TAX SHARING AND DISAFFILIATION AGREEMENT
Published on December 27, 2004
Exhibit 10.14
TAX SHARING AND DISAFFILIATION AGREEMENT
BETWEEN
ALCAN INC.
AND
NOVELIS INC.
AND
ARCUSTARGET INC.
AND
ALCAN CORPORATION
AND
NOVELIS CORPORATION
Dated December o, 2004
TABLE OF CONTENT
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TAX SHARING AND DISAFFILIATION AGREEMENT (the "AGREEMENT") entered into in the
City of Montreal, Province of Quebec dated December o, 2004 with effect as of
the Effective Date (as defined below).
RECITALS:
WHEREAS Alcan Group (as defined below) currently conducts the Alcan Businesses
(as defined below);
WHEREAS Alcan intends to effect a spinoff of the Separated Businesses to the
holders of the Alcan Common Shares (as defined below);
WHEREAS such spinoff will be achieved through (i) the Reorganization (as defined
below), by which Alcan will transfer the Separated Businesses to Arcustarget;
(ii) the Arrangement (as defined below), by which the holders of Alcan Common
Shares will become shareholders of Novelis, Arcustarget will become a subsidiary
of Novelis and Novelis and Arcustarget will amalgamate;
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WHEREAS Alcan and Novelis have agreed on the anticipated tax consequences of the
Reorganization and the Arrangement in the jurisdictions where the transactions
forming part of the Reorganization and the Arrangement will take place (the "TAX
FRAMEWORK");
WHEREAS Alcan intends in particular, and Novelis accepts, that:
(i) certain transactions forming part of the Reorganization, for Canadian
income tax purposes, be governed by paragraph 55(3)(b) of the Tax Act
(as defined below) and sections 85.1 and 86 of the Tax Act, such that
no gain will be realized by Alcan, Novelis and Alcan Common
Shareholders (as defined below);
(ii) the Separation qualify for United States federal income tax purposes as
a reorganization within the meaning of Section 368(a)(1) of the Code
(as defined below), pursuant to which no gain or loss will be
recognized for United States federal income tax purposes by Alcan,
Novelis, AC, AAC or by the shareholders of Alcan under Section 355 of
the Code (as defined below) and the related provisions thereunder; and
(iii) for United States federal income tax purposes, the Separation Agreement
be treated as a plan of reorganization within the meaning of the Code;
WHEREAS the Reorganization will result in certain entities ceasing to be part of
a group of entities that in certain jurisdictions were filing, lodging or
otherwise submitting their tax returns on a consolidated, combined, unitary,
unity or other similar basis;
WHEREAS the Parties desire, in connection with the Reorganization and the
Arrangement, to (i) give each other certain representations and warranties with
respect to certain tax matters, (ii) confirm that no representations and
warranties are being given with respect to certain other tax matters, (iii) set
out certain rules which shall govern their conduct after the Separation and (iv)
allocate certain obligations with respect to certain tax matters;
WHEREAS Alcan and Novelis have entered into the Separation Agreement (the
"SEPARATION AGREEMENT") and several ancillary agreements, as amended, modified,
supplemented or restated to complete the Separation (as defined below);
WHEREAS this Agreement is an Ancillary Agreement for the purposes of the
Separation Agreement;
NOW THEREFORE, in consideration of the mutual agreements, covenants and other
provisions set forth in this Agreement, the Parties hereby agree as follows:
ARTICLE I -
INTERPRETATION
1.01 DEFINITIONS
The capitalized words and expressions and variations thereof used in
this Agreement or in its schedules shall have the meanings ascribed to
them as set forth herein. Capitalized
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words and expressions and variations thereof not defined in this
Agreement shall have the meanings ascribed to them in Schedule 1.01 -
Definitions of the Separation Agreement.
"50% INTEREST" means with respect to any corporation (within the
meaning of the Code) stock or other equity interests of such
corporation possessing at least 50 percent of the total combined voting
power of all classes of stock or equity interests entitled to vote or
at least 50 percent of the total value of shares of all classes of
stock or equity interests.
"AAC GROUP" means, for any taxable period, AAC and any Subsidiaries of
AAC as of that taxable period.
"AAC" has the meaning set forth in the preamble to this Agreement.
"AC" has the meaning set forth in the preamble to this Agreement.
"AC GROUP" means, for any taxable period, AC and its Subsidiaries as of
that taxable period other than members of the AAC Group.
"AFFILIATE" means any Person that directly or indirectly through one or
more intermediaries, Controls, is Controlled by, or is under common
Control with a specified Person.
"AGREEMENT" means this Tax Sharing and Disaffiliation Agreement between
the Parties, including all of the schedules hereto, and as the same may
be amended from time to time.
"ALCAN" has the meaning set forth in the preamble to this Agreement.
"ALCAN BUSINESSES" has the meaning set forth in the Separation
Agreement.
"ALCAN CLASS A COMMON SHARES" or "NEW ALCAN COMMON SHARES" means the
class A common shares of Alcan which Alcan will be authorized to issue
upon the Arrangement becoming effective and which are to be issued
under the Arrangement to Alcan Common Shareholders in exchange, in
part, for Alcan Common Shares, and to be redesignated as Alcan common
shares once the current Alcan Common Shares have been deleted from the
share capital of Alcan.
"ALCAN COMMON SHAREHOLDERS" means the holders of Alcan Common Shares.
"ALCAN COMMON SHARES" means the voting common shares of Alcan.
"ALCAN GROUP" means Alcan and its Subsidiaries, whether held directly
or indirectly; for greater certainty, (i) prior to the Effective Time,
"Alcan Group" includes Arcustarget Group, (ii) on and after the
Effective Time, "Alcan Group" excludes Arcustarget Group, and (iii) in
all circumstances "Alcan Group" excludes Novelis; provided, however,
that for United States Tax purposes, "Alcan Group" excludes the AAC
Group for all times after the Date of the U.S. Internal Distribution.
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"ALCAN INDEMNIFIED PARTIES" has the meaning set forth in Section 3.02
of this Agreement.
"ALCAN SPECIAL SHARES" means the non-voting, redeemable, retractable,
special shares of Alcan, which Alcan will be authorized to issue upon
the Arrangement becoming effective and which are to be issued pursuant
to the Arrangement to Alcan Common Shareholders in exchange, in part,
for the Alcan Common Shares.
"ALCAN TAX CONSOLIDATED GROUP" means any group of Persons who are
Affiliates of Alcan and who file, lodge or otherwise submit their Tax
Returns on a consolidated, combined, unitary, unity or similar basis.
"APPLICABLE LAW" means any applicable law, statute, rule or regulation
of any Governmental Authority or any outstanding order, judgment,
injunction, ruling or decree by any Governmental Authority.
"ARCUSTARGET" had the meaning set forth in the recitals of this
Agreement.
"ARCUSTARGET GROUP" means Arcustarget and its Subsidiaries, whether
held directly or indirectly.
"ARRANGEMENT" means the proposed arrangement under the provisions of
section 192 of the CBCA on, and subject to, the terms and conditions
set forth in the Plan of Arrangement.
"BUSINESS DAY" means any day excluding (i) Saturday, Sunday and any
other day which, in the City of Montreal (Canada) or in the City of New
York (United States) is a legal holiday or (ii) a day on which banks
are authorized by Applicable Law to close in the City of Montreal
(Canada) or in the City of New York (United States).
"CANADIAN TAX RULING" means the advance income tax ruling received by
Alcan from the CRA on December 15, 2004 and as may be further revised,
supplemented or modified at the request of Alcan confirming the
Canadian federal income tax consequences of certain aspects of the
Arrangement and certain other transactions.
"CBCA" means the Canada Business Corporations Act.
"CLAIM" means any assessment or reassessment, tax inquiry, audit,
examination, investigation, dispute, litigation or other proceeding
(including, for United States federal income tax purposes, a notice of
a potential Claim such as a Form 5701 Notice of Proposed Adjustment),
made by the CRA, a Provincial Revenue Authority, the IRS or any other
Taxing Authority, that would result in any Tax liability to an
Indemnitor.
"CLOSING AGENDA" means the final closing agenda relating to the
Reorganization and the Arrangement.
"CODE" means the United States Internal Revenue Code of 1986, as
amended.
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"CONSTITUENT DOCUMENTS" means, with respect to any Person, (a) the
articles of incorporation, certificate of incorporation, constitution
or certificate of formation (or the equivalent organizational
documents) of such Person, (b) the by-laws, operating agreement (or the
equivalent governing documents) of such Person, (c) any document
setting forth the manner of election and duties of the directors or
managing members of such Person (if any) and the designation, amount or
relative rights, limitations and preferences of any class or series of
such Person's Stock and (d) with respect to any Person organized under
the laws of Canada or any province therein, any unanimous shareholder
agreement.
