Exhibit 10.1
EMPLOYEE BENEFITS ALLOCATION AGREEMENT
This EMPLOYEE BENEFITS ALLOCATION AGREEMENT (this "Agreement"),
dated as of March 30, 1998, by and among W. R. Grace & Co., a Delaware
corporation ("Grace"), W. R. Grace & Co.-Conn., a Connecticut corporation and
a wholly owned subsidiary of Grace ("Grace-Conn."), and General Specialty
Chemicals, Inc. (to be renamed W. R. Grace & Co.), a Delaware corporation and
a wholly owned subsidiary of Grace ("New Grace").
RECITALS
A. The Merger Agreement. Grace and Sealed Air Corporation, a
Delaware corporation ("SAC"), have entered into an Agreement and Plan of
Merger, dated as of August 14, 1997 (the "Merger Agreement"), pursuant to
which, at the Effective Time (as defined therein), a wholly owned subsidiary
of Grace will merge with and into SAC, with SAC being the surviving
corporation (the "Merger"), and Grace being renamed Sealed Air Corporation.
B. The Distribution Agreement. The Distribution Agreement dated
as of March 30, 1997, by and among Grace, Grace-Conn. and New Grace (the
"Distribution Agreement") and the Other Agreements (as defined in the
Distribution Agreement) set forth certain transactions that SAC has required
as a condition to its willingness to consummate the Merger, and the purpose of
the Distribution Agreement is to make possible the Merger by divesting Grace
of the businesses and operations to be conducted by New Grace and its
subsidiaries, including New Grace-Conn.
C. The Contribution. Prior to the Effective Time, and subject to
the terms and conditions set forth in the Distribution Agreement, Grace
intends to cause the transfer to a wholly owned subsidiary of Grace-Conn.
("Packco") of certain assets and liabilities of Grace and its subsidiaries
predominantly related to the Packaging Business (the "Contribution"), as
contemplated by the Distribution Agreement and the Other Agreements.
D. The Distribution. Following the Contribution and prior to the
Effective Time, subject to the conditions set forth in the Distribution
Agreement, (i) the capital stock of Packco will be distributed to Grace, (ii)
the capital stock of Grace-Conn. will be contributed to New Grace and (iii)
all of the issued and outstanding shares of the common stock of New Grace
(together with the New Grace Rights, "New Grace Common Stock") will be
distributed (the "Distribution") to the holders as of the Record Date of the
common stock of Grace, par value $.01 per share ("Grace Common Stock"), other
than shares held in the treasury of Grace, on a pro rata basis.
E. This Agreement. This Agreement is one of the Other Agreements
contemplated by the Distribution Agreement, and its purpose is to set forth the
agreement of Grace, Grace-Conn. and New Grace with respect to certain matters
relating to employees and employee benefit plans and compensation arrangements;
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements set forth herein, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 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 4.1(b).
AICP: the Annual Incentive Compensation Program of Grace.
Alternate Payee: an alternate payee under a domestic relations
order which qualifies under Section 414(p) of the Code and Section 206(d) of
ERISA and which creates or recognizes an alternate payee's right to, or
assigns to an alternate payee, all or a portion of the benefits payable to a
participant under any Plan, or an alternate recipient under a medical child
support order which qualifies under Section 609(a) of ERISA and which creates
or recognizes the existence of an alternate recipient's right to, or assigns
to an alternate recipient the right to, receive benefits for which a
participant or beneficiary is eligible under any Plan.
ASA: has the meaning assigned to it in Section 4.1(b).
Benefit Plan: any Plan established, sponsored or maintained by
any member of the Packco Group, any member of the New Grace Group, or any
predecessor or affiliate of any of the foregoing, existing as of the
Distribution Date or prior thereto, to which any member of the Packco Group or
the New Grace Group contributes, has contributed, is required to contribute or
has been required to contribute, on behalf of any employee of a member of the
Packco Group or a member of the New Grace Group, or under which any employee
of a member of the Packco Group or a member of the New Grace Group, former
employee of a member of the Packco Group or a member of the New Grace Group,
or any beneficiary or dependent thereof, is covered, is eligible for coverage
or has benefits rights.
Change in Control Severance Agreements: the agreements listed on
Schedule I hereto.
Change in Control Severance Plan: the Grace Change in Control
Severance Program for U.S. Employees (April 3, 1996 - April 3, 1998).
Current Performance Period: any three-year performance period
under the Grace LTIP that begins before and ends after the Effective Time.
Current Plan Year: the plan year or fiscal year, to the extent
applicable with respect to any Plan, during which the Distribution Date
occurs.
Cypress 401(k) Plans: the Cypress Packaging, Inc. Union Employees
401(k) Pension Plan and the Cypress Packaging, Inc. 401(k) Retirement Plan.
Deferred Compensation Plan: the W. R. Grace & Co. Deferred
Compensation Program.
Distribution Agreement: has the meaning assigned to it in the
fourth paragraph hereof.
Employee: with respect to any entity, an individual who is
considered, according to the payroll and other records of such entity, to be
employed by such entity, regardless of whether such individual is, at the
relevant time, actively at work or on leave of absence (including vacation,
holiday, sick leave, family and medical leave, disability leave, military
leave, jury duty, layoff with rights of recall, and any other leave of absence
or similar interruption of active employment that is not considered, according
to the policies or practices of such entity, to have resulted in a permanent
termination of such individual's employment), but excluding any individual who
is, as of the relevant time, on long-term disability leave.
Foreign Plan: has the meaning assigned to it in Section 6.1.
Grace: has the meaning assigned to it in the first paragraph
hereof.
Grace Dependent Care Plan: the W. R. Grace & Co. Dependent Care
Plan.
Grace LTIP: the Grace Long Term Incentive Program.
