Document:

vhi-ex105_367.htm

 

Exhibit 10.5

TAX AGREEMENT

Between

CONTRAN CORPORATION

and

VALHI, INC.

This Tax Agreement (the “Agreement”) dated as of June 3, 2015 is between Contran Corporation (“Contran”), a Delaware corporation having its principal executive offices at Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240, and Valhi, Inc. (“VHI”), a Delaware corporation having its principal executive offices at Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, TX 75240.

WHEREAS, Contran and VHI file consolidated returns of federal income taxes and, subject to certain jurisdictional limitations, are subject to combined state and local tax reporting;

WHEREAS, this Agreement supercedes and amends and restates the Tax Agreement dated December 1, 2012 previously entered into between Contran and VHI;

WHEREAS, Contran and VHI wish to provide for the allocation of liabilities, and procedures to be followed, with respect to federal income taxes of VHI and any subsidiaries of VHI and with respect to certain combined state and local taxes on the terms of this Agreement; and

WHEREAS, Contran and VHI have historically followed the terms and conditions as provided in this Agreement, and this Agreement serves to formally document such terms and conditions which Contran and Valhi previously followed.

NOW, THEREFORE, in consideration of the promises and agreements herein contained, the parties hereto agree as follows:

1.Definitions. As used in this Agreement, the following terms have the meanings set forth below:

(a)Code: The Internal Revenue Code of 1986, as amended, and with respect to any section thereof any successor provisions under such Code or any successor Code.

(b)Combined Foreign, State and Local Taxes: For a taxable period, and with respect to a specified group of entities, the amount of all Foreign, State and Local Taxes, for which liability is computed on the basis of a combined, unitary or consolidated return (whether at the initiative of the tax authority or of the taxpayer).

(c)Contran Corporation: A Delaware corporation that is the common parent of a group of corporations, which group of corporations includes the VHI Group and Contran Group, electing to file a consolidated federal income tax return.

(d)Federal Taxes: All federal income taxes, together with all interest and penalties with respect thereto.

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(e)Foreign, State and Local Taxes: All foreign, state and local taxes, including franchise and similar taxes, together with all interest and penalties with respect thereto. 

(f)Contran Group: Contran and each of its direct and indirect subsidiaries which would be a member of an affiliated group, within the meaning of section 1504(a) of the Code, and eligible to file a combined, unitary or consolidated return of which Contran was the common parent (the “Contran Tax Group”), as such Contran Group is constituted from time to time. For purposes of this Agreement (to the extent related to the determination of Combined Foreign, State and Local Taxes for the Contran Group), the term “Contran Group” shall include all direct and indirect subsidiaries of Contran with reference to which Combined Foreign, State and Local Taxes are determined.

(g)VHI Group: VHI and each of its direct or indirect subsidiaries which would be a member of an affiliated group, within the meaning of section 1504(a) of the Code, and eligible to file a combined, unitary or consolidated return of which VHI was the common parent, as such VHI Group is constituted from time to time. For purposes of this Agreement (to the extent related to the determination of Combined Foreign, State and Local Taxes for the VHI Group) , the term “VHI Group” shall include all direct and indirect subsidiaries of VHI with reference to which Combined, Foreign, State and Local taxes are determined.

(h)VHI Group Tax Liability: For a taxable period, the liability for Federal Taxes and Combined Foreign, State and Local taxes, as applicable, that the VHI Group would have had if it were not a member of the Contran Tax Group during such taxable period (or during any taxable period prior thereto), and instead filed a separate consolidated or combined return, as applicable, for such taxable period; provided, however, that for purposes of determining such liability for a taxable period all tax elections shall be consistent with the tax elections made by Contran for such period. In making such tax elections it is understood Contran will make those tax elections which are beneficial to the Contran Tax Group on a consolidated basis. Nevertheless, Contran will use its best efforts in the case of those elections which affect the computation of the VHI Group Tax Liability, to make elections in a reasonable manner so as to minimize the VHI Group Tax Liability.  For purposes of this Agreement, in determining the Combined Foreign, State and Local Taxes for the VHI Group, such determination shall be made based on a separate Foreign, State and Local Tax Calculation as if the VHI Group were a separate unitary filer with respect to states and other jurisdictions in which Contran is required to file on a unitary or combined basis.

(i)Foreign, State and Local Tax Calculation: For each reporting period, the Tax Calculation will be based on the estimated taxable income of the VHI Group for the taxable period that includes such reporting period, applied to current year tax rates and using the VHI Group’s applicable apportionment factors and state, local or other applicable adjustments, in each case based on the applicable combined or unitary return most recently-filed as of each reporting period by the Contran Tax Group for each applicable tax jurisdiction (as modified for extraordinary, one-time event adjustments or tax law changes, if any, impacting the unitary calculation for the VHI Group).

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2.Contran as Agent. Contran shall be the sole agent for the VHI Group in all matters relating to the VHI Group Tax Liability. The VHI Group shall not (a) terminate such agency or (b) without the consent of Contran, participate, or attempt to participate, in any matters related to the VHI Group Tax Liability, including, but not limited to, preparation or filing of, or resolution of disputes, protests or audits with the Internal Revenue Service, state or local taxing authorities concerning, the Contran Tax Group’s consolidated returns of Federal Taxes, returns of Combined Foreign, State and Local Taxes or the VHI Group Tax Liability with respect thereto. The VHI Group shall cooperate fully in providing Contran with all information and documents necessary or desirable to enable Contran to perform its obligations under this Section, including completion of Internal Revenue Service and state or local tax audits in connection with such VHI Group Tax Liability and determination of the proper liability for such VHI Group Tax Liability. 

3.Liability for Taxes; Refunds.

(a)Contran, as the common parent of the VHI Group, shall be responsible for, and shall pay to the appropriate taxing authority, as applicable, the consolidated tax liability for Federal Taxes and Combined Foreign, State and Local Taxes for the Contran Group and has the sole right to any refunds received from such taxing authority subject to the provisions of Sections 5 and 6 of this Agreement.

(b)Notwithstanding any other provision of this Agreement, VHI and each subsidiary of VHI which is a member of the VHI Group shall be severally liable to Contran for the VHI Group Tax Liability.

(c)VHI shall indemnify Contran and hold it and the Contran Group other than the VHI Group, harmless from and against any deficiency in the VHI Group Tax Liability that may be due to Contran.

(d)Contran shall indemnify VHI and hold it and the VHI Group harmless from and against any Federal Taxes and Combined Foreign, State and Local Taxes attributable to the Contran Group or any other member of the Contran Tax Group, other than the VHI Group, as such taxes are determined under this and other tax sharing agreements.

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4.Tax Returns. Contran shall file on behalf of the VHI Group any and all federal, foreign, state and local tax returns that are required as they pertain to the VHI Group Tax Liability. The VHI Group, at Contran’s request, shall join in any applicable consolidated returns of Federal Taxes and any returns of Combined Foreign, State and Local Taxes (for which returns have not been theretofore filed) and execute its consent, if such consent has not previously been executed, to each such filing on any form as may be prescribed for such consent if such consent is required. The decision of Contran’s Vice President and Tax Director (or any other officer so designated by Contran) with responsibility for tax matters shall, subject to the provisions of this Agreement, be binding in any dispute between Contran and the VHI as to what tax position should be taken with respect to any item or transaction of the VHI Group. The preceding sentence is limited to the tax positions that affect the VHI Group Tax Liability and the combined Contran Group and Contran Tax Group. In addition, Contran and members of the Contran Group, including VHI and members of the VHI Group, shall provide each other with such cooperation, assistance and information as each of them may request of the other with respect to the filing of any tax return, amended return, claim for refund or other document with any taxing authority. VHI shall be solely responsible for all taxes due for the VHI Group with respect to tax returns filed by VHI or a member of the VHI Group that are required to be filed on a separate company basis, independent of Contran. 

5.Payment of VHI Group Tax Liability for Federal Taxes and Foreign, State and Local Taxes. On or before each date, as determined under section 6655 of the Code (with respect to Federal Taxes) and the applicable tax provisions with respect to any Foreign, State and Local Taxes due pursuant to this Agreement, for payment of an installment of estimated Federal Taxes or any Foreign, State and Local Taxes, VHI shall pay to Contran an amount equal to the installment which the VHI Group would have been required to pay as an estimated payment of Federal Taxes to the Internal Revenue Service or any Foreign, State and Local Taxes to the applicable taxing authority if it were filing a separate consolidated, combined or unitary return in respect of the VHI Group Tax Liability. Any balance owed with respect to the VHI Group Tax Liability for such taxable period shall be paid to Contran on or before the 15th day of the third month after the close of such taxable period. If it is not possible to determine the amount of such balance on or before such day, (a) a reasonable estimate thereof shall be paid on or before such day, (b) the amount of such balance shall be finally determined on or before the earlier of; (i) the 15th day of the ninth month after the close of such taxable period (or the applicable due date for the Contran foreign, state or local combined or unitary return) and (ii) the date on which the Contran Group consolidated tax return for such period is filed with the Internal Revenue Service or the applicable tax authority, and (c) any difference between the amount so determined and the estimated amount paid shall; (i) in the case of an underpayment, be promptly paid to Contran and (ii) in the case of an overpayment, be promptly refunded or applied against the estimated VHI Group Tax Liability for the immediately following tax period, at the option of Contran. If the overpayment is not applied to the immediately following tax period, such overpayment shall be promptly refunded to the VHI Group. As between the parties to this Agreement, the VHI Group shall be solely responsible for the VHI Group Tax Liability and shall have no responsibility for Federal Taxes of the Contran Group other than payment of the VHI Group Tax Liability in accordance with the terms of this Agreement.  Notwithstanding the foregoing, Contran at its option may extend the payment due date for any of the payments referenced above.

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6.Refunds for VHI Group Losses and Credits for Federal Taxes. If the calculation with respect to the VHI Group Tax Liability for Federal Taxes results in a net operating loss (“NOL”) for the current tax period that, in the absence of a Code Section 172(b)(3) election made by Contran, is carried back under Code Sections 172 and 1502 to a prior taxable period or periods of the VHI Group with respect to which the VHI Group previously made payments to Contran, then, in that event, Contran shall pay (or credit) VHI an amount equal to the tax refund to which the VHI Group would have been entitled had the VHI Group filed a separate consolidated federal income tax return for such year (but not in excess of the net aggregate amount of the VHI Group Tax Liability paid to Contran with respect to the preceding two taxable periods). If the calculation with respect to the VHI Group Tax Liability results in an NOL for the current tax period, that subject to the Code Section 172(b)(3) election made by Contran, is not carried back under Code Sections 172 and 1502 to a prior taxable period or periods of the VHI Group with respect to which VHI made payments to Contran or is not carried back because the Contran Tax Group does not have a consolidated net operating loss for the current tax period, then, in that event such NOL shall be an NOL carryover to be used in computing the VHI Group Tax Liability for future taxable periods, under the law applicable to NOL carryovers in general, as such law applies to the relevant taxable period. Payments made pursuant to this Section 6 shall be made on the date that Contran (or any successor common parent of a tax group to which the Contran Group is a member) files its consolidated federal income tax return for the taxable period involved. Principles similar to those discussed in this Section 6 shall apply in the case of the utilization of all VHI Group loss and credit carrybacks and carryovers. 

7.Refunds for VHI Group Combined or Unitary Foreign, State and Local Losses and Credits . The foregoing principles contained in Section 6 shall apply in similar fashion to any consolidated, unitary or combined foreign, state or other local income tax returns, containing any member of the VHI Group, which may be filed based on the VHI Group Tax Liability for Foreign, State and Local Taxes.

8.Subsequent Adjustments. If any settlement with the Internal Revenue Service, foreign, state or local tax authority or court decision which has become final results in any adjustment to any item of income, deduction, loss or credit to the Contran Group in respect of any taxable period subject to this Agreement, which, in any such case, affects or relates to any member of the VHI Group as constituted during such taxable period, the VHI Tax Group Liability shall be re-determined to give effect to such adjustment as if it had been made as part of or reflected in the original computation of the VHI Tax Group Liability and proper adjustment of amounts paid or owing hereunder in respect of such liability and allocation shall be promptly made in light thereof.

9.Amendments. This Agreement may be amended, modified, superseded or cancelled, and any of the terms, covenants, or conditions hereof may be waived, only by a written instrument specifically referring to this Agreement and executed by all parties (or, in the case of a waiver, by or on behalf of the party waiving compliance). The failure of any party at any time or times to require performance of any provision of this Agreement shall in no manner affect the right at a later time to enforce the same. No waiver by any party of any condition, or of any breach of any term or covenant, contained in this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such condition or breach, or a waiver of any other condition or of any breach of any other term or covenant.

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10.Retention of Records. Contran shall retain all tax returns, tax reports, related workpapers and all schedules (along with all documents that pertain to any such tax returns, reports or workpapers) that relate to a taxable period in which the VHI Group is included in a consolidated or combined tax return with Contran. Contran shall make such documents available to VHI at VHI’s request. Contran shall not dispose of such documents without the permission of VHI. 

11.Headings. The headings of this Agreement are for convenience of reference only, and shall not in any way affect the meaning or interpretation of this Agreement.

12.Governing Law. This Agreement shall be construed and enforced in accordance with the laws of the State of Delaware without regard to conflicts of laws provisions.

13.Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be an original, but all of which shall constitute but one agreement.

14.Successors. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective subsidiaries, and their respective successors and assigns.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first above written.

 

	
CONTRAN CORPORATION

	
 
	
 
	
 

	
By:
	
 
	
 /s/ Gregory M. Swalwell

	
 
	
 
	
Gregory M. Swalwell

	
 
	
 
	
Vice President and Controller

 

	
VALHI, INC.

	
 
	
 
	
 

	
By:
	
 
	
 /s/ Kelly D. Luttmer

	
 
	
 
	
Kelly D. Luttmer

	
 
	
 
	
Executive Vice President and Tax Director

 

7Exhibit

Exhibit (10)AA

Amended and Restated Target Corporation 2011 Long-Term Incentive Plan

NON-EMPLOYEE DIRECTOR
RESTRICTED STOCK UNIT AGREEMENT

THIS RESTRICTED STOCK UNIT AGREEMENT (the “Agreement”) is made in Minneapolis, Minnesota as of the date of grant (the “Grant Date”) set forth in the award letter (the “Award Letter”) by and between the Company and the person (the “Director”) identified in the Award Letter. This award (the “Award”) of Restricted Stock Units (“RSUs”), provided to you as a member of the Board, is being issued under the Amended and Restated Target Corporation 2011 Long-Term Incentive Plan (the “Plan”), subject to the following terms and conditions.

1.    Definitions. Except as otherwise provided in this Agreement, the defined terms used in this Agreement shall have the same meaning as in the Plan. The term “Committee” shall also include those persons to whom authority has been delegated under the Plan.

2.    Grant of RSUs. Subject to the relevant terms of the Plan and this Agreement, as of the Grant Date, the Company has granted the Director the number of RSUs set forth in the Award Letter.

3.    Vesting Schedule. Beginning with the calendar quarter in which the Grant Date occurs, 25% of the RSUs shall vest on the last day of each calendar quarter of the year in which the Grant Date occurs (i.e., March 31, June 30, September 30 and December 31) and any remaining RSUs shall become fully vested on December 31 of the year in which the Grant Date occurs (the “Final Vesting Date”).

4.    Circumstances that Accelerate the Vesting Date. All unvested RSUs subject to this Agreement shall become immediately vested if the Director ceases to be a member of the Board due to (a) death, (b) Disability, (c) reaching the mandatory retirement age for members of the Board, or (d) reaching the maximum term limit for members of the Board.

In the event a Change in Control occurs prior to the Final Vesting Date, a pro-rata portion of the RSUs shall become immediately vested, to the extent not already vested. For this purpose a pro-rata portion of the RSUs shall be determined by multiplying the aggregate RSUs subject to the Award by a fraction, the numerator of which is the number of months that have elapsed since the Grant Date (rounded to the nearest whole month) and the denominator is 12.

5.    Effect of Ceasing to be a Member of the Board. In the event that the Director ceases to be a member of the Board for any reason prior to the Final Vesting Date, except as specifically provided in this Agreement, the unvested portion of the Award shall be forfeited.

6.    Dividend Equivalents. The Director shall have the right to receive additional RSUs with a value equal to the regular cash dividend paid on one Share for each RSU held pursuant to this Agreement prior to the conversion of RSUs and issuance of Shares pursuant to Section 7. The number of additional RSUs to be received as dividend equivalents for each RSU held shall be determined by dividing the cash dividend per share by the Fair Market Value of one Share on the dividend payment date; provided, however, that for purposes of avoiding the issuance of fractional RSUs, on each dividend payment date the additional RSUs issued as dividend equivalents shall be rounded up to the nearest whole number. All such additional RSUs received as dividend equivalents shall be fully vested upon issuance, and shall be converted into Shares on the basis and at the time set forth in Section 7 hereof.

7.    Conversion of RSUs and Issuance of Shares. The Director shall receive one Share for each vested RSU on the date that is as soon as administratively feasible, but not more than 90 days, following the Director’s death or other termination of service as a member of the Board and cessation of all contractual relationships as an independent contractor with the Company (or any other entity which would be treated as a single employer with the Company under Code Section 414(b) or 414(c)) which causes the Director to experience a “separation from service” within the meaning of Code Section 409A; provided, however, that in the event the Company determines that the Director is a “specified employee” under Code Section 409A (or successor provision) and that such distribution is subject to Code Section 409A(a)(2)(B), the issuance of the Director’s Shares will be suspended until six months after the Director’s separation from service, or if earlier, the Director’s death. Until such time as the Director’s RSUs have been converted into Shares pursuant to this Section 7, the RSUs will not carry any of the rights of share ownership and will not be entitled to vote or receive dividends (other than the right to receive dividend equivalents).

8.    Limitations on Transfer. The Award shall not be sold, assigned, transferred, exchanged or encumbered by the Director other than pursuant to the terms of the Plan. 

9.    Service as a Member of the Board. Nothing in this Agreement, the Plan or the Award Letter shall give the Director any claim or right to continue as a member of the Board.

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10.    Governing Law; Venue; Jurisdiction. To the extent that federal laws do not otherwise control, this Agreement, the Award Letter, the Plan and all determinations made and actions taken pursuant to the Plan shall be governed by the laws of the State of Minnesota without regard to its conflicts-of-law principles and shall be construed accordingly. The exclusive forum and venue for any legal action arising out of or related to this Agreement shall be the United States District Court for the District of Minnesota, and the parties submit to the personal jurisdiction of that court. If neither subject matter nor diversity jurisdiction exists in the United States District Court for the District of Minnesota, then the exclusive forum and venue for any such action shall be the courts of the State of Minnesota located in Hennepin County, and the Director, as a condition of this Agreement, consents to the personal jurisdiction of that court. If any provision of this Agreement, the Award Letter or the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Agreement, the Award Letter or the Plan, and the Agreement, the Award Letter and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

11.    Currencies and Dates. Unless otherwise stated, all dollars specified in this Agreement and the Award Letter shall be in U.S. dollars and all dates specified in this Agreement shall be U.S. dates.

12.    Plan and Award Letter Incorporated by Reference; Electronic Delivery. The Plan, as hereafter amended from time to time, and the Award Letter shall be deemed to be incorporated into this Agreement and are integral parts hereof. In the event there is any inconsistency between the provisions of this Agreement and the Plan, the provisions of the Plan shall govern. The Company or a third party designated by the Company may deliver to the Director by electronic means any documents related to his or her participation in the Plan. The Director acknowledges receipt of a copy of the Plan and the Award Letter.  

[End of Agreement]

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