Employee Benefits And Compensation Agreement

EMPLOYEE BENEFITS AND COMPENSATION AGREEMENT


EMPLOYEE BENEFITS AND COMPENSATION AGREEMENT (the "Agreement") dated as of , 1996 by and among W. R. Grace & Co., a New York corporation ("Grace"), National Medical Care, Inc., a Delaware corporation ("NMC") which, as of the date hereof, is a wholly owned, indirect subsidiary of Grace, and W. R. Grace & Co.-Conn., a Connecticut corporation ("Grace-Conn."), which as of the date hereof, is a wholly owned direct subsidiary of Grace.


WHEREAS, Grace and Fresenius AG, an Aktiengellschaft organized under the laws of the Federal Republic of Germany ("Fresenius AG"), have entered into an Agreement and Plan of Reorganization dated February 4, 1996 (the "Reorganization Agreement");


WHEREAS, immediately prior to the Effective Time (as defined in the Reorganization Agreement, Grace intends to transfer to (or retain in) Grace-Conn. all non-healthcare assets and liabilities, its interests in the Amicon bioseparations business and GN Holdings, Inc. and certain other assets, and to effect a distribution (the "Distribution") to its common shareholders of all of its equity interest in a Delaware corporation ("Grace Delaware") which will own all the outstanding stock of Grace-Conn. in a transaction intended to qualify under section 355 of the Internal Revenue Code of 1986, as amended (the "Code");


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WHEREAS, Grace, Grace-Conn. and Fresenius AG have entered into a Distribution Agreement, dated February 4, 1996 (the "Distribution Agreement") that, together with the exhibits thereto, among other things, sets forth the principal corporate transactions required to effect the Distribution and sets forth other agreements that will govern certain other matters following the Distribution; and


WHEREAS, in anticipation of the Distribution, Grace, NMC and Grace-Conn. desire to set forth their agreement with respect to certain matters related to employees and employee benefit plans and compensation arrangements, this agreement constituting an Other Agreement as contemplated in section 2.03 of the Distribution Agreement;


NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, the parties hereby agree as follows:


SECTION 1 DEFINITIONS.


Capitalized terms used but not defined herein shall have the respective meanings assigned to them in the Distribution Agreement or the Reorganization 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 plural forms of the terms defined):


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AGREEMENT: has the meaning assigned to it in the preamble hereof.


AMICON EMPLOYEE: has the meaning assigned to it in Section 12(a) hereof.


AMICON MIRROR SELF-INSURED WELFARE PLAN: has the meaning assigned to it in Section 12(a) hereof.


BENEFIT PLAN: any Plan established, sponsored or maintained by any member of the NMC Group, any member of the Grace-Conn. 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 NMC Group or the Grace-Conn. Group contributes, has contributed, is required to contribute or has been required to contribute, on behalf of any employee of a member of the NMC Group or a member of the Grace-Conn. Group, or under which any employee of a member of the NMC Group or a member of the Grace-Conn. Group, former employee of a member of the NMC Group or a member of the Grace-Conn. Group, or any beneficiary or dependent thereof, is covered, is eligible for coverage or has benefits rights.


CODE: the Internal Revenue Code of 1986, as amended.


CURRENT PERFORMANCE PERIOD: either of the following "performance periods" under the Grace LTIP: 1994-1996 and 1995-1997.


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DISTRIBUTION AGREEMENT: has the meaning assigned to it in the fourth paragraph hereof.


ERISA: the Employee Retirement Income Security Act of 1974, as amended.


FINAL PERFORMANCE UNIT AWARD: has the meaning assigned to it in Section 4(a) hereof.


FRESENIUS MEDICAL CARE ADS: has the meaning assigned to it in Section 3(a) hereof.


GRACE: has the meaning assigned to it in the first paragraph hereof.


GRACE-CONN. BENEFIT PLAN: any Benefit Plan, other than any NMC Free-Standing Plan, that is maintained by Grace, a member of the NMC Group or the Grace-Conn. Group, including without limitation life insurance, medical and nonqualified retirement plans.


GRACE-CONN. PARTICIPANT: any individual who (i) is an employee of any member of the Grace-Conn. Group, (ii) immediately after the Distribution Date is a former employee of any member of the Grace-Conn. Group or Grace who has not been an employee of the NMC Group since such individual's latest period of employment with Grace-Conn. Group or Grace, or (iii) is a beneficiary or dependent of any individual described in clause (i) or (ii).


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GRACE DELAWARE: has the meaning assigned to it in the third paragraph hereof.


GRACE LTIP: the Grace Long-Term Incentive Program.


GRACE OPTION: an option to purchase shares of Grace Common Stock granted pursuant the Grace 1994 Stock Incentive Plan, the Grace 1989 Stock Incentive Plan, the Grace 1986 Stock Incentive Plan, or the Grace 1981 Stock Incentive Plan.


HAMPERS EMPLOYMENT AGREEMENT: has the meaning assigned to it in Section 8(b) hereof.


HAMPERS NON-QUALIFIED PENSION BENEFIT: has the meaning assigned to it in Section 8(b) hereof.


IRS: the Internal Revenue Service.


LTIP AWARDS: has the meaning assigned to it in Section 4(a) hereof.


NMC: has the meaning assigned to it in the first paragraph hereof.