Grace Medical Expense Plan: the W. R. Grace & Co. Health Care
Reimbursement Account Plan.
Grace Option: an option to purchase shares of Grace Common Stock
granted pursuant to any Grace Stock Incentive Plan.
Grace Severance Pay Plan: the W. R. Grace & Co. Severance Pay
Plan for Salaried Employees, as amended effective July 1, 1996.
Grace Stock Incentive Plans: the Grace 1996 Stock Incentive Plan,
the Grace 1994 Stock Incentive Plan, the Grace 1989 Stock Incentive Plan, the
Grace 1986 Stock Incentive Plan, and the Grace 1981 Stock Incentive Plan.
Hourly Non-Union Retirement Plan: the W. R. Grace & Co.-Conn.
Retirement Plan for Non-Union Employees of Subsidiary Corporations.
Hourly SIP: the W. R. Grace & Co. Hourly Employee Savings and
Investment Plan.
Insured Foreign Plan: a Foreign Plan that provides retirement or
pension benefits and that is funded through individually allocated insurance
contracts, each of which is identified as such in the Packaging Business
Disclosure Letter to the Merger Agreement.
IRS: the Internal Revenue Service.
Local Actuary: has the meaning assigned to it in Section 6.1.
LTIP Awards: has the meaning assigned to it in Section 3(a)
hereof.
Newco Ratio: the amount obtained by dividing (i) the average of
the arithmetic mean between the highest and lowest sales prices of a share of
Grace Common Stock on the New York Stock Exchange Composite Tape on each of
the five trading days immediately preceding the ex-dividend date for the
Distribution by (ii) the average of the arithmetic mean between the highest
and lowest sales prices of a share of Newco Common Stock on the New York Stock
Exchange Composite Tape on each of the five trading days beginning on the
ex-dividend date for the Distribution.
New Grace Benefit Plan: any Benefit Plan that is sponsored or
maintained by a member of the New Grace Group as of the Distribution Date.
New Grace Employee: any Employee who is allocated to the New Grace
Group pursuant to Section 2.1 of this Agreement and who is not hired by any
member of the Packco Group pursuant to Section 6.11(b) of the Merger Agreement.
New Grace Participant: any individual who is a New Grace Employee
or a beneficiary, dependent or Alternate Payee of such an individual.
New Grace Ratio: the amount obtained by dividing (i) the average
of the arithmetic mean between the highest and lowest sales prices of a share
of Grace Common Stock on the New York Stock Exchange Composite Tape on each of
the five trading days immediately preceding the ex-dividend date for the
Distribution by (ii) the average of the arithmetic mean between the highest
and lowest sales prices of a share of New Grace Common Stock on the New York
Stock Exchange Composite Tape on each of the five trading days beginning on
the ex-dividend date for the Distribution.
Noninsured Foreign Pension Plan: a Foreign Plan that is a defined
benefit pension plan and is not an Insured Foreign Plan, each Noninsured
Foreign Pension Plan being identified as such in the Packaging Business
Disclosure Schedule to the Merger Agreement.
Packco Benefit Plan: any Benefit Plan that is sponsored or
maintained by a member of the Packco Group following the Distribution Date.
Packco Employee: any Employee who is allocated to the Packco Group
pursuant to Section 2.1 of this Agreement or who is hired by any member of the
Packco Group pursuant to Section 6.11(b) of the Merger Agreement.
Packco Health Plan: the Blue Cross Blue Shield Health Plan for
Cryovac and Formpac Employees.
Packco Hourly Non-Union Retirement Plan: has the meaning assigned
to it in Section 4.1(d).
Packco Medical and Dependent Care Expense Plan: the Health Care
and Dependent Care Spending Account Plan for Cryovac and Formpac Employees.
Packco Participant: any individual who is a Packco Employee or a
beneficiary, dependent or Alternate Payee of such an individual.
Packco Savings Plan: a Qualified Plan designated by Grace to
receive a transfer of assets from the Hourly SIP and/or the Salaried SIP
pursuant to Section 4.2(b).
Pension Plan: any Benefit Plan that is an "employee pension
benefit plan" (within the meaning of section 3(2) of ERISA), whether or not
that Plan is a Qualified Plan.
Plan: any bonus, incentive compensation, deferred compensation,
pension, profit sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation rights, phantom stock, company car, fringe
benefit, leave of absence, layoff, vacation, day or dependent care, legal
services, cafeteria, life, health, medical, accident, disability, workman's
compensation or other insurance, severance, separation or other employee
benefit plan, practice, policy or other arrangement of any kind (including,
but not limited to, any "employee benefit plan" (within the meaning of section
3(3) of ERISA)).
Qualified Plan: any Benefit Plan that is an "employee pension
benefit plan" (within the meaning of section 3(2) of ERISA) and which is
intended to qualify under section 401(a) of the Code.
Salaried Retirement Plan: the W. R. Grace & Co. Retirement Plan
for Salaried Employees.
Salaried SIP: the W. R. Grace & Co. Salaried Employees Savings
and Investment Plan.
Salary Protection Plan: the W. R. Grace & Co. Executive Salary
Protection Plan.
Schurpack 401(k) Plan: the Schurpack Employees 401(k) Thrift Plan.
SERP: the W. R. Grace & Co. Supplemental Executive Retirement
Plan.
Split Dollar Program: the W. R. Grace & Co. Executive Split
Dollar Life Insurance Program.
Terminated Grace Employee: any individual who is, as of the
Distribution Date, a former Employee of any member of the New Grace Group or
the Packco Group.
Terminated Grace Participant: a Terminated Grace Employee or a
beneficiary, dependent or Alternate Payee of a Terminated Grace Employee.
Termination Benefits: has the meaning assigned to it in Section
2.2(a) hereof.
