UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): April 27, 2005
ASHLAND INC.
(Exact name of registrant as specified in its charter)
Kentucky
(State or other jurisdiction of incorporation)
1-2918 61-0122250
(Commission File Number) (I.R.S. Employer
Identification No.)
50 E. RiverCenter Boulevard, Covington, Kentucky 41012-0391
(Address of principal executive offices) (Zip Code)
P.O. Box 391, Covington, Kentucky 41012-0391
(Mailing Address) (Zip Code)
Registrant's telephone number, including area code (859) 815-3333
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of
the following provisions:
[X ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 2230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
-1-
Item 1.01 Entry into a Material Definitive Agreement
On April 27, 2005, Ashland Inc. ("Ashland") signed an amendment to
its agreement to transfer its 38-percent interest in Marathon Ashland
Petroleum LLC ("MAP") and two other businesses to Marathon Oil Corporation
("Marathon"). Under the amended agreement, Ashland's interest in these
businesses is valued at approximately $3.7 billion compared to
approximately $3 billion in the earlier agreement, with substantially all
the increase in value going directly to Ashland's shareholders in the form
of Marathon stock. In addition, Marathon has agreed to pay the first $200
million of any Section 355(e) tax, if any, as compared to the prior
agreement where Ashland bore full responsibility for any Section 355(e)
tax. The transaction is expected to be tax free to Ashland's shareholders
and tax efficient to Ashland. The two other businesses are Ashland's maleic
anhydride business and 60 Valvoline Instant Oil Change (VIOC) centers in
Michigan and northwest Ohio, which are valued at $94 million.
Under the terms of the amended agreement, Ashland's shareholders
will receive Marathon common stock with an aggregate value of $915 million.
Based on the number of shares outstanding on March 31, 2005, shareholders
would receive $12.56 in Marathon stock per Ashland share. Ashland will
receive cash and MAP accounts receivable totaling $2.8 billion. In
addition, MAP has not made quarterly cash distributions to Ashland and
Marathon since March 18, 2004, and such distributions will continue to be
suspended until the closing of the transaction. As a result, the final
amount of cash to be received by Ashland will be increased by an amount
equal to 38 percent of the cash accumulated from operations during the
period prior to closing. At March 31, 2005, Ashland's share of this
accumulated cash was $560 million.
Under the terms of the earlier agreement, the closing was
conditioned on receipt of private letter rulings from the Internal Revenue
Service with respect to certain tax issues. Under the terms of the amended
agreement, Ashland and Marathon expect to enter into a closing agreement
with the IRS that will resolve these tax issues. Under the closing
agreement, the retention by Ashland of certain contingent liabilities
related to previously-ow ned businesses will reduce Ashland's tax basis.
Ashland estimates this basis reduction may increase any Section 355(e) tax
on the transaction by approximately $66 million. Marathon has agreed to pay
the first $200 million of any Section 355(e) tax. Ashland would pay up to
the next $175 million of Section 355(e) tax, if required. Any remaining
Section 355(e) tax would be shared equally by Ashland and Marathon. Based
on the number of Ashland shares outstanding as of March 31, 2005, and
Ashland's current estimate of it's tax basis, Ashland expects that it would
be required to pay Section 355(e) tax only if Ashland's stock price on the
closing date exceeds approximately $74.50 per share.
Ashland intends to use a substantial portion of the transaction
proceeds to retire all or most of the company's outstanding debt and
certain other financial obligations.
The transaction is subject to, among other things, approval by
Ashland's shareholders, consent from public debt holders, finalization of
the closing agreement with the IRS and customary antitrust review. Ashland
and Marathon have agreed to use their reasonable best efforts to complete
the transaction by June 30, 2005, with the termination date for the
transaction extended to September 30, 2005.
The foregoing description of the transaction is qualified in its
entirety by reference to the terms of the agreements which are filed as
Exhibits to this Form 8-K and are incorporated by reference herein.
Item 9.01 Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired
None.
(b) Pro Forma Financial Information
None.
(c) Exhibits
2.1* Amendment No. 1 dated as of April 27, 2005 to the Master Agreement
dated as of March 18, 2004 among Ashland Inc., ATB Holdings, Inc.,
EXM LLC, , New EXM Inc., Marathon Oil Corporation, Marathon Domestic
LLC and Marathon Ashland Petroleum LLC.
2.2* Amended and Restated Tax Matters Agreement dated as of April 27,
2005, among Ashland Inc., ATB Holdings Inc., EXM LLC, New EXM Inc.,
Marathon Oil Corporation, Marathon Oil Company, Marathon Domestic LLC
and Marathon Ashland Petroleum LLC.
2.3* Amendment No. 3 dated as of April 27, 2005 to the Amended and
Restated Limited Liability Company Agreement dated as of December 31,
1998 of Marathon Ashland Petroleum LLC, by and between Ashland Inc.
and Marathon Oil Company, a wholly owned subsidiary of Marathon Oil
Corporation.
*Ashland agrees to furnish supplementally a copy of any omitted schedule to
the United States Securities and Exchange Commission upon request.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
ASHLAND INC.
--------------------------------------------
(Registrant)
Date: May 2, 2005 /s/ J. Marvin Quin
--------------------------------------------
Name: J. Marvin Quin
Title: Senior Vice President,
Chief Financial Officer
EXHIBIT INDEX
2.1* Amendment No. 1 dated as of April 27, 2005 to the Master Agreement
dated as of March 18, 2004 among Ashland Inc., ATB Holdings, Inc.,
EXM LLC, , New EXM Inc., Marathon Oil Corporation, Marathon Domestic
LLC and Marathon Ashland Petroleum LLC.
2.2* Amended and Restated Tax Matters Agreement dated as of April 27,
2005, among Ashland Inc., ATB Holdings Inc., EXM LLC, New EXM Inc.,
Marathon Oil Corporation, Marathon Oil Company, Marathon Domestic LLC
and Marathon Ashland Petroleum LLC.
2.3* Amendment No. 3 dated as of April 27, 2005 to the Amended and
Restated Limited Liability Company Agreement dated as of December 31,
1998 of Marathon Ashland Petroleum LLC, by and between Ashland Inc.
and Marathon Oil Company, a wholly owned subsidiary of Marathon Oil
Corporation.
*Ashland agrees to furnish supplementally a copy of any omitted schedule to
the United States Securities and Exchange Commission upon request.
EXHIBIT 2.1
CONFORMED COPY
AMENDMENT NO. 1 dated as of April 27, 2005 (this
"Amendment"), to the Master Agreement dated as of March
18, 2004 (the "Master Agreement"), among Ashland Inc., a
Kentucky corporation ("Ashland"), ATB Holdings Inc., a
Delaware corporation ("HoldCo"), EXM LLC, a Kentucky
limited liability company and wholly owned subsidiary of
HoldCo ("New Ashland LLC"), New EXM Inc., a Kentucky
corporation and wholly owned subsidiary of HoldCo ("New
Ashland Inc."), Marathon Oil Corporation, a Delaware
corporation ("Marathon"), Marathon Oil Company, an Ohio
corporation and wholly owned subsidiary of Marathon
("Marathon Company"), Marathon Domestic LLC, a Delaware
limited liability company and wholly owned subsidiary of
Marathon ("Merger Sub") and Marathon Ashland Petroleum
LLC, a Delaware limited liability company owned by
Marathon Company and Ashland ("MAP").
WHEREAS the parties hereto are parties to the Master
Agreement, pursuant to which the parties have agreed to effect the
Transactions described therein (capitalized terms used in this Amendment
and not defined herein shall have the meanings given such terms in the
Master Agreement);
WHEREAS, simultaneously with the execution and delivery
of this Amendment, the parties hereto are entering into an Amended and
Restated Tax Matters Agreement providing for, in part, the allocation and
assignment among themselves of Taxes resulting from the application of
Section 355(e) of the Code to the Transactions; and
WHEREAS the parties hereto wish to amend the Master
Agreement as provided herein, including to provide that: (i) the New
Ashland Inc. Share Issuance shall be effected by a share issuance to HoldCo
as part of the Conversion Merger, followed by a distribution of the shares
of New Ashland Inc. Common Stock by HoldCo to the holders of HoldCo Common
Stock on the basis of one share of New Ashland Inc. Common Stock for each
outstanding share of HoldCo Common Stock, prior to the Acquisition Merger;
(ii) the aggregate value of the shares of Marathon Common Stock to be
received by the holders of HoldCo Common Stock in the Acquisition Merger as
Acquisition Merger Consideration shall be increased from $315,000,000 to
$915,000,000,(iii) the Map Partial Redemption Amount shall be increased by
$100,000,000 and (iv) the obligation of the Ashland Parties and the
Marathon Parties to effect the Transactions is subject to Ashland and
Marathon having entered into a closing agreement with the Internal Revenue
Service in effect on the Closing Date and, if applicable, having received
the private letter rulings from the Internal Revenue Service, providing all
the required agreements or rulings described in Exhibit D (as amended
hereby) to the Master Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. STRUCTURE AND CONSIDERATION AMENDMENTS TO THE
MASTER AGREEMENT. Effective as of the date of this Amendment, the Master
Agreement is hereby amended as follows:
(a) The Index of Defined Terms in the Master Agreement is
hereby amended by (i) adding the new terms "Distribution" and
"Distribution Effective Time" and their corresponding section
"1.04(a)", (ii) replacing the corresponding section "1.04(a)" with
section "1.04(b)" for the terms "Acquisition Merger", "DGCL" and
"DLLCA", (iii) replacing the corresponding section "1.04(b)" with
section "4.05" for the term "Code" and (iv) replacing the
corresponding section "5.01(a)(i)" with section "5.01(a)(ii)" for
the term "Exchange Agent".
(b) Section 1.03(a) of the Master Agreement is hereby
amended by replacing the reference therein to "Section 1.04(a)"
with "Section 1.04(b)".
(c) Section 1.04 of the Master Agreement is hereby
amended and restated in its entirety in the form of Annex A to
this Amendment.
(d) Section 3.04 of the Master Agreement is hereby
amended and restated in its entirety in the form of Annex B to
this Amendment.
(e) Sections 4.03(a) and (b) of the Master Agreement are
hereby amended and restated in their entirety in the form of Annex
C to this Amendment.
(f) Section 4.05 of the Master Agreement is hereby
amended and restated in its entirety in the form of Annex D to
this Amendment.
(g) Article V of the Master Agreement is hereby amended
and restated in its entirety in the form of Annex E to this
Amendment.
(h) Section 6.03(c) of the Master Agreement is hereby
amended and restated in its entirety in the form of Annex F to
this Amendment.
(i) Section 6.05(b)(ii)(A) of the Master Agreement is
hereby amended and restated in its entirety in the form of Annex G
to this Amendment.
(j) Section 9.07(b) of the Master Agreement is hereby
amended and restated in its entirety in the form of Annex H to
this Amendment.
(k) Section 10.02(d) of the Master Agreement is hereby
amended by (i) replacing the reference therein to "Section
1.04(b)" with "Section 1.04(a)" and (ii) adding the following
proviso to the end thereof: "; provided, however, that each of
Ashland and HoldCo hereby covenant to cause their respective
boards of directors to convene a meeting and to make a good faith
determination with respect to the foregoing prior to the date the
Closing would otherwise occur but for the failure of this
condition to be satisfied."
(l) Sections 13.01(b)(x) and 13.02(b)(ix) of the Master
Agreement are hereby amended by replacing the references therein
to "$315,000,000" with "$815,000,000".
(m) The definition of the term "MAP Partial Redemption
Amount" set forth in Section 14.02 of the Master Agreement is
hereby amended by replacing the reference therein to
"$2,699,170,000" with "$2,799,170,000".
(n) The definition of the term "New Ashland Inc. Common
Stock" set forth in Section 14.02 of the Master Agreement is
hereby amended and restated in its entirety in the form of Annex I
to this Amendment.
(o) Clause (iii) of the third sentence of Section 14.06
of the Master Agreement is hereby amended and restated in its
entirety in the form of Annex J to this Amendment.
SECTION 2. TAX CLOSING CONDITION AMENDMENTS TO THE MASTER
AGREEMENT. Effective as of the date of this Amendment, the Master Agreement
is hereby amended as follows:
(a) The Index of Defined Terms in the Master Agreement is
hereby amended by adding the new term "Closing Agreement" and its
corresponding section "14.02".
(b) Clauses (iii) and (iv) of the sixth recital set forth
in the Master Agreement are hereby amended and restated in their
entirety in the form of Annex K to this Amendment.
(c) Sections 9.03(b) and 9.16 of the Master Agreement and
the definition of the term "Ashland Debt Obligation Amount" set
forth in Section 14.02 of the Master Agreement are hereby amended
by replacing the references therein to "Private Letter Rulings"
with "Closing Agreement or Private Letter Rulings".
(d) Section 10.01(f) of the Master Agreement is hereby
amended and restated in its entirety in the form of Annex L to
this Amendment.
(e) Section 14.02 of the Master Agreement is hereby
amended by adding the following defined term at the appropriate
alphabetical location:
"Closing Agreement" means the closing agreement to
be entered into by Marathon, Ashland, New Ashland Inc.
and certain related parties and the IRS with respect to
the Transactions pursuant to Code Section 7121 and
described in Section 5.01 of the Tax Matters Agreement.
(f) Exhibit D to the Master Agreement is hereby amended
and restated in its entirety in the form of Annex M to this
Amendment.
SECTION 3. OTHER AMENDMENTS TO THE MASTER AGREEMENT.
Effective as of the date of this Amendment, the Master Agreement is hereby
amended as follows:
(a) The last sentence of Section 1.05 of the Master
Agreement is hereby deleted.
(b) The first sentence of Section 9.03(a) of the Master
Agreement is hereby amended and restated in its entirety in the
form of Annex N to this Amendment.
(c) The first sentence of Section 9.09(b) of the Master
Agreement is hereby amended and restated in its entirety in the
form of Annex O to this Amendment.
(d) The first sentence of Section 9.16 of the Master
Agreement is hereby amended and restated in its entirety in the
form of Annex P to this Amendment.
(e) Article IX of the Master Agreement is hereby amended
by adding a new Section 9.17 in the form of Annex Q to this
Amendment at the appropriate numerical location.
(f) Section 10.01(c) of the Master Agreement is hereby
amended by adding the following words immediately after the first
occurrence of the word "Transactions": "(other than the transfer
of the Ashland LOOP/LOCAP Interest)".
(g) Section 11.01(b)(i) of the Master Agreement is hereby
amended and restated in its entirety in the form of Annex R to
this Amendment.
(h) Section 14.02 of the Master Agreement is hereby
amended by adding the following defined terms at the appropriate
alphabetical locations:
"Ashland Affected Non-Qualified Employee Stock Option or
SAR" means any Ashland Non-Qualified Employee Stock Option or
Ashland SAR granted to an employee of MAP, Marathon or any of
their subsidiaries who is actively employed with MAP, Marathon or
any of their subsidiaries immediately prior to the Closing that is
outstanding and unexercised immediately prior to the Closing and
(i) was granted in 2001 or 2002 and is unvested immediately prior
to the Closing or (ii) was granted in 2003 and is scheduled to
vest on September 18, 2005. For purposes of this definition, any
employee of MAP, Marathon or any of their subsidiaries who is not
actively at work immediately prior to the Closing due solely to a
leave of absence (including due to vacation, holiday, sick leave,
maternity or paternity leave, military leave, jury duty,
bereavement leave, injury or short-term disability) other than
long-term disability, in compliance with applicable policies of
MAP, Marathon or such subsidiary, shall be deemed to be actively
employed with MAP, Marathon or such subsidiary immediately prior
to the Closing.
"Ashland Non-Qualified Employee Stock Option" means any
Ashland Employee Stock Option granted under the terms of the
Ashland Inc. Stock Option Plan for Employees of Joint Ventures
that is not intended to qualify as an "incentive stock option"
within the meaning of Section 422 of the Code.
(i) The definition of the term "MAP Adjustment Amount"
set forth in Section 14.02 of the Master Agreement is hereby
amended and restated in its entirety in the form of Annex S to
this Amendment.
SECTION 4. EFFECT ON THE MASTER AGREEMENT. Except as
specifically amended by this Amendment, the Master Agreement shall remain
in full force and effect and the Master Agreement, as amended by this
Amendment, is hereby ratified and affirmed in all respects. On and after
the date hereof, each reference in the Master Agreement to "this
Agreement," "herein," "hereunder" or words of similar import shall mean and
be a reference to the Master Agreement as amended by this Amendment.
SECTION 5. INTERPRETATION. When a reference is made in
this Amendment to a Section or Article, such reference shall be to a
Section or Article of this Amendment unless otherwise indicated. The
headings contained in this Amendment are for reference purposes only and
shall not affect in any way the meaning or interpretation of this
Amendment. Whenever the words "include", "includes" or "including" are used
in this Amendment, they shall be deemed to be followed by the words
"without limitation".
SECTION 6. SEVERABILITY. If any term or other provision
of this Amendment is invalid, illegal or incapable of being enforced by any
rule or Law, or public policy, all other conditions and provisions of this
Amendment shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party hereto. Upon such
determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good
faith to modify this Amendment so as to effect the original intent of the
parties hereto as closely as possible to the end that the transactions
contemplated hereby are fulfilled to the greatest extent possible.
SECTION 7. COUNTERPARTS. This Amendment 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.
SECTION 8. NO THIRD-PARTY BENEFICIARIES. This Amendment
is not intended to confer upon any person other than the parties hereto any
rights or remedies.
SECTION 9. EXERCISE OF RIGHTS AND REMEDIES. Except as
this Amendment otherwise provides, no delay or omission in the exercise of,
or failure to assert, any right, power or remedy accruing to any party
hereto as a result of any breach or default hereunder by any other party
hereto will impair any such right, power or remedy, nor will it be
construed, deemed or interpreted as a waiver of or acquiescence in any such
breach or default, or of any similar breach or default occurring later; nor
will any waiver of any single breach or default be construed, deemed or
interpreted as a waiver of any other breach or default hereunder occurring
before or after that waiver. The failure of any party to this Amendment to
assert any of its rights under this Amendment or otherwise shall not
constitute a waiver of such rights.
SECTION 10. GOVERNING LAW. THIS AMENDMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE
PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
SECTION 11. ASSIGNMENT. Neither this Amendment nor any of
the rights, interests or obligations under this Amendment shall be
assigned, in whole or in part, by any of the parties without the prior
written consent of the other parties, except that the rights, interests and
obligations of any party under this Amendment may be assigned by operation
of law pursuant to a merger, consolidation or other business combination
involving such party that would not reasonably expected to prevent or
materially delay the consummation of the Transactions; provided, however,
that any assignment pursuant to the exception set forth in this sentence
shall not operate to release any party from its obligations under this
Amendment. Subject to the preceding sentences, this Amendment will be
binding upon, inure to the benefit of, and be enforceable by, the parties
and their respective successors and assigns.
SECTION 12. ENFORCEMENT. The parties agree that
irreparable damage would occur in the event that any of the provisions of
the Transaction Agreements were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that,
subject to Sections 13.01(c) and 13.02(c) of the Master Agreement, the
parties shall be entitled to an injunction or injunctions to prevent
breaches of this Amendment and to enforce specifically the terms and
provisions of this Amendment in any New York state court or any Federal
court located in the Borough of Manhattan, The City of New York in the
State of New York, this being in addition to any other remedy to which they
are entitled at law or in equity. In addition, each of the parties hereto
(a) consents to submit itself to the personal jurisdiction of any New York
state court or any Federal court located in the Borough of Manhattan, The
City of New York in the State of New York in the event any dispute arises
out of this Amendment, (b) agrees that it will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from
any such court, (c) agrees that it will not bring any action relating to
this Amendment in any court other than any New York state court or any
Federal court sitting in the Borough of Manhattan, The City of New York in
the State of New York (provided, however, that this clause (c) shall not
limit the ability of any party hereto to (i) file a proof of claim or bring
any action in any court in which a bankruptcy or reorganization proceeding
involving another party hereto is pending, (ii) file a counter-claim or
cross-claim against another party hereto in any court in which a proceeding
involving both such parties is pending or (iii) implead another party
hereto in respect of a Third Party Claim in any court in which a proceeding
relating to such Third Party Claim is then pending) and (d) waives any
right to trial by jury with respect to any action related to or arising out
of this Amendment.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Amendment, all as of the date first written above.
