Exhibit B to Distribution
Agreement
Form of Tax Sharing
Agreement
FORM OF
TAX SHARING AGREEMENT
by and among
X. X. XXXXX & CO.,
X. X. XXXXX & CO.-CONN.
and
SEALED AIR CORPORATION
Dated as of [ ], 1997
TAX SHARING AGREEMENT
This TAX SHARING AGREEMENT (this "Agreement"), dated as of
__________, 1997, by and among X. X. Xxxxx & Co., a Delaware corporation
("Grace"), X. X. Xxxxx & Co.-Xxxx., a Connecticut corporation and a wholly
owned subsidiary of Grace ("Grace-Conn."), and Sealed Air Corporation, a
Delaware corporation ("Sealed Air").
RECITALS
WHEREAS, Grace, Packco Acquisition Corp., a Delaware corporation
and a wholly owned subsidiary of Grace, and Sealed Air have entered into an
Agreement and Plan of Merger (the "Merger Agreement");
WHEREAS, Grace, Grace-Conn. and Grace Specialty Chemicals, Inc., a
Delaware corporation and a wholly owned subsidiary of Grace ("New Grace"),
have entered into the Distribution Agreement;
AND WHEREAS, Grace, on behalf of itself and the Packco Group,
and Grace-Conn., on behalf of itself and the New Grace Group, wish to
provide for the allocation between the Packco Group and the New Grace Group
of all responsibilities, liabilities and benefits relating to or affecting
Taxes (as hereinafter defined) paid or payable by either of them for all
taxable periods, whether beginning before, on or after the Distribution
Date (as hereinafter defined) and to provide for certain other matters.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements set forth herein, the
parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
Capitalized terms used but not defined herein shall have the
respective meanings assigned to them in the Distribution Agreement or the
Merger Agreement. As used in this Agreement, the following terms shall have
the following meanings (such meanings to be equally applicable to both the
singular and the plural forms of the terms defined):
"Action": as defined in Section 5.3(a).
"Active New Grace Businesses": as defined in Section 5.2(b).
"Active Packo Business": as defined in Section 5.1(b).
"Adjusted Item": as defined in Section 3.2(a)(v).
"Adjusted Party" means the party for the account of which is an
Adjusted Item.
"Affiliated Group" means the affiliated group of which Grace is
the common parent or any predecessor or successor thereto.
"Code" means the Internal Revenue Code of 1986, as amended, and
shall include corresponding provisions of any subsequently enacted federal tax
laws.
"Conn Prepared Returns": as defined in Section 2.2(a).
"Conn Prior Payments": as defined in Section 3.2(c)(iii).
"Consistency/Basis Disagreement": as defined in Section 2.2(b).
"Corresponding Item": as defined in Section 3.2(a)(v).
"Corresponding Party" means the party for the account of which is
a Corresponding Item.
"Del Prepared Returns": as defined in Section 2.2(a).
"Discontinued Businesses": shall mean (x) the can sealing and
coating portion of the New Grace Business which portion is described in the
proviso to the definition of the Packaging Business and (y) certain other
businesses currently accounted for as discontinued operations.
"Distribution Date" means the date on which the Distribution
occurs. For purposes of this Agreement, the Distribution shall be deemed
effective as of the close of business on the Distribution Date.
"Equity Securities" means any stock or other equity securities
treated as stock for tax purposes, or options, warrants, rights, convertible
debt, or any other instrument or security that affords any Person the right,
whether conditional or otherwise, to acquire stock.
"Final Determination" means the final resolution of liability for
any Tax for a taxable period (i) by a duly executed IRS Form 870 or 870-AD (or
any successor forms thereto), on the date such Form is effective, or by a
comparable form under the laws of other jurisdictions; except that a Form 870
or 870-AD or comparable form that reserves (whether by its terms or by
operation of law) the right of the taxpayer to file a claim for refund
and/or the right of the taxing authority to assert a further deficiency
shall not constitute a Final Determination with respect to the right so
reserved; (ii) by a decision, judgment, decree, or other order by a court
of competent jurisdiction, which has become final and unappealable; (iii)
by a closing agreement or accepted offer in compromise under Section 7121
or 7122 of the Code, or comparable agreements under the laws of other
jurisdictions; (iv) by any allowance of a refund or credit in respect of
an overpayment of Tax, but only after the expiration of all periods during
which such refund may be recovered (including by way of offset) by the
jurisdiction imposing Tax; or (v) by any other final disposition, including
by reason of the expiration of the applicable statute of limitations or by
mutual agreement of the parties.
"Foreign Cap" shall mean $3 million.
"Foreign Packco Subsidiary" means a Packco Subsidiary organized in
a foreign jurisdiction.
"Foreign Packco Tax Item" means a Tax Item of a Foreign Packco
Subsidiary arising in the Pre-Distribution Period attributable to the
Packaging Business conducted by such Subsidiary other than any Tax Item of a
Foreign Packco Subsidiary arising as a result of a Foreign Transfer.
"Foreign New Grace Subsidiary" means a New Grace Subsidiary
organized in a foreign jurisdiction.
"Forwarding Party": as defined in Section 4.1.
"Forwarding Responsibilities": as defined in Section 4.1.
"Hypothetical Pre-Distribution Tax": as defined in Section 2.2(d).
"Hypothetical Pre-Distribution Overall Tax Benefit": as defined
in Section 2.2(d).
"Indemnified Amount": as defined in Section 4.1.
"Indemnitee": as defined in Section 4.2(a).
"Indemnitor": as defined in Section 4.2(a).
"Indemnity Issue": as defined in Section 4.2(a).
"Interest": as defined under "Taxes" below.
"IRS" means the Internal Revenue Service.
"New Grace Tax Item" means a Tax Item arising in the
Pre-Distribution Period attributable to (i) New Grace, Grace-Conn., Packco,
any Foreign New Grace Subsidiary, any member of the Affiliated Group which was
a member prior to the Distribution Date or any member of the affiliated group
for United States federal income tax purposes of which X. X. Xxxxx & Co., a New
York corporation, was the common parent or (ii) the New Grace Business
conducted by any Foreign Packco Subsidiary.
"Overall Tax Benefit" shall mean, for any taxable period, the net
operating loss, unused credits (taking into account foreign tax credits when
realized regardless of the period for which the associated earnings and
profits were earned) and any other aggregate net unused Tax Benefit not used
to reduce Taxes for the period.
"Packco Prior Payments": as defined in Section 3.2(c)(iii).
"Packaging Tax Item" means a Tax Item attributable to Sealed
Air, any member of the Packco Group or otherwise relating to the Packaging
Business or the Packaging Assets that is not a New Grace Tax Item or a
Foreign Packco Tax Item.
"Payee": as defined in Section 3.2(c).
"Payor": as defined in Section 3.2(c).
"Post-Distribution Period" means the Post-Distribution
Taxable Periods and the portion of any Straddle Period beginning
on the date after the Distribution Date.
"Post-Distribution Taxable Period" means any taxable period
beginning after the Distribution Date.
"Pre-Distribution Period" means the Pre-Distribution Taxable
Periods and the portion of any Straddle Period ending on the Distribution
Date.
"Pre-Distribution Schedules": as defined in Section 2.2(b).