Union Retirement Plan: the Retirement Plan of W. R. Grace &
Co.-Conn. Chemical Group (Cedar Rapids Plant).
U.S. Welfare Plan: a Welfare Plan other than a Welfare Plan that
is maintained outside of the United States primarily for the benefit of
individuals substantially all of whom are nonresident aliens with respect to
the United States.
Welfare Plan: any Benefit Plan that is an "employee welfare
benefit plan" (within the meaning of section 3(1) of ERISA).
ARTICLE II
TRANSFER OF EMPLOYEES; TERMINATION BENEFITS
SECTION 2.1 Transfer of Employees. (a) Grace and New Grace
shall take all steps necessary or appropriate so that all of the Employees of
Grace and its subsidiaries are allocated between the New Grace Group and the
Packco Group in accordance with the principles set forth in the Section
2.1(b), and so that each individual who is so allocated to the Packco Group
is, as of the Distribution Date, an Employee of a member of the Packco Group,
and each other individual who is, as of the Distribution Date, an Employee of
Grace or any of its Subsidiaries is an Employee of a member of the New Grace
Group.
(b) In making the allocation provided for in Section 2.1, Grace
and New Grace shall allocate each Employee who is exclusively employed in the
Packaging Business to the Packco Group and each Employee who is exclusively
employed in the New Grace Business to the New Grace Group. All other
Employees shall be allocated in a mutually agreeable manner that, to the
extent possible, takes into account the Employees' expertise, experience and
existing positions and duties and does not unreasonably disrupt either the
Packaging Business or the New Grace Business and maximizes the ability of each
of the Packco Group and the New Grace Group to manage and operate their
respective businesses after the Distribution Date, taking into account the
respective needs of such businesses as established by past practice.
SECTION 2.2 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 2.1 or otherwise as a result of the
consummation of the transactions contemplated by the Distribution Agreement and
the Merger, to have become entitled to any benefits under any Benefit Plan,
contract, agreement, statute, regulation or other arrangement that provides
for the payment of severance pay, salary continuation, pay in lieu of notice,
unused vacation pay, or similar benefits in connection with actual or
constructive termination or alleged actual or constructive termination of
employment (collectively, "Termination Benefits"). Without limiting the
generality of the foregoing, none of the transactions contemplated by the
Distribution Agreement and the Merger Agreement constitute a "change in
control" for purposes of any Benefit Plan. Grace shall take all steps
necessary and appropriate so that any Change in Control Severance Agreement
between Grace and any Packco Employee terminates before the Distribution Date.
(b) All Liabilities (other than for Severance Costs as defined
in Section 8.04 of the Distribution Agreement) relating to or arising out of
claims made by or on behalf of New Grace Participants or Packco Participants
for, or with respect to, Termination Benefits relating to the actual or
constructive termination or alleged actual or constructive termination of
employment of any New Grace Employee or Packco Employee with any member of the
Packco Group or the New Grace Group, which claims arise as a result of the
consummation of the transactions contemplated by the Distribution Agreement,
shall be considered other Transaction Costs that are governed by clause (ii)
of the first sentence of Section 8.04 of the Distribution Agreement.
(c) Except as specifically provided otherwise in Section 2.2(b)
above and in Section 8.04 of the Distribution Agreement, effective as of the
Distribution Date, the New Grace Group shall assume or retain, as appropriate,
all Liabilities relating to or arising out of claims made by or on behalf of
New Grace Participants for, or with respect to, Termination Benefits relating
to the actual or constructive termination or alleged actual or constructive
termination of employment of any New Grace Employee with any member of the
Packco Group or the New Grace Group, whether before, on or after the
Distribution Date. In addition, the New Grace Group shall assume or retain,
as appropriate, all Liabilities (including with respect to Packco Employees)
pursuant to the Change in Control Severance Plan and the Change in Control
Severance Agreements.
(d) Except as specifically provided otherwise in Sections 2.2(b)
and (c) above and in Section 8.04 of the Distribution Agreement, effective as
of the Distribution Date, the Packco Group shall assume or retain, as
appropriate, all Liabilities relating to or arising out of claims made by or
on behalf of Packco Participants for, or with respect to, Termination Benefits
relating to the actual or constructive termination or alleged actual or
constructive termination of employment of any Packco Employee with any member
of the Packco Group or the New Grace Group, whether before (in the case of
constructive termination), on or after the Distribution Date.
ARTICLE III
INCENTIVE PLANS
SECTION 3.1 Grace LTIP. (a) The contingent awards for
Current Performance Periods held by New Grace Participants and Packco
Participants (such contingent awards, the "LTIP Awards") under the Grace LTIP
shall be adjusted and paid in cash by New Grace in accordance with such
methodology as New Grace determines in its sole discretion.
(b) Effective as of the Distribution Date, the New Grace Group
shall assume or retain, as appropriate, all Liabilities relating to or arising
out of awards payable under the Grace LTIP.
SECTION 3.2 Grace Options. (a) New Grace shall assume and
adopt, effective as of the Distribution Date, each of the Grace Stock
Incentive Plans, with such changes as may be necessary to reflect the change
in the issuer of awards thereunder and such other changes as New Grace shall,
in its sole discretion, determine. As soon as practicable after and effective
as of the Distribution Date, all Grace Options that are then outstanding shall
be adjusted or replaced as set forth in this Section 3.2, or in such other
manner as the parties hereto shall agree.
