn. agrees to indemnify and hold
harmless each Packco Indemnitee, from and against any cost, fine,
penalty or other expense of any kind attributable to the gross
negligence or willful misconduct of a member of the Packco Group,
or New Grace Group, as the case may be, in supplying a member of
the other Group with inaccurate or incomplete information.
ARTICLE V.
CERTAIN POST-DISTRIBUTION TRANSACTIONS
Section 5.1 Sealed Air and Packco Group Covenants.
Unless, in the case of any of Sections 5.1(a) through
(f) below, Grace has obtained a ruling letter from the IRS or an
opinion of nationally recognized counsel to Grace, in either
case, to the effect that, without material qualification, such
act or omission will not adversely affect the federal income tax
consequences of the Distribution to any of Grace, Grace-Conn. or
the stockholders of Grace-Conn., as set forth in the Tax
Opinions, and the substance of, and basis for, such conclusion in
such ruling or opinion is reasonably satisfactory to Grace-Conn.
in its good faith solely with regard to preserving the Tax-Free
Status of the Distribution (the "Ruling/Opinion Exception"):
(a) No Sealed Air Party at any time nor any member of
the Packco Group at any time after the Effective Time shall take
any action, or fail or omit to take any action, that would cause
any representation made in the Sealed Air Tax Matters Certificate
or the Grace Tax Matters Certificate to be untrue in a manner
that would have an adverse effect on the Tax-Free Status of the
Distribution.
(b) Until the first day after the Restriction Period,
the Packco Group shall continue the active conduct of the
Packaging Business (the "Active Packco Business"). The Packco
Group shall not liquidate, dispose of, or otherwise discontinue
the conduct of any material portion of the Active Packco
Business. The Packco Group shall continue the active conduct of
the Packaging Business primarily through officers and employees
of the Packco Group (and not through independent contractors).
(c) Until the first day after the Restriction Period,
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no Sealed Air Party nor any member of the Packco Group shall sell
or otherwise issue to any Person, or redeem or otherwise acquire
from any Person (other than any member of the Packco Group), any
Equity Securities of Grace or any other member of the Packco
Group; provided, however, that purchases that, in the aggregate,
meet the requirements of Section 4.05(1)(b) of Revenue Procedure
96-30 shall not constitute a redemption or acquisition of stock
of Grace for purposes of this Section 5.1(c).
(d) Until the first day after the Restriction Period,
no Sealed Air Party nor any member of the Packco Group shall (i)
solicit any Person to make a tender offer for, or otherwise
acquire or sell, the Equity Securities of Grace, (ii) participate
in or support any unsolicited tender offer for, or other
acquisition or disposition of, the Equity Securities of Grace or
(iii) approve or otherwise permit any proposed business
combination or any transaction which, in the case of (i), (ii) or
(iii), individually or in the aggregate, together with the
transactions contemplated under the Distribution Agreement, the
Merger Agreement, the Benefits Agreement and this Agreement,
results in one or more Persons acquiring (other than in
acquisitions not taken into account for purposes of Section
355(e)) directly or indirectly stock representing a 50 percent or
greater interest (within the meaning of Section 355(e) of the
Code) in Grace. In addition, no Sealed Air Party nor any member
of the Packco Group shall at any time, whether before or
subsequent to the expiration of the Restriction Period, engage in
any action described in clauses (i), (ii) or (iii) of the
preceding sentence if it is pursuant to an arrangement negotiated
(in whole or in part) prior to the Distribution, even if at the
time of the Distribution it is subject to various conditions, nor
shall any such Party or member take any action, or fail or omit
to take any action, that would cause Section 355(d) or (e) to
apply to the Distribution.
(e) Until the first day after the Restriction Period,
no Sealed Air Party nor the members of the Packco Group shall
sell, transfer, or otherwise dispose of or agree to dispose of
assets (including, for such purpose, any shares of capital stock
of a Subsidiary) that, in the aggregate, constitute more than 60%
of the gross assets of Packco, nor shall they sell, transfer, or
otherwise dispose of or agree to dispose of assets (including,
for such purpose, any shares of capital stock of a Subsidiary)
that, in the aggregate, constitute more than 60% of the
consolidated gross assets of the Packco Group. The foregoing
sentence shall not apply to sales, transfers, or dispositions of
assets in the ordinary course of business. The percentages of
gross assets or consolidated gross assets of Packco or the Packco
Group, as the case may be, sold, transferred, or otherwise
disposed of, shall be based on the fair market value of the gross
assets of Packco and the Packco Group as of the Effective Time,
and for this purpose, the values set forth in the Packaging
Business Disclosure Letter Balance Sheet shall be conclusive.