"CONTROL" or "CONTROLLED" means, (a) for purposes of paragraph (a) of
the definition of Triggering Event, control for purposes of the Tax
Act, and (b) for other any purpose, means the presence of one of the
following: (i) the legal, beneficial or equitable ownership, directly
or indirectly, of more than 50% (by vote or value) of the capital or
voting stock (or other ownership or voting interest, if not a
corporation) of such Person or (ii) the ability, directly or
indirectly, to direct the voting of a majority of the directors of such
Person's board of directors or, if such Person does not have a board of
directors, a majority of the positions on any similar body, whether
through appointment, voting agreement or otherwise.
"CRA" means the Canada Revenue Agency.
"DATE OF THE U.S. INTERNAL DISTRIBUTION" means the date on which the
U.S. Internal Distribution occurs.
"DISAFFILIATION DATE" means, (a) for United States Tax purposes the
Date of the U.S. Internal Distribution, and (b) for other purposes, the
Effective Date.
"DISPUTE RESOLUTION AGREEMENT" means the Agreement with Respect to
Dispute Resolution dated the Effective Date, as amended, restated or
modified from time to time, and constituting an Ancillary Agreement to
the Separation Agreement.
"EFFECTIVE DATE" has the meaning set forth in the Separation Agreement.
"EFFECTIVE TIME" means 12:01 a.m. Montreal time on the Effective Date.
"FINAL DETERMINATION" means with respect to any issue (a) a decision,
judgment, decree or other order by any court of competent jurisdiction,
which decision, judgment, decree or other order has become final and
not subject to further appeal, (b) a closing agreement (in the United
States, whether or not entered into under Section 7121 of the Code) or
any other binding settlement agreement (in the United States, whether
or not with the IRS) entered into in connection with or in
contemplation of an administrative or judicial proceeding by a Taxing
Authority, or (c) the completion of the highest level of administrative
proceedings if a judicial contest is not or is no longer available.
"FIRST GROUP" has the meaning set forth in Section 11.01.
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"FISCAL YEAR 2004 STUB PERIOD" shall mean the Fiscal Year 2004 and, if
the U.S. Internal Distribution occurs after December 31, 2004, the
period beginning January 1, 2005 and ending on or after the Date of the
U.S. Internal Distribution.
"FISCAL YEAR 2004" shall mean the period beginning January 1, 2004 and
ending December 31, 2004.
"FISCAL YEAR 2005" shall mean the period beginning January 1, 2005 and
ending December 31, 2005.
"FORM 10" shall mean the registration statement on Form 10 (including
the related information statement) relating to the listing of Novelis
Shares on the New York Stock Exchange and the related registration of
the class of equity securities that includes the Novelis Common Shares
under Section 12(b) of the US Securities Exchange Act of 1934, in the
form in which it was declared effective by the Securities and Exchange
Commission.
"FORMER MEMBER" has the meaning set forth in paragraph (a) of Section
7.02.
"GOVERNMENTAL AUTHORITY" means any court, arbitration panel,
governmental or regulatory authority, agency, stock exchange,
commission or body.
"GROUP" means AAC Group, AC Group, Alcan Group, Arcustarget Group or
Novelis Group, as the context requires.
"INDEMNIFIED PARTY" has the meaning set forth in Section 8.01.
"INDEMNITOR" has the meaning set forth in Section 8.01.
"IRS" means the United States Internal Revenue Service.
"LIABILITIES" has the meaning set forth in the Separation Agreement.
"NOVELIS" means Novelis Inc., a corporation incorporated under the
CBCA, formed to acquire under the Arrangement and independently carry
on the Separated Businesses, and to be amalgamated with Arcustarget on
the Effective Date, and, for greater certainty, includes the
corporation resulting from the amalgamation of Novelis and Arcustarget
and any successors thereto.
"NOVELIS COMMON SHARES" means the voting common shares of Novelis to be
issued to holders of Alcan Special Shares pursuant to the Arrangement
in exchange for such Alcan Special Shares.
"NOVELIS GROUP" means Novelis and its Subsidiaries, whether held
directly or indirectly; for greater certainty, (i) prior to the
Effective Time, "Novelis Group" excludes Arcustarget Group, and (ii) on
and after the Effective Time, "Novelis Group" includes Arcustarget
Group; provided, however, that for United States Tax purposes, "Novelis
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Group" shall include the AAC Group for all times after the Date of the
U.S. Internal Distribution.
"NOVELIS INDEMNIFIED PARTIES" has the meaning set forth in Section
3.01.
"PARTIES" means the parties to this Agreement and, in the singular,
means any of them.
"PERIOD" means any taxable year or other taxable period.
"PERSON" shall mean any individual, partnership, joint venture,
corporation, limited liability company, company, trust, unincorporated
organization or Governmental Authority.
"PLAN OF ARRANGEMENT" means the plan of arrangement set out as Schedule
1.01 - "PA" of the Separation Agreement, as the same may be amended
from time to time.
"POST-DISTRIBUTION PERIOD" means any taxable year or other taxable
period beginning after the Date of the U.S. Internal Distribution and,
in the case of any Straddle Period, that part of the Straddle Period
that begins after the close of the Date of the U.S. Internal
Distribution.
"PRE-DISTRIBUTION PERIOD" means any taxable year or other taxable
period that ends on or before the Date of the U.S. Internal
Distribution and, in the case of any Straddle Period, the part of the
Straddle Period through the close of the Date of the U.S. Internal
Distribution.
"PRE-SEPARATION PERIOD" means (i) any taxable year or other taxable
period that ends on or before the Effective Time and (ii) for United
States Tax purposes, a Pre-Distribution Period.
"POST-SEPARATION PERIOD" means (i) any taxable year or other taxable
period that begins on or after the Effective Time and (ii) for United
States Tax purposes, a Post-Distribution Period.
"PROVINCIAL REVENUE AUTHORITY" has the meaning set forth in the
Separation Agreement.
"REORGANIZATION" means the transactions relating to the transfers of
property directly or indirectly to Arcustarget set out in Part I of the
Closing Agenda.
"SECOND GROUP" has the meaning set forth in Section 11.01.
"SEPARATED BUSINESSES" has the meaning set forth in the Separation
Agreement.
"SEPARATION" has the meaning set forth in the Separation Agreement.
"SEPARATION AGREEMENT" has the meaning set forth in the recitals of
this Agreement.
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"STRADDLE PERIOD" means any taxable year or other taxable period that,
for the purposes of any Tax Return or any other determination of Taxes
payable, begins before and ends after the Effective Time.
"SUBSIDIARY" of any Person means any corporation, partnership, limited
liability entity, joint venture or other organization, whether
incorporated or unincorporated, of which a majority of the total voting
power of capital stock or other interests entitled (without the
occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof, is at the time owned or controlled,
directly or indirectly, by such Person. In determining whether a
Subsidiary is a Subsidiary of AAC or AC for any period, AAC and the
Subsidiaries of AAC shall not be treated as Subsidiaries of AC.
"TAX" or "TAXES" whether used in the form of a noun or adjective, means
all forms of taxation, whenever created or imposed, including, but not
limited to, taxes on or measured by income, capital, franchise, gross
receipts, sales, use, excise, payroll, personal property (tangible or
intangible), real property, ad-valorem, value-added, goods and
services, leasing, leasing use or other taxes, levies, imposts, duties,
charges or withholdings of any nature whether imposed by a country,
locality, municipality, government, state, province, federation, or
other Governmental Authority, including any penalties, fines and
additions to tax and any interest on tax, compounded or otherwise.
"TAX ACT" means the Income Tax Act (Canada), as amended.
"TAX FRAMEWORK" has the meaning set forth in the recitals of this
Agreement.
"TAX RETURNS" means all reports, returns, information statements,
questionnaires or other documents or data (whether in printed,
electronic or other form) required to be filed or that may be filed for
any period with any Taxing Authority (whether domestic or foreign) in
connection with any Tax or Taxes (whether domestic or foreign).
"TAXING AUTHORITY" means any governmental entity imposing Taxes or
empowered or authorized to administer any Taxes imposed by any country,
locality, municipality, government, state, province, federation or
other Governmental Authority.
"TRANSFER TAXES" means any transfer, sales, use, real property
transfer, goods and services, value-added, stamp, filing, recordation
and similar taxes and fees imposed in connection with the
Reorganization or the Separation.
"TREASURY REGULATIONS" means the regulations promulgated by the United
States Treasury Department under the Code.