"Pre-Distribution Taxable Period" means any taxable period ending
on or before the Distribution Date
"Proceeding" shall mean any audit or other examination, judicial
or administrative proceeding relating to liability for or refunds or
adjustments with respect to Taxes.
"Recipient Group": as defined in Section 4.1.
"Restriction Period" means the period beginning on the date
hereof and ending on the two-year anniversary of the Effective Time.
"Reviewing Party": as defined in Section 5.3(c).
"Ruling/Opinion Exception": as defined in Section 5.1.
"Sealed Air Parties" means Sealed Air and each of its past,
present or future Affiliates, other than any member of the
Packco Group.
"Straddle Period" means a taxable period that includes, but does
not end on, the Distribution Date.
"Substantial Authority": as defined in Section 2.1.
"Tax Benefit" means any item of loss, deduction, credit or any
other Tax Item which decreases Taxes paid or payable.
"Tax Deficiency" means an assessment of Taxes, as a result of a
Final Determination.
"Tax Detriment" means any item of income, gain, recapture of
credit or any other Tax Item which increases Taxes paid or payable.
"Tax-Free Status" means the qualification of the Distribution
(i) as a transaction described in Section 355(a)(1) of the Code, (ii) as a
transaction in which the stock distributed thereby is qualified property
for purposes of Section 355(c)(2) of the Code and (iii) as a transaction in
which each of Grace, Grace-Conn., Packco, New Grace and each member of the
New Grace Group recognizes no income or gain.
"Tax Item" means any item of income, gain, loss, deduction,
credit, recapture of credit or any other item which increases or decreases
Taxes paid or payable, including an adjustment under Code Section 481
resulting from a change in accounting method.
"Tax Opinions" shall mean the Grace Tax Opinion and the Sealed Air
Tax Opinion.
"Tax Refund" means a refund of Taxes as the result of a Final
Determination.
"Tax Return" means any return, filing, questionnaire, information
return or other document required to be filed, including requests for
extensions of time, filings made with estimated tax payments, claims for
refund and amended returns that may be filed, for any period with any taxing
authority (whether domestic or foreign) in connection with any Tax or Taxes
(whether or not a payment is required to be made with respect to
such filing).
"Taxes" means all forms of taxation, whenever created or imposed,
and whether of the United States or elsewhere, and whether imposed by a local,
municipal, governmental, state, foreign, federation or other body, and,
without limiting the generality of the foregoing, shall include income, sales,
use, ad valorem, gross receipts, trade, license, value added, franchise,
transfer, recording, withholding, payroll, employment, excise, occupation,
unemployment insurance, social security, business license, business
organization, stamp, environmental, premium and property taxes, together with
any related interest, penalties and additions to any such tax, or additional
amounts imposed by any taxing authority (domestic or foreign) (such interest,
penalties, additions and additional amounts, "Interest").
"Transaction Party": as defined in Section 5.3(c).
ARTICLE II.
FILING OF TAX RETURNS
---------------------
Section 2.1 Manner of Filing. All Tax Returns filed after the
Distribution Date and the Pre-Distribution Schedules shall be prepared on a
basis which is consistent with the consummation of the transactions as set
forth in the Distribution Agreement, the Grace Tax Matters Certificate, the
Sealed Air Tax Matters Certificate, the Tax Opinions and any opinions,
rulings, agreements or written advice relating to Foreign Transfers (in the
absence of a controlling change in law or circumstances) and shall be filed
on a timely basis (including extensions) by the party responsible for such
filing under this Agreement. The Pre-Distribution Schedules and all Tax
Returns in respect of a Pre-Distribution Taxable Period or portion, ending
on the Distribution Date of any Straddle Period, that include any member of
the New Grace Group or the Packco Group shall be prepared on the basis of
substantial authority or on a reasonable basis with (if applicable)
appropriate disclosure (each, "Substantial Authority"); provided, however,
that such Schedules and Returns shall be prepared on a basis consistent
with the elections (other than elections relating to carrybacks and
carryforwards described in Section 3.3(a)), accounting methods, conventions
and principles of taxation used for the most recent taxable periods of
members of the New Grace Group for which Tax Returns involving similar Tax
Items have been filed, to the extent that a failure to do so would result
in a Tax Detriment, or a reduction in a Tax Benefit, to a member of the
Packco Group, as long as such consistent position has Substantial
Authority. All Tax Returns in respect of a Post-Distribution Taxable
Period or portion, beginning after the Distribution Date, of any Straddle
Period, shall be prepared with Substantial Authority; provided, however,
that such Returns shall be prepared on a basis consistent with the
elections (other than elections relating to carrybacks and carryforwards
described in Section 3.3(a)), accounting methods, conventions and
principles of taxation used for the most recent taxable periods of members
of the New Grace Group for which Tax Returns involving similar Tax Items
have been filed, to the extent that a failure to do so would result in a
Tax Detriment, or a reduction in a Tax Benefit, to a member of the other
Group, as long as such consistent position has Substantial Authority. In
the event of a conflict with respect to a Straddle Period between the
requirements of the immediately preceding sentence and the second preceding
sentence, the second preceding sentence shall prevail. Subject to the
provisions of this Agreement, all decisions relating to the preparation of
Tax Returns shall be made in the sole discretion of the party responsible
under this Agreement for such preparation. Grace shall provide Grace-Conn.
with copies of all Tax Returns filed after the Distribution Date that
relate to any member of the New Grace Group. Grace-Conn. shall provide
Grace with a copy of any portion of a Tax Return necessary to confirm
Grace-Conn.'s entitlement to payment hereunder in respect of a carryback or
refund.
Section 2.2 Pre-Distribution and Straddle Period Tax Returns.
(a) Grace shall prepare and file, or cause to be prepared and
filed, any Tax Returns required to be filed by a member or members of the
New Grace Group or the Packco Group for any Pre-Distribution Taxable Period
and any Straddle Period; provided, however, that Grace-Conn. shall prepare
and file, or cause to be prepared and filed, any Tax Returns relating
solely to a member or members of the New Grace Group or their respective
assets or businesses (such Tax Returns to be prepared and filed, or caused
to be prepared and filed, by Grace, the "Del Prepared Returns", and by
Grace-Conn., the "Conn Prepared Returns", respectively).
(b) With respect to any Del Prepared Return that has not been
filed as of the Distribution Date and relates to a Pre-Distribution Taxable
Period or a Straddle Period, Grace-Conn. shall, 25 calendar days before the
due date (including extensions) for such Return, provide Grace with a
schedule (collectively, the "Pre-Distribution Schedules") detailing the
computation of (i) in the case of a Pre-Distribution Taxable Period, the
Tax and/or Overall Tax Benefit and (ii) in the case of a Straddle Period,
the Hypothetical Pre-Distribution Tax and/or Hypothetical Pre-Distribution
Overall Tax Benefit, in either case, attributable to the member or members
of the New Grace Group or the Packco Group included in such Return. Any
Pre-Distribution Schedule relating to a Pre-Distribution Taxable Period
shall be delivered to Grace in the form of a completed, but unexecuted Tax
Return. If Grace so requests, Grace-Conn. shall discuss with Grace the
preparation of, and allow Grace periodically to review major issues with
respect to, any Pre-Distribution Schedule. In the event that Grace
disagrees with any Tax Item reflected (or anticipated to be reflected) on a
Pre-Distribution Schedule and demonstrates (by means of a written
explanation in sufficient detail to permit such conclusion to be verified)
its conclusion that Grace-Conn. has failed to comply with the requirements
of the second sentence of Section 2.1 hereof (a "Consistency/Basis
Disagreement"), Grace-Conn. shall explain its calculation of such Tax Item
within 14 days of receipt of Grace's written explanation. The parties
shall attempt in good faith mutually to resolve any Consistency/Basis
Disagreements prior to the due date for filing the relevant Tax Return.