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(f) Until the first day after the Restriction Period,
neither Packco nor its Subsidiaries shall voluntarily dissolve or
liquidate or engage in any merger, consolidation or other re-
organization. The foregoing sentence shall not apply to
transactions in which Packco acquires another corporation,
limited liability company, limited partnership, general
partner-ship or joint venture solely for cash or other
consideration that is not Equity Securities. Reorganizations of
Packco with its Affiliates, and liquidations of Packco's
Affiliates, are not subject to Section 5.1(b) or this Section
5.1(f) to the extent not inconsistent with the structure
necessary for the Distribution to qualify for Tax-Free Status.
(g) Until the first day after the Restriction Period,
Grace shall furnish Grace-Conn. with a copy of any ruling request
that Sealed Air, Grace or any of their Affiliates may file with
the IRS and any opinion received that relates to or otherwise
reasonably could be expected to have an effect on the Tax-Free
Status of the Distribution.
Section 5.2 New Grace Covenants.
Unless, in the case of any of Sections 5.2(a) through
(e) below, Grace-Conn. has obtained a ruling letter from the IRS
or an opinion of nationally recognized counsel to Grace-Conn., in
either case, to the effect that, without material qualification,
such act or omission will not adversely affect the federal income
tax consequences of the Distribution to any of Grace, Grace-Conn.
or the stockholders of Grace-Conn., as set forth in the Tax
Opinions, and the substance of, and basis for, such conclusion in
such ruling or opinion is reasonably satisfactory to Grace in its
good faith solely with regard to preserving the Tax-Free Status
of the Distribution:
(a) No member of the New Grace Group shall take any
action, or fail or omit to take any action, that would cause any
representation made in the Sealed Air Tax Matters Certificate or
the Grace Tax Matters Certificate to be untrue in a manner that
would have an adverse effect on the Tax-Free Status of the
Distribution.
(b) Until the first day after the Restriction Period,
the New Grace Group shall continue the active conduct of one of
the Active New Grace Businesses. "Active New Grace Businesses"
shall mean each of the Grace Davison business and the Grace
Construction Business. The New Grace Group may dispose of,
liquidate or discontinue the conduct of the Grace Davison
business or the Grace Construction Products business if it
actively continues the conduct of the other. The New Grace Group
shall continue the active conduct of at least one of the Active
New Grace Businesses primarily through officers and employees of
the New Grace Group (and not through independent contractors).
(c) Until the first day after the Restriction Period,
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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
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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
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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.
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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-
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Conn. and Grace on behalf of themselves and each member of the
New Grace Group and Packco Group, respectively. This Agreement
shall constitute a direct obligation of each such member. Grace-
Conn. and Grace hereby guarantee the performance of all actions,
agreements and obligations provided for under this Agreement of
each member of the New Grace Group and the Packco Group,
respectively. Grace-Conn. and Grace shall, upon the written
request of the other, cause any of their respective Group members
formally to execute this Agreement. This Agreement shall be
binding upon, and shall inure to the benefit of, the successors
and assigns of any of the corporations bound hereby.
Section 6.9. Term. This Agreement shall commence on
the date of execution indicated below and shall continue in
effect until otherwise agreed to in writing by Grace-Conn. and
Grace, or their successors.
Section 6.10. Titles and Headings. Titles and head-
ings to Sections herein are inserted for the convenience of
reference only and are not intended to be a part or to affect the
meaning or interpretation of this Agreement.
Section 6.11. Legal Enforceability. Any provision of
this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction. Without prejudice to any rights or remedies
otherwise available to any party hereto, each party hereto
acknowledges that damages would be an inadequate remedy for any
breach of the provisions of this Agreement and agrees that the
obligations of the parties hereunder shall be specifically
enforceable.
Section 6.12. Governing Law. This Agreement shall be
governed by the laws of the State of Delaware.
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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:
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