"TRIGGERING EVENT" means:
(a) for the purposes of the Tax Act, an acquisition of Control of
Novelis; or
(b) for United States federal income tax purposes, any action or
actions of or involving any Person (other than Alcan or any
Person that is an Affiliate of Alcan immediately before or
immediately after such action or actions), or any omission
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or omissions of such Person of an action or actions available to
it, after the Date of the U.S. Internal Distribution, if as a
result of such action or omission a Final Determination is made
that the Separation is not Tax-free (i) by failing to qualify as
a distribution described in Sections 355 and 368(a)(1)(D) of the
Code, (ii) because any stock or securities of AAC distributed by
AC in the U.S. Internal Distribution fail to qualify as
"qualified property" within the meaning of Section 355(c)(2) of
the Code, or (iii) because Section 355(e) of the Code applies to
the Separation.
"U.S.INTERNAL DISTRIBUTION" means the distribution by AC to Alcan of
all the shares of AAC in the course of the Separation.
"U.S.SEPARATION DATE", for United States Tax purposes, means the date
on which the Separation is completed.
"UNITED STATES" means the United States of America.
1.02 SCHEDULES
The following schedules are attached to this Agreement and form part
hereof:
Schedule 2.02(i) Corporate Structure of the Novelis Group
After the Separation
Schedule 8.02 Tax Claims That Are The Sole Responsibility of
Alcan
Schedule 11.01 Transfer Pricing Adjustments
1.03 HEADINGS
The article, section and paragraph headings contained in this Agreement
are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
1.04 CURRENCY
Unless otherwise indicated herein, all Dollar amounts referred to in
this Agreement refer to the lawful currency of the United States of
America and all payments must be made in such currency.
ARTICLE II -
REPRESENTATIONS, WARRANTIES AND COVENANTS
2.01 REPRESENTATIONS, WARRANTIES AND COVENANTS OF ALCAN IN FAVOUR OF NOVELIS
(a) Alcan represents as at the date hereof and warrants to and in
favour of Novelis as at the date hereof (and acknowledges that
Novelis is relying upon such representations and warranties in
connection with the matters contemplated by this Agreement) as
follows:
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(i) to the best of Alcan's knowledge, there is no "specified
shareholder" of Alcan as such expression is defined for the
purposes of paragraph 55(3.1)(b) of the Tax Act; and
(ii) all the facts relating to Alcan that are disclosed in the
Canadian Tax Ruling are true and accurate in all material
respects;
(b) Alcan covenants that it shall not, and that it shall cause each
other member of the Alcan Group not to, enter into any
transaction or permit any transaction within its control to occur
that would cause Alcan or any other member of the Alcan Group
that is a corporation to cease to be a "specified corporation"
(within the meaning of the Tax Act) on or prior to the Effective
Date, except as contemplated in the Canadian Tax Ruling, and
Alcan and each such member will fulfill, and will cause any
Person Controlled by it after the Effective Date to fulfill all
representations or undertakings provided by it to the CRA, to the
Provincial Revenue Authorities or to tax counsel in connection
with the Canadian Tax Ruling;
(c) Alcan covenants that it shall not, and that it shall cause each
other member of the Alcan Group not to, take any action, omit to
take any action or enter into any transaction that could cause
the Arrangement or any related transaction to be treated in a
manner inconsistent with the Canadian Tax Ruling or the Tax
Framework;
(d) Alcan covenants that it shall, and that it shall cause each other
member of the Alcan Group that is required to file Canadian Tax
Returns, to file such Tax Returns (including, for greater
certainty, any election forms under section 85 of the Tax Act) in
accordance with the terms of the Plan of Arrangement and the
Canadian Tax Ruling following the Effective Date; and
(e) Alcan covenants that it shall, and that it shall cause each other
member of the Alcan Group to, cooperate with Novelis and the
relevant other members of the Novelis Group in the preparation
and filing of all elections under the Tax Act as contemplated in
the Reorganization, the Canadian Tax Ruling, the Plan of
Arrangement, the Tax Framework and this Agreement (and of any
similar elections that may be required under applicable
provincial or foreign legislation); such elections shall be made
in the form and within the time limits prescribed in the Tax Act
(or the applicable provincial or foreign legislation); except
that Alcan may decide, in its sole discretion, to amend or
late-file such elections, in which case Alcan shall be liable to
indemnify any Novelis Indemnified Person for any late-filing
penalties; where an agreed amount is to be included in any such
election, such amount will be within the range contemplated by
the Tax Act (or applicable provincial of foreign legislation) and
will be the amount contemplated by the Canadian Tax Ruling, the
Plan of Arrangement and this Agreement, where such amount is
specified therein and, in any other case, will be the amount
determined by Alcan in its sole discretion.
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2.02 REPRESENTATIONS, WARRANTIES AND COVENANTS OF NOVELIS IN FAVOUR OF ALCAN
AND AC
(a) Novelis covenants that it shall, and that it shall cause each
other member of the Novelis Group to, use its commercially
reasonable efforts and do all things reasonably required of it to
cause the Reorganization to be completed within the time periods
contemplated by the Separation Agreement;
(b) Novelis covenants that it shall, and that it shall cause each
other member of the Novelis Group to, use its commercially
reasonable efforts and do all things reasonably required of it to
cause the Arrangement to become effective within the time periods
contemplated by the Separation Agreement;
(c) Novelis covenants that it shall not, and that it shall cause each
other member of the Novelis Group not to, enter into any
transaction or permit any transaction within its control to occur
that would cause Alcan or any other member of the Alcan Group
that is a corporation to cease to be a "specified corporation"
(within the meaning of the Tax Act) on or prior to the Effective
Date, except as contemplated in the Canadian Tax Ruling, and
Novelis and each other member of the Novelis Group will fulfill,
and will cause any Person Controlled by it after the Effective
Date to fulfill, all representations or undertakings provided by
it to the CRA, to the Provincial Revenue Authorities in
connection with the Canadian Tax Ruling;
(d) Novelis covenants that it shall not, and that it shall cause each
other member of the Novelis Group not to, take any action, omit
to take any action or enter into any transaction that could cause
the Reorganization, the Arrangement or any related transaction to
be treated in a manner inconsistent with the Canadian Tax Ruling
or the Tax Framework;
(e) Novelis covenants that it shall file, and that it shall cause
each other member of the Novelis Group that is required to file
Canadian Tax Returns to file, such Tax Returns (including, for
greater certainty, any election forms under section 85 of the Tax
Act) in accordance with the terms of the Plan of Arrangement and
the Canadian Tax Ruling following the Effective Date. To the
extent allowed by Applicable Law, Novelis shall, and shall cause
each other member of the Novelis Group to, make adjustments to
its stated capital and paid-up capital accounts in accordance
with the terms of the Plan of Arrangement and the Canadian Tax
Ruling following the Effective Date in order that the
Reorganization and the Separation are implemented on a tax
efficient basis for Alcan and the members of the Alcan Group;
(f) Novelis covenants that it shall, and that it shall cause each
other member of the Novelis Group to, use reasonable best efforts
to apply for such amendments to the Canadian Tax Ruling and make
such amendments to the Separation Agreement as may be necessary
or desirable to obtain the Canadian Tax Ruling or to implement
the Plan of Arrangement as may be desired by Alcan (i) to enable
it to implement arrangements or carry out transactions deemed
advantageous by it for the
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purposes of the Separation, or (ii) to achieve a tax efficient
treatment (to be determined in Alcan's discretion) of transaction
costs on a worldwide net basis;
(g) Novelis covenants that it shall, and that it shall cause each
other member of the Novelis Group to, cooperate with Alcan and
the relevant other members of the Alcan Group in the preparation
and filing of all elections under the Tax Act as contemplated in
the Reorganization, the Canadian Tax Ruling, the Plan of
Arrangement, the Tax Framework and this Agreement (and of any
similar elections that may be required under applicable
provincial or foreign legislation); such elections shall be made
in the form and within the time limits prescribed in the Tax Act
except that Alcan may decide, in its sole discretion, to amend or
late-file such elections; where an agreed amount is to be
included in any such election, such amount will be within the
range contemplated by the Tax Act (or applicable provincial or
foreign Tax legislation) and will be the amount contemplated by
the Canadian Tax Ruling, the Plan of Arrangement, the Tax
Framework and this Agreement, where such amount is specified
therein and, in any other case, will be the amount determined by
Alcan in its sole discretion;
(h) Novelis covenants that it shall not, and that it shall cause each
other member of the Novelis Group not to, make any Tax election,
pay or cause to be paid any distribution from a member of the
Novelis Group or take any other action that could cause an actual
increase in the Taxes for which a member of the Alcan Group is
responsible or that will cause an actual reduction in the amount
of any refund of Taxes payable to a member of the Alcan Group
other than as a result of the Separation;
(i) Novelis covenants that it shall not, and it shall cause each
other member of the Novelis Group not to, change any aspect of
the corporate structure of the Novelis Group as described in
Schedule 2.02(i) for a period of two years after the Effective
Time whether through a merger, an amalgamation, a liquidation, a
dissolution, a retraction of shares, a redemption of shares, a
sale of shares, a purchase of shares, a transfer of shares, an
issuance of shares, the payment of a dividend in kind or in
shares, a sale of assets or any similar transaction, except if
such transaction is described in the Plan of Arrangement, without
the prior written consent of Alcan, not to be unreasonably
withheld or delayed; and
(j) Novelis represents as at the date hereof, warrants and covenants
to and in favour of Alcan and AC as follows:
(i) for United States federal income tax purposes, Novelis plans
and intends to and shall from the date of this Agreement
until two years after the U.S. Separation Date (A) maintain
AAC's status as a corporation directly engaged in the active
conduct of the AAC Business, and (B) take all actions to
carry out, and not take any action that would prevent or be
inconsistent with the completion of, the transactions
contemplated by the Separation Agreement; and
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(ii) there is no plan or intention to, and no Person will from
the date of this Agreement until two years after the U.S.
Separation Date (A) take any action that would result in AAC
ceasing to be directly engaged in the active conduct of the
AAC Business, (B) redeem or otherwise repurchase (directly
or through an Affiliate of AAC, Arcustarget or Novelis, or
any of their respective successors) any of AAC's,
Arcustarget's or Novelis' outstanding stock, other than
through stock purchases meeting certain United States
federal income tax requirements (other than the redemption
of the Novelis Special Shares as part of the Arrangement),
(C) amend the Constituent Documents of AAC, Arcustarget or
Novelis, or any of their respective successors or take any
similar action that would affect the relative voting rights
of separate classes of their respective stock or convert one
class of AAC's, Arcustarget's or Novelis' stock into another
class of their respective stock, (D) liquidate or partially
liquidate AAC or its Subsidiaries, (E) merge AAC,
Arcustarget or Novelis with any other corporation (otherwise
than by the amalgamation of Arcustarget and Novelis as part
of the Arrangement) or sell or otherwise dispose of (other
than in the ordinary course of AAC's, Arcustarget's or
Novelis' respective businesses) the assets of AAC or its
Subsidiaries, and (F) take any other action or actions that
in the aggregate would likely have the effect that any
Person (other than Novelis or Arcustarget as part of the
Plan of Arrangement) will acquire, as part of a plan or
series of related transactions, stock of AAC, Arcustarget or
Novelis (or any of their respective successors) representing
a 50% Interest in AAC, Arcustarget or Novelis (or their
respective successors);
2.03 REPRESENTATIONS, WARRANTIES AND COVENANTS OF AC IN FAVOUR OF AAC AND
NOVELIS
AC represents as at the date hereof, warrants and covenants to and in
favour of AAC and Novelis as follows:
(a) to the fullest extent possible under United States federal income
and state Tax laws, it shall, and it shall cause its Affiliates
to, treat the Separation as tax-free under Sections 355 and
368(a)(1)(D) for all United States federal and state Tax
purposes;
(b) for United States federal income tax purposes,
(i) AC has the plan and intention to, and will from the date of
this Agreement until two years after the U.S. Separation
Date (A) maintain AC's status as a corporation directly
engaged in the active conduct of the AC Business, and (B)
take all actions necessary to carry out, and not take any
action that would prevent or be inconsistent with the
completion of, the transactions contemplated by the
Separation Agreement; and
(ii) there is no plan or intention to, and no Person will from
the date of this Agreement until two years after the U.S.
Separation Date (A) take any
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action that would result in AC ceasing to be directly
engaged in the active conduct of the AC Business, (B) redeem
or otherwise repurchase (directly or through an Affiliate of
AC or Alcan), any of AC's or Alcan's outstanding stock,
other than as part of the Arrangement or through stock
purchases meeting the requirements of Section 4.05(1)(b) of
Revenue Procedure 96-30, 1996-1 C.B. 696, (C) amend the
Constituent Documents of AC or Alcan or take any similar
action that would affect the relative voting rights of
separate classes of their respective stock or convert one
class of AC's or Alcan's stock into another class of their
respective stock, (D) liquidate or partially liquidate AC,
(E) merge AC or Alcan with any other corporation or sell or
otherwise dispose of (other than in the ordinary course of
business) the assets of the AC Business, and (F) take any
other action or actions that in the aggregate would likely
have the effect that any Person (other than pursuant to the
Separation Agreement) will acquire, as part of a plan or
series of related transactions, stock of AC or Alcan
representing a 50% Interest in AC or Alcan (or their
respective successors);
(c) AC covenants that it shall not, and that it shall cause its
Affiliates not to, take any action that would be inconsistent
with any of the representations, warranties or covenants
contained in this Section 2.03; and
(d) AC covenants that it shall not, and it shall cause each other
member of the AC Group not to, make any Tax election, pay or
cause to be paid any distribution from an Affiliate or take any
other action that could cause an actual increase in the Taxes for
which a member of the AAC Group is responsible or that will cause
an actual reduction in the amount of any refund of Taxes payable
to a member of the AAC Group other than as a result of
transactions forming part of the Separation.
2.04 REPRESENTATIONS, WARRANTIES AND COVENANTS OF AAC IN FAVOUR OF AC AND
ALCAN
AAC represents as at the date hereof, warrants and covenants to and in
favour of AC and Alcan as follows:
(a) to the fullest extent possible under United States federal income
and state tax laws, it shall, and shall cause its Affiliates to,
treat the Separation as tax-free under Sections 355 and
368(a)(1)(D) for all United States federal and state purposes;
(b) for United States federal income tax purposes,
(i) AAC has the plan and intention to, and will from the date of
this Agreement until two years after the U.S. Separation
Date (A) maintain AAC's status as a corporation directly
engaged in the active conduct of the AAC Business, and (B)
take all actions necessary to carry out, and not
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take any action that would prevent or be inconsistent with
the completion of, the transactions contemplated by the
Separation Agreement; and
(ii) there is no plan or intention to, and no Person will from
the date of this Agreement until two years after the U.S.
Separation Date (A) take any action that would result in AAC
ceasing to be directly engaged in the active conduct of the
AAC Business, (B) redeem or otherwise repurchase (directly
or through an Affiliate of AAC, Arcustarget or Novelis, or
any of their respective successors) any of AAC's,
Arcustarget's or Novelis' outstanding stock, other than as
part of the Arrangement or through stock purchases meeting
the requirements of Section 4.05(1)(b) of Revenue Procedure
96-30, 1996-1 C.B. 696, (C) amend the Constituent Documents
of AAC, Arcustarget or Novelis or any of their respective
successors other than as part of the Arrangement, or take
any similar action that would affect the relative voting
rights of separate classes of their respective stock or
convert one class of AAC's, Arcustarget's or Novelis' stock
into another class of their respective stock, (D) liquidate
or partially liquidate AAC or its Subsidiaries, (E) merge
AAC, Arcustarget or Novelis with any other corporation
(otherwise than by the amalgamation of Arcustarget and
Novelis as part of the Arrangement) or sell or otherwise
dispose of (other than in the ordinary course of AAC's,
Arcustarget's or Novelis' respective businesses) the assets
of AAC or its Subsidiaries, and (F) take any other action or
actions that in the aggregate would likely have the effect
that any Person (other than Novelis or Arcustarget pursuant
to the Separation Agreement) will acquire, as part of a plan
or series of related transactions, stock of AAC, Arcustarget
or Novelis (or any of their respective successors)
representing a 50% Interest in AAC, Arcustarget, Novelis (or
their respective successors); and
(c) Novelis and AAC covenant that they shall not, and that they shall
cause each other member of the AAC Group not to, make any Tax
election, pay or cause to be paid any distribution from an
Affiliate or take any other action that could cause an actual
increase in the Taxes for which a member of the AC Group is
responsible or that will cause an actual reduction in the amount
of any refund of Taxes payable to a member of the AC Group other
than as a result of transactions forming part of the Separation.
2.05 REPRESENTATIONS, WARRANTIES AND COVENANTS OF NOVELIS AND ARCUSTARGET IN
FAVOUR OF AC
[SHOULD ALSO BE GIVEN BY ARCUSTARGET]
Novelis and Arcustarget represent as at the date hereof, warrant and
covenant to and in favour of AC as at the date hereof as follows:
(a) For United States federal income tax purposes,
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(i) Novelis and Arcustarget have the plan and intention to, and
will from the date of this Agreement until two years after
the U.S. Separation Date (A) maintain AAC's status as a
corporation engaged in the active conduct of the AAC
Business, and (B) take all actions necessary to carry out,
and not take any action that would prevent or be
inconsistent with the completion of, the transactions
contemplated by the Separation Agreement; and
(ii) there is no plan or intention to, and no Person will from
the date of this Agreement until two years after the U.S.
