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Exhibit 10.15
TAX MATTERS AGREEMENT
BY AND BETWEEN
GENCORP INC.
AND
OMNOVA SOLUTIONS INC.
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TAX MATTERS AGREEMENT
BY AND BETWEEN
GENCORP INC.
AND
OMNOVA SOLUTIONS INC.
TABLE OF CONTENTS
PAGE
RECITALS .....................................................1
ARTICLE I DEFINITIONS..........................................2
ARTICLE II ALLOCATION OF TAX LIABILITIES........................6
2.01 Liability for United States Federal Taxes............6
2.02 Liability for State Taxes............................6
2.03 Liability for Foreign Taxes..........................7
2.04 Spin-off Taxes.......................................7
2.05 Method of Allocating Taxes for Straddle Periods......7
2.06 Tax Accounting Practices.............................8
ARTICLE III PREPARATION AND FILING OF TAX RETURNS................8
3.01 General..............................................8
3.02 Consolidated, Combined and Joint Returns.............8
3.05 Right to Review Returns..............................9
ARTICLE IV TAX REFUNDS AND CARRYOVERS..........................10
4.01 Refunds..............................................0
4.02 Carrybacks or Claims for Refund......................0
4.03 Carryovers from Pre-Distribution Periods to
Post-Distribution Periods............................1
4.04 State Tax Credits....................................1
ARTICLE V TAX PAYMENTS........................................11
5.01 Payment of Consolidated United States Federal Taxes
for Pre-Distribution Periods.........................1
5.02 Payment of State and Foreign Taxes for Which
GenCorp has Filing Responsibility....................1
5.03 Indemnification Payments.............................1
5.04 Tax Treatment of Tax and Indemnification Payments....2
ARTICLE VI TAX AUDITS AND APPEALS..............................
6.01 Notice...............................................2
6.02 Control of Audits and Appeals........................2
6.03 Consent to Settlements...............................3
6.04 Information..........................................4
6.05 Expenses.............................................4
6.06 Adverse Effect Issues................................4
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ARTICLE VII SPECIAL RULES PERTAINING TO GENCORP SERVICES, INC....16
7.01 Liability for State Taxes............................16
7.02 GSI Tax Returns......................................16
ARTICLE VIII MISCELLANEOUS MATTERS................................16
8.01 Amendment and Waiver.................................16
8.02 Tax Allocation Agreements, Etc.......................16
8.03 Entire Agreement; Inconsistent Provisions............17
8.04 Affiliate Obligations................................17
8.05 Further Action.......................................17
8.06 Time for Notice......................................17
8.07 Notices..............................................17
8.08 Remedies.............................................17
8.09 Successors and Assigns...............................18
8.10 Severability.........................................18
8.11 Counterparts.........................................18
8.12 Descriptive Headings.................................18
8.13 No Third-Party Beneficiaries.........................18
8.14 Construction.........................................18
8.15 Form of Payments and Late Payments...................18
8.16 Governing Law........................................19
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TAX MATTERS AGREEMENT
BY AND BETWEEN
GENCORP INC.
AND
OMNOVA SOLUTIONS INC.
THIS TAX MATTERS AGREEMENT (the "Agreement") is made and entered into
as of ___________, 1999, by and between GenCorp Inc. ("GenCorp"), an Ohio
corporation, and OMNOVA Solutions Inc. ("OMNOVA"), an Ohio corporation, on
behalf of themselves and their respective Affiliates.
RECITALS:
--------
WHEREAS, the Board of Directors of GenCorp has determined that it is
appropriate and desirable to separate GenCorp's Decorative & Building Products
and Performance Chemicals businesses from its other businesses by means of a
series of transactions, including (1) a transfer to OMNOVA of the assets of such
businesses in exchange for all the issued and outstanding stock of OMNOVA and
other consideration (the "Separation") and (2) a dividend consisting of all the
issued and outstanding stock of OMNOVA, on a pro rata basis, to the holders of
GenCorp common stock (the "Distribution"), in transactions that will qualify for
tax-free treatment for purposes of United States Federal Taxes under Sections
368(a)(1)(D) and 355 of the Code (the Separation, the Distribution and related
transactions described in the Ruling Request and in the Ruling being,
collectively, the "Spin-off"); and
WHEREAS, GenCorp and OMNOVA have set forth the principal corporate
transactions required to effect the Spin-off, together with the terms of such
transactions and related matters, in a Distribution Agreement between GenCorp
and OMNOVA, dated as of ___________, 1999 (the Distribution Agreement"); and
WHEREAS, after the Spin-off. OMNOVA and its Affiliates will cease to be
members of the affiliated group (within the meaning of Section 1504(a) of the
Code) of which GenCorp is the common parent, effective as of the Distribution
Date; and
WHEREAS, GenCorp and OMNOVA desire to provide for and agree upon (1)
the allocation of liabilities for Taxes with respect to the Parties prior to,
arising out of, and subsequent to the Spin-off, (2) the preparation and filing
of Tax Returns along with the payment of Taxes shown due and payable thereon,
(3) the retention and maintenance of records necessary to prepare and file
appropriate Tax Returns and to handle any Tax Contests, as well as the provision
for appropriate access to those records by the Parties, (4) the conduct of
audits, examinations and proceedings by governmental entities which could result
in a redetermination of Taxes of the Parties, (5) the responsibility for any Tax
deficiencies and the treatment of refunds of Taxes and Carryovers and Carrybacks
of the Parties, (6) the cooperation of the Parties with one another in order to
fulfill their duties and responsibilities under this Agreement and under the
Code and other applicable Law, and (7) other matters related to Taxes;
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NOW, THEREFORE, in consideration of the foregoing, and of the mutual
promises, covenants and conditions hereinafter contained, the Parties agree as
follows:
ARTICLE I
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DEFINITIONS
-----------
"Affiliate" means any Person that directly or indirectly controls, is
under the control of, or is under common control with, the Person in question.
"Control" of a Person means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
whether through ownership or voting securities, by contract or otherwise. Except
as otherwise provided herein, the term "Affiliate" shall refer to Affiliates of
a Person determined immediately after the Distribution Date, provided, however,
that, after the Spin-off, GenCorp and OMNOVA (in each case together with the
members of their respective Groups) shall not be Affiliates of each another.
"Adverse Effect Issue" has the meaning set forth in Section 6.06(b).
"Affected Party" has the meaning set forth in Section 6.06(b).
"Agreement" has the meaning set forth in the introduction.
"Carryover" and "Carryback" mean any net operating loss, net capital
loss, excess tax credit, or other similar Tax item which may or must be carried
forward or back, respectively, from one Tax Period to another under the Code or
other applicable Law.
"Code" means the United States Internal Revenue Code of 1986, as
amended, or any successor law.
"Distribution" has the meaning set forth in the Recitals.
"Distribution Agreement" has the meaning set forth in the Recitals.
"Distribution Date" means the effective date of the Distribution as set
forth in the Distribution Agreement.
"Examined Party" has the meaning set forth in Section 6.06(a).
"Foreign Taxes" means any Taxes imposed or collected by any foreign
government, together with any interest and any penalties, additions to tax or
additional amounts with respect thereto, and "Foreign Tax" means any one of the
foregoing Foreign Taxes.
"GenCorp" has the meaning set forth in the introduction.
"GenCorp Group" means GenCorp and its Affiliates.
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"Granting Party" has the meaning set forth in Section 6.02(b).
"Group" means each of the GenCorp Group and the OMNOVA Group whenever
no distinction is otherwise required between them.
"GSI" has the meaning set forth in Section 7.01.
"Including" has the meaning set forth in Section 8.14.
"Indemnification Payment" means a payment subject to Section 5.03.
"Indemnified Party" and "Indemnifying Party" have the meanings set
forth in Section 5.03(b).
"IRS" means the United States Internal Revenue Service and any
successor department, agency or organization of the United States.
"Joint Contest" means any Tax Contest seeking a redetermination of
Taxes which involves or could involve one or more members of the GenCorp Group
and the OMNOVA Group.
"Law" means the law of any governmental entity or political subdivision
thereof, other than the Code, relating to any Tax.
"OMNOVA" has the meaning set forth in the introduction.
"OMNOVA Group" means OMNOVA and its Affiliates.
"OMNOVA Group Carryback" has the meaning set forth in Section 4.02(a).
"Participating Party" has the meaning set forth in Section 6.02(b).
"Parties" means GenCorp and OMNOVA.
"Party" means either GenCorp or OMNOVA.
"Person" means any individual and any partnership, joint venture,
corporation, limited liability company, trust, unincorporated organization or
other business entity formed or operating under United States or foreign law.
"Post-Distribution Period" means any Tax Period beginning after the
Distribution Date and, in the case of any Straddle Period, the portion of such
Tax Period ending after the Distribution Date.
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"Pre-Distribution Period" means any Tax Period ending on or before the
Distribution Date and, in the case of any Straddle Period, the portion of such
Tax Period ending on the Distribution Date.
"Prime Rate" means the prime interest rate published in the Wall Street
Journal from time to time.
"Return" means any return or report of Taxes due, any information
return or statement with respect to Taxes, or any other similar report,
statement, declaration, or document required to be filed under the Code or other
Laws, any claims for refund of Taxes paid, and any amendments or supplements to
any of the foregoing.
"Ruling" means the private letter ruling, dated June 30, 1999, issued
by the IRS in reply to the Ruling Request (including any amendment or supplement
thereto).
"Ruling Request" means the private letter ruling request filed by
GenCorp with the IRS on February 24, 1999, (as modified or supplemented by any
materials submitted to the IRS), seeking rulings that, inter alia, the Spin-off
will qualify for Federal income tax purposes for tax-free treatment under
Sections 368(a)(1)(D) and 355 of the Code.
"Separate Contest" means a Tax Contest which involves (i) only GenCorp
and members of the GenCorp Group, or (ii) only OMNOVA and members of the OMNOVA
Group.
"Separation" has the meaning set forth in the Recitals.
"Short Period" means any Tax Period which is based on an accounting
period which is shorter than the normal accounting period used for determining
such Tax (e.g., in the case of the United States Federal income Tax, any Tax
Period of less than one year).
"Spin-off" has the meaning set forth in the Recitals.
"Spin-off Taxes" means any Taxes incurred by or imposed on GenCorp or
OMNOVA (or their respective Affiliates) resulting from the Spin-off and any
disposition of stock or assets undertaken to separate the OMNOVA Group from the
GenCorp Group, in accordance with the terms of the Distribution Agreement.
"State Property Taxes" means State Taxes that are imposed on or with
respect to the ownership or use of property or based on the value of property,
including ad valorem, real property, personal property (tangible or intangible)
and similar Taxes.
"State Taxes" means all Taxes imposed or collected by any state or
local government in the United States (including possessions and territories of
the United States), and "State Tax" means any one of the foregoing State Taxes.
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"Straddle Period" means (i) any Tax Period that begins before and ends
after the Distribution Date, (ii) any Short Period that ends on the Distribution
Date and (iii) any Short Period that begins on the first day following the
Distribution Date.
"Tax Authority" means, with respect to any Tax, the governmental entity
or political subdivision thereof that imposes such Tax and any governmental
department, office or agency (if any) charged with the determination or
collection of such Tax for such entity or subdivision.
"Tax Benefit" means any refund, credit, Carryover, Carryback or other
reduction in otherwise required Tax payments. Such term does not include a
decrease in any Tax in one Tax Period that results from a Tax Adjustment in
another Tax Period, such as an increase in a deduction for depreciation that
results from a determination that, in a previous Tax Period, an expenditure is
capitalized and not deducted, or an item of gain is recognized.
"Tax Contest" means an audit, review, examination or any other
administrative or judicial proceeding with the purpose or effect of
redetermining Taxes of any member of any of the GenCorp Group or the OMNOVA
Group for (1) any Pre-Distribution Period, (2) any Straddle Period or (3) any
Post-Distribution Period, if such proceeding could result in any Tax Adjustment
or Tax Benefit for any Pre-Distribution Period or Straddle Period (without
regard to whether such matter was initiated by an appropriate Tax Authority or
in response to a claim for a refund of Taxes).
"Taxes" means all Federal, state, territorial, local, foreign and other
net income, gross income, gross receipts, sales, use, value added, ad valorem,
transfer, franchise, profits, license, lease, service, service use, withholding,
payroll, employment, unemployment insurance, workers compensation, social
security, excise, severance, stamp, business license, occupation, premium,
property, environmental, windfall profits, customs, duties, alternative minimum,
estimated or other taxes, fees, premiums, assessments or charges of any kind
whatever imposed or collected by any governmental entity or political
subdivision thereof, which any member of the GenCorp Group or of the OMNOVA
Group is required to pay, collect or withhold, together with any interest and
any penalties, additions to Tax or additional amounts with respect thereto, and
"Tax" means any one of the foregoing Taxes.
"Tax Period" means, with respect to any Tax, the period for which the
Tax is reported as provided under the Code or other applicable Laws...
"United States Federal Taxes" means all Taxes imposed or collected by
the United States Federal Government, and "United States Federal Tax" means any
one of the foregoing United States Federal Taxes.
"1999 Fiscal Year" has the meaning set forth in Section 3.02(b).
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ARTICLE II
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ALLOCATION OF TAX LIABILITIES
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2.01 LIABILITY FOR UNITED STATES FEDERAL TAXES.
(a) Subject to Sections 2.04, 2.05, 4.01, and 4.02, GenCorp
shall be liable for, and shall indemnify and hold the OMNOVA Group harmless
from:
(1) any United States Federal Taxes imposed on GenCorp,
OMNOVA and all members of their respective Groups for any Pre-Distribution
Period and
(2) any United States Federal Taxes imposed on any
members of the GenCorp Group for any Post-Distribution Period.
(b) Subject to Sections 2.04, 2.05, 4.01, and 4.02,
OMNOVA shall be liable for, and shall indemnify and hold the GenCorp Group
harmless from all United States Federal Taxes imposed on any members of the
OMNOVA Group for any Post-Distribution Period.
2.02 LIABILITY FOR STATE TAXES.
(a) Subject to Sections 2.04, 2.05, 4.01, 4.02, and 7.01,
GenCorp shall be liable for, and shall indemnify and hold the OMNOVA Group
harmless from:
(1) any State Taxes imposed on GenCorp or OMNOVA
and all members of their respective Groups for any Pre-Distribution Period
(except as provided in Section 2.02(b)(1)) and
(2) any State Taxes imposed on any members of
the GenCorp Group for any Post-Distribution Period.
(b) Subject to Sections 2.04, 2.05, 4.01, 4.02, and 7.01,
OMNOVA shall be liable for, and shall indemnify and hold the GenCorp Group
harmless from:
(1) any State Property Taxes imposed on GenCorp
or OMNOVA and all members of their respective groups for any Pre-Distribution
Period, to the extent such State Property Taxes are imposed on or with respect
to the ownership or use, or are based on the value, of property principally used
by any member of the OMNOVA Group before the Spin-off or immediately thereafter
(including all property transferred, directly or indirectly, to any member of
the OMNOVA Group in the Spin-off).
(2) any State Taxes imposed on any members of
the OMNOVA Group for any Post-Distribution Period...
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2.03 LIABILITY FOR FOREIGN TAXES.
(a) Subject to Sections 2.04, 2.05, 4.01, and 4.02,
GenCorp shall be liable for, and shall indemnify and hold the OMNOVA Group
harmless from:
(1) any Foreign Taxes imposed on GenCorp, OMNOVA or
their respective Groups for any Pre-Distribution Period and
(2) any Foreign Taxes imposed on the GenCorp
Group for any Post-Distribution Period.
(b) Subject to Sections 2.04, 2.05, 4.01, and 4.02,
OMNOVA shall be liable for, and shall indemnify and hold the GenCorp Group
harmless from all Foreign Taxes imposed on the OMNOVA Group for any
Post-Distribution Period.
2.04 SPIN-OFF TAXES. Except as otherwise provided in Section 5.02 of
the Distribution Agreement, GenCorp shall be liable for, and shall indemnify and
hold the OMNOVA Group harmless from all Spin-off Taxes.
2.05 METHOD OF ALLOCATING TAXES FOR STRADDLE PERIODS.
(a) To the extent required or allowed by applicable law,
the Parties shall apportion their respective liabilities for Taxes relating to a
Straddle Period that begins before and ends after the Distribution Date in
accordance with an actual or hypothetical closing of the books on the
Distribution Date in the case of income Taxes or other Taxes based on actual
events and activities of such Party.
(b) Except as provided in Section 2.05(a), Taxes for any
Straddle Period, with respect to any member of the GenCorp Group and the OMNOVA
Group shall be apportioned between Pre-Distribution and Post-Distribution
Periods as follows: First, Taxes for Tax Periods or portions thereof ending on
the last day of the calendar month preceding the Distribution Date (such date is
hereinafter referred to as the "Cutoff Date") shall be based on actual events
and activities through the Cutoff Date and in accordance with past accounting
practices. Second, Taxes for the period from the Cutoff Date through the
Distribution Date shall be computed by prorating the activities of the calendar
month which includes the Distribution Date on a daily pro rata basis.
Notwithstanding the foregoing provisions of this Section 2.05(b), (i)
depreciation, amortization and depletion for any Straddle Period shall be
apportioned on a daily pro rata basis and (ii) extraordinary items not arising
in the ordinary course of business shall be apportioned to the Tax Period in
which the event giving rise to such item occurs.
(c) For purposes of this Agreement, franchise Taxes shall
be allocated to the Periods in which the items with respect to which the Tax is
imposed occur, regardless of whether the Tax is imposed with respect to one or
more other Periods.
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(d) For purposes of this Agreement, any taxes computed on a
unitary method shall be allocated between the members of the GenCorp
Group and the OMNOVA Group consistent with past accounting practice and
consistent with applicable law.
2.06 TAX ACCOUNTING PRACTICES. Any Straddle Period Returns prepared by
any member of the GenCorp Group or the OMNOVA Group shall be filed in accordance
with past Tax accounting practices used with respect to the Tax Returns in
question, and to the extent any items are not covered by past practices, in
accordance with reasonable Tax accounting practices selected by GenCorp or
OMNOVA, as the case may be (except that accounting elections and determinations
shall be made by each Party, where reasonably possible, in a manner that
minimizes the net Tax incurred by the other Party and its Affiliates). In the
event any member of the GenCorp Group or the OMNOVA Group files Tax Returns for
Straddle Periods that are inconsistent with such past Tax accounting practices,
then, notwithstanding any provision of this Agreement to the contrary, in
addition to any other remedies available, the other Party shall only be
responsible for the amount of Taxes it would owe if such Tax Returns had been
consistent with such past Tax accounting practices. The Parties shall consult
regarding any such proposed changes in accounting methods and attempt in good
faith to agree as to procedures to be followed and the amount of any indemnity
hereunder.
ARTICLE III
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PREPARATION AND FILING OF TAX RETURNS
-------------------------------------
3.01 GENERAL Except as otherwise provided in this Article III, Tax
Returns shall be prepared and filed by the Person liable for the Tax reported on
such Tax Return, or otherwise obligated to file such Return, under the Code or
other applicable Law. Schedule 3.01 sets forth the United States Federal and
State Tax Returns relating to income Taxes to be filed under this provision and
the Person responsible for filing each such Return. Without limiting the
foregoing, in accordance with Article VI, the Person responsible for filing such
a Return shall also be responsible for responding to any revenue agent request
or any other formal or informal request for information or otherwise relating to
such Return by the IRS or any other applicable Tax Authority. The Parties shall
render assistance and cooperate with one another in accordance with the terms of
the Distribution Agreement.
3.02 CONSOLIDATED, COMBINED AND JOINT RETURNS.
(a) Any Tax Returns for United States Federal Taxes imposed
for any Pre-Distribution Period which reflect Taxes for which any member of the
GenCorp Group has liability under Article II (including, without limitation,
GenCorp's consolidated Federal income Tax Return for the Tax Period in which
the Distribution occurs) shall be prepared by and filed by GenCorp. In
furtherance of, and not by limitation of, the cooperation and assistance
required by the terms of the Distribution Agreement, OMNOVA shall, in
connection with any Tax Return for United States Federal income Taxes for any
Pre-Distribution Period filed after the Distribution Date for which GenCorp has
filing responsibility under this Agreement and which reflects income or
transactions attributable to the OMNOVA Group, provide GenCorp with (i) true
and correct separate Federal income Tax Returns for the OMNOVA Group, together
with
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all accompanying work papers and other computations of separate
Federal income Tax liability for the OMNOVA Group; (ii) a true and correct
reconciliation of book income to Federal taxable income for the OMNOVA Group,
and (iii) any other information or documentation reasonably requested by GenCorp
in connection with such Tax Return; provided, however, that the Parties shall
consult regarding the type and extent of the information required by GenCorp
hereunder.
(b) With respect to the Period ending on November 30,
1999, or, where applicable to any Group member, the corresponding 52-53 week
Period (the "1999 Fiscal Year"), OMNOVA hereby agrees to provide GenCorp with
all such Returns, work papers and computations relating to Federal Taxes on or
before May 15, 2000, and with all such Returns, work papers and computations
relating to State Taxes on or before on or before June 15, 2000.
(c) If, without reasonable cause, OMNOVA fails to provide
any information required by this Section 3.02 within the time frame specified
herein, GenCorp may file the applicable Returns based on the information
available at the time such Returns are due and OMNOVA shall be liable for, and
shall indemnify GenCorp from, any interest or penalties relating to Taxes,
additions to Tax or other costs imposed on GenCorp as a result of OMNOVA's
failure to provide such information; provided, however, that in no event will
OMNOVA be liable to reimburse GenCorp for or indemnify GenCorp against any
increase in tax liability (excluding interest, penalties, additions to tax and
the like) resulting from such information. The Parties shall attempt in good
faith to reach agreement regarding the information to be provided by OMNOVA to
GenCorp and the time such information is needed.
(d) Any Tax Returns for State Taxes for any
Pre-Distribution Period which reflect Taxes for which the GenCorp Group has
liability under Article II, shall be prepared and filed by GenCorp. Sections
3.02(a) and 3.02(c) shall apply mutatis mutandis to all State Tax Returns for
any Pre-Distribution Period that GenCorp must prepare and/or file under this
Agreement that is measured by income and that includes any income or
transactions attributable to OMNOVA or any member of the OMNOVA Group.
(e) Any Tax Returns for Foreign Taxes for any
Pre-Distribution Period which reflect Taxes for which the GenCorp Group has
liability under Article II, shall be prepared and filed by GenCorp. Any Tax
Returns for Foreign Taxes for any Post-Distribution Period (including any such
Straddle Period) which reflect Taxes for which the OMNOVA Group has liability
under Article II, shall be prepared and filed by OMNOVA. For any Straddle Period
Tax Returns prepared and filed by OMNOVA, the liability for Taxes reflected on
such Tax Return will be divided between the Pre-Distribution Period and the
Post-Distribution Period in accordance with Section 2.05.
3.03 RIGHT TO REVIEW RETURNS. Upon the request of either Party, the
other Party shall make available for inspection and copying all Tax Returns (and
related work papers) with respect to Taxes to the extent that (i) such Return
relates to Taxes for which the requesting Party may be liable under this
Agreement, (ii) such Return relates to Taxes for which the requesting Party may
have a claim for Tax Benefits hereunder, or (iii) the requesting Party
reasonably determines that it must inspect such Return to confirm any Person's
compliance with the terms
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of this Agreement. The Parties shall attempt in good faith to resolve any issues
arising out of the review of such Returns.
ARTICLE IV
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TAX REFUNDS AND CARRYOVERS
--------------------------
4.01 REFUNDS. Except as provided in Section 4.02, any refund of any
Taxes for any Pre-Distribution Period shall belong to GenCorp. In the event
OMNOVA or any of its Affiliates receives a refund for any Pre-Distribution
Period, the Person receiving such refund shall immediately remit such refund to
GenCorp. A refund includes the application of an amount otherwise refundable as
a reduction of amounts owed or to be owed notwithstanding that no cash is
transferred.
4.02 CARRYBACKS OR CLAIMS FOR REFUND.
(a) At the request of OMNOVA and at OMNOVA's expense,
GenCorp or one of its Affiliates will file one or more claims for refund
(including any tentative carryback or refund adjustment under Section 6411 of
the Code) of Taxes with respect to any Pre-Distribution Period resulting from
any Carryback generated by any member of the OMNOVA Group from a
Post-Distribution Period ("OMNOVA Group Carryback"), provided (subject to
Section 4.02(b)) that such refund does not result in any increase in the
liability of any member of GenCorp's Group for Taxes for any Tax Period. In the
event GenCorp or one of its Affiliates receives a refund for any
Pre-Distribution Period resulting from any OMNOVA Group Carryback from a
Post-Distribution Period, GenCorp shall immediately remit such refund to OMNOVA.
(b) In the event GenCorp or one of its Affiliates files
one or more claims for refund (including any tentative carryback or refund
adjustment under Section 6411 of the Code) of Taxes with respect to any
Pre-Distribution Period resulting from any OMNOVA Group Carryback from a
Post-Distribution Period that results in any increase in the liability of any
member of GenCorp's Group for Taxes for any Tax Period, GenCorp or any of its
Affiliates shall be entitled to retain that portion of the refund that exactly
offsets the additional Taxes for which it becomes liable as a result of filing
the refund claim, and the balance of such refund shall be refunded immediately
to OMNOVA. To the extent the increased liability for Taxes of GenCorp or any of
its Affiliates with respect to any Pre-Distribution Period resulting from any
OMNOVA Group Carryback from a Post-Distribution Period is reversed for any Tax
Period, the amount of any Tax Benefit resulting from such reversal shall be paid
immediately to OMNOVA on the date when the Return is filed for the year in which
the Tax Benefit arises or, if such return has already been filed, then
immediately after GenCorp or any of its Affiliates receives a payment reflecting
the Tax Benefit in question. Similarly, to the extent the increased liability
for Taxes of GenCorp or any of its Affiliates with respect to any
Pre-Distribution Period resulting from any OMNOVA Group Carryback from a
Post-Distribution Period for any Period arises after the refund has been paid to
OMNOVA, GenCorp shall inform OMNOVA of the amount of such increase, and OMNOVA
shall pay the amount of such increase to GenCorp promptly. Procedures similar to
those in Section 5.03 shall apply. All computations under this Section 4.02
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shall be adjusted to take into account interest payable by or to GenCorp, and
any Tax Benefit resulting therefrom.
4.03 CARRYOVERS FROM PRE-DISTRIBUTION PERIODS TO POST-DISTRIBUTION
PERIODS.
(a) If GenCorp or any of its Affiliates (determined for
this purpose as of immediately before the Distribution Date) is entitled to
carry over any Tax Benefit from a Pre-Distribution Period to a Post-Distribution
Period, and if the proper person to claim such Tax Benefit is a member of the
OMNOVA Group, OMNOVA or such member shall, upon request of GenCorp and at
GenCorp's expense, file any return or report reasonably requested by GenCorp in
a manner that claims such Tax Benefit and shall pay the full amount of such Tax
Benefit to GenCorp promptly upon receipt, provided (subject to Section 4.03(b))
that such Tax Benefit does not result in any increase in the liability of any
member of the OMNOVA Group for Taxes for any Tax Period.
(b) If OMNOVA or any of its Affiliates claims a carryover
of a Tax Benefit described in Section 4.03(a) that results in any increase in
the liability of any member of the OMNOVA Group for Taxes for any Tax Period,
the provisions of Section 4.02(b) shall apply, mutatis mutandis, to OMNOVA's
obligation to refund such Tax Benefit to GenCorp.
4.04 STATE TAX CREDITS. Notwithstanding any other provision of this
Agreement, the Parties shall consult and shall attempt in good faith to agree
concerning the allocation between them of credits for State Taxes.
ARTICLE V
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TAX PAYMENTS
------------
5.01 PAYMENT OF CONSOLIDATED UNITED STATES FEDERAL TAXES FOR
PRE-DISTRIBUTION PERIODS. GenCorp shall pay all Taxes due, be entitled to the
benefit of all overpayments of estimated income tax, and, except as provided in
Section 4.02, shall receive all refunds in connection with, the filing of
GenCorp's Tax Returns relating to U.S. Federal Taxes for all Pre-Distribution
Periods, including GenCorp's consolidated Federal income Tax Return for the 1999
Fiscal Year.
5.02 PAYMENT OF STATE AND FOREIGN TAXES FOR WHICH GENCORP HAS FILING
RESPONSIBILITY. GenCorp shall pay to the appropriate Tax Authority all State and
Foreign Taxes for Tax Returns with respect to which GenCorp (or another member
of the GenCorp Group) has filing responsibility pursuant to Article III.
5.03 INDEMNIFICATION PAYMENTS.
(a) The Parties shall attempt to agree upon procedures
for the payment of indemnities under this Agreement. In the absence of any such
Agreement, the procedures set forth in paragraph (b) shall be followed.
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(b) Upon payment of any Taxes with respect to which
either Party is entitled to receive indemnification hereunder, such member (the
"Indemnified Party") shall send to the other Party (the "Indemnifying Party") an
invoice accompanied by evidence of payment and a statement detailing the Taxes
paid and describing in reasonable detail the particulars relating thereto. The
Indemnifying Party (or such one or more members of the Indemnifying Party's
Group as it shall nominate) shall remit payment for Taxes for which the
Indemnifying Party is liable for indemnification hereunder to the Indemnified
Party (or such one or more members of the Indemnified Party's Group as it shall
nominate) within 30 days of receipt of such invoice, evidence of payment and
statement, or at any earlier time identified by the Indemnifying Party.
Notwithstanding any provision in this Agreement to the contrary, to the extent
the Indemnified Party receives a refund of Taxes for which it has been
indemnified, it shall remit the refund to the Indemnifying Party (or such one or
more members of the Indemnifying Party's Group as it shall nominate)
immediately. The amount of any payment under this Section 5.03 that is
attributable to interest paid to a Tax Authority shall be adjusted to take into
account the Tax Benefit resulting therefrom.
5.04 TAX TREATMENT OF TAX AND INDEMNIFICATION PAYMENTS. The Parties
agree that, in the absence of any change in law, any Tax or indemnification
payments made under this Agreement or the Distribution Agreement (including
payments made under Sections 2.04, 4.01, 4.02, 4.03, and 5.03) shall be reported
for Tax purposes by the payor and the recipient as capital contributions or
dividends, as appropriate, relating back to the period beginning before the
Distribution Date. The Parties will file their respective Tax Returns on this
basis, unless agreed otherwise in writing by the Indemnified Party and the
Indemnifying Party.
ARTICLE VI
----------
TAX AUDITS AND APPEALS
----------------------
6.01 NOTICE. Each Party shall provide prompt notice to the other
Party of any pending or threatened Tax Contest of which it becomes aware
relating to Taxes for Tax Periods for which it is indemnified by the other
Party. Such notice shall contain factual information (to the extent known)
describing any asserted Tax liability in reasonable detail and shall be
accompanied by copies of any notice or other document received from any Tax
Authority in respect of any such matter. If either Party has knowledge of an
asserted Tax liability with respect to a matter for which it is to be
indemnified hereunder and such Party fails to give the Indemnifying Party notice
of such asserted Tax liability within 30 days after it has received written
notice thereof, then, unless such failure has no material adverse effect upon
the Indemnifying Party's ability to participate in the Tax Contest, the
Indemnifying Party shall have no obligation to indemnify the Indemnified Party
for any Taxes arising out of such asserted Tax liability.
6.02 CONTROL OF AUDITS AND APPEALS.
(a) SEPARATE CONTESTS. Any Separate Contest shall be
controlled solely by the Party involved in the Tax Contest.
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(b) JOINT CONTESTS. With respect to any Joint Contest,
the Party that filed the Return shall control the proceeding. The personnel and
outside advisers (including counsel) of the Party not controlling the proceeding
may participate, at the expense of such Party, in the proceeding to the extent
such proceeding relates to items or adjustments for which such Party may incur
indemnity liability under this Agreement. Such participation shall be reflected
by the grant of appropriate powers of attorney. The Party granting such power of
attorney (the "Granting Party") shall have the right to revoke the power of
attorney if the Granting Party reasonably determines that the actions or failure
to act on the part of the other Person (the "Participating Party") in the
proceeding has resulted, or can be reasonably expected to result, in the
hindrance or delay of any resolution or settlement of the proceeding. In the
event the Participating Party fails to participate timely and fully in any
proceeding to the extent to which such proceeding relates to items or
adjustments for which the Participating Party has indemnity liability under this
Agreement, the Participating Party shall be liable for, in addition to all Taxes
for which the Participating Party shall be liable under this Agreement, any and
all costs imposed on, or incurred by, the Granting Party as a result of the
Participating Party's failure to participate. The revocation of any power of
attorney under this Section 6.02 shall in no way limit the Participating Party's
indemnity liability under this Agreement.
6.03 CONSENT TO SETTLEMENTS.
(a) Subject to Sections 6.03(b) and (c), neither Party
shall agree to any Tax liability or compromise any Tax claim in a Joint Contest
for the account of any member of the other Group without the consent of such
other Party, which consent shall not be withheld unreasonably. Decisions
regarding settlement of a Joint Contest shall be made jointly by the Parties and
their respective representatives.
(b) If GenCorp refuses to accept a settlement proposal in
a Joint Contest that OMNOVA wishes to accept, then the contest shall continue,
and (i) OMNOVA's liability to GenCorp with respect to such adjustment shall be
determined as if the settlement proposal had been accepted; (ii) GenCorp shall
indemnify OMNOVA from and against any Taxes resulting from an outcome of the
contest less favorable than the settlement and any other costs resulting from
the continuation of the contest, and (iii) GenCorp shall be entitled to all
benefits resulting from any outcome of the contest that is more favorable than
the settlement (less any costs to OMNOVA, against which GenCorp shall indemnify
OMNOVA).
(c) If OMNOVA refuses to accept a settlement proposal in
a Joint Contest that GenCorp wishes to accept, then the contest shall continue
and (i) GenCorp's liability to OMNOVA with respect to such adjustment shall be
determined as if the settlement proposal had been accepted, (ii) OMNOVA shall
indemnify GenCorp from and against any Taxes resulting from an outcome of the
contest less favorable than the settlement and any other costs resulting from
the continuation of the contest, and (iii) OMNOVA shall be entitled to all
benefits resulting from any outcome of the contest that is more favorable than
the settlement (less any costs to GenCorp, against which OMNOVA shall indemnify
GenCorp).
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6.04 INFORMATION. Each Party shall provide the other Party with
information pertaining to any increase or decrease in its Taxes that might
affect the liability for Taxes of the other Party for any Period. In addition,
upon reasonable request, each Party shall provide information to the other Party
regarding the Tax treatment of any item.
6.05 EXPENSES. Each Party shall bear its own Group's expenses
incurred in connection with any Tax Contest.
6.06 ADVERSE EFFECT ISSUES
(a) The procedures set forth in Sections 6.06(c) through
6.06(f) shall apply if -
(i) in an examination of a Federal income Tax
Return of one of the Parties or any member of its Group (the "Examined Party"),
the IRS raises one or more Adverse Effect Issues, or
(ii) the Examined Party (whether or not in the
course of any audit, examination or other proceeding relating to the
determination of its liability for Federal income Taxes) files an amended
Federal income Tax Return or claim for refund of Federal income Taxes or
otherwise takes a position with the IRS inconsistent with a Federal income Tax
Return already filed, if such amended Federal income Tax Return, claim or
position is likely, itself or in combination with other issues, to be an Adverse
Effect Issue.
(b) One or more issues are "Adverse Effect Issues" if, in
the reasonable judgment of the Examined Party, the aggregate effect of all such
issues with respect to the Periods within an examination cycle or similar
proceeding of the Examined Party is significantly likely to increase the
liability for Federal income Taxes (less interest) of the Party that is not the
Examined Party and the members of its Group (the "Affected Party") by at least
$250,000. Only for purposes of determining whether an issue is an Adverse Effect
Issue, the amount of such increase in liability for Federal income Taxes shall
be measured under the following principles:
(i) All increases (less any offsetting decreases
resulting from the same or a related item) in the Affected Party's liability for
Federal income Tax likely to result from such Adverse Effect Issue for all
Periods shall be taken into account, provided, however, that any decrease in
liability for Federal income Tax that may result from the sale or disposition of
property not expected to be sold or disposed of (for example, stock of an
operating subsidiary), or similar items, shall not be taken into account.
(ii) Computations of liability for Federal income Tax
shall be based on the highest marginal rate of Federal income Tax applicable to
the Affected Party for each of the Periods involved.
(iii) There shall be taken into account only
increases in liability for Federal income Tax as compared with the return
position taken by the Affected Party.
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(c) In each case, the Parties shall use their reasonable
best efforts to identify issues that are, or in combination with other issues
could become, Adverse Effect Issues.
(i) Promptly upon becoming aware that any
Adverse Effect Issue has been raised as described in Section 6.06(a)(i), the
Examined Party shall provide notice of such event to the Affected Party. Such
notice shall include a description of the Adverse Effect Issue, a computation
(as described in Section 6.06(b)(ii)) showing the expected increase in the
Affected Party's liability for Federal income Tax resulting therefrom, and
copies of all correspondence between the Examined Party and the IRS (including
information document requests, responses thereto and notices of proposed
adjustment).
(ii) No less than 30 days before filing any
amended return or claim for refund or taking any action described in Section
6.06(a)(ii), the Examined Party shall (x) provide notice to the Affected Party
(such Notice to include the information and material listed with respect to the
notice provided in Section 6.06(c)(i) and copies of all amended returns, claims
for refund or other documents proposed to be filed with the IRS with respect to
such Adverse Effect Issue) and (y) consult with the Affected Party regarding
such action.
(d) Within 30 days after the notice provided in Section
6.06(c)(i) or Section 6.06(c)(ii), the Affected Party may notify the Examined
Party that the Affected Party wishes to participate in proceedings relating to
the disposition of any or all of the Adverse Effect Issues. If the Affected
Party provides such notice, the procedures for Joint Contest set forth in
Section 6.02(b) shall apply, with the Examined Party being in control of the
proceeding. Provided, however, that (i) if the Affected Party does not provide
such notice within such time period, the proceeding shall continue without
participation of the Affected Party and without regard to Sections 6.06(e) and
6.06(f), and (ii) the Affected Party's right to participate in the proceedings
shall terminate if the Examined Party makes a reasonable determination, after
consultation with the Affected Party, that, notwithstanding the Adverse Effect
Items, the total net increase in the Affected Party's liability for Taxes
(determined as set forth in Section 6.06(b)) from all adjustments relating to
the Period or Periods in the examination cycle or similar proceeding is less
than the amount set forth in Section 6.06(b).
(e) Subject to Section 6.06(f), the Examined Party shall
settle any Adverse Effect Issue with the IRS only with the prior consent of the
Affected Party. The Parties shall attempt in good faith to agree as to the terms
of a proposed settlement. If the Parties are unable to agree, the procedures set
forth in Section 6.03(b) or Section 6.03(c), as the case may be, shall apply to
such Adverse Effect Issue.
(f) Notwithstanding Section 6.06(e), the Examined Party
may settle with the IRS any Adverse Effect Issue without consent of the Affected
Party, if, after consultation with the Affected Party, the Examined Party
reasonably determines that (i) a settlement of such Adverse Effect Issue is
desirable to the Examined Party; (ii) in light of all the circumstances
(including the likelihood of various positions of the Parties being sustained in
further proceedings, the cost of such proceedings and the impact of settlement
on other issues), the overall terms of the settlement do not discriminate
against the Affected Party; and (iii) other
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issues (which may or may not be Adverse Effect Issues) will be settled, and it
is not practical to settle such other issues on the proposed terms without a
settlement of the Adverse Effect Issue. Before determining that a proposed
settlement of other issues is not practical without a settlement of the Adverse
Effect Issue, the Examined Party will use its reasonable best efforts to secure
a settlement of the other issues while leaving the Adverse Effect Issue open for
further proceedings (for example, by entering into an agreement on IRS Form
870AD or similar form to close proceedings relating to one or more Periods but
reserving the Adverse Effect Issue for further proceedings).
ARTICLE VII
-----------
SPECIAL RULES PERTAINING TO GENCORP SERVICES, INC.
--------------------------------------------------
7.01 LIABILITY FOR STATE TAXES. Notwithstanding Section 2.02(b), OMNOVA
shall be responsible for, and shall indemnify GenCorp against, (a) all
liabilities for State Taxes of GenCorp Services, Inc., a Ohio corporation
("GSI"), and (b) any liability to GSI or to any member of the GenCorp Group for
adjustments to State Taxes resulting from transactions or arrangements between
GSI and any other member of the GenCorp Group or the OMNOVA Group. Such
liabilities for any Straddle Year in jurisdictions using the unitary method
shall be determined in accordance with Section 2.05(d).
7.02 GSI TAX RETURNS.Notwithstanding Sections 3.01 and 3.02, OMNOVA
shall file all State Tax Returns for GSI, with the exception of unitary returns
set forth on Schedule 3.01, and any tax audit or other proceeding pertaining to
any State Tax of GSI shall be a Separate Contest of the OMNOVA Group. GenCorp
shall provide notice to OMNOVA of any issue raised by a Tax Authority that could
reasonably result in the application of this Article VIII.
ARTICLE VIII
------------
MISCELLANEOUS MATTERS
---------------------
8.01 AMENDMENT AND WAIVER. This Agreement shall not be amended or
modified in any manner whatsoever except by a writing executed by each of the
Parties. No failure by either Party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach or any other covenant, duty, agreement or condition.
8.02 TAX ALLOCATION AGREEMENTS, ETC. Immediately prior to the
Distribution, GenCorp shall cause any and all tax allocation, tax sharing and
similar agreements or arrangements existing between GenCorp and all members of
the OMNOVA Group to be terminated as of the Distribution Date, and shall cause
any amounts due under such agreements or arrangements to be settled in the
manner agreed to by the Parties prior to the Distribution Date. Upon such
termination and settlement, no further payments made by one Party to the other
with respect to such agreements or arrangements shall be made, and all other
rights and obligations resulting from such agreements or arrangements between
the Parties shall cease as of such time. This Agreement shall supercede any such
agreements or arrangements.
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8.03 ENTIRE AGREEMENT; INCONSISTENT PROVISIONS; OTHER AGREEMENTS. The
Parties agree that the Distribution Agreement, this Agreement and the other
Ancillary Agreements (as that term is defined in the Distribution Agreement)
constitutes the entire agreement between them in respect of the subject matter
of this Agreement, and that, in the event of a conflict or other inconsistency
between any provision or term of this Agreement and any other agreement,
including any provision or term of the Distribution Agreement, then insofar as
such matter relates to Taxes, this Agreement shall prevail.
8.04 AFFILIATE OBLIGATIONS. To the extent that the provisions of this
Agreement pertain to an Affiliate of GenCorp or OMNOVA, GenCorp and OMNOVA
hereby respectively agree that they shall cause such Affiliate to carry out the
terms of this Agreement.
8.05 FURTHER ACTION. The Parties shall execute and deliver all
documents, provide all information, and take or refrain from taking any action
as may be necessary or appropriate to achieve the purposes of this Agreement.
Without limiting the preceding sentence, the members of each Group shall provide
the members of the other Group with such powers of attorney or other authorizing
documentation as is reasonably necessary to empower then to execute and file Tax
Returns they are responsible for hereunder, file claims for refunds and
equivalent claims for Taxes for which they are responsible, and contest, settle
and resolve any Tax Contests that they control under Article VII.
8.06 TIME FOR NOTICE. Notice of any indemnification claim under this
Agreement must be received by the Party against which such claim is made no
later than 30 days from the date on which the Taxes to which such claim relates
have been paid.
8.07 NOTICES. All notices, demands and other communications which may
or are required to be given to or made by either party to the other in
connection with this Agreement shall be in writing (including telex, fax or
other similar writing) and shall be deemed to have been duly given or made: (a)
if sent by registered or certified mail, five days after the posting thereof
with first class postage attached, (b) if sent by hand or overnight delivery,
upon the delivery thereof and (c) if sent by telex or fax, upon confirmation of
receipt of such telex or fax, in each case addressed to the respective parties
as follows:
GenCorp: GenCorp Inc.
Xxxxxxx 00 & Xxxxxxx Xxxx
Xxxxxx Xxxxxxx, XX 00000
Attn: Secretary
OMNOVA: OMNOVA Solutions Inc.
000 Xxxxx Xxxx
Xxxxxxxx, Xxxx 00000
Attn: Secretary
or to such other address and to the attention of such other persons as either
party hereto may specify from time to time by notice to the other party.
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8.08 SUCCESSORS AND ASSIGNS. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns; provided, however, that neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned (other than by merger or pursuant to a sale of all or substantially all
of a party's assets to one Person) by either of the parties hereto without the
prior written consent of the other party, which consent shall not be
unreasonably withheld; provided, however, that no such assignment shall relieve
the assigning party of any liabilities or obligations hereunder. Any transfer or
assignment of any of the rights, interests or obligations hereunder in violation
of the terms hereof shall be void and of no force or effect.
8.09 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the court making the determination of invalidity or
unenforceability shall have the power to delete specific words or phrases, or to
replace any invalid or unenforceable term or provision with a term or provision
that is valid and enforceable and that comes closest to expressing the intention
of the invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within which the
judgment may be appealed.
8.10 COUNTERPARTS. This Agreement may be executed simultaneously in
multiple counterparts, each of which shall be deemed an original, but all such
counterparts taken together shall constitute one and the same Agreement.
8.11 DESCRIPTIVE HEADINGS. The Table of Contents and Article and
Section headings of this Agreement are inserted for convenience only and shall
not constitute a part of this Agreement in construing or interpreting any
provision hereof.
8.12 NO THIRD-PARTY BENEFICIARIES. Except as provided in Article V
hereto nothing herein, expressed or implied, is intended or shall be construed
to confer upon or give to any Person any legal or equitable right, remedy, claim
or other benefit under or by reason of this Agreement.
8.13 CONSTRUCTION. It is acknowledged by OMNOVA and GenCorp that this
Agreement has undergone several drafts with the negotiated suggestions of each
and, therefore, no presumptions shall arise favoring either party by virtue of
the authorship of any provision of this Agreement.
8.14 FORM OF PAYMENTS AND LATE PAYMENTS. Any payments owed by any
member of either Group to any member of the other Group under this Agreement
shall be made in the currency in which the Tax to which such payment relates is
assessed by the Tax Authority, and shall be paid in immediately available funds
and in such other manner as the Person to whom such payment is owed may
reasonably request. Any payments required by this Agreement that
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are not made when due shall bear interest at the Prime Rate from the due date of
the payment to the date paid.
8.15 GOVERNING LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY
AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAW, AND
NOT THE LAW OF CONFLICTS, OF THE STATE OF OHIO.
IN WITNESS WHEREOF, the Agreement has been duly executed as of the day
and year first above written.
GENCORP INC.
By ___________________________
Name: [---------------------]
Title: [---------------------]
Attest:
____________________________
Secretary
OMNOVA SOLUTIONS INC..
By ___________________________
Name: [---------------------]
Title: [---------------------]
Attest:
____________________________
Secretary