(b) Each such Grace Option that is held by a New Grace Employee
or a Terminated Grace Participant shall be replaced with an option (a "New
Grace Option") to acquire a number of New Grace Common Shares that equals the
number of shares subject to such Grace Option immediately before such
replacement, times the New Grace Ratio (rounded up to the nearest whole
share), with a per-share exercise price that equals the per-share exercise
price of such Grace Option immediately before such replacement, divided by the
New Grace Ratio (rounded up to the nearest one hundredth of a cent). Each New
Grace Option shall otherwise have the same terms and conditions as the Grace
Option it replaces, except that references to employment by or termination of
employment with Grace and its affiliates shall be changed to references to
employment by or termination of employment with New Grace and its affiliates.
Effective as of the Distribution Date, New Grace shall assume all Liabilities
relating to or arising under the New Grace Options or the Grace Stock
Incentive Plans.
(c) Each such Grace Option that is held by a Packco Employee
shall be adjusted so that the number of Newco Common Shares subject to such
Grace Option equals the number of shares subject to such Grace Option
immediately before such adjustment, times the Newco Ratio (rounded down to the
nearest whole share), and the per-share exercise price equals the per-share
exercise price of such Grace Option immediately before such adjustment,
divided by the Newco Ratio (rounded up to the nearest whole cent). Each Grace
Option as so adjusted shall otherwise have the same terms and conditions as
were in effect before such adjustment. Effective as of the Distribution Date,
Grace shall retain all Liabilities relating to or arising under the Grace
Options held by Packco Employees.
SECTION 3.3 Annual Incentive Compensation Plan. (a) New
Grace shall pay, or cause to be paid by another member of the New Grace Group,
all bonuses earned by Packco Employees and New Grace Employees for the 1997
calendar year under the AICP, in accordance with the terms of the AICP as
interpreted by New Grace in its sole discretion. Effective as of the
Distribution Date, the New Grace Group shall assume all Liabilities relating
to or arising under the AICP.
(b) Packco Employees shall not be eligible to earn bonuses under
the AICP for 1998 or any subsequent year. However, if the Distribution Date
occurs later than March 31, 1998, then Grace and New Grace shall use
reasonable best efforts to develop and implement an annual incentive program
for Packco Employees, the cost of which will be shared between the New Grace
Group and the Packco Group in a manner relating to the relative portions of
the 1998 calendar year that precede and follow the Distribution Date.
ARTICLE IV
PENSION AND SAVINGS PLANS
SECTION 4.1 Retirement Plans and Supplemental Retirement
Plan. (a) Grace, New Grace and Grace-Conn. shall take all steps necessary or
appropriate so that, effective no later than the Distribution Date: (i) one
or more members of the New Grace Group are the sole sponsors of the Salaried
Retirement Plan, the SERP and the Hourly Non-Union Retirement Plan; and (ii)
one or more members of the Packco Group are the sole sponsors of the Union
Retirement Plan. Such steps shall include, without limitation, the
appointment or reappointment by New Grace (by action after the Distribution
Date to approve or ratify such appointment or reappointment) of all named
fiduciaries, trustees, custodians, recordkeepers and other fiduciaries and
service providers to the Salaried Retirement Plan, the SERP and the Hourly
Non-Union Retirement Plan, and the appointment or reappointment by Grace of
all named fiduciaries, trustees, custodians, recordkeepers and other
fiduciaries and service providers to the Union Retirement Plan.
(b) Effective as of the Distribution Date, the Packco Employees
shall cease accruing benefits under the Salaried Retirement Plan, the SERP and
the Hourly Non-Union Retirement Plan. As promptly as practicable following
the Distribution Date, and effective as of the Distribution Date, Grace
intends to implement a program for Packco Employees who participated in the
Salaried Retirement Plan before the Distribution Date designed to
substantially make up for any anticipated material adverse impact on them
resulting from the termination of such participation as of the Distribution
Date. Such program will assume that each such Packco Participant works as an
employee until normal retirement (age 65) and that he or she will achieve a
reasonable investment return on his or her account in the Sealed Air
Corporation Profit Sharing Plan. Upon the implementation of such program by
Grace, New Grace shall (i) cause the Salaried Retirement Plan to be amended so
that, effective immediately before the Distribution Date: (A) the accrued
benefit of each Packco Employee who is a participant therein is increased by
crediting such Packco Employee with an additional year of service; (B) the
accrued benefit of each such Packco Employee who is at least 40 years old as
of the Distribution Date is also increased by an amount equal to the lesser of
(x) 13 percent of the amount of such accrued benefit (after giving effect to
the increase described in clause (A) of this sentence) or (y) the increase
that results from crediting such Packco Employee with an additional four years
of service, and (C) the accrued benefits of all such Packco Employees, as so
increased, shall be fully vested as of the Distribution Date; or (ii) provide
additional retirement benefits to such Packco Employees as a group having, in
the aggregate, a value substantially equivalent to the increased benefits
described in clause (i); provided, that the aggregate expense associated with
the benefits described in clause (i) or (ii) (as applicable) shall be limited
to the extent necessary so that the Accrued Benefit Obligation, calculated in
accordance with FAS 87 ("ABO"), of such benefits does not exceed $15 million.
Such ABO shall be determined by Actuarial Sciences Associates ("ASA") in
accordance with the actuarial assumptions set forth in Schedule II hereto and
in a manner consistent with past practice with respect to the Salaried
Retirement Plan.
(c) Effective as of the Distribution Date, the New Grace Group
shall assume or retain (as applicable) all Liabilities relating to or arising
under the Salaried Retirement Plan and the SERP, including without limitation
for benefits payable thereunder to Packco Participants. Effective as of the
Distribution Date, the Packco Group shall assume or retain (as applicable) all
Liabilities relating to or arising under the Union Retirement Plan.
(d) (i) Effective immediately after the Effective Time, Grace
shall establish, cause to be established or designate a defined benefit
pension plan (the "Packco Hourly Non-Union Retirement Plan") to provide
benefits and assume liabilities and accept a transfer of assets from the
Hourly Non-Union Retirement Plan, as provided for in this Section 4.1(d).