NMC FREE-STANDING PLAN: any Benefit Plan that is sponsored or maintained by Grace, a member of the NMC Group or the Grace-Conn. Group exclusively for the benefit of NMC Participants, including but not limited to (i) the National Medical Care, Inc. Retirement Plan; (ii) the NMC Employees Savings and Investment Plan;


- 5 - 6 (iii) the National Medical Care, Inc. Deferred Compensation Plan; (iv) the National Medical Care, Inc. Supplemental Executive Retirement Plan; and (v) the National Medical Care, Inc. Medical Plan. In addition to the Plans described in the immediately preceding sentence, any Benefit Plan that is sponsored or maintained by the NMC Group that covers Amicon Employees, as well as NMC Participants, but no other Grace-Conn. Participants, shall also be regarded as an "NMC Free-Standing Plan".


NMC INSURED WELFARE PLAN: A Welfare Plan maintained by NMC or any NMC Subsidiary that provides benefits through an insurance policy or contract with one or more insurance companies.


NMC PARTICIPANT: any individual who (i) immediately before and after the Distribution Date, is an employee of NMC or any NMC Subsidiary, (ii) immediately after the Distribution Date is a former employee of NMC or any NMC Subsidiary who has not been an employee of the Grace-Conn. Group since such individual's latest period of employment with NMC or an NMC Subsidiary, or (iii) is a beneficiary or dependent of any individual described in clause (i) or (ii).


NMC SELF-INSURED WELFARE PLAN: A Welfare Plan maintained by NMC or any NMC Subsidiary that provides benefits directly from employer assets, and not through an insurance policy or contract with one or more insurance companies.


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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 intended to qualify under section 401(a) of the Code.


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 arrangement of any kind (including, but not limited to, any "employee benefit plan" (within the meaning of section 3(3) of ERISA)).


RATIO: the amount obtained by dividing (i) the average of the arithmetic mean of the highest and lowest sales prices per share of the Grace Common Stock on the New York Stock Exchange Composite Tape on each of the ten trading days immediately preceding the Distribution Date, by (ii) the average of the arithmetic mean (divided by 1.112) of the highest and lowest sales prices per share of the Fresenius USA Common Stock on the American Stock Exchange


- 7 - 8 Composite Tape on each of the ten trading days immediately preceding the Distribution Date.


TERMINATION BENEFITS: has the meaning assigned to it in Section 2(a) hereof.


WELFARE PLAN: any Benefit Plan that is an "employee welfare benefit plan" (within the meaning of section 3(1) of ERISA).


SECTION 2 TERMINATION BENEFITS.


(a) No employee of the Grace-Conn. Group and no employee of the NMC Group shall be deemed, as a result of the Distribution or Reorganization, to have terminated employment (voluntarily or involuntarily) from either Group for purposes of any Plan, program, contract, agreement 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").


(b) The NMC Group shall assume or retain, as appropriate, shall be solely responsible for, and shall indemnify the Grace-Conn. Indemnities against, all Indemnifiable Losses relating to or arising out of claims made by or on behalf of NMC Participants for, or with respect to, Termination Benefits relating to the actual or constructive termination or alleged actual or constructive ter-


- 8 - 9 mination of employment of any NMC Participant with any member of the NMC Group, whether before, on or after the Distribution Date.


(c) The Grace-Conn. Group shall assume or retain, as appropriate, shall be solely responsible for, and shall indemnify the NMC Indemnitees against, all Indemnifiable Losses relating to or arising out of claims made by or on behalf of Grace-Conn. 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 Grace-Conn. Participant with any member or the Grace-Conn. Group, whether before, on or after the Distribution Date.


SECTION 3 GRACE OPTIONS.


(a) As soon as practicable after the Distribution Date, each Grace Option held by NMC Participants as of the Distribution Date shall be converted into options for American Depository Shares of Fresenius Medical Care AG ("Fresenius Medical Care ADSs") by applying the following procedure: each NMC Participant (who has received one or more grants of Grace Options) shall be credited with options for the number of Fresenius Medical Care ADSs that equal the number of shares of Grace Common Stock covered by outstanding Grace Options that were awarded to the NMC Participant as part of a specific grant at a specific option price, multiplied by the Ratio;


- 9 - 10 and the option price of the options for Fresenius Medical Care ADSs shall be equal to the option price of the specific grant of Grace Options from which the options for the Fresenius Medical Care ADSs were derived, divided by the Ratio. The options for Fresenius Medical Care ADSs that result from the conversion described in this Section 3(a) shall become vested at the same time and in the same manner as would apply to the Grace Options from which the options for the ADSs were derived; provided that, Fresenius Medical Care AG may accelerate the vesting schedule regarding any option for Fresenius Medical Care ADSs, if such change is consistent with applicable law. NMC Participants shall have no right, title or claim to Grace Options from which options for Fresenius Medical Care ADSs were derived in accordance with this Section 3(a).


(b) From and after the Distribution Date, the NMC Group shall assume or retain, as appropriate, shall be solely responsible for, and shall indemnify the Grace-Conn. Indemnities against, all Indemnifiable Losses relating to or arising out of claims made by or in behalf of NMC Participants for, or with respect to, Grace Options awarded to NMC Participants and/or options with respect to Fresenius Medical Care ADSs held by or awarded to NMC Participants.


SECTION 4 GRACE LTIP.


(a) The contingent awards under the Grace LTIP for Current Performance Periods held by NMC Participants [and by the


- 10 - 11 individuals listed on Schedule A hereto (which lists Grace-Conn. Participants who are employed by Amicon, Inc. and who hold LTIP awards)] (such contingent awards, the "LTIP Awards") shall become vested and nonforfeitable as of ...