Separation Date (A) take any action that would result in AAC
ceasing to be directly engaged in the active conduct of the
AAC Business, (B) redeem or otherwise repurchase (directly
or through an Affiliate of AAC, Arcustarget or Novelis, or
any of their respective successors) any of AAC's,
Arcustarget's or Novelis' outstanding stock, other than as
part of the Arrangement or through stock purchases meeting
the requirements of Section 4.05(1)(b) of Revenue Procedure
96-30, 1996-1 C.B. 696, (C) amend the Constituent Documents
of AAC, Arcustarget or Novelis (or any of their respective
successors) other than as part of the Arrangement or take
any similar action that would affect the relative voting
rights of separate classes of their respective stock or
convert one class of AAC's, Arcustarget's or Novelis' stock
into another class of their respective stock, (D) liquidate
or partially liquidate AAC or its Subsidiaries, (E) merge
AAC, Arcustarget or Novelis with any other corporation
(otherwise than by the amalgamation of Arcustarget and
Novelis as part of the Arrangement) or sell or otherwise
dispose of (other than in the ordinary course of AAC's,
Arcustarget's or Novelis' respective businesses) the assets
of AAC or its Subsidiaries, and (F) take any other action or
actions that in the aggregate would likely have the effect
that any Person (other than Novelis or Arcustarget pursuant
to the Separation Agreement) will acquire, as part of a plan
or series of related transactions, stock of AAC, Arcustarget
or Novelis (or any of their respective successors)
representing a 50% Interest in AAC, Arcustarget or Novelis
(or their respective successors); and
(b) Novelis and Arcustarget covenant that they shall not, and that
they shall cause their Affiliates not to, take any action that
would be inconsistent with any of the representations, warranties
or covenants contained in this Section 2.05.
2.06 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
(a) The representations and warranties of the Parties contained in
this Article II shall survive the Effective Date until sixty (60)
days after the expiry of all applicable prescription periods or
statute of limitations (giving effect to any waiver, mitigation
or extension thereof) after which no assessment, reassessment or
other notice or document assessing liability for Taxes for a
taxation year or taxable period (or other relevant period) may be
issued to the relevant Party pursuant to any Applicable Law.
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(b) Except as otherwise expressly set out herein, the covenants under
this Article II shall survive indefinitely.
ARTICLE III -
INDEMNIFICATION
3.01 INDEMNIFICATION BY ALCAN
Alcan shall indemnify, defend and hold harmless Novelis and each other
member of the Novelis Group and each of their respective directors,
officers and employees, and each of the heirs, executors, trustees,
administrators, successors and assigns of any of the foregoing
(collectively, the "NOVELIS INDEMNIFIED PARTIES"), from and against any
and all Liabilities of the Novelis Indemnified Parties relating to,
arising out of or resulting from a breach of a representation, warranty
or covenant of Alcan or AC in this Agreement.
3.02 INDEMNIFICATION BY NOVELIS
Novelis shall indemnify, defend and hold harmless Alcan and each other
member of the Alcan Group and each of their respective directors,
officers and employees, and each of the heirs, executors, trustees,
administrators, successor and assigns of any of the foregoing
(collectively, the "ALCAN INDEMNIFIED PARTIEs"), from and against any
and all Liabilities of the Alcan Indemnified Parties relating to,
arising out of or resulting from a breach of a representation, warranty
or covenant of Novelis or AAC in this Agreement.
3.03 INDEMNIFICATION IN THE EVENT OF MUTUAL BREACH
Notwithstanding Sections 3.01 and 3.02 of this Agreement, Alcan shall
not be liable to indemnify any Novelis Indemnified Party, and Novelis
shall not be liable to indemnify any Alcan Indemnified Party, from and
against any Liability relating to, arising out of or resulting from the
application of the Tax Act, or any other similar or equivalent Canadian
federal or provincial or foreign Tax legislation to (x) the
transactions described in the Canadian Tax Ruling in a manner
inconsistent with such ruling or (y) the transactions forming part of
the Separation in a manner inconsistent with the Tax Framework, if such
Liability is caused by the combined and simultaneous action of both (i)
one or more members of the Alcan Group and (ii) one or more members of
the Novelis Group.
3.04 Indemnification in the Event of a Triggering Event
If (i) the Tax consequences to the transactions described in the
Canadian Tax Ruling differ from those set out in the Canadian Tax
ruling or if the Tax consequences to the transactions forming part of
the Separation differ from those set out in the Tax Framework, (ii)
Sections 3.01, 3.02 and 3.03 do not apply and (iii) such different Tax
consequences result from a Triggering Event, Novelis shall indemnify
the Alcan Indemnified Parties from and against any Liability relating
to, arising out of or resulting from such different Tax consequences
under the Tax Act or any other similar or
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equivalent Canadian federal or provincial Tax legislation or the Code,
even if such Triggering Event does not result from any action or
omission of any member of the Novelis Group.
3.05 Indemnification in Other Circumstances
If the Tax consequences to the transactions described in the Canadian
Tax Ruling differ from those set out in the Canadian Tax Ruling or if
the Tax consequences to the transactions forming part of the Separation
differ from those set out in the Tax Framework and Sections 3.01, 3.02,
3.03 and 3.04 do not apply, then no indemnity shall be provided for
under this agreement except in the circumstances and to the extent
provided for in Sections 4 to 7 and 11.
3.06 EVENT OF LAST ACT
For greater certainty:
(a) Alcan will be liable under Section 3.01 of this Article III and
Novelis will not be liable under Section 3.02 of this Article III
even though the action of the member of the Alcan Group that
precipitated the Liability of Alcan was preceded by one or more
actions of one or more members of the Novelis Group that, in and
by themselves, would not have precipitated the Liability of
Novelis;
(b) Novelis will be liable under Section 3.02 of this Article III and
Alcan will not be liable under Section 3.01 of this Article III
even though the action of the member of the Novelis Group that
precipitated the Liability of Novelis was preceded by one or more
actions of one or more members of the Alcan Group that, in and by
themselves, would not have precipitated the Liability of Alcan;
(c) Novelis will be liable under Section 3.04 of this Article III and
Alcan will not be liable under Section 3.01 of this Article III
even though the last action that made a Triggering Event happen
was preceded by one or more actions of one or more members of the
Alcan Group that, in and by themselves, would not have
precipitated the Liability of Alcan.
ARTICLE IV -
GENERAL LIABILITY FOR TAXES FOR PRE-SEPARATION PERIOD
4.01 GENERAL LIABILITY
(a) Except as set forth in Section 7.02, Novelis and the members of
the Novelis Group shall be liable for and shall indemnify and
hold harmless any member of the Alcan Group against Taxes
relating to the Pre-Separation Period of any Person that is a
member of the Novelis Group immediately following the Effective
Time.
(b) Except as set forth in Section 7.02, Alcan and the members of the
Alcan Group shall be liable for and shall indemnify and hold
harmless any member of the
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Novelis Group against Taxes relating to the Pre-Separation Period
of any Person that is a member of the Alcan Group immediately
following the Effective Time.
ARTICLE V -
GENERAL LIABILITY FOR TAXES FOR THE POST-SEPARATION PERIOD
5.01 GENERAL LIABILITY
(a) Except as set forth in Section 7.02, Novelis and the members of
the Novelis Group shall be liable for and shall indemnify and
hold harmless any member of the Alcan Group against Taxes
relating to the Post-Separation Period of any Person that is a
member of the Novelis Group immediately following the Effective
Time.
(b) Except as set forth in Section 7.02, Alcan and the members of the
Alcan Group shall be liable for and shall indemnify and hold
harmless any member of the Novelis Group against Taxes relating
to the Post-Separation Period of any Person that is a member of
the Alcan Group immediately following the Effective Time.
ARTICLE VI -
ALLOCATION OF LIABILITIES FOR TRANSFER TAXES
6.01 GENERAL ALLOCATION
Each Person that acquires property of any kind in the course of the
Reorganization will be liable for the Transfer Taxes payable in respect
thereof.
ARTICLE VII -
YEAR END AND DISAFFILIATION
7.01 YEAR END
To the extent permitted by law or administrative practice, the taxable
year or taxable period of any Person that is a member of the Novelis
Group immediately following the Separation and whose taxable year or
taxable period does not end on or immediately before the Disaffiliation
Date, shall close on or immediately before the Disaffiliation Date;
such taxable year or taxable period shall be considered a
Pre-Separation Period.