(ii) As soon as practicable after the Effective Time, following (A)
the receipt by New Grace of a copy of a favorable determination letter or
Grace's certification to New Grace, in a manner reasonably acceptable to New
Grace, that the Packco Hourly Non-Union Retirement Plan is qualified under
Section 401(a) of the Code and the related trust is exempt from taxation under
Section 501(a) of the Code, and (B) the receipt by Grace of a copy of a
favorable determination letter or New Grace's certification to Grace, in a
manner reasonably acceptable to Grace, that the Hourly Non-Union Retirement
Plan is qualified under Section 401(a) of the Code and the related trust is
exempt from taxation under Section 501(a) of the Code, New Grace shall direct
the trustee of the trust funding the Hourly Non-Union Retirement Plan to
transfer to the trustee of the trust established to fund the Packco Hourly
Non-Union Retirement Plan the amount described in Section 4.1(d)(iii) below.
Such transfer shall be in cash unless otherwise agreed by Grace and New Grace.
As of the date of such transfer, and effective immediately after the Effective
Time, the Packco Group and the Packco Hourly Non-Union Retirement Plan shall
assume all Liabilities for benefits payable to Packco Participants under the
Hourly Non-Union Retirement Plan, and the New Grace Group and the Hourly
Non-Union Retirement Plan shall retain no Liabilities for such benefits.
(iii) The amount transferred pursuant to this Section 4.1(d) shall
be an amount equal to (A) less (B), as adjusted by (C); where (A) equals a
portion of the assets of the Hourly Non-Union Retirement Plan having a fair
market value equal to the ABO as of the Distribution Date attributable to
Packco Participants; where (B) equals the aggregate payments made from the
trust funding the Hourly Non-Union Retirement Plan in respect of Packco
Participants from the Effective Time through the date the transfer occurs; and
where (C) equals the amount of the net earnings or losses, as the case may be,
from the Effective Time through the date the transfer occurs, on the average
of the daily balances of the foregoing and based upon the actual rate of
return earned by the Hourly Non-Union Retirement Plan during such period. All
of the foregoing calculations shall be made by ASA in accordance with the
assumptions set forth on Schedule III hereto. Grace shall be entitled to
review and comment on such calculations as ASA is in the process of performing
them. Notwithstanding the foregoing, however, in no event shall the amount so
transferred be less than the amount necessary to comply with, nor more than
the maximum amount permitted by, Section 414(l) of the Code and the
regulations promulgated thereunder, as determined by ASA.
(iv) Grace, New Grace and Grace-Conn. shall, in connection with
the transfer described in this Section 4.1(d), cooperate in making any and all
appropriate filings required under the Code or ERISA, and the regulations
thereunder and any applicable securities laws, and take all such action as may
be necessary and appropriate to cause such transfers to take place as soon as
practicable after the Effective Time. New Grace and Grace-Conn. agree, during
the period ending with the date of the transfer of assets to the Packco Hourly
Non-Union Retirement Plan, to cause distributions in respect of Packco
Participants to be made in the ordinary course from the Hourly Non-Union
Retirement Plan in accordance with applicable law and pursuant to plan
provisions.
SECTION 4.2 Savings Plans. (a) Grace, New Grace and
Grace-Conn. shall take all steps necessary or appropriate so that, effective
no later than the Distribution Date: (i) one or more members of the New Grace
Group are the sole sponsors of the Hourly SIP and the Salaried SIP; and (ii)
one or more members of the Packco Group are the sole sponsors of the Cypress
401(k) Plans and the Schurpack 401(k) Plan. Effective as of the Distribution
Date, the Packco Group shall assume all Liabilities relating to or arising
under the Cypress 401(k) Plans and the Schurpack 401(k) Plan. Such steps
shall include, without limitation, the appointment or reappointment by New
Grace (by action after the Distribution Date to approve or ratify such
appointment or reappointment) of all named fiduciaries, trustees, custodians,
recordkeepers and other fiduciaries and service providers to the Hourly SIP
and the Salaried SIP, and the appointment or reappointment by Grace of all
named fiduciaries, trustees, custodians, recordkeepers and other fiduciaries
and service providers to the Cypress 401(k) Plans and the Schurpack 401(k)
Plan.
(b) Each of the transfers provided for in this Section 4.2(b)
shall be implemented only if both Grace and New Grace so agree after the
Distribution Date.
(i) Grace, New Grace and Grace-Conn. shall take all steps necessary
or appropriate in order to transfer to a Packco Savings Plan and the related
trust, as soon as practicable after the Effective Time, all account balances
(including the pre-tax, after-tax and rollover account balances) under each of
the Hourly SIP and the Salaried SIP of all Packco Participants. Such assets
shall be transferred in kind, to the extent elected by New Grace with the
consent of Grace (which consent shall not be unreasonably withheld), and
otherwise shall be made in cash; provided, that in any event, unless the
parties agree otherwise, any outstanding participant loans and FMC American
Depositary Receipts shall be transferred in kind. It is the intention of
Grace, New Grace and Grace-Conn. to carry out such transfer so as to preserve,
to the extent practicable, the investment elections of participants as in
effect immediately before the transfer, unless the parties agree otherwise.
(ii) Grace, New Grace and Grace-Conn. shall cooperate in making all
appropriate filings required under the Code or ERISA, and the regulations
thereunder and any applicable securities laws, implementing all appropriate
communications with participants, maintaining and transferring appropriate
records, and taking all such other actions as may be necessary and appropriate
to implement the provisions of this Section 4.2(b) and to cause the transfers
of assets pursuant to this Section 4.2(b) to take place as soon as practicable
after the Effective Time; provided, that each of such transfers shall take
place only after (A) the receipt by New Grace of a favorable determination
letter or Grace's certification, in a manner reasonably acceptable to New
Grace, that the relevant Packco Savings Plan is qualified under Section 401(a)
of the Code and the related trust is exempt from taxation under Section 501(a)
of the Code, and (B) the receipt by Grace of a favorable determination letter
or New Grace's certification, in a manner reasonably acceptable to Grace, that
the Hourly SIP or the Salaried SIP, as applicable, is qualified under Section
401(a) of the Code and the related trust is exempt from taxation under Section
501(a) of the Code.