(c) Whether or not any Consistency/Basis Disagreements or any
other disagreements relating to a Tax Item on a Pre-Distribution Schedule
have been resolved by the applicable due date, Grace shall (i) prepare the
Del Prepared Returns on the basis of, and in a manner consistent with, the
Pre-Distribution Schedules, (ii) provide Grace-Conn. with a copy of each
Del Prepared Return 14 calendar days before such Return is filed and
reflect any comments thereon provided in good faith by Grace-Conn. and
(iii) provide Grace-Conn. with a copy of each Del Prepared Return two
business days after such Return is filed. In the event that any
Consistency/Basis Disagreements relating to a Pre-Distribution Schedule
have not been resolved prior to the filing of the relevant Tax Return, such
disagreements shall be promptly resolved pursuant to Section 6.7 hereof.
(d) The "Hypothetical Pre-Distribution Tax" shall mean the Tax
that would have been due for the taxable period ending on the Distribution
Date if the Distribution Date were the last day of the taxable period. The
"Hypothetical Pre-Distribution Overall Tax Benefit" shall mean the Overall
Tax Benefit that would have arisen in the taxable period ending on the
Distribution Date if the Distribution Date were the last day of the taxable
period. Such Tax or Overall Tax Benefit shall be computed by determining
items of income, expense, deduction, loss and credit on a "closing of the
books" basis, reflecting tax accounting principles as of the close of
business on the Distribution Date.
Section 2.3 Post-Distribution Tax Returns. Any Tax Return for
a Post-Distribution Taxable Period shall be the responsibility of the New
Grace Group if such Tax Return relates solely to a member or members of the
New Grace Group or their respective assets or businesses, and shall be the
responsibility of the Packco Group if such Tax Return relates solely to a
member or members of the Packco Group or Sealed Air or their respective
assets or businesses.
ARTICLE III.
PAYMENT OF TAXES
Section 3.1 Allocation of Tax Liabilities With Respect to
Unfiled Returns.
(a) All Taxes shall be paid by the party responsible under this
Agreement for filing the Tax Return pursuant to which such Taxes are due;
provided, however, that
(i) in the case of Taxes due with respect to Del
Prepared Returns for Pre-Distribution Taxable Periods or Straddle Periods,
Grace-Conn. shall pay Grace the amount, if any, of the Tax or Hypothetical
Pre-Distribution Tax, as the case may be, if any, reflected in the Pre-
Distribution Schedule relating to such Tax Return attributable to the
member or members of the New Grace Group or the Packco Group included in
such Return. Such payment shall be made, at Grace-Conn.'s discretion,
either in immediately available funds on the morning of the relevant date
when payment is due to the governmental authority in respect of such Tax
Return or, if not in immediately available funds, two business days prior
to such due date. Grace shall forward any such payment that it receives
from Grace-Conn. to the appropriate taxing authority.
(ii) in the case of Del Prepared Returns for any
taxable period, on the relevant date on which payment is due (or a refund
is received) in respect of such Tax Return, Grace shall pay Grace-Conn. the
amount, if any, of the actual reduction in Taxes, or the actual increase in
the Tax refund, that would have been payable or receivable with respect to
such Tax Return but for any Overall Tax Benefit (or Hypothetical Pre-
Distribution Tax Benefit) that is for the account of Grace-Conn. under
Section 3.2(a)(iii), below. In the case of a payment by Grace in respect
of a reduction in Taxes, such payment shall be made in immediately
available funds on the morning of the relevant due date or, if not in
immediately available funds, two business days prior to the due date.
(iii) the parties intend that, in implementing this
Section 3.1(a), payment and reimbursement between the parties shall reflect
the principles of Section 3.2(a).
(b) Notwithstanding anything to the contrary, any Tax Item
resulting from any act or omission not in the ordinary course of business
(other than transactions contemplated by this Agreement, the Distribution
Agreement, the Merger Agreement or the Benefits Agreement) on the part of
any member of the Packco Group or any of the Sealed Air Parties occurring
on the Distribution Date after the Effective Time shall be deemed to arise
in a taxable period which begins after the Distribution Date.
Section 3.2 Indemnities; Redetermined Tax Liabilities. Except as
otherwise provided in Article V:
(a) Indemnities.
(i) Grace-Conn. shall be responsible for (w) any
Tax for a Pre-Distribution Taxable Period (and any Hypothetical Pre-
Distribution Tax for a Straddle Period) of Grace, Grace-Conn., Packco, any
Foreign New Grace Subsidiary, any current or former member of the
Affiliated Group which was a member prior to the Distribution Date or any
current or former member of the affiliated group for United States federal
income tax purposes of which X. X. Xxxxx & Co., a New York corporation,
was the common parent, (x) any Tax for a Pre-Distribution Taxable Period
(and any Hypothetical Pre-Distribution Tax for a Straddle Period) of a
Foreign Packco Subsidiary attributable to the Packaging Business reflected
on a Tax Return filed by such Subsidiary on or before the Distribution Date
or on a Pre-Distribution Schedule, (y) any Tax of any member of the New
Grace Group or a Foreign Packco Subsidiary, in either case, to the extent
attributable to the New Grace Business and (z) 75% (or if the Packco Group
has borne an amount of Tax in respect of adjustments to Foreign Packco Tax
Items (and fees and expenses in Proceedings relating to such adjustments)
that exceeds the Foreign Cap, then 100%) of any increase in Tax of a member
of the Packco Group attributable to an adjustment to a Foreign Packco Tax
Item.
(ii) Grace shall be responsible for any Taxes (x)
of any member of the Packco Group or otherwise relating to the Packaging
Business or the Packaging Assets (except to the extent that Grace-Conn. is
responsible for such Taxes pursuant to clause (i) above) and (y) of any of
the Sealed Air Parties, whether arising before, on or after the
Distribution Date.
(iii) Any Overall Tax Benefit (or Hypothetical
Pre-Distribution Overall Tax Benefit) shall be for the account of Grace-
Conn. to the extent that such Overall Tax Benefit (or Hypothetical Pre-
Distribution Overall Tax Benefit) is attributable to (w) Grace, Grace-
Conn., Packco, any Foreign New Grace Subsidiary, any current or former
member of the Affiliated Group which was a member prior to the Distribution
Date or any current or former member of the affiliated group for United
States federal income tax purposes of which X. X. Xxxxx & Co., a New York
corporation, was the common parent, in each case, for the Pre-Distribution
Period, (x) the Packaging Business of a Foreign Packco Subsidiary for the
Pre-Distribution Period reflected on a Tax Return filed by such Subsidiary
on or before the Distribution Date or on a Pre-Distribution Schedule (other
than the Foreign NOLs), (y) a Pre-Distribution Period of any member of the
New Grace Group or a Foreign Packco Subsidiary, in either case, to the
extent attributable to the New Grace Business (other than the Foreign NOLs)
or (z) any adjustment to a Foreign Packco Tax Item.
