1
================================================================================
TAX MATTERS AGREEMENT
BY AND AMONG
MANVILLE CORPORATION
RIVERWOOD INTERNATIONAL CORPORATION
CDRO HOLDING CORPORATION
AND
CDRO ACQUISITION CORPORATION
DATED AS OF
OCTOBER 25, 1995
================================================================================
2
TABLE OF CONTENTS
Section Page
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Termination of Existing Tax Sharing Agreements; Tax Sharing Payments; Indemnifiable Separate Taxes . . . . . . . . 5
3. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4. Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5. Refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6. Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7. Conduct of Tax Affairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8. Section 338(h)(10) Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
9. Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
10. Tax Dispute Resolution Mechanism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
11. Cooperation on Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
12. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
13. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
15. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
16. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
17. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
18. Assignment; Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
19. No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
20. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
21. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3
22. Termination; Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
23. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
24. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ii
4
TAX MATTERS AGREEMENT
TAX MATTERS AGREEMENT, dated as of October 25, 1995, by and
among Manville Corporation, a Delaware corporation ("Stockholder"), Riverwood
International Corporation, a Delaware corporation (the "Company"), CDRO Holding
Corporation, a Delaware corporation ("Purchaser"), and CDRO Acquisition
Corporation, a Delaware corporation ("Newco").
WHEREAS Stockholder currently owns more than 80% of the
outstanding capital stock of the Company;
WHEREAS the Company, Purchaser and Newco have entered into an
Agreement and Plan of Merger dated as of the date hereof (the "Merger
Agreement"), pursuant to which Newco will be merged with the Company, as a
result of which Purchaser will become the owner of all of the outstanding
capital stock of the survivor of the merger, and Stockholder and the other
shareholders of the Company will receive cash in exchange for their capital
stock of the Company;
WHEREAS Stockholder, Purchaser and Newco have entered into a
Voting and Indemnification Agreement dated as of the date hereof (the
"Indemnification Agreement") as contemplated by the Merger Agreement; and
WHEREAS the Company, Stockholder and Purchaser wish to set
forth their agreement with respect to certain tax matters as set forth below.
NOW THEREFORE, in consideration of the premises and the mutual
agreements set forth herein, the parties hereto agree as follows:
1. Definitions. Except as specifically set forth herein,
capitalized terms as used herein have the meanings set forth in the Merger
Agreement. The following terms as used herein have the following meanings:
"Additional Section 338 Form": as defined in Section 8.2(c).
"Affiliate": of any Person means any other Person that,
directly or indirectly through one or more intermediaries, Controls, is
Controlled by or is under common Control with the first Person, including but
not limited to a Subsidiary of the first Person, a Person of which the first
Person is a Subsidiary, or another Subsidiary of a Person of which the first
Person is also a Subsidiary.
5
"Code": the Internal Revenue Code of 1986, as amended.
"Combined State Tax Return": any Return relating to Combined
State Taxes.
"Combined State Taxes": any state or local Income Taxes with
respect to which the Company or any of its Subsidiaries has filed or is
required to file pursuant to Section 4.1(b) a state or local Income Tax Return
with a member of the Stockholder's Group on a consolidated, combined, or
unitary basis.
"Control": the possession, directly or indirectly, of the
power to direct or cause the direction of the management policies of a Person,
whether through the ownership of securities, by contract or otherwise.
"Federal Income Taxes": any federal Income Taxes with respect
to which the Company or any of its Subsidiaries has filed or is required to
file pursuant to Section 4.1(a) a consolidated federal Income Tax Return with
the Stockholder's Consolidated Group.
"Final Allocation": as defined in Section 8.3.
"Form 8023": as defined in Section 8.2(a).
"Income Tax": any federal, state, local, provincial, foreign
or other income, alternative, minimum, accumulated earnings, personal holding
company, franchise, capital stock, net worth, capital, profits or windfall
profits tax or other similar tax, estimated tax, duty or other governmental
charge or assessment or deficiencies thereof (including but not limited to all
interest and penalties thereon and additions thereto).
"Indemnifiable Separate Taxes": all state and local Income
Taxes (excluding Combined State Taxes) with respect to the Company and its
Subsidiaries for all Pre-Closing Tax Periods, other than (i) any such Taxes
shown on Returns relating to such Taxes as originally filed with the applicable
Taxing Authorities (as amended pursuant to Section 10(e)) and (ii) any Taxes
described in Section 8.6(b) or Section 8.6(c).
"Indemnified Party": as defined in Section 12.3.
"Indemnifying Party": as defined in Section 12.3.
2
6
"IRS": the Internal Revenue Service.
"Losses": as defined in Section 12.1.
"Non-Company Affiliate": any Affiliate of Stockholder other
than the Company and its Subsidiaries.
"Obligated Party": as defined in Section 13.
"Person": any natural person, firm, partnership, joint
venture, association, corporation, company, trust, business trust, governmental
authority or other entity.
"Pre-Closing Tax Period": any taxable period with respect to
the Company or any of its Subsidiaries ending on or before the close of
business on the Closing Date.
"Pro Forma Combined State Return": as defined in Section
2.2(b).
"Pro Forma Federal Return": as defined in Section 2.2(b).
"Pro Forma Returns": as defined in Section 2.2(c).
"Purchaser Indemnitees": as defined in Section 12.1.
"Representatives": as defined in Section 13.
"Return": any return, report, declaration, form, claim for
refund or information statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Section 338 Election": an election pursuant to section 338
of the Code other than such an election made in conjunction with an election
pursuant to section 338(h)(10) of the Code, and any comparable or corresponding
election with respect to state or local Income Taxes, as applicable to the
Company and each of its Subsidiaries.
"Section 338 Forms": as defined in Section 8.2(a).
"Section 338(h)(10) Election": an election pursuant to
section 338(h)(10) of the Code, and any comparable
3
7
or corresponding election with respect to Combined State Taxes, as applicable
to the Company and each of its Subsidiaries.
"Stockholder Indemnitees": as defined in Section 12.2.
"Stockholder's Consolidated Group": with respect to Federal
Income Taxes, any affiliated group of corporations for purposes of filing
consolidated Returns of which Stockholder (or any predecessor thereof or
successor thereto) is a member.
"Stockholder's Group": with respect to Combined State Taxes,
any consolidated, combined, or unitary group of Persons of which Stockholder or
any Non-Company Affiliate (or any predecessor thereof or successor thereto) is
a member.
"Subsidiary": of any Person means any other Person in which
the first Person owns or controls, directly or indirectly, capital stock or
other equity interests representing more than 50% of the outstanding voting
power (including but not limited to the ability to elect a majority of the
board of directors or other body performing similar functions for such other
Person) or more than 50% of the equity interests in such other Person.
"Tax": any federal, state, local, provincial, foreign or
other income, alternative, minimum, accumulated earnings, personal holding
company, franchise, capital stock, net worth, capital, profits, windfall
profits, gross receipts, value added, sales, use, excise, custom duties,
transfer, conveyance, mortgage, registration, stamp, documentary, recording,
premium, severance, environmental, real and personal property, ad valorem,
intangibles, rent, occupancy, license, occupational, employment, unemployment
insurance, social security, disability, workers' compensation, payroll, health
care, withholding, estimated or other similar tax, duty or other governmental
charge or assessment or deficiencies thereof (including but not limited to all
interest and penalties thereon and additions thereto).