(c) If Grace and New Grace agree to implement the transfers
provided for in Section 4.2(b), subject to the completion of such transfer and
effective as of the Distribution Date, the members of the Packco Group and the
SAC Savings Plan shall assume all Liabilities to or relating to Packco
Participants relating to or arising under the Hourly SIP and the Salaried SIP.
Effective as of the Distribution Date, the New Grace Group shall assume or
retain (as applicable) all Liabilities relating to or arising under the Hourly
SIP and the Salaried SIP, including without limitation for benefits payable
thereunder to Packco Participants, that are not assumed by the Packco Group
and the relevant Packco Savings Plan pursuant to the preceding sentence.
SECTION 4.3 Qualification of Plans. The New Grace Group
shall be responsible for all Liabilities incurred by the Packco Group as a
result of the failure of any of the Hourly Non-Union Retirement Plan, the
Union Retirement Plan, the Hourly SIP, the Salaried SIP, the Cypress 401(k)
Plans or the Schurpack 401(k) Plan to be qualified under Section 401(a) of the
Code on or before the date assets are transferred from such Plan to a Packco
Benefit Plan, or the date sponsorship of such Plan is assumed by any member of
the Packco Group, as applicable. The Packco Group shall be responsible for
all Liabilities incurred by the New Grace Group as a result of the failure of
the Packco Hourly Non-Union Retirement Plan or any Packco Savings Plan to be
qualified under Section 401(a) of the Code on or before the date assets are
transferred to such Plan from a New Grace Benefit Plan. The parties hereto
agree that to the extent any of them becomes aware that any such Plan fails or
may fail to be so qualified, it shall notify the other parties and the parties
shall cooperate and use best efforts to avoid such disqualification, including
using the Internal Revenue Service's Voluntary Compliance Resolution program
or similar programs, and taking any steps available pursuant to such program
to avoid disqualification, as determined by the party who is made responsible
under this Section 4.3 for the Liabilities that would result from such
disqualification (and the Liabilities for which such party is responsible shall
include all costs and expenses resulting from such steps, including fines,
penalties, contributions, attorneys' fees and expenses and administrative
expenses).
ARTICLE V
WELFARE AND OTHER BENEFITS
SECTION 5.1 Benefits for Active Employees. (a) Grace, New
Grace and Grace-Conn. shall take all steps necessary or appropriate so that,
effective no later than the Distribution Date, one or more members of the
Packco Group are the sole sponsors of the Packco Health Plan. Such steps
shall include, without limitation, the appointment or reappointment by Grace
of all named fiduciaries, trustees, custodians, recordkeepers and other
fiduciaries and service providers to the Packco Health Plan, to the extent such
appointments or reappointments are necessary.
(b) Effective as of the Distribution Date, the New Grace Group
shall assume or retain (as applicable) all Liabilities relating to or arising
out of claims for benefits under U.S. Welfare Plans by New Grace Participants
and Terminated Grace Participants, whenever such claims are incurred, and (ii)
by Packco Participants to the extent such claims are incurred before the
Distribution Date and reported within 365 days thereafter. Effective as of
the Distribution Date, the Packco Group shall assume or retain (as applicable)
all Liabilities relating to or arising out of all other claims for benefits
under U.S. Welfare Plans by Packco Participants, except as specifically
provided in Section 5.2.
SECTION 5.2 Retiree Welfare Benefits. Effective as of the
Distribution Date, the New Grace Group shall assume all Liabilities for
providing post-retirement medical and life insurance benefits under U.S.
Welfare Plans sponsored by Grace or any of its subsidiaries before the
Distribution Date or any members of the New Grace Group on or after the
Distribution Date, to: (i) Terminated Grace Participants; (ii) Packco
Participants who would have been eligible to receive such benefits if they had
retired at any time on or before the first anniversary of the Distribution
Date (regardless of when they actually do retire); and (iii) any New Grace
Participants who become eligible for such benefits after the Distribution Date
pursuant to the Grace Severance Pay Plan as a result of a termination of
employment as of the Distribution Date. Effective as of the Distribution Date,
the Packco Group shall provide Packco Participants who retire after the
Distribution Date for whom the New Grace has not assumed Liabilities for
providing post-retirement medical and life insurance benefits pursuant to the
preceding sentence with such benefits pursuant to one or more group insurance
or group self-insured programs; provided, that the Packco Group may require
such Packco Participants to bear the entire cost of such benefits, together
with a reasonable fee for their allocable share of the Packco Group's costs of
administering such programs.
SECTION 5.3 Severance. The Packco Group shall adopt,
effective as of the Distribution Date, and shall maintain in effect without
amendment adverse to participants, at least through the first anniversary of
the Distribution Date, a severance plan providing Packco Employees with
severance benefits as outlined in Exhibit A hereto.
SECTION 5.4 Split Dollar Plan; Deferred Compensation Plan;
Salary Protection Plan. Effective as of the Distribution Date, each Packco
Employee who participates in the Split Dollar Plan, the Deferred Compensation
Plan or the Salary Protection Plan shall be treated as a terminated
participant under such Plan, and shall have the same options with respect to
such Plan as are available to any other participant in such Plan upon
termination of employment, in accordance with the terms of such Plan as in
effect immediately before the Distribution Date. Effective as of the
Distribution Date, the New Grace Group shall assume all Liabilities relating
to or arising under the Split Dollar Plan, the Deferred Compensation Plan and
the Salary Protection Plan.