(iv) For purposes of determining the amount for which
Grace or Grace-Conn. is responsible for paying the other party, or entitled
to receive from the other party, in the event of any adjustment, including
a Final Determination, of a Tax Item of a Foreign Packaging Subsidiary
(other than a Tax Item that arises as a result of a Foreign Transfer), Tax
Items that are clearly attributable to the Packaging Business or the New
Grace Business, respectively, shall be allocated to such Business and Tax
Items that are not so attributable shall be allocated in the proportion
that the earnings from operations of such Business operated by such
Subsidiary bears to the total earnings from operations of such Subsidiary,
as reflected in audited financial statements for the most recent, as of the
end of such taxable period, full-year accounting period. Tax Items so
allocated shall be treated for all purposes of this Agreement as
attributable to the Business to which they are allocated.
(v) Timing Adjustments. In the event of any
adjustment, including a Final Determination, of a Tax Item (the "Adjusted
Item") which results in a Tax Benefit or Tax Detriment for the account of
one party and a corresponding Tax Detriment or Tax Benefit (the
"Corresponding Item") for the account of the other party, then (I) if the
Corresponding Item is a Tax Benefit, the Corresponding Party shall pay the
Adjusted Party and (II) if the Corresponding Item is a Tax Detriment, the
Adjusted Party shall pay the Corresponding Party, in either case, for each
taxable period in which a member of the Group of the party entitled to
payment under this Section 3.2(a)(v) actually realizes the Tax Benefit, in
the case of (I), or the Tax Detriment, in the case of (II), by reason of
the adjustment, an amount equal to such realized Tax Benefit, in the case
of (I), or realized Tax Detriment, in the case of (II), including interest
(computed at a 5% annual rate) from the original due date (without
extensions) for filing of the Return for such taxable period through the
date of payment under this Section 3.2(a)(v).
(b) Final Determinations. In the case of any Final
Determination regarding a Tax Return, any Tax Deficiency shall be paid to
the appropriate taxing authority by, and any Tax Refund received from the
appropriate taxing authority shall be paid to, the party which filed such
Return; provided, however, that whether or not there is a Tax Deficiency or
Tax Refund and whether or not a payment is required to or from the
appropriate taxing authority, Grace shall make payments to, or receive
payments from, Grace-Conn. based upon the following principles:
(i) Grace-Conn. shall make a payment to Grace in an
amount equal to (x) any increase in the Tax of any of the Sealed Air
Parties or any member of the Packco Group resulting from any adjustment to
a New Grace Tax Item and (y) 75% (or, if the Packco Group has borne an
amount of Tax in respect of adjustments to Foreign Packco Tax Items (and
fees and expenses in Proceedings relating to such adjustments) that exceeds
the Foreign Cap, then 100%) of any increase in the Tax of any of the Sealed
Air Parties or any member of the Packco Group resulting from any adjustment
to a Foreign Packco Tax Item, in either case (x) or (y), together with any
Interest relating thereto that is or has been imposed by the relevant
taxing authority (or would have been imposed but for an offsetting
Packaging Tax Item).
(ii) Grace shall pay to Grace-Conn. an amount
equal to (x) any decrease in the Tax of any of the Sealed Air Parties or
any member of the Packco Group resulting from any adjustment to a New Grace
Tax Item and (y) any decrease in the Tax of any of the Sealed Air Parties
or any member of the Packco Group resulting from any adjustment to a
Foreign Packco Tax Item, in either case (x) or (y), together with any
Interest relating thereto that is or has been paid by the relevant taxing
authority (or would have been paid but for an offsetting Packaging Tax
Item).
(iii) The parties intend that, in implementing this
Section 3.2(b), payment and reimbursement between the parties shall reflect
the principles of Section 3.2(a).
(iv) Payments otherwise required to be made
under this Section 3.2(b) with respect to a single Final Determination
shall be netted and offset against each other so that either Grace shall
make a payment to Grace-Conn. or Grace-Conn. shall make a payment to Grace,
but not both.
(c) Calculation and Payment of Amounts.
(i) All calculations and determinations required
to be made pursuant to this Article III shall initially be made by the
party obligated to make such payment (the "Payor") in its good faith. If
the party entitled to receive a payment (the "Payee") so requests, the
Payor shall present its calculations and determinations to the Payee in
writing. The Payee shall be deemed to consent to such calculations and
determinations unless the Payee notifies the Payor in writing within 30
days of receiving such calculations and determinations. If the Payee
disagrees with the Payor's calculations and determinations, the parties
shall attempt in good faith mutually to resolve the disagreement. In the
event that they cannot so resolve the disagreement, it shall be resolved
promptly pursuant to Section 6.7 hereof.
(ii) For all tax purposes, the parties hereto
agree to treat, and to cause their respect affiliates to treat, (x) any
payment required to be paid to a member of the other Group by this
Agreement as an adjustment to the portion of the New Grace Capital
Contribution that is contributed from Grace to New Grace and (ii) any
payment of interest or Taxes (other than U.S. Federal income taxes) by or
to a taxing authority as taxable or deductible, as the case may be, to the
party entitled under this Agreement to retain such payment or required
under this Agreement to make such payment, in either case except as
otherwise mandated by the law or a Final Determination. In the event of
such a Final Determination, the payment in question shall be adjusted to
place the parties in the same after-tax position that they would have
enjoyed absent such Final Determination. Any payment required by this
Agreement that is not made on or before the date required hereunder shall
bear interest, from and after such date through the date of payment, at the
appropriate market interest rate.
(iii) Payment of any amount required to be made
pursuant to this Article III as a result of a Final Determination shall
become due and payable after such Final Determination has been made within
ten business days of the receipt of written notice from the party entitled
to receive such payment to the party required to make such payment. Any
amounts required to be paid in respect of Taxes or Overall Tax Benefits
pursuant to this Article III shall be adjusted to avoid duplication of
payments and to take into account the sum of any payments previously made
by any member of the Packco Group on or prior to the Distribution Date or
by Grace-Conn. or any other member of the New Grace Group at any time in
respect of such Taxes or Overall Tax Benefits (the "Conn Prior Payments")
and the sum of any payments previously made by any member of the Packco
Group after the Distribution Date in respect of such Taxes or Overall Tax
Benefits (the "Packco Prior Payments"). Appropriate payments will be made
between the parties in the event that the Conn Prior Payments or the Packco
Prior Payments, respectively, exceed the amounts for which Grace-Conn. or
Packco, respectively, is responsible under the principles of Section
3.2(a).