ASHLAND INC.,
by /s/ James J. O'Brien
------------------------
Name: James J. O'Brien
Title: Chief Executive Officer
ATB HOLDINGS INC.,
by /s/ James J. O'Brien
------------------------
Name: James J. O'Brien
Title: President
EXM LLC,
by
ATB HOLDINGS INC.,
by /s/ James J. O'Brien
------------------------
Name: James J. O'Brien
Title: President
NEW EXM INC.,
by /s/ James J. O'Brien
------------------------
Name: James J. O'Brien
Title: President
MARATHON OIL CORPORATION,
by /s/ Janet F. Clark
------------------------
Name: Janet F. Clark
Title: Senior Vice President and Chief
Financial Officer
MARATHON OIL COMPANY,
by /s/ Janet F. Clark
------------------------
Name: Janet F. Clark
Title: Senior Vice President
MARATHON DOMESTIC LLC,
by
MARATHON OIL CORPORATION,
by /s/ Janet F. Clark
------------------------
Name: Janet F. Clark
Title: Senior Vice President and Chief
Financial Officer
MARATHON ASHLAND PETROLEUM LLC,
by /s/ Anthony R. Kenney
------------------------
Name: Anthony R. Kenney
Title: Vice President
ANNEX A
SECTION 1.04. Distribution; Acquisition Merger. (a)
Promptly following the Conversion Merger Effective Time, HoldCo shall
distribute to the holders of HoldCo Common Stock (as defined in Section
2.04(a)(i)) shares of New Ashland Inc. Common Stock on the basis of one
share of New Ashland Inc. Common Stock for each outstanding share of HoldCo
Common Stock (the "Distribution"). On or prior to the Closing Date, the
Board of Directors of HoldCo shall formally declare the Distribution and
shall authorize and direct HoldCo to pay it promptly following the
Conversion Merger Effective Time by delivery of certificates representing
shares of New Ashland Inc. Common Stock to the Exchange Agent (as defined
in Section 5.01(a)(ii)) for delivery to the holders of HoldCo Common Stock
entitled thereto. The Distribution shall be deemed effective upon written
notification by HoldCo to the Exchange Agent that the Distribution has been
declared and that the Exchange Agent is authorized to proceed with the
distribution of New Ashland Inc. Common Stock (the "Distribution Effective
Time").
(b) Promptly following the Distribution Effective Time,
pursuant to Article IV and in accordance with the Delaware General
Corporation Law (the "DGCL") and the Delaware Limited Liability Company Act
(the "DLLCA"), HoldCo shall be merged with and into Merger Sub (the
"Acquisition Merger") at the Acquisition Merger Effective Time.
ANNEX B
SECTION 3.04. Conversion of New Ashland Securities. At
the Conversion Merger Effective Time, by virtue of the Conversion Merger
and without any action on the part of HoldCo:
(a) each New Ashland LLC Interest issued and outstanding
immediately prior to the Conversion Merger Effective Time shall be
converted into and thereafter represent a number of duly issued, fully paid
and nonassessable shares of New Ashland Inc. Common Stock equal to the
quotient of (x) the number of shares of HoldCo Common Stock issued and
outstanding immediately prior to the Conversion Merger Effective Time
divided by (y) the number of New Ashland LLC Interests issued and
outstanding immediately prior to the Conversion Merger Effective Time; and
(b) each share of New Ashland Inc. Common Stock held by
HoldCo immediately prior to the Conversion Merger Effective Time shall
automatically be canceled and retired and shall cease to exist, and no
consideration shall be delivered or deliverable in exchange therefor.
ANNEX C
SECTION 4.03. Effect on Capital Stock. (a) At the
Acquisition Merger Effective Time, by virtue of the Acquisition Merger and
without any action on the part of the holder of any shares of HoldCo Common
Stock or any membership interests in Merger Sub:
(i) subject to Section 5.01(e), each issued and
outstanding share of HoldCo Common Stock shall be
converted into the right to receive a number of duly
issued, fully paid and nonassessable shares of Marathon
Common Stock equal to the Exchange Ratio (as defined in
Section 4.03(b)); and
(ii) all of the limited liability company
interests in Merger Sub issued and outstanding
immediately prior to the Acquisition Merger Effective
Time shall remain outstanding without change.
(b) The shares of Marathon Common Stock to be issued upon
the conversion of shares of HoldCo Common Stock pursuant to Section
4.03(a)(i) and cash in lieu of fractional shares of Marathon Common Stock
as contemplated by Section 5.01(e) are referred to collectively as
"Acquisition Merger Consideration". As of the Acquisition Merger Effective
Time, all such shares of HoldCo Common Stock shall no longer be outstanding
and shall automatically be canceled and retired and shall cease to exist,
and each holder of a certificate formerly representing the right to receive
any such shares of HoldCo Common Stock pursuant to Section 2.04(b) shall
cease to have any rights with respect thereto, except the right to receive,
upon surrender of such certificate in accordance with Section 5.01, the
Acquisition Merger Consideration, without interest. "Exchange Ratio" means
$915,000,000 divided by the product of (x) the Fair Market Value and (y)
the total number of shares of Ashland Common Stock issued and outstanding
immediately prior to the Reorganization Merger Effective Time. "Fair Market
Value" means an amount equal to the average of the closing sale prices per
share for the Marathon Common Stock on the New York Stock Exchange (the
"NYSE"), as reported in The Wall Street Journal, Northeastern edition, for
each of the twenty consecutive trading days ending with the third complete
trading day prior to the Closing Date (not counting the Closing Date) (the
"Averaging Period"). Notwithstanding the foregoing, if the Board of
Directors of Marathon (the "Marathon Board") declares a dividend on the
outstanding shares of Marathon Common Stock having a record date before the
Closing Date but an ex-dividend date (based on "regular way" trading on the
NYSE of shares of Marathon Common Stock) (the "Ex-Date") that occurs after
the first trading day of the Averaging Period, then for purposes of
computing the Fair Market Value, the closing price on any trading day
before the Ex-Date will be adjusted by subtracting therefrom the amount of
such dividend. For purposes of the immediately preceding sentence, the
amount of any noncash dividend will be the fair market value thereof on the
payment date for such dividend as determined in good faith by mutual
agreement of Ashland and Marathon.
ANNEX D
SECTION 4.05. Tax Treatment. The parties intend that (a)
the Reorganization Merger will qualify as a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), and the rules and regulations promulgated thereunder and
Ashland and HoldCo will each be a "party" to such reorganization within the
meaning of Section 368(b) of the Code, (b) the Conversion Merger followed
by the Distribution will qualify as a "reorganization" within the meaning
of Section 368(a) of the Code and a transaction described in Section 355 of
the Code and HoldCo and New Ashland Inc. will each be a "party" to such
reorganization within the meaning of Section 368(b) of the Code, (c) the
Acquisition Merger will qualify as a "reorganization" within the meaning of
Section 368(a) of the Code and HoldCo and Marathon will each be a "party"
to such reorganization within the meaning of Section 368(b) of the Code and
(d) this Agreement will constitute a "plan of reorganization" for U.S.
Federal income Tax purposes.
ANNEX E
ARTICLE V
Exchange of HoldCo Certificates
SECTION 5.01. Exchange of Certificates. (a) Exchange
Agent. (i) [Intentionally Omitted.]
(ii) Promptly following the Acquisition Merger
Effective Time, Marathon shall issue and deposit with an exchange
agent designated by Ashland and reasonably acceptable to Marathon
(the "Exchange Agent"), for the benefit of the holders of shares
of HoldCo Common Stock, for exchange in accordance with this
Article V, through the Exchange Agent, certificates representing a
number of shares of Marathon Common Stock equal to the product of
(x) the total number of shares of Ashland Common Stock issued and
outstanding immediately prior to the Reorganization Merger
Effective Time and (y) the Exchange Ratio, rounded up to the
nearest whole share. Marathon shall provide to the Exchange Agent
(or, following the termination of the Exchange Fund pursuant to
Section 5.01(f), to New Ashland Inc. so long as it is the record
holder on the applicable record date of shares of Marathon Common
Stock delivered to New Ashland Inc. upon such termination)
following the Acquisition Merger Effective Time all the cash
necessary to pay any dividends or other distributions in
accordance with Section 5.01(c)(ii) (the shares of Marathon Common
Stock, together with the cash provided to pay any dividends or
distributions with respect thereto, deposited with the Exchange
Agent being hereinafter referred to as the "Exchange Fund"). For
the purposes of such deposit, Marathon shall assume that there
will not be any fractional shares of Marathon Common Stock.
(iii) The Exchange Agent shall, pursuant to
irrevocable instructions delivered by New Ashland Inc. and
Marathon, deliver the Marathon Common Stock contemplated to be
issued pursuant to Section 4.03 and this Article V out of the
Exchange Fund. The Exchange Fund shall not be used for any other
purpose.
(b) Exchange Procedures. As promptly as reasonably
practicable after the Acquisition Merger Effective Time, the Exchange Agent
shall mail to each holder of record of a certificate or certificates (each,
a "Certificate") that immediately prior to the Reorganization Merger
Effective Time represented outstanding shares of Ashland Common Stock
(other than holders of Dissenters' Shares), (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificate or Certificates shall pass, only upon delivery of
the Certificate or Certificates to the Exchange Agent and shall be in such
form and have such other provisions as New Ashland Inc. and Marathon may
reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificate or Certificates in exchange for Acquisition
Merger Consideration. Upon surrender of a Certificate or Certificates for
cancelation to the Exchange Agent or, following termination of the Exchange
Fund pursuant to Section 5.01(f), New Ashland Inc., together with such
letter of transmittal, duly executed and completed in accordance with the
instructions thereto, and such other documents as may reasonably be
required by the Exchange Agent or New Ashland Inc., as applicable, the
holder of such Certificate or Certificates shall be entitled to receive in
exchange therefor (i) a certificate or certificates representing that
number of whole shares of Marathon Common Stock that such holder has the
right to receive pursuant to the provisions of Section 4.03 and this
Article V, (ii) cash in lieu of fractional shares of Marathon Common Stock
that such holder has the right to receive pursuant to Section 5.01(e) and
(iii) any dividends or other distributions such holder has the right to
receive pursuant to Section 5.01(c), and the Certificate or Certificates so
surrendered shall forthwith be canceled. In the event of a transfer of
ownership of Ashland Common Stock or HoldCo Common Stock that is not
registered in the transfer records of Ashland or HoldCo, a certificate or
certificates representing the appropriate number of shares of Marathon
Common Stock, together with a check for cash to be paid in lieu of
fractional shares, may be issued and paid to a person other than the person
in whose name the Certificate or Certificates so surrendered is registered,
if such Certificate or Certificates shall be properly endorsed or otherwise
be in proper form for transfer and the person requesting such issuance and
payment shall pay any transfer or other Taxes required by reason of the
issuance of shares of Marathon Common Stock to a person other than the
registered holder of such Certificate or Certificates or establish to the
satisfaction of New Ashland Inc. that such Tax has been paid or is not
applicable. Until surrendered as contemplated by this Section 5.01, each
Certificate shall be deemed at any time after the Acquisition Merger
Effective Time to represent only the right to receive upon such surrender
Acquisition Merger Consideration as contemplated by this Section 5.01. No
interest shall be paid or accrue on any cash in lieu of fractional shares
or accrued and unpaid dividends or distributions, if any, payable upon
surrender of any Certificate.
(c) Distributions with Respect to Unexchanged Shares. (i)
[Intentionally Omitted.]
(ii) No dividends or other distributions with
respect to shares of Marathon Common Stock with a record date on
or after the Closing Date shall be paid to the holder of any
Certificate with respect to the shares of Marathon Common Stock
issuable upon surrender thereof, and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to
Section 5.01(e), until the surrender of such Certificate in
accordance with this Article V. Subject to applicable Law,
following surrender of any such Certificate, there shall be paid
to the holder of the certificate representing whole shares of
Marathon Common Stock issued in exchange therefor, without
interest, (A) at the time of such surrender, the amount of any
cash payable in lieu of a fractional share of Marathon Common
Stock to which such holder is entitled pursuant to Section 5.01(e)
and the amount of dividends or other distributions with a record
date on or after the Closing Date theretofore paid with respect to
such whole shares of Marathon Common Stock and (B) at the
appropriate payment date, the amount of dividends or other
distributions with a record date on or after the Closing Date but
prior to such surrender and a payment date subsequent to such
surrender payable with respect to such whole shares of Marathon
Common Stock.
(d) No Further Ownership Rights in HoldCo Common Stock.
The Acquisition Merger Consideration issued (and paid) upon conversion of
any shares of HoldCo Common Stock in accordance with the terms of this
Article V shall be deemed to have been issued (and paid) in full
satisfaction of all rights pertaining to such shares of HoldCo Common
Stock, and after the Acquisition Merger Effective Time there shall be no
further registration of transfers on the stock transfer books of the
business entity surviving the Acquisition Merger, Merger Sub, of shares of
HoldCo Common Stock that were outstanding immediately prior to the
Acquisition Merger Effective Time. If, after the Acquisition Merger
Effective Time, any Certificates are presented to New Ashland Inc. or the
Exchange Agent for any reason, they shall be canceled and exchanged as
provided in this Article V except as otherwise provided by applicable Law.
Unless Marathon otherwise consents, the Acquisition Merger Consideration
shall not be issued to any person who is an "affiliate" of Ashland for
purposes of Rule 145 under the Securities Act of 1933, as amended (the
"Securities Act"), on the date of the Ashland Shareholders Meeting, as
determined from representations contained in the letters of transmittal to
be delivered by former holders of shares of Ashland Common Stock pursuant
to the provisions of Section 5.01(b) (a "Rule 145 Affiliate"), until
Marathon has received a written agreement from such Rule 145 Affiliate
substantially in the form attached hereto as Exhibit C; provided, however,
that Marathon shall be solely responsible for any Losses (as defined in
Section 13.01(a)) of any of the Ashland Parties and their respective
affiliates and Representatives (in each case other than such Rule 145
Affiliate) to the extent resulting from, arising out of, or relating to,
directly or indirectly, any refusal by Marathon to consent to the issuance
of Acquisition Merger Consideration to any such Rule 145 Affiliate pursuant
to this sentence.
(e) No Fractional Shares. (i) No certificates or scrip
representing fractional shares of Marathon Common Stock shall be issued
upon the conversion of HoldCo Common Stock pursuant to Section 4.03, and
such fractional share interests shall not entitle the owner thereof to vote
or to any rights of a holder of Marathon Common Stock. For purposes of this
Section 5.01(e), all fractional shares to which a single record holder
would be entitled shall be aggregated and calculations shall be rounded to
three decimal places. Notwithstanding any other provision of this
Agreement, each holder of Certificates who otherwise would be entitled to
receive a fraction of a share of Marathon Common Stock (determined after
taking into account all Certificates delivered by such holder) shall
receive, in lieu thereof, cash (without interest) in an amount equal to the
product of such fractional part of a share of Marathon Common Stock
multiplied by the Fair Market Value.
(ii) As promptly as practicable following the
Acquisition Merger Effective Time, the Exchange Agent shall
determine the excess of (A) the number of shares of Marathon
Common Stock delivered to the Exchange Agent by Marathon pursuant
to Section 5.01(a) over (B) the aggregate number of whole shares
of Marathon Common Stock to be issued to holders of HoldCo Common
Stock pursuant to Section 5.01(b) (such excess being herein called
the "Excess Shares"). As promptly as practicable after such
determination, Marathon shall deposit an amount into the Exchange
Fund equal to the product of the number of Excess Shares
multiplied by the Fair Market Value, and the Exchange Agent shall
return certificates representing such Excess Shares to Marathon.
(f) Termination of Exchange Fund. Any portion of the
Exchange Fund that remains undistributed to the holders of Certificates for
six months after the Acquisition Merger Effective Time shall be delivered
to or in accordance with the instructions of New Ashland Inc., upon demand,
and any holder of a Certificate who has not theretofore complied with this
Article V shall thereafter look only to New Ashland Inc. for payment of its
claim for Acquisition Merger Consideration and any dividends or
distributions with respect to Marathon Common Stock as contemplated by
Section 5.01(c).
(g) Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such Certificate to be lost, stolen or destroyed and,
if required by New Ashland Inc., the execution of an indemnity reasonably
satisfactory to New Ashland Inc. (and, if required by New Ashland Inc., the
posting by such person of a bond in such reasonable amount as New Ashland
Inc. may direct, as indemnity) against any claim that may be made against
it with respect to such Certificate, the Exchange Agent will deliver in
exchange for such lost, stolen or destroyed Certificate the applicable
Acquisition Merger Consideration with respect to the shares of HoldCo
Common Stock formerly represented thereby, and any dividends or other
distributions such holder has the right to receive in respect thereof,
pursuant to this Agreement.
(h) Withholding Rights. Marathon shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to
this Agreement to any holder of Certificates and any holder of Dissenters'
Shares such amounts as may be required to be deducted and withheld by
Marathon with respect to the making of such payment under the Code or under
any provision of state, local or foreign Tax Law. To the extent that
amounts are so withheld and paid over to the appropriate Tax Authority (as
defined in Section 14.02), Marathon will be treated as though it withheld
an appropriate amount of the type of consideration otherwise payable
pursuant to this Agreement to any holder of Certificates or Dissenters'
Shares, sold such consideration for an amount of cash equal to the fair
market value of such consideration at the time of such deemed sale and paid
such cash proceeds to the appropriate Tax Authority. Such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to
the holder of the shares represented by the Certificates or Dissenters'
Shares, as the case may be, in respect of which such deduction and
withholding was made.
(i) No Liability. None of the Ashland Parties, the
Marathon Parties or the Exchange Agent shall be liable to any person in
respect of any shares of Marathon Common Stock (or dividends or
distributions with respect thereto) or cash from the Exchange Fund
delivered to a public official pursuant to any applicable abandoned
property, escheat or similar Law. If any Certificate has not been
surrendered prior to five years after the Acquisition Merger Effective Time
(or immediately prior to such earlier date on which Acquisition Merger
Consideration or any dividends or distributions with respect to Marathon
Common Stock as contemplated by Section 5.01(c) in respect of such
Certificate would otherwise escheat to or become the property of any
Governmental Entity (as defined in Section 6.05(b))), any such shares,
cash, dividends or distributions in respect of such Certificate shall, to
the extent permitted by applicable Law, become the property of New Ashland
Inc., free and clear of all claims or interest of any person previously
entitled thereto.
(j) Investment of Exchange Fund. The Exchange Agent shall
invest any cash included in the Exchange Fund, as directed by New Ashland
Inc., on a daily basis. Any interest and other income resulting from such
investments shall be paid to New Ashland Inc.
ANNEX F
(c) As of the date of this Agreement, the authorized capital stock of New
Ashland Inc. consists of 1,000 shares of Common Stock, of which 100 shares
of Common Stock have been duly authorized and validly issued, are fully
paid and nonassessable and are owned by HoldCo free and clear of any Lien.
Immediately prior to the Conversion Merger Effective Time, the authorized
capital stock of New Ashland Inc. will consist of 200,000,000 shares of
Common Stock and 30,000,000 shares of preferred stock, of which 100 shares
of Common Stock will have been duly authorized and validly issued, fully
paid and nonassessable and owned by HoldCo free and clear of any Lien,
other than any Lien (i) pursuant to the HoldCo Borrowing arrangements or
(ii) in favor of any Marathon Party or any of their respective subsidiaries
or affiliates.
ANNEX G
(ii) the filing with the Securities and Exchange Commission (the "SEC") of
(A) a joint registration --- statement on Form S-4 (the "Ashland Form S-4")
in connection with the issuance by HoldCo of HoldCo Common Stock in
connection with the Reorganization Merger (the "HoldCo Share Issuance") and
the issuance by New Ashland Inc. of New Ashland Inc. Common Stock in the
Conversion Merger, followed by the distribution thereof to holders of
HoldCo Common Stock in the Distribution (the "New Ashland Inc. Share
Issuance"),
ANNEX H
(b) Ashland and New Ashland Inc. shall prepare and submit to the NYSE or
The Nasdaq Stock Market ("NASDAQ") an application (or amendment thereto)
for listing on the NYSE or NASDAQ of the New Ashland Inc. Common Stock to
be issued to holders of Ashland Common Stock in the Distribution, and shall
use their reasonable best efforts to obtain, prior to the Ashland
Shareholders Meeting, approval for the listing of such shares, subject to
official notice of issuance.
ANNEX I
"New Ashland Inc. Common Stock" means New Ashland Inc. common stock, par
value $0.01 per share, and, with respect to such shares issued at and after
the Conversion Merger Effective Time, includes the associated Ashland
Rights.
ANNEX J
(iii) after the Closing, the holders entitled to receive HoldCo Common
Stock in the Reorganization Merger shall have the rights and remedies
specified in Section 1.04(a) and Article V only.
ANNEX K
(iii) a Tax Matters Agreement (as amended and restated as of April 27, 2005
the "Tax Matters Agreement"); and
(iv) Amendment No. 2 to the MAP LLC Agreement (as defined in Section 14.02)
(the "MAP LLC Agreement Amendment" and, together with this Agreement, the
Maleic Agreement, the VIOC Agreement, the Tax Matters Agreement and
Amendment No. 3 dated as of April 27, 2005, to the MAP LLC Agreement, the
"Transaction Agreements");
ANNEX L
(f) Closing Agreement; Private Letter Rulings; Tax Opinions. Ashland and
Marathon shall have entered into the Closing Agreement with the IRS (which
Closing Agreement shall be in effect on the Closing Date) and, if
applicable, received the private letter rulings from the IRS referred to in
Exhibit D (the "Private Letter Rulings"),providing all the required
agreements or rulings described in Exhibit D and in form and substance
reasonably satisfactory to each of the Ashland Board and the Marathon
Board. Ashland and Marathon shall have received the respective Tax
Opinions, dated as of the Closing Date, described in Exhibit D (to the
extent such Tax Opinions are required under Exhibit D).
ANNEX M
EXHIBIT D
CLOSING AGREEMENT/PRIVATE LETTER RULING/TAX OPINION CLOSING CONDITIONS
STRUCTURE
1. The Closing Agreement provides that the Maleic/VIOC
Contribution described in Section 1.02(a), the MAP/LOOP/LOCAP Contribution
described in Section 1.02(b) and the Reorganization Merger described in
Section 1.02(c), taken together, qualify as a reorganization under Section
368(a)(1)(F) of the Code.
2. The Closing Agreement provides that the Capital Contribution
described in Section 1.03(b) and the Conversion Merger described in Section
1.03(c), taken together with the Distribution described in Section 1.04(a)
qualify as a reorganization under Section 368(a)(1)(D) of the Code.
3. The Closing Agreement provides that the Distribution described
in Section 1.04(a) qualifies as a distribution described in Section 355(a)
of the Code and, accordingly, no gain or loss will be recognized by (and no
amount will otherwise be included in the income of) the shareholders of
HoldCo upon the receipt of New Ashland Inc. Common Stock pursuant to the
Distribution.
4. Either:
(a) The Closing Agreement provides that the Acquisition
Merger described in Section 1.04(b) will qualify as a reorganization under
Section 368(a)(1)(A) of the Code; or
(b) If the Closing Agreement does not provide the agreement
described in paragraph 4(a) above, Cravath, Swaine & Moore LLP delivers a
written opinion to Ashland, in form and substance reasonably satisfactory
to the Ashland Board, concluding that the Acquisition Merger described in
Section 1.04(b) will qualify as a reorganization under Section 368(a)(1)(A)
of the Code; and Miller & Chevalier Chartered delivers a written opinion to
Marathon, in form and substance reasonably satisfactory to the Marathon
Board, that such Acquisition Merger qualifies as a reorganization under
Section 368(a)(1)(A) of the Code.
5. The Closing Agreement provides that the shares of New Ashland
Inc. Common Stock distributed to shareholders of HoldCo in the Distribution
described in Section 1.04(a) will not be treated as "other property",
within the meaning of Section 356(a) of the Code, received in exchange for
HoldCo stock in the Acquisition Merger.
SECTION 357
6. The Closing Agreement provides that the assumption by Marathon
and/or Merger Sub of liabilities of HoldCo in the Acquisition Merger will
not be treated as money or other property under Section 357 of the Code.
CONTINGENT LIABILITIES
7. The Closing Agreement provides that:
(a) HoldCo's basis in its shares of New Ashland Inc. Common
Stock will be reduced under Code Section 358(d)(1) as a result of the
deemed assumption by New Ashland Inc. of the Ashland Asbestos Liabilities
(as defined in the Tax Matters Agreement) and the Ashland Environmental
Liabilities (as defined in the Tax Matters Agreement) pursuant to the
Conversion Merger either (i) by a specified amount determined as of the
Closing that will not exceed $94,000,000 or such greater amount as may be
acceptable to Marathon in its sole discretion or (ii) by the estimated
present value (computed using a discount rate of no less than seven
percent, or such lower rate as is acceptable to Marathon in its sole
discretion) of such liabilities, determined as of the Closing.
(b) HoldCo's basis in its shares of New Ashland Inc. Common
Stock will be reduced under Code Section 358(d)(1) as a result of the
Conversion Merger by the estimated present value (computed using a discount
rate of no less than seven percent, or such lower rate as is acceptable to
Marathon in its sole discretion) of the Ashland Residual Operations
Liabilities (as defined in the Tax Matters Agreement) other than the
Ashland Asbestos Liabilities and the Ashland Environmental Liabilities,
determined as of the Closing.
(c) The Ashland Residual Operations Liabilities will not
include potential future defense costs of New Ashland Inc. related to the
Ashland Residual Operations Liabilities (e.g. attorneys' fees or litigation
expenses).
(d) The Ashland Residual Operations Liabilities will not
include any portion that is reimbursed or reasonably expected to be
reimbursed by insurance.
(e) The amount of Ashland Asbestos Liabilities and Ashland
Environmental Liabilities will be determined (net of the estimated present
value of any related insurance recoveries or defense costs) as of the
Closing and will not be subsequently redetermined.
8. The Closing Agreement provides that:
(a) HoldCo and Marathon or an affiliate of Marathon that is
the "acquiring corporation" of HoldCo in the Acquisition Merger within the
meaning of Code Section 381(a) (such affiliate the "HoldCo Successor") will
be entitled to deduct the Specified Liability Deductions under Code Section
162(a) at the time such liabilities have accrued and economic performance
of such liabilities has occurred without regard to whether such deductions
exceed the amount of Ashland Residual Operations Liabilities determined for
purposes of paragraphs (7)(a) and (b). Such deductions shall be net of
amounts reimbursed by insurance or reasonably expected to be reimbursed by
insurance.
(b) Neither HoldCo, Marathon, nor any member of the Marathon
Group (as defined in the Tax Matters Agreement) will have income or gain as
a result of New Ashland Inc.'s receipt of insurance recoveries with respect
to the Ashland Residual Operations Liabilities to the extent such
recoveries are taken into account in determining the amount of the
deduction under paragraph (8)(a) above.
(c) Neither New Ashland Inc. nor any member of the New
Ashland Inc. Group (as defined in the Tax Matters Agreement) will have
income or gain as a result of New Ashland Inc.'s receipt of insurance
recoveries with respect to the Ashland Residual Operations Liabilities to
the extent such recoveries are taken into account in determining the amount
of the deduction under paragraph (8)(a) above.
(d) Specified Liability Deductions will not be limited under
Code Section 382 or 384 or Treas. Reg. ss. 1.1502-15.
(e) New Ashland Inc. will be entitled to deduct the defense
costs related to the Ashland Residual Operations Liabilities to the extent
such defense costs are incurred after Closing and are otherwise deductible.
(f) Neither HoldCo, Marathon nor any member of the Marathon
Group will realize income or gain as a result of the accrual or payment of
the Ashland Residual Operations Liabilities by New Ashland Inc. or by New
Ashland Inc.'s payment of the defense costs related to the Ashland Residual
Operations Liabilities.
PARTNERSHIP
9. Either:
(a) The Closing Agreement or a private letter ruling issued
by the IRS provides that the MAP Partial Redemption does not constitute a
disguised sale of a partnership interest under Section 707(a)(2)(B) of the
Code; or
(b) If the Closing Agreement or a private letter ruling
issued by the IRS does not provide the agreement described in paragraph
9(a) above, Cravath, Swaine & Moore LLP delivers a written opinion to
Ashland, in form and substance reasonably satisfactory to the Ashland
Board, concluding that the MAP Partial Redemption will not constitute a
disguised sale of a partnership interest under Section 707(a)(2)(B) of the
Code; and Miller & Chevalier Chartered delivers a written opinion to
Marathon, in form and substance reasonably satisfactory to the Marathon
Board, concluding that the MAP Partial Redemption does not constitute a
disguised sale of a partnership interest under Section 707(a)(2)(B) of the
Code.
10. Either:
(a) The Closing Agreement or a private letter ruling issued
by the IRS provides that the MAP Partial Redemption will not be treated as
a sale or exchange of property between Ashland and MAP under Section 751(b)
of the Code; or
(b) If the Closing Agreement or a private letter ruling
issued by the IRS does not provide the agreement described in paragraph
10(a) above, Cravath, Swaine & Moore LLP delivers a written opinion to
Ashland, in form and substance reasonably satisfactory to the Ashland
Board, concluding that the MAP Partial Redemption will not constitute a
sale or exchange of property between Ashland and MAP under Section 751(b)
of the Code; and Miller & Chevalier Chartered delivers a written opinion to
Marathon, in form and substance reasonably satisfactory to the Marathon
Board, concluding that the MAP Partial Redemption does not constitute a
sale or exchange of property between Ashland and MAP under Section 751(b)
of the Code.
ANNEX N
Upon the terms and subject to the conditions set forth in this Agreement,
each of the parties shall use its reasonable best efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable to cause the Closing to occur on June 30, 2005 or as promptly as
practicable thereafter (in accordance with the other terms of this
Agreement, including Section 1.05 of this Agreement, which provides that
the Closing shall occur on the last business day of a calendar month unless
otherwise mutually agreed by Ashland and Marathon), including (i) the
obtaining of all necessary actions or nonactions, waivers, consents,
orders, authorizations and approvals from Governmental Entities and the
making of all necessary registrations, declarations and filings (including
filings with Governmental Entities, if any) and the taking of all
reasonable steps as may be necessary to obtain an approval or waiver from,
or to avoid an action or proceeding by, any Governmental Entity, (ii) the
obtaining of all necessary consents, approvals or waivers from third
parties, (iii) the defending of any lawsuits or other legal proceedings,
whether judicial or administrative, challenging this Agreement or any other
Transaction Agreement or the consummation of the Transactions, including
seeking to have any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed and (iv) the
execution and delivery of any additional instruments necessary to
consummate the Transactions and to fully carry out the purposes of the
Transaction Agreements.
ANNEX O
Ashland or New Ashland Inc. shall bear the cost of the St. Paul Park QQQ
Project incurred after January 1, 2003 not to exceed $9,350,000 (the "St.
Paul Park QQQ Project Payment Amount").
ANNEX P
No later than May 15, 2005, Ashland shall provide to Marathon a schedule
setting forth estimates, prepared in good faith by Ashland in light of any
communications with the Internal Revenue Service (the "IRS"), written or
otherwise, of the Ashland Debt Obligation Amounts based on assumed Closing
Dates occurring on the last day of each month from June of 2005 through
September of 2005.
ANNEX Q
SECTION 9.17. Treatment of Ashland Affected Non-Qualified
Employee Stock Options or SARs. The Ashland Parties shall take or cause to
be taken such actions as are necessary to provide that (i) each Ashland
Affected Non-Qualified Employee Stock Option or SAR shall become fully
vested as of the Closing and (ii) each Ashland Affected Non-Qualified
Employee Stock Option or SAR and each Ashland Non-Qualified Employee Stock
Option or Ashland SAR granted to an employee of MAP or any of its
subsidiaries that is outstanding and has vested and is exercisable but
remains unexercised immediately prior to the Closing shall remain
exercisable until the expiration of the 90-day period immediately following
the Closing Date, in each case with the same reduction in the exercise
price therefor as shall be applicable to Ashland Non-Qualified Employee
Stock Options or Ashland SARs granted to employees of Ashland, as a result
of the consummation of the Transactions. The parties hereto intend that the
foregoing shall be accomplished in a manner consistent with good faith
compliance with the requirements of Section 409A of the Code.
ANNEX R
(b) by either Ashland or Marathon:
(i) if the Transactions are not consummated during the
period ending on September 30, 2005 (the "Outside Date"), unless
the failure to consummate the Transactions is the result of a
material breach of the Transaction Agreements by the party seeking
to terminate this Agreement;
ANNEX S
"MAP Adjustment Amount" means 38% of the Distributable Cash of MAP (as such
term is defined in the MAP LLC Agreement) as of the close of business on
the Closing Date plus 38% of the amount of any Qualified Expenditure (as
such term is defined in Amendment No. 1 dated as of March 17, 2004 to the
MAP LLC Agreement) actually paid by MAP on or prior to the Closing Date,
for which MAP has not received payment from Marathon under the Project Loan
Agreement Detroit Refinery Expansion Project dated as of March 17, 2004;
provided, however, that for purposes of this Agreement, the existing lease
with Air Products and Chemicals, Inc. dated January 20, 2003, as amended,
relating to the supply of hydrogen to the Catlettsburg refinery and the
existing leases acquired from Ultramar Diamond Shamrock Corporation ("UDS")
in connection with the 1999 acquisition of certain marketing and logistics
assets of UDS located in the State of Michigan shall not be treated as
Ordinary Course Debt (as such term is defined in the MAP LLC Agreement).
EXHIBIT 2.2
CONFORMED COPY
AMENDED AND RESTATED TAX MATTERS AGREEMENT dated
as of April 27, 2005 (the "TMA" or "Agreement") among
Ashland Inc., a Kentucky corporation ("Ashland"), ATB
Holdings, Inc., a Delaware corporation ("HoldCo"), EXM
LLC, a Kentucky limited liability company ("New Ashland
LLC"), New EXM Inc., a Kentucky corporation ("New
Ashland Inc."), Marathon Oil Company, an Ohio Company
("Marathon Company"), Marathon Oil Corporation, a
Delaware corporation ("Marathon"), Marathon Domestic
LLC, a Delaware limited liability company ("Merger
Sub") and Marathon Ashland Petroleum LLC, a Delaware
limited liability company owned by Marathon Company and
Ashland ("MAP").
WHEREAS, Ashland is the common parent of an affiliated
group of domestic corporations that has elected to file consolidated
Federal income tax returns.
WHEREAS, Marathon is the common parent of an affiliated
group of domestic corporations that has elected to file consolidated
Federal income tax returns (the "Marathon Affiliated Group").
WHEREAS, Ashland and Marathon Company, a wholly-owned
subsidiary of Marathon, own all the limited liability company interests in
MAP, which is treated for Federal income tax purposes as a partnership.
WHEREAS, Ashland and Marathon and certain of their
respective related parties have entered into the Master Agreement pursuant
to which they have agreed to engage in the transactions contemplated by the
Transaction Agreements and the Ancillary Agreements, as those terms are
defined in the Master Agreement (collectively, the "Transactions").
WHEREAS, as part of the Transactions, HoldCo will become
the common parent of the Ashland Affiliated Group in a series of steps
which are intended to qualify as a reorganization described in Code Section
368(a)(1)(F) (the "F Reorganization").
WHEREAS, as part of the F Reorganization, Ashland will
contribute its Membership Interest and the Acquired Businesses to HoldCo
and will merge with and into New Ashland LLC, which will assume all
obligations of Ashland, including the obligations of Ashland under this TMA
(the "F Reorganization Merger").
WHEREAS, as part of the Transactions, MAP will redeem a
portion of Ashland's interest in MAP in exchange for a distribution of cash
and MAP accounts receivable, as set forth in the Master Agreement (the "MAP
Partial Redemption").
WHEREAS, as part of the Transactions, New Ashland LLC
will merge with and into New Ashland Inc., which will assume all
obligations of New Ashland LLC, including the obligations that New Ashland
LLC assumed from Ashland (the "Conversion Merger").
WHEREAS, as part of the Transactions, (i) HoldCo will
distribute, to the former holders of the stock of Ashland, all the stock of
New Ashland Inc. in a transaction intended to qualify as a distribution
described in Code Section 355 (the "Spinoff"), and (ii) HoldCo will merge
with and into Merger Sub in a transaction intended to qualify as a
reorganization described in Code Section 368(a)(1)(A) (the "Acquisition
Merger") and as a result of such merger, HoldCo will cease to exist.
WHEREAS after the Acquisition Merger, Marathon may cause
Merger Sub to contribute all or a portion of the assets and liabilities
that it acquired in the Acquisition Merger to a newly formed corporation
that is a wholly-owned, direct subsidiary of Merger Sub or, alternatively
Marathon may contribute Merger Sub to a wholly-owned subsidiary of
Marathon.
WHEREAS, immediately after the Spinoff, New Ashland Inc.
will be the common parent of an affiliated group of domestic corporations
that elects to file consolidated Federal income tax returns, which will not
include HoldCo (the "New Ashland Inc. Affiliated Group").
WHEREAS the parties to this TMA wish to allocate and
assign certain Tax responsibilities, liabilities and benefits among
themselves and to provide for certain other Tax matters.
WHEREAS the parties entered into the original TMA on
March 18, 2004.
WHEREAS the parties have entered into Amendment No. 1 to
the Master Agreement, dated April 27, 2005 ("Amendment No. 1"), amending
certain terms of the Master Agreement.
WHEREAS the parties wish to amend and restate in its
entirety this TMA.
NOW, THEREFORE, in consideration of the mutual covenants
and agreements contained in this TMA, the parties agree as follows:
ARTICLE I
Definitions
As used in this Agreement, the following terms shall have
the following meaning:
"Acquired Businesses" means the "Maleic Business" and the
"VIOC Centers", as each such term is defined in the Master Agreement.
"Acquisition Merger" has the meaning set forth in the
ninth WHEREAS clause of this TMA.
"affiliate" has the meaning ascribed to such term in the
Master Agreement.
"affiliated group" means an affiliated group of
corporations within the meaning of Code Section 1504(a) for the taxable
period in question.
"Ashland Affiliated Group" means the affiliated group of
domestic corporations that has elected to file consolidated Federal income
tax returns of which Ashland (and immediately after the F Reorganization,
HoldCo) is the common parent.
"Ashland Group" means (i) the corporations that are
members of the Ashland Affiliated Group and (ii) the corporations that
would be members of the Ashland Affiliated Group but for the fact that they
are not includible corporations under Code Section 1504(b).
"Ashland Asbestos Liabilities" means any obligation of
Ashland or any of its present or former subsidiaries (including but not
limited to Riley Stoker Inc.) relating to claims made at any time that are
attributable to allegations of exposure to asbestos on or before the
Closing Date with respect to Residual Business Operations, to the extent
that New Ashland Inc. or any member of the New Ashland Inc. Group is liable
for such obligation after the Closing Date.
"Ashland Employee Liabilities" means (i) any obligation
of Ashland or any of its present or former subsidiaries for any Employee
Benefit Obligation to be provided to or on behalf of present or former
employees of Ashland or any such subsidiaries for services that are
attributable to Residual Business Operations or to the HoldCo Businesses,
in each case that are performed on or before the Closing Date, to the
extent that New Ashland Inc. or any member of the New Ashland Inc. Group is
liable for such obligation after the Closing Date and (ii) any obligation
pursuant to the exercise of any Option by any current or former employees
of HoldCo Businesses or Residual Business Operations with respect to the
capital stock of Ashland, HoldCo or New Ashland Inc.
"Ashland Environmental Liabilities" means any obligation
of Ashland or any of its present or former subsidiaries relating to claims
made at any time for environmental damages or remediation or similar
expenses arising from acts, omissions or conditions occurring or existing
on or before the Closing Date that are attributable to Residual Business
Operations or to the HoldCo Businesses, to the extent that New Ashland Inc.
or any member of the New Ashland Inc. Group is liable for such obligation
after the Closing Date.
"Ashland Residual Operations Liabilities" means any
obligation of Ashland or any of its present or former subsidiaries that is
attributable to Residual Business Operations or to the HoldCo Businesses,
including but not limited to Ashland Asbestos Liabilities, Ashland Employee
Liabilities and Ashland Environmental Liabilities, but shall not include
any associated defense costs incurred by New Ashland Inc. after the
Closing.
"Bankruptcy Event" means, with respect to any Person, the
occurrence or existence of any of the following events or conditions: such
Person (1) is dissolved (other than the dissolution of a transferor in
connection with a transfer to a successor as contemplated by Section
10.15); (2) admits in writing its inability generally to pay its debts; (3)
makes a general assignment for the benefit of its creditors; (4) institutes
or has instituted against it a proceeding seeking a judgment of insolvency
or bankruptcy or any similar relief under any bankruptcy or insolvency law
or other similar law affecting creditors' rights, or a petition is
presented for its winding up or liquidation and, in the case of any such
proceeding or petition instituted or presented against it, such proceeding
or petition (A) results in a judgment of insolvency or bankruptcy or the
entry of an order for similar relief or the making of an order for its
winding up or liquidation or (B) is not dismissed or discharged within 60
days of the institution or filing thereof; (5) has a resolution passed by
its Board of Directors for its winding up or liquidation (other than the
winding up or liquidation of a transferor in connection with a transfer to
a successor as contemplated by Section 10.15); (6) consents to, or becomes
subject to an order or judgment providing for, the appointment of an
administrator, receiver, trustee, custodian or other similar official for
it or for all or substantially all its assets and, in the case of an order
or judgment, such judgment or order is not dismissed, discharged, stayed or
restrained in each case within sixty (60) days of the entry or making
thereof; or (7) takes any action in furtherance of, or expressly indicates
its consent to, approval of, or acquiescence in, any of the foregoing.
"Bankruptcy Party" has the meaning set forth in Section
8.02(c) of this TMA.
"Bankruptcy Tax Claims" has the meaning set forth in
Section 8.02(c) of this TMA.
"Basket One Amount" has the meaning set forth in Section
5.02(b)(i) of this TMA.
"Basket One Cap" has the meaning set forth in Section
5.02(b)(ii)(C) of this TMA.
"Basket One Cap Base Amount" has the meaning set forth in
Section 5.02(b)(ii)(C).
"Basket One Cap Carryforward" has the meaning set forth
in Section 5.02(b)(ii)(C) of this TMA.
"Basket One Deductions" has the meaning set forth in
Section 5.02(b)(ii)(B) of this TMA.
"Basket One Tax Rate" has the meaning set forth in
Section 5.02(b)(ii)(A) of this TMA.
"Basket Two Amount" has the meaning set forth in Section
5.02(c)(i) of this TMA.
"Basket Two Carryovers" has the meaning set forth in
Section 5.02(c)(ii)(B) of this TMA.
"Basket Two Deductions" has the meaning set forth in
Section 5.02(c)(ii)(A) of this TMA.
"Closing" and Closing Date" have the meanings set forth
in the Master Agreement.
"Closing Agreement" means the closing agreement to be
entered into by Marathon, Ashland, New Ashland Inc. and certain related
parties and the IRS with respect to the Transactions pursuant to Code
Section 7121 and described in Section 5.01 of this Tax Matters Agreement
received by Ashland and Marathon with respect to the Transactions on or
before the Closing Date.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Conversion Merger" has the meaning set forth in the
eighth WHEREAS clause of this TMA.
"Detroit Facility" means MAP's $325 million borrowing
facility provided by Marathon Company as lender, the proceeds of which
facility are used for the sole purpose of funding an expansion and clean
fuels modification project at MAP's Detroit refinery.
"Employee Benefit Obligation" means any obligation
(whether current or deferred) for any compensation, pension, severance
payment, medical, retirement or disability benefit, life insurance or any
similar employee benefit.
"Escrow" means the escrow created under the Escrow
Agreement.
"Escrow Agreement" has the meaning set forth in Section
6.02(a) of this TMA.
"Escrow Threshold" has the meaning set forth in Section
6.02(c)(i)(B) of this TMA.
"Excess Section 355(e) Taxes" means the excess, if any of
the total amount of Section 358(d)(1) Adjustment Taxes over $75 million.
"Extraordinary Events" means (i) unforeseen funding
requirements resulting from damage to MAP properties by storm, fire, or
similar catastrophic events, or (ii) unforeseen expenditures that are
mandated by law, regulation or administrative ruling, in each case that are
promulgated after the Closing Date.
"F Reorganization Merger" has the meaning set forth in
the sixth WHEREAS clause of this TMA.
"Federal Tax Benefit Payments" has the meaning set forth
in Section 5.02(a)(i) of this TMA.
"Final Determination" means the final resolution of
liability for any Tax for any taxable period by or as a result of: (i) a
final and unappealable decision, judgment, decree or other order by any
court of competent jurisdiction; (ii) a final closing agreement (other than
the Closing Agreement) or accepted offer in compromise under Code Sections
7121 or 7122, or a comparable agreement under the laws of any other
jurisdiction, which resolves the entire Tax liability for the entire
taxable period; (iii) a duly executed IRS Form 870 or 870-AD (or any
successor forms thereto), on the date such form is effective, or by a
comparable form under the laws of other jurisdictions; except that a Form
870 or 870-AD or comparable form that reserves (whether by its terms or by
operation of law) the right of the taxpayer to file a claim for Refund
and/or the right of the Tax Authority to assert a further deficiency shall
not constitute a Final Determination with respect to the right so reserved;
(iv) any allowance of a Refund or credit in respect of an overpayment of
such Tax, but only after the expiration of all periods during which such
Refund may be recovered (including by way of offset) by the jurisdiction
imposing such Tax; (v) the execution of a closing agreement with respect to
a pre-filing agreement described in Rev. Proc. 2001-22, or (vi) any other
final disposition by reason of the expiration of the applicable statute of
limitations or by mutual agreement of the parties hereto.
"Fully Funded" has the meaning set forth in Section
6.02(c)(i)(A) of this TMA.
"HoldCo Businesses" means the Acquired Businesses and the
JV Interests.
"Income Taxes" means any Taxes imposed on or determined
by reference to gross or net income or profits or any other measure of
income or profits.
"Independent Entity" has the meaning set forth in Section
9.01 of this TMA.
"Inflation Factor" means the U.S. GDP Implicit Price
Deflator, which shall be applied annually to adjust prices to constant
dollar amounts beginning with the calendar year following the year of the
Closing Date.
"IRS" means the U.S. Internal Revenue Service.
"JV Interests" means the "Membership Interest" and the
"LOOP/LOCAP Interests", as each such term is defined in the Master
Agreement.
"JV Entities" means the entities wholly or partially
owned, directly or indirectly, through the ownership of the JV Interests.
"MAP LLC Agreement" means the Amended and Restated
Limited Liability Company Agreement of MAP, dated as of December 31, 1998,
as amended to the date of this TMA.
"Marathon Affiliated Group" has the meaning set forth in
the second WHEREAS clause of this TMA.
"Marathon Group" means (i) the corporations that are
members of the Marathon Affiliated Group and (ii) the corporations that
would be members of the Marathon Affiliated Group but for the fact that
they are not includible corporations under Code Section 1504(b), including
in both cases, beginning on the day after the Closing Date, former members
of the Ashland Group that become members of the Marathon Group by reason of
the Acquisition Merger.
"Marathon Portion" has the meaning set forth in Section
2.05 of this TMA.
"Marathon Tax Matter" means any Tax Item arising from or
related to the ownership or operation of HoldCo or the HoldCo Businesses
attributable to a Post-Closing Period.
"Master Agreement" means the Master Agreement dated as of
March 18, 2004, among Ashland, HoldCo, New Ashland LLC, New Ashland Inc.,
Marathon, Marathon Company, Merger Sub and MAP, as amended by Amendment No.
1.
"Net Deduction Method" means, with respect to Specified
Liability Deductions, the deduction of such amounts as they are accrued and
recognized under the accrual method of accounting, net of actual and
anticipated insurance recoveries determined under the accrual method of
accounting, in each case applied consistently from year to year.
"New Ashland Inc. Affiliated Group" has the meaning set
forth in the eleventh WHEREAS clause of this TMA.
"New Ashland Inc. Group" means (i) the corporations that
are members of the New Ashland Inc. Affiliated Group and (ii) the
corporations that would be members of the New Ashland Inc. Affiliated Group
but for the fact that they are not includible corporations under Code
Section 1504(b).
"New Ashland Inc. Portion" has the meaning set forth in
Section 2.05 of this TMA.
"New Ashland Inc. Tax Matter" means any Tax Item (i)
arising during a Pre-Closing Period or (ii) from or related to a
Post-Closing Period that is not a Marathon Tax Matter.
"Non-Bankruptcy Party" has the meaning set forth in
Section 8.02(c) of this TMA.
"Non-Federal Tax Benefit Payment" has the meaning set
forth in Section 5.02(a)(i) of this TMA.
"Option" means any compensatory stock option, stock
appreciation right, restricted stock or similar instrument.
"Other Taxes" means any Taxes other than Income Taxes.
"Pass-Though Items" mean any Tax Items that are passed
through to, and reportable on the Tax Returns of, one or more of the owners
of MAP or any other JV Entity and that could result in an increase or
decrease in any such owner's liability for Taxes.
"Post-Closing Period" means any taxable period, and in
the case of a Straddle Period the portion of any such period, beginning
after the Closing Date.
"Pre-Closing Period" means the Pre-Closing Taxable
Periods, and the portion of any Straddle Period ending on the Closing Date.
"Pre-Closing Taxable Period" means any taxable period
ending on or before the Closing Date.
"Refund" means any refund of Taxes, including any
reductions of Taxes paid or payable by means of credits, offsets or
otherwise.
"Residual Business Operations" means former business
operations of Ashland or any current or former member of the Ashland Group,
in each case determined as of the date of this Agreement, that will not be
transferred or deemed to be transferred to New Ashland Inc. pursuant to the
Conversion Merger.
"Section 355(e) Tax Claim" has the meaning set forth in
Section 8.02(e) of this TMA.
"Section 355(e) Taxes" means any Taxes, arising in any
taxable period, resulting from the application of Code Section 355(e) or
any similar provision under state or local law to the Spinoff, including
any Taxes attributable to an adjustment to the tax basis of the stock of
New Ashland Inc. resulting from any audit by any Tax Authority or any Final
Determination.
"Section 355(e) Schedule" has the meaning set forth in
Section 3.07(a) of this TMA.
"Section 358(d)(1) Adjustment" means the reduction in the
tax basis of New Ashland Inc. stock under Section 358(d)(1) resulting from
the assumption by New Ashland Inc. of the Ashland Residual Operations
Liabilities pursuant to the Conversion Merger.
"Section 358(d)(1) Adjustment Taxes" means, with respect
to any calculation of Section 355(e) Taxes the excess, if any, of (i) any
such Section 355(e) Taxes over (ii) the amount of any such Section 355(e)
Taxes that would exist if the Section 358(d)(1) Adjustment were $0.
"Specified Liability Deductions" means the amount, in any
taxable period, allowable as deductible expenses for Federal income tax
purposes in respect of Ashland Residual Operations Liabilities (after
applying the applicable limitations, if any, under Code Sections 382 and
384 and Treasury Regulation Section 1.1502-15).
"Spinoff" has the meaning set forth in the ninth WHEREAS
clause of this TMA.
"Straddle Period" means any taxable period that includes,
but does not end on, the Closing Date.
"subsidiary" has the meaning ascribed to such term in the
Master Agreement.
"Tax" or "Taxes" means all forms of taxation imposed by
any federal, state, local or foreign jurisdiction (including any
subdivision and any revenue agency of such a jurisdiction), including
without limitation net income, gross income, alternative minimum, sales,
use, ad valorem, gross receipts, value added, franchise, license, transfer,
withholding, payroll, employment, excise, severance, stamp, property,
custom duty, taxes or governmental charges, together with any related
interest, penalties or other additional amounts imposed by any federal,
state, local or foreign jurisdiction (including any subdivision and any
revenue agency of such a jurisdiction), and including all liability for or
in respect of any of the foregoing as a result of being a member of a
consolidated or similar group or a partner in an entity treated as a
partnership or other pass-through entity for Tax purposes or as a result of
any tax sharing or similar contractual agreement.
"Tax Authority" means any federal, state, local or
foreign jurisdiction (including any subdivision and any revenue agency of
such a jurisdiction) imposing Taxes and the agency, if any, charged with
the collection of such Taxes for such authority.
"Tax Benefit" means any item of loss, deduction, credit,
or any other Tax Item that decreases Taxes paid or payable.
"Tax Benefit Payments" has the meaning set forth in
Section 5.02(a)(i) of this TMA.
"Tax Certificate" means any letter or certificate that is
referred to in, and forms a basis for, a Tax Opinion.
"Tax Claim" has the meaning set forth in Section
8.02(a)(i) of this TMA.
"Tax Detriment" means any item of income, gain, recapture
of credit or any other Tax Item that increases Taxes paid or payable, or
any reduction in or limitation of, any Tax Item due to the application of
Code Sections 382, 384 or Treasury Regulation Section 1.1502-15.
"Tax Item" means any item of income, gain, loss,
deduction, credit, recapture of credit, or other similar item, that may
have the effect of increasing or decreasing any Tax paid or payable,
including any adjustment to tax basis, capitalized interest or any
adjustment under Code Section 481.
"Tax Loss" means the increase in Tax paid or payable to
the relevant Tax Authority (or, without duplication, the reduction in any
Refund) attributable to a Tax Detriment.
"Tax Opinion" means the opinions of Cravath, Swaine &
Moore LLP and Miller & Chevalier Chartered concerning certain Federal
income tax issues related to the Transactions to be delivered to Ashland
and Marathon, respectively, pursuant to Section 10.01(f) of the Master
Agreement.
"Tax Return" means any return, filing, questionnaire,
information statement, or other document required to be filed, including
amended returns that may be filed for any period or portion thereof with
any Tax Authority in connection with any Tax (whether or not a payment is
required to be made with respect to such filing).
"Tax Savings" means the decrease in Tax paid or payable
to the relevant Tax Authority (or, without duplication, the increase in any
Refund) attributable to a Tax Benefit.
"Tax Structure" means the manner, order or form in which
the Transactions (currently as contemplated or as amended prior to the
Closing) are effected pursuant to the Master Agreement or any Transaction
Agreement.
"Transactions" has the meaning set forth in the fourth
WHEREAS clause of this TMA.
"Transaction Taxes" means Taxes, other than Transfer
Taxes and Section 355(e) Taxes, of any member of the Ashland Group for any
Pre-Closing Period or the New Ashland Inc. Group or the Marathon Group for
any taxable period resulting from, or arising in connection with any
portion of the Transactions.
"Transfer Taxes" has the meaning set forth in Section
2.03 of this TMA.
"Valvoline" means the active trade or business conducted
by the business division of Ashland (and immediately following the
Transactions, of New Ashland Inc.) of the same name.
All capitalized terms used but not defined in this TMA
shall have the meanings ascribed to such terms in the Master Agreement.
ARTICLE II
Indemnification for Taxes
SECTION 2.01. General. (a) Indemnification by New Ashland
Inc. Except as otherwise provided in Sections 2.03, 2.04, 2.05, 2.06 and
Articles V and VI of this TMA, New Ashland Inc. and each member of the New
Ashland Inc. Group shall be liable for, shall indemnify each member of the
Marathon Group against, and shall be entitled to all Refunds of, less
reasonable out-of-pocket costs and expenses incurred in connection with
such Refund, (i) all Taxes for all Pre-Closing Periods of each member of
the Ashland Group and the Acquired Businesses; (ii) all Taxes for all
Post-Closing Periods that are imposed on or collected from any member of
the Marathon Affiliated Group as a transferee of or successor to HoldCo,
pursuant to any law, rule or regulation, imposed on taxable income or gain
that is attributable, in whole or in part, to events or transactions that
occur on or before the Closing Date but that is recognized for tax purposes
in a Post-Closing Period as a result of the installment method of
accounting, completed contract method of accounting, the long-term contract
method of accounting, the recapture of a dual consolidated loss, Section
481 of the Code (other than any such Taxes imposed by reason of a change in
accounting method by HoldCo or a successor to HoldCo made or applied for by
Marathon or a Member of the Marathon Group after the Closing Date, unless
such change was contemplated by this TMA, or made or applied for by New
Ashland Inc. or a member of the New Ashland Inc. Group, or made by Marathon
with New Ashland Inc.'s consent, or required as a condition of the
Transactions by the Closing Agreement or otherwise), or other provisions of
Federal, state, local or foreign tax law that have a similar effect and all
Taxes attributable to the adoption by HoldCo of the Net Deduction Method
with respect to Specified Liability Deductions; (iii) all Taxes for all
taxable periods of each member of the New Ashland Inc. Group; (iv) all
Taxes imposed on any member of the Marathon Group with respect to insurance
recoveries received by any member of the New Ashland Inc. Group that are
attributable to Residual Business Operations; (v) all Taxes for which any
current or former member of the Ashland Group or the New Ashland Inc. Group
is liable under Treasury Regulation Section 1.1502-6 (or any analogous
provision of state, local or foreign law); (vi) all Taxes payable by
Ashland or HoldCo that are attributable to Pass-Through Items of MAP or any
other JV Entity with respect to any Pre-Closing Period; (vii) all
Transaction Taxes; and (viii) all Tax Losses of any member of the Marathon
Group resulting from the failure by any member of the Ashland Group or the
New Ashland Inc. Group, as the case may be, to use a consistent position as
described in the last sentence of Section 3.04 of this TMA.
(b) Indemnification by Marathon. Except as otherwise
provided in Sections 2.03, 2.04, 2.05, 2.06 and Articles V and VI of this
TMA, Marathon and each member of the Marathon Group shall be liable for,
and shall indemnify each member of the New Ashland Inc. Group against, and
shall be entitled to all Refunds of, less reasonable out-of-pocket costs
and expenses incurred in connection with such Refund, (i) all Taxes for all
taxable periods of each member of the Marathon Group, other than as a
successor to or transferee of a former member of the Ashland Affiliated
Group by reason of the Acquisition Merger, and (ii) all Taxes for all
taxable periods that are imposed on and payable by MAP or any JV Entities.
SECTION 2.02. Apportionment of Items for Straddle
Periods. (a) Taxes. Taxes and Refunds of any entity or with respect to the
Acquired Businesses for any Straddle Period shall be apportioned between
the Pre-Closing Period and the Post-Closing Period on the basis of a
"closing of the books" as of the end of the Closing Date, provided that
Other Taxes that are not based on revenues, sales or a similar measure
shall be apportioned between the Pre-Closing Period and the Post-Closing
Period based on the number of days of the relevant taxable period that are
in the Pre-Closing Period and the Post-Closing Period respectively.
(b) Apportionment of Pass-Through Items of MAP and
certain other JV Entities. For purposes of determining the Taxes payable by
the owner of a JV Interest in MAP or any other JV Entity that is treated
for purposes of the relevant Tax as a pass-through entity, the Pass-Through
Items for any Straddle Period of such JV Entity shall be apportioned
between the Pre-Closing Period and the Post-Closing Period on the basis of
a "closing of the books" as of the end of the Closing Date in accordance
with Code Section 706(c)(2)(A) and Treasury Regulation Section
1.706-1(c)(2)(i) (or corresponding principles of state, local or foreign
laws, rules or regulations); provided that Other Taxes of MAP or such JV
Entity that are not based on revenues, sales or a similar measure shall be
apportioned between the Pre-Closing and the Post-Closing Period based on
the number of days of the relevant taxable period that are in the
Pre-Closing Period and the Post-Closing Period respectively.
SECTION 2.03. Transfer Taxes. New Ashland Inc. shall be
liable for, shall indemnify each member of the Marathon Group against, and
shall be entitled to retain all Refunds of, less reasonable out-of-pocket
costs and expenses incurred in connection with such Refund, all transfer,
documentary, sales, use, registration and similar Taxes and related fees
incurred in connection with the Transactions (collectively "Transfer
Taxes"). New Ashland Inc., with Marathon's cooperation, shall timely
prepare and file all Tax Returns relating to Transfer Taxes as may be
required to comply with the provisions of such Tax laws.
SECTION 2.04. Certain Transaction Taxes. Marathon shall
be liable for, shall indemnify each member of the New Ashland Inc. Group
against, and shall be entitled to retain all Refunds of, less reasonable
out-of-pocket costs and expenses incurred in connection with such Refund,
any Transaction Taxes to the extent that such Taxes are primarily
attributable to:
(a) any inaccurate, written representation or warranty of
fact or intent specifically made by, or specifically attributed
to, any member of the Marathon Group (other than HoldCo) in the
Closing Agreement or a Tax Certificate and that is specified on
Schedule 2.04 attached hereto (as amended from time to time by the
unanimous agreement of Marathon and Ashland).
(b) any breach by any member of the Marathon Group of a
covenant in Section 7.03(b) of this TMA,
unless such Transaction Taxes would have been imposed without regard to
such inaccuracy or breach.
SECTION 2.05. Section 355(e) Taxes. With respect to any
estimate or any other calculation of Section 355(e) Taxes,
(a) The "Marathon Portion" of such Section 355(e) Taxes
means:
(i) 100% of the Section 355(e) Taxes in excess of $0
and to and including the sum of (A) $200 million and (B) all
Excess Section 355(e) Taxes; and
(ii) 50% of the Section 355(e) Taxes in excess of
the sum of (A) $375 million and (B) all Excess Section 355(e)
Taxes.
(b) The "New Ashland Inc. Portion" of such Section 355(e)
Taxes means:
(i) 100% of the Section 355(e) Taxes in excess of
the amount included in the Marathon Portion under Section
2.05(a)(i) and to and including the sum of (A) $375 million and
(B) all Excess Section 355(e) Taxes; and
(ii) 50% of the Section 355(e) Taxes in excess of
the sum of (A) $375 million; and (B) all Excess Section 355(e)
Taxes.
(c) Marathon and each member of the Marathon Group shall
be liable for, and shall indemnify each member of the New Ashland
Inc. Group against, and shall be entitled to all Refunds of, the
Marathon Portion of all Section 355(e) Taxes. New Ashland Inc. and
each member of the New Ashland Inc. Group shall be liable for, and
shall indemnify each member of the Marathon Group against, and
shall be entitled to all Refunds of, the New Ashland Inc. Portion
of the Section 355(e) Taxes.
SECTION 2.06. Gain Recognition Agreement Taxes. Each
member of the New Ashland Inc. Group shall comply with the terms of any
Section 367 "gain recognition agreement" executed by a member of the
Ashland Group during a Pre-Closing Period, including, without limitation,
by including the gain, if any, required to be recognized pursuant to the
terms of any such agreement (or by virtue of the application of any
provision of Treasury Regulation Section 1.367(a)-8) and the payment of any
Tax that is required to be paid pursuant to Treasury Regulation Section
1.367(a)-8(b)(3). If a Tax Authority determines that any member of the
Ashland Group or the New Ashland Inc. Group has failed to comply with the
terms of any such agreement or any provision of Treasury Regulation Section
1.367(a)-8, the New Ashland Inc. Group shall be liable for any resulting
liability for Taxes and each member of the New Ashland Inc. Group shall
indemnify each member of the Marathon Group against any such Tax liability.
ARTICLE III
Preparation and Filing of Tax Returns
SECTION 3.01. Preparation and Filing of Original Tax
Returns. (a) Ashland (before the F Reorganization Merger), and New Ashland
Inc. LLC and New Ashland Inc. (after the F Reorganization Merger), shall
prepare and file, or cause to be prepared and filed, all Tax Returns (i) of
each member of the Ashland Group (including any Tax Returns related to the
Acquired Businesses) for all Pre-Closing Periods, (ii) of each member of
the New Ashland Inc. Group for all taxable periods and (iii) that it is
required to file pursuant to Section 3.02. Ashland and New Ashland Inc., as
the case may be, shall timely pay all Taxes with respect to such Tax
Returns.
(b) Marathon shall prepare and file, or cause to be
prepared and filed, all Tax Returns (i) of former members of the Ashland
Group and successors thereof that become members of the Marathon Group by
reason of the Acquisition Merger for all Post-Closing Periods, (ii) of each
other member of the Marathon Group for all taxable periods, and (iii) that
it is required to prepare and file pursuant to Section 3.02. Marathon shall
timely pay all Taxes with respect to such Tax Returns.
(c) MAP shall prepare and file, or cause to be prepared
and filed, all Tax Returns of MAP and its subsidiaries for any Pre-Closing
Period and any Straddle Period, and such Tax Returns shall be prepared and
filed in a manner consistent with past practice and in accordance with the
MAP LLC Agreement as in effect immediately prior to the Closing. On or
before August 15, 2005, MAP shall provide to New Ashland Inc. (i) the final
IRS Schedule K-1 with respect to the taxable year for MAP ending on
December 31, 2004; and (ii) a pro forma IRS Schedule K-1 with respect to
the taxable year or portion thereof ending on the Closing Date, showing the
estimated Pass-Through Items that will be apportioned to Ashland for the
Pre-Closing Period. In addition, on or before February 1, 2006, MAP shall
provide to New Ashland Inc. the final IRS Schedule K-1 with respect to the
taxable year for MAP ending on the Closing Date.
SECTION 3.02. Straddle Period Tax Returns. (a) Following
the Closing Date, Marathon and New Ashland Inc. shall meet and prepare a
written schedule that allocates the responsibility for preparing and filing
Straddle Period Tax Returns in each jurisdiction of former members of the
Ashland Group and successors thereof that become members of the Marathon
Group by reason of the Acquisition Merger. If the parties are unable to
agree, the party with the most substantial presence in the jurisdiction,
taking into account their respective assets or businesses, shall have
preparation and filing responsibility. If Marathon and New Ashland Inc. are
not able to agree upon the party with the most substantial presence in a
jurisdiction within 60 days after the Closing Date, the preparation and
filing responsibility for the disputed jurisdictions shall be determined by
a mutually acceptable certified public accounting firm. The filing party
shall timely pay all Taxes with respect to such Straddle Period Tax
Returns.
(b) For each Straddle Period Tax Return described in
Section 3.01(a) of this TMA that includes any Marathon Tax Matter, Marathon
shall promptly prepare and provide to New Ashland Inc. any information or
documentation reasonably requested by New Ashland Inc. to facilitate the
preparation and filing of such Tax Return. For each Straddle Period Tax
Return described in Section 3.01(c) of this TMA that includes any New
Ashland Inc. Tax Matter, New Ashland Inc. shall promptly prepare and
provide to Marathon any information or documentation reasonably requested
by Marathon to facilitate the preparation and filing of such Tax Return.
(c) All Straddle Period Tax Returns shall be submitted to
the other party not later than 30 days prior to the due date, including
extensions, for the filing of such Tax Returns (or if such due date is
within 45 days following the Closing Date, as promptly as practicable
following the Closing Date). Such other party shall have the right to
review such Tax Returns and to review all workpapers and procedures used to
prepare any such Tax Return. If the nonfiling party, within 10 business
days after delivery of any such Tax Return, notifies the filing party in
writing that it objects to any of the Tax Items in such Tax Return, both
parties shall attempt in good faith to resolve the dispute and, if they are
unable to do so, the disputed items shall be resolved within a reasonable
time, taking into account the deadline for filing such Tax Return, by a
mutually acceptable certified public accounting firm. Upon resolution of
all such Tax Items, the filing party shall file the relevant Straddle
Period Tax Return on that basis. The accounting firm shall treat all Tax
Returns of the parties as confidential, and shall not reveal any
information contained in, or any part of, the Tax Returns of one party to
the other without prior written consent. The costs, fees, and expenses of
such certified public accounting firm shall be borne equally by Marathon
and New Ashland Inc.
(d) Marathon and New Ashland Inc., as the case may be,
shall provide the other party with a calculation and determination of the
amount of the Straddle Period Taxes that are included in any returns filed
by the other party under Sections 3.01(a) and 3.01(c) of this TMA. In the
absence of a Final Determination, all such determinations shall be prepared
in a manner consistent with past practice. If either party disputes such a
determination, it may make a written request that the other party obtain
written confirmation from a mutually acceptable certified public accounting
firm that the determination is consistent with the preceding sentence. If
the accounting firm issues a confirmation, then such determination shall be
binding upon the parties. If the accounting firm does not issue a
confirmation, then the determination in the returns shall be amended to
permit a confirmation to be issued by the accounting firm in respect of the
amended determination. If a dispute is not resolved prior to the due date
of a Tax Return, the Tax Return shall be filed in accordance with the
determination made by the filing party, and both parties hereby agree to
file or cause to be filed an amended Tax Return, if necessary, reflecting
the resolution of the issue by the accounting firm. The accounting firm
shall treat all Tax Returns of the parties as confidential, and shall not
reveal any information contained in, or any part of, the Tax Returns of one
party to the other without prior written consent. The costs, fees, and
expenses of such certified public accounting firm shall be borne equally by
Marathon and New Ashland Inc.
SECTION 3.03. Amended Tax Returns. (a) New Ashland Inc.
shall be entitled to amend any Tax Return described in Section 3.01(a) of
this TMA; provided that, to the extent that such an amendment with respect
to a Straddle Period Tax Return adversely affects any Marathon Tax Matter
or would result in a Tax Detriment to Marathon, such amendment may not be
made without the prior written consent of Marathon, which may not be
unreasonably withheld or delayed. New Ashland Inc. may request that
Marathon amend any Straddle Period Tax Return described in Section 3.01(c)
of this TMA that Marathon is obligated to file, but only to the extent that
such amendment affects a New Ashland Inc. Tax Matter; provided that such an
amendment shall be filed only with the prior written consent of Marathon,
which may not be unreasonably withheld or delayed.
(b) Marathon shall be entitled to amend any Tax Return
described in Section 3.01(c) of this TMA; provided that, to the extent that
such an amendment with respect to a Straddle Period Tax Return adversely
affects any New Ashland Inc. Tax Matter or would result in a Tax Detriment
to New Ashland Inc., such amendment may not be made without the prior
written consent of New Ashland Inc., which may not be unreasonably withheld
or delayed. Marathon may request that New Ashland Inc. amend any Straddle
Period Tax Return described in Section 3.01(a) of this TMA, but only to the
extent that such amendment affects a Marathon Tax Matter or a Tax Item that
could result in a Tax Detriment to Marathon; provided that such an
amendment shall be filed only with the prior written consent of New Ashland
Inc., which may not be unreasonably withheld or delayed.
(c) MAP shall not, and Marathon shall not permit MAP to,
amend any Tax Return of MAP or any of its subsidiaries for any Pre-Closing
Period or any Straddle Period if such amendment would result in a Tax
Detriment to New Ashland Inc. without the prior written consent of New
Ashland Inc., which may not be unreasonably withheld or delayed.
(d) In the event that a party refuses to consent to an
amendment to a Tax Return to which such consent is required pursuant to
this Section 3.03 and the parties are unable to resolve their disagreements
after good faith attempts to do so, the parties shall engage a mutually
acceptable certified public accounting firm to estimate the present value
of the realizable Tax Savings of the amendment to the party proposing such
amendment and the present value of the realizable Tax Loss of the amendment
to the party withholding its consent to such amendment. If the accounting
firm determines that the present value of such estimated Tax Savings
exceeds the present value of such estimated Tax Loss, the party proposing
such amendment shall be entitled to so amend the applicable Tax Return,
provided that such party agrees to pay to the party withholding its consent
an amount equal to the present value of any such Tax Loss. The accounting
firm shall treat all Tax Returns of the parties as confidential, and shall
not reveal any information contained in, or any part of, the Tax Returns of
one party to the other without prior written consent. The fees and expenses
of the accounting firm shall be borne by the party proposing such
amendment.
SECTION 3.04. Manner of Preparation and Filing. All Tax
Returns, and amendments thereto, described in this Article III shall be
filed on a timely basis by the party responsible for filing such Tax
Returns under this Agreement. Except as provided in this Section 3.04,
Section 5.01 and Section 7.03, and except as otherwise required by a Final
Determination, all Tax Returns, and amendments thereto, shall be prepared
and filed in a manner consistent with the provisions of this TMA, the
Closing Agreement, and the Tax Opinion. If any Tax Return of a member of
the Ashland Group or the New Ashland Inc. Group (including any Tax Return
related to the Acquired Businesses) for any Pre-Closing Period or any
Straddle Period is prepared and filed in a manner inconsistent with the
elections (other than elections relating to carrybacks and carryforwards
described in Section 4.01), accounting methods, conventions and principles
of taxation used for the most recent taxable period of members of the
Ashland Group or New Ashland Inc. Group, as the case may be, for which Tax
Returns involving similar Tax Items have been filed, New Ashland Inc. and
each member of the New Ashland Inc. Group shall indemnify each member of
the Marathon Group against all Tax Detriments and reductions in Tax
Benefits that result from the failure to use a consistent position as
provided in Section 2.01(a) of this TMA and shall pay to Marathon the
amount of any resulting Tax Loss within 30 days of the date of that such
Tax Loss is considered to arise under the principles of Section 4.01(c)
below.
SECTION 3.05. Agent for Filing Tax Returns. (a) Subject
to Section 8.02(c), Marathon, Ashland and HoldCo each hereby designates New
Ashland Inc. as its agent to take any and all actions necessary or
incidental to the preparation and filing by New Ashland Inc. of any Tax
Return described in Section 3.01(a). In addition, Ashland and HoldCo agree
that they shall designate 565 Corporation as the "substitute agent" (as
such term is used in Treasury Regulation Section 1.1502-77(d)) for the
Ashland Affiliated Group. Marathon shall take any and all actions necessary
or incidental to obtain the approval of such designation by the IRS.
(b) Marathon shall be the "Tax Matters Partner" (as
defined under Code Section 6231(a)(7)) of MAP for all Pre-Closing Periods
and all Post-Closing Periods and shall manage the audits of MAP conducted
by the IRS or any other Tax Authority.
SECTION 3.06. Payments And Refunds. (a) To the extent
that Marathon is responsible for filing Straddle Period or other Tax
Returns that include Taxes for which New Ashland Inc. has indemnified
Marathon, New Ashland Inc. shall pay to Marathon the amount of any such
Taxes two days prior to the due date of the Tax Return. To the extent that
New Ashland Inc. is responsible for filing Straddle Period or other Tax
Returns that include Taxes for which Marathon has indemnified New Ashland
Inc., Marathon shall pay to New Ashland Inc. the amount of any such Taxes
two days prior to the due date of such Tax Return.
(b) At any time, either party in its sole discretion may
make a payment to a Tax Authority with respect to Straddle Period Tax
Return to stop the running of interest in whole or in part. The paying
party shall provide the other party with a calculation and determination of
the amount of non-paying party's share of such payment and the non-paying
party shall pay such amount to the paying party within two days after
receipt of such notice.
(c) To the extent that Marathon receives a Refund of
Taxes for which New Ashland Inc. has indemnified Marathon, Marathon shall
pay to New Ashland Inc. the amount of such Refund (including any interest
received by Marathon) within ten days. To the extent that New Ashland Inc.
receives a Refund of Taxes for which Marathon has indemnified New Ashland
Inc., New Ashland Inc. shall pay to Marathon the amount of such Refund
(including any interest received by New Ashland Inc.) within ten days.
SECTION 3.07. Section 355(e) Taxes. (a) Payment of
Section 355(e) Taxes. At least (i) 30 days before filing any Tax Return due
after the Closing Date (including an estimated, final or amended return) on
which any Section 355(e) Taxes are required to be reported by the Ashland
Group or the New Ashland Inc. Group: or (ii) upon a reasonable request by
Marathon for purposes of preparing its financial accounting statements or
otherwise, within 20 days of such request, New Ashland Inc. shall deliver
to Marathon a schedule prepared by Deloitte & Touche LLP (the "Section
355(e) Schedule") setting forth New Ashland Inc.'s estimate of the amounts
of the Section 355(e) Taxes, the Section 358(d)(1) Adjustment Taxes, and
the Marathon Portion and the New Ashland Inc. Portion of the Section 355(e)
Taxes. Such estimated Section 355(e) Schedule shall show separately the
Federal, state, local and total amounts of the Section 355(e) Taxes. The
Section 355(e) Schedule shall be prepared using a trading price for the New
Ashland Inc. stock equal to the average of the high and low trading prices
of such stock on the New York Stock Exchange on the Closing Date and shall
set forth the estimated tax basis of the stock of New Ashland Inc. as of
the Closing Date. Marathon shall have the right to review the Section
355(e) Schedule and to review all workpapers and procedures used to prepare
such schedule. If Marathon, within five business days after delivery of
such schedule, notifies New Ashland Inc. in writing that it objects to any
of the amounts set forth on the Section 355(e) Schedule, both parties shall
attempt in good faith to resolve the dispute and, if they are unable to do
so, the disputed items shall be resolved within a reasonable time by a
mutually acceptable certified public accounting firm and the Section 355(e)
Schedule shall be amended accordingly. If a dispute is not resolved at
least two business days prior to the due date of the Tax Return, the Tax
Return shall be filed in accordance with the Section 355(e) Schedule
prepared by Deloitte & Touche LLP, and both parties hereby agree to prepare
an amended Section 355(e) Schedule, if necessary, reflecting the resolution
of the issue by the accounting firm. The costs, fees, and expenses of such
certified public accounting firm shall be borne equally by Marathon and New
Ashland Inc. Marathon, as the successor to and on behalf of HoldCo, shall
pay to New Ashland Inc. the Marathon Portion of the Section 355(e) Taxes
shown on the Section 355(e) Schedule two business days prior to the date on
which such Tax Return is due. New Ashland Inc. shall timely pay the Section
355(e) Taxes shown on the Section 355(e) Schedule to the relevant Tax
Authorities and shall provide written evidence to Marathon that it has done
so.
(b) True-up Upon Filing Amended Schedules, Filing Tax
Returns or Final Determinations. New Ashland Inc. shall deliver to Marathon
an updated Section 355(e) Schedule at least 30 days (i) before the filing
of any Tax Return (including any estimated, final or amended return) on
which any Section 355(e) Taxes are reported; (ii) before making any payment
of Section 355(e) Taxes; or (iii) after any Final Determination with
respect to Section 355(e) Taxes (other than a Final Determination described
in parts (i) or (ii) of this sentence). To the extent that the Marathon
Portion shown on such updated Section 355(e) Schedule is greater than (or
less than) the Marathon Portion shown on the Section 355(e) Schedule
described in paragraph (a) above (or, if a true-up payment has previously
been made under this paragraph (b), the updated Section 355(e) Schedule
that served as the basis for such true-up payment), Marathon shall promptly
pay to New Ashland Inc. (or New Ashland Inc. shall promptly pay to
Marathon, as the case may be) the amount of such excess (or deficiency),
together with interest (at the rate specified in Section 6.01(a)(i) of this
TMA) from the date of the prior payment made under paragraph (a) or this
paragraph (b). The procedures set forth in paragraph (a) for Marathon's
review of the Section 355(e) Schedule and the dispute resolution process
shall apply for purposes of the updated Section 355(e) Schedules under this
paragraph (b).
ARTICLE IV
Certain Tax Items and Tax Positions
SECTION 4.01. Carrybacks and Carryforwards. (a) To the
extent permissible by the applicable Tax law, Marathon shall cause each
member of the Marathon Group (including former members of the Ashland
Group) not to carryback any Tax Item attributable to a Post-Closing Tax
Period to a Pre-Closing Tax Period of a member of the Ashland Group or of
the New Ashland Inc. Group. To the extent that Marathon is not permitted by
applicable law to forgo such carryback and requests that New Ashland Inc.
obtain a Refund of Tax with respect to such carryback, then New Ashland
Inc. shall take all reasonable measures to obtain a Refund with respect to
the carryback (including by filing an amended return) and shall pay to
Marathon the Tax Savings realized by any member of the New Ashland Inc.
Group by reason of such carryback, including any interest received thereon
(provided, further, that the out-of-pocket costs associated with claiming
any such carryback shall be borne by Marathon). To the extent that a
carryback of a Tax Item attributable to a Post-Closing Tax Period to a
Pre-Closing Tax Period of a member of the New Ashland Inc. Group (including
a former member of the Ashland Group) results in a Tax Detriment to any
member of the New Ashland Inc. Group (or former member of the Ashland
Group), Marathon shall pay to New Ashland Inc. the Tax Loss realized by the
New Ashland Inc. Group by reason of such carryback.
(b) To the extent permissible by the applicable Tax law,
with respect to any Tax Item attributable to a Pre-Closing Tax Period that
may be carried forward to a Post-Closing Tax Period of a member of the
Marathon Group (including a former member of the Ashland Group), New
Ashland Inc. shall cause each member of the New Ashland Inc. Group or of
the Ashland Group to carry back any such Tax Item and not to carry forward
any such Tax Item to such a Post-Closing Tax Period of a member of the
Marathon Group (including a former member of the Ashland Group). To the
extent that New Ashland Inc. is not permitted by applicable law to carry
back such Tax Item or to forgo such carry forward of such Tax Item and
requests that Marathon obtain a Refund, reduction or offset of Tax with
respect to such carry forward, then Marathon shall take all reasonable
measures to obtain such a Refund, reduction or offset with respect to the
carry forward (including by filing an amended return) and shall pay to New
Ashland Inc. the Tax Savings realized by any member of the Marathon Group
by reason of such carry forward, including any interest received thereon
(provided, further, that the out-of-pocket costs associated with claiming
any such carryforward shall be borne by New Ashland Inc.). To the extent
that a carry forward of a Tax Item, including without limitation, a foreign
oil extraction loss as defined in Code Section 907(c), attributable to a
Pre-Closing Tax Period to a Post-Closing Tax Period of a member of the
Marathon Group (including a former member of the Ashland Group) results in
a Tax Detriment to any member of the Marathon Group, New Ashland Inc. shall
pay to Marathon the Tax Loss realized by the Marathon Group by reason of
such carry forward.
(c) A party shall be considered to realize a Tax Savings
with respect to a Tax Benefit, or a Tax Loss with respect to a Tax
Detriment, to the extent, and only to the extent, that the amount of Taxes
it is actually required to pay to the applicable Tax Authority for a
taxable period is decreased or increased (respectively) from the amount of
Taxes it would have actually been required to pay to such Tax Authority for
such taxable period in the absence of such Tax Benefit or Tax Detriment.
Such Tax Savings or Tax Loss shall be considered to arise at the time that
such party's decreased or increased payment (respectively) for such taxable
period is first due or otherwise actually realized as a change in the
amount of Tax or Refund, reductions or credit of Tax then due and payable.
If any party is considered under subsection (a) or (b) of this Section 4.01
to realize a Tax Savings for which it is required to make a payment, or Tax
Loss with respect to which the other party is required to make a payment,
the party required to make such payment shall make such payment within 30
days of the date such Tax Savings or Tax Loss is considered to arise.
(d) For purposes of this Section 4.01, a Tax Item is
deemed to be attributable to the taxable period in which it first accrued
or was otherwise taken into account for Tax purposes. For the avoidance of
doubt, a net operating loss, foreign tax credit or similar Tax Item is
deemed to be attributable to the taxable period in which the loss, foreign
tax or equivalent event giving rise to such Tax Item first accrued or was
otherwise taken into account for Tax purposes.
SECTION 4.02. Special Allocation of Certain Deductions.
Ashland and Marathon Company shall execute and deliver an amendment to the
MAP LLC Agreement, in the form attached hereto as Exhibit A, that shall
specially allocate to Marathon Company any Pass-Through Items that would be
allocable to New Ashland Inc. in the absence of such amendment and that are
attributable to a payment that is (1) described in Section 12.01(d)(vii) of
the Master Agreement, which results in a special non-pro rata distribution
to Ashland, or (2) made with respect to the St. Paul Park QQQ Project or
the Plains Settlement (as both are described in Section 9.09 of the Master
Agreement). If any such payment produces a Tax Benefit for any member of
the New Ashland Inc. Group, then New Ashland Inc. shall pay to Marathon the
amount of any resulting Tax Savings actually realized by such member of the
New Ashland Inc. Group within 30 days of the date that such Tax Savings is
realized. Such Tax Savings shall be considered to be realized by a member
of the New Ashland Inc. Group or the Marathon Group, as the case may be,
pursuant to the principles of Section 4.01(c) above.
SECTION 4.03. Increase in Tax Basis of Certain MAP
Deductions for Post-Closing Payments. If as a result of a Final
Determination with respect to whether certain refinery assets contributed
by Ashland to MAP are considered to be asset class 13.3 (Petroleum
Refining) or 28.0 (Manufacture of Chemicals and Allied Products), New
Ashland Inc. pays any additional Tax with respect to a Pre-Closing Tax
Period, and such Final Determination results in the increase in the
adjusted Tax basis as of the date of such contribution of any asset or
property of MAP that was contributed by Ashland to MAP, Marathon shall
cause MAP to take depreciation deductions with respect to such additional
Tax basis to the maximum extent allowed, and as promptly as permitted, by
applicable law, which shall include Marathon causing MAP to amend any
relevant Tax Return of MAP. Marathon shall pay to New Ashland Inc. the
amount of any Tax Savings realized by a member of the Marathon Group as a
result of the use of such additional Tax basis within 30 days of the date
that such Tax Savings is realized under the principles of Section 4.01(c)
above.
ARTICLE V
Specified Liability Deductions
SECTION 5.01. Deduction of Specified Liability
Deductions; Request for Closing Agreement. The parties will request the IRS
to enter into the Closing Agreement with Marathon, Ashland and New Ashland
Inc with respect to the Transactions. If the IRS enters into such Closing
Agreement, the Specified Liability Deductions shall be claimed by HoldCo on
the Marathon Affiliated Group's consolidated Federal income tax return for
each taxable period in which the Closing Agreement is in effect and not by
New Ashland Inc. or any member of the New Ashland Inc. Group. The amount of
the Specified Liability Deductions claimed by Marathon shall be determined
under the Net Deduction Method unless a different method is specified in
the Closing Agreement. If a different method is specified in the Closing
Agreement, the parties will negotiate in good faith to amend this TMA to
provide adequate protections to each of the parties' respective interests.
Unless explicitly provided to the contrary in this Article V, Marathon
shall retain full control over all Tax Items on its Tax Returns.
SECTION 5.02 Tax Benefit Payments from Marathon to New
Ashland Inc. (a) (i) If the IRS enters into the Closing Agreement, then for
each taxable year for which HoldCo claims the Specified Liability
Deductions it shall make a payment to New Ashland Inc. in respect of the
Federal Tax Benefits attributable to such Specified Liability Deductions
(the "Federal Tax Benefit Payment") and one or more payments to New Ashland
Inc. in respect of the state, local or foreign Tax Benefits attributable to
such Specified Liability Deductions (the "Non-Federal Tax Benefit Payment"
and, together with the Federal Tax Benefit Payment, the "Tax Benefit
Payments").
(ii) The Federal Tax Benefit Payment for a taxable year
shall equal the sum of the Basket One Amount and the Basket Two Amount for
such taxable year. The Non-Federal Tax Benefit Payment for a taxable year
shall be determined with respect to the entire amount of Specified
Liability Deductions for such taxable year on a "with and without" basis
under the methodology and principles applicable solely to the Basket Two
Amount, with appropriate adjustments to reflect the differences between the
Code and the applicable Tax law for such purpose, and there shall be no
Basket One Amount or Basket One Deductions for such purpose. For purposes
of calculating the Tax Benefit Payments, the amount of the Specified
Liability Deductions shall be determined using the Net Deduction Method
unless another method is specified in the Closing Agreement.
(iii) The Tax Benefit Payments shall be paid directly to
New Ashland Inc. or placed in escrow as provided in Article VI below.
(b) (i) Basket One Amount. For each taxable year of
HoldCo ending on or before January 1, 2025, the Basket One Amount shall
equal the Basket One Tax Rate multiplied by the Basket One Deductions for
such taxable year. For each taxable year ending on or after January 1,
2025, the Basket One Amount, and the Basket One Deductions, shall be $0.00.
(ii) Definitions.
(A) The Basket One Tax Rate for a taxable year shall
equal the highest marginal Federal income tax rate applicable to
corporations for such taxable year minus 3 percentage points. As
of the date of this TMA, the Basket One Tax Rate is 32% (35% --
currently the highest marginal Federal income tax rate applicable
to corporations (Section 11 of the Code) -- minus 3 percentage
points).
(B) The Basket One Deductions for a taxable year shall
equal the lesser of (I) the Specified Liability Deductions for
such taxable year and (II) the Basket One Cap for such taxable
year.
(C) The Basket One Cap for a taxable year shall equal (I)
$30 million adjusted by the Inflation Factor, but in no event more
than $60 million (the "Basket One Cap Base Amount"), plus (II) the
unused Basket One Cap Carryforward, if any, from each of the two
preceding taxable years. The Basket One Cap Carryforward
originating in a taxable year shall equal the excess, if any, of
the Basket One Cap Base Amount for such taxable year over the
Specified Liability Deductions for such taxable year. Specified
Liability Deductions for a taxable year shall be considered to be
used first against, and to the extent of, the Basket One Cap Base
Amount for such taxable year. For purposes of determining the
amount of the Basket One Cap Carryforward "used" in a particular
taxable year, the excess, if any, of the Specified Liability
Deductions for that taxable year over the Basket One Cap Base
Amount for such taxable year shall be considered to be used first
against, and the extent of, the Basket One Cap Carryforward
originating in the second preceding taxable year; and next
against, and to the extent of, the Basket One Cap Carryforward
originating in the immediately preceding taxable year.
(c) (i) Basket Two Amount. The Basket Two Amount for a
taxable year shall be determined on a "with and without" basis to measure
the actual Tax savings realized by the Marathon Affiliated Group from its
use of Basket Two Deductions and Basket Two Carryovers, and shall equal the
excess (if any) of (A) the amount of Federal income tax that the Marathon
Affiliated Group would have been required to pay with respect to such
taxable year if there were no Basket Two Deductions for, and no Basket Two
Carryovers to, such taxable year over (B) the amount of Federal income tax
that the Marathon Affiliated Group was actually required to pay with
respect to such taxable year.
(ii) Definitions.
(A) The Basket Two Deductions for a taxable year shall
equal the excess, if any, of (I) the total Specified Liability
Deductions for such taxable year over (II) the Basket One
Deductions for such taxable year.
(B) The Basket Two Carryovers to a taxable year shall
equal the amount of Basket Two Carryovers originating in other
taxable years and carried forward or carried back to such taxable
year. The Basket Two Carryovers originating in a taxable year are
the carryovers of net operating losses, excess foreign tax
credits, minimum tax credits or other Tax Items of the Marathon
Affiliated Group, if any, that originate in such year under the
principles of the Code, but only to the extent such carryovers are
greater than the amount of such carryovers that would have
originated in such taxable year if the Marathon Affiliated Group
had no Basket Two Deductions for such taxable year and no Basket
Two Carryovers to such taxable year. Carryovers of all Tax Items
shall be considered to be subject to the rules of the Internal
Revenue Code and the Treasury Regulations governing the carry
forward, carryback, use, limitation and expiration of carryovers
of the relevant type of Tax Item. If the carryover of a Tax Item
originating in a taxable year includes a portion that is a Basket
Two Carryover and another portion that is not a Basket Two
Carryover, such portions shall be considered to be used on a "with
and without basis" as described in Section 5.02(c)(i) above.
(d) Redeterminations. The Basket One Amount for a taxable
year, once determined, shall not be redetermined for any reason other than
an adjustment in the amount of the Specified Liability Deductions for such
taxable year resulting from a Tax Claim with respect to the New Ashland
Inc. Affiliated Group or the Marathon Affiliated Group by a Tax Authority.
The Basket Two Amount for a taxable year shall be redetermined at
appropriate times (e.g., payment, refund, or Final Determination), taking
into account actual adjustments with respect to Tax Claims and subsequent
events that affect the calculation of the Basket Two Amount, including
carry forwards and carrybacks. Payments of the increased or decreased
amount of any Tax Benefit Payments for any taxable year shall be made as
provided in Article VI below.
(e) Verification by Accounting Firm. For each taxable
year, unless Marathon and New Ashland Inc. otherwise agree, New Ashland
Inc. at its own expense will cause a nationally recognized accounting firm
to prepare and deliver to Marathon a certificate, in a form acceptable to
Marathon, verifying the amount and deductibility of the Specified Liability
Deductions for such taxable year (taking into account any issues raised by
the IRS from time to time), which verification shall include the amount of
actual and accruable insurance recoveries for such year. New Ashland Inc.
will at its own expense provide to Marathon a written opinion of Cravath,
Swaine & Moore LLP or any other law firm acceptable to Marathon, which
opinion shall be addressed to New Ashland Inc. and may rely on the Closing
Agreement, to the effect that Marathon will be entitled to deduct the
Specified Liability Deductions on its Tax Return. Such opinion shall be
updated or amended, from time to time, as Marathon may reasonably request
to take into account material changes in facts or in law. For each taxable
year, unless Marathon and New Ashland Inc. otherwise agree, Marathon at its
own expense will cause a nationally recognized accounting firm to prepare
and deliver to New Ashland Inc. a certificate verifying the amount of Tax
Benefit Payments for such taxable year, provided that no such verification
shall be required with respect to Non-Federal Tax Benefit Payments with
respect to any jurisdiction in which the Tax liability of Marathon and the
other members of the Marathon Group for such taxable year is less than
$500,000 unless New Ashland Inc. agrees to bear the cost of such
verification.
(f) (i) Principles and Examples. The parties have set
forth the examples in Exhibit B attached hereto to illustrate the
application of this Article V and of Article VI below. The parties have
also agreed that Tax Benefit Payments in respect of the Basket One Amount
shall be payable without regard to whether Marathon or any member of the
Marathon Group realizes an actual Tax savings from the use of the Basket
One Deductions; that Tax Benefit Payments in respect of the Basket Two
Amount shall be payable only to the extent that the Marathon Affiliated
Group realizes an actual Tax savings from the use of the Basket Two
Deductions on a "with and without" basis; and that any Specified Liability
Deduction shall potentially give rise to a single Basket One Amount or
Basket Two Amount and shall not be double-counted. Any uncertainties or
ambiguities in the computation of the Tax Benefit Payments for any taxable
year shall be resolved in a manner that is consistent with the examples in
Exhibit B and with such principles.
(ii) Short Taxable Years. The provisions of Article V and
Article VI are based on taxable years of twelve full months. The
application of such provisions shall be appropriately adjusted in the event
of one or more taxable years of less than 12 months to effectuate the goals
and principles of Article V and Article VI.
(iii) Successors. In the event that there is a successor
to the New Ashland Inc. Affiliated Group or the Marathon Affiliated Group,
the provisions of this Article V shall be applied to such successors as if
they were the New Ashland Inc. Affiliated Group or the Marathon Affiliated
Group, respectively.
ARTICLE VI
Payments of Tax Benefit Amounts; Escrow
SECTION 6.01 Time of Tax Benefit Payments. (a) Original
Payments. Subject to Section 6.02 below, Marathon shall pay to New Ashland
Inc. or place in Escrow, as the case may be, the amount of the Tax Benefit
Payment as follows:
(i) Federal Tax Benefit Payments. If New Ashland Inc.
provides to Marathon a good faith estimate of the amount of the Specified
Liability Deductions for a calendar year by November 30th of such year, and
verification of the Specified Liability Deductions as required in Section
5.02(e) for such calendar year by February 28th of the following year, then
Marathon shall pay to New Ashland Inc. or Escrow, as the case may be, the
amount of the Federal Tax Benefit Payment for the taxable year
corresponding to such calendar year either (A) within 10 days after the due
date of the Marathon corporate income Tax Return without extensions for
such taxable year (generally March 15th), or (B) within 10 days after the
due date of the corporate income Tax Return for the Marathon Affiliated
Group, with extensions for such calendar year (generally September 15th),
with interest from the due date of such Tax Return without extension to the
date of payment at the Marathon short-term borrowing rate for the
applicable period. If New Ashland Inc. does not provide to Marathon the
estimate and the actual determination of the Specified Liability Deductions
within the time requirements of the preceding sentence, then Marathon shall
pay to New Ashland Inc. or Escrow, as the case may be, the amount of the
Federal Tax Benefit Payment for such taxable year within 10 days of the
later of (A) the date on which New Ashland Inc. provides such determination
to Marathon and (B) the due date of the Federal corporate income Tax Return
for the Marathon Affiliated Group, with extensions for such taxable year
(generally September 15th), in each case without interest.
(ii) Non-Federal Tax Benefit Payments. Marathon shall pay
to New Ashland Inc. or Escrow, as the case may be, in each case without
interest, the amount of the Non-Federal Tax Benefit Payments for a taxable
year within 30 days after the due date of the relevant HoldCo separate or
combined, as the case may be, state, local or foreign Tax Returns, with
extensions.
(b) Redeterminations. If an event giving rise to the
redetermination of a Tax Benefit Payment for any taxable year occurs as
provided in Section 5.02(d) above, the party becoming aware of such event
shall promptly notify the other party.
(i) If such redetermination increases the amount of such
Tax Benefit Payment, then within 30 days after the receipt by Marathon of a
Refund corresponding to such Tax Benefit Payment, or, if there is no such
Refund, then within 30 days after such redetermination, Marathon shall pay
to New Ashland Inc. or Escrow, as the case may be, the amount of such
increase, together with the corresponding amount of interest (if any)
payable by the relevant Tax Authority with respect to such redetermination.
(ii) If such redetermination decreases the amount of such
Tax Benefit Payment, then, within 30 days after the payment by Marathon of
the Tax corresponding to such redetermination, or, if there is no such Tax
payment, then within 30 days after such redetermination, the amount of such
decrease (including any interest, penalty or addition to Tax resulting from
such redetermination) shall be paid to Marathon as provided in this Section
6.01(b)(ii). Such decrease shall be paid first by paying to Marathon
amounts in Escrow up to the amount of such decrease (and all future
payments to New Ashland Inc. under this TMA for the current taxable year
and subsequent taxable years shall be escrowed until the Escrow is Fully
Funded, as provided in Section 6.02(c) below). If such decrease exceeds the
amount so paid to Marathon from the Escrow, New Ashland Inc. shall pay such
excess to Marathon; provided that if the total amount that New Ashland Inc.
would be required to pay to Marathon in a particular calendar year under
this Section 6.01(b)(ii) as a result of any and all redeterminations
exceeds $25 million, then New Ashland Inc. may pay such excess over $25
million in eight equal semi-annual payments, with the first payment due six
months from the date of such redetermination, with interest computed at an
interest rate as reasonably determined by Marathon to be the market rate
for four-year amortizing loans available to companies with credit ratings
similar to that of New Ashland Inc.; provided further that if New Ashland
Inc. undergoes a Bankruptcy Event, all such amounts shall be immediately
due and payable to Marathon.
SECTION 6.02 Escrow. (a) Escrow Agreement. In the event
that any Tax Benefit Payments are required under this Agreement to be
placed in Escrow, the parties will execute an Escrow Agreement in the form
as to be agreed to by the parties and attached hereto as Exhibit C to this
TMA. Unless otherwise agreed by the parties, The Bank of New York shall
serve as escrow agent under the Escrow Agreement. The out-of-pocket costs
and expenses of creating and maintaining the Escrow, including the fees of
the escrow agent, shall be shared equally by Marathon and New Ashland Inc.
(b) Basket One Benefits. Except as otherwise provided in
this Section 6.02(b), all Tax Benefit Payments in respect of Basket One
Amounts shall be paid by Marathon directly to New Ashland Inc. and shall
not be placed in Escrow. Notwithstanding the foregoing, Tax Benefit
Payments in respect of Basket One Amounts shall be placed in Escrow in the
following circumstances:
(i) If New Ashland Inc. has undergone a Bankruptcy Event,
all Tax Benefit Payments in respect of Basket One Amounts otherwise payable
by Marathon to New Ashland Inc. on or after the date of such Bankruptcy
Event shall be placed in Escrow as if they were in respect of Basket Two
Amounts until such time that any judgment, order, proceeding or petition
that constitutes a Bankruptcy Event has been dismissed or discharged.
(ii) In the circumstances described in Section 6.02(d)
below.
(c) Basket Two Benefits. Except as otherwise provided in
this Section 6.02(c) all Tax Benefit Payments in respect of Basket Two
Amounts shall be paid by Marathon directly to New Ashland Inc. and shall
not be placed in Escrow. Notwithstanding the foregoing, Tax Benefit
Payments in respect of Basket Two Amounts shall be placed in Escrow in the
following circumstances:
(i) If the Escrow is not Fully Funded at the time that
such a Tax Benefit Payment for a taxable year is required to be made, then
the amount of such Tax Benefit Payment necessary to cause the Escrow to be
Fully Funded shall be placed in Escrow.
(A) The Escrow shall be considered to be Fully Funded at
the time a Tax Benefit Payment for a taxable year is
required to be made if the amount in the Escrow at such
time is equal to the excess (if any) of (I) the total
amount of Tax Benefit Payments other than Basket One
Amounts paid or payable for such taxable year and the
four preceding taxable years over (II) the Escrow
Threshold at such time.
(B) If New Ashland Inc. has a credit rating provided by
Moody's or Standard & Poor (or successors thereto) at the
relevant time, the Escrow Threshold at any time shall
equal:
a. If the credit rating of New Ashland Inc. is
either a BB+ or Ba1 or higher, unlimited.
b. If the credit rating of New Ashland Inc. is
either a BB or Ba2, $50 million (for the
calendar years 2005 through 2009); $55 million
(for the calendar years 2010 through 2014); or
$60 million (for calendar years after 2014).
c. If the credit rating of New Ashland Inc. is
either a BB- or Ba3, $25 million.
d. If the credit rating of New Ashland Inc. is (A)
below BB- or Ba3, or (B) New Ashland Inc.
undergoes a Bankruptcy Event, $0; provided,
however, that this subparagraph (B) will not
apply after the date that any judgment, order,
proceeding or petition that constitutes a
Bankruptcy Event has been dismissed or
discharged.
(C) If, at the time any Tax Benefit Payment for a taxable
year is required to be made, New Ashland Inc. does not
have a credit rating provided by Moody's or Standard &
Poor (or successors thereto), New Ashland Inc. will
obtain, at its own cost, from Moody's or Standard & Poor,
or both, a pro forma credit rating and provide such
rating to Marathon prior to the time of such Tax Benefit
Payment. Such rating will be updated at least annually.
(ii) In the circumstances described in Section 6.02(d)
below.
(d) Certain Changes in Escrow Threshold. If the Escrow
Threshold decreases as a result of a reduction in the credit rating of New
Ashland Inc., the occurrence of a Bankruptcy Event with respect to New
Ashland Inc. or the payment of Escrowed funds to Marathon in respect of a
redetermination of a Tax Benefit Payment as provided in Section 6.01(b)
above, and as a result the Escrow is not Fully Funded, then all payments to
New Ashland Inc. under this TMA, net of set-off, including all Tax Benefit
Payments in respect of Basket One Amounts and Basket Two Amounts, shall be
placed in Escrow until the Escrow is Fully Funded.
(e) Release of Escrowed Amounts. Except as provided in
Section 6.02(d) above, any amounts placed in Escrow in respect of a Tax
Benefit Payment for a taxable year shall be released from Escrow upon the
fifth anniversary of the filing of the corporate income Tax Return for the
Marathon Affiliated Group for such taxable year and shall be paid directly
to New Ashland Inc. If, as a result of an upgrade in New Ashland Inc.'s
credit rating or any other event, the amount in the Escrow exceeds the
amount required to cause the Escrow to be Fully Funded, then the amount of
such excess shall be promptly released from the Escrow and paid directly to
New Ashland Inc. Whenever Escrowed Amounts are required to be released to
New Ashland Inc. pursuant to this Section 6.02(e), Marathon and New Ashland
Inc. shall promptly deliver to the escrow agent detailed written
instructions directing the release of such Escrowed Amounts, signed on
behalf of both Marathon and New Ashland Inc.
(f) Other Arrangements. The Escrow arrangements
described in this Section 6.02 may be replaced with other credit support
reasonably acceptable to and approved by Marathon, which approval shall not
be unreasonably withheld.
ARTICLE VII
Covenants, Representations and Warranties
SECTION 7.01. Representations and Warranties of Ashland
and New Ashland Inc. Ashland and New Ashland Inc., jointly and severally,
represent and warrant to Marathon that, as of the date of this Agreement
and as of the Closing Date as though made on the Closing Date:
(a) It knows of no fact that could reasonably be expected
to cause any representation, warranty or other statement contained in the
Closing Agreement, a Tax Certificate or the Tax Opinion to be incorrect
(including by omission of a material fact).
(b) No member of the New Ashland Inc. Group has any
current plan or intention to take any action, or fail to take any action,
that would be inconsistent with any representation, warranty or other
statement made by, or that relates primarily to, any member of the New
Ashland Inc. Group and is contained in the Closing Agreement, a Tax
Certificate or the Tax Opinion.
(c) New Ashland Inc. will use its reasonable best
efforts, with the assistance and participation of Marathon, to have at
least $21 million dollars on deposit, decreased for any amounts applied
against Taxes for Pre-Closing Tax Periods (other than Federal Income Taxes
shown as owing on any Tax Returns for the Ashland Affiliated Group's 2003,
2004 and 2005 fiscal years), with the IRS with respect to liabilities for
Taxes for Pre-Closing Tax Periods (including interest on such amounts).
This amount shall be used (to the extent necessary) for the payment or
settlement of such Taxes and interest and shall not be withdrawn prior to a
Final Determination with respect to such Taxes and interest. Any portion of
such deposit that is not used for the payment or settlement of Taxes for
such periods (including interest on such amounts) shall be paid to New
Ashland Inc.
(d) Following the Transactions, New Ashland Inc. intends
to continue the active conduct of Valvoline, independently and with its
separate officers, directors, and employees, and New Ashland Inc. does not
plan any substantial reduction in business activity of Valvoline.
(e) To the best of the knowledge of Ashland and New
Ashland Inc., there are no material Ashland Residual Operations Liabilities
other than those that Ashland has disclosed to the IRS and Marathon.
(f) Ashland and New Ashland Inc. have prepared their
estimate of the adjusted tax basis of the New Ashland Inc. common stock in
good faith.
SECTION 7.02. Representations and Warranties of Marathon.
Marathon represents and warrants to Ashland and New Ashland Inc. that, as
of the date of this Agreement and as of the Closing Date as though made on
the Closing Date:
(a) It knows of no fact that could reasonably be expected
to cause any representation, warranty or other statement contained in the
Closing Agreement, a Tax Certificate or the Tax Opinion to be incorrect
(including by omission of a material fact).
(b) No current member of the Marathon Group has any
current plan or intention to take any action, or fail to take any action,
that would be inconsistent with any representation, warranty or other
statement made by, or that relates primarily to, any member of the Marathon
Group and is contained in the Closing Agreement, a Tax Certificate or the
Tax Opinion.
(c) For the two-year period following the Transactions,
Marathon intends to continue the active conduct of the Acquired Businesses,
independently and, except as described in the Closing Agreement, with their
separate officers, directors and employees, and Marathon does not plan any
substantial reduction in business activity for the Acquired Businesses
during such period.
SECTION 7.03. Covenants of New Ashland Inc. and Marathon.
(a) (i) Each of Ashland and New Ashland Inc. agrees that it shall not take
or omit to take, and shall not permit any of the Ashland Group or the New
Ashland Inc. Group, respectively, to take or omit to take, any action that
will, or would reasonably be expected to, cause any written representation
contained in the Closing Agreement, a Tax Certificate or the Tax Opinion to
be incorrect.
(ii) Each of Ashland and New Ashland Inc. agrees that it
shall, and shall cause each member of the Ashland Group and the New Ashland
Inc. Group, respectively, to prepare and file all Tax Returns on a basis
consistent with the Closing Agreement and the Tax Opinion, except as
otherwise required by Article V or a Final Determination; provided that, to
the extent that the Closing Agreement and the Tax Opinion are inconsistent
in any respect, such Tax Returns shall be prepared and filed on a basis
consistent with the Closing Agreement.
(iii) New Ashland Inc. will use its reasonable best
efforts, with the assistance and participation of Marathon, to maintain at
least $21 million dollars, decreased for any amounts applied against Taxes
for Pre-Closing Tax Periods (other than Federal Income Taxes shown as owing
on any Tax Returns for the Ashland Affiliated Group's 2003, 2004 and 2005
fiscal years), on deposit with the IRS for Taxes for Pre-Closing Tax
Periods (including interest on such amounts). This amount shall be used (to
the extent necessary) for the payment or settlement of such Taxes and
interest and shall not be withdrawn prior to a Final Determination with
respect to such Taxes and interest. Any portion of such deposit that is not
used for the payment or settlement of Taxes for such periods (including
interest on such amounts) shall be paid to New Ashland Inc.
(iv) New Ashland Inc. will forgo the use of bonus
depreciation on all Ashland property eligible for bonus depreciation and
will elect to use straight line depreciation on such property on its fiscal
2004 Tax Return and its Tax Return for the taxable year ending on the
Closing Date. New Ashland Inc. will use its reasonable best efforts, with
the assistance and participation of Marathon, to consider all reasonable
steps to maximize the tax basis of the New Ashland Inc. common stock;
provided, however, New Ashland Inc. in its sole discretion may determine
that it will not adopt or implement any such steps.
(b) (i) Marathon agrees that, for a period beginning on
the Closing Date and ending two years after the Closing Date, it shall not
take or omit to take, and shall not permit any member of the Marathon Group
to take or omit to take, any action that will, or would reasonably be
expected to, cause any written representation contained in the Closing
Agreement, or a Tax Certificate, and that is specified on Schedule 2.04
attached hereto, to be incorrect.
(ii) Marathon agrees that it shall, and shall cause each
member of the Marathon Group to, prepare and file all Tax Returns on a
basis consistent with the Closing Agreement and the Tax Opinion, except as
otherwise required by Article V or a Final Determination; provided that, to
the extent that the Closing Agreement and the Tax Opinion are inconsistent
in any respect, such Tax Returns shall be prepared and filed on a basis
consistent with the Closing Agreement.
(iii) Marathon agrees that, for a period beginning on the
Closing Date and ending two years after the Closing Date, it (A) shall not,
and shall cause each member of the Marathon Group not to, amend the Company
Leverage Policy set forth in Schedule 8.14 to the MAP LLC Agreement, as
such Policy is amended and restated as of the date of this Agreement and
(B) shall cause MAP to comply at all times with such Company Leverage
Policy; provided that, Marathon may amend the Company Leverage Policy to
the extent that both Marathon and New Ashland Inc. reasonably agree is
consistent with the Closing Agreement.
(iv) Marathon agrees that, for a period beginning on the
Closing Date and ending two years after the Closing Date, it shall not, and
shall cause each member of the Marathon Group not to, make any capital
contribution of money or other property to MAP or any JV Entity (including
any capital contribution pursuant to Article IV of the MAP LLC Agreement or
any other provision of the MAP LLC Agreement) other than capital
contributions (i) that are the result of, and in response to, Extraordinary
Events; or (ii) if the Closing Agreement provides that the MAP Partial
Redemption does not constitute a disguised sale, capital contributions for
purposes specifically identified in the Closing Agreement.
(v) During the period beginning on October 1, 2004 (or,
if earlier, the day before the Closing Date) and ending on the date two
years after the Closing Date, Marathon shall cause MAP and its subsidiaries
not to, and MAP and its subsidiaries shall not (A) incur any indebtedness
owed to Marathon or any affiliate of Marathon (other than borrowings under
the Detroit Facility) or (B) incur any indebtedness under one or more
revolving credit facilities, uncommitted money market credit facilities or
other comparable debt facilities to the extent such indebtedness is
guaranteed, directly or indirectly, by Marathon or any affiliate of
Marathon (other than such an affiliate that is MAP or any wholly-owned
subsidiary of MAP), except such Marathon guaranteed debt will be
permissible if the Closing Agreement provides that the MAP Partial
Redemption does not constitute a disguised sale and the Closing Agreement
contemplates debt guaranteed by Marathon.
(vi) Marathon agrees that during the two-year period
beginning on the Closing Date, it shall cause MAP not to make any sales of
receivables except for sales of receivables pursuant to the Receivables
Sales Facility (as such term is defined in the MAP LLC Agreement). Marathon
and MAP agree that if MAP makes any sales of receivables pursuant to the
Receivables Sales Facility they will treat such sales (A) as sales for
Federal income tax purposes and (B) based on the relevant accounting
pronouncements, as they exist on the date of this Agreement, as sales for
financial accounting purposes. If as a result of any change or modification
to such accounting pronouncements between the date of this Agreement and
the Closing Date, Marathon concludes that it and MAP will not be able to
treat such sales of receivables as sales for financial accounting purposes,
it shall cause MAP to use its reasonable best efforts to modify the
Receivables Sales Facility in order to achieve sale treatment for financial
accounting purposes, if such modification can be made in a manner that is
(i) acceptable to Marathon from a tax point of view and otherwise
reasonably acceptable to Marathon, and (ii) acceptable to Ashland from a
tax point of view. If such a change in accounting pronouncements arises and
Marathon, after discussions with Ashland, concludes that it cannot so
modify the Receivables Sales Facility, Marathon shall deliver a written
notice to Ashland attesting to this conclusion at least two business days
prior to the Closing Date. The failure of Marathon to deliver such written
notice shall constitute its agreement to the second sentence of this
paragraph (vi) notwithstanding any such change in accounting
pronouncements. Marathon further agrees that if the relevant accounting
pronouncements change after the Closing Date and, as a result of such
changes, Marathon concludes that it and MAP will not be able to treat sales
of receivables pursuant to the Receivables Sales Facility as sales for
financial accounting purposes, Marathon shall cause MAP to modify the
Receivables Sales Facility in order to achieve sale treatment for financial
accounting purposes if it can do so at an insignificant cost (provided that
such modification is acceptable to New Ashland Inc. from a tax point of
view) or if New Ashland Inc. agrees to indemnify Marathon and MAP for any
increased costs that result from such changes.
SECTION 7.04. Valuation Report. Each of Ashland and
Marathon shall use its reasonable best efforts to cause Deloitte & Touche
LLP to deliver to Ashland and Marathon, no later than June 15, 2005, a
report, in form and substance reasonably satisfactory to each of Ashland
and Marathon and consistent with the Engagement Letter dated as of November
24, 2003, among Ashland, Marathon and Deloitte & Touche LLP. Each of
Ashland and Marathon shall, and shall cause each of its affiliates
(including MAP) to, cooperate with Deloitte & Touche LLP in connection with
the preparation of such report, which cooperation shall include the
provision of any relevant books, records, documentation and other
information and the making available of its employees and facilities as
Deloitte & Touche LLP may reasonably request.
SECTION 7.05. Cooperation and Exchange of Information.
(a) Each of Marathon and New Ashland Inc. shall, and shall cause each of
its affiliates to, cooperate fully with all reasonable requests from the
other party in all matters relating to Taxes covered by this Agreement,
including without limitation, in connection with the preparation and filing
of Tax Returns, any amendments or claims for Refund with respect thereto,
the conduct and resolution of Tax Claims and the implementation of this TMA
(including, without limitation, the provisions of Articles V and VI). Such
cooperation shall include (i) provision on a mutually convenient basis upon
reasonable request of Tax Returns, books, records (including information
regarding ownership and Tax basis of property), documentation and other
information related to such Tax Returns and Tax Claims, including
accompanying schedules, related work papers, and documents related to
rulings or other determinations by Tax Authorities, (ii) the execution of
any document or the certification of any information that may be necessary
or beneficial in connection with the filing of any Tax Returns or claims
for Refund or the conduct or resolution of any Tax Claim, (iii) obtaining
any document or information that is necessary or beneficial in connection
with the foregoing, (iv) upon reasonable request, the making available of
its employees and facilities on a reasonable and mutually convenient basis
to facilitate the foregoing and (v) the reasonable good faith effort of New
Ashland Inc. to provide to Marathon information reasonably requested by
Marathon for the preparation of its published financial statements.
(b) Marathon and New Ashland Inc. shall meet regularly to
review major issues with respect to Tax Claims and the status of audits
with respect to Pre-Closing Periods and Straddle Periods as long as the
relevant statute of limitations remains open with respect to any
Pre-Closing Period or Straddle Period. New Ashland Inc. shall make
available appropriate personnel to discuss the foregoing items and shall
make available for inspection relevant documents relating to such audits.
SECTION 7.06. [Intentionally Omitted]
SECTION 7.07. Ownership of Tax Records; Retention of
Information. New Ashland Inc. shall own, and have all rights, title and
interest in, all books, records, documentation and other information in
existence as of the Closing Date related to any Tax or Tax Item of Ashland
or any of its subsidiaries. New Ashland Inc. agrees to retain all Tax
Returns, related schedules and workpapers, and all other material records
and other documents as required under Code Section 6001 and the regulations
promulgated thereunder relating thereto existing on the date hereof or
created through the Closing Date, until the expiration of the statute of
limitations (including extensions) of the taxable years to which such Tax
Returns and other documents relate and until the Final Determination of any
payments which may be required in respect of such years under this TMA. New
Ashland Inc. shall provide to Marathon copies of any such documentation or
information in existence as of the Closing Date related to any Marathon Tax
Matter or with respect to items that could result in a Tax Detriment to
Marathon and, as reasonably requested by Marathon, in connection with any
Tax Claim. New Ashland Inc. agrees that, if it intends to dispose of any
such documentation or other information, it shall provide written notice to
Marathon describing the documentation or other information to be disposed
of 60 days prior to taking such action. Marathon shall be entitled to
arrange to take delivery of the documentation or other information
described in the notice at its expense during the succeeding 60-day period.
ARTICLE VIII
Tax Claims
SECTION 8.01. Calculation of Losses. The amount of any
indemnification provided under this TMA, other then pursuant to Article V
and VI, shall be (i) increased to take account of any net Tax Loss incurred
by the indemnified party arising from the receipt of indemnity payments
hereunder (grossed up for such increase) and (ii) reduced to take account
of any net Tax Savings realized by the indemnified party arising from the
incurrence or payment of any such indemnified loss. In computing the amount
of any such Tax Loss or Tax Savings, the indemnified party shall be deemed
to recognize all other Tax Items before recognizing any Tax Item arising
from the receipt of any indemnity payment hereunder or the incurrence or
payment of any indemnified loss.
SECTION 8.02. Procedures. (a) Tax Claims. (i) If a party
(the "indemnified party") receives any written notice of deficiency, claim
or adjustment or other written notice from a Tax Authority that may result
in the indemnified party being entitled to any indemnification provided for
under this Agreement in respect of, arising out of or involving an audit
proceeding, audit inquiry, information request, suit, action, contest or
similar claim made by any Tax Authority (a "Tax Claim") such indemnified
party shall notify the indemnifying party in writing (and in reasonable
detail) of the Tax Claim within 10 business days after such indemnified
party receives notice or otherwise becomes aware of the existence of the
Tax Claim; provided, however, that failure to give such notification shall
not affect the indemnification provided under this Agreement, except to the
extent the indemnifying party shall have been materially and adversely
prejudiced as a result of such failure. Thereafter, the indemnified party
shall keep the indemnifying party apprised of the status of any
investigation or audit and deliver to the indemnifying party, within five
business days' time after the indemnified party's receipt thereof, copies
of all notices and documents received by the indemnified party related to
the Tax Claim. New Ashland Inc. undertakes and agrees that it will keep
Marathon reasonably informed of the existence and progress of any audit or
other proceeding that relates to a Pre-Closing Period with respect to which
Marathon could be liable as a successor, under Treasury Regulation Section
1.1502-6, or otherwise.
(ii) If any party receives a written notice from a Tax
Authority that may result in an adjustment in the amount of the
Specified Liability Deductions for a taxable year as a result of
an audit of the New Ashland Inc. Affiliated Group or the Marathon
Affiliated Group, then for purposes of this TMA, such audit and
related proceeding, to the extent they concern the amount of the
Specified Liability Deductions claimed or capable of being claimed
by Marathon or the Marathon Group as successor to HoldCo, shall be
treated as a Tax Claim with respect to which Marathon is the
indemnified party and New Ashland Inc. is the indemnifying party,
provided, however, that the resolution of such issues shall not
preclude Marathon from compromising or -------- ------- settling
any other issues in its Tax Returns administratively with any Tax
Authority and Marathon shall have the right to determine in its
sole reasonable discretion the appropriate forum and location of
any judicial proceeding with respect to Specified Liability
Deductions.
(b) Assumption. Except as provided in Section 8.02(c) and
(e) of this TMA, if a Tax Claim is made against an indemnified party, the
indemnifying party shall be entitled to participate in the defense thereof
and, if it so chooses, to assume the defense thereof with professional
advisors and counsel selected by the indemnifying party; provided, however,
that such professional advisors or counsel are not reasonably objected to
by the indemnified party. Should the indemnifying party so elect to assume
the defense of a Tax Claim, the indemnifying party shall not be liable to
the indemnified party for any fees or expenses relating to such
professional advisors or counsel subsequently incurred by the indemnified
party in connection with the defense thereof. If the indemnifying party
assumes such defense, the indemnified party shall have the right to
participate in the defense thereof and to employ professional advisors and
counsel (not reasonably objected to by the indemnifying party), at its own
expense, separate from the professional advisors and counsel employed by
the indemnifying party, it being understood that the indemnifying party
shall control such defense. The indemnifying party shall be liable for the
fees and expenses of professional advisors and counsel employed by the
indemnified party for any period during which the indemnifying party has
not assumed the defense thereof. If the indemnifying party chooses to
defend or prosecute a Tax Claim, all the indemnified parties shall
cooperate in the defense or prosecution thereof. Such cooperation shall
include the retention and (upon the indemnifying party's request) the
provision to the indemnifying party of records and information that are
reasonably relevant to such Tax Claim, making employees available on a
mutually convenient basis to provide additional information and explanation
of any material provided hereunder, cooperating and assisting in the
investigation, defense and resolution of such matters and providing legal
and business assistance with respect to such matters. Whether or not the
indemnifying party assumes the defense of a Tax Claim, the indemnified
party shall not admit any liability with respect to, or settle, compromise
or discharge, such Tax Claim without the indemnifying party's prior written
consent. If the indemnifying party assumes the defense of a Tax Claim, the
indemnified party shall agree to any settlement, compromise, or discharge
of a Tax Claim that the indemnifying party may recommend and that by its
terms obligates the indemnifying party to pay the full amount of the
liability in connection with such Tax Claim; provided that if such
settlement, compromise or discharge imposes conditions, costs or other
detriments (in addition to the liability in connection with such Tax Claim)
upon the indemnified party, such indemnified party may use its reasonable
judgment in determining whether to so agree, such agreement not to be
unreasonably withheld.
(c) Joint rights and assumption of control. If a party to
this TMA suffers a Bankruptcy Event, then the party suffering the
Bankruptcy Event (the "Bankruptcy Party") shall vigorously pursue the
assertion, or defense (as the case may be) of all Tax Claims for which any
other party to this TMA (the "Non-Bankruptcy Party") might be jointly and
severally, directly or indirectly liable ("Bankruptcy Tax Claims") and the
Non-Bankruptcy Party shall have the right to participate in the defense of
any Bankruptcy Tax Claims and to employ professional advisors and counsel
(not reasonably objected to by the Bankruptcy Party), at its own expense,
separate from the professional advisors and counsel employed by the
Bankruptcy Party, it being understood that the Bankruptcy Party shall
control the defense of such claims. Both parties shall in good faith
cooperate with one another and the Bankruptcy Party shall not unreasonably
reject any suggestions made by the Non-Bankruptcy Party. Such cooperation
shall include the retention and (upon the Non-Bankruptcy Party's request)
the provision to the Non-Bankruptcy Party of records and information that
are reasonably relevant to such Bankruptcy Tax Claims (including copies of
all protests, pleadings, briefs, filings, correspondence and similar
materials relative to such claims), making employees available on a
mutually convenient basis to provide additional information and explanation
of any material provided hereunder, cooperating and assisting in the
investigation, defense and resolution of such matters, and providing legal
and business assistance with respect to such matters. The preceding
sentences of this Section 8.02(c) notwithstanding, if the Bankruptcy Party
fails to vigorously pursue such Bankruptcy Tax Claims, or such Bankruptcy
Party is discharged, or otherwise effectively barred from liability for
such Bankruptcy Tax Claims, the Non-Bankruptcy Party shall have the right
to assume full control over the defense of such Bankruptcy Tax Claims and,
if such control is assumed, the Bankruptcy Party shall irrevocably
designate, and agree to cause each of its affiliates to designate
irrevocably, the Non-Bankruptcy Party as the sole and exclusive agent and
attorney-in-fact to take any action as such Non-Bankruptcy Party may deem
appropriate, necessary, or incidental in any and all matters relating to
Pre-Closing Period Tax Claims of the Ashland Group and the Bankruptcy Party
shall continue to cooperate fully in the defense or prosecution thereof,
but it shall not have the right to participate in the proceedings.
(d) Mitigation. New Ashland Inc. and Marathon shall
cooperate with each other with respect to resolving any claim or liability
with respect to which one party is obligated to indemnify the other party
hereunder, including by making reasonable efforts to mitigate or resolve
any such claim or liability, which shall include claiming any indemnified
loss as a deduction or offset on any relevant Tax Return (including any
amended Tax Return). In the event that New Ashland Inc. or Marathon shall
fail to make such reasonable efforts to mitigate or resolve any claim or
liability, then notwithstanding anything else to the contrary contained
herein, the other party shall not be required to indemnify any person for
any indemnified loss that could reasonably be expected to have been avoided
if New Ashland Inc. or Marathon, as the case may be, had made such efforts.
(e) Marathon Participation Rights with respect to Section
355(e) Tax Claims. Unless otherwise agreed to by the parties, New Ashland
Inc. shall control the defense of all Tax Claims made with respect to
Section 355(e) Taxes (a "Section 355(e) Tax Claim") and shall vigorously
pursue the defense of such claims. Marathon shall have the right to
participate in the defense of all Section 355(e) Tax Claims and to employ
professional advisors and counsel (not reasonably objected to by New
Ashland Inc.), at its own expense, separate from the professional advisors
and counsel employed by New Ashland Inc. Both parties shall in good faith
cooperate with one another and New Ashland Inc. shall not unreasonably
reject any suggestions made by Marathon. Such cooperation shall include the
retention and (upon Marathon's request) the provision to the Marathon of
records and information that are reasonably relevant to such Section 355(e)
Tax Claims (including copies of all protests, pleadings, briefs, filings,
correspondence and similar materials relative to such claims), making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder, cooperating
and assisting in the investigation, defense and resolution of such matters,
and providing legal and business assistance with respect to such matters.
New Ashland Inc. shall not admit any liability with respect to, or settle,
compromise or discharge any Section 355(e) Tax Claim without the prior
written consent of Marathon, such consent not to be unreasonably withheld.
SECTION 8.03. Treatment of Indemnification Payments. The
parties agree that any indemnity payments made pursuant to this Agreement
or pursuant to Article XIII of the Master Agreement shall be treated for
all Tax purposes as distributions or capital contributions, as the case may
be, between HoldCo and New Ashland Inc. made immediately prior to the
Spinoff and, accordingly, not as taxable income to the recipient or as a
deductible expense to the payor, unless otherwise required by a Final
Determination or the Closing Agreement.
ARTICLE IX
Dispute Resolution; Interest
SECTION 9.01. Dispute Resolution. In the event that
Marathon or any member of the Marathon Group, as the case may be, on the
one hand, and New Ashland Inc. or any member of the New Ashland Inc. Group,
as the case may be, on the other hand, disagree as to the amount or
calculation of any payment to be made under this TMA, or the interpretation
or application of any provision under this TMA, the parties shall attempt
in good faith to resolve such dispute. If such dispute is not resolved
within sixty (60) business days following the commencement of the dispute,
Marathon and New Ashland Inc. shall jointly retain a tax attorney who has
retired from active practice in a nationally recognized law firm or
independent public accounting firm, which firm is independent of both
parties, or a retired Federal judge experienced in Tax Matters (the
"Independent Entity"), to resolve the dispute. If the parties are unable to
agree on an Independent Entity, then each party shall appoint a person who
would qualify as an Independent Entity (but for the approval of the other
party), and such persons shall then appoint a person who meets the above
description as the Independent Entity and who shall serve as the
Independent Entity. The Independent Entity shall act as an arbitrator to
resolve all points of disagreement and its decision shall be final and
binding upon all parties involved. Following the decision of the
Independent Entity, Marathon, and members of the Marathon Group, and New
Ashland Inc. and members of the New Ashland Inc. Group shall each take or
cause to be taken any action necessary to implement the decision of the
Independent Entity. The fees and expenses relating to the Independent
Entity shall be borne equally by Marathon and New Ashland Inc.
SECTION 9.02. Interest. Any payment required to be made
under this TMA that is not made on or before the date on which such payment
is due shall bear interest computed at the rate specified from time to time
pursuant to Code Section 6621(a)(2).
ARTICLE X
General Provisions
SECTION 10.01. Termination. This Agreement shall
terminate simultaneous with any termination of the Master Agreement
pursuant to Article XI thereof. In the event of termination of this
Agreement, this Agreement shall forthwith become void and have no effect,
without any liability or obligation on the part of any party hereto.
SECTION 10.02. Survival. Notwithstanding anything in this
TMA to the contrary apart from Section 10.01, the provisions of this TMA
shall survive for 30 days after the full period of all applicable statutes
of limitations (giving effect to any waiver, mitigation or extension
thereof) unless by their term they expire at an earlier date.
SECTION 10.03. Right of Set-off. Either party may set-off
any amount to which it is entitled under this TMA against amounts otherwise
payable hereunder by such party. Neither the exercise of nor the failure to
exercise such right of set-off will constitute an election of remedies or
limit such party in any manner in the enforcement of any other remedies
that may be available to it.
SECTION 10.04. Notices. All notices, requests, claims,
demands and other communications under this Agreement shall be in writing
and shall be deemed given upon receipt by the parties at the following
addresses (or at such other address for a party as shall be specified by
like notice):
if to the Ashland Parties, to:
Ashland Inc.
50 E. RiverCenter Boulevard
Covington, KY 41012-0391
Attention: J. Marvin Quin
David L. Hausrath, Esq.
Facsimile: (859) 815-5053
with a copy to:
Cravath, Swaine & Moore LLP
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7474
Attention: Stephen L. Gordon, Esq.
if to the Marathon Parties, to:
Marathon Oil Corporation
5555 San Felipe Road
Houston, TX 77056
Attention: Raja Sahni
Richard L. Horstman, Esq.
Facsimile: (713) 513-4172
with copies to:
Baker Botts L.L.P.
One Shell Plaza
Houston, TX 77002-4995
Attention: Theodore W. Paris, Esq.
Miller & Chevalier Chartered
655 Fifteenth Street, N.W.
Washington, DC 20005-5701
Attention: Daniel W. Luchsinger, Esq.
SECTION 10.05. Interpretation. When a reference is made
in this Agreement to a Section, such reference shall be to a Section of
this Agreement unless otherwise indicated. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall
be deemed to be followed by the words "without limitation". This Agreement
is intended to calculate, allocate and assign certain Tax responsibilities,
liabilities and benefits among the parties to this Agreement, and any
situation or circumstance concerning such calculation, allocation and
assignment that is not specifically contemplated hereby or provided for
herein shall be determined in a manner consistent with the underlying
principles of calculation, allocation and assignment in this Agreement.
SECTION 10.06. Severability. If any term or other
provision of this Agreement is invalid, illegal or incapable of being
enforced by any rule or law, or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and
effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate
in good faith to modify this Agreement so as to effect the original intent
of the parties as closely as possible to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
SECTION 10.07. 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.
SECTION 10.08. No Third-Party Beneficiaries. This
Agreement is not intended to confer upon any person other than the parties
hereto any rights or remedies.
SECTION 10.09. Existing MAP Agreements. To the extent any
provision of this TMA conflicts with the determination of the Tax Liability
(as defined in the MAP LLC Agreement) of Ashland or its successors for any
Straddle Period of MAP as determined under Section 10.03 of the MAP LLC
Agreement, such Tax Liability shall be determined in accordance with this
Agreement. In all other respects, except as expressly modified herein, the
terms and conditions of the MAP LLC Agreement, the ATCA, and the Put/Call
Agreement shall continue to apply to the extent provided in Article XII of
the Master Agreement. For the avoidance of doubt, the term Tax Distribution
Amount (as defined in the MAP LLC Agreement) shall not include the Tax
Liability (as defined in the MAP LLC Agreement) of the Ashland Affiliated
Group that is attributable to the MAP Partial Redemption.
SECTION 10.10. Continuing Ashland Participation Rights
With Respect To Pre-Closing Pass-Through Items. Notwithstanding anything to
the contrary in the Master Agreement, this Agreement or the other
Transaction Agreements and Ancillary Agreements (as defined in the Master
Agreement), New Ashland Inc. and its successors shall retain the right (to
the extent provided for in Section 6.08 of the MAP LLC Agreement or any
other provision of the MAP LLC Agreement) to participate in the preparation
and filing of all Tax Returns, and in the defense of any Tax Claim, with
respect to all Pass-Through Items relating to any Pre-Closing Period of MAP
or any other JV Entity as if it were a member of MAP or such JV Entity. Any
Tax Claim with respect to any issue concerning MAP's income, gain, losses,
deductions or credits that could result in additional Taxes for the
Pre-Closing Period for Ashland and additional basis (other than additional
basis that is subject to Section 4.03 of the TMA) or deductions in the
Post-Closing Period for Marathon or any member of the Marathon Group shall
be treated under Section 6.08(e)(ii) of the MAP LLC Agreement as an issue
the tax effect of which, if resolved adversely would be, and the tax effect
of settling the issue is, not proportionately the same for both Members. If
an issue is treated as not proportionately the same for both Members under
the preceding sentence, then in applying Section 6.08(e)(iv) of the MAP LLC
Agreement, nationally recognized tax counsel (whose selection shall be
based on the principles of Section 9.01 of the TMA) shall determine if the
settlement is fair to both Members based on the merits of the issue. Such
fees of the nationally recognized tax counsel shall be shared, 62% by
Marathon and 38% by New Ashland Inc.
SECTION 10.11. Prior Tax Sharing Agreements. Except as
specifically provided in Section 10.09, as of the Closing Date, this
Agreement supersedes and terminates all prior agreements as to the
allocation of tax liabilities among the members of the Ashland Group, and
after the Closing Date neither HoldCo nor any member of the Marathon Group,
as successor, transferee or otherwise, shall be bound thereby or have any
liability thereunder.
SECTION 10.12. Entire Agreement; Amendments. This
Agreement embodies the entire understanding among the parties relating to
its subject matter. Any and all prior correspondence, conversations, and
memoranda are merged herein and shall be without effect hereon. No
promises, covenants, or representations of any kind, other than those
expressly stated herein, have been made to induce either party to enter
into this Agreement. This Agreement shall not be amended, supplemented,
modified, or terminated except by a writing duly signed by each of the
parties hereto, and no waiver of any provisions of this Agreement shall be
effective unless in a writing duly signed by the party sought to be bound.
SECTION 10.13. Amendments Resulting From Pre-Closing
Change In Tax Structure. If, prior to the Closing, the Tax Structure of the
Transactions is modified, revised or changed in any manner, for any reason
(including, but not limited to, modifications, revisions or changes
resulting from changes in law or in response to communications (written or
otherwise) with the IRS or any other Tax Authority), the parties will
negotiate in good faith to amend this Agreement, to the extent necessary,
to reflect the underlying principles of calculation, allocation and
assignment in this Agreement.
SECTION 10.14. Payments. All payments under this TMA
shall be made by wire transfer in immediately available funds.
SECTION 10.15. Successors. This Agreement shall be
binding upon and inure to the benefit of any successor to any of the
parties, by merger, acquisition of assets or otherwise, to the same extent
as if the successor had been an original party to the Agreement, and in
such event, all references herein to a party shall refer instead to the
successor of such party.
SECTION 10.16. Confidentiality. Each party to this
Agreement shall hold, and cause its officers, employees, agents,
consultants, and advisors to hold, in strict confidence, unless compelled
to disclose by judicial or administrative process or, in the opinion of its
counsel, by other requirements of law, all information that it or any of
its officers, employees, agents, consultants, and advisors may acquire
pursuant to, or in the course of performing its obligations under, any
provision of this Agreement.
SECTION 10.17. Governing Law. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York, regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed by its respective duly authorized officer as of
the date first set forth above.
ASHLAND INC.,
by /s/ James J. O'Brien
---------------------------------------------
Name: James J. O'Brien
Title: Chief Executive Officer
ATB HOLDINGS INC.,
by /s/ James J. O'Brien
---------------------------------------------
Name: James J. O'Brien
Title: President
EXM LLC,
by
---------------------------------------------
ATB HOLDINGS INC.,
by /s/ James J. O'Brien
---------------------------------------------
Name: James J. O'Brien
Title: President
NEW EXM INC.,
by /s/ James J. O'Brien
---------------------------------------------
Name: James J. O'Brien
Title: President
MARATHON OIL CORPORATION,
by /s/ Janet F. Clark
---------------------------------------------
Name: Janet F. Clark
Title: Senior Vice President and Chief
Financial Officer
MARATHON OIL COMPANY,
by /s/ Janet F. Clark
---------------------------------------------
Name: Janet F. Clark
Title: Senior Vice President
MARATHON DOMESTIC LLC,
by
---------------------------------------------
MARATHON OIL CORPORATION,
by /s/ Janet F. Clark
---------------------------------------------
Name: Janet F. Clark
Title: Senior Vice President and Chief
Financial Officer
MARATHON ASHLAND PETROLEUM LLC,
by /s/ Anthony R. Kenney
---------------------------------------------
Name: Anthony R. Kenney
Title: Vice President
EXHIBIT 2.3
CONFORMED COPY
AMENDMENT NO. 3 dated as of April 27, 2005 (this
"Amendment"), to the Amended and Restated Limited
Liability Company Agreement dated as of December 31, 1998
(the "MAP LLC Agreement") of Marathon Ashland Petroleum
LLC (the "Company"), by and between Ashland Inc., a
Kentucky corporation ("Ashland") and Marathon Oil
Company, an Ohio corporation ("Marathon"), a wholly owned
subsidiary of Marathon Oil Corporation, a Delaware
Corporation ("Marathon Corporation").
WHEREAS Ashland and Marathon are the only Members of the
Company and are parties to the MAP LLC Agreement, which sets forth the
rights and responsibilities of each of them with respect to the governance,
financing and operation of the Company (capitalized terms used in this
Amendment and not defined herein shall have the meanings given such terms
in the MAP LLC Agreement, as amended);
WHEREAS Marathon Corporation, Marathon, Ashland, New
Ashland Inc., certain of their respective affiliates and the Company are
parties to a Master Agreement, pursuant to which the parties have agreed to
effect the Transactions described therein;
WHEREAS the parties have entered into Amendment No. 1 to
the Master Agreement, dated April 27, 2005, amending certain terms of the
Master Agreement;
WHEREAS Marathon Corporation, Marathon, Ashland, New
Ashland Inc. and certain of their respective affiliates are parties to an
Amended and Restated Tax Matters Agreement, dated April 27, 2005, which
sets forth the rights and obligations of the parties with respect to Taxes
in connection with the Transactions;
WHEREAS in connection with the MAP Partial Redemption,
Marathon and Ashland wish to adjust the Percentage Interests of the
Members;
WHEREAS the Members wish to amend the MAP LLC Agreement
to facilitate the Transactions.
NOW, THEREFORE, in consideration of the mutual agreements
herein contained and other good and valuable consideration, the sufficiency
and receipt of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. PERCENTAGE INTEREST AFTER MAP PARTIAL
REDEMPTION
Effective as of the date of this Amendment, Section
3.01(b) of the MAP LLC Agreement (as amended) is amended and restated as
follows:
(b) Immediately following the MAP Partial Redemption, the
respective Percentage Interests of Ashland and Marathon will be determined
as follows: Ashland's Percentage Interest will equal the quotient,
expressed as a percentage, of (x) $3.815 billion plus the MAP Adjustment
Amount (as defined in the Master Agreement) minus the MAP Partial
Redemption Amount (as defined in the Master Agreement) divided by (y)
$10.039 billion plus 100% of the Distributable Cash of the Company as of
the Closing Date minus the MAP Partial Redemption Amount. Marathon's
Percentage Interest will equal 100% minus Ashland's Percentage Interest.
The Percentage Interests of the Members will be appropriately adjusted if
the MAP Partial Redemption Amount is increased in accordance with Sections
1.01 or 1.06 of the Master Agreement.
SECTION 2. COMPANY LEVERAGE POLICY
The Company Leverage Policy (set forth in Schedule 8.14)
is amended and restated in its entirety. Such policy is set forth in a new
Schedule 8.14 attached hereto.
SECTION 3. RECEIVABLES PURCHASE AND SALE AGREEMENT
The Receivables Purchase and Sale Agreement (set forth in
Attachment B) is amended and restated in its entirety. Such agreement and
exhibits thereto are set forth in a new Attachment B attached hereto.
SECTION 4. PARTIES IN INTEREST This Amendment shall inure
to the benefit of, and be binding upon, the parties hereto and their
respective successors, legal representatives and permitted assigns.
SECTION 5. COUNTERPARTS This Amendment may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 6. GOVERNING LAW THIS AMENDMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE,
WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF. ANY
RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR PROCEEDING RELATED TO
OR ARISING OUT OF THIS AMENDMENT, OR ANY TRANSACTION OR CONDUCT IN
CONNECTION HEREWITH, IS WAIVED.
SECTION 7. NO THIRD-PARTY BENEFICIARIES This Amendment is
not intended to confer upon any person other than the parties hereto any
rights or remedies.
SECTION 8. INTERPRETATION The headings contained in this
Amendment are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Amendment. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall
be deemed to be followed by the words "without limitation".
SECTION 9. SEVERABILITY If any term or other provision of
this Amendment is invalid, illegal or incapable of being enforced by any
rule or law, or public policy, all other conditions and provisions of this
Amendment shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions and amendments contemplated
hereby is not affected in any manner materially adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good
faith to modify this Amendment so as to effect the original intent of the
parties as closely as possible to the end that the transactions and
amendments contemplated hereby are fulfilled to the extent possible.
SECTION 10. CONTINUATION OF MAP LLC AGREEMENT The MAP LLC
Agreement continues in full force and effect, except as expressly amended
herein.
SECTION 11. CONSEQUENCES OF TERMINATION OF MASTER
AGREEMENT In the event of a termination of the Master Agreement pursuant to
Section 11.01 of the Master Agreement, the parties further agree that, as
of the date the Master Agreement is terminated the Company Leverage Policy
(set forth in Schedule 8.14) shall be amended and restored to its language
existing prior to the execution of Amendment No. 2 to the Amended and
Restated Limited Liability Company Agreement, dated March 18, 2004.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the day and year first written above.
MARATHON OIL COMPANY,
By /s/ Janet F. Clark
-----------------------------
Name: Janet F. Clark
Title: Senior Vice President
ASHLAND INC.,
By /s/ James J. O'Brien
-----------------------------
Name: James J. O'Brien
Title: Chief Executive Officer