SECTION 5.5 Dependent Care and Medical Expense Plans. (a)
Grace, New Grace and Grace-Conn. shall take all steps necessary or appropriate
so that, effective no later than the Distribution Date, one or more members of
the New Grace Group are the sole sponsors of the Grace Dependent Care Plan and
the Grace Medical Expense Plan, and the New Grace Group shall assume all
Liabilities under such Plans. Such steps shall include, without limitation,
the appointment or reappointment by New Grace (by action after the
Distribution Date to approve or ratify such appointment or reappointment) of
all named fiduciaries, trustees, custodians, recordkeepers and other
fiduciaries and service providers to such Plans, to the extent such
appointments or reappointments are necessary.
(b) Grace, New Grace and Grace-Conn. shall take all steps
necessary or appropriate so that, effective no later than the Distribution
Date, one or more members of the Packco Group are the sole sponsors of the
Packco Medical and Dependent Care Expense Plan, and the Packco Group shall
assume all Liabilities under such Plan. Such steps shall include, without
limitation, the appointment or reappointment by Grace of all named
fiduciaries, trustees, custodians, recordkeepers and other fiduciaries and
service providers to such Plan, to the extent such appointments or
reappointments are necessary. No employer contributions to such Plan shall be
made or promised with respect to the 1998 plan year unless the parties
otherwise agree.
ARTICLE VI
NON-U.S. PLANS
SECTION 6.1 Non-U.S. Plans Generally. As soon as practicable after
the date of this Agreement, the parties hereto shall enter into one or more
agreements or memoranda of understanding (collectively, the "Foreign Plans
Agreement") regarding the treatment and allocation of Liabilities relating to
or arising under Benefit Plans (the "Foreign Plans") for Employees located
outside the United States, including without limitation expatriates, and to
expatriate employees located in the United States. The Foreign Plans Agreement
shall provide for the treatment of each Foreign Plan, which treatment may
include (without limitation) (i) the retention or assumption of such Foreign
Plan by the Packco Group, (ii) the retention or assumption of such Foreign Plan
by the New Grace Group, or (iii) an allocation of the liabilities and assets
(if any) of the Foreign Plan between a Plan (which may include the Foreign
Plan) that is intended to be maintained by the New Grace Group and a Plan
(which may include the Foreign Plan) that is intended to be maintained by the
Packco Group, after the Distribution Date; provided, that the insurance
contracts funding each Insured Foreign Pension Plan (and any assets related
thereto) shall be divided between the appropriate Packco Benefit Plan and New
Grace Benefit Plan by the insurer in accordance with applicable law, regulation
and practice. Any transfers of assets or liabilities from a Noninsured Foreign
Pension Plan shall be made on the basis of reasonable methods and assumptions
determined by the local actuarial firm that is, as of the date of this
Agreement, serving as the actuary for such Noninsured Foreign Pension Plan (or
another actuarial firm if the parties hereto so agree) (the "Local Actuary"),
in accordance with applicable legal and regulatory requirements, local
practice and the past practice of Grace; provided, that each of Grace,
Grace-Conn. and New Grace shall be entitled to review such methods and
assumptions and object to them if they are unreasonable, and to review all
calculations and determinations of the Local Actuary for accuracy. It is the
intention of the parties hereto that the Packco Group will assume or retain
Liabilities for Packco Employees under Foreign Plans and that to the extent
permitted and practicable under legal and regulatory requirements and local
practice, assets transferred from Noninsured Foreign Pension Plans pursuant to
the Foreign Plans Agreement shall equal the Projected Benefit Obligation,
calculated in accordance with FAS 87, for the liabilities assumed by Packco
Benefit Plans pursuant to the Foreign Plans Agreement.
ARTICLE VII
GENERAL
SECTION 7.1 Preservation of Rights to Amend or Terminate
Plans and to Terminate or Change Terms of Employment. No provision of this
Agreement shall be construed as a limitation on the rights of any member of
the Packco Group or the New Grace Group to amend or terminate any Benefit Plan
or other plan, program or arrangement relating to employees. No provision of
this Agreement shall be construed to create a right in any employee or former
employee or beneficiary or dependent of such employee or former employee under
a Benefit Plan which such employee or former employee or beneficiary would not
otherwise have under the terms of the Benefit Plan itself. Nothing contained
in this Agreement shall confer upon any individual the right to remain an
employee of any member of the Packco Group or the New Grace Group or restrain
any member of the Packco Group or the New Grace Group from changing the terms
and conditions of employment of any individual at any time following the
Distribution Date, except as provided in Section 5.3 of this Agreement.
SECTION 7.2 Other Liabilities; Guarantee of Obligations.
Effective as of the Distribution Date, the New Grace Group shall assume or
retain (as applicable) all Liabilities relating to or arising out of claims
for compensation and benefits made by or on behalf of any New Grace
Participant, including salary, wages, bonuses, incentive compensation,
severance benefits, separation pay, accrued sick, holiday, vacation, health,
dental or retirement benefits, or other compensation under applicable law or
otherwise, relating to or arising out of employment by Grace or any of its
subsidiaries before the Distribution Date or employment by any member of the
New Grace Group on or after the Distribution Date. Effective as of the
Distribution Date, the Packco Group shall assume or retain (as applicable)
responsibility for all Liabilities relating to or arising out of claims for
compensation and benefits made by or on behalf of any Packco Participant,
including salary, wages, bonuses, incentive compensation, severance benefits,
separation pay, accrued sick, holiday, vacation, health, dental or retirement
benefits, or other compensation under applicable law or otherwise, relating to
or arising out of employment by Grace or any of its subsidiaries before the
Distribution Date or employment by any member of the Packco Group on or after
the Distribution Date. Notwithstanding the foregoing, this Section 7.2 shall
not apply to any Liability that is specifically provided for elsewhere in this
Agreement.