(d) Other Tax Liabilities and Refunds. Any Tax or Tax refund
that is not otherwise covered by Section 3.1 or 3.2(b) shall be allocated,
and payment shall be made by Grace-Conn. or Grace, using the principles of
Sections 3.2(a); provided, however, that any Tax refund (whether or not
governed by Section 3.1 or 3.2(b)) arising as a result of an adjustment of
a Foreign Packco Tax Item shall be allocated in the same manner and to the
same extent as Taxes and expenses in respect of adjustments of Foreign
Packco Tax Items have been borne (it being agreed and understood that to
the extent that the Foreign Cap has been exceeded, such refund shall be
entirely for the benefit of Grace-Conn. and to the extent that refunds are
shared 75% by Grace-Conn. and 25% by Grace the Foreign Cap shall be
increased by the amount refunded to Grace). Any Tax refund received by one
party that is for the account of the other party shall be paid to such
other party promptly upon receipt thereof. Any Tax paid by one party that
is the responsibility of the other party shall be reimbursed promptly by
the other party.
Section 3.3. Carrybacks and Refund Claims. (a) Any Tax refund
resulting from the carryback by any member of the New Grace Group of any
Tax Item arising after the Distribution Date to a Pre-Distribution Taxable
Period or a Straddle Period shall be for the account of Grace-Conn., and
Grace shall promptly pay over to Grace-Conn. any such Tax refund that it
receives. In the event that a member of the New Grace Group, on the one
hand, and a member of the Packco Group or a Sealed Air Party, on the other
hand, are each entitled to carryback a Tax Item to a Pre-Distribution
Taxable Period or a Straddle Period, the respective Tax Items shall be
utilized under the rules of applicable law (which shall be, in the case of
carrybacks to such periods of the Affiliated Group and carrybacks under
foreign or State law with respect to which there is no applicable rule
regarding the priority of such utilization, the rules contained in Treasury
Regulation Section 1.1502-21T). Any election affecting the carryback or
carryforward of any Tax Item of any member of the New Grace Group, or a
payment to or by such a member under this Agreement in respect of a
carryback or carryforward, including the elections under Section 172(b)(3)
of the Code and Treasury Regulation Sections 1.1502-21T(b)(3) and
1.172-13(c) with respect to the taxable years of the Affiliated Group that
begin on each of January 1, 1997, and January 1, 1998, shall not be made
without the consent of Grace-Conn. and shall be made if Grace-Conn. so
requests.
(b) Grace-Conn. shall be permitted to file, and Grace shall
fully cooperate with Grace-Conn. in connection with, any refund claim. To
the extent that such a refund claim (other than a claim arising from a
carryback) does not result in a Tax refund (or would not result in a refund
if a claim were filed) as the result of an offsetting Packaging Tax Item
(including a Packaging Tax Item carried back to a Pre-Distribution Taxable
Period or a Straddle Period), Grace shall remit to Grace-Conn. the amount
of any decrease in Tax that results or would have resulted from such refund
claim.
Section 3.4. Liability for Taxes with Respect to Post-
Distribution Periods. Unless otherwise specifically provided in this
Agreement or the Distribution Agreement, the New Grace Group shall pay all
Taxes and shall be entitled to receive and retain all refunds of Taxes with
respect to periods beginning after the Distribution Date which are
attributable to the New Grace Business. Unless otherwise provided in this
Agreement, the Packco Group shall pay all Taxes and shall be entitled to
receive and retain all refunds of Taxes with respect to periods beginning
after the Distribution Date which are attributable to the Packaging
Business.
ARTICLE IV.
INDEMNITY, COOPERATION AND EXCHANGE OF INFORMATION
Section 4.1. Breach. Grace-Conn. shall be liable for and shall
indemnify, defend and hold harmless the Packco Indemnitees from and against,
and Grace shall be liable for and shall indemnify, defend and hold harmless
the New Grace Indemnitees from and against, any payment required to be made as
a result of the breach by a member of the New Grace Group or the Packco Group,
respectively, of any obligation under this Agreement. If any member of the
Packco Group or the New Grace Group, fails to comply in any respect whatsoever
with any of its responsibilities under this Agreement relating to promptly
forwarding to any member of the other Group (the "Recipient Group") any
communications with and refunds received from any taxing authority
("Forwarding Responsibilities"), then Grace or Grace-Conn., as the case may
be, (the "Forwarding Party") shall be liable for and shall indemnify and hold
the New Grace Indemnitees or the Packco Indemnitees, as the case may be,
harmless from and against any costs or expenses (including, without limitation,
Taxes and reasonably incurred lawyers' and accountants' fees) ("Indemnified
Amount") incurred by or imposed upon any member of the Recipient Group arising
out of, in connection with or relating to such communication; provided,
however, that the liability of the Forwarding Party with respect to any one
such failure shall be equal to that portion of the Indemnified Amount that a
member of the Recipient Group demonstrates is caused (directly or indirectly)
by such failure.
Section 4.2. Contests. (a) Whenever a party hereto (the
"Indemnitee") becomes aware of the existence of an issue that could increase
the liability for any Tax, or decrease the amount of any refund, of the other
party hereto or any member of its Group or require a payment hereunder (an
"Indemnity Issue"), the Indemnitee shall in good faith promptly give notice to
such other party (the "Indemnitor") of such Indemnity Issue. The failure of
any Indemnitee to give such notice shall not relieve any Indemnitor of its
obligations under this Agreement, except to the extent that such Indemnitor or
its affiliate is actually materially prejudiced by such failure to give
notice.
(b) The Indemnitor and its representatives, at the Indemnitor's
expense, shall be entitled to participate (i) in all conferences, meetings
or proceedings with any taxing authority, the subject matter of which is or
includes an Indemnity Issue in respect of a Pre-Distribution Period and
(ii) in all appearances before any court, the subject matter of which is or
includes an Indemnity Issue in respect of a Pre-Distribution Period.
(c) Except as provided in Section 4.2(d), Grace-Conn. shall
have the right to decide as between the parties hereto how any Indemnity
Issue for a Pre-Distribution Taxable Period is to be dealt with and finally
resolved with the appropriate taxing authority and shall control all
Proceedings relating thereto. Grace agrees to cooperate with Grace-Conn.
in the settlement of any such Indemnity Issue; provided, however, that
Grace-Conn. shall act in good faith in the conduct of such Proceedings and
shall keep Grace reasonably informed of any developments which can
reasonably be expected to affect adversely Grace. Such cooperation shall
include permitting Grace-Conn. to litigate or otherwise resolve any such
Indemnity Issue. It is expressly the intention of the parties to this
Agreement to take, and the parties shall take, all actions necessary to
establish Grace-Conn. as the sole agent for Tax purposes of each member of
the Affiliated Group, as if Grace-Conn. were the common parent of the
Affiliated Group, with respect to all combined, consolidated and unitary
Tax Returns of the Affiliated Group for the Pre-Distribution Taxable
Periods.
(d) The parties jointly shall represent the interests of (i)
the Affiliated Group in any Proceeding relating to any Straddle Period and
(ii) any Foreign Packco Subsidiary in any Proceeding relating to any
taxable period that involves an Indemnity Issue. Neither party shall
settle any dispute relating to any such period without the consent of the
other party (which consent shall not be unreasonably withheld); provided,
however, that if either party proposes a settlement and the other party
does not consent thereto, the nonconsenting party shall assume control of
the Proceeding (and bear all subsequently incurred costs, fees and expenses
relating thereto) and the respective liabilities of the parties shall be
determined pursuant to Section 6.7 based on the magnitude and likelihood of
success of the issues involved in the Proceeding, the reasonableness of the
settlement offer, the expense of continuing the Proceeding and other
relevant factors. Any other disputes regarding the conduct or resolution
of any such Proceeding shall be resolved pursuant to Section 6.7. All
costs, fees and expenses paid to third parties in the course of such
Proceeding shall be borne by the parties in the same ratio as the ratio in
which, pursuant to the terms of this Agreement, the parties would share the
responsibility for payment of the Taxes asserted by the taxing authority in
its claim or assessment if such claim or assessment were sustained in its
entirety; provided, however, that in the event that any party hereto
retains its own advisors or experts in connection with any Proceeding, the
costs and expenses thereof shall be borne solely by such party.