"Tax Dispute Accountants": as defined in Section 10.
"Tax Dispute Resolution Mechanism": as defined in Section 10.
4
8
"Tax Sharing Agreement": the Tax Sharing Agreement dated as
of June 17, 1992 between Stockholder and the Company, as amended to the date of
this Agreement.
"Taxing Authority": any federal, state, local or foreign
governmental authority responsible for any Tax.
2. Termination of Existing Tax Sharing Agreements; Tax
Sharing Payments; Indemnifiable Separate Taxes.
2.1 Tax Sharing Agreements. From the date hereof through the
Closing, the Tax Sharing Agreement shall remain in full force and effect and
shall not be amended without the consent of Purchaser and Newco, and the
parties thereto shall make all payments required thereunder. Any and all
existing Tax sharing agreements and arrangements (including but not limited to
the Tax Sharing Agreement) between the Company or any of its Subsidiaries on
the one side, and Stockholder or any Non-Company Affiliate, on the other side
(copies of which, together with all amendments thereto through the date hereof,
have been provided to Purchaser), shall be terminated effective upon the
Closing, and no additional payments shall be made thereunder. After the
Closing neither the Company, any of its Subsidiaries, Stockholder nor any
Non-Company Affiliate shall have any further rights or liabilities thereunder
for any taxable year (whether the current year, a future year, or a past year).
2.2 Tax Sharing Payments. The provisions of this Section 2.2
shall become effective upon the Closing:
(a) The Company shall pay to Stockholder an amount equal to
the estimated Federal Income Taxes and estimated Combined State Taxes with
respect to the Company and its Subsidiaries for all Pre-Closing Tax Periods,
for which Taxes Stockholder is responsible pursuant to Section 3.1(a) or
Section 3.1(b), and shall make each such payment no later than 5 business days
prior to the due date for the payment of such estimated Taxes to the applicable
Taxing Authority. The amount of such payment in respect of such estimated
Taxes shall be calculated in accordance with past practices pursuant to the
provisions of Article III of the Tax Sharing Agreement, based on Stockholder's
reasonable estimates of the income of the Company and its Subsidiaries and
reduced by the amount of any payments on account of such Taxes previously paid
to Stockholder.
(b) Stockholder shall deliver to Purchaser a pro forma
Federal Income Tax Return (each a "Pro Forma Federal Return") of the Company
and its Subsidiaries (i) for the
5
9
period beginning January 1, 1995 and ending on December 31, 1995, which Return
shall be delivered no later than July 17, 1996, and (ii) for the period
beginning January 1, 1996 and ending at the close of business on the Closing
Date, which Return shall be delivered no later than July 17, 1997, in each case
calculated in accordance with the principles of Section 2.2(e). Stockholder
shall deliver to Purchaser a pro forma Combined State Tax Return (each a "Pro
Forma Combined State Return") for each jurisdiction in which a Combined State
Tax Return is filed no later than 60 days prior to the due date for the
applicable Return (including all extensions thereof) for the period beginning
January 1, 1995 and ending on December 31, 1995 and for the period beginning
January 1, 1996 and ending at the close of business on the Closing Date, in
each case calculated in accordance with the principles of Section 2.2(e).
Purchaser will and will cause the Company and its Subsidiaries to furnish Tax
information to Stockholder for preparation of the Pro Forma Returns in a timely
manner.
(c) Purchaser shall have the right at Purchaser's expense to
review all work papers and procedures used to prepare each of the Pro Forma
Federal Returns and the Pro Forma Combined State Returns (together, the "Pro
Forma Returns"). Unless Purchaser timely objects as specified in this Section
2.2(c), the Pro Forma Returns shall be final and binding on the parties without
further adjustment. If Purchaser objects to any item on any Pro Forma Return,
it shall, within 30 days after delivery of such Pro Forma Return, notify
Stockholder in writing that it so objects, specifying any such item and stating
the factual or legal basis for any such objection. If a notice of objection
shall be duly delivered, disputed items shall be resolved pursuant to the Tax
Dispute Resolution Mechanism. Upon resolution of all disputed items, the Pro
Forma Returns shall be adjusted to reflect such resolution and shall be final
and binding on the parties without further adjustment.
(d) Purchaser shall cause the Company to pay to Stockholder,
or Stockholder shall pay to the Company, as appropriate, together with interest
calculated in accordance with past practices pursuant to the provisions of the
Tax Sharing Agreement, an amount reflecting the difference between (i) the sum
of the liabilities shown on the final Pro Forma Returns for each period and
(ii) the aggregate of all amounts previously paid by the Company or any of its
Subsidiaries with respect thereto. The payment for the period beginning
January 1, 1995 and ending on December 31, 1995 shall be made at the time
Stockholder's Consolidated Group files its consolidated federal Income Tax
Return for
6
10
the taxable year ending December 31, 1995, and the payment for the period
beginning January 1, 1996 and ending at the close of business on the Closing
Date shall be made at the time Stockholder's Consolidated Group files its
consolidated federal Income Tax Return for the taxable year ending December 31,
1996. If a Pro Forma Return for Federal Income Taxes or for a Combined State
Tax reflects a net operating loss, net capital loss, excess tax credit or other
similar tax attribute, then Stockholder shall pay to the Company, within 45
days after Stockholder's Consolidated Group files its consolidated federal
Income Tax Return for the relevant taxable year, together with interest
calculated in accordance with past practices pursuant to the provisions of the
Tax Sharing Agreement, an amount equal to the refund that the Company and its
Subsidiaries would have received as a result of the carryback of such attribute
to the relevant Pro Forma Return (or Pro Forma Riverwood Return, as such term
is defined in the Tax Sharing Agreement) previously prepared with respect to
Federal Income Taxes or the same Combined State Tax, as the case may be
(whether or not such attribute is actually carried back with respect to the
relevant Federal Income Tax Returns or Combined State Tax Returns). All such
payments shall be calculated in accordance with the principles of Section
2.2(e).
(e) The calculation of the amount of Tax liabilities and
attributes set forth on the Pro Forma Returns shall be made as if the Company
were filing its own consolidated, combined or unitary Income Tax Returns
including those of its Subsidiaries that are members of Stockholder's
Consolidated Group or the applicable group for which a Combined State Tax
Return is filed (with the Company as the common parent) for all Pre-Closing Tax
Periods (assuming that the Company and its Subsidiaries had not been in
existence before January 1, 1992), provided that (i) income, gains, deductions,
losses, credits and recapture of credits shall be computed, and relevant Tax
elections shall be given effect, in a manner consistent with past practices
pursuant to the provisions of Article III of the Tax Sharing Agreement
(including but not limited to the concept that the Pro Forma Returns shall not
include any deductions, losses or credits of the Company and its Subsidiaries
arising from the payment of certain expenses by Stockholder that have not been
and will not be reimbursed by the Company or any of its Subsidiaries) and (ii)
the applicable Tax rates shall be the appropriate statutory rates in effect
during the relevant taxable period. Stockholder and Purchaser agree that the
Pro Forma Federal Return for the period beginning January 1, 1996 and ending at
the close of business on the Closing Date will be prepared on the basis of a
closing of the books of
7
11
the Company and its Subsidiaries as of the close of business on the Closing
Date, as adjusted to reflect income, gains, deductions, losses, credits and
recapture of credits shown on the Company's permanent records (including work
papers) pursuant to Treas. Reg. section 1.1502-76(b)(2)(i) and not on the basis
of proration pursuant to Treas. Reg. section 1.1502-76(b)(2)(ii). The
calculation of the liability for Combined State Tax set forth on each Pro Forma
Combined State Return for the period beginning January 1, 1996 and ending at
the close of business on the Closing Date shall be made in accordance with
comparable provisions under applicable law in accordance with past practices
pursuant to the provisions of Article III of the Tax Sharing Agreement. Except
as set forth to the contrary in this Section 2.2, the Pro Forma Returns shall
be prepared consistently with the applicable Returns as originally filed with
the applicable Taxing Authority, except for such inconsistencies as are
consistent with past practices pursuant to the provisions of Article III of the
Tax Sharing Agreement, and the Pro Forma Returns shall not be amended or
otherwise reflect any changes in or audit adjustments with respect to such
applicable Returns.
(f) Notwithstanding anything in this Section 2.2 to the
contrary, the Pro Forma Returns shall not include any amounts arising from (i)
the restoration of gain or loss on any deferred intercompany transaction (x)
between any of the Company and its Subsidiaries, on the one hand, and any of
Stockholder or any Non-Company Affiliate, on the other hand, that has
previously been taken into account in a Pro Forma Riverwood Return (as such
term is defined in the Tax Sharing Agreement) or (y) between any of the Company
and its Subsidiaries, or the inclusion in income of any excess loss account
with respect to the stock of the Company or any of its Subsidiaries, or (ii)
any income, gains, deductions, losses, credits or recapture of credits
resulting from the deemed sale of assets and other deemed transactions arising
from the Section 338(h)(10) Elections.
2.3 Payments and Returns with Respect to Indemnifiable
Separate Taxes. The provisions of this Section 2.3 shall become effective upon
the Closing:
(a) No later than 5 business days prior to the date on which
any Indemnifiable Separate Tax will actually be paid by the Company or any of
its Subsidiaries to the applicable Taxing Authority, Stockholder shall pay to
the Company the amount of such Tax. If the taxable period covered by any
Return with respect to Indemnifiable Separate Taxes shall include any period
ending after the Closing
8
12
Date, then such Indemnifiable Separate Taxes shall be determined as if such
taxable period ended on the Closing Date, based on a closing of the books of
the Company and its Subsidiaries as of the close of business on the Closing
Date.
(b) The Company shall pay to Stockholder the amount of any
actual reduction in the amount of Income Taxes paid by the Company and its
Subsidiaries for any period beginning after the Closing Date that results from
any deduction of (i) the payment or accrual of Indemnifiable Separate Taxes by
the Company or any of its Subsidiaries or (ii) the payment or accrual of any
amount pursuant to this Section 2.3(b), in each case other than any such
payment or accrual that increases the purchase price for the deemed sale of
assets resulting from the making of the Section 338(h)(10) Elections or any
Section 338 Election. Each payment pursuant to this Section 2.3(b) shall be
made within 5 business days after the filing of the Return for such Income
Taxes (other than a Return for estimated Taxes) that reflects such reduction
(or in the case of a refund reflecting such reduction, after the receipt of
such refund).
(c) Stockholder shall pay to the Company the amount of any
actual increase in the amount of Income Taxes paid by the Company and its
Subsidiaries for any period beginning after the Closing Date that results from
any inclusion in income of the receipt or accrual of any amount pursuant to
Section 2.3(a) or this Section 2.3(c) other than any such receipt or accrual
that reduces the purchase price for the deemed sale of assets resulting from
the making of the Section 338(h)(10) Elections or any Section 338 Election.
Each payment pursuant to this Section 2.3(c) shall be made within 5 business
days after the filing of the Return for such Income Taxes (other than a Return
for estimated Taxes) that reflects such increase.
(d) Upon the making of any payment pursuant to Section 2.3(a),
Stockholder and the Company will in good faith attempt to negotiate a single
payment covering the net amount of the payments to be made pursuant to Section
2.3(b) and Section 2.3(c) relating to the Indemnifiable Separate Taxes covered
by such payment pursuant to Section 2.3(a), taking into account the tax
position of the Company and its Subsidiaries. If Stockholder and the Company
are able to negotiate such a single payment, then the making of such payment
shall discharge the obligations of each with respect to Section 2.3(b) and
Section 2.3(c) covered by such single payment.
9
13
(e) Notwithstanding the other provisions of this Section 2.3,
(i) if Purchaser shall fail to provide notice to Stockholder with respect to an
Indemnifiable Separate Tax as provided in Section 6, Stockholder shall not be
required to pay to the Company pursuant to Section 2.3(a) any portion of such
Indemnifiable Separate Tax to the extent that such failure to give notice
results in a lack of actual notice to Stockholder and Stockholder is materially
prejudiced as a result of such failure, (ii) if the Company shall file any
Return (including amended Returns) relating to an Indemnifiable Separate Tax
without complying with the provisions of Section 2.3(f), Stockholder shall not
be required to pay to the Company pursuant to Section 2.3(a) any portion of
such Indemnifiable Separate Tax to the extent that Stockholder is materially
prejudiced as a result of such failure to comply, and (iii) in any such case,
and to such extent, the provisions of Section 2.3(b), Section 2.3(c) and
Section 2.3(d) relating to such Indemnifiable Separate Tax shall not apply.
(f) The Company shall not file any Return (including amended
Returns) relating to Indemnifiable Separate Taxes without first providing
Stockholder the opportunity to prepare a draft of such Return. The Company
shall furnish Tax information to Stockholder for preparation of a draft of each
such Return in a timely manner. Stockholder shall deliver to the Company a
draft of each such Return to be filed at any time after the Closing Date no
later than the date that is 60 days prior to date on which such Return is to be
filed. The Company shall have the right at its expense to review all work
papers and procedures used to prepare each such draft Return. Unless the
Company timely objects as specified in this Section 2.3(f), each such draft
Return shall be final and binding on the parties without further adjustment.
If the Company objects to any item on any such draft Return, it shall, within
30 days after delivery of such draft Return, notify Stockholder in writing that
it so objects, specifying any such item and stating the factual or legal basis
for any such objection. If a notice of objection shall be duly delivered,
disputed items shall be resolved pursuant to the Tax Dispute Resolution
Mechanism. Upon resolution of all disputed items, such Return shall be
adjusted to reflect such resolution and shall be final and binding on the
parties without further adjustment. If the Company shall provide Stockholder
the opportunity to prepare a draft of any such Return and shall furnish Tax
information to Stockholder for preparation of a draft of such Return, and if
Stockholder shall fail to provide a draft of such Return, in each case as
provided in this Section 2.3(f), the Company shall prepare the Return with
respect to such Indemnifiable
10
14
Separate Tax in its sole discretion in accordance with the provisions of
Section 4.2.
3. Payments.
3.1 Stockholder's Responsibility. As between Stockholder and
the Non-Company Affiliates, on the one hand, and the Company and its
Subsidiaries, Purchaser, Newco and their respective Affiliates, on the other
hand, Stockholder shall pay or cause to be paid to the applicable Taxing
Authority (a) all Federal Income Taxes payable with respect to the Company and
its Subsidiaries for all Pre-Closing Tax Periods, (b) all Combined State Taxes
payable with respect to the Company and such Subsidiaries for all Pre-Closing
Tax Periods and (c) all Income Taxes for which the Company or any of its
Subsidiaries may be held liable, pursuant to section 1.1502-6(a) of the
Treasury Regulations, or any state or local law with respect to Income Taxes,
as a member of Stockholder's Consolidated Group or any Stockholder's Group.
3.2 Purchaser's Responsibility. As between Stockholder and
the Non-Company Affiliates, on the one hand, and the Company and its
Subsidiaries, Purchaser, Newco and their respective Affiliates, on the other
hand, Purchaser shall pay or cause to be paid to the applicable Taxing
Authority all Taxes payable with respect to the Company or any of its
Subsidiaries that are not described as being the responsibility of Stockholder
in Section 3.1.
4. Returns.
4.1 Stockholder's Responsibility. Stockholder and Purchaser
shall cause the Company and its Subsidiaries, to the extent permitted by law,
to join, for all Pre-Closing Tax Periods, in (a) the consolidated federal
Income Tax Returns of Stockholder's Consolidated Group, (b) the combined,
consolidated or unitary Returns for state and local Income Taxes of
Stockholder's Group with respect to which the Company or any of its
Subsidiaries (i) filed such a Return for the most recent taxable period for
which a Return has been filed prior to the Closing and may file such a Return
for subsequent taxable periods or (ii) is required by the applicable Taxing
Authority to file such a Return. Stockholder shall file or cause to be filed
all Returns set forth in the immediately preceding sentence. The income,
gains, deductions, losses, credits and recapture of credits of the Company and
such Subsidiaries for Pre-Closing Tax Periods shall be included in the
consolidated federal Income Tax Returns of Stockholder's Consolidated Group and
in the Combined State Tax Returns, where applic-
11
15
able. Stockholder shall file, or shall cause the Company to file or cause to
be filed, all other Returns relating to the business or assets of the Company
and its Subsidiaries required to be filed on or prior to the Closing Date. Any
such Returns shall, to the extent permitted by applicable Tax law, be filed on
a basis consistent with the last previous such Returns filed in respect of the
Company and its Subsidiaries.
4.2 Purchaser's Responsibility. Purchaser shall file, or
cause to be filed, all Returns relating to the business or assets of the
Company and its Subsidiaries other than those Returns described in Section 4.1
(including but not limited to any federal Income Tax Return filed by the
consolidated group of which Purchaser is a member with respect to any taxable
period ending after the Closing Date). The income, gains, deductions, losses,
credits and recapture of credits of the Company and its Subsidiaries, other
than those required to be included in the Returns described in Section 4.1,
shall be included in the Returns described in the immediately preceding
sentence, including but not limited to all items for periods after the Closing
Date. Any such Returns shall, insofar as they relate to items for periods
ended on or prior to the Closing Date and to the extent permitted by applicable
Tax law, be filed on a basis consistent with the last previous such Returns
filed in respect of the Company and its Subsidiaries.
5. Refunds. Subject to the provisions of this Section 5, (a)
Stockholder or the Non-Company Affiliates shall be entitled to retain, or
Stockholder shall be entitled to receive immediate payment from the Company or
Purchaser of, any refund or credit with respect to (i) Taxes (including but not
limited to refunds and credits arising by reason of amended Returns filed after
the Closing Date), plus any interest received with respect thereto from the
applicable Taxing Authorities, relating to the Company or any of its
Subsidiaries that are described as being the responsibility of Stockholder in
Section 3.1, and (ii) Indemnifiable Separate Taxes for which Stockholder shall
have made a payment to the Company pursuant to Section 2.3, plus any interest
received with respect thereto from the applicable Taxing Authorities, and (b)
Purchaser, the Company or its Subsidiaries shall be entitled to retain, or
Purchaser shall be entitled to receive immediate payment from Stockholder of,
any refund or credit with respect to Taxes (other than Indemnifiable Separate
Taxes for which Stockholder shall have made a payment to the Company pursuant
to Section 2.3), plus any interest received with respect thereto from the
applicable Taxing Authorities,
12
16
relating to the Company or any of its Subsidiaries that are described as being
the responsibility of Purchaser in Section 3.2, provided that neither the
Company nor any of its Subsidiaries shall carry back any item of loss,
deduction or credit from a Return described as being the responsibility of
Purchaser in Section 4.2, to a Return described as being the responsibility of
Stockholder in Section 4.1 (other than the next to last sentence thereof).
Purchaser and Stockholder shall cooperate, and shall cause the Company and its
Subsidiaries to cooperate with Stockholder, with respect to claiming any refund
or credit with respect to Taxes referred to in this Section 5. Such
cooperation shall include providing all relevant information available to
Stockholder or Purchaser (through the Company or otherwise), as the case may
be, with respect to any such claim; filing and diligently pursuing such claim
(including by litigation, if appropriate); paying over to Stockholder or
Purchaser, as the case may be, and in accordance with this provision, any
amount received by Purchaser (or the Company or any of its Subsidiaries) or
Stockholder (or the Non-Company Affiliates), as the case may be, with respect
to such claim; and, in the case of the party filing such a claim, consulting
with the other party prior to agreeing to any disposition of such claim,
provided that the foregoing shall be done in a manner so as not to interfere
unreasonably with the conduct of the business of the parties. The party that
is to enjoy the economic benefit of a refund under this Section 5 shall bear
the reasonable out-of-pocket expenses of the other party incurred in seeking
such refund. If one party is to enjoy the economic benefit of a refund under
this Section 5 but the refund involves an issue that reasonably could be
expected to have a material adverse effect on the other party, the party that
would enjoy the economic benefit shall give notice to the other party of such
issue, with respect to which the parties, each at its own expense, shall
jointly pursue such issue, and any disagreement between them as to such issue
shall be resolved pursuant to the Tax Dispute Resolution Mechanism.
6. Audits. Each of Purchaser and Stockholder shall promptly
notify the other in writing within 10 business days from its receipt of notice
of (a) any pending or threatened Tax audits or assessments of the Company or
any of its Subsidiaries, as long as any taxable periods ending on or prior to
the Closing Date remain open, and (b) any pending or threatened Tax audits or
assessments of Purchaser or Stockholder, or any of the Affiliates thereof, that
reasonably could be expected to affect the Tax liabilities of the Company or
any of its Subsidiaries, in each case for taxable periods ending on or prior to
the Closing Date.
13
17
Stockholder shall have the right to represent the interests of the Company and
its Subsidiaries in any Tax audit or administrative or court proceeding to the
extent relating to Indemnifiable Separate Taxes or to Taxes that are described
as being the responsibility of Stockholder in Section 3.1, and to employ
counsel of its choice at its expense, provided that Stockholder shall give
notice to Purchaser, keep Purchaser reasonably informed and consult with
Purchaser with respect to any issue relating to such audit or proceeding that
reasonably could be expected to have a material adverse effect on Purchaser,
the Company or any of its Subsidiaries. Purchaser shall have the right to
represent the interests of the Company and its Subsidiaries in any Tax audit or
administrative or court proceeding not described in the immediately preceding
sentence and to employ counsel of its choice at its expense. Purchaser and
Stockholder shall cooperate, and Purchaser shall cause the Company and its
Subsidiaries to cooperate with Stockholder, with respect to any Tax audit or
administrative or court proceeding relating to Taxes referred to in this
Section 6. Such cooperation shall include providing all relevant information
available to Stockholder or Purchaser (through the Company or otherwise), as
the case may be, with respect to any such audit or proceeding and making
personnel available at and for reasonable times, including, without limitation,
to prepare responses to requests for information, provided that the foregoing
shall be done in a manner so as not to interfere unreasonably with the conduct
of the business of the parties.
7. Conduct of Tax Affairs. (a) Through the Closing,
Stockholder, the Company and its Subsidiaries will conduct all Tax affairs
relating to the Company and its Subsidiaries only in the ordinary course, in
substantially the same manner as heretofore conducted and in good faith in
substantially the same manner as such affairs would have been conducted if this
Agreement had not been entered into.
(b) Notwithstanding any other provision of this Agreement,
Purchaser shall be responsible for, and neither Stockholder nor any of the
Non-Company Affiliates shall bear, any Taxes that arise due to the failure,
following the Closing, of Purchaser to cause the Company and its Subsidiaries
to carry on their business on the Closing Date in the ordinary course and in
substantially the same manner as heretofore conducted, taking into account the
Merger, the other transactions contemplated by the Merger Agreement and the
making of the Section 338(h)(10) Elections.
14
18
8. Section 338(h)(10) Election.
8.1 Election. Purchaser shall, and Stockholder shall, or
shall cause the proper Non-Company Affiliate to, join in all Section 338(h)(10)
Elections.
8.2 Forms. (a) Purchaser shall be responsible for the
preparation of all forms and schedules required to be filed in connection with
the Section 338(h)(10) Elections ("Section 338 Forms"), including IRS Form
8023-A and all attachments required to be filed therewith pursuant to
applicable Treasury Regulations ("Form 8023"). Stockholder and Purchaser shall
cooperate in drafting and making final the Section 338 Forms. Purchaser shall
be responsible for filing the Section 338 Forms with the proper Taxing
Authorities, provided that Stockholder shall be responsible for filing any
Section 338 Form that must be filed with a Return described in Section 4.1.
(b) At least 15 days prior to the Closing Date, Purchaser
shall furnish Stockholder with four copies (three for Purchaser and one for
Stockholder) of Form 8023 prepared by Purchaser. On or before the Closing
Date, Purchaser and Stockholder shall agree upon the form and content of Form
8023 to be filed on the Closing Date. At the Closing, Stockholder shall
deliver to Purchaser three copies of such Form 8023 executed by the proper
party on behalf of Stockholder. On the Closing Date, Purchaser shall cause
such Form 8023 to be executed by the proper party on behalf of Purchaser, and
shall file such Form 8023 with the IRS.
(c) Purchaser shall prepare (i) any corrections, amendments
or supplements to the Form 8023 as executed by Purchaser and Stockholder
pursuant to Section 8.2(b) and (ii) any state or local reports or forms that
are necessary or appropriate for purposes of complying with the requirements
for making the Section 338(h)(10) Elections (each an "Additional Section 338
Form"). Stockholder and Purchaser shall cooperate in drafting and making final
each Additional Section 338 Form. At least 30 days prior to the latest date
for the filing of each Additional Section 338 Form, Purchaser shall furnish
Stockholder with four copies of such Additional Section 338 Form (three for
Purchaser and one for Stockholder) prepared by Purchaser. At least 15 days
prior to the latest date for the filing of each Additional Section 338 Form,
Purchaser and Stockholder shall agree upon the final form and content of such
Additional Section 338 Form, and Stockholder shall deliver to Purchaser three
copies of such Additional Section 338 Form executed by the proper party on
behalf of Stockholder. Purchaser shall
15
19
cause each Additional Section 338 Form to be executed by the proper party on
behalf of Purchaser, and shall file such Additional Section 338 Form with the
applicable Taxing Authority.
8.3 Allocation. On or before the last day of the seventh
month beginning after the month that includes the Closing Date, Purchaser shall
provide to Stockholder a proposed allocation of the purchase price for the
deemed sale of assets resulting from the making of the Section 338(h)(10)
Elections, together with a report or reports in support of such allocation
prepared by the valuation services group of Deloitte & Touche LLP or of Coopers
& Xxxxxxx L.L.P. or any other firm or firms of independent appraisers of
nationally recognized reputation selected by Purchaser, the fees and expenses
of which shall be borne by Purchaser, setting forth the estimated fair market
values of the assets of the Company and, to the extent relevant to such deemed
sale, its Subsidiaries. Stockholder and Purchaser shall cooperate in
determining the amount of the purchase price for the deemed sale of assets
resulting from the making of the Section 338(h)(10) Elections (including the
liabilities on the Closing Date of the Company and those of its Subsidiaries to
which the Section 338(h)(10) Elections apply) and the final allocation thereof
(the "Final Allocation"). The determination of the Final Allocation (other
than the determination of such liabilities) shall be at the sole discretion of
Purchaser. Any dispute with respect to the determination of such liabilities
shall be resolved pursuant to the Tax Dispute Resolution Mechanism. The
liabilities on the Closing Date of the Company and each of its Subsidiaries to
which the Section 338(h)(10) Elections apply and the Final Allocation shall be
reflected in an Additional Section 338 Form filed with the IRS on or before the
fifteenth day of the ninth month beginning after the month that includes the
Closing Date.
8.4 Modification; Revocation. Purchaser and Stockholder
agree that none of them shall, or shall permit any of their Affiliates to, take
any action to modify the Section 338 Forms following the execution thereof, or
to modify or revoke the Section 338(h)(10) Elections following the filing of
the Section 338 Forms, without the written consent of Stockholder and
Purchaser, as the case may be.
8.5 Consistent Treatment. Purchaser and Stockholder shall,
and shall cause their respective Affiliates to, file all Returns in a manner
consistent with the information contained in the Section 338 Forms and the
Additional Section 338 Forms as filed and the Final Allocation.
16
20
8.6 Taxes and Expenses Resulting from Elections.
Notwithstanding any other provision of this Agreement, (a) Stockholder shall
bear all federal Income Taxes and Combined State Taxes resulting from the
making of the Section 338(h)(10) Elections (including but not limited to any
effect on such Taxes of the making of a Section 338 Election with respect to
any non-United States Subsidiary of the Company), (b) the Company shall bear
all other Taxes resulting from the making of the Section 338(h)(10) Elections
(including but not limited to any effect on such Taxes of the making of a
Section 338 Election with respect to any non-United States Subsidiary of the
Company), (c) the Company shall bear all Taxes resulting from the making of a
Section 338 Election with respect to the Company or any United States
Subsidiary of the Company (including but not limited to any effect on such
Taxes of the making of a Section 338 Election with respect to any non-United
States Subsidiary of the Company), (d) Purchaser and its Affiliates (including
the Company and its Subsidiaries following the Closing), on the one side, and
Stockholder and the Non-Company Affiliates, on the other side, shall bear their
respective administrative, appraisal, legal, accounting and similar expenses
resulting from the making of the Section 338(h)(10) Elections, and (e)
Purchaser and its Affiliates (including the Company and its Subsidiaries
following the Closing) shall bear all administrative, appraisal, legal,
accounting and similar expenses resulting from the making of any Section 338
Elections.
8.7 Deemed Sale of Assets If Newco Is Survivor of Merger.
If Newco is the survivor of the merger of Newco and the Company pursuant to the
Merger Agreement, the parties hereto shall treat such merger for all Income Tax
purposes as a sale of all of the Company's assets for the sum of the Merger
Consideration and the liabilities of the Company on the Closing Date, and as a
complete liquidation of the Company to which the provisions of section 332 of
the Code apply and a distribution of the Merger Consideration to its
shareholders. In such case, the Section 338(h)(10) Elections will be
applicable only to the applicable Subsidiaries of the Company; IRS Form 8594
with respect to such deemed sale and all comparable or corresponding forms
under applicable state and local Income Tax law relating to Combined State
Taxes shall be treated as Section 338 Forms and, as applicable, Additional
Section 338 Forms; the provisions of Sections 2.2(f)(ii), 2.3(b), 2.3(c), 8.3,
8.6(a), 8.6(b), 8.6(d) and 11(d) and the definition of the term Indemnifiable
Separate Taxes shall be applied as if such deemed sale were a part of the
deemed sale of assets resulting from the making of the Section 338(h)(10)
Elections if those
17
21
elections were applicable to the Company as well as the applicable Subsidiaries
of the Company; and the provisions of Sections 2.3(b), 2.3(c), 8.6(c) and
8.6(e) and the definition of the term Indemnifiable Separate Taxes shall be
applied as if such deemed sale were a deemed sale of assets resulting from the
making of a Section 338 Election if that election were applicable to the
Company.
9. Transfer Taxes. Notwithstanding any other provision of
this Agreement, all transfer, documentary, sales, use, stamp, registration and
other such Taxes and fees incurred in connection with the transactions
contemplated by the Merger Agreement (including but not limited to any New York
State Gains Tax, any New York City Transfer Tax and any similar Tax imposed in
other jurisdictions) shall be borne and paid by Purchaser, and Purchaser will,
at its own expense, file all necessary Returns and other documentation with
respect to all such Taxes and fees.
10. Tax Dispute Resolution Mechanism. Wherever in this
Agreement it shall be provided that a dispute shall be resolved pursuant to the
"Tax Dispute Resolution Mechanism," such dispute shall be resolved as follows:
(a) the parties will in good faith attempt to negotiate a prompt settlement of
the dispute; (b) if the parties are unable to negotiate a resolution of the
dispute within 30 days, the dispute will be submitted to the New York office of
a firm of independent accountants of nationally recognized standing reasonably
satisfactory to Stockholder and Purchaser (or, if Stockholder and Purchaser do
not agree on such a firm, then a firm chosen by the Arbitration and Mediation
Committee of the New York Society of Certified Public Accountants) (the "Tax
Dispute Accountants"); (c) the parties will present their arguments and submit
the proposed amount of each item in dispute to the Tax Dispute Accountants
within 15 days after submission of the dispute to the Tax Dispute Accountants;
(d) the Tax Dispute Accountants shall resolve the dispute, in a fair and
equitable manner and in accordance with applicable Tax law and the provisions
of this Agreement, by selecting, for each item in dispute, the proposed amount
for such item submitted by one party or the other party within 30 days after
the parties have presented their arguments to the Tax Dispute Accountants,
whose decision shall be final, conclusive and binding on the parties; (e)
notwithstanding any other provision of this Agreement, any payment to be made
as a result of the resolution of a dispute shall be made, and any other action
to be taken as a result of the resolution of a dispute shall be taken, on or
before the later of (i) the date on which such payment or action would
otherwise be required or (ii) the
18
22
third business day following the date on which the dispute is resolved (in the
case of a dispute resolved by the Tax Dispute Accountants, such date being the
date on which the parties receive written notice from the Tax Dispute
Accountants of their resolution), provided that if a dispute with respect to an
item in a Return shall not be resolved on or before the date that is three
business days prior to the latest date on which such Return may be filed under
applicable Tax law, then the party having the responsibility for filing such
Return pursuant to Section 4 shall file such Return reflecting all disputed
items that have been resolved in the manner so resolved, and reflecting all
unresolved disputed items in the manner proposed by such party, and shall, upon
the resolution of all such unresolved disputed items, file an amended Return
reflecting the resolution thereof in the manner so resolved; and (f) the fees
and expenses of the Tax Dispute Accountants in resolving a dispute will be
borne equally by Stockholder and Purchaser.
11. Cooperation on Tax Matters. (a) Purchaser and
Stockholder agree to furnish or cause to be furnished to each other, upon
request, as promptly as practicable, such information (including access to
books and records) relating to the Company and its Subsidiaries as is
reasonably necessary for the preparation of the Pro Forma Returns, for the
filing of all other relevant Returns, for the preparation for any audit, and
for the prosecution or defense of any claim, suit or proceeding relating to any
proposed adjustment and any claim subject to Section 12.3.
(b) The parties agree to use their reasonable good faith
efforts to cooperate in connection with the transition from the performance of
tax compliance services relating to the Company and its Subsidiaries by
Stockholder prior to the Closing to the performance of such services by the
Company after the Closing, taking into account the need to minimize both the
cost of such transition and the disruption to the ongoing business activities
of the parties.
(c) Purchaser and Stockholder agree to retain or cause to be
retained all books, records, Returns, schedules, documents, work papers and
other material items of information relating to Taxes with respect to the
Company and its Subsidiaries for periods prior to or ending on the Closing Date
for the longer of (i) the seven-year period beginning on the Closing Date or
(ii) the full period of the applicable statute of limitations, including any
extension thereof, and to abide by all record retention agreements entered into
with any Taxing Authority. Purchaser and Stockholder agree to give each other
reasonable notice prior
19
23
to transferring, discarding or destroying any such materials relating to Taxes
with respect to the Company and its Subsidiaries, and, if the other party so
requests, to allow the other party to take possession of such materials.
(d) Purchaser and Stockholder shall cooperate, and Purchaser
shall cause the Company and its Subsidiaries to cooperate with Stockholder,
with respect to the preparation and filing of any Return for which the other is
responsible pursuant to Section 4 (including but not limited to providing work
papers and schedules). Except as otherwise provided with respect to items
relating to the allocation of the purchase price for the deemed sale of assets
resulting from the making of the Section 338(h)(10) Elections, Purchaser shall
prepare or cause the Company to prepare, in a manner and at such time or times
as is consistent with past practice, the Tax work paper preparation package or
packages necessary to enable Stockholder to prepare consolidated federal and
combined, unitary or consolidated state, local and foreign Income Tax Returns,
and to prepare drafts of Returns (including amended Returns) relating to
Indemnifiable Separate Taxes pursuant to Section 2.3(f), for all taxable
periods from January 1, 1995 through the Closing Date.
12. Indemnification.
12.1 Indemnification by Stockholder. Stockholder covenants
and agrees, from and after the Effective Time, to defend, indemnify and hold
harmless each of Purchaser, Newco, their respective Affiliates, the Company and
its Subsidiaries (collectively, the "Purchaser Indemnitees") from and against,
and pay or reimburse the Purchaser Indemnitees for, any and all actual claims,
demands, liabilities, obligations, losses, fines, costs, expenses, deficiencies
or damages (collectively, "Losses"), whether or not resulting from third party
claims, including interest, additions and penalties with respect thereto and
out-of-pocket expenses and reasonable attorneys' and accountants' fees and
expenses incurred in the investigation or defense of any of the same or in
asserting, preserving or enforcing any of their respective rights under this
Agreement, in each case resulting from or arising out of any failure of
Stockholder to perform any agreement or covenant under Sections 2.1, 2.2, 2.3,
3.1, 4.1, 5, 6, 7(a), 8, 10, 11, 12.1, 12.3, 12.4, 13, 14 and 18 or fulfill any
other obligation in respect thereof. Stockholder shall not have any liability
under any provision of this Agreement for any Losses to the extent that any
such Losses arise from actions taken by Purchaser, any of its Affiliates, the
Company or any of its Sub-
20
24
sidiaries after the Closing, or from the failure of any thereof to take any
required action, except for failure to give notice as provided in Section 12.3.
Purchaser shall take and cause its Affiliates, the Company and its Subsidiaries
to take all reasonable steps to mitigate any Losses with respect to which
Stockholder could have an indemnification obligation under this Section 12.1
upon any of the Purchaser Indemnitees' becoming aware of any event which could
reasonably be expected to give rise thereto.
12.2 Indemnification by Purchaser. Purchaser covenants and
agrees, from and after the Effective Time, to defend, indemnify and hold
harmless each of Stockholder and the Non-Company Affiliates (collectively, the
"Stockholder Indemnitees") from and against, and pay or reimburse the
Stockholder Indemnitees for, any and all Losses, in each case resulting from or
arising out of any failure of Purchaser to perform any agreement or covenant
under Sections 2.1, 2.2, 2.3, 3.2, 4.2, 5, 6, 7(b), 8, 9, 10, 11, 12.2, 12.3,
12.4, 13, 14 and 18 or fulfill any other obligation in respect thereof.
Purchaser shall not have any liability under any provision of this Agreement
for any Losses to the extent that any such Losses arise from actions taken by
Stockholder or any of the Non-Company Affiliates after the Closing, or from the
failure of any thereof to take any required action, except for failure to give
notice as provided in Section 12.3. Stockholder shall take and cause its
Affiliates to take all reasonable steps to mitigate any Losses with respect to
which Purchaser could have an indemnification obligation under this Section
12.2 upon any of the Stockholder Indemnitees' becoming aware of any event which
could reasonably be expected to give rise thereto.
12.3 Indemnification Procedures. In the case of any claim
asserted by a third party against a party entitled to indemnification under
this Section 12 (the "Indemnified Party"), notice shall be given by the
Indemnified Party to the party required to provide indemnification (the
"Indemnifying Party") promptly after such Indemnified Party has actual
knowledge of any claim as to which indemnity may be sought (which notice shall
state the basis of the claim and the agreement or covenant alleged not to have
been performed), and the Indemnified Party shall permit the Indemnifying Party
(at the expense of such Indemnifying Party) to assume the defense of any claim
or any litigation resulting therefrom, provided that (a) the failure of any
Indemnified Party to give notice as provided in this Section 12.3 shall not
relieve the Indemnifying Party of its indemnification obligations under this
Section 12 except to the extent that
21
25
such failure results in a lack of actual notice to the Indemnifying Party and
such Indemnifying Party is materially prejudiced as a result of such failure to
give notice and (b) in the case of any such claim against any of Purchaser,
Newco, their respective Affiliates, the Company or any of its Subsidiaries
relating to Taxes other than those set forth in clauses (a) and (b) of Section
3.1, counsel for Stockholder who shall conduct the defense of such claim or
litigation shall be reasonably satisfactory to Purchaser, and Purchaser may
participate in such defense at Purchaser's expense. The Indemnified Party
shall promptly deliver to the Indemnifying Party copies of all notices and
documents (including court papers) received by the Indemnified Party relating
to the third party claim. Except with the prior written consent of the
Indemnified Party, no Indemnifying Party, in the defense of any such claim or
litigation, shall consent to entry of any judgment or enter into any settlement
(i) that provides for injunctive or other nonmonetary relief affecting the
Indemnified Party, (ii) that reasonably could be expected to affect adversely
any Tax liability of any Indemnified Party with respect to which the
Indemnifying Party has no indemnification obligation under this Section 12 or
(iii) that does not include as an unconditional term thereof the giving by each
claimant or plaintiff to such Indemnified Party of a release from all liability
with respect to such claim or litigation. In the event that the Indemnifying
Party does not accept the defense of any matter as above provided, the
Indemnified Party shall have the full right to defend against any such claim or
demand, and shall be entitled to settle or agree to pay in full such claim or
demand.
12.4 Tax Treatment of Indemnification Payments. Unless
otherwise required by law, each of Purchaser and Stockholder agrees to treat
and to cause their respective Affiliates to treat, for all Tax purposes, any
indemnification payment made pursuant to this Section 12 as an adjustment to
the Merger Consideration paid to Stockholder (or, if applicable, in the case of
a payment by Stockholder, as the satisfaction of a liability of the Company and
its Subsidiaries assumed by Stockholder, the assumption of which was a
contribution by Stockholder to the capital of the Company) or as a
reimbursement for or a payment of a liability that was properly an obligation
of the Indemnifying Party, and not of the Indemnified Party.
13. Confidentiality. Each of Purchaser, Newco and the
Company, on the one hand, and Stockholder, on the other hand, shall, and shall
use reasonable efforts to cause its respective Affiliates, agents, advisors and
representa-
22
26
tives and its and their respective officers, directors or employees (the
"Representatives," neither party being treated as a Representative of the
other) to, keep confidential and not disclose to others or use in any way
except to further the purposes of this Agreement, without the written consent
of Stockholder or the Company, respectively, all information of the other party
and their respective Affiliates that has been acquired in connection with this
Agreement, provided that the foregoing shall not apply to information that (a)
is or hereafter becomes generally available to the public other than as a
result of a disclosure by the party that would otherwise have an obligation of
confidentiality hereunder (the "Obligated Party") or any Representative
thereof, (b) is hereafter disclosed to the Obligated Party or any
Representative thereof by a third party who is not in default of any
confidentiality obligation to the other party, (c) is reasonably required to be
submitted by the Obligated Party or any Representative thereof to any
Governmental Entity, including in connection with any action, suit or
proceeding, (d) is provided by Stockholder under confidentiality terms and
conditions for the benefit of the Company, substantially similar to those
confidentiality arrangements set forth in the Confidentiality Agreement and
with a term of at least five years from the date hereof, (i) to third parties
for consulting, accounting, legal and similar purposes or (ii) to prospective
purchasers of Stockholder or of all or any portion of the securities or assets
of Stockholder to the extent considered reasonably necessary by Stockholder to
facilitate such purchase, (e) is necessary, in the reasonable judgment of the
Obligated Party, to disclose in order to assert or defend any claim against (or
made by) any insurer or other Person, provided that prior notice of such
disclosure is provided to the other party, (f) is or was independently
developed by the Obligated Party or any Representative thereof, or (g) is
required to be disclosed by the Obligated Party or any Representative thereof
in compliance with applicable laws or regulations or order by a Governmental
Entity, provided that in the event that the Obligated Party or any
Representative thereof is requested by any Governmental Entity to disclose any
such information, the Obligated Party shall give, or shall use reasonable
efforts to cause such Representative to give, the other party prompt written
notice of such request so that the other party or its relevant Affiliate may
seek an appropriate protective order, and in the absence of a protective order,
the Obligated Party or such Representative shall use reasonable efforts to
obtain assurances that confidential treatment will be accorded to such
information. This obligation of confidentiality shall apply to all information
which
23
27
(x) either party has reason to know is confidential or (y) is marked
confidential (or, if provided orally, is confirmed in writing as confidential
within 30 days of the date of disclosure to the other party), and this
obligation of confidentiality with respect to each matter disclosed to the
other party shall continue for a period of seven years after such disclosure.
Each of Purchaser, Newco and the Company, on the one hand, and Stockholder, on
the other hand, acknowledges that the other party and its Affiliates would be
irreparably damaged in the event of a breach or threatened breach of any of the
Obligated Party's obligations under this Section 13, and agrees (and shall use
reasonable efforts to cause each of its Representatives to agree) that, in the
event of a breach or threatened breach of any such obligation, the other party
and its Affiliates shall, in addition to any other rights and remedies
available to it in respect of such breach, be entitled to an injunction from a
court of competent jurisdiction granting it specific performance of the
provisions of this Section 13.
14. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given upon (a) transmitter's
confirmation of a receipt of a facsimile transmission, (b) confirmed delivery
by a standard overnight carrier or when delivered by hand or (c) the expiration
of five business days after the day when mailed in the United States by
certified or registered mail, postage prepaid, addressed at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Stockholder, to:
Manville Corporation
000 00xx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxx Xxxx, Esq.
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxxx, Esq.
24
28
and with a copy to:
Xxxxx Xxxx & Xxxxxxxx
0000 "X" Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxxxx, Esq.
(b) if to the Company, to:
Riverwood International Corporation
0000 Xxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: General Counsel
with a copy to:
[ON OR BEFORE THE CLOSING DATE]
Skadden, Arps, Slate, Xxxxxxx & Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxxx, Esq.
and with a copy to:
[ON OR BEFORE THE CLOSING DATE]
Xxxxx Xxxx & Xxxxxxxx
0000 "X" Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxxxx, Esq.
or with a copy to:
[AFTER THE CLOSING DATE]
Debevoise & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
and
25
29
(c) if to Purchaser or Newco, to:
CDRO Holding Corporation
CDRO Acquisition Corporation
c/o Clayton, Dubilier & Rice Fund V
Limited Partnership
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: CD&R Associates V Limited Partnership
Attention: CD&R Investment Associates, Inc.
Attention: Xxxxxxx Xxxxxxxx, Vice
President, Treasurer and
Secretary
with a copy to
Xxxxxxx, Dubilier & Rice, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxx
and with a copy to:
Debevoise & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
15. Governing Law. Except to the extent federal, state,
local or foreign Tax laws, rules, or regulations govern the filing of Returns
or the positions taken with respect to Taxes in Returns, and regardless of the
law that might otherwise be applied under principles of conflicts of laws, this
Agreement shall be governed by and construed and enforced in accordance with
the internal laws of the State of New York.
16. Counterparts. This Agreement may be executed in more
than one counterpart, each of which shall be deemed an original, but all such
counterparts when executed shall constitute one and the same agreement.
26
30
17. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
18. Assignment; Binding Effect. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto (whether by operation of law of otherwise) without the
prior written consent of the other parties, provided that Purchaser or Newco
may assign this Agreement to any Subsidiary of Purchaser or Newco, or to any
lender to Purchaser or Newco or any Subsidiary or Affiliate thereof as security
for obligations to such lender, and provided, further, that no such assignment
to any such lender shall in any way affect the assigning party's obligations or
liabilities under this Agreement. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties hereto and their respective successors and permitted assigns.
Purchaser shall promptly notify Stockholder of any assignment (whether by
operation of law or otherwise) permitted by the provisions of this Section 18.
19. No Third Party Beneficiaries. Except as provided in
Section 12 with respect to indemnification of Indemnified Parties hereunder,
nothing in this Agreement, express or implied, is intended to or shall confer
any rights, benefits or remedies of any nature whatsoever upon any Person other
than the parties hereto and their respective successors and permitted assigns.
20. Waivers. Any party hereto may by written notice to the
other parties (a) extend the time for the performance of any of the obligations
or other actions of the other parties under this Agreement, (b) waive
compliance with any of the conditions or covenants of the other parties
contained in this Agreement and (c) waive or modify performance of any of the
obligations of the other parties under this Agreement. Except as provided in
the preceding sentence, no action taken pursuant to this Agreement shall be
deemed to constitute a waiver by the party taking such action of compliance
with any covenants or agreements contained herein. The waiver by any party
hereto of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any preceding or succeeding breach,
27
31
and no failure by a party to exercise any right or privilege hereunder shall be
deemed a waiver of such party's rights or privileges hereunder or shall be
deemed a waiver of such party's rights to exercise the same at any subsequent
time or times hereunder.
21. Amendments. This Agreement may not be modified, amended,
altered or supplemented except by an instrument in writing executed on behalf
of each of the parties hereto.
22. Termination; Survival. This Agreement shall be
terminated upon the termination of the Merger Agreement in accordance with the
terms thereof. This Agreement shall survive the consummation of the Merger
pursuant to the Merger Agreement.
23. Headings. The headings contained in this Agreement are
for convenience of reference only and shall not be deemed for any purpose to
constitute a part of or to affect in any way the meaning or interpretation of
this Agreement.
24. Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all prior agreements and understandings (excluding the
Merger Agreement and the Indemnification Agreement), both written and oral,
between the parties with respect to the subject matter hereof. The
28
32
parties hereto also acknowledge that the Chief Financial Officer of Stockholder
has delivered to Purchaser and Newco the Tax Letter.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their respective officers thereunto duly authorized
as of the date first written above.
MANVILLE CORPORATION
By: /s/ XXXXXXX X. XXX XXXX
-----------------------------------
Name: Xxxxxxx X. Xxx Xxxx
Title: Senior Vice President,
General Counsel & Secretary
RIVERWOOD INTERNATIONAL CORPORATION
By: /s/ XXXXXX X. XXXXXXX
-----------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: President and Chief Executive
Officer
CDRO HOLDING CORPORATION
By: /s/ XXXXX X. XXXXXX
-----------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
CDRO ACQUISITION CORPORATION
By: /s/ XXXXX X. XXXXXX
-----------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
29