SECTION 7.3 Assumption of Plans; Termination of
Participation. Except as specifically provided otherwise in this Agreement,
Grace, New Grace and Grace-Conn. shall take all steps necessary or appropriate
so that, effective no later than the Distribution Date, one or more members of
the New Grace Group are the sole sponsors of all Benefit Plans that are, as of
the date of this Agreement, sponsored by Grace, and the New Grace Group shall
assume or retain (as applicable) all Liabilities relating to or arising under
such Benefit Plans. Such steps shall include, without limitation and where
appropriate, the appointment or reappointment by New Grace (by action after
the Distribution Date to approve or ratify such appointment or reappointment)
of all named fiduciaries, trustees, custodians, recordkeepers and other
fiduciaries and service providers to such Benefit Plans. Except as
specifically provided otherwise in this Agreement or in the agreement provided
for in Section 6.1 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 7.4 Information. The parties hereto shall, before
the Distribution Date or as soon as practicable thereafter, provide each other
with all information as may reasonably be requested and necessary to
administer each Benefit Plan effectively in compliance with applicable law.
Such information shall be provided in the form requested if, at the time of
such request, it exists in such form or can readily be converted to such form.
If a request would require a party providing information to incur any expenses
in order to receive advice from any actuary, consultant or consulting firm,
the information need not be provided unless the requesting party reimburses
the party providing the information for all such expenses.
SECTION 7.5 Complete Agreement; Coordination with Tax Sharing
Agreement. (a) This Agreement, the Exhibits and Schedules hereto and the
agreements and other documents referred to herein, shall constitute the entire
agreement between the parties hereto with respect to the subject matter hereof
(other than the Distribution Agreement, the Merger Agreement and the schedules
and exhibits thereto) and shall supersede all previous negotiations,
commitments and writings with respect to such subject matter.
(b) This Agreement, and not the Tax Sharing Agreement,
constitutes the sole agreement of the parties regarding responsibility for any
excise taxes, penalties or similar levies that may be imposed by any taxing
authority on, or with respect to, any Benefit Plan, except as otherwise
specifically provided in the Tax Sharing Agreement with respect to payroll
taxes.
SECTION 7.6 Governing Law. This Agreement shall be governed
by and construed and enforced in accordance with the laws of the State of
Delaware (other than the laws regarding choice of laws and conflict of laws
that would apply the substantive laws of any other jurisdiction) as to all
matters, including matters of validity, construction, effect, performance and
remedies, except to the extent preempted by federal law.
SECTION 7.7 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 7.8 Successors and Assigns; No Third-Party
Beneficiaries. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests and obligations hereunder shall be assigned by any party
hereto without the prior written consent of the other party (which consent
shall not be unreasonably withheld). Without limiting the generality of the
foregoing, it is expressly acknowledged that at the Effective Time, the
Certificate of Incorporation of Grace will be amended (the "Newco Amendment")
to change the name of Grace to "Sealed Air Corporation" and that references
herein to "Grace" include, from and after the Effective Time, such corporation
(which is also referred to in the Merger Agreement as Newco). Accordingly, to
the extent this Agreement calls for the agreement of "Grace" or of "the
parties" from and after the Effective Time, the agreement of Newco (as defined
in the Merger Agreement) will be required. This Agreement is solely for the
benefit of the parties hereto and their Subsidiaries and is not intended to
confer, nor shall it confer, upon any other Persons (including New Grace
Participants and Packco Participants) any rights or remedies hereunder.
SECTION 7.9 Amendment and Modification. This Agreement may
be amended, modified or supplemented only by a written agreement signed by all
of the parties hereto.
SECTION 7.10 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 7.11 Interpretation. The Article and Section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties hereto and shall not in any way affect
the meaning or interpretation of this Agreement.
SECTION 7.12 Indemnity Procedures. The provisions of Article
IV of the Distribution Agreement shall apply with respect to Liabilities
allocated under this Agreement.
SECTION 7.13 Severability. If any provision of this
Agreement or the application thereof to any person or circumstance is
determined by a court of competent jurisdiction to be invalid, void or
unenforceable, the remaining provisions hereof, or the application of such
provision to persons or circumstances other than those as to which it has been
held invalid or unenforceable, shall remain in full force and effect and shall
in no way be affected, impaired or invalidated thereby, so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner adverse to any party.
SECTION 7.14 References; Construction. References to any
"Article," "Exhibit," "Schedule" or "Section," without more, are to Articles,
Exhibits, Schedules and Sections to or of this Agreement. Unless otherwise
expressly stated, clauses beginning with the term "including" set forth
examples only and in no way limit the generality of the matters thus
exemplified.
SECTION 7.15 SAC Reasonable Consent. The parties hereto
agree that any actions to be taken by Grace, Grace-Conn. or New Grace to
implement the terms of this Agreement that are not specifically required
herein that relate to Packco or the Packaging Business, and any actions that
are to be taken pursuant to this Agreement only by agreement of the parties,
must be reasonably satisfactory to SAC.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the date first above written.
W. R. GRACE & CO.
By: /s/ Larry Ellberger
----------------------------
Name: Larry Ellberger
Title: Senior Vice President
W. R. GRACE & CO.-CONN.
By: /s/ Robert B. Lamm
----------------------------
Name: Robert B. Lamm
Title: Vice President
GRACE SPECIALTY CHEMICALS, INC.
By: /s/ W.B. McGowan
----------------------------
Name: W.B. McGowan
Title: Senior Vice President