Section 4.3. Cooperation and Exchange of Information.
(a) Grace shall, and shall cause each appropriate member of the
Packco Group to, prepare and submit to Grace-Conn., as soon as practicable,
but in no event later than the date that is 30 days after a request from
Grace-Conn. (i) all information as Grace-Conn. shall reasonably request to
enable Grace-Conn. to file any Conn Prepared Return or prepare any Pre-
Distribution Schedule (which information shall be provided in the form and
of the quality in which comparable information was provided prior to the
Distribution) and (ii) any Del Prepared Return (including any amended
return) for any year within the carryback or carryforward period for an
Overall Tax Benefit or Hypothetical Pre-Distribution Overall Tax Benefit
that is for the account of Grace-Conn. or for any year with respect to
which Grace is entitled to a payment under Section 3.2(a)(v). Grace-Conn.
shall bear any out-of-pocket marginal expense paid by any member of the
Packco Group in preparing and submitting such information in respect of a
Pre-Distribution Schedule relating to a Pre-Distribution Taxable Period,
and the parties shall share equally any such expenses in respect of a Pre-
Distribution Schedule relating to a Straddle Period.
(b) Each party on behalf of itself and each member of its Group,
agrees to provide the other party and the members of such party's Group
with such cooperation and information as the second party or its Group
members shall reasonably request in connection with the preparation or
filing of any Tax Return, Pre-Distribution Schedule or claim for refund not
inconsistent with this Agreement or in conducting any Proceeding in respect
of Taxes. Such cooperation and information shall include, without
limitation, (i) execution and delivery of a power of attorney by Grace or
any other member of the Packco Group to Grace-Conn. or another member of
the New Grace Group or designation of an officer of Grace-Conn. or another
member of the New Grace Group as an officer of Grace or any other member of
the Packco Group for the purpose of signing Tax Returns, cashing refund
checks and conducting Proceedings if Xxxxx Xxxx. could not otherwise
exercise its rights under this Agreement with respect to such Returns,
refunds or Proceedings, (ii) promptly forwarding copies of appropriate
notices and forms or other communications received from or sent to any
taxing authority which relate to the Affiliated Group, the Packaging
Business or the New Grace Business and (iii) providing copies of all
relevant portions of Tax Returns, accompanying schedules, related
workpapers, documents relating to rulings or other determinations by taxing
authorities, including, without limitation, foreign taxing authorities, and
records concerning the ownership and Tax basis of property, which either
party may possess. Each party shall make, and shall cause the members of
the Packco Group to make, their employees and facilities available on a
mutually convenient basis to provide explanation of any documents or
information provided hereunder.
(c) Grace and Grace-Conn. agree to retain all Tax Returns,
related schedules and workpapers, and all material records and other
documents as required under Section 6001 of the Code and the regulations
promulgated thereunder relating thereto existing on the date hereof or
created through the Distribution Date, until the expiration of the statute
of limitations (including extensions) of the taxable years to which such
Tax Returns and other documents relate and until the Final Determination of
any payments which may be required in respect of such years under this
Agreement. Grace-Conn. and Grace agree to advise each other promptly of
any such Final Determination. Any information obtained under this Section
shall be kept confidential, except as may be otherwise necessary in
connection with the filing of Tax Returns or claims for refund or in
conducting any audit or other proceeding.
(d) If (i) any member of the Packco Group fails to provide any
information requested pursuant to this Section 4.3(a) by the dates and in
the manner specified in Section 4.3(a) hereof or (ii) with respect to
information not requested pursuant to Section 4.3(a) hereof, any member of
either Group fails to provide any information requested pursuant to this
Section 4.3, within a reasonable period, then the requesting party shall
have the right to engage a "Big Six" public accounting firm of its choice
to gather such information. Each party agrees upon two business days'
notice, in the case of a failure to provide information pursuant to Section
4.3 hereof to permit any such "Big Six" public accounting firm full access
to all appropriate records or other information in the possession of any
member of the party's Group during reasonable business hours, and promptly
to reimburse or pay directly all costs and expenses in connection with the
engagement of such public accountants.
(e) If any member of either Group supplies information
pursuant to this Agreement and an officer of any member of the other Group
signs a statement or other document under penalties of perjury in reliance
upon the accuracy of such information and so requests, then a duly
authorized officer of the member supplying such information shall certify,
under penalties of perjury, the accuracy and completeness of the
information so supplied. Grace agrees to indemnify and hold harmless each
New Grace Indemnitee, and Grace-Conn. agrees to indemnify and hold harmless
each Packco Indemnitee, from and against any cost, fine, penalty or other
expense of any kind attributable to the gross negligence or willful
misconduct of a member of the Packco Group, or New Grace Group, as the case
may be, in supplying a member of the other Group with inaccurate or
incomplete information.
ARTICLE V.
CERTAIN POST-DISTRIBUTION TRANSACTIONS
Section 5.1. Sealed Air and Packco Group Covenants.
Unless, in the case of any of Sections 5.1(a) through (f) below,
Grace has obtained a ruling letter from the IRS or an opinion of nationally
recognized counsel to Grace, in either case, to the effect that, without
material qualification, such act or omission will not adversely affect the
federal income tax consequences of the Distribution to any of Grace, Grace-
Conn. or the stockholders of Grace-Conn., as set forth in the Tax Opinions,
and the substance of, and basis for, such conclusion in such ruling or
opinion is reasonably satisfactory to Grace-Conn. in its good faith solely
with regard to preserving the Tax-Free Status of the Distribution (the
"Ruling/Opinion Exception"):
(a) No Sealed Air Party at any time nor any member of the Packco
Group at any time after the Effective Time shall take any action, or fail
or omit to take any action, that would cause any representation made in the
Sealed Air Tax Matters Certificate or the Grace Tax Matters Certificate to
be untrue in a manner that would have an adverse effect on the Tax-Free
Status of the Distribution.
(b) Until the first day after the Restriction Period, the Packco
Group shall continue the active conduct of the Packaging Business (the "Active
Packco Business"). The Packco Group shall not liquidate, dispose of, or
otherwise discontinue the conduct of any material portion of the Active Packco
Business. The Packco Group shall continue the active conduct of the
Packaging Business primarily through officers and employees of the Packco
Group (and not through independent contractors).
(c) Until the first day after the Restriction Period, no Sealed
Air Party nor any member of the Packco Group shall sell or otherwise issue
to any Person, or redeem or otherwise acquire from any Person (other than
any member of the Packco Group), any Equity Securities of Grace or any
other member of the Packco Group; provided, however, that purchases that,
in the aggregate, meet the requirements of Section 4.05(1)(b) of Revenue
Procedure 96-30 shall not constitute a redemption or acquisition of stock
of Grace for purposes of this Section 5.1(c).