7.02 LIABILITIES RELATING TO PRE-SEPARATION PERIODS FOR TAX CONSOLIDATED
GROUPS
(a) Notwithstanding Sections 4.01 and 5.01 and subject to Applicable
Law:
(i) if, in the course of or as a result of the Separation, a
Person ceases to be part of an Alcan Tax Consolidated Group
and such Person is a member of the Novelis Group immediately
after the Disaffiliation Date (a "FORMER MEMBER"), Novelis
shall be liable for and shall indemnify and hold the
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Alcan Group harmless against (A) any Tax liability of such
Former Member for any Pre-Separation Period, as determined
in a manner consistent with past practice and in accordance
with the Alcan Group's intergroup method of income tax
allocation, or, in the absence thereof, any other
permissible allocation methodology as determined by Alcan,
and (B) any Tax liability resulting from a Final
Determination with respect to an adjustment attributable to
such Former Member for any Pre-Separation Period. Such
Former Member shall be entitled to any refund of, or credit
for, Taxes of such Former Member or amounts owed by such
Former Member or for which such Former Member is responsible
under this paragraph (i) of this Section 7.02 (a). Any
liability for Taxes under this paragraph (i) of this Section
7.02 (a) shall be measured by the relevant Alcan Tax
Consolidated Group's actual liability for Taxes after
applying tax benefits otherwise available to the Alcan Tax
Consolidated Group other than tax benefits that the Alcan
Tax Consolidated Group in good faith determines would
actually offset Tax liabilities of the Alcan Tax
Consolidated Group in other taxable years or periods. Any
right to refund under this paragraph (i) of this Section
7.02 (a) shall be measured by the actual refund or credit of
the Alcan Tax Consolidated Group attributable to the
adjustment without regard to offsetting Tax attributes or
liabilities of the Alcan Tax Consolidated Group;
(ii) Alcan shall be liable for and shall hold such Former Member
harmless against any liability attributable to any member of
the Alcan Tax Consolidated Group (other than Persons who,
immediately following the Disaffiliation Date, are members
of the Novelis Group) for any Pre-Separation Period,
including any liability asserted against any member of an
Alcan Tax Consolidated Group under provisions that impose
several liability on members of an affiliated group of
corporations that files consolidated returns in respect of
Taxes of any member of such Alcan Tax Consolidated Group
(other than Persons who, immediately following the
Separation, are members of the Novelis Group). Alcan shall
be entitled to any refund of or credit for Taxes for any
periods that are attributable to such Alcan Tax Consolidated
Group or amounts owed by such Alcan Tax Consolidated Group
or for which such Alcan Tax Consolidated Group is
responsible under this paragraph (ii) of this Section 7.02.
(b) If, in the course of or as a result of the Separation, a Former
Member ceases to be a part of an Alcan Tax Consolidated Group,
Alcan shall determine and Novelis shall cause such Former Member
to pay the final amount owed, if any, under clause (A) of of
Section 7.02 (a) (i) for the Fiscal Year 2004 Stub Period as
follows:
(i) within sixty (60) days from the Disaffiliation Date,
Novelis shall and shall cause such Former Member to
provide Alcan with a complete information package for
income tax purposes in the customary Alcan format of such
Former Member's Fiscal Year 2004, setting forth the
operating and
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nonoperating tax and financial results in sufficient
detail to enable Alcan to compute such Former Member's
Fiscal Year 2004 Tax liability;
(ii) Alcan will calculate in accordance with the principles of
this Agreement and consistent with past practice an
estimate of such Former Member's Fiscal Year 2004 Stub
Period tax liability and submit the calculation to such
Former Member within thirty (30) days after the date on
which the tax package described in paragraph (i) of this
Section 7.02 (b) is provided to Alcan;
(iii) the Former Member shall have the right to object in
writing to such calculation within (30) days after the
date on which the tax package described in paragraph (i)
of this Section 7.02 (b) is provided to Alcan, on the
grounds that there is substantial authority that such
calculation is incorrect; provided that if the Former
Member so objects:
(1) Alcan and the Former Member shall promptly submit
the dispute to an independent accounting or law
firm acceptable to both Alcan and the Former
Member for prompt resolution, whose decision shall
be final and binding on Alcan and the Former
Member; and
(2) the party that such accounting or law firm
determines has lost the dispute shall pay all of
the fees and expenses incurred in connection with
submitting such dispute;
(iv) the Former Member shall pay to Alcan the amount determined
according to paragraphs (ii) and (iii) of this Section
7.02 (b) at least [FIVE (5)] Business Days prior to the
date on which such amount is payable to the competent Tax
Authority; and
(v) a determination of the final amount owed, if any, under
paragraphs (ii) and (iii) of this Section 7.02 (b) by the
Former Member to Alcan shall be made when the Alcan Tax
Consolidated Group's Fiscal Year 2004 Tax Returns are
filed and such final amount shall be paid within thirty
(30) days from the date Alcan notifies the Former Member
of any additional amounts due, together with interest
thereon from the date on which such Tax Return is filed,
and amounts or owed by Alcan to the Former Member as a
refund of an overpayment shall be refunded by Alcan within
thirty (30) days, together with interest thereon from the
date on which Alcan receives a refund of such amount.
(c) To the extent permitted under applicable Tax laws, Novelis shall
and shall cause each Former Member to make the appropriate
elections to waive any option to carryback any net operating
loss, any credits or any similar item to Pre-Separation Periods
in respect of any Tax Returns that are filed by or for an Alcan
Tax Consolidated Group. To the extent such an election is not
permitted under applicable Tax laws, any Former Member shall be
entitled to carryback any net
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operating loss or other item from a Post-Separation Period to a
Straddle Period, except to the extent that Alcan determines in
good faith that such action will cause an actual increase in the
Taxes for which the Alcan Group is responsible or will cause an
actual reduction in the amount of any refund of Taxes payable to
the Alcan Group. Any refund of Taxes resulting from any such
carryback by a Former Member shall be payable to such Former
Member not later than twenty (20) days after the receipt or
crediting of a refund together with interest thereon from the
date on which the refund (together with the interest thereon) is
actually received or credited.
(d) Subject to paragraphs (a) to (c) of this Section 7.02, if, in the
course of or as a result of the Separation, a Former Member
ceases to be a part of an Alcan Tax Consolidated Group, the
following rules shall apply:
(i) the disaffiliation or deconsolidation of such Person from
the Alcan Tax Consolidated Group shall be treated
according to Applicable Law;
(ii) if, under Applicable Law, there is more than one method of
implementing or treating such disaffiliation or
deconsolidation or if elections can or are required to be
made in connection with such disaffiliation or
deconsolidation, Alcan shall, in its sole discretion,
choose the proper method or treatment and make the
relevant election or decide how any such election should
be made, in which case, Novelis and the members of the
Novelis Group shall be bound by Alcan's choice and
elections. Novelis shall and shall cause all member of the
Novelis Group to file all Tax Returns consistent with
Alcan's choice and elections and, where required, join in
the making of the relevant elections and otherwise
cooperate with Alcan;
(iii) if Applicable Law is silent about such disaffiliation or
deconsolidation, Alcan shall decide, in its sole
discretion, how such withdrawal should be implemented or
treated, and Novelis and the members of the Novelis Group
shall be bound by any decision made by Alcan in this
respect and shall be required to take whatever action is
required to give effect to such decision. Novelis shall
and shall cause all member of the Novelis Group to file
all Tax Returns consistent with Alcan's choice and
elections and, where required, join in the making of the
relevant elections and otherwise cooperate with Alcan.
ARTICLE VIII - CONTROL OF TAX CHALLENGES
8.01 CONTROL OF CHALLENGE OF TAX CLAIMS
(a) Subject to Sections 8.02 and 8.03 of this Agreement, if a member
of the Alcan Group or a member of the Novelis Group (the
"INDEMNIFIED PARTY") receives a Claim that could give rise to an
indemnification under this Agreement, the Indemnified Party, if a
member of the Alcan Group, shall promptly notify Novelis, and if
a member of the Novelis Group shall notify
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Alcan, (in each case the recipient of the notification being the
"INDEMNITOR").
(b) The Indemnified Party agrees to contest any Claim and not to
settle any Claim without the prior written consent of the
Indemnitor, provided that within thirty (30) days after notice of
a Claim by the Indemnified Party to the Indemnitor:
(i) the Indemnitor requests in writing that such Claim be
contested by the Indemnified Party;
(ii) the Indemnitor shall have provided an opinion of an
independent tax counsel, selected by the Indemnitor and
reasonably acceptable to the Indemnified Party, to the
effect that it is more likely than not that a Final
Determination will be substantially consistent with the
Indemnitor's position relating to such Claim; and
(iii) the Indemnitor agrees in writing to pay on demand and pays
all out-of-pocket costs, losses and expenses (including,
but not limited to, legal and accounting fees) paid or
incurred by the Indemnified Party in connection with
contesting such Claim.
(c) Where a Claim is being contested, and regardless of whether the
Indemnified Party is a member of the Alcan Group or the Novelis
Group, Alcan shall determine, in its sole discretion, the nature
of all actions to be taken to contest such Claim, including:
(i) whether any action to contest such Claim shall initially
be by way of judicial or administrative proceeding, or
both;
(ii) whether any such Claim shall be contested by resisting
payment thereof or by paying the same and seeking a refund
thereof; and
(iii) the court or other judicial body before which judicial
action, if any, shall be commenced.
(d) The Indemnitor shall be entitled to participate in contesting any
such Claim at its own expense. To the extent the Indemnitor is
not participating, the Indemnified Party shall keep the
Indemnitor and, upon written request by the Indemnitor, its
counsel, informed as to the progress of the contest.
(e) If the Indemnitor requests that the Indemnified Party accept a
settlement of a Claim offered by a Taxing Authority and if such
Claim may, in the reasonable discretion of the Indemnified Party,
be settled without prejudicing any claims a Taxing Authority may
have with respect to matters other than the transactions
contemplated by the Separation Agreement, the Indemnified Party
shall either:
(i) accept such settlement offer; or
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(ii) agree with the Indemnitor that the Indemnitor's liability
with respect to such Claim shall be limited to the lesser
of (A) an amount calculated on the basis of such
settlement offer plus interest owed to the Taxing
Authority on the date of eventual payment, or (B) the
amount calculated on the basis of a Final Determination.
(f) Except as provided below in this paragraph (f), the Indemnified
Party shall not settle a Claim that the Indemnitor is entitled to
require the Indemnified Party to contest under paragraph (b) of
this Section 8.01 without the prior written consent of the
Indemnitor. At any time, whether before or after commencing to
take any action pursuant to this Section 8.01 with respect to any
Claim, the Indemnified Party may decline to take action with
respect to such Claim and may settle such Claim without the prior
written consent of the Indemnitor by notifying the Indemnitor in
writing that the Indemnitor is released from its obligations to
indemnify the Indemnified Party with respect to such Claim (which
notification shall release the Indemnitor from such obligations
except to the extent the Indemnitor has previously agreed in
writing that it would be willing to have its liability calculated
on the basis of a settlement offer in accordance with paragraph
(e) of this Section 8.01 with respect to any Claim related to
such Claim or based on the outcome of such Claim. If the
Indemnified Party settles any Claim or otherwise takes or fails
to take any action pursuant to this paragraph, the Indemnified
Party shall pay to the Indemnitor any amounts paid or advanced by
the Indemnitor with respect to such Claim (other than amounts
payable by the Indemnitor in connection with a settlement offer
pursuant to paragraph (e) of this Section 8.01)), plus interest
attributable to such amounts.
8.02 CERTAIN SPECIFIED TAX CLAIMS
Notwithstanding Section 8.01 of this Agreement, Alcan shall have sole
responsibility for all Claims listed in Schedule 8.02 to this Agreement
and shall have the absolute right to enjoy any benefits of, and the
obligation to bear the costs of, any such challenge.
ARTICLE IX -
COOPERATION, RECORD RETENTION AND CONFIDENTIALITY
9.01 COOPERATION AND RECORD RETENTION
(a) Alcan shall and shall cause each other member of the Alcan Group
to, and Novelis shall and shall cause each other member of the
Novelis Group to, cooperate with any member of the other Group in
the conduct of any audit or the proceedings in respect of a
Pre-Separation Period or Straddle Period. Alcan shall and shall
cause each other member of the Alcan Group to, and Novelis shall
and shall cause each other member of the Novelis Group to,
execute and deliver such powers of attorney and make available
such other documents as are reasonably necessary to carry out the
intent of this Agreement. Alcan shall and shall cause each other
member of the Alcan Group to notify Novelis in writing, and
Novelis
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shall and shall cause each other member of the Novelis Group to
notify Alcan in writing, of any audit adjustments which do not
result in Tax liability but can be reasonably expected to affect
Tax Returns of a member of the other Group for any Period.
(b) Alcan shall and shall cause each other member of the Alcan Group
to, and Novelis shall and shall cause each other member of the
Novelis Group to, in accordance with their respective current
record retention policies and all Applicable Laws, retain
records, documents, accounting data and other information
(including computer data) necessary for the preparation, filing,
review or audit of any Tax Returns in respect of any
Pre-Separation Period or Straddle Period.
(c) Alcan shall and shall cause each other member of the Alcan Group
to, and Novelis shall and shall cause each other member of the
Novelis Group to, provide to any member of the other Group
reasonable access to such records, documents, data and
information and to personnel and premises and ensure the
cooperation of such personnel for the purpose of the review or
audit of any Tax Returns in respect of any Pre-Separation Period
or Straddle Period.
(d) Novelis shall provide and shall cause each other member of the
Novelis Group to provide to Alcan access to such records,
documents, data, information, personnel and premises of Novelis
and of the other relevant members of the Novelis Group as may be
required by Alcan to comply with the Canadian tax regime
applicable to Canadian foreign affiliates or to transfer pricing.
Without limiting the generality of the foregoing, Novelis shall
cause each other member of the Novelis Group that was a foreign
affiliate of Alcan before the Separation, upon request by Alcan,
to:
(i) respond in full to the annual questionnaire of the CRA
concerning foreign affiliates (generally known as the
"Foreign Affiliate Reporting Package") within 3 months of
the receipt of such questionnaire;
(ii) provide Alcan with complete financial statements;
(iii) respond to questions concerning Form T-106 within one (1)
month of receipt; and
(iv) respond promptly to other relevant questions for the
purposes of the foreign affiliate regime or the
transfer-pricing regime in all cases for any
Pre-Separation Period or a Straddle Period.
9.02 Confidentiality
(a) Alcan shall and shall cause each other member of the Alcan Group
to (i) treat in a confidential manner all information and data
relating to Novelis and every other member of the Novelis Group
that it may receive or have access to pursuant to the provisions
of this Agreement and (ii) not disclose any such information to
any
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third party except (A) to the extent required by law or by an
order from a competent tribunal, (B) to the extent required to
interpret, give effect to or enforce this Agreement, (C) to tax,
audit or legal professionals on a need-to-know basis, or (D) with
the prior written consent of Novelis.
(b) Novelis shall and shall cause each other member of the Novelis to
(i) treat in a confidential manner all information and data
relating to Alcan and every other member of the Alcan Group that
it may receive or have access to pursuant to the provisions of
this Agreement and (ii) not disclose any such information to any
third party except (A) to the extent required by law or by an
order from a competent tribunal, (B) to the extent required to
interpret, give effect to or enforce this Agreement, (C) to tax,
audit or legal professionals on a need-to-know basis, or (D) with
the prior written consent of Alcan.
ARTICLE X -
TAX RETURNS
10.01 TAX RETURNS
(a) Alcan shall prepare or cause to be prepared all Tax Returns with
respect to members of the Novelis Group, including those Tax
Returns that are filed on a consolidated, combined or unitary
basis, that are required to be filed in respect of any
Pre-Separation Period or Straddle Period and Novelis shall or
shall cause such Tax Returns to be filed by the member
customarily responsible for the filing of such Tax Returns within
the period prescribed therefor.
(b) In respect of any Period other than a Pre-Separation Period or a
Straddle Period,
(i) Alcan shall, and shall cause each other responsible member
of the Alcan Group to, file or cause to be filed all Tax
Returns with respect to members of the Alcan Group, and
(ii) Novelis shall, and shall cause each other responsible
member of the Novelis Group to, file or cause to be filed
all Tax Returns with respect to members of the Novelis
Group.
(c) No member of the Novelis Group shall amend any of its Tax Returns
for any Pre-Separation Period or Straddle Period without the
prior written consent of Alcan, such consent not to be
unreasonably withheld or delayed. For the purpose of the
preceding sentence, it shall not be unreasonable for Alcan to
withhold its consent where such amendment would negatively impact
Alcan or any other member of the Alcan Group as determined by
Alcan in its sole discretion.
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(d) For the purposes of paragraph (a) of this Section 10.01, Alcan
shall be entitled:
(i) to conclusively rely on any information or data supplied
to it by any member of the Novelis Group or by the
auditors, advisors or representatives of any member of the
Novelis Group; and
(ii) subject to paragraph (b) of Section 7.02, make all
determinations or decisions that are of an elective or
discretionary nature.
ARTICLE XI -
TRANSFER PRICING ISSUES
11.01 TRANSFER PRICING ISSUES
(a) If any Taxing Authority proposes to increase the income of a
member of the Alcan Group or of the Novelis Group (the "FIRST
GROUP") as a result of the supply of property or services by such
member of the First Group to a member of the other group (the
"SECOND GROUP") or by a member of the Second Group to such member
of the First Group on the basis of any affiliation or other
relationship between such persons, such member of the First Group
shall notify the Second Group. The Parties acknowledge the
existence of the adjustments and proposed adjustments set out in
Schedule 11.01 to this Agreement and such schedule shall serve as
notification to Novelis in respect of such adjustments and
proposed adjustments.
(b) The member of the First Group shall have the right to challenge
such proposed adjustment, in which the case the relevant member
of the Second Group shall cooperate with the relevant member of
the First Group including, if so requested by the relevant member
of the First Group, to (i) seek a determination in respect of
such proposed adjustment from the Taxing Authority in any
jurisdiction in which the relevant member of the Second Group is
resident or carries on business or (ii) challenge such proposed
adjustment in any such jurisdiction. The relevant member of the
First Group shall reimburse the relevant member of the Second
Group for all its reasonable out-of-pocket expenses incurred for
this purpose.
(c) Once a Final Determination has been made by the relevant Taxing
Authority with respect to the proposed adjustment, or if the
relevant member of the First Group decides not to challenge the
proposed adjustment, then the relevant member of the Second Group
shall pay to the relevant member of the First Group an amount
equal to Tax savings (including interest) or other relief that
the relevant member of the Second Group will achieve or obtain as
a result of such adjustment. If the tax savings or other relief
are in the form of a reduction of cash Taxes for the same year or
a preceding year, the amount payable by the relevant member of
the Second Group shall be equal to the amount of such Tax
savings. In any other case, the amount of the payment shall be
equal to the net present value of such Tax savings or other
relief using an annual discount rate of 8%. Any such
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payment shall be treated as a payment for the supply of property
or services by the relevant member of the First Group to the
relevant member of the Second Group which gave rise to the
relevant adjustment. In the event that the relevant member of the
First Group disagrees with the amount of the Tax savings achieved
by the relevant member of the Second Group in any jurisdiction as
determined by the Taxing Authority in such jurisdiction,
paragraph (b) of this Section 11.01 shall apply mutatis mutandis.
(d) No member of the Novelis Group shall request or initiate any
adjustment described above without the prior written consent of
Alcan.
(e) These principles set out in this Section 12.01 shall apply to (i)
transactions that have already given rise to an adjustment or
proposed adjustment by a Taxing Authority, (ii) transactions
completed before the Effective Date that, as of the Effective
Date, have not given rise to an adjustment or proposed adjustment
and (iii) transactions completed on or after the Effective Date.
ARTICLE XII -
DISPUTE RESOLUTION
12.01 DISPUTE RESOLUTION AGREEMENT TO APPLY
Save as provided for in paragraph (c) of Section 11.01, the Dispute
Resolution Agreement among the Parties and other parties thereto shall
govern all disputes, controversies or claims (whether arising in
contract, delict, tort or otherwise) between the Parties that may arise
out of, or relate to, or arise under or in connection with, this
Agreement or the transactions contemplated hereby (including all
actions taken in furtherance of the transactions contemplated hereby),
or the commercial or economic relationship of the Parties relating
hereto or thereto.
ARTICLE XIII -
MISCELLANEOUS
13.01 EFFECT ON OTHER TAX SHARING AGREEMENTS
Any and all prior tax sharing agreements or practices between any
member of the Alcan Group and any member of the Novelis Group shall be
terminated and superseded by this Agreement on the Effective Date (or,
in the case of the United States, the Date of the U.S. Internal
Distribution).
13.02 Counterparts
This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been signed by each of the
Parties and delivered to the other Parties.
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13.03 ENTIRE AGREEMENT
This Agreement and the Separation Agreement, the schedules and exhibits
hereto and thereto and the specific agreements contemplated herein or
thereby contain the entire agreement between the Parties with respect
to the subject matter hereof and supersede all previous agreements,
oral or written, negotiations, discussions, writings, understandings,
commitments and conversations with respect to such subject matter. No
agreements or understandings exist between the Parties other than those
set forth or referred to herein or therein.
13.04 INCONSISTENCIES WITH SEPARATION AGREEMENT
Where any inconsistency between a provision of this Agreement and a
provision of the Separation Agreement arises as regards to taxation
matters, the provisions of this Agreement shall prevail.
13.05 GOVERNING LAW
(a) Subject to paragraph (b) of this Section 14.05, this Agreement
shall be governed by and construed and interpreted in accordance
with the laws applicable in the Province of Quebec, irrespective
of conflict of laws principles under Quebec law, as to all
matters, including matters of validity, construction, effect,
enforceability, performance and remedies.
(b) The interpretation or application of this Agreement to matters
pertaining to Taxes that are assessed or payable in jurisdictions
other than Canada shall be governed by the laws of that other
jurisdiction irrespective of conflict of laws principles under
the laws of such jurisdiction, as to all matters, including
matters of validity, construction, effect, enforceability,
performance and remedies, and where such other jurisdiction is
the United States, the laws of the State of New York shall apply.
13.06 DISCLAIMER REGARDING TAX ATTRIBUTES
Except as otherwise provided in this Agreement, no representation or
warranty is being made by Alcan or any member of the Alcan Group in
this Agreement regarding the tax attributes of the properties or
entities that are to be transferred, directly or indirectly, to
Arcustarget or Novelis as part of the Reorganization or the
Arrangement.
13.07 TAX SERVICES
For a period of two (2) years following the Effective Date, Novelis
shall and shall cause each other member of the Novelis Group not to use
the services in the area of taxation of any accounting or law firm that
rendered professional services in the area of taxation to Alcan or to
any member of the Alcan Group in connection with the Separation, except
with the prior written consent of Alcan.
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13.08 TAX LIABILITY
For the purposes of Articles IV, V, VI, VII and XI of this Agreement,
when, under Applicable Law, the primary liability for a Tax rests with
one person but another person is also liable to pay such Tax or any
portion thereof (or an amount equal to such Tax or any portion thereof)
due to the relationship between such persons or as a result of a
payment or other transaction between such persons, such Tax shall be
considered as a Tax of the first person and not as a Tax of the second
person.
13.09 NOTICES
All notices and other communications under this Agreement shall be in
writing and shall be deemed to be duly given (a) on the date of
delivery, if delivered personally, (b) on the first Business Day
following the day of dispatch if delivered by a nationally recognized
next-day courier service, (c) on the date of actual receipt if
delivered by registered or certified mail, return receipt requested,
postage prepaid or (d) if sent by facsimile transmission, when
transmitted and receipt is confirmed by telephone. All notices
hereunder shall be delivered as follows:
If to Alcan, to:
Alcan Inc.
1188 Sherbrooke Street West
Montreal, Quebec
H3A 3G2
Fax: 514-848-8436
Attention: Chief Legal Officer
With a copy to:
Alcan Inc.
1188 Sherbrooke Street West
Montreal, Quebec
H3A 3G2
Fax: 514-848-8115
Attention: Chief Tax Officer
If to Novelis or Arcustarget, to
Novelis Inc.
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If to AC, to
Alcan Corporation
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If to AAC, to
Novelis Corporation
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Any Party may, by notice to the other Parties, change the address or
facsimile number to which such notices are to be given.
13.10 INTEREST
Where in this Agreement an amount of interest is stipulated to be
payable, such interest shall be computed at an annual rate of 7% unless
otherwise specified.
13.11 ASSIGNABILITY
This Agreement shall be binding upon and inure to the benefit of the
Parties hereto and thereto, respectively, and their respective
successors and assigns; provided, however, that no Party hereto may
assign its respective rights or delegate its respective obligations
under this Agreement without the express prior written consent of the
other Party, not to be unreasonably withheld or delayed.
13.12 SEVERABILITY
If any provision of this Agreement or the application thereof to any
Person or circumstance is determined by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to Persons or
circumstances or in jurisdictions other than those as to which it has
been held invalid or unenforceable, shall remain in full force and
effect and shall in no way be affected, impaired or invalidated
thereby, so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any Party.
Upon such determination, the Parties shall negotiate in good faith in
an effort to agree upon such a suitable and equitable provision to
effect the original intent of the Parties.
13.13 WAIVERS OF DEFAULT
Waiver by any Party of any default by the other Party of any provision
of this Agreement shall not be deemed a waiver by the waiving Party of
any subsequent or other default, nor shall it prejudice the rights of
the other Party.
13.14 AMENDMENTS
No provisions of this Agreement shall be deemed waived, amended,
supplemented or modified by any Party, unless such waiver, amendment,
supplement or modification is in writing and signed by the authorized
representative of the Party against whom it is sought to enforce such
waiver, amendment, supplement or modification.
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13.15 FURTHER ASSURANCES
Each of the Parties will promptly do, make, execute or deliver, or
cause to be done, made, executed or delivered, all further acts,
documents and things as the other Party to this Agreement may
reasonably require from time to time for the purpose of giving effect
to this Agreement and will use reasonable efforts and take any steps as
may be reasonably within its power to implement to their full extent
the provisions of this Agreement.
[The remainder of this page is intentionally blank.]
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IN WITNESS WHEREOF, the Parties have caused this Tax Sharing and Disaffiliation
Agreement to be executed by their duly authorized representatives.
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SCHEDULE 2.02(i)
Corporate Structure of the Novelis Group After the Separation
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SCHEDULE 8.02
Tax Claims That Are The Sole Responsibility of Alcan
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SCHEDULE 11.01
Transfer Pricing Adjustments
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