(d) Until the first day after the Restriction Period, no
Sealed Air Party nor any member of the Packco Group shall (i) solicit any
Person to make a tender offer for, or otherwise acquire or sell, the Equity
Securities of Grace, (ii) participate in or support any unsolicited tender
offer for, or other acquisition or disposition of, the Equity Securities of
Grace or (iii) approve or otherwise permit any proposed business
combination or any transaction which, in the case of (i), (ii) or (iii),
individually or in the aggregate, together with the transactions
contemplated under the Distribution Agreement, the Merger Agreement, the
Benefits Agreement and this Agreement, results in one or more Persons
acquiring (other than in acquisitions not taken into account for purposes
of Section 355(e)) directly or indirectly stock representing a 50 percent
or greater interest (within the meaning of Section 355(e) of the Code) in
Grace. In addition, no Sealed Air Party nor any member of the Packco Group
shall at any time, whether before or subsequent to the expiration of the
Restriction Period, engage in any action described in clauses (i), (ii) or
(iii) of the preceding sentence if it is pursuant to an arrangement
negotiated (in whole or in part) prior to the Distribution, even if at the
time of the Distribution it is subject to various conditions, nor shall any
such Party or member take any action, or fail or omit to take any action,
that would cause Section 355(d) or (e) to apply to the Distribution.
(e) Until the first day after the Restriction Period, no
Sealed Air Party nor the members of the Packco Group shall sell, transfer,
or otherwise dispose of or agree to dispose of assets (including, for such
purpose, any shares of capital stock of a Subsidiary) that, in the
aggregate, constitute more than 60% of the gross assets of Packco, nor
shall they sell, transfer, or otherwise dispose of or agree to dispose of
assets (including, for such purpose, any shares of capital stock of a
Subsidiary) that, in the aggregate, constitute more than 60% of the con-
solidated gross assets of the Packco Group. The foregoing sentence shall
not apply to sales, transfers, or dispositions of assets in the ordinary
course of business. The percentages of gross assets or consolidated gross
assets of Packco or the Packco Group, as the case may be, sold,
transferred, or otherwise disposed of, shall be based on the fair market
value of the gross assets of Packco and the Packco Group as of the
Effective Time, and for this purpose, the values set forth in the Packaging
Business Disclosure Letter Balance Sheet shall be conclusive.
(f) Until the first day after the Restriction Period, neither
Packco nor its Subsidiaries shall voluntarily dissolve or liquidate or engage
in any merger, consolidation or other reorganization. The foregoing sentence
shall not apply to transactions in which Packco acquires another
corporation, limited liability company, limited partnership, general
partnership or joint venture solely for cash or other consideration that
is not Equity Securities. Reorganizations of Packco with its Affiliates,
and liquidations of Packco's Affiliates, are not subject to Section 5.1(b)
or this Section 5.1(f) to the extent not inconsistent with the structure
necessary for the Distribution to qualify for Tax-Free Status.
(g) Until the first day after the Restriction Period, Grace shall
xxxxxxx Xxxxx-Xxxx. 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
Xxxxx Xxxxxxx business and the Grace Construction Business. The New Grace
Group may dispose of, liquidate or discontinue the conduct of the Xxxxx
Xxxxxxx business or the Grace Construction Products business if it actively
continues the conduct of the other. The New Grace Group shall continue the
active conduc11zt of at least one of the Active New Grace Businesses primarily
through officers and employees of the New Grace Group (and not through
independent contractors).
(c) Until the first day after the Restriction Period, no member of
the New Grace Group shall sell or otherwise issue to any Person, or redeem
or otherwise acquire from any Person (other than any member of the New
Grace Group), any Equity Securities of New Grace or any other member of the
New Grace Group; provided, however, that purchases that, in the aggregate,
meet the requirements of Section 4.05(1)(b) of Revenue Procedure 96-30
shall not constitute a redemption or acquisition of stock of New Grace for
purposes of this Section 5.2(c).
(d) Until the first day after the Restriction Period, no member of
the New Grace Group shall (i) solicit any Person to make a tender offer for,
or otherwise acquire or sell, the Equity Securities of New Grace, (ii)
participate in or support any unsolicited tender offer for, or other
acquisition or disposition of, the Equity Securities of New Grace or (iii)
approve or otherwise permit any proposed business combination or any
transaction which, in the case of (i), (ii) or (iii), individually or in
the aggregate, together with the transactions contemplated under the
Distribution Agreement, the Merger Agreement, the Benefits Agreement and
this Agreement, results in one or more Persons acquiring (other than in
acquisitions not taken into account for purposes of Section 355(e))
directly or indirectly stock representing a 50 percent or greater interest
(within the meaning of Section 355(e) of the Code) in New Grace. In
addition, no member of the New Grace Group shall at any time, whether
before or subsequent to the expiration of the Restriction Period, engage in
any action described in clauses (i), (ii) or (iii) of the preceding
sentence if it is pursuant to an arrangement negotiated (in whole or in
part) prior to the Distribution, even if at the time of the Distribution it
is subject to various conditions, nor shall any such member take any
action, or fail or omit to take any action, that would cause Section 355(d)
or (e) of the Code to apply to the Distribution.
(e) Until the first day after the Restriction Period, no member of
the New Grace Group shall sell, transfer, or otherwise dispose of or agree to
dispose of assets (including, for such purpose, any shares of capital stock
of a Subsidiary) that, in the aggregate, constitute more than 60% of the
gross assets of New Grace, nor shall they sell, transfer, or otherwise
dispose of or agree to dispose of assets (including, for such purpose, any
shares of capital stock of a Subsidiary) that, in the aggregate, constitute
more than 60% of the consolidated gross assets of the New Grace Group. The
foregoing sentence shall not apply to sales, transfers, or dispositions of
assets in the ordinary course of business or to a sale, transfer or
disposition of any or all of the Discontinued Businesses and either of the
Active New Grace Businesses; provided, however, that in the event of a
sale, transfer or disposition of one of the Active New Grace Businesses,
the retained Active New Grace Business shall be conducted by a member of
the New Grace Group at substantially the same level as on the Distribution
Date. The percentages of gross assets or consolidated gross assets of New
Grace or the New Grace Group, as the case may be, sold, transferred, or
otherwise disposed of, shall be based on the fair market value of the gross
assets of New Grace and the New Grace Group as of the Effective Time, and
for this purpose, the values set forth in the [Registration Statements]
shall be conclusive.
(f) Until the first day after the Restriction Period, Grace-
Conn. shall xxxxxxx Xxxxx with a copy of any ruling request that Grace-
Conn. or any of its Affiliates may file with the IRS and any opinion
received that relates to or otherwise reasonably could be expected to have
an effect on the Tax-Free Status of the Distribution.
Section 5.3. Responsibility for Taxes.
(a) Sealed Air and Grace agree to indemnify and hold the
Grace-Conn. Indemnitees harmless from and against all Indemnifiable Losses
resulting from (x) any Action which causes the Distribution to fail to have
Tax-Free Status or (y) the Merger failing to qualify as a reorganization
under Section 368 of the Code. An "Action" shall mean any act or omission
which fails to comply with any of the representations in the Sealed Air Tax
Matters Certificate or the covenants in Section 5.1 and any act or omission
which would fail to comply with any of the covenants in Section 5.1 but for
compliance with the Ruling/Opinion Exception. An "Action" shall also
include an action or omission which would be a breach of the covenant
contained in the first sentence of Section 5.1(d), if such covenant were in
effect until the day which is five years after the Effective Time instead
of until the first day after the Restriction Period.
(b) Grace-Conn. agrees to indemnify and hold the
Packco Indemnitees harmless from and against any Tax resulting from the
failure of the Distribution to have Tax-Free Status, except where such failure
is attributable to an Action.
(c) For purposes of Sections 5.1 and 5.2 hereof, when a tax
opinion or ruling of one party (the "Transaction Party") is required to be
reasonably satisfactory to the other party (the "Reviewing Party"), the
Reviewing Party at the request of the Transaction Party shall designate
nationally recognized counsel to review such opinion or ruling without
revealing the substance of the underlying transaction to the Reviewing Party
and the concurrence of such outside counsel to the sufficiency of such opinion
or ruling shall constitute "reasonable satisfaction" to the Reviewing Party
for purposes of this Agreement.
Section 5.4. Injunction. The parties hereto agree that the
payment of monetary compensation would not be an adequate remedy for a
breach of the obligations contained in Article V hereof, and each party
consents to the issuance and entry of an injunction against the taking of
any action by it or a member of its Group that would constitute such a
breach; provided, however, that the foregoing shall be without prejudice to
and shall not constitute a waiver of any other remedy either party may be
entitled to at law or at equity hereunder.
ARTICLE VI.
MISCELLANEOUS
Section 6.1. Expenses. Unless otherwise expressly
provided in this Agreement, the Distribution Agreement or the Merger
Agreement, each party shall bear any and all expenses that arise from their
respective obligations under this Agreement.
Section 6.2. Foreign Transfer Taxes. Adjusted Foreign
Transfer Taxes shall be shared by the parties as provided in the
Distribution Agreement. Audit adjustments and Final Determinations of
such Taxes shall be governed by the Distribution Agreement. This
Agreement governs responsibilities of the parties with respect to filing
Tax Returns relating to Foreign Transfer Taxes, paying Foreign Transfer
Taxes reflected on such Tax Returns to the applicable governmental
authority and conducting Proceedings relating to Foreign Transfer Taxes.
For purposes of determining indemnity and reimbursement obligations of the
parties under this Agreement, Tax Items arising as a result of the Foreign
Transfers (but not Tax Items arising from any actual distribution of
Subsidiary Excess Cash) shall be disregarded, and the Pre-Distribution
Schedules shall not reflect such Tax Items.
Section 6.3. Payments Paid or Received on Behalf of
Indemnitees; Right to Designate Payee. Each of Grace-Conn. and Grace
shall be entitled to designate an Affiliate of such party as payee with
respect to any payment that would otherwise be made to Grace-Conn. or
Grace, respectively, under this Agreement. Any payment received by Grace-
Conn. or Grace, respectively, or its respective designees shall be received
on behalf of the relevant Grace-Conn. Indemnitees or Packco Indemnitees.
Section 6.4. Foreign Exchange Rate. If any amount
required to be paid hereunder is determined by reference to a Tax, Tax
refund, Tax Benefit or Tax Detriment that is denominated in a currency
other than United States dollars, such payment shall be made in United
States dollars and the amount thereof shall be computed using the Foreign
Exchange Rate for such currency determined as of the date that such Tax is
paid, such Tax refund is received or such Tax Benefit or Tax Detriment
reduces or increases the amount of Tax or Tax refund that would otherwise
be paid or received.
Section 6.5. Amendment. This Agreement may not be amended
except by an agreement in writing, signed by the parties hereto. Anything
in this Agreement or the Distribution Agreement to the contrary
notwithstanding, in the event and to the extent that there shall be a
conflict between the provisions of this Agreement and the Distribution
Agreement, the provisions of this Agreement shall control.
Section 6.6. Notices. All notices and other communications
hereunder shall be in writing and shall be delivered by hand including
overnight business courier or mailed by registered or certified mail (return
receipt requested) to the parties at the following addresses (or at such other
addresses for a party as shall be specified by like notice) and shall be
deemed given on the date on which such notice is received:
(a) To Grace-Conn. or any member of the New Grace Group:
X. X. Xxxxx & Co.-Xxxx.
Xxx Xxxx Xxxxxx Xxxx
Xxxx Xxxxx, Xxxxxxx 00000-0000
Attention: Secretary
Fax: (000) 000-0000
with a copy to:
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.
Fax: (000) 000-0000
(b) To Grace or any member of the Packco Group:
care of Sealed Air
Park 00 Xxxx
Xxxxxx Xxxxx, Xxx Xxxxxx 00000
Attention: [ ]
Fax: [ ]
with a copy to:
Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxx.
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxxxx Xxxxx, Esq.
Fax: (000) 000-0000
Section 6.7. Resolution of Disputes. Any disputes
between the parties with respect to this Agreement regarding the practice
and preparation of returns or the calculation of amounts shall be resolved
by a "Big Six" public accounting firm whose determination shall be
conclusive and binding on the parties. The fees and expenses of such firm
shall be shared equally by Grace-Conn. and Grace, except as otherwise
provided herein. Any other disputes shall be resolved by a "Big Six"
public accounting firm or a law firm or by any other procedure that the
parties may choose.
Section 6.8. Application to Present and Future
Subsidiaries. This Agreement is being entered into by Grace-Conn. and
Grace on behalf of themselves and each member of the New Grace Group and
Packco Group, respectively. This Agreement shall constitute a direct
obligation of each such member. Grace-Conn. and Grace hereby guarantee the
performance of all actions, agreements and obligations provided for under
this Agreement of each member of the New Grace Group and the Packco Group,
respectively. Grace-Conn. and Grace shall, upon the written request of
the other, cause any of their respective Group members formally to execute
this Agreement. This Agreement shall be binding upon, and shall inure to
the benefit of, the successors and assigns of any of the corporations bound
hereby.
Section 6.9. Term. This Agreement shall commence on
the date of execution indicated below and shall continue in effect until
otherwise agreed to in writing by Grace-Conn. and Grace, or their successors.
Section 6.10. Titles and Headings. Titles and headings to
Sections herein are inserted for the convenience of reference only and are not
intended to be a part or to affect the meaning or interpretation of this
Agreement.
Section 6.11. Legal Enforceability. Any provision of
this Agreement which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof. Any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction. Without prejudice to any rights or remedies otherwise
available to any party hereto, each party hereto acknowledges that damages
would be an inadequate remedy for any breach of the provisions of this
Agreement and agrees that the obligations of the parties hereunder shall be
specifically enforceable.
Section Governing Law. 6.12. This Agreement shall be governed
by the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the __ day of ___________, 1997.
X. X. XXXXX & CO.
By:
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Name:
Title:
X. X. XXXXX & CO.-CONN.
By:
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Name:
Title:
SEALED AIR CORPORATION
By:
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Name